October 23rd, 2019
Daily Market Commentary
- Rogers Communications Inc. cut its financial guidance as it reported a profit of $593 million in its latest quarter, compared with $594 million in the same quarter last year. The cable and wireless company says it earned $1.14 per diluted share for the quarter ended Sept. 30, down from $1.15 per diluted share a year ago. Revenue totalled $3.75 billion, down from nearly $3.77 billion in the same quarter last year.
- European equities retreated at the open as a stream of earnings misses and profit warnings soured market sentiment. The benchmark Stoxx Europe 600 Index was down 0.4%. Nokian Renkaat Oyj dropped 6.2% after the car tire manufacturer lowered its guidance for the full year. Infineon Technologies AG fell 3.2% after the U.S. bellwether Texas Instruments Inc. gave a weaker-than-expected forecast.
- Futures on U.S. equity indexes slipped and European stocks struggled for traction as investors plowed through earnings reports without finding much to justify optimism for global growth. Contracts on the S&P 500 and Dow Jones Industrial Average declined after Caterpillar reported results that missed analysts’ forecasts, sending the shares tumbling in pre-market trading.
- Japanese stocks rose, as a gain in defensive companies offset a sell-off in semiconductor shares. Pharmaceuticals and transportation providers supported the benchmark gauge the most. Eisai rose 18% after partner Biogen said that it will ask U.S. regulators to approve their Alzheimer’s drug. Telecommunications shares weighed on the index after SoftBank announced a $9.5 billion rescue plan for WeWork. Chip-related stocks took a hit after Texas Instruments raised alarms with a fourth-quarter revenue forecast that trailed the lowest analyst estimate.
- Oil fell as Russia sounded a cautious note on whether OPEC and its partners may cut production further, while industry data showed U.S. crude inventories were expanding. Futures fell as much as 1.3% in New York, erasing some of Tuesday’s gains as Russia’s Energy Minister Alexander Novak said no countries in the OPEC+ coalition had proposed changing the current level of output cuts. The American Petroleum Institute reported crude stockpiles rose by 4.45 million barrels last week, according to people familiar with the data. Official government figures are due Wednesday.
- Gold gained for a second day as Treasury yields slipped and continuing Brexit turmoil supported prices. Prices are rising even as gold ETF holdings head for the first weekly decline in six. The largest precious-metals ETF, SPDR Gold Shares, on Tuesday saw its biggest outflow in more than a month. The recent selling was surprising, but gold ETF investors will probably still keep buying at times of weakness, according to Commerzbank.
- WeWork has secured a $9.5 billion rescue package from SoftBank Group Corp., a deal that hands 80% of the company to the Japanese conglomerate while capping one of the more dramatic business debacles in recent memory. The transaction announced in Tokyo Wednesday marks the end of an era for the troubled co-working giant, which raised money at a $47 billion valuation in January, pulled out of a botched initial public offering attempt last month and is now valued at less than $8 billion in the bailout.
- Caterpillar Inc. lowered its earnings forecast as it reported the first decline in quarterly profit in almost three years, adding to worries over a slowing global economy that have weighed on sales of its signature yellow machines. The largest maker of mining and machinery equipment reported a 5.2% drop in sales and expects demand to be flat in the fourth quarter. Its shares fell. The profit outlook suggests the deterioration in Asia that the company flagged in July has worsened. Caterpillar said in July that it was counting on dealers to work through an inventory buildup to help meet earnings targets, but Wednesday’s results signal the glut remains.
- The Chinese government is considering a plan to replace Hong Kong’s Carrie Lam as chief executive, pro-establishment lawmaker Michael Tiensaid, in a potential strategy shift by Beijing as pro-democracy demonstrations continue to rock the Asian financial center. Tien said he has information from Beijing that the government was considering candidates to fill Hong Kong’s top job next year. His comments came after the Financial Times reported, citing unidentified people briefed on the deliberations, that an “interim” chief executive would be installed by March if President Xi Jinping decides to carry out the plan.
- Boris Johnson held talks with Labour leader Jeremy Corbyn in an attempt to reach an agreement on a new timetable for pushing his Brexit deal through Parliament and into law. The prime minister and the leader of the opposition met in Westminster but no agreement has so far emerged from the discussion on the way forward for the Withdrawal Agreement Bill. The meeting came after Parliament rejected Johnson’s plan to rush the bill, which turns his Brexit deal into law, through the House of Commons in just three days.
- Debt-laden Casino Guichard-Perrachon SA is asking lenders to back a 3.5 billion-euro ($3.9 billion) refinancing, pledging assets as security in return for funds to bolster its balance sheet. The company said late Tuesday it’s in talks with banks to extend credit facilities and agreed to limit future dividend payments. It’s also raising new money secured against the retailer’s operating units and real estate assets to repay bonds maturing within the next three years.
- Avenue Capital Management is in talks with investors to raise as much as $1 billion for the purchase of aircraft to boost its leasing business, according to a person with knowledge of the matter. The New York-based investment firm led by Marc Lasry expects to raise the funds over the next three months to buy up to 50 planes, said the person, who asked not to be identified because the information is private. The latest drive to raise cash would add to Avenue Capital’s war chest for aircraft. The company has already invested in narrow-body and wide-body jets and leases them to airlines, the person said.
