As reported in an earlier post The Shanghai Composite soared 3.2% today as investors weighed the likelihood of further stimulus from Beijing following data that China’s economy grew at its slowest pace in a quarter of a century. Q4 gross domestic product eased to 6.8% from a year earlier, while full-year growth slipped to 6.9%, adding to the troubling economic picture that’s unsettling traders around the world. Additional December data that missed expectations: Industrial output +5.9%; Retail sales +11.1%; Fixed asset investment growth +10%.
In Asia, Japan +0.6% to 17048. Hong Kong +2.1% to 19636. China +3.2%to 3008. India +1.2% to 24480.
In Europe, at midday, London +2,1%. Paris +2.5%. Frankfurt +2.2%.
Futures at 6:20, Dow +1.6%. S&P +1.6%. Nasdaq +1.6%. Crude +1.7% to $29.91. Gold -0.4% to $1086.90.
Ten-year Treasury Yield +5 bps to 2.08%
Equities across the globe are posting big gains after China’s 6.9% annual growth rate seemed to offer relief to investors, some of whom had feared far worse, and many expect Beijing may do more to stimulate its economy. Gains in crude oil and base metals prices are also lifting downtrodden energy and mining shares. U.S. futures are all up by 1.6%.
China’s embattled top securities regulator, Xiao Gang, has offered to resign, after perceived mismanagement wiped more than $5T off the capitalization of the Shanghai and Shenzhen stock markets since last June, Reuters reports. Xiao was the brainchild behind China’s “circuit breaker,” a mechanism blamed for exacerbating the sharp selloff. The system was deactivated on Jan. 7, just three days after its introduction.
Opposition candidate Tsai Ing-wen won a landslide victory in Taiwan’s presidential election on Saturday, bringing to power her Democratic Progressive Party, which espouses Taiwan’s formal independence from China. “Our democratic system, national identity and international space must be fully respected,” Tsai told a news conference. “Any suppression [of those] will harm…relations” between China and Taiwan. The election had been closely watched from Beijing to Washington because of the implications for cross-strait ties and regional stability.
For the third time in less than a year, the International Monetary Fund has cut its global growth forecasts, citing a sharp slowdown in China trade, weak commodity prices and rising interest rates in the U.S. The Fund now predicts that the world economy to grow 3.4% in 2016 and 3.6% in 2017, both years down 0.2 percentage point from the previous estimates, and said policymakers should be considering ways to bolster short-term demand.
Eurozone inflation rose slightly to 0.2% in December, in line with expectations, giving a bit of relief for the ECB and its quantitative easing plan. But with disappointing industrial production numbers and slow growth, analysts are questioning whether the central bank could signal more stimulus when it meets this coming week, having sorely disappointed markets last month. Euro -0.2% to $1.0872.
July’s nuclear deal between Iran and six world powers came into effect Saturday evening, triggering an end to years of sweeping sanctions on Tehran and unfreezing $100B worth of Iranian assets. “Today marks the first day of a safer world,” Secretary of State John Kerry declared in Vienna. “We are really reminded once again of diplomacy’s power to tackle significant challenges.”
Despite tumbling in the previous session due to the lifting of sanctions, crude is inching back towards $30 per barrel. Prices appeared to get some support from strong oil data in China, where preliminary demand for 2015 was at a record 10.32M barrels per day, up 2.5% from a year ago, despite a slowing economy. However, fears of additional Iranian barrels is still likely to weigh on traders’ minds. Deputy Oil Minister Rokneddin Javadi said on Monday the Islamic Republic was ready to add 500K bpd to its output. Brent +4.6% to $29.86/bbl; WTI +1.7% to $29.91/bbl.
Regardless of today’s rebound, unseasonably warm weather and rising supply will keep the crude market oversupplied until at least late 2016, the International Energy Agency said in its latest monthly report. “We conclude that the oil market faces the prospect of a third successive year when supply will exceed demand by 1M bpd”. Prices could be pressured further as Iran revives exports with the end of sanctions, the agency added, cutting its forecast for 2016 OPEC crude demand by 300K bpd to 31.7M.
Puerto Rico is running out of money faster than expected, leaving an increasing hole in the amount needed to operate and pay back investors. According to an updated fiscal plan, the island now estimates it’s $16B short of the money it needs to cover debt payments over the next five years, a 15% bigger figure than the one released in September. The gap over 10 years is almost $24B, even with planned fiscal adjustments.
The world’s political and business leaders, plus the usual smattering of celebrities are heading to Davos, the Swiss Alpine resort where the World Economic Forum’s annual conference begins this evening. The official theme of the 2016 meeting is “mastering the fourth industrial revolution.” In WEF-speak, that means the “fusion of technologies that is blurring the lines between the physical, digital and biological spheres.”
