Market Snapshot
Asia:: Japan +1.1% to 18292. Hong Kong +0.8% to 23068. China +1.6% to 3391. India +0.8 to 27215.
Europe: London +0.5%. Paris +0.5%. Frankfurt +0.5%.
Futures: Dow flat. S&P flat. Nasdaq +0.1%. Crude +1.3% to $47.46. Gold -0.5% to $1181.60.
Ten-year Treasury Yield -1 bps to 2.01%
Economic News
9:15 Industrial Production
10:00 Job Openings and Labor Turnover Survey
10:00 Reuters/UofM Consumer Sentiment
10:00 Atlanta Fed’s Business Inflation Expectations
4:00 PM Treasury International Capital
Markets
World shares are heading higher, extending a rally that’s added $4.1T to global equities this month, following a slew of weak economic reports that have dashed expectations for a Fed rate hike in 2015. European stocks are up, and U.S. futures are edging to the green, adding to the gains in Asia which saw equities close at two-month highs. Another round of corporate earnings is still ahead and traders are awaiting figures on U.S. industrial production, which has shown a slowdown in manufacturing output since late last year.
U.S. banks are feasting on Treasuries in yet another sign investors expect policy makers to delay raising interest rates. Commercial lenders boosted their holdings to a record $2.15T at the end of last month, translating to a stake almost double the amount owned by China, the biggest U.S. foreign creditor. According to futures data, the probability the Fed will increase rates in December has now dropped to 30% from 70% odds at the beginning of August.
Forget about the IPO slowdown, the U.S. venture capital market is on track for one of its best years in almost two decades. Despite a slight deceleration in Q3, venture capitalists have so far pumped $47.2B into the market in 2015, according to a report from PwC, the NVCA and Thomson Reuters. That level is higher than 17 of the last 20 years, and the third quarter marks the second-highest period in aggregate investment dollars since the fourth quarter of 2000.
“It is inaccurate to suggest that the Treasury Department is in talks to undertake any of Puerto Rico’s obligations,” White House spokesman Josh Earnest said during a daily news briefing on Thursday. “To my layman view, issuing bonds that are backed by the full faith and credit of the U.S., would raise some questions about whether or not we’re undertaking their financial obligations.” The statement confirms that any issuance of a “superbond” administered by Treasury would not involve the federal government issuing debt or even guaranteeing debt.
Fitch has cut Brazil’s credit rating to the brink of junk, warning the country could soon lose its coveted investment grade due to the “rising government debt burden, increased challenges to fiscal consolidation and a worsening economic growth backdrop.” The rating agency left a negative outlook on the new rating, suggesting it eventually could follow Standard & Poor’s recent downgrade to junk. A second move into the territory would trigger further losses for Brazil’s economy, since it could force many investors to sell some of their assets.
Stocks
Netflix’s first original feature film, Beasts of No Nation, is scheduled to make its global debut on Friday. The movie will be Netflix’s (NFLX) first film to be released simultaneously in 29 theaters and on its streaming service, blending the new with the old and prompting questions about the future direction of the movie business. It’s also a major shake-up to an industry in which movies generally get a 90-day window before they hit the Internet or DVDs.
What about Hulu? In a wide-ranging interview with The Hollywood Reporter, CEO Mike Hopkins said he currently has no plans to move into original films like Netflix (NFLX) and Amazon (AMZN) or take the service overseas. “Movies are important for us, but I’m not sure we’re at a point where we’re going to be doing original movies,” he confirmed.
Starbucks is in talks with an Italian partner to open branches in Italy, one of the few major markets where it has yet to make an entrance. The country’s entrenched cafe culture – Italians often prefer espresso drinks to regular coffee, and typically pay less for them than what Starbucks normally charges – has been seen as a reason why Starbucks (SBUX) has held back. A deal with local business magnate Antonio Percassi is expected to be signed by Christmas.
McDonald’s is close to deciding on whether to restructure its sizable real estate assets into a McREIT, board member Miles White said in an interview with WSJ. The company has long emphasized the importance of owning its property, but with its sales slumping recently, some investors and analysts have called for it to spin off the U.S. holdings. McDonald’s (MCD) leaders will discuss more on the business strategy at its investors meeting in November.
Plagued by a Maggi noodle recall and a strong Swiss franc, Nestle (NSRGY) reported weak sales growth during the nine months to September that missed analyst forecasts. Underlying growth slowed to 4.2% vs. estimates of 4.7%, sliding further behind the 5-6% organic growth target the company refers to as the “Nestle Model.” The food maker now expects organic sales growth of 4.5% in 2015.
SeaWorld intends to challenge a decision banning it from breeding killer whales in captivity, after California authorities gave the theme park permits for two larger orca pools on condition it stops the practice. Attendance at SeaWorld (SEAS) has steadily declined since the release of the popular documentary “Blackfish” in 2013, and the company’s stock price has suffered as a result. SEAS closed at $18.77 a share on Thursday. In May 2013, the stock price was $38.88.
UPS has announced it will charge more to ship larger and heavier packages this holiday season as it moves to recoup some of the higher costs of handling larger shipments that are causing delivery logjams. Effective Nov. 2, the surcharge for Over Maximum Packages and the tables for Ground, Air and International fuel surcharges will be increased. UPS (NYSE:UPS) will also raise Freight rates an average net of 4.9% starting on Oct. 26.
According to new U.K. rules, Britain’s biggest banks will have to hold up to £3.3B of extra capital between them when they are forced to ringfence their investment banking operations in 2019. The Bank of England’s regulations are also allowing “ringfenced” banks to transfer capital from their retail arms to other parts of their businesses in the form of dividends, a move loudly applauded by the U.K.’s largest lenders. Related tickers: RBS, HSBC, LYG, BCS, SAN
U.S. health regulators have dealt a blow to AstraZeneca’s (AZN) fixed-dose combination of the diabetes drugs saxagliptin and dapagliflozin, stating that more clinical data is required for an approval. In a late-stage clinical trial, AstraZeneca said its combination therapy helped patients reduce blood sugar levels more than either drug alone. “This is clearly bad news for Astra,” said Sam Fazeli, an analyst with Bloomberg Intelligence. “It’s not clear how long they will have to wait.”