- Alphabet Inc.’s Google said it’s built a computer that’s reached “quantum supremacy,” performing a computation in 200 seconds that would take the fastest supercomputers about 10,000 years. The results of Google’s tests, which were conducted using a quantum chip it developed in-house, were published Wednesday in the scientific journal Nature. “This achievement is the result of years of research and the dedication of many people,” Google engineering director Hartmut Neven said in a blogpost. “It’s also the beginning of a new journey: figuring out how to put this technology to work. We’re working with the research community and have open-sourced tools to enable others to work alongside us to identify new applications.”
- Again and again, Malaysia has publicly demanded Goldman Sachs pay an eye-popping $7.5 billion for its role in the 1MDB scandal. But privately, Malaysian negotiators are considering settling for a fraction of that. Representatives for Malaysia have discussed figures of around $2 billion to $3 billion in talks with the Wall Street bank, according to people with knowledge of the matter. Though a final deal may diverge from that range, it shows what negotiators for the country may be willing to accept. Simultaneously, Malaysian prosecutors are trying to turn up the pressure by pushing for Goldman’s criminal case to be heard at the country’s High Court.
- Russia and Turkey agreed to work together to take back large chunks of Syrian territory controlled by Kurdish forces once allied with the U.S., giving each country a bigger say in how postwar Syria will look. After six hours of talks, Russian President Vladimir Putin and Turkish leader Recep Tayyip Erdogan struck a deal on Tuesday to clear the Kurdish fighters from a zone in northeastern Syria bordering Turkey. Ankara had launched a widely deplored offensive against the Kurdish YPG militia before a temporary truce negotiated with the U.S. last week paused fighting, taking control of a strip of Syrian land along its frontier.
- The Bank of Japan is considering lowering its forecasts for economic growth and inflation this year in a quarterly outlook report to be released at the end of a policy meeting on Oct. 31, according to people familiar with the matter. Officials at the central bank see a need to factor into their growth and inflation forecasts a delayed pickup in the global economy and lower energy prices, the people said. Any downgrade is likely to be small, they added. A lowering of projections hasn’t prompted action from the central bank on most previous occasions.
- China’s large-scale hog farms that survived the world’s worst animal disease outbreak are expanding their herds, driving a recovery in sow numbers as early as next year, a pig conference heard. The restocking of industrial-scale farms will result in a shift in hog production in the world’s largest pork-consuming nation, said Qiu Huaji, head of swine infectious diseases with the Chinese Academy of Agricultural Sciences’ Harbin Veterinary Research Institute. Their scale-up will lead to greater improvement in measures to protect pigs from African swine fever.
- China is planning to sell euro-denominated bonds amid a slump in borrowing costs in the currency, in what could mark its first such issuance since 2004. China’s Ministry of Finance is planning to sell U.S. dollar and euro-denominated bonds, according to people familiar with the matter. The ministry didn’t immediately reply to a fax sent by Bloomberg seeking comment. China last sold euro-denominated bonds in 2004, according to Bloomberg data.
- Reynolds Consumer Products Inc. the maker of Reynolds Wrap aluminum foil and Hefty trash bags, intends to seek a valuation of $7 billion in its U.S. initial public offering, according to people with knowledge of the matter. The company hired Credit Suisse Group AG, JPMorgan Chase & Co. and Goldman Sachs Group Inc. for the share sale, said the people, who asked not to be identified because the information was private. The offering could happen as soon as this year or the first quarter of 2020, the people said.
- U.S. buyout firm Cerberus Capital Management is considering a sale of its closely-held drugmaker Covis Pharma Holdings Sarl that could fetch about $800 million, according to people familiar with the matter. Cerberus is working with a financial adviser as it seeks a buyer for the pharmaceutical company, the people said, asking not to be identified because the matter is private. Covis has attracted interest from other private equity firms seeking to leverage the business for more acquisitions, the people said.
- China’s CCTV is sticking to its pledge to drop National Basketball Association coverage two weeks after a league official’s Twitter post roiled its business in the mainland. The state broadcaster’s sports channel CCTV-5 — which averaged 25 million viewers per game during previous NBA finals — has no plans to air the opening games, the first time it has not covered regular season games in at least a decade. There are no NBA games scheduled for broadcast on CCTV this week, according to its website, although there will be more than 30 games played in the U.S. between teams like the Los Angeles Lakers and Clippers as the season kicks off.
- President Donald Trump boasted on Monday that American incomes have skyrocketed during his presidency, surpassing gains under his predecessors, a claim that isn’t supported by official government data. Trump said at a Cabinet meeting that over 2 1/2 years, net incomes “rose $5,000, not including $2,000 for taxes, so it rose, let’s say, $7,000.” He also reposted a tweet over the weekend from an employee of conservative group Turning Point USA, who touted similar figures. Trump’s estimates came from his Council of Economic Advisers that’s charged with providing advice on economic policy, according to a White House spokesperson. A June CEA report estimated that government deregulation will provide an inflation-adjusted $3,100 per household annually by 2021 and a separate White House statement showed that the Republican tax cuts package will bump that up to about $6,600 for the average household. In his comments Monday, Trump rounded the figure up to $7,000.
*All sources from Bloomberg unless otherwise specified