Top 5 Things to Know in the Market on Monday
Investing.com -- Hong Kong's police used live ammunition against protesters as disruptions to the Chinese trade hub worsen. Meanwhile, U.S. officials continue to play down hopes of a mutual tariff roll-back, Saudi Aramco publishes a 600-page IPO prospectus with no mention of price or volume, and Brexit slows the U.K. economy to a crawl. Here's what you need to know in financial markets on Monday, 11th November.
1. Hong Kong markets tumble on escalating conflict
Hong Kong’s main stock exchange, the Hang Seng, fell 2.6%, its biggest one-day fall since August, after another escalation in the clashes between police and protesters.
Police shot and critically injured a man involved in protests aimed at disrupting commuters’ journeys to work on Monday morning. Elsewhere, protesters reportedly set a man on fire.
Disruptions to the business day continued for hours, with local banks reportedly sending staff home due to prolonged exposure to tear gas in their respective neighborhoods. The disturbances followed another weekend of widespread road blockages and vandalizing of shopping malls.
2. Navarro rams home the 'no tariff rollback' point
White House trade advisor Peter Navarro at the weekend echoed a warning Friday from President Donald Trump, underlining the resistance to a mutul roll-back of import tariffs as part of a “phase-1” trade truce with China.
“There's no rollback at all,” Navarro said. “So we need the tariffs there, but the tariffs are really our best insurance policy as well to make sure that the Chinese are negotiating in good faith.”
On Friday, Trump had said told reporters that he hasn’t “agreed to anything”, disputing earlier Chinese claims that the two were about to announce the cancellation of recent tariffs.
Trump’s comments had ensured that markets ended the week on a downbeat note, after hitting new record highs earlier in the week on the back of China’s claims.
3. Stocks set to open lower as earnings season winds down
U.S. stock markets were poised to open clearly lower in the wake of the comments on trade and the heightened violence in Hong Kong. Both President Trump and Commerce Secretary Wilbur Ross have said in the past that their attitude on trade talks would be conditioned, among other things, by how China responds to the ongoing crisis there.
By 6:15 AM ET (1115 GMT), Dow futures were down 116 points or 0.4%, while the S&P 500 futures contract and Nasdaq 100 futures contracts were down in parallel.
European markets had also opened lower, with the resource-heavy FTSE 100 losing most on the abrupt revision to the outlook for Chinese commodity demand.
Earnings season is now winding down, with 89% of the S&P 500 having reported by the end of last week. Factset calculates that the blended decline in earnings across the index has been 2.4%, with energy, materials and real estate companies posting the highest incidence of shortfalls vis-à-vis consensus.
4. Brexit paralyses U.K. economy
The U.K. economy grew at its slowest annual rate in nearly a decade in the third quarter, as the global slowdown and concerns about Brexit worries hit business investment and manufacturing.
Solid consumer spending meant the economy grew 0.3% from the second quarter, leaving GDP up 1.0% from a year earlier. That was marginally worse than a forecast of 1.1% and down clearly from 1.3% in the second quarter. Analysts at ING said the dynamic would most likely stay weak next year as business investment is likely to still be depressed by uncertainty, even if the election on Dec. 12 produces a majority Conservative government.
5. Fill in the blanks, says Aramco
Saudi Aramco published the prospectus for its initial public offering, with two conspicuous omissions. It left out how many shares it wants to sell and the price range within which it expects to sell them.
The omissions – which Bloomberg said would be filled in at the end of the week – underlined the high degree of uncertainty over the ongoing sale, with buyers and sellers still reportedly far apart in their valuation of the company.
According to the prospectus, Aramco’s third-quarter profit fell to $21.2 billion in the third quarter from $30.3 billion a year ago, due to lower world prices, and to exceptional costs arising from the attacks on its infrastructure in September, which caused it to buy crude from elsewhere in order to cover its short-term obligations to customers.