Oil Disputes, European Business Activity, Japanese Stability and Company News

Stock and fundamental news

• Services PMIs due across Europe on Thursday are likely to show a further slowdown in activity and bolster expectations for rate cuts in the region. Investors are already betting the European Central Bank will cut rates by 25 basis points at its next two meetings in October and December after top hawk Isabel Schnabel sounded more optimistic about bringing inflation under control.

• While the UK services sector is expanding, composite PMIs in Germany and elsewhere in Europe are expected to continue to show weakness in September data. In the US, the headline data on Thursday will be jobless claims and the ISM services survey, although the main event will be payrolls data on Friday. In New Zealand, economists are increasingly expecting the central bank to cut rates by 50 basis points at each of its October and November meetings.

• Asian markets had a mixed day, with the MSCI ex-Japan index falling 1.4%, retreating from a 32-month peak. That was led by a 3.5% drop in Hong Kong's Hang Seng, which has pulled back from a meteoric rise of 30% in just three weeks. Hong Kong tech shares fell more than 5%, while property shares were on track for their biggest one-day drop in almost two years, falling 7.2%.

• Japan’s Nikkei, which rose 2.3% as newly elected Prime Minister Shigeru Ishiba hung up his hawkish feathers and essentially told the Bank of Japan not to raise rates anymore. BOJ policy advocate Asahi Noguchi echoed the message, saying the central bank should patiently maintain easy monetary policy. That’s good for Japanese stocks but not so good for the yen, which fell to its lowest in a month. The currency fell 2% overnight and was last at 146.9 per dollar. Markets now point to almost no chance of the BOJ tightening policy in October and an increase of just 4.6 basis points in December, or less than an even chance of a 10 basis point move. Rates are expected to reach just 0.5% by the end of next year from the current 0.25%.

• The US stock market traded neutrally yesterday. Investors are waiting for tomorrow's report on the labor market. But expectations have improved - the US economy remains strong. Against this background, the yield on US government bonds has grown and the dollar has strengthened.

• Libya resumes oil production and exports, with pumping scheduled to gradually resume on October 1, with a full return to operations scheduled for Wednesday, October 2. The resumption of production after a roughly month-long shutdown was made possible by the resolution of a dispute over the appointment of a new governor of Libya's Central Bank, a key step in breaking the impasse in Libya's national energy sector.

• Global seaborne crude supplies fell for the fourth month in a row in September 2024, reaching 37.6 million barrels per day. Saudi Arabia threatens to push oil prices to $50 - WSJ. If OPEC+ member countries that violate the agreements do not adhere to the agreed production curbs. But OPEC+ denied these words.

• France's TotalEnergies (TTE) and U.S. hydrocarbon company APA Corp. plan to invest $10 billion in oil production off the coast of Suriname.

• The GranMorgu project is centred on an offshore area believed to contain around 700 million barrels of oil. It is adjacent to ExxonMobil's successful project in neighbouring Guyana.

• DeepMind and BioNTech are building AI lab assistants to advance scientific research. In the coming years, tools DeepMind is working on will be able to design experiments based on a given hypothesis and give scientists insight into potential success or failure, says Demis Gasabis, head of Google’s AI team. Meanwhile, BioNTech and InstaDeep said Tuesday they have developed an AI assistant called Laila with “deep knowledge of biology.” It is based on Meta’s Llama 3 model.

• Toyota (TM) is investing $500 million in an electric air taxi company. The first tranche of the deal is expected by the end of 2024, the next - in 2025.

• Oracle (ORCL) to invest $6.5 billion in AI and cloud services center in Malaysia

• According to Lloyds Bank's annual survey, UK financial institutions' investment in AI has doubled in the past year, with
63% of respondents investing in AI, up from 32% in 2023.

• Bitwise Asset Management has filed an application for an ETF (exchange-traded fund) on the XRP cryptocurrency.

• Japan's financial regulator (FSA) plans to review cryptocurrency regulation. Possible changes include: reducing taxes on cryptocurrency profits from 55% to 20%; creating conditions for the launch of cryptocurrency-based ETFs.

• The US Labor Inspectorate has accused Amazon of illegally refusing to negotiate with a union representing drivers working for the contractor.

• Drugmaker Lilly (LLY) plans to spend another $4.5 billion on manufacturing and drug development
Humana (HUM) shares fell the most in 15 years, down 12%
The insurer was hit by a drop in its Medicare Advantage quality rating, posing a major threat to earnings.

• OpenAI raised $6.6 billion in funding, valued at over $157 billion.

• Apollo (APO) CEO Rowan warns that the Fed's aggressive rate cuts could backfire
He sees no reason for the Fed to continue cutting interest rates to stimulate the economy right now.

• The U.S. Commerce Department said Wednesday it plans to spend $100 million to encourage the use of artificial intelligence in developing new green semiconductor materials.

• Nikola's hydrogen truck deliveries to dealers rose 22% in Q3. The electric vehicle maker delivered 88 Class 8 hydrogen fuel cell trucks to dealers in the quarter, in line with its sales expectations of 80 to 100 units. The company's shares have fallen more than 82% since the last close of trading this year, reflecting weak growth in the electric vehicle industry.

• Yesterday, after the reports, NKE (-7%) and CAG (-8%) shares fell

• US destroyers helped Israel shoot down Iranian missiles - WP. During Iran's massive attack on Israel, the US helped the latter shoot down Iranian missiles. Israel declared the UN Secretary General persona non grata and banned him from entering the country. The reason was Guterres' evasive comment after the Iranian shelling on October 1. The Iranian foreign minister said Tehran was done with its response to Israel unless it escalated. Before Iran launched missiles yesterday, Israel sent a message to Tehran: "No matter how big or small the strike, and no matter whether there are casualties or not... Israel... will directly hit Iran's nuclear or oil facilities."

• Larry Fink said that China is the largest and most fundamental supporter of the Russian economy. He also noted that BlackRock may reconsider its operations in the Chinese market and that Western companies should reassess their relations with China.

• Macron endorses temporary extra tax on large French companies French President Emmanuel Macron has backed his new government's strategy even if it departs from his long-standing pro-business stance.

• US bans more goods from China over forced labor allegations.

• The ADP US Private Sector Employment Report for September 2024 showed a strong US labor market.
- The number of new jobs was 143 thousand (103 thousand previous).
- Wages for those changing jobs grew at the slowest pace in the last three years. The slowdown in wage growth for those changing jobs is a sign of stabilization in the labor market.
- The US payroll grew more than expected in September.
- Thanks to increased employment in construction and in the leisure and hospitality industries.

Key events that could impact markets on Thursday:
- HCOB Eurozone Services PMI -
UK Services PMI
- US Initial Jobless Claims, ISM Services PMI
- Speeches by Atlanta Federal Reserve President Raphael Bostic and Bank of Minneapolis President Neel Kashkari