Market Comments: The S&P and TSX began the week with losses. The S&P took its worst fall of the past three months last Tuesday, ending just five points higher than it was when the Fed launched its economic stimulus mid September. Gold did very well last week, nearing $1,800 USD and gaining 1.5% on Thursday alone. Commodities pushed the TSX higher on Thursday.
Last week, it was reported that U.S. consumer spending increased by 0.5% in August. This is mostly a result of increased fuel prices. “Inflation rose 0.4 per cent over the month, the largest gain since March 2011. Year on year it climbed 1.5 per cent,” says the Financial Times.
Company News: The Glencore-Xstrata merger is likely to go through, as the board of Xstrata recommended the merger to shareholders. This will create a “global commodities and mining powerhouse,” says The Telegraph. With regards to the controversial elements of the deal, Xstrata will retain a majority of directors on the combined board, and will be valued at 3.05 Glencore shares.
Heineken is the new owner of Asia Pacific Breweries, the maker of Tiger Beer. This was a strategic move by Heineken, which now has a strong foothold in developing Asian markets.
Also, the chief executive of Apple apologized for the iPhone’s failings in its new Maps application, says the Financial Times. “Apple has been accused of putting corporate interests ahead of its customers’ by ousting Google Maps, which has been bundled into the iPhone’s software since its launch in 2007, in favour of an in-house product.” Apple sold 5 million iPhone 5s, less than the expected 6 million globally. Google hit record highs last Monday, gaining 2% and closing at $749.38.
International News: The big news internationally is the Wheatley report, which came out last Friday. The report “unveiled a sweeping set of reforms to the London interbank offered rate that would cull the number of daily fixings from 150 to 20 and impose new regulatory oversight, and hand the rate-setting process to an independent administrator,” says the Times. Several governments have stated their support of Wheatley’s recommendations, and plan to use similar mechanisms in their own rate setting. Also last week, the British Banking Association voted to cede its role in setting LIBOR. Again, LIBOR is the London Interbank Offered Rate, and impacts c. $350tn contracts worldwide.
In Eurozone news, Spain impacted markets by announcing large fiscal spending cuts. This news comes on the heels of widespread fear that Moody’s may cut the government’s debt rating to Junk status. The European Banking Authority (EBA) reported last week that the “European banking sector needs about 338 billion euros of additional equity capital to comply” with Basel III rules. Currently, many European Banks “are not in a position to extend new credit no matter what the regulators do. Asking them to raise more capital will not harm growth in the short term but it will improve growth in the longer term by making European economies less vulnerable to these kinds of credit crunches in the future.”
Recent Comments