DAILY MARKET REPORTS
- U.S. stocks fell on Monday as an increase in tensions between Western powers and Saudi Arabia added to worries over rising borrowing costs and the impact of tariffs, following the main three indexes’ biggest weekly declines in over seven months.
- Among the biggest drag on the three major indexes was Apple, which fell 1.6% after Goldman Sachs said there were multiple signs of rapidly slowing consumer demand in China, which could affect demand for iPhones this fall.
- With the third-quarter earnings season entering high gear this week, Goldman’s warning on weak demand from China would only add to fears about the impact of the U.S.-China trade war on corporate profits.
- Also adding to the tensions was U.S. President Donald Trump’s threat of “severe punishment” if it was found journalist Jamal Khashoggi, was killed in the Saudi consulate in Istanbul.
- Saudi Arabia has vowed to retaliate to any move to punish the Kingdom.
- Bank of America gave up earlier gains to trade 2% lower, despite posting a better-than-expected quarterly profit, boosted by lower costs, higher interest rates, and lending growth.
- L3 Technologies rose 10.2% and Harris climbed 9.0% after the military communication equipment providers announced an all-stock merger on Sunday, to create the sixth-largest defense contractor in the United States.
- Sears plummeted 16.3% after the retailer filed for Chapter 11 bankruptcy, throwing into doubt the future of the company which has withered in the age of internet shopping..
US FINANCIAL MARKET
- Bank of America reported a better-than-expected rise in quarterly profit on Monday as the second-largest U.S. lender benefited from cost cuts, while higher interest rates and loan growth helped offset weaker bond trading revenue.
- Total interest income – the difference between what is earned on loans and paid on deposits – rose 6.4% to $11.87 billion.
- Loans in its consumer banking business grew 6% to $285 billion. Total deposits rose about 5% to $1.35 trillion.
- Revenue rose by a more modest 4%, to $22.8 billion, compared with the $22.67 billion estimates.
- Net income rose 35% to $6.7 billion in the third quarter.
Sears, once a retail titan, files for Chapter 11 bankruptcy
- Sears filed for Chapter 11 bankruptcy on Monday with a plan to close 142 more stores, throwing into doubt the future of the century-old retailer that once dominated U.S. malls but has withered in the age of internet shopping.
- Sears shares were trading down 14% in pre-market at 35 cents, giving the company a market capitalization of just $35 million.
- Sears said it will sell assets and begin closing 142 unprofitable stores by year-end with the aim of reorganizing around a smaller platform of around 700 of its best stores.
Harris to merge with L3 in all stock deal, creating defense contracting giant with $34 billion market value
- Harris to merge with L3 in all-stock deal, creating defense contracting giant with $34 billion market value.
- The combined company, L3 Harris Technologies, will be the sixth largest defense company in the United States and a top 10 defense company globally, with approximately 48,000 employees and customers in over 100 countries, the companies said.
- The deal is the latest example of how increased defense spending under President Trump and the Republican Congress is driving contractors to pursue mergers so they have more scale to bid on bigger projects.
Facebook now says data breach affected 29 million users, details impact
- Cyber attackers stole data from 29 million Facebook accounts using an automated program that moved from one friend to the next, Facebook announced on Friday, saying its largest-ever data theft hit fewer than the 50 million profiles it initially reported.
- The attackers took profile details such as birth dates, employers, education history, religious preference, types of devices used, pages followed and recent searches and location check-ins from 14 million users.
- The breach has left users more vulnerable to targeted phishing attacks and could deepen unease about posting to a service whose privacy, moderation and security practices have been called into question by a series of scandals.
Broadcom gets EU antitrust nod for CA Technologies deal
- Chipmaker Broadcom said it has obtained antitrust clearance from the European Union for its $19-billion deal to acquire software company CA Technologies.
- Broadcom had on Wednesday said a memo, purportedly signed by the U.S. Department of Defense and circulated among lawmakers calling for a review of the deal, was likely fake.
- The chipmaker said it now expects the deal to close on Nov. 5, as the clearance from the EU was the last regulatory hurdle.
Disney offers EU antitrust concessions over $71.3 billion Fox deal
- Walt Disney has offered concessions in an attempt to allay EU antitrust concerns over its $71.3 billion bid for Twenty-First Century Fox’s entertainment assets, the European Commission said on Monday.
- The Commission extended its deadline for reviewing the deal to Nov. 11 from Oct. 19. It is now expected to seek feedback from customers and rivals before deciding whether to accept the concessions or demand more.
- Disney secured approval from the U.S. Justice Department on condition after agreeing to sell Fox’s 22 regional sports networks.
Apple buys music analytics company Asaii: Axios
- Apple has acquired music analytics start-up Asaii in a bid to strengthen content recommendations to its music users.
- Apple’s deal to buy Asaii was worth less than $100 million, Axios reported, citing a source.
- Last month, Apple completed the acquisition of music discovery app Shazam, a deal to help it better compete with Spotify, the industry leader in music streaming services.
Walmart acquires online lingerie retailer Bare Necessities
- Walmart said it has acquired online lingerie retailer Bare Necessities for an undisclosed amount, its second apparel-focused acquisition in less than two weeks as it seeks deeper inroads into the online fashion space.
- Walmart’s string of small fashion-company acquisitions is designed to help the retailer access younger, millennial customers who do not normally shop on its website and recover ground lost to Amazon and others.
