Market Snapshot
Asia:: Japan +2.1% to 18825. Hong Kong +1.3% to 23152. China +1.3% to 3412. India +0.7% to 27471.
Europe: London +1.1%. Paris +1.7%. Frankfurt +2%.
Futures: Dow +0.5%. S&P +0.4%. Nasdaq +0.8%. Crude +0.3% to $45.51. Gold +0.5% to $1171.40.
Ten-year Treasury Yield +3 bps to 2.05%
Economic News
9:45 PMI Manufacturing Index Flash
Markets
Stocks across the globe are extending a rally from the previous session, after ECB President Mario Draghi signaled his willingness to add more stimulus to the eurozone’s flagging economies. “We are ready to act if needed…and we are open to the full menu of monetary policy,” Draghi said at his news conference. The euro fell 1.8% following the comments yesterday, the currency’s biggest drop since the central bank announced quantitative easing in January, and is now trading at $1.1104.
While the eurozone’s composite PMI unexpectedly increased to 54 in October from 53.6 in September, signaling a pickup in activity, forward-looking indicators point to a risk of a slowdown, according to Markit Economics. Service-sector expectations for the year ahead fell to a 10-month low, while the factory orders-to-inventory ratio dipped to the weakest level in nine months. The report falls in line with Draghi’s latest analysis of the economy.
At a rate review next week, the Bank of Japan will cut its growth and inflation outlook for this fiscal year but only slightly tweak its projections for 2016, Reuters reports. By not straying far from its current projections, the BOJ can still maintain it’s on course to meet its inflation goal of 2% next year without needing to step up its massive asset purchase scheme. Critics say the program has been only marginally effective, and the BOJ board itself has not been unreservedly behind it. Nikkei +2.1% to 18,825.
South Korea’s economy rebounded in the third quarter, shaking off a blow dealt by a deadly MERS outbreak earlier this year. Gross domestic product expanded 1.2% from the three months through June, marking the fastest pace of growth since Q2 of 2010. Growth factors: Rising consumption and construction activity gave the economy a much needed boost, but weak exports may mean the country is still on track for a full-year slowdown.
U.S. Senators expressed skepticism about how much they could help debt-ridden Puerto Rico at a hearing on Thursday, where the territory’s top officials warned the island could be completely illiquid by November. A so-called “Super Chapter 9” plan was also discussed. If enacted, it would allow Puerto Rico to use bankruptcy to restructure all its debt, not just the small portion held by public agencies that would be eligible if Chapter 9 were extended.
Stocks
Three tech giant names are still dominating the headlines, following a large commotion after Thursday’s closing bell. Shares of Microsoft (MSFT), Amazon (AMZN) and Google holding company Alphabet (GOOG) all jumped at least 9% in after-hours trading, with the latter two firms’ shares topping all-time highs. Quick earnings breakdown: Microsoft soared past expectations on cloud products, Amazon posted its second straight profit powered by Web Services, and Alphabet announced a massive buyback of up to $5.1B in Class C capital stock.
On to General Motors! Fresh from securing member approval of a labor contract with Fiat Chrysler (FCAU), the United Auto Workers is turning its attention to wage negotiations at GM (GM), where union leaders believe they have the best chance of sealing a quick deal. Officials aim to use the new four-year pact reached at Fiat Chrysler as a template for talks, although UAW President Dennis Williams has signaled he will press for a richer deal because GM is more profitable. In the meantime, talks with Ford (F) will be put on the back burner.
The recall of potentially defective Takata (TKTDY) airbags, one of the largest and most complex auto recalls in the nation’s history, may grow even larger. The NHTSA has expanded its investigation beyond front seat airbags to include the ones on a vehicle’s side and is examining all model years, not just older inflators. More than 19M cars have already been called back in the U.S. to fix the dangerous devices, and millions more have been recalled abroad.
Tesla Motors could begin producing cars in China in two years, Chief Executive Elon Musk said, adding that local production had the potential to cut the sales prices of its models in the country by a third. Weak sales in China led to massive job cuts earlier this year. Domestic media put the headcount reduction at 30% percent of Tesla’s (TSLA) 600 Chinese staff.
Australia’s antitrust regulator is raising more concerns about Halliburton’s (HAL) proposed buyout of Baker Hughes (BHI), in another setback for a deal that has already been hit with competition issues in the U.S. Delaying its final ruling for a third time, the Australian Competition and Consumer Commission said the $34.6B takeover may “result in the merged entity being one of only a small number of suppliers that could service the relevant markets.” The regulator will give a final ruling on Dec. 17.
Valeant’s stock price continued its slide on Thursday (-7.4%), a day after Citron Research accused the company of using a network of pharmacies to create phantom sales of its products. The drugmaker has now vowed to refute the allegations in a conference call on Monday. Valeant (VRX) shares, which hit a record high of $263.81 on Aug. 6, closed yesterday’s session at $109.87.
The U.S. is emerging as a serious alternative to Hong Kong as the possible headquarters for HSBC, sources told FT. Hong Kong had long been considered the most likely destination for HSBC if it decided to move, but growing concerns about the political risk of the bank ending up under Chinese control have prompted a rethink. HSBC plans to update investors early next month on its discussions and aims to decide on its future headquarters by the end of the year.
More dark pool doom? Credit Suisse (NYSE:CS) and Barclays (BCS) are in talks to pay as much as $150M combined to end several investigations and one lawsuit alleging improprieties related to their “dark pools,” WSJ reports. The settlements with the SEC and NY Attorney General could result in the two biggest penalties to date for alleged wrongdoing at bank-operated private-trading venues. The biggest thus far is the $20.3M New York brokerage Investment Technology Group agreed to pay the SEC in August.
Liberty Global has confirmed that it’s in takeover discussions with U.K.-based Cable & Wireless Communications (CWIXF) in a deal that could value the company at more than $5B. A buyout could happen before the two companies report financial results in early November, WSJ reports. If completed, the deal would broaden Liberty Global’s (LBTYA) presence in the Caribbean and Latin America.
Seeking to rebuild employee morale, Twitter (TWTR) CEO Jack Dorsey is giving a third of his personal stake in the firm (around 1% of Twitter) to an employee equity pool following the recent layoff of 8% of the company’s global staff. This is not the first time Dorsey has dipped into his personal wealth. He recently disclosed plans to donate 40M shares of Square (SQ) (10% of the company) to the Start Small Foundation, a charity that invests in small creative businesses.