Market Snapshot
Asia: Japan +0.3% to 18026. Hong Kong -0.5% to 21455. China -3.6% to 3005. India -0.4% to 25766.
Europe: London -0.5%. Paris +0.1%. Frankfurt -0.2%.
Futures: Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude +1.0% to $44.45. Gold -0.2% to $1105.40.
Ten-year Treasury Yield -1 bp to 2.17%
Economic News
8:30 Retail Sales
8:30 Empire State Mfg Survey
8:55 Redbook Chain Store Sales
9:15 Industrial Production
10:00 Business Inventories
Markets
Stock market volatility in China extended as the Shanghai Composite Index shed 3.6% to mark its sharpest drop in three weeks. The index barely held onto the psychologically critical 3,000 level. The Hang Seng lost 0.5%, and the major index in Australia was off 1.5%. The yen broke back higher after the Bank of Japan held rates steady. The central bank warned on slowing demand from emerging markets. European stocks are mildly lower in mid-day trading. Traders across the Atlantic indicate uncertainty over the U.S. Federal Reserve’s interest rate decision later this week is holding back action. U.S. stock index futures point to a minor downtown at the open as caution ahead of the Fed meeting locks down investors.
Retail sales for August will be released later today in one of the most highly-anticipated economic releases of the month. Sales are expected to rise 0.3% to mark a deceleration from the 0.6% gain recorded in July. There’s been plenty of discussion in the retail sector on the impact of the shift of the Labor Day weekend into September this year and the slower start for back-to-school shopping as more consumers shift to online purchasing. Fed watchers in particular will dissect the August report and any revisions to the July number. A gain of 1% or more in either month could be used to support the case for a rate hike.
Inflation in the U.K. was flat during August, meeting analysts’ expectations. Food and transport prices were a significant drag on inflation during the month. The reading on prices has been flat or negative for five months out of seven as inflation in the region stays well below the Bank of England’s 2% target rate.
Brazil announced a new round of spending cuts and tax hikes in an effort to narrow a budget deficit after the nation’s credit rating was reduced last week. The new measures total 65B reals ($16.9B), including tough cuts in public health and housing spending. Brazil is racing to get ahead of more credit agency cuts to speculative territory after S&P acted last week.
Stocks
The UAW extended its deadline with Fiat Chrysler Automobiles on an hour-by-hour basis to allow talks to continue through the night. The development is also a positive sign for automakers Ford (NYSE:F) and General Motors (GM), which are in the back seat while Fiat looks to drive home a new labor deal as the lead negotiator with the workers group.
Disney lined up a deal to make Tencent (TCEHY) China’s exclusive online distributor of the first six Star Wars films. The move by Disney (DIS) will give Tencent legitimate access to the movies to a crucial movie market for the first time. The deal – which includes the existing films as well as related content, including shorts, deleted scenes, featurettes and other extras – is an extension of a media collaboration that Tencent has with Disney and Fox (FOXA) for video on demand.
BMW and Toyota may deepen their partnership in a bid to lower global manufacturing costs and explore hydrogen car options. The two automakers have already worked together on a hydrogen prototype of the BMW Series 5. Toyota (TM) and BMW (BAMXY) are out in front of peers in hydrogen development. Speculation on strategic alliances between automakers has been a large focus of the Frankfurt Motor Show this week, although most executives have danced around questions on major mergers.
Petrobras will reportedly slow down a planned sale of assets and turn its attention to cost-cutting to trim its massive debt. The change in strategy would mean Petrobras’ (PBR) plan to sell up to 25% of distribution unit BR Distribuidora would be placed on hold. PBR appears unable to meet its goal of selling $15.1B of assets by the end of 2016, and cost-cutting efforts have fallen short.
Ford will start using an advanced Alcoa (AA) aluminum alloy for several parts of its top-selling F-150 pickup, and the companies will collaborate on using the next-gen “Micromill” process aluminum in other vehicles through a joint development agreement. The steel-replacing alloy has been a key target for automakers seeking to meet tougher fuel standards with lighter vehicles while meeting safety standards. Ford’s (F) F-150 sales in the U.S. have picked up momentum this summer, as production has ramped up.
A number of companies could see a bounce in trading today after setting buyback allowances higher. Sanmina (SANM) launched a new $200M buyback, which is an amount that could cover 14% of shares at current levels. Parexel (PRXL) announced its own $200M repurchase plan to represent 5% of shares at current levels. New buyback firepower from Datalink (DTLK) of $10M is good enough to cover 7% of shares at current levels. Sonic (SONC) also weighed in with guidance for $126M in buybacks.
Canadian National Railway launched a C$850M debt offering that it expects to close on Sept. 22. The deal is in three tranches: C$350M in 2.8% notes due 2025, C$400M in 3.95% notes due 2045, and C$100M in 4% notes due 2065. Canadian National Railway (CNI) expects to use the proceeds for general purposes, including debt rollovers as well as share buybacks.
Silver Wheaton perked up in after-hours trading yesterday after the company initiated its first-ever normal course issuer bid for 20.23M common shares, representing 5% of total common shares outstanding. Silver Wheaton (SLW) maintains the strategy may be the best option for shareholders.