- Walmart did not offer additional details on the impact of the acquisition to earnings and did not comment on how this buy will bolster its market share in the category.
US ECONOMY & POLITIC
- U.S. retail sales barely rose in September as a rebound in motor vehicle purchases was offset by the biggest drop in spending at restaurants and bars in nearly two years.
- Retail sales edged up 0.1% last month after a similar gain in August, compared to forecasts of an increase of 0.6% in September.
- Retail sales in September rose 4.7% from a year ago.
- Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.5% last month. “Core” retail sales correspond most closely with the consumer spending component of gross domestic product.
- Data for August was revised down to show core retail sales were unchanged instead of the previously reported 0.1% gain.
U.S. to seek currency chapters in trade talks with Japan, others: Mnuchin
- U.S. Treasury Secretary Steven Mnuchin said on Saturday that Washington wants to include a provision to deter currency manipulation in future trade deals, including with Japan, based on the currency chapter in the new deal to revamp NAFTA.
- The remark drew concern in Japan, where local media ran front-page stories questioning if this would give Washington the right to label as currency manipulation any foreign exchange market interventions by Tokyo to keep sharp yen rises in check.
- The yen is often regarded as a “safe-haven” currency in Asia, attracting capital inflows during times of market distress that can spike its value for short periods, hurting exports.
- Along with fears of being slapped with higher tariffs on its auto exports to the United States, Japan worries about having its hands tied on addressing sharp yen rises that hurts its export-reliant economy.
U.S. weapons makers rattled over Saudi Arabia deals
- Major U.S. defense contractors have expressed concern to the Trump administration that lawmakers angered by the disappearance of a Saudi journalist in Turkey will block further arms deals with Saudi Arabia, a senior U.S. official told Reuters.
- Turkish reports that journalist Jamal Khashoggi, a vocal critic of Riyadh, was killed inside the Saudi consulate in Istanbul and removed have hardened resistance in the U.S. Congress to selling weapons to Saudi Arabia, already a sore point for many lawmakers concerned about the Saudi role in Yemen’s civil war.
- Under U.S. law, major foreign military sales can be blocked by Congress. An informal review process lets key lawmakers use a “hold” to stall deals if they have concerns such as whether the weapons being supplied would be used to kill civilians.
- U.S. President Donald Trump said on Thursday he was wary of halting arms sales to Riyadh because of Khashoggi as it would just shift its weapons purchases to Russia and China.
EUROPE & WORLD
- European shares failed to rebound and hit a 22-month low on Monday after their worst week since a correction in February as threats such as trade wars, rising yields, Chinese growth, Brexit and the Italy/EU budget row continued to weigh on markets.
- For European bourses, there was no wind of optimism from Asia where stocks suffered as rising diplomatic tensions between Riyadh and the West over the disappearance of a journalist pushed oil higher.
- European shares have underperformed their American peers since the beginning of the year and analysts believe companies which fail to meet expectations during the third quarter corporate earnings season will be severely punished.
Crunch time for Italy, Brexit as leaders convene in Brussels
- Brussels, the political heart of Europe, could prove the center of global market focus next week as Italy’s budget and Brexit talks overshadow economic data and central banks.
- Eurozone countries, including Italy, have until Monday to submit their draft budgetary plans to the European Commission, winch which would have to warn Rome within a week if it planned to trigger the rejection process.
- EU leaders from Wednesday to Friday are expected to spend time discussing Italy, even if it is not formally on the agenda of exceptional talks that will also see them meeting around 25 Asian leaders, including the prime ministers of China and Japan.
BOJ’s Kuroda says Fed rate hikes good for global economy
- Bank of Japan Governor Haruhiko Kuroda said steady interest rate hikes by the Federal Reserve were “basically good” for the world economy, shrugging off concerns that higher U.S. rates could hurt Asian economies by triggering capital outflows.
- Kuroda, however, was more cautious about the risks posed by escalating trade tensions, which he described as of a “rather unusual” scale and a “new development” for the global economy.
- He also said an aging population could pose structural challenges for central banks, as it undercuts their economies’ growth potential and requires them to use more monetary firepower than before to reflate growth.
North, South Korea agree to reconnect roads, rail amid U.S. concern over easing sanctions
- North and South Korea agreed on Monday to begin reconnecting rail and road links, another step in an improving relationship that has raised U.S. concern about the possible undermining of its bid to press the North to give up its nuclear program.
- The agreement on transport links came during talks in the border village of Panmunjom aimed at following up on the third summit this year between South Korea’s President Moon Jae-in and North Korean leader Kim Jong Un, last month.
- The accord includes the reinstatement of a joint military commission, the halting of military exercises, a no-fly zone near their border and the gradual removal of landmines and guard posts within the Demilitarised Zone (DMZ).
Kuwait Airways signs agreement to buy eight Airbus A330-800neo planes
- Kuwait Airways said it has signed an agreement with European planemaker Airbus to buy eight A330-800neo airliners.
- Kuwait Airways expects the deliveries to take place between March 2019 and the end of 2026, the Gulf carrier said.
TODAY in HISTORY
- It was announced that Nikita Khruschev was removed from his positions as premier and secretary of the Communist Party of the USSR. (1964)
- Nelson Mandela and F. W. de Klerk were awarded the Nobel Peace Prize for their work to end apartheid in South Africa. (1993)
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