World shares extended a losing streak today as bourses came under pressure from weak Chinese trade data (see below) and fallout from Monday's oil price rout, which saw crude plunge 6% to its lowest level in almost seven years. "All of this is just a reminder of the weaker China macro story, which is passing through into the global backdrop as we have seen with the drop in oil prices, as no one is prepared to cut supply," said Simon Quijano-Evans, chief emerging markets strategist at Commerzbank. Investors are also moving to the sidelines before next week's meeting where the Fed is expected to raise U.S. interest rates.
Economy
Intensifying concerns about the world's second-largest economy, China's November exports dropped 6.8% for a fifth consecutive month, while imports fell 8.7% over the same period, marking a decline for every month over the past year. The figures leave the country with a trade surplus of $54.1B. The data also comes after a report last week showed China's manufacturing conditions slipping to the weakest level in more than three years, while inflation data tomorrow is forecast to show additional weakness in consumer prices.
Japan's latest recession turned out not to have been a recession at all. The country's economy grew at a relatively robust pace last quarter, with GDP up an annualized 1%, compared to a preliminary reading of a fall of 0.8%. The latest report, which reflects more buoyant data on business investment and a rosier view of consumer spending, could relieve the pressure on Japan's central bank to do more to support growth or expand its stimulus program.
Eurozone growth in the third quarter was bolstered by rising inventories and higher household spending as exports suffered from a slowdown in global trade. GDP in the 19-nation bloc rose 0.3% in the three months through September after expanding 0.4% in the prior quarter, the European Union's statistics office said. The data comes less than a week after the ECB cut one of its main interest rates to a record low and expanded its asset-purchase program to at least €1.5T.
Impeachment proceedings against Brazil's President Dilma Rousseff were delayed on Monday, when House Speaker Eduardo Cunha said an agreement couldn't be reached on the creation of a committee to handle the first phase of investigations. Rousseff is accused of illegally meddling with the government's books in 2014 and 2015 to disguise a growing budget gap. Government loyalists, who are hoping for a quick resolution, criticized the delay as a maneuver that was in violation of deadlines set by the rules for an impeachment process.
Former pariah state Myanmar is set to launch its new stock exchange on Wednesday, marking the next stage of economic rehabilitation following decades under military rule. Owners of the Yangon Stock Exchange (YSX), reportedly a $24M investment, include state-owned Myanmar Economic Bank, Daiwa Securities and the Japan Exchange Group. Since Western sanctions were lifted on Myanmar in 2013, foreign direct investment hit a record $8B during the 2014-2015 fiscal year as multinationals bet on an emerging consumer boom.
The U.S. Export-Import Bank may have been reauthorized on Friday, but the fight is still not over for the government's embattled export credit agency. With three empty seats on its five-member board, the bank lacks a quorum. This means that until President Obama nominates members, and the Senate confirms them, Ex-Im Bank can only approve small export deals, not the big orders for aircraft, satellites and major manufacturing equipment. For opponents of the agency, "this is again their chance to try to kill Ex-Im," said Senator Sherrod Brown of Ohio.
Prime Democratic nominee Hillary Clinton is planning to deter companies from leaving the U.S. through an "exit tax," her campaign said late Monday, making it even more restrictive than President Obama's proposals. The move would require companies to pay American taxes on deferred foreign earnings if they attempt a so-called "tax inversion." Republican front-runner Donald Trump also made headlines yesterday, calling for a ban on Muslims entering the U.S. until the nation's leaders can "figure out what is going on."
Stocks
The proposed $110B MegaBrew deal will get tested before Congress today, with AB InBev (NYSE:BUD) Chief Executive Carlos Brito and Molson Coors (NYSE:TAP) CEO Mark Hunter testifying before the Senate Judiciary Committee. The panel will review how the merger of the world's two biggest beer producers, which could soon hold the No. 1 or No. 2 positions in 24 of the world's 30 largest beer markets, would affect competitors and consumers. As part of the deal, AB InBev plans to sell SABMiller's (OTCPK:SBMRY) 58% stake in MillerCoors to Molson, and is exploring the sale of European brands Grolsch and Peroni.
Thirty Boston College students got sick after eating at a Chipotle (NYSE:CMG) restaurant over the weekend, a school spokesman said, sending shares down 6% in after-hours trading yesterday. The incident renews fears about food poisoning at the restaurant chain, which is trying to bounce back from a spate of E. coli illnesses in nine states that sickened at least 47 customers. On Friday, Chipotle said it expected sales to drop between 8-11% in the fourth quarter, marking the first time the figure fell since the company went public in 2006.
The $13.9B buyout of Keurig Green Mountain by privately-owned JAB Holding Company created a lot of buzz in the beverage sector yesterday. Both SodaStream (SODA +10.6%) and Coffee Holding (JVA +5.5%) saw a lot of traction with M&A in the segment raising their profile. Keurig (NASDAQ:GMCR) stakeholder Coca-Cola (NYSE:KO) said it backed the takeover and indicated it will work with JAB to stay on as a major single-serve partner.
Valeant Pharmaceuticals is considering selling its gas permeable contact lens division, Paragon Vision Sciences, which has come under scrutiny by the Federal Trade Commission for monopoly concerns. The probe is one of several reviews of the company that is being investigated by lawmakers over steep price increases and from investors over its relationship with specialty pharmacy Philidor. Valeant (NYSE:VRX) shares have dropped more than 60%since it came under criticism for drug price hikes in September.
