DAILY MARKET REPORTS
- The S&P 500 rose Monday, on track to enter the fourth quarter with its biggest year-to-date gain in more than two decades.
- The broad stock-market index has rallied 19% this year, on track for the best performance in the first three quarters of a year since 1997.
- The advance comes alongside a rally in both bonds and commodities, which have clinched strong gains despite a dizzying three months for markets, punctuated by extreme moves across assets.
- Investors battled concerns about a trade and currency battle between the U.S. and China, recession signals and recently, political headwinds, in the third quarter.
- Expectations that the Federal Reserve would maintain accommodative monetary policy tended to outweigh fears about growth this quarter as the central bank slashed rates for the first time in more than a decade in July and trimmed them again this month.
US FINANCIAL MARKET
U.S. Treasury says no plans to block Chinese listings ‘at this time’
- The United States does not currently plan to stop Chinese companies from listing on U.S. exchanges, Bloomberg reported on Saturday, citing a U.S. Treasury official.
- “The administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time,” Bloomberg quoted Treasury spokeswoman Monica Crowley as saying.
- Reuters reported on Friday that President Donald Trump’s administration is considering delisting Chinese companies from U.S. stock exchanges in a move that would be part of a broader effort to limit U.S. investment in Chinese companies.
Forever 21, Teen-Focused Retailer, Files for Bankruptcy
- Fast fashion retailer Forever 21 filed for bankruptcy protection on Sunday and said it planned to close hundreds of stores, the latest casualty of shifting shopping habits.
- The closely held company, which has 800 stores world-wide, has been facing a cash crunch and preparing for a bankruptcy filing. The chain has secured $350 million in financing to fund its restructuring.
- Forever 21, founded in 1984, sells low-price apparel like $5 tops and $20 dresses.
- It is a major tenant of mall operators in the U.S. where it has 541 of its locations.
- The company plans to close 350 stores world-wide, including up to 178 in the U.S., a spokeswoman said.
CVS Stops Selling Zantac Products
- CVS has stopped selling Zantac products at its drugstores, citing a recent alert by the U.S. Food and Drug Administration (FDA) that the popular heartburn drug could contain low levels of a probable human carcinogen.
- CVS said Saturday that it is taking the action “out of an abundance of caution.” There is no recall of the product, but customers who purchased these products at CVS can return them for a refund.
- Zantac is sold by Sanofi and generically under the name ranitidine. A Sanofi spokesman said Sunday that the company is working closely with the FDA and conducting its own investigations. The company has no plans to stop distributing or manufacturing Zantac or other ranitidine products, he said.
- The FDA has said the chemical, known as NDMA, could cause harm in large amounts; however, the levels it is finding in preliminary tests of Zantac “barely exceed amounts you might expect to find in common foods.”
Blackstone Snaps Up Colony Capital Warehouses for $5.9 Billion
- Blackstone has struck a deal to buy a portfolio of U.S. industrial warehouses from Colony Capital for $5.9 billion, including debt, furthering its bet on the continued growth of e-commerce.
- The deal is Blackstone’s second major purchase of a warehouse network this year. In June, the company’s real-estate business signed a deal to buy the U.S. warehouses of Singapore-based GLP for $18.7 billion, including debt.
- For Colony, the sale marks a major step toward pivoting its strategy to investing in digital real estate and infrastructure such as data centers, cell towers and fiber-optic networks and away from traditional real-estate holdings.
- The company expects to receive proceeds of more than $1.2 billion.
- The deal includes 60 million square feet across 465 warehouses in 26 U.S. markets, with particular concentrations in Dallas, Atlanta, Florida, northern New Jersey and California. It also includes Colony’s 51% stake in a 4 million square-foot portfolio of bulk-distribution warehouses, larger facilities further outside urban centers. Blackstone is also buying the unit that manages both sets of properties.
WeWork Needs Cash as Botched IPO Scuttles Planned Infusion
- We Co. had $2.5 billion of cash as of June 30. At its current rate of cash burn—about $700 million a quarter—it would run out of money some time after the first quarter of 2020, according to Chris Lane, an analyst at Sanford C. Bernstein & Co. He and his colleagues projected in a recent note to clients that We would burn through nearly $10 billion in cash between 2019 and 2022, assuming it keeps growing.
- Further adding pressure are agreements We made in a bond offering last year, for which it must keep at least $500 million of cash, according to S&P Global Ratings, which downgraded the company’s bonds last week.
Elon Musk Unveils ‘Starship’ He Says Will Take People to Mars
- SpaceX chief raises possibility of first orbital test flight of supersize Mars vehicle next year.
- Mr. Musk’s announcement over the weekend, made with his typical showmanship, sketched out a superambitious timetable for building and testing a privately funded, behemoth rocket intended to take people to the moon and eventually to Mars.
- Mr. Musk’s Mars-oriented project includes a stainless-steel rocket, called Starship, reaching some 40 stories tall when mated with a booster and featuring fins at the nose as well as near the engine nozzles at the bottom. The design, including in-space refueling capabilities, is an evolution of preliminary versions Mr. Musk’s SpaceX has unveiled in recent years, with more specifics on timing.
- The shifting engineering features have captivated space aficionados and prompted skepticism among some critics.
