Daily Agenda: Markets Mixed Ahead of Fed Announcement

Rumors spark selloff for Chinese stocks as yen sinks on stimulus chatter; Statoil announces more cutbacks; tech buoyed by Apple earnings and chip merger.

Japanese Prime Minister Shinzo Abe

TOKYO JAPAN - Apr 06 2016: Japanese Prime Minister Shinzo Abe during his meeting with President of Ukraine Petro Poroshenko in Tokyo

Markets were mixed ahead of today’s Federal Open Market Committee announcement. Rumors drove volatility higher in early trading, with the ChiNext small cap index selling off by more than 5 percent, as the possibility that regulators would crack down on wealth-management products linked to equity markets sent stocks tumbling. Separately, the yen pulled back sharply against primary currencies after reports surfaced that Prime Minister Shinzo Abe might unveil a $265 billion stimulus package early next week. In Europe, equities and U.S. stock futures rose as investors guessed that the Fed would continue to take a dovish tone and shrugged off grim earnings guidance from energy and heavy-equipment companies, focusing instead on upbeat earnings and merger announcements in other sectors.

Statoil to cut spending as earnings slump. Norwegian oil and gas giant Statoil on Wednesday announced cuts to capital expenditures after second-quarter earnings contracted. With a debt-to-capital ratio that exceeds 30 percent, the company, which is majority state owned, will work to reduce overhead as the oil-price rally that began earlier in the year loses momentum. Total revenue for the quarter was 33 percent lower than than the same period in 2015.

Massive semiconductor merger. On Tuesday, Analog Devices announced the acquisition of chipmaker Linear Technology in a deal that will see the combined market value of the new company at more than $30 billion. Analog will purchase Linear for $60 per share in a combined cash and stock offer that represents a 24 percent premium to the prior closing price. Credit Suisse is advising Analog while Qatalyst Partners is working for Linear.

Apple earnings beat estimates. Apple released second-quarter results after stock markets closed on Tuesday, with per-share earnings exceeding consensus analyst estimates due to better-than-expected iPad sales. Revenues registered in-line with earlier guidance, slipping at 14.5 percent versus the same period last year, with weaker gross margins as sales of lower-cost products rose. Management stressed the future of the company lies with service business units including iCloud.

U.K. GDP better than forecast. Preliminary gross-domestic-product data from Britain’s Office for National Statistics revealed that the economy grew at a faster pace than anticipated by economists during the second quarter. The headline index rose by an annualized 2.2 percent versus a prior 2 percent, a 0.6 percent rise over the previous quarter.

Deutsche Bank profits fall sharply. On Tuesday, Deutsche Bank, Germany’s largest bank, announced financial results for the second quarter that included a 67 percent year-over-year decline in pre-tax profits and a 20 percent fall in revenues. The results were stronger than consensus analyst estimates, which called for a loss for the quarter due to restructuring expenses and declining capital-markets revenues.


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