Market Snapshot
Asia:: Japan +0.6% to 18436. Hong Kong -0.6% to 22845. China +1.5% to 3369. India closed.
Europe: London -0.1%. Paris -0.1%. Frankfurt +0.2%.
Futures: Dow +0.3%. S&P +0.4%. Nasdaq +0.4%. Crude +1% to $45.67. Gold flat at $1167.40.
Ten-year Treasury Yield flat at 2.03%
Economic News
8:30 Initial Jobless Claims
9:00 FHFA House Price Index
10:00 Existing Home Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 Money Supply
4:30 Fed Balance Sheet
Markets
All eyes will be on ECB President Mario Draghi today amid a policy meeting in Malta that will provide clues about further monetary stimulus. Grounds for extending QE would include deflation risks, slowing growth in China and stock market volatility. On the flip slide, oil prices remain low, which is a boost for energy-importing eurozone countries, and confidence indicators remain solid. Economists widely expect Draghi to keep the door open for more stimulus at the press conference, but see him stopping short of announcing any new policy measures.
Chinese stocks recovered Thursday from an unexpected selloff in the previous session, though investors remain wary of weakness in the world’s second largest economy. The central bank’s moves to add liquidity to the market have helped restore some confidence, analysts said. After the close on Wednesday, the PBOC injected 105.5B yuan ($16.6B) into 11 financial institutions via medium-term lending facilities. Shanghai +1.5%; Shenzhen +3.7%; Chinext +4.8%.
Treasury Secretary Jacob Lew is concerned that “last-minute brinkmanship” in Congress could lead to a legislative “accident” in which lawmakers would fail to raise the debt ceiling before a Nov. 3 deadline. The standoff is bubbling through financial markets as investors limit their exposure to Treasury bills that mature in November, pushing yields to levels last seen two years ago, when Congress went through a similar episode. Republicans also find themselves distracted by leadership turmoil after House Speaker John Boehner said he would resign at the end of October.
The White House is also making its most expansive push yet to solve the debt crisis in Puerto Rico, pressing Congress to amend bankruptcy code, instate a financial control board and extend tax credits as the commonwealth struggles with $72B in debt. On Wednesday, the Government Development Bank, the island’s de facto fiscal authority, ended talks with a group of its bondholders and their advisers after failing to reach a deal on restructuring the debt.
Gold has recaptured its shine in recent months, but that doesn’t change the cloudy outlook for the precious metal over the longer-term, warns Goldman Sachs, which sees prices falling to $1,000 in 12 months as the Fed normalizes monetary policy. The yellow metal has rallied almost 8% since mid-July, and is currently trading at $1,167 an ounce.
“Greece has done a certain number of reforms, and we are going to give them money, €3B in all,” European Economics Commissioner Pierre Moscovici told Europe 1 radio regarding the next installment of the country’s bailout program. “And in the course of November, December, we will deal with the issue of the recapitalization of Greek banks and Greek debt,” he added.
A fresh drive to impeach Brazilian President Dilma Rousseff is undermining market confidence again and bringing a decision about her political survival one step closer. The new petition is seen carrying more weight than the two dozen attempts before it, as it’s based on a federal audit stating her government doctored fiscal documents to hide the size of the country’s massive deficit. The Brazilian real has plunged 32% so far this year, while GDP is forecast to contract 3% in 2015.
Stocks
Approval of a four-year labor contract with Fiat Chrysler (FCAU) appeared headed for victory Wednesday night after United Auto Workers members showed overwhelming support for the deal. The final results of the ratification vote are expected to be issued today. If approved, UAW President Dennis Williams will next move his focus to winning similar contracts at Ford (F) and General Motors (GM).
Ferrari sparkled on its first day of trading yesterday as the luxury sports car maker celebrated the first step toward becoming an independent company. The stock traded as high as $60.97, or 17% above the $52/share IPO price, and closed at $55. According to analysts, about 9% of Ferrari (RACE) is publicly traded, creating a scarcity premium that is helping sustain its share price.
Norwegian Air has agreed to buy 19 Boeing (BA) 787-9s to expand its long-haul fleet fivefold to 38 aircraft in the next five years. The purchase, valued at more than $5B based on list prices, is the largest any European firm has ever made for Dreamliners. Norwegian (NWARF) plans to use a mix of commercial loans and U.S. export credits to pay for the order and will not need to issue new shares.
In his second public appearance since being named Twitter’s (TWTR) permanent chief executive, Jack Dorsey apologized for the longstanding rocky relationship the company had with outside app developers. “We are going to reset our relations and we want to make sure that we are learning, that we are listening and that we are rebooting,” Dorsey said at the company’s annual developer conference in San Francisco. Twitter also announced a slew of new offerings to make it easier for developers to build apps, make money, use Twitter content and take advantage of the social media’s trove of data.
YouTube is launching a $10-a-month subscription option in the U.S. next week that will allow viewers to watch videos from across the site without interruption from advertisements. Why not just get AdBlock? Well, the service, called YouTube Red, will also provide original shows and movies, a subscription to the Google (GOOG, GOOGL) Play Music service and supports the newly-launched YouTube Gaming app.
A swift plunge in the stock price of Valeant Pharmaceuticals (VRX) cost some of Wall Street’s top names billions of dollars on Wednesday but Pershing Square’s Bill Ackman took the meltdown as a buying opportunity. Ackman swept up 2.1M additional shares as the company plummeted as much as 40% on a report from Citron Research that alleged it fraudulently inflated revenues. The report goes so far as to call Valeant the “pharmaceutical Enron.”
With the hedge fund industry facing increasing pressure, David Einhorn, whose Greenlight Capital (NASDAQ:GLRE) is nursing a 17% loss this year, has decided to shake up his portfolio. The billionaire investor has liquidated investments in LAM Research (LRCX) and Citizens Financial (CFG), bought new shares in Michael Kors (NYSE:KORS) and UIL Holdings (UIL), and exited short bets against St. Joe (JOE), U.S. Steel (X), Robert Half (RHI) and Intel (INTC). Should Einhorn end 2015 in the red, it would be his first loss since the financial crisis.
CIT Group Chief Executive John Thain, who was appointed to turn around the commercial lender after its bankruptcy in 2009, will retire as CEO in March, but will continue as board chairman. He’ll be succeeded as CEO by board member Ellen Alemany. Thain has had quite a career, including positions such as the finance chief of Goldman Sachs, head of the New York Stock Exchange and CEO of Merrill Lynch. CIT rose 5.1% in after-hours trading.