Market Snapshot
Asia: Japan -2.4% to 17427. Hong Kong +3.3% to 21259. China +2.9% to 3170. Hong Kong +3.5%.
Europe: London +1.7%. Paris +1.9%. Frankfurt +2.2%.
Futures: Dow +1.9%. S&P +2%. Nasdaq +1.9%. Crude -2.1% to $45.09. Gold -0.1% to $1119.70.
Ten-year Treasury Yield +4 bps to 2.17%.
Economic News
6:00 NFIB Small Business Optimism Index
10:00 Labor market conditions
3:00 PM Consumer Credit
Markets
Global stocks move higher following an uptick in eurozone GDP growth – which has been revised up to 0.4% on quarter from an initial estimate of 0.3%, boosted by household consumption and exports. GDP expanded 0.5% in Q1.
While the data was good in Europe, it was poor in China, sparking hope of more loose economic policy and a rise in stocks. Chinese imports fell for the tenth month in a row, tumbling a greater than expected 13.8% in August vs consensus of -8.2% and a drop of 8.1% in July. Exports dived 5.5% vs -8.3% previously. The fall in imports reflects lower global commodity prices and sluggish internal demand. While for many observers the dollar trade figures will do little to allay worries about China’s stumbling economy, research firm Capital Economics reckons that “trade has actually been quite healthy recently in volume terms.”
German exports recovered to climb 2.4% on month in July after dropping 1.1% in June and blew past consensus of +0.7%. Imports grew 2.2% vs -0.8%, while the trade surplus rose to a record €22.8B from €22.1B. However, the numbers come a day after data showed that industrial output slowed in July and after GDP missed forecasts.
While the eurozone’s GDP grew better than first thought, Japan’s economy contracted an annualized 1.2% in April-June vs an initial estimate of -1.6%. However, capital expenditure fell 0.9%, more than the original estimate of 0.1%, clouding growth prospects.
Japanese Prime Minister Shinzo Abe has won a rare second three-year term as the President of his Liberal Democratic Party after a potential rival was unable to muster enough sponsors to launch a challenge in a vote. While Abe wants to “spread the feeling of recovery to every nook and cranny of the regions,” the 1.2% fall in GDP in Q2 suggests that his radical reform program is stuttering. Still, Abe’s victory represents a rare period of stability in Japan’s often turbulent political scene.
Stocks
European Union and U.S. antitrust regulators will today reportedly approve GE’s (GE) €12.4B ($13.9B) acquisition of the power business of French peer Alstom (ALSMY). The authorization will come after months of wrangling, although it’s not clear what conditions authorities will require for the deal to go through.
Samsung reportedly intends to slash 10% of staff at its headquarters, where 99,000 employees work. The company plans to target staff in the human resources, public relations and finance departments. “Cutting jobs is the easiest way to control costs,” says Nomura analyst Chung Chang Won. “Samsung’s (SSNLF) preparing to tighten its belt as it isn’t likely to see rapid profit growth in the years to come.” The report comes as Samsung’s new flagship Galaxy smartphones fail to wow consumers.
Uber has raised $1.2B so far for its China unit, including from strategic partner Baidu (BIDU), as it looks to enter 100 more cities in the country over the next year. The controversial taxi-hailing service operates in 20 cities, with its market share rising to 30-35% from 1% at the start of 2015. Uber’s (Pending:UBER) Chinese rival, Didi Kuaidi, is reportedly close to raising $1B after attracting $2B in July. The plan for both companies seems to be to burn large quantities of cash in a bid to gain market share.
Woodside Petroleum has offered A$11.65B ($8.1B) in stock to acquire fellow Australian firm Oil Search (OISHF) in a deal that would imply a premium of 14%. The thinking amongst analysts seems to be that given that Oil Search has an attractive liquefied natural gas project in Papua New Guinea, Woodside’s (OTCPK:WOPEF) proposal is too low. Sanford C Bernstein’s Cristobal Garcia reckons a bidding war could break out that could pull in Total (TOT) and Exxon Mobil (XOM).
In the latest in a series of overseas acquisitions by Japanese insurers, Mitsui Sumitomo (MSADF) has agreed to acquire U.K. peer Amlin (APLCF) for £3.47B ($5.34B). The transaction is the fourth international deal in as many months involving Japanese insurers, which are looking to spread their geographic risk and generate growth beyond an ageing home market.