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Market Update - 21/10/16

Friday, October 21, 2016

Disclaimer: This is an informal commentary by one of our Market Analysts. It should not be taken as investment advice and is made available only on that basis.
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Equities shrugged off any spill over from the ECB meeting as a lack of taper talk in the press conference pushed the Euro lower. SPX attempted a half-hearted selloff in the morning, reaching down 50bps, but rapidly bounced back to unchanged before waffling about in the afternoon. Yet there were corners of the market that were moving: crude staged a decisive reversal from the 15-month highs reached yesterday, and the US dollar returned to strength (DXY hit 98.4) against both EUR and CNH. US election debate provided very little new material for investors.

BAT in UK proposes a merger with Reynolds in US, at $56.50 in cash & stock, owns 42% already, values company in total at $81.3bn. Deal is unsolicited, is at a 20% premium to last night’s close. BATS completed deal last year to buy Lorillard for $25bn.

Tesla Motors plans to charge buyers of its newest cars $8,000 to activate autonomous-driving technology, hinting those who do would be able to offset the cost through a ride-hailing network.

Morgan Stanley is set to collect $120 million if Bayer's deal for U.S. seed giant Monsanto closes. It would be the second-largest fee for a single bank on record.

New  stock exchange IEX Group in US tried to slow down high-frequency traders by putting in a speed bump. Now, an upgrade by Nasdaq Inc. may speed them back up again.

Royal Dutch Shell reached a deal to sell $1 billion of shale oil and gas assets in Western Canada as part of a global divestment program to raise cash and streamline operations.

Microsoft revealed that it’s cloud computing business is moving into high gear as sales of it’s Azure service soared. Results good after hours, closed at $57.25, traded over $60 , will be an all time high.

HK closed early today due to a typhoon.

All markets remain open today in Europe and US

Nikkei fell small today, approached 17,300 before selling off late in day.  USD strength helped exporters. Chinese construction names better on increased fiscal spending.

JP Morgan bullish on Vivendi ahead of numbers, market is bullish on music business.

Dovish Fed Governor Tarullo is expected to speak today and possibly could set the scene for a hike in December by leaning that way (66% priced in)

The rating agencies will be looked at today with Fitch opining on Italy's BBB+ rating with no change expected but there is a chance that DBRS lowers its outlook on Portugal later.

UBS Group  the world’s third-biggest currency trader, said it processed a record number of currency trades during the minutes of the pound’s flash crash this month.

The euro fell to its lowest level since March after Mario Draghi signaled Thursday quantitative easing won’t come to an “abrupt” end, leaving traders waiting until at least December for news about policy changes.

Markets up a little, Eurostoxx + 12 BPs.