US ECONOMY & POLITICS
Fed Adds $63.5 Billion to Financial System in Repo Transaction
- The Federal Reserve Bank of New York added $63.5 billion to the financial system Monday, using the market for repurchase agreements, or repo, to relieve funding pressure in money markets.
- In the repo market, borrowers seeking cash offer lenders collateral in the form of safe securities—frequently Treasury bonds—in exchange for a short-term loan. The term of these loans can be as short as overnight.
- When the Fed adds money to the financial system through the repo market, it is acting as a lender. In typical repo market transactions, lenders can include money-market mutual funds, banks or hedge funds that are seeking to earn a slightly higher rate of interest than what is available from holding very short-term government securities. The borrowers are often banks, securities firms or hedge funds that use the cash to finance positions in the market.
- The Fed began offering repo loans two weeks ago after a shortage of available cash in the financial system led repo rates to climb as financial companies scrambled for overnight funding. The actions marked the first time since the financial crisis that the Fed had taken such actions.
EUROPE & WORLD
Budweiser Brewer’s IPO Draws Cheers from Investors in Debut
- Shares of the world’s largest brewer’s Asian operations climbed in their trading debut on Hong Kong’s stock exchange Monday.
- Budweiser Brewing’s shares opened slightly above their initial public offering price after the unit of Anheuser-Busch InBev raised $5 billion from the share sale.
- The shares closed at 28.20 Hong Kong dollars (US$3.60), about 4.4% higher than their IPO price of HK$27 a share, giving the business a market capitalization of roughly $47 billion.
Global third-quarter M&A sinks to three-year low amid U.S.-China trade war fears
- Global mergers and acquisitions (M&A) plunged 16% year-on-year to $729 billion in the third quarter, according to Refinitiv data, the lowest quarterly volume since 2016.
- The United States, where consumer spending barely rose in the summer and business investment remained subdued amid the trade tensions, was particularly hit. U.S. M&A sank 40% year-on-year to $246 billion in the third quarter, the lowest such quarterly level since 2014.
- Asia, which has been hit by concerns over the future of Hong Kong as a financial hub following a wave of pro-democracy protests, fared only slightly better. M&A activity in the region dropped 20% year-to-year to $160 billion, the lowest level since 2017.
- The only regional bright spot in the third quarter was Europe, where M&A activity reached $249 billion, up more than 45% over the same period last year.
- Britain, where uncertainty over Brexit has turned companies into cheaper acquisition targets, remained Europe’s biggest M&A market with a 6.4% share of global M&A and $177 billion worth of deals so far this year.
European Jobs Offer Some Joy Amid Manufacturing, Inflation Gloom
- Figures Monday showed the euro-area unemployment rate fell to 7.4% in August, the lowest in over 11 years.
- Italy reported an unexpected drop to 9.5% and Germany saw the number of people out of work decline for the first time since April. However, Germany also saw a decline in vacancies, a sign of caution among companies about hiring, and inflation in Europe’s largest economy slipped below 1% for the first time since 2016.
- German inflation unexpectedly slowed to the weakest level in almost three years.
- Consumer prices rose an annual 0.9% in September, well short of the just under 2% rate the ECB aims to achieve for the entire euro area.
Netanyahu Will Return Mandate to Rivlin, Jerusalem Post Says
- Israeli Prime Minister Benjamin Netanyahu will “return his mandate” to President Reuven Rivlin after being unable to form a government, according to a tweet by the Jerusalem Post’s chief political correspondent.
- Gil Hoffman said in a post that he’ll make the move “barring a change of heart” by Benny Gantz’s Blue and White party on letting Netanyahu start as prime minister and bring allies with him into the coalition.
- Netanyahu was tapped last week to form Israel’s next government with no clear indication he’d be able to pull that off and end weeks of political stalemate.
South Africa Trade Surplus at 8-Month High as Mine Exports Rise
- The 6.8 billion rand ($448 million) surplus compares with a revised 3.7 billion shortfall in July, Pretoria-based South African Revenue Service said Monday in a statement on its website.
- The median estimate of seven economists in a Bloomberg survey was for a positive balance of 1.2 billion rand.
U.K. Prepares New Proposal in Divorce Talks
- Boris Johnson plans to present the European Union with a new offer in a bid to break the deadlock.
- But if he can’t get an agreement, it’s still not clear how the government would engineer a no-deal exit now that Parliament has moved to block it. His ministers won’t say what the plan is.
Saudi Economic Growth Stumbles to Weakest Since 2017 Contraction
- Saudi Arabia’s economy expanded at a weaker pace for a second quarter, dragged down by curbs on crude output negotiated by OPEC, even though non-oil growth picked up.
- Gross domestic product (GDP) expanded 0.5% in the second quarter from a year earlier, the slowest since it contracted in 2017.
- The oil sector shrank an annual 3%, while non-oil growth accelerated to almost 3%.
TODAY in HISTORY
- The U.S. Congress authorized the first census 1790
- Ohio became the 17th state in the United States 1803
- Rebecca Lee was the first black woman awarded a medical degree 1864
- Nebraska became the 37th state in the United States 1867
- Yellowstone became the world’s first National Park 1872
- President John F. Kennedy signed a signed an executive order establishing the Peace Corps 1961
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