This content is from: Portfolio

Daily Agenda: Markets Rally on Weak U.S. Jobs Data

Futures markets discount likelihood of October Fed rate hike; European service sector runs out of gas; activist Peltz takes a stake in General Electric.

A weaker-than-anticipated September jobs report on Friday left investors once again scratching their heads as the timing of a Fed interest-rate hike was once again called into question. Currently, the probability of a rate-hike announcement at the Federal Open Market Committee’s October meeting implied by futures markets is under 10 percent, after Treasuries rose in the wake of weak employment gains. In reaction to the renewed uncertainty over tightening, equity index prices rose across European and emerging markets, along with copper and oil futures, as traders repositioned for a liftoff in December or later.

European service sector losing momentum. Critical service-sector purchasing manager index (PMI) data released Monday by Markit indicated sluggish trajectory for the euro zone with a final headline reading for September of 53.7 for the common currency region as a whole versus a flash mark of 54.4 and weaker than forecast levels for Germany, Italy and Spain. Aggregate euro-zone composite PMI also missed expectations. Meanwhile, U.K. services activity also disappointed for the month with a final headline PMI reading of 53.3—much weaker than consensus forecasts of 56 and the lowest reading for the measure since April 2013.

Peltz takes aim at General Electric. In a statement released Monday, Trian Fund Management, the New York investment firm controlled by legendary activist and takeover manager Nelson Peltz, announced that it has acquired 98.5 million shares of General Electric or roughly 1 percent of shares outstanding. Trian amassed the $2.5 billion stake as the Fairfield, Connecticut-based industrial giant began offloading some financial services divisions. Trian is advocating the disposal of more assets and cost cutting to enhance shareholder value.

Glencore shares surge on rumors. The wild ride for shareholders of Baar, Switzerland-based commodity giant Glencore continued Monday in early trading in Hong Kong, after press reports that management was willing to entertain acquisition offers drove the share price of the company up by nearly 70 percent intra-day. Glencore management has said that such an offer was unlikely. The company issued a formal statement later in the day underscoring that no material change had occurred to support the surge in price or volume. Separately, as the embattled firm seeks to sell assets to retire a portion of its $30 billion in net debt and shore up its balance sheet, project-specific bank loans secured by Glencore during the commodity super-cycle are coming under increasing scrutiny among investors.

U.K. to exit Lloyds completely. According to a statement released Monday, British Chancellor of the Exchequer George Osborne now plans to sell the government’s remaining shares of Lloyds Banking Group within the coming months, with anonymous sources indicating that the divesture will be complete by early 2016. According to the statement, a portion of the shares sold will be offered to members of the public at a 5 percent discount to current market price. The government stake in the bank resulted from over $30 billion in bailout funds advanced in 2008 and 2009.

Initial agreement nears for Trans-Pacific Partnership. In comments to the media Monday, Japanese Minister of the Economy Akira Amari indicated that the 12-country meeting to initiate the long-awaited Trans-Pacific Partnership would end with an agreement in principal shortly. Negotiations had long been stalled in part over complex issues relating to intellectual-property laws governing the production of biologic drugs among group members. If enacted, the new trade block will encompass nearly 40 percent of the global economy.

Portuguese election leaves pro-austerity group in lead but without a clear majority. Despite winning the most votes in the general election, the center-right coalition led by incumbent Portuguese Prime Minister Pedro Passos Coelho failed to maintain a controlling majority in parliament. The pro-austerity bloc must now reach an accord with the Socialist party to remain in power as a minority government. The center-right victory comes after initial polling indicated a likely Socialist victory.

Potash drops K+S bid. Canadian fertilizer giant Potash Corp. of Saskatchewan is walking away from an $8 billion offer for rival K+S with company management blaming the broad selloff in commodities and a lack of enthusiasm among K+S leadership as the primary causes. While the K+S board argued that the offer did not fully value the German argichemical firm, shareholders had largely backed the deal.

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