Suncor Energy and Canadian Oil Sands have reached a friendly deal after the former agreed to raise its takeover offer to about C$4.24B ($2.92B). Suncor’s (NYSE:SU) new all-stock transaction, which boosts the overall bid value from about C$3.78B, is subject to at least 51% of Canadian Oil Sands’ (OTCQX:COSWF) shares being tendered and includes a C$130M breakup fee.
French oil major Total is likely to report a heavy fall in full-year adjusted net profit (on Feb. 11) because of the collapse in oil prices, CEO Patrick Pouyanné said in an interview with Europe1. “Our profits fall. They will fall a little more than 20% while the oil price falls 50%.” According to FactSet, Total (NYSE:TOT) is expected to report 2015 adjusted net profit of $9.97B, down 22% compared to 2014.
For the third time in roughly a year, Elon Musk’s SpaceX on Sunday failed to successfully land the main part of a spent rocket on a floating ocean platform, although it came pretty close. The booster maneuvered back to its destination as intended, but touched down harder than planned amid 10- to 15-foot swells, causing it to tip over and explode. Last month, SpaceX made a successful, first-of-its-kind return of a used booster that hurtled back from space and made a pinpoint touchdown on land without incurring any significant damage.
Renault is recalling more than 15K vehicles to make changes to their engines and bring them into line with emissions standards, Energy Minister Segolene Royal told RTL radio. The minister also repeated that Renault (OTCPK:RNLSY) was not alone in exceeding emissions levels, although she did not name any other carmakers. Last week, Renault said fraud investigators had inspected three factories to look into its vehicle emissions technology – news that wiped billions off its market value in an echo of the scandal engulfing rival Volkswagen (OTCPK:VLKAY).
Meanwhile, South Korea is suing the head of VW’s (OTCPK:VLKAY) Korean office over its failure to comply with an order to recall diesel vehicles equipped with emissions-cheating devices. In November, South Korea fined the German automaker a record 14.1B won ($12.3M) and ordered a recall of more than 125K vehicles. Sixty-six institutional investors are also taking legal action against Volkswagen in Germany relating to the emissions scandal. The first claim will be made within the next week.
Already troubled by lawsuits and official investigations, Deutsche Bank (NYSE:DB) is facing another challenge – it’s about to be sued in British court for using high-speed trading software. That lawsuit asserts the lender used a platform known as Autobahn to take advantage of millisecond changes in exchange rates to give clients worse prices than they were entitled to. Deutsche Bank has denied the claims, saying it “disagrees with the allegations and will be defending itself in court.”
Star Wars: The Force Awakens led China’s box office for a second week, pushing ticket sales in the world’s second-biggest movie market past $100M. Disney (NYSE:DIS) is counting on China to bolster earnings from the epic after buying the Star Wars franchise in 2012 and announcing plans to make more installments. While the latest episode slipped from first place to third this past weekend in the U.S., Nomura estimates it will bring in $230M over its full run in mainland cinemas.
WhatsApp is scrapping its subscription fee and will explore other ways to allow businesses to interact with its users (but will not introduce third-party ads) to make up for the lost revenue. “Many WhatsApp users don’t have a debit or credit card number and they worried they’d lose access to their friends and family after their first year,” the company wrote in a blog post. The Facebook-owned (NASDAQ:FB) app had previously charged an annual renewal fee of $0.99 for all users after their first year.
Twitter experienced an outage overnight, with website visitors receiving a message telling them that “something is technically wrong”. “Thanks for noticing. We’re going to fix it up and have things back to normal soon,” the company declared. Mobile users noted that the service was failing to update, and Tweetdeck, Twitter’s (NYSE:TWTR) social media dashboard, also appeared to be down.
Adidas has appointed Kasper Rorsted as its new chief executive, replacing Herbert Hainer at the helm of the German sportswear company. Rorsted, who is currently the CEO of Henkel (OTCPK:HENKY), will join the company’s board in August and become CEO two months later. Adidas (OTCQX:ADDYY) investors welcomed the news yesterday, with the stock climbing over 11% in Germany in response to the announcement.
Although it expects “tougher market conditions” in 2016, Unilever (NYSE:UL) reported fourth-quarter sales that beat estimates amid higher prices for its goods in Latin America. Revenue rose 4.9%, while core operating profit increased 12% to €7.9B. Separately, Sean Gogarty, head of Unilever’s developed-market spreads business, has resigned to pursue other opportunities, and will be replaced by Nicolas Liabeuf, senior vice president of marketing operations. UL +4.1% premarket.
As part of a new Silicon Valley-based initiative, Airbus (OTCPK:EADSY) has established a partnership with Uber (Private:UBER) that will allow users to hail copters, carving out a new business model for helicopter operators. “Its a pilot project, we’ll see where it goes – but it’s pretty exciting,” Airbus CEO Tom Enders said in an interview. The new tie-up will launch at the Sundance Film Festival in Utah this week, making it easier for attendees to navigate the event.