European and Asian shares have tracked yesterday's U.S. stock performances and have pulled back after enjoying strong gains earlier this week, although U.S. futures were back in the green at the time of writing. For those looking for reasons for any of the negativity, take your pick from the following: worries about China as producer prices remain firmly in deflation; will the Fed raise rates next week or hold off?; concerns about Japanese capital spending; Brazil being sent into junk territory; and the lack of pizzazz in Apple's (NASDAQ:AAPL) product launches yesterday.
Economy
China's CPI inflation rose 2% on year in August from 1.6% in July and topped consensus as a 19.6% surge in pork costs drove food expenses higher. Excluding the flying pig prices, inflation is looking pretty subdued, while the deflation in producer costs deepened as PPI tumbled 5.9%. That's the metric's 42nd consecutive decline. After rising strongly yesterday, the Shanghai Composite fell 1.45% today.
Standard & Poor's has cut Brazil's investment-grade credit rating to junk for the first time since 2008, warning that it could lower the grade again in the coming months. The agency pointed to political challenges that are putting a balanced budget at risk as a reason for lowering the rating to BB+. Fitch and Moody's still have Brazil at investment grade - for now - but if either one follows suit, as the country's situation rapidly degrades, it would trigger massive cash outflows from pension funds.
Japanese machinery orders, a leading indicator of capital expenditure, unexpectedly dropped 3.6% on month in July after falling 7.9% in June and badly missed consensus of +3.7%. The problem for policymakers is that they were hoping that the weaker yen and lower energy prices would help boost corporate profits, which would be used to increase wages and capital spending. However, this doesn't seem to be happening. The Nikkei tumbled today after surging 7.7% yesterday.
Stocks
Bombardier surged 24% in Toronto yesterday, the most in a single day since 1988, amid growing optimism over the potential value of the company's rail unit and the sales prospects for the firm's CSeries jet. According to earlier reports, Bombardier (OTCPK:BDRAF, OTCQX:BDRBF) rejected a bid by Beijing Infrastructure Investment for 60%-100% of Bombardier Transportation that gave the business an enterprise value of as much as $8B.
Japan's government is looking to raise a total of $11.5B in the sale of stakes of 10% in Japan Post Holdings Co and its bank and insurance units. The privatization is set to be Japan's largest in almost three decades as Prime Minister Shinzo Abe continues his economic reforms. Japan Post Bank has a portfolio of $1.7T, making it one of the world's largest institutional investors, while the insurance company is the country's biggest by assets. However, worries exist about the prospects for the firms.
XPO Logistics has agreed to acquire trucking and logistics company Con-Way (NYSE:CNW) for $3B including debt. The agreement is the latest in a string of transactions that have helped XPO (NYSE:XPO) grow into a major player in the global logistics market: since 2011, the company has completed at least 14 mergers and increased its revenue to a projected $6.7B this year from $177M.
Express Scripts has appointed company President Tim Wentworth to the additional role of CEO, effective when current CEO George Paz retires in May. Paz will continue to serve on the Board of Directors of Express Scripts (NASDAQ:ESRX) as non-executive Chairman.
The Department of Justice has issued guidelines to federal prosecutors that encourage the prosecution of individual employees at financial firms involved in wrongdoing. While authorities have obtained billions of dollars in fines from major companies, the DOJ has prosecuted few executives in relation to the housing collapse, financial crisis and other corporate scandals. In settlement talks, Justice only wants to give credit to companies for co-operation, which can save billions, if they provide evidence against employees "regardless of their position, status or seniority."
New York regulators have sent letters seeking information to big banks that are primary Treasury dealers as part of a probe into the potential manipulation of bond auctions, Reuters reports. The banks - including Barclays (NYSE:BCS), Deutsche Bank (NYSE:DB), Goldman Sachs (NYSE:GS), Societe Generale (OTCPK:SCGLY) and Credit Suisse (NYSE:CS) - aren't charged with specific wrongdoing at the moment, as the investigation is still in its early stages. Boston's public employee pension fund, State-Boston Retirement System, sued 22 primary dealers in July alleging conspiracy to manipulate Treasury auctions.
Companies raised $28B of investment-grade bonds in U.S. markets yesterday as the corporate-debt market roared back to life after a three-week hiatus that was partly due to worries about China. Nineteen companies issued debt, including Gilead Sciences (NASDAQ:GILD) with a $10B deal, home-improvement retailer Lowe's Cos. (NYSE:LOW) and hotelier Marriott International (NASDAQ:MAR). Overall, firms have sold $1.2T worth of new debt in the U.S. this year, including junk-rated paper, putting the market on course to set a record for a fourth consecutive year.
Ikea's sales climbed 11% to €31.9B in the year to August as the world's largest furniture retailer enjoyed strong growth across different regions. "China remained the fastest-growing Ikea Group market, followed by Russia," Ikea said. "Germany showed record growth and North America performed well. Also south Europe demonstrated positive progress." The Swedish behemoth aims to earn annual revenue of €50B by 2020.
Dell intends to invest $125B in China over the next five years as the world's third-largest computer manufacturer continues its expansion in the country. "Dell will embrace the principle of 'In China, for China' and closely integrate Dell China strategies with national policies," CEO Michael Dell said. The plan includes strengthening the company's research and development team in the country.
Today's Markets
In Asia, Japan -2.5% to 18300. Hong Kong -2.6% to 21563. China -1.45% to 3198. India -0.4% to 25622.
In Europe, at midday, London -0.6%. Paris -0.4%. Frankfurt -0.2%.
Futures at 6:20, Dow +0.3%. S&P +0.4%. Nasdaq +0.4%. Crude +1.6% to $44.85. Gold +0.3% to $1105.20.
Ten-year Treasury Yield +3 bps to 2.21%.
Today's Economic CalendarIn Europe, at midday, London -0.6%. Paris -0.4%. Frankfurt -0.2%.
Futures at 6:20, Dow +0.3%. S&P +0.4%. Nasdaq +0.4%. Crude +1.6% to $44.85. Gold +0.3% to $1105.20.
Ten-year Treasury Yield +3 bps to 2.21%.
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