- Asian stocks fluctuate with Fed’s pace in focus
Asian shares struggled for direction in early trade, reflecting subdued risk appetite as traders mulled the
prospect of less aggressive Federal Reserve interest rate cuts. Stocks moved between losses and gains in
Japan and South Korea, with those in Australia modestly higher. Futures pointed to gains in Hong Kong. - Dow posts back-to-back loss Tuesday as Wall Street’s rally pauses
The S&P 500 and the Dow Jones Industrial Average ended Tuesday marginally lower, as investors grappled
with persistent concerns about an uptick in interest rates and digested this week’s latest earnings reports.
The S&P 500 ended the session lower by 0.05%, closing at 5,851.20. It was the broad market index’s first
back-to-back loss since early September. The 30-stock Dow slid 6.71 points, or 0.02%, ending at 42,924.89
and posting a second straight losing day. The Nasdaq Composite outperformed with a gain of 0.18% to
18,573.13. - Oil prices slip on rising U.S. crude inventories
Oil prices edged down on Wednesday after industry data showed U.S. crude inventories had swelled more
than expected, while the market kept watch on diplomatic efforts in the Middle East as Israel continued
attacks on Gaza and Lebanon. Brent crude futures dipped 31 cents, or 0.4%, to $75.73 a barrel by 0011
GMT. U.S. West Texas Intermediate crude futures shed 32 cents, or 0.5%, to $71.42 per barrel. Crude futures
settled higher in the two previous sessions this week. - Gold scales record peak as U.S. election jitters drive safe-haven rush
Gold hit an all-time peak on Tuesday as factors including safe-haven demand, spurred by U.S. election
uncertainties and the Middle East war, combined with expectations of further monetary easing to amplify
bullion’s surge. Spot gold rose 0.7% to $2,739.81 per ounce after hitting a record $2,744.08 earlier in the
session. U.S. gold futures gained 0.6% to $2,754.30. Bullion, considered a hedge against geopolitical and
economic uncertainties, has gained over 32% this year, reaching multiple records. Lower interest rates also
increase the appeal of holding gold. - Lagarde Sees Clear Direction for Rates, Pace to Be Decided
The direction of European Central Bank borrowing costs is clear but the pace at which they’ll be lowered is
still to be decided, according to President Christine Lagarde, who didn’t rule out bigger moves.
Speaking Tuesday on the sidelines of the International Monetary Fund and World Bank annual meetings,
Lagarde said disinflation is on the right track, describing recent numbers as relatively reassuring. - IMF Expects More BOJ Hikes, With Greater Confidence on Inflation
The International Monetary Fund is gaining confidence over the sustainability of Japan’s inflation, and
expects the Bank of Japan to stay on a gradual path of raising interest rates in coming years, according to its
mission chief for the nation. We have seen indicators of consumption starting to increase, and we have seen
employees’ scheduled earnings starting to increase, and this is an indication of a positive price-wage cycle
working in the economy, Nada Choueiri, the Japan mission chief, said Tuesday in an interview on the sidelines
of the IMF and World Bank annual meetings in Washington. This is why we are more confident. - IMF Lowers Global Growth Forecast, Warns of Increasing Risks
The International Monetary Fund lowered its global growth forecast for next year and warned of accelerating
risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending
nations into recession. Global output will expand 3.2%, 0.1 percentage point slower than a July estimate, the
IMF said in an update of its World Economic Outlook released on Tuesday. It left the projection for this year
unchanged at 3.2%. Inflation will slow to 4.3% next year from 5.8% in 2024. - IMF warns on China’s property market worsening as it cuts country’s growth outlook
The Washington, D.C.-based organization highlighted that China’s property sector contracting by more than
expected is one of many downside risks for the global economic outlook. China last week reported third-
quarter gross domestic product growth of 4.6%, slightly higher than the 4.5% that economists polled by
Reuters had been expecting. In a report published Tuesday, the IMF trimmed its forecast for growth in China
for this year to 4.8%, 0.2 percentage points lower than in its July projection. - A tidal wave of natural gas supply, the biggest yet, will reshape global markets, says RBC Capital
The biggest influx of liquified natural gas (LNG) supply is coming and it will transform the global market,
bringing about wider implications than previous expansions, said RBC Capital Markets. The expansion is likely
to lead to a state of oversupply by the end of 2026, which will remain until 2030, with prices possibly moving
below double-digits, analysts such as RBC’s Anan Dhanani have projected. - Tokyo Metro shares surge 45% on debut after Japan’s largest IPO in six years
