Market Snapshot
Asia: Japan -0.2% to 18264. Hong Kong -0.3% to 21504. China +0.1% to 3200. India -0.05% to 25610.
Europe: London -0.1%. Paris -0.6%. Frankfurt -0.7%.
Futures: Dow -0.1%. S&P -0.2%. Nasdaq -0.3%. Crude -1.85% to $45.07. Gold -0.3% to $1106.10.
Ten-year Treasury Yield -2 bps to 2.20.
Economic News
8:30 Producer Price Index
10:00 Reuters/UofM Consumer Sentiment
2:00 PM Treasury Budget
Markets
Crude oil was sharply lower at the time of writing despite the IEA predicting the “largest cut in non-OPEC supply in more than two decades” due to low prices, and as Goldman Sachs warned that crude could collapse to $20 a barrel due to massive oversupply. Twenty bucks isn’t Goldman’s most likely scenario but it’s a nice dramatic number that generates lots of tweets, as were the forecasts by Goldman and others in the not-so-distant past that oil would hit $150-$200 a barrel.
Confidence among large Japanese manufacturers seems to have swept back in Q3, according to the Business Survey Index, which jumped to 11 from -6 in Q2. Companies intend to increase capex by 6.1% during FY16, with the figure up from 5.9% previously. Part of the government’s strategy to revive the economy is to push companies to increase their capex, although as disappointing July machinery orders data showed yesterday, Prime Minister Shinzo Abe hasn’t had too much success yet.
Italian industrial output grew at the fastest pace for a year in July, rising 1.1% after falling 1% in June and topping consensus. “It’s very positive data, consistent with most recent indications we got from businesses,” says UniCredit economist Loredana Federico. “After a long contraction, manufacturing can now rise thanks to higher domestic demand and the resilience of foreign demand.”
German CPI was flat on month in August as falling energy costs continued to have an impact on the overall rate. Wholesale prices were firmly stuck in deflation, dropping 0.8%. In Spain, final CPI was -0.3%.
Stocks
ZS Pharma rose 4.75% in post-market trading after official confirmation that it’s in preliminary discussions with Switzerland’s Actelion (ALIOY) over a “potential strategic transaction.” ZS (ZSPH) had surged 28% in normal trading as Bloomberg reported that Actelion had offered to acquire the company in a deal worth $2.5B despite ZS not yet generating revenue. The firm’s leading drug candidate is ZS-9, a treatment for a life-threatening condition called hyperkalemia that is related to potassium levels in the blood.
Global equities were mainly lower at the time of writing but looked to be ending the week fairly calmly following a turbulent few sessions, and ahead of a data dump by China on Sunday and a Fed rate decision later next week. Asset manager Kathy Lien believes it will be difficult for the Fed to act. “Based on the performance of the U.S. economy alone, the Fed should raise rates but they do not operate in a vacuum,” Lien says.
GE has agreed to sell its GE Capital Transportation Finance business to Bank of Montreal’s BMO Financial Group (BMO). While terms were undisclosed, BMO said the business had net earning assets of $8.7B on June 30. GE (GE) is also exploring the sale of its asset-management arm as the company continues to divest its financial businesses as part of its strategy to shift its emphasis back onto its industrial division.
Boeing is not keen on selling its interest in rocket joint venture United Launch Alliance, the WSJ reports, although partner Lockheed Martin (LMT) is enthusiastic as it looks to carry out a portfolio restructuring. The companies have reportedly received a $2B bid from Aerojet Rocketdyne Holdings (AJRD). Boeing (NYSE:BA) said yesterday that it remains committed to United Launch.
Two large suppliers of well-known brands to Wal-Mart (WMT) are refusing to accept new terms that the retailer is imposing, Bloomberg reports, and hope to use their size to negotiate a better deal. However, many of Wal-Mart’s 10,000 suppliers aren’t large enough to hold such leverage and are having to put up with new storage fees and a schedule that could put back payments.
Toyota has canceled the day shift at three factories in northeastern Japan following torrential rains that have caused massive flooding. While Toyota’s (TM) facilities haven’t suffered damage, three people have died, over 20 are missing and 100,000 have had to flee their homes