The U.S. Federal Trade Commission has filed a complaint aimed at stopping Staples (NASDAQ:SPLS), the nation's largest office supply store, from buying its top rival, Office Depot Inc (NASDAQ:ODP). "The commission has reason to believe that the proposed merger between Staples and Office Depot is likely to eliminate beneficial competition," FTC Chairwoman Edith Ramirez said in a statement. Canada's Competition Bureau also said it would challenge the proposed transaction.
Air France-KLM estimates the negative effect of the Paris attacks on total November revenue at around €50M ($54.3M), while the Bank of France has cut its forecast for economic growth for the country to 0.3%. Although the airline expects the impact of the attacks to linger this month, management is sticking to its financial forecasts for the full year, CFO Pierre-Francois Riolacci told journalists. The report came shortly after an "anonymous" bomb threat overnight diverted an Air France (OTC:AFRAF) passenger jet - traveling to Paris from San Francisco - to Montreal's Trudeau Airport.
As the climate summit in Paris enters its final week, clean energy stocks have gained little ground, and several fund managers say they have not been doing any additional buying as a result of the meeting. "I have quite low expectations of anything meaningful" for the near term, said Edward Guinness, portfolio manager at the Guinness Atkinson Alternative Energy Fund. Even if the talks see big commitments for alternative energy development, money won't start flowing for several years and many of the pledges are aimed at early stage projects not run by public companies. ETFs: XLE, ERX, VDE, KOL,OIH, ERY, DIG, DUG, IYE, FENY, PXJ, RYE, FXN, DDG
Anglo American -9% in London after announcing several restructuring steps that will cut 85,000 jobs amid a commodities slump that's hitting miners across the globe. The company said it will consolidate its six business units into three (De Beers, Industrial Metals and Bulk Commodities), confirmed plans to sell its niobium and phosphates business, and increased its divestment target from $3B to $4B. Anglo (OTCPK:AAUKY) also declared it would withhold dividend payments for the next 18 months to shore up its balance sheet.
The Kinder Morgan contagion triggered a selloff throughout the entire MLP space yesterday as fears of a wave of yield cuts have spread throughout the market. "While KMI is no longer an MLP, it is viewed as a leading indicator for MLPs," Pointe Capital's Dan Willard said. "If times are challenging for KMI, then many assume it is for all." Analysts are increasingly expecting a dividend cut, given that the company won't issue more equity and plans to retain its investment grade rating, which means it also cannot issue more debt. KMI-1.6% premarket.
Despite the drop in natural gas and crude prices, activist investor Carl Icahn has raised his stake in struggling Cheniere Energy (NYSEMKT:LNG), marking the eighth time he upped his holdings in the company since taking an initial 8.2% position in August. According to a Dow Jones report, the billionaire boosted his stake to 13.8% from 12.7% previously. The stock is now up slightly premarket following a day in which it slid 5.4%. It has plummetedmore than 40% this year.
LeBron James has agreed to stay put - with Nike (NYSE:NKE). The sports apparel retailer and the basketball star have agreed to a lifetime relationship, marking the latest high-profile NBA endorsement. "We see the potential for this to continue to grow throughout his playing career and beyond," Nike declared, although it didn't disclose the terms of the agreement. Sources say it's the largest endorsement deal in the company's history.
Newell Rubbermaid, known for its Sharpie markers and Parker pens, is in talks to combine with consumer products company Jarden (NYSE:JAH), according to the WSJ. Both companies' shares have surged in recent years on the strengthening economy and prior acquisitions that were well received by investors. The combined company would have around $14B in annual sales.NWL +2.1% premarket.
Canadian Pacific is expected to revise terms of its $28.4B bid for rival Norfolk Southern (NYSE:NSC), with a complex plan that aims to put cash in shareholders' hands ahead of a regulatory review of the deal, WSJ reports. In its new bid, CP Rail (NYSE:CP) is expected to offer $32.86 in cash and 0.451 of a share in a new holding company that would run the two railways, against its previously rebuffed proposal of $46.72 and .348 shares for each Norfolk share. Last week, Norfolk rejected the takeover offer saying the bid would face regulatory hurdles "at any offer price".
Today's Markets
In Asia, Japan -1% to 19493. Hong Kong -1.3% to 21905. China -1.9% to 3470. India -0.9% to 25310.
In Europe, at midday, London -0.8%. Paris -0.9%. Frankfurt -1%.
Futures at 6:20, Dow -0.6%. S&P -0.6%. Nasdaq -0.6%. Crude +0.9% to $37.97. Gold -0.3% to $1071.60.
Ten-year Treasury Yield flat at 2.23%
Today's Economic CalendarIn Europe, at midday, London -0.8%. Paris -0.9%. Frankfurt -1%.
Futures at 6:20, Dow -0.6%. S&P -0.6%. Nasdaq -0.6%. Crude +0.9% to $37.97. Gold -0.3% to $1071.60.
Ten-year Treasury Yield flat at 2.23%
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $13B, 3-Year Note Auction
Companies reporting earnings today8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $13B, 3-Year Note Auction
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