The company had raised 348.6 billion yen ($2.3 billion) in the largest initial public offering in Japan in six
years. Shares were priced at the top-end of the IPO price band of 1,100 yen to 1,200 yen. Reuters reported
that the IPO was more than 15 times oversubscribed, with the portion available to retail investors around 10
times oversubscribed. - Russia says it has no intention of abandoning Iran as it faces Israel’s wrath
The Kremlin said it has no intention of abandoning Iran as it faces the threat of a direct attack by Israel. Iran’s
proxies, the militant groups Hamas and Hezbollah, have come under heavy attack in Gaza and Lebanon,
respectively. We are developing cooperation with Iran in a variety of areas. We intend to do this further,
Kremlin Press Secretary Dmitry Peskov told CNBC Tuesday. To see just how Russia could look to support Iran,
all eyes are now on the BRICS summit that’s taking place in Kazan, southwestern Russia. - Blinken and Netanyahu Agree Sinwar’s Death Opens Options
The US’s top diplomat and Israel’s Prime Minister Benjamin Netanyahu agreed Tuesday that the killing of
Hamas leader Yahya Sinwar opens new possibilities for ending the conflict in the Gaza Strip but gave no
indication that a 2 1/2-hour meeting yielded an accord on what comes next. Secretary of State Antony
Blinken, on his 11th trip to the region since Hamas attacked Israel in October 2023, called for charting a new
path forward that allows Palestinians to rebuild their lives and provides governance, security and
reconstruction for Gaza, according to a US readout of their meeting in Jerusalem. - Russia pushes new world order agenda as it hosts beefed-up BRICS summit
Russia is rolling out the red carpet to its allies on Tuesday, as it hosts the latest BRICS summit in a show of
strength to the West. The group, which includes Brazil, Russia, India, China and South Africa, was initially
formed as an organization of rapidly economically-developing nations. It has morphed into a geopolitical
forum for the world’s most powerful nations outside of — and, importantly, challenging — the Western
world. - SAP SE’s shares rose 1.4% to a record as cloud revenue soared at Europe’s biggest software company,
which is transitioning customers away from locally run systems with the promise of artificial-intelligence
tools and analytics
Cloud revenue rose 25% in the third quarter from a year earlier to €4.35 billion, roughly in line with analysts’
estimates. The firm’s cloud backlog, which reflects sales that will be booked over the next twelve months,
gained 25% to €15.4 billion. SAP raised its 2024 outlook for some financial metrics, including free cash flow,
which is now seen at €3.5 billion to €4 billion, from about €3.5 billion previously. Its guidance for 2024 cloud
revenue remains €17 billion to €17.3 billion at constant currencies, up 24% to 27%. Chief Executive
Officer Christian Klein is seeking to accelerate the shift to the cloud, in part using a new AI-focused strategy
announced early this year. About 30% of cloud deals in the third quarter contained business AI use cases,
Klein said. - Philip Morris International Inc. shares soared 10.5% after the company forecast higher-than-expected
profit this year thanks to soaring demand for its Zyn nicotine pouches in the US
PMI, which also makes Marlboro cigarettes, said that adjusted diluted earnings per share will now grow as
much as 15% for the full year, excluding currency movements. That’s up from 13% previously. Sales of Zyn
pouches, which contain nicotine and are taken orally by stuffing them under the upper or lower lip, rose 41%
alone during the third quarter in the US, PMI said. Demand for IQOS heated tobacco sticks in markets such as
Greece and Germany are also driving sales, the company added. PMI is moving toward cigarette alternatives
amid increasing public awareness and concern about the health impact of tobacco. While the products
contain fewer of the particles and chemicals that have linked cigarettes to cancer and heart disease, their
mounting popularity has sparked controversy over whether young people who have never smoked have
become hooked on them. - Verizon Communications shares fell 5% after it reported third-quarter revenue that missed analysts’
expectations, weighed down by lackluster sales of hardware such as mobile phones
The company reported a net gain of 239,000 monthly phone subscribers, beating analysts’ projections of
222,000. But total revenue was essentially flat from a year earlier at $33.3 billion, slightly under analysts’
expectations of $33.4 billion, as service revenue and other growth was offset by declines in wireless
equipment revenue. It was the second consecutive quarter that lower equipment revenue overshadowed
other gains. Telecom executives, including Verizon Chief Executive Officer Hans Vestberg, have said they
didn’t expect Apple Inc.’s latest iPhone, which came out in September, to spur a significant upgrade cycle.
