Market Snapshot
Asia: Japan -2.2% to 17792. Hong Kong -0.5% to 20841. China closed. India -2.2% to 25201.
Europe: London -1.8%. Paris -2.2%. Frankfurt -2.2%.
Futures: Dow -1%. S&P -0.9%. Nasdaq -1%. Crude -0.8% to $46.40. Gold -0.1% at $1123.50.
Ten-year Treasury Yield -4 bps to 2.12%
Economic News
8:30 Non-farm payrolls
Markets
US markets open weaker as investors digest one of the most significant data releases of the summer for its implications on the timing of the first rate hike since 2006. The August non-farm payrolls report is the final read on monthly labor conditions before the Federal Reserve makes a decision on interest rates at its September 16-17 meeting. Economists expect employers to have added more than 220,000 workers in August, with unemployment ticking down a tenth of a percentage point to 5.2%.
World shares are also heading south as worries about an imminent rate increase by the Federal Reserve overshadow the potential for stimulus by the European Central Bank. Other reports on Thursday, including low jobless claims levels and a narrowing of the trade deficit, continue to indicate a strengthening U.S. economy that can support a rate liftoff as early as September. Robust U.S. jobs data today may give the Fed a final push, but global market volatility has prompted some analysts to predict a December rate increase.
German factory orders fell more than expected in July, indicating that growth in the eurozone’s economic engine may still be bumpy. Orders, adjusted for seasonal swings and inflation, dropped 1.4% vs. forecasts for a fall of just 0.6%. Moreover, the 2% climb in June was revised down to 1.8%. The report comes after the ECB lowered its growth forecasts for the eurozone on Thursday, with President Mario Draghi citing a slowdown in emerging-market economies.
Finance ministers and central bankers of G20 member states have gathered in Turkey’s Ankara city today to discuss the situation of the world economy, the slowdown in the emerging markets, as well as structural reforms and stabilization policies. Meeting participants will also talk over investment and infrastructure ideas, international financial architecture, regulation concerns and tax/currency issues.
The United States is preparing to sanction Chinese companies connected to the theft of U.S. intellectual property as early as next week, FT reports. The timing would give China some time to cool down before President Xi Jinping meets President Obama later in September. White House officials are also considering sanctions against Russian individuals and companies guilty of economic espionage and theft of trade secrets.
Meanwhile, China has sent the largest delegation ever to a major new conference being held in Russia’s far east with trade deals worth tens of billions of dollars on the table. Due to U.S. and EU sanctions over Ukraine, Russia and China’s economic ties have strengthened over the past year, increasing yuan-ruble trade and investment. Some 1500 foreign delegates from 24 countries are also attending the first Eastern Economic forum, which runs through September 5.
Stocks
The drama at Volkswagen is leading to more unexpected turns after the Porsche and Piech clans named CFO Hans Dieter Poetsch as their candidate for chairman. Poetsch’s gentle demeanor should help him mend fences at the company, which was rocked by a power struggle between CEO Martin Winterkorn and former chairman Ferdinand Piech in April. Although Volkswagen (VLKAY) has grown to become the world’s largest carmaker, it has proven to be one of the most difficult companies to manage due to labor representatives.
The bidding battle for Avolon (AVOL) has ended with Bohai Leasing snapping up the Dublin-based aircraft leasing company in a deal valued at just over $2.5B. Bohai said the $31/share agreed price vs. the August 10 offer price of $32/share “reflects significant volatility across global equity markets.” The move comes as Chinese lessors continue their expansion due to large carriers opening more routes at home and overseas.
Narrowing its focus to healthcare and crop science, Bayer (BAYRY) is proceeding with the multibillion-euro flotation of its plastics unit. “It will give us the opportunity to build our position as a pure-play polymers producer with strong competitive advantages,” said Patrick Thomas, Covestro’s chief executive. The business, which makes products ranging from foam for mattresses to high-tech plastics for cars, had revenues of €11.8B in 2014 and EBITDA of €1.2B.
Samsung Electronics is making the technology of its upcoming Gear S2 smartwatch available to competitors who use Android, hoping to increase its share of the market, which is now dominated by Apple (AAPL). According to Strategy Analytics, worldwide smartwatch shipments grew to 5M in the second quarter of this year from 1M in the same period of 2014. While Apple Watch captured 75% of global smartwatch market, Samsung (SSNLF) only took an 8% share.
Amazon Web Services is buying backend mobile video service Elemental Technologies for more than $500M in cash, The Information reports. Amazon (AMZN) plans to pair Elemental’s software with AWS’ cloud infrastructure and promises to “provide media and entertainment companies with a range of integrated solutions.” Elemental clients include ESPN, ABC, CNN, the MLB, the NBA, and BBC.
Facebook has begun testing an interactive/full-screen mobile ad format (first revealed in June) that lets users browse multiple pages of photos, videos, and other material. Initial testers for the ads, which could bring much higher prices than standard News Feed ads, include Gatorade and Michael Kors. Facebook (FB) is also pushing to host more content and is building a commerce portion of the site to host products as well.
BP attorneys have told a federal appeals court that the company should be allowed to recoup some of the money it paid in economic damage claims under a settlement arising from its Gulf of Mexico oil spill. After a 2012 settlement was approved, BP (BP) argued that the claims administrator had not been correctly matching business’ revenues and expenses, resulting in overpayments. A court eventually ordered a new calculation method but refused to order restitution of payments already made. BP -1.9% premarket.
GVC Holdings has agreed to buy Bwin.Party Digital Entertainment (PYGMF) for about £1.1B ($1.7B), winning a fight with 888 Holdings (EIHDF) to acquire the online gambling company. GVC’s (GMVHF) battle was the latest in a series of combinations in the gaming industry driven both by the growth of the sector and protection from increasing tax and regulatory pressures.