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Daily Agenda: Chinese GDP More Robust than Expected

Asian and European equity markets respond to better-than-forecast Beijing growth data; Morgan Stanley earnings hurt by poor trading revenues; Tokyo gears up for Japan Post IPO.

Third-quarter 2015 GDP data released last night by China’s National Bureau of Statistics was stronger than analysts anticipated, with an annualized growth rate of 6.9 percent versus median forecasts of 6.8 percent. Although the lowest reading since 2009, its strength relative to expectations was fueled in part by a service-sector rebound that offset sluggish demand for manufactured goods, welcome news for investors concerned about a hard landing for China. While some grumble that China’s official statistics are flawed and that private-sector indicators do not support published numbers, a bullish factor was separately posted government expenditure data that included a 16.4 percent annualized year-to-date increase in spending. This uptick in stimulus underscores Beijing’s determination to meet growth targets regardless of cost. The extraordinary welcome planned for the kickoff of Chinese President Xi Jinping’s state visit to the U.K. today to drum up greater trade between the countries underscores the fact that, regardless of the accuracy of Beijing’s data, Chinese demand remains a critical factor for global-growth expectations.

Morgan Stanley earnings disappoint. Following rivals J.P. Morgan Chase and Goldman Sachs Group, Morgan Stanley today released third-quarter results that were lower than anticipated due in part to reduced profits in fixed income and commodity trading. Net income for the bank was $1.02 billion, down from $1.7 billion during the same period last year, according to the report. As with its rivals, equity trading and wealth management were bright spots for Morgan Stanley during the quarter. Earlier this month equity division head Edward “Ted” Pick was promoted to head all trading for the bank.

Japan’s government gears up for public debut of Japan Post. Japanese Ministry of Finance data released today revealed that the government placed shares for both Japan Post Bank and Japan Post Insurance at the high end of the anticipated price range in the leadup to the firms’ initial public offering, scheduled for October 26. The sale of 11 percent of the government-owned companies to the public and domestic and international institutions will mark the largest divestiture by Japan since 1987.

Iran calls for OPEC to cut production. In a discussion with reporters in Tehran on Monday, Iran’s Oil Minister Bijan Namdar Zanganeh called for OPEC to reduce production levels to support prices but held out little hope of such a shift occurring at the organization’s next meeting in December. Saudi Arabia’s ongoing commitment to battling increased North American production levels was underscored over the weekend by the release of data from the Joint Organizations Data Initiative revealing the highest commercial crude stockpiles in the Kingdom since 2002 at over 326 million barrels.

Valeant tops estimates. Third-quarter results from Laval, Quebec–based Valeant Pharmaceuticals International beat analysts’ consensus estimates with stronger sales of skin and eye-care products that drove a 36 percent year-over-year increase in revenues that lifted earnings to $2.74 per adjusted share. The company’s stock has declined by nearly 30 percent year-to-date as it became mired in a controversy over hikes in drug prices.

Canadian oil merger rejected by corporate leaders. Executives of Calgary-headquartered Canadian Oil Sands today rejected a $3.3 billion acquisition overture from Suncor Energy, saying the offer undervalued the firm. Suncor, Canada’s largest oil producer, also based in Calgary, has recently sought to take advantage of slumping oil prices and high industry debt levels to acquire stakes in several smaller rivals.

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