Written by Gary
U.S. stock future indexes are flat and are still processing the weekend terrorist attack in Paris sending investors scrambled for safe-havens like the U.S. dollar and gold. Oil prices temporally rose after the attack and now are headed sharply down prior to the U.S. opening bell. Markets are expected to open flat and continue with a ‘normal’ morning dip. High volatility is expected and further market losses could occur if crude prices continue to fall.
Here is the current market situation from CNN Money | |
 | European markets are mixed. The FTSE 100 is higher by 0.33%, while the CAC 40 is leading the DAX lower. They are down 0.16% and 0.04% respectively. |
From Seeking Alpha’ Monday Morning Briefing
Markets across the globe are still processing the weekend’s coordinated terrorist attacks in Paris that left at least 132 people dead and more than 350 wounded. The events sent Asian bourses lower overnight, while U.S. futures inched higher, erasing earlier losses as they tracked moves in Europe. Among the biggest casualties in the financial markets is the euro, which shed 0.5% to $1.0710, as investors scrambled for safe-havens like the U.S. dollar and gold. The attacks are also likely to hit France’s economy, which has the largest number of tourists in the world. The sector accounts for almost 7.5% of the country’s GDP.
Japan’s economy slid back into recession in the third quarter, marking the latest setback for Prime Minister Shinzo Abe and his “Abenomics” policies. With consumer spending still soft and businesses cutting back on investment, gross domestic product shrank at an annualized rate of 0.8%, putting policymakers under pressure to deploy more stimulus measures. The GDP figure follows a revised 0.7% contraction in April-June, which was the first decline in three quarters.
S&P 500 earnings are on track to close their first season of negative growth since 2009, with more than 90% of components having already reported results. Thomson Reuters data suggests this will occur again in Q4, predicting a bigger 2.4% contraction and setting up for a bona fide ‘earnings recession’ (two consecutive periods of declines).
What Is Moving the Markets
| Here are the headlines moving the markets. | |
 | Exclusive: China’s Tsinghua Unigroup to invest $47 billion to build chip empire BEIJING/HONG KONG (Reuters) – China’s Tsinghua Unigroup Ltd plans to invest 300 billion yuan ($47 billion) over the next five years in a bid to become the world’s third-biggest chipmaker, the chairman of the state-backed technology conglomerate said on Monday. |
| Buffett’s Berkshire cuts Goldman stake (Reuters) – Warren Buffett’s Berkshire Hathaway Inc on Monday said it reduced its investment in Goldman Sachs Group Inc by 13 percent during the third quarter. |
| GE, Textron team up to make new turboprop engine, aircraft LAS VEGAS (Reuters) – GE Aviation said on Monday it had teamed up with Textron Aviation to produce an all-new turboprop aircraft and engine for the general aviation market, part of an effort GE expects will generate up to $1 billion in annual sales of engines by around 2020. |
| Buffett not selling stocks as a result of Paris attacks: CNBC (Reuters) – Billionaire investor Warren Buffett is not selling any securities from his portfolio as a result of Friday’s attacks in Paris, CNBC said on Monday. |
| Japan relapses into recession in July-September, a blow to ‘Abenomics’ TOKYO (Reuters) – Japan slipped into its fourth technical recession in five years between July and September – spotlighting how the government’s “Abenomics” policies have struggled to drag the economy out of chronic stagnation. |
| Empire Fed Misses (Again), Contracts For 4th Straight Month As Average Workweek CollapsesFor the 4th month in a row, and 9th month of the last 10, Empire Fed Manufacturing survey missed expectations printing -10.74 (against expectations of -6.34). This is the 4th monthly contraction – the longest streak of contraction outside of recession. Future outlook (hope) dropped to recent lows as New Orders have now contracted for 7 straight months, and number of employees shrinks once again as the average workweek collapsed to the lowest sicne July 2011.
Charts: Bloomberg |
| Marriott Buys Starwood At A 4% Discount, Creates World’s Largest Hotel “Take-Under”While the debt-funded buyback bubble may finally be on its way out, the M&A bubble is still on its 4th wind, confirmed moments ago when Marriott International announced it would buy Sheraton-owner Starwood Hotels & Resorts Worldwide Inc in a $12.2 billion deal to create the world’s largest hotel chain. After the transaction, the combined company will own or franchise more than 5,500 hotels with 1.1 million rooms worldwide, giving Marriott greater presence in markets outside the United States. Starwood, which gets nearly two-thirds of its revenue from outside the United States, had essentially put itself up for sale in April, when it said it was considering strategic alternatives. Both hotel chains have seen their revenues decline in recent years as a result of increasing “disruption” by the unprofitable likes of AirBNB and other startups which have little chance of making money but hope to but their competitors either out of business or to consolidate. Today’s deal proves that Air BnB may be succeeding. However, the most interesting aspect of the deal is that instead of the traditional transaction premium, Marriott will buy Starwood in a deal where shareholders will receive 0.92 Marriott Class A shares and $2 in cash for each Starwood share, the companies said on Monday. This works out to $72.08 per share for Starwood, a discount of about 4 percent to the stock’s Friday close. In other words, an aggressive take under for a company that was trading as high as $86/share, suggesting the purchase price is about 16% below the 52 week highs. According to the press release, Starwood shareholders will also get about $7.80 per share from the spinoff of its timeshare business and subsequent merger with Interval Leisure Group Inc. Starwood shares were down 3.3 percent at $72.50 in premarket trading on Monday, while Marriott shares were up 1.7 percent at $74.01. According to |
| Frontrunning: November 16Belgian Police ‘Arrest’ Public Enemy No.1 (Sky News) France Widens Crackdown at Home as Bombs Rain on Islamic State (BBG) Putin Goes From G-20 Pariah to Player at Obama Turkey Talk (BBG) Paris Attacks: 150 Raids as France Goes to ‘War With Terrorism’ (NBC) ‘Rocket Launcher Found’ In French Police Raids (Sky) Geopolitical worries lift oil after Paris attacks, but glut weighs (Reuters) Japan’s economy falls back into recession again (BBC) ‘Abenomics’ architect predicts no more Bank of Japan easing this year (Reuters) Merkel Says Saudis Will Help Push Political Process in Syria (BBG) – by funding even more ISIS terrorists? Brussels police surround houses seeking Paris suspects (Reuters) Trafigura Reveals $4.3 Billion in Oil Payments to Governments ( |
| Oil Majors’ Dividends Survive Crude’s PlungeThe world’s biggest energy companies have doubled down on their promise to protect dividends, despite a precipitous drop in profits this year, driven by a steep decline in oil prices. |
| No Panic in Bond MarketFutures-market bets on rising U.S. interest rates have reached a six-month high. Yet, few analysts and traders expect to see rates continue to rise for long. |
| Should Monetary Policy Respond To Financial Conditions?from Liberty Street Economics — this post authored by Bianca De Paoli There is an ongoing debate about whether policymakers should respond to financial conditions when setting monetary policy. An argument is often made that financial stability concerns are more appropriately dealt with by using regulatory and macroprudential tools. This post offers a theoretical justification for policymakers to monitor and possibly respond to financial conditions not because this would lessen concerns about financial stability but because this information helps reveal the state of the economy and the appropriate stance of monetary policy.
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| Need to Know: Prepare for a swift, painful and temporary pullback with Paris attacks in mindAs one might expect, stocks could be set for a tough start to the week. Not only in the U.S., but just about everywhere. And gold, which is often blown kisses as a safe haven during times like these, is showing some upside early. |
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