Weekly Market Update: Pandemic, Brexit and election uncertainties continue to chip away at market confidence
US stock markets trended lower for the fourth straight week. Coronavirus worries in Europe were exported across the northern hemisphere as the flu season looms large, keeping a lid on investors’ willingness to add risk. Officials in Europe and Washington also showed little, if any, sense of urgency to reach a breakthrough in both Brexit and US fiscal stimulus talks. Adding to the uncertainty, President Trump continued to cast doubt on the potential authenticity of the upcoming election, forcing colleagues within the Republican party to avow that they will abide by the results and expect a peaceful transition of power in January. Banks in particular were soft globally amid a continued drift lower in rates and a report that accused several major banks of laundering over $2T in funds over the last 20 years. The US dollar benefited from several waves of safe haven trading while emerging market currencies lagged. The Euro tested fresh 7-week lows alongside gold prices. For the week, the S&P fell 0.6%, the DJIA dropped 1.7%, and the Nasdaq gained 1.1%.
In corporate news this week, Nike shares surged after blowing away Q1 expectations with large gains in online sales and a return to revenue growth in China. Embattled Nikola founder Trevor Milton voluntarily stepped down as Chairman as federal officials opened a probe into fraud claims against the electric vehicle company. Costco posted beats on its top and bottom line and reported comp sales +11%, but expectations got ahead of themselves and shares in the warehouse retailer moved lowed. Tesla held its Battery Day event, though investors were not so enthused by the focus on long-term vision and less on specifics and near-term deliverables. On the M&A front, Microsoft announced the acquisition of ZeniMax Media, the parent company of ‘Fallout’ and ‘Doom’ games publisher Bethesda Softworks, for $7.5B in cash. UK betting operator William Hill reportedly has been approached by Apollo and Caesars about a potential cash takeover. Illumina affirmed it would reacquire its former cancer detection spinoff Grail for $8B in a cash and stock deal. Scripps announced plans to acquire ION Media for $2.65B, and Warren Buffett’s Berkshire Hathaway will help finance the purchase with a $600M investment in preferred stock.
SUN 9/20 Several major global banks including Standard Chartered, JP Morgan, Deutsche Bank, Bank of New York Mellon and HSBC accused of laundering over $2.0T in funds over 20+ years in document filed by FinCEN
MON 9/21 NKLA Founder Trevor Milton proposes to voluntarily step down as Chairman and from the Board; Appoints former GM exec Stephen Girsky as successor; effective immediately (US) Fed's Kaplan (FOMC dissenter): Sees rates near zero as appropriate for the coming 2.5-3.0 years MSFT To acquire ZeniMax Media and its Game Publisher Bethesda Softworks for $7.5B in cash *(US) FED Q2 FINANCIAL ACCOUNTS HOUSEHOLD CHANGE IN NET WORTH: +$7.61T V -$6.548T PRIOR
TUES 9/22 (UK) PM Johnson: Announces new restrictions to combat the spread of coronavirus; new restrictions likely to remain for six months (until Mar 2021) - comments in Parliament (US) Senator Romney (R-UT) says will support vote this year on Trump's Supreme Court nominee - Politico *(US) SEPT RICHMOND FED MANUFACTURING INDEX: 21 V 12E (highest since Sep 2018) *(US) AUG EXISTING HOME SALES: 6.00M V 6.01ME (sales pace at 14-year high) (US) FDA reportedly expected to release a new standard for Emergency Use Authorization (EUA) for coronavirus vaccine that may make it difficult to see approval before Election Day (Nov 3rd) - Wash Post NKE Reports Q1 $0.95 v $0.46e, Rev $10.6B v $9.17Be *(NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 0.25%; (AS EXPECTED)
WEDS 9/23 *(FR) FRANCE SEPT PRELIMINARY MANUFACTURING PMI: 50.9 V 50.6E (moves back into expansion) *(DE) GERMANY SEPT PRELIMINARY MANUFACTURING PMI: 56.6 V 52.5E (3rd straight expansion and highest reading since Jun 2018) *(EU) EURO ZONE SEPT PRELIMINARY MANUFACTURING PMI: 53.7 V 51.9E (3rd month of expansion and highest reading since Aug 2018) *(UK) SEPT PRELIMINARY PMI MANUFACTURING: 54.3 V 54.0E (4th straight expansion) *(US) SEPT PRELIMINARY MARKIT MANUFACTURING PMI: 53.5 V 53.5E *(US) DOE CRUDE: -1.6M V -1.5ME; GASOLINE: -4.0M V -0.5ME; DISTILLATE: -3.4M V +1ME (US) Association of American Railroads weekly rail traffic report for week ending Sep 19th: 522K, -1.3% y/y (US) Calif Gov Newsom signs exec order to ban sales of new automobiles with internal combustion engines in California beginning 2035 - press (US) Pres Trump: believes the election will end up in the Supreme Court; that's why it's important to have nine justices seated (US) President Trump: Going to have to see what happens on transfer of power
THURS 9/25 *(DE) GERMANY SEPT IFO BUSINESS CLIMATE SURVEY: 93.4 V 93.8E (5th straight month of improvement) SSP Confirms to acquire ION Media for $2.65B cash-debt; Berkshire Hathaway to invest $600M PFD equity; To get warrant to buy up to 23.1M shares of Scripps *(US) INITIAL JOBLESS CLAIMS: 870K V 840KE; CONTINUING CLAIMS: 12.58M V 12.28ME *(US) AUG NEW HOME SALES: 1.01M V 890KE (highest in 14 years) (US) House Ways and Means Chair Neal (D-MA): confirms Democrats are drafting a new COVID response bill; could be voted on next week; likely to be at $2.2T COST Reports Q4 $3.13 v $2.85e, Rev $52.3B v $52.5Be
FRI 9/26 WMH.UK Reportedly approached by Apollo for potential deal - press *(US) AUG PRELIMINARY DURABLE GOODS ORDERS: 0.4% V 1.4%E; DURABLES (EX-TRANSPORTATION): 0.4% V 1.0%E (US) PRES TRUMP REPORTEDLY PLANS TO NOMINATE AMY CONEY BARRETT TO THE SUPREME COURT - CNN