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Daily Agenda: Investors Focus on Central Banks Rather Than Earnings

Trudeau wins Canadian election; IBM and China Mobile earnings disappoint; Russian GDP reveals more pain for staggering economy.

Sentiment in global markets appears to remain fixed on central-bank policy expectations this week as investors worry about global growth. Hopes for more easing in the near-term from both the European Central Bank, which will hold its monthly policy meeting in Malta tomorrow, and the People’s Bank of China, are providing some bullish support for equity markets despite a mixed earnings season and renewed pressure on energy and mining prices. In the U.S., San Francisco Federal Reserve President John Williams yesterday became the latest policy maker to weigh in on a rate hike by stating that he favored a kickoff for tightening in light of improving fundamentals, echoing comments last week by New York Fed President William Dudley.

Liberal Party’s Trudeau victorious in Canada. Justin Trudeau will become the first new Canadian prime minister in over nine years after his Liberal party won a majority in yesterday’s national election. Trudeau, the son of former Prime Minister Pierre Trudeau, ran on a platform of economic stimulus including government infrastructure investment and a tax hike for the wealthiest 1 percent. The incoming PM also supports the Keystone and Energy East pipelines that will connect with U.S. and North Atlantic markets, respectively, while opposing the Northern Gateway, designed to transport Canadian gas and oil for Asian export.

IBM reports another weak quarter. Technology stalwart IBM Corp. announced its 14th consecutive quarterly earnings contraction on Monday after equity markets closed. The Armonk, New York-based company reported a sharp decline in sales attributed in part on the impact of a strong dollar on international sales while lowering guidance for the full fiscal year earnings to a range of $14.75 and $15.75 per share from a prior $15.75 to $16.50.

Grim GDP figures confirm Russian recession deepening. Third quarter gross-domestic-product estimates announced by the Russian Ministry of the Economy Tuesday indicated a 4.3 percent decline in overall activity versus the same period last year, as Western sanctions and energy commodity prices continue to take a heavy toll. These figures follow a release on Monday from the Federal Statistics Service in Moscow detailing the 11th consecutive contraction in average wages in September and the sharpest drop in retail sales in more than 15 years.

Largest wireless carrier misses estimates. Hong Kong-based China Mobile’s third-quarter results fell short of analysts’ expectations despite a 13 percent rise in net income for the period. The largest global wireless carrier by customer base reported subscriber growth of only 1 percent versus the prior quarter as competition on the Chinese mainland increased. Last week the company announced a reorganization of state-owned wireless carrier assets that will see China Mobile and two smaller rivals share infrastructure and cut costs.

Yum announces China spin off. On Tuesday Yum! Brands confirmed a spinoff of Chinese operations, which have suffered in recent quarters, as a separate listed company to be headed by unit CEO Micky Pant. Earlier this year JPMorgan analyst John Ivankoe wrote that a spinoff was increasingly probable at the Luisville, Kentucky-based fast-food giant, as activist investors argued for a breakup.

Prices dip at the factory gate in Germany. September producer-price index figures released Tuesday by the Statistisches Bundesamt Deutschland revealed weaker- than-forecast prices for German companies with a 0.4 percent decline in costs for the month or a 2.1 percent slide from the same month in 2014. The contraction, the deepest since February, was driven largely by energy costs, which registered a 6.1 percent year-over-year drop.

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