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Good morning. Optimism about a trade deal is flourishing, the Saudi Aramco IPO is here and McDonald’s fired its CEO. Here’s what’s moving markets.
Plenty of encouraging noises on the trade front. U.S. Commerce Secretary Wilbur Ross says the talks being held with car companies in Europe and Japan have been positive and may mean tariffs can be avoided on autos being imported into America. That follows on from top negotiators from the U.S. and China saying they are getting closer to reaching an agreement on the first phase of a trade deal between the two, though President Donald Trump wants to make sure the signing takes place in the U.S. Signing location aside, all that optimism should give cyclical stocks, particularly autos, a lift as we head into a new week.
The Big One
For some time, a half-joking discussion in the Bloomberg office was which would come first, Brexit or Saudi Aramco’s IPO? Saudi Arabia has now confirmed that the latter is going to win the race, with the kingdom approving plans to list the world's most profitable company on the Riyadh exchange only for now, meaning bourses in New York and London will have to wait to see if further placements will come. Saudi leaders are said to be willing to accept a valuation of between $1.6 trillion and $1.8 trillion, though it may even have to grin and bear something even below that.
The bitterly divided British electorate is not the only game in town when it comes to European politics. Spain will vote this coming weekend and the latest polls indicate another stalemate, increasing the uncertainty in another country with serious divisions to heal. Looking further ahead, the shrinking popularity of Annegret Kramp-Karrenbauer, backed by Angela Merkel to eventually replace her in Germany, is leading to questions about the potential of a new leadership challenge. And in Italy, the governing coalition is still battling over elements of the country’s budget.
A bombshell announcement from one of the world’s most visible brands over the weekend as fast-food giant McDonald’s Corp. fired its chief executive over a consensual relationship he had with an employee in violation of company policy. Steve Easterbrook had been a successful boss at the company, with shares doubling during his tenure. His strategies helped revive sales with all-day breakfast options and a charge into online ordering and delivery, offsetting pressures caused by consumers shifting to healthier options. His successor, Chris Kempczinski, will step into big shoes.
Extra optimism about the trade picture gave Asian shares a lift, while both European and U.S. futures are also pointing to positive opens. Purchasing managers’ indexes that track manufacturing in the euro area will be closely watched given concerns about the health of the global economy, as will manufacturing data from the U.S. later. Christine Lagarde will make her first speech as president of the European Central Bank this evening.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Market returns are going to tumble in the next decade, Morgan Stanley says
- The next computer revolution will be about the brain.
- Investors are lining up for legal battles against Neil Woodford.
- The dark side of zero-cost investing.
- Vaping’s role as a gateway questioned in new study.
- Under Armour is facing an accounting probe.
- The disastrous arrival of VAR in English soccer.
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