Saudi Arabia Sets Emerging Market Bond Record
Saudi Arabia issued its first bond sale of around $17.5bn, beating Argentina’s previous record for an emerging market.
Editor’s Remarks: Saudi Arabia drew an impressive $67bn in demand for its first international bond sale. The demand stems from low interest rates around the globe. Saudi Arabia is looking to make major changes to its economic strategy by stabilising its finances and move further from oil. Saudi Arabia wants to avoid the massive deficits of the past year (almost $100bn) and reinvigorate its growth. The success of the bond sale likely means large Saudi companies will begin to issue and more sovereign sales in the coming years. Saudi Arabia has seemingly convinced investors that its young population will deliver for it.
What to watch: Brent Crude, WTI, USD/SAR, GBP/SAR, EUR/SAR
Halliburton Releases Earnings Surprise
Halliburton announced a profit for the third quarter, beating market expectations, and anticipates rig counts will increase.
Editor’s Remarks: Oil continues to dominate the news with all signs pointing towards joy at the rising oil prices. The IMF announced that the oil price Saudi Arabia needs to hit even on expenses is half as low as first predicted, signalling to investors that efforts will be made to help a rise in prices. However, Halliburton’s announcement that rig count, especially in the US, where it primarily operates, will continue to rise should worry others that oversupply may occur again. Halliburton is now leaner after suffering numerous cost cuts along with most oilfield services companies, but performance will continue to rely upon US rig count numbers and an improved oil price.
What to watch: Halliburton, Schlumberger, Baker Hughes Rig Count, Brent Crude, WTI
Chinese Economy Growth Rate Steadies
China released its growth rate for the third quarter of 2016 yesterday, seeing a steady advance of 6.7% for the past three quarters.
Editor’s Remarks: China was in line with market expectations after the government increased its spending and there was an uptick in fixed asset investments. The government has increased expenses by over 10% compared to this time last year. Chinese growth has stabilised in 2016 after falling steadily over the past four years. However, many are concerned that the growth is not keeping pace with the country’s rising debt. The debt-for-equity programme created last week and economic reforms coming next year will help correct this inequality, but it may be too late. At least a stable Chinese economy will calm investors’ worries over the slowing global demand.
What to watch: Chinese Corporate Debt, USD/CNY, GBP/CNY, EUR/CNY
Berlusconi Attacks Renzi’s Referendum
Former Italian Prime Minister Silvio Berlusconi, whose party still retains 12% of the vote, attacked Matteo Renzi’s constitutional reform.
Editor’s Remarks: Silvio Berlusconi may be banned from office due to tax fraud but he still has a major voice in the Italian community. Until now, Prime Minister Matteo Renzi has avoided Berlusconi, with the latter’s news channels choosing not to attack the referendum. Berlusconi accused the constitution of being the pathway to Renzi becoming the “master of Italy”. It seems less and less likely that the constitution will win but it also seems less likely that Renzi will stick by his old plans to quit if the constitution fails. The last thing Italy needs is more problems.
What to watch: Forza Italia, December Constitution Referendum, Matteo Renzi, Silvio Berlusconi
Morgan Stanley Conquers Bond Trading
Morgan Stanley doubled its bond-trading revenue to see earnings rise over 60% compared to the same time last year.
Editor’s Remarks: All banks are highlighting the boost from bond trading over the last quarter. However, Morgan Stanley displayed difficulty over recent years in getting the most from that unit. It decided then to restructure its bond trading with a change of leadership and the removal of 25% of its team. Morgan Stanley is holding off celebrating until it proves its success over a significantly longer period, i.e. several years, which highlights the difficulty in handling the volatility and tough capital needs of bond trading. Morgan Stanley must now focus on managing the new regulations surrounding selling retirement products in the coming weeks.
What to watch: Morgan Stanley (MS), Goldman Sachs (GS), JPMorgan Chase (JPM), Bank of America Corp (BAC)