Apple’s iPhone 16 offers only modest hardware upgrades, and its advanced artificial intelligence technology
will only be gradually added to the device via incremental software updates. As the pool of potential new
wireless customers tightens, Verizon has been offering customizable mobile and broadband plans and
throwing in perks such as savings on streaming services like Netflix and Max. The company is also pushing its
fixed wireless product, which delivers high-speed internet over the airwaves rather than through lines into
the home. Vestberg said this convergence of plans and products has been attractive to customers and leads
to lower churn, or customers leaving for rivals. - General Motors Co. shares rallied 9.8% after it signaled solid US demand for its highest-margin vehicles
even as the broader market softens, posting better-than-expected results for the latest quarter and raising
the low end of its full-year profit forecast
The carmaker boosted its 2024 adjusted earnings before interest and taxes forecast to at least $14 billion, up
from the minimum of $13 billion it had previously projected. While some rival automakers are cutting prices
and boosting incentives to reduce inventory, GM has been able to hold the line on high-demand vehicles like
its gas-powered GMC Yukon SUV and Chevy Silverado pickup. Profits from those models more than offset
losses from a growing electric vehicle business and continued red ink in China. Industry-wide US new vehicle
sales have fallen for the past two quarters, with the decline accelerating to 1.9% in the most recent three-
month period. High sticker prices and financing costs are dissuading some would-be buyers. But GM has been
able to maintain its margins with a combination of price maintenance and well-managed inventories. - A severe E. coli outbreak tied to McDonald’s Corp.’s Quarter Pounders sickened dozens of people in the
US, mainly in Colorado and Nebraska, and killed one, the US Centers for Disease Control and Prevention
said
Ten people have been hospitalized, including a child with complications from HUS, a syndrome that damages
small blood vessels and can lead to deadly clots, the agency said. Of the people who have been interviewed,
all reported eating at McDonald’s before falling ill between Sept. 27 and Oct. 11, the CDC said, with most
specifying a Quarter Pounder. Twenty-six cases have been reported in Colorado, the state’s health
department said. One older person with underlying conditions in Colorado has died after contracting E. coli,
according to the statement, and state public health officials are coordinating with the CDC. McDonald’s
shares dropped 5.6% in afterhours trading. McDonald’s said it was taking swift and decisive action to control
the outbreak. The company has removed the Quarter Pounder from restaurants in Colorado, Kansas, Utah
and Wyoming, as well as parts of Idaho, Iowa, Missouri, Montana, Nebraska, Nevada, New Mexico, and
Oklahoma. It also said that some of the infections may stem from a single supplier of the onions that serves
three distribution centers. - Starbucks Corp. pulled guidance for 2025 after sales plunged for a third consecutive quarter, calling
attention to the scope of the problems facing new Chief Executive Officer Brian Niccol
The coffee chain reported a 7% decline in same-store sales in the fourth quarter ended Sept. 29, according to
a preliminary earnings release on Tuesday. The weakness was especially evident in the US, where
transactions were down 10% from the prior year, and in China, where comparable sales fell 14%. Starbucks
said withdrawing guidance for the current fiscal year will give Niccol an opportunity to assess the business
and solidify a turnaround plan. Since taking over the top post on Sept. 9, he’s been rearranging the leadership
ranks and has unveiled the broad outline of a plan to stoke growth that includes making cafes more inviting
and speeding up morning service. - Norfolk Southern shares rose 4.9% after the rail freight company reported profits for the third quarter
that topped analysts’ expectations. Wall Street analysts were impressed by productivity gains
THIRD QUARTER RESULTS: Adjusted EPS $3.25 vs. $2.65 y/y, estimate $3.11. Railway operating revenue $3.1
billion, +4.3% y/y, estimate $3.09 billion. Adjusted operating ratio 63.4% vs. 69.1% y/y, estimate 64.8%.
Evercore ISI (outperform), Jonathan Chappell: EPS upside alone is positive for the stock, but the fact that
beats will be rare this quarter, the upside came from costs/productivity, and the 2H/FY24 guidance range was
maintained in the face of many headwinds associated with fuel, coal prices, and softer demand in some
industrial freight categories is a surprise, Chappell writes. Calls Norfolk’s margin reversion path robust; if
execution remains on a positive trajectory (and all else equal on the macro front), there’s even more EPS
upside potential. - Deutsche Bank swings back to profit in the third quarter, beating expectations
Germany’s largest lender had posted a 143-million-euro loss in the second quarter, at the time announcing it
would not embark on a second share buyback program this year and factoring in a provision for its long-
running lawsuit over its acquisition of its Postbank division. Some 60% of plaintiffs in the litigation, pillared on
allegations that Deutsche Bank underpaid for its purchase, have since settled with the German bank in
August. Deutsche Bank in February embarked on a sweeping cost-saving push set to lighten the lender’s
headcount by 3,500 roles by 2025, a figure that includes 800 cuts announced in the previous year. - SAP boss warns against regulating AI, says Europe risks falling behind U.S., China
Christian Klein, head of German software giant SAP, says Europe risks falling behind the U.S. and China if it
ends up overregulating the AI sector. If you only regulate technology in Europe, how can our startups here in
Europe compete against the other startups in China, in Asia, in the U.S.? Klein said. Instead, he argues
businesses need a more harmonized, pan-European approach to pressing issues like the energy crisis and
digital transformation and less regulation overall, not more.
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