Top 5 Things to Know in the Market on Monday - Investing.com

© Reuters.

Investing.com -- Markets are set to open lower after investors take a more sober look at the provisional trade deal delivered by the U.S. and China at the end of last week, while the U.K.'s Brexit hopes get a fresh setback and Turkish assets fall after the U.S. and EU threaten sanctions. Elsewhere. Softbank is reported to be set to take control over WeWork's parent company to stop the hemorrhaging of cash at the office space provider. Here's what you need to know in financial markets on Monday, 14th October.

1. Stocks euphoria to continue ebbing

U.S. stock markets are indicated to open the week lower, on disappointment that the substance of Friday’s interim trade agreement between the U.S. and China falls well short of the hype given it by the White House.

By 6:05 AM ET (1005 GMT) were marked down 120 points, or 0.5%, while were also down 0.5% and were down 0.6%, die partly to a report by Bloomberg saying that wants more talks before it commits even to the little that was supposedly agreed on Friday.

Both the New York Stock Exchange and NASDAQ will open for trading as normal today, despite the Columbus Day holiday. The Securities Industry and Financial Markets Association, by contrast, has recommended that the bond market be closed.

2. China's economy is still slowing

Asian markets rallied in relief at the results of U.S.-China trade talks at the end of last week, but the hard data continued to show the extent of China’s problems.

Chinese fell at the steepest level since March in September. They dropped 3.2% on the year. fell an even steeper 8.2%, equalling their worst drop since 2016.

There was further evidence of the Chinese economy’s struggles in a 5.2% annual drop in , the 15th straight monthly decline. Even sales of new-energy vehicles – cars which are either wholly or partially electric-powered, fell for the third month in a row. That’s due in large measure to the phasing out of subsidies for electric car purchases.

On an otherwise light day for data, the euro zone’s fell by a worse-than-expected 2.8% on the year in August, despite a 0.4% monthly rebound.

3. Softbank set to take over WeWork

Softbank is in talks to take control of parent company, according to the Wall Street Journal and Financial Times, aiming to recapitalize the company at a sharply lower valuation than that which it was seeking from the public capital markets last month.

The papers reported that Softbank is also lining up billions of dollars in fresh debt from JPMorgan (NYSE:). Both reports said that a deal wasn’t guaranteed and the FT noted that if new money can’t be raised, then bankruptcy proceedings may be necessary. The WSJ noted that We Co., the largest commercial tenant in some urban real estate markets, needs $3 billion to get through the next year.

Softbank is already We Co.’s largest external shareholder, having invested over $10 billion in We Co. directly and through its Saudi-backed Vision Fund.

4. Turkish assets falls under sanctions threat

The , and the local and bond markets, all after both the U.S. and EU warned of imposing economic sanctions on the country if it continues its military operations in Kurdish-controlled areas of Syria.

The dollar rose as high as 5.9225 lira, the highest since June, after a weekend peppered with reports of atrocities committed and jailbreaks by Islamic State prisoners whose Kurdish guards had been redeployed to fight Turkish units.

President Recep Tayyip Erdogan has counted on Turkey’s significant geopolitical value to defy pressure from the West: he has threatened to reignite Europe’s migrant crisis by sending 3.6 million Syrian refugees westward, while also threatening a major security realignment by buying new missile defense equipment from Russia rather than from its NATO allies.

5. Not good enough, EU tells U.K. on Brexit plans

The retreated after its sharpest one-day rally in more than two years, after the EU’s top negotiator reportedly told EU diplomats that the U.K.’s latest proposals on settling the Irish border chapter of the Brexit negotiations were unworkable.

The EU’s reaction means that it’s virtually impossible to agree a legally-binding withdrawal agreement at a summit due at the end of this week. As such, Prime Minister Boris Johnson will be forced under a recently passed law to ask the EU for another extension to the Oct. 31 Brexit deadline.

Outgoing EU Commission President Jean-Claude Juncker told an Austrian newspaper at the weekend that it would be “unhistoric” not to grant such a request.

Johnson's government meanwhile is preparing for a general election: a new session of parliament opened by the Queen today will read out a laundry list of major spending promises for the time after Brexit.

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2019-10-14 10:09:00Z
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Wall Street’s Sky-High Expectations Are About to Collide With Reality - The New York Times

Wall Street’s eternally optimistic forecasters are expecting corporate profit growth to surge by the middle of next year — views that are about to collide with reality as hundreds of companies report financial results and update investors on their prospects.

American companies go through this ritual every three months: sharing financial statements and holding conference calls in which they sometimes offer their expectations for future quarters, what Wall Street calls “guidance.” For this quarter, it begins with reports from several big banks on Tuesday.

In between these reports, executives continue to issue guidance, trying to nudge expectations higher or lower with speeches at conferences or other events so official results don’t jolt investors.

Lately, they’ve been doing less of the in-between nudging, and that could make this round of earnings reports more important than usual.

“Companies are starting to do what they do when there is rampant uncertainty, which is just stop issuing guidance,” said Savita Subramanian, head of United States equity strategy at Bank of America Merrill Lynch. “Companies just basically go dark.”

During the three months that ended in September, companies in the S&P 500 offered the fewest updates — positive or negative — to investors since 2000, according to the bank’s analysts.

The “rampant uncertainty” that Ms. Subramanian referred to flows from many sources: signs that the economy and job growth are slowing, evidence that the manufacturing sector may already be in a recession, and the trade war’s toll on China, Japan and Germany.

Plus, politics and the 2020 presidential election were always going to be a distraction, but the impeachment investigation has made it harder to know where policy will go.

On Friday, President Trump said the United States and China had reached an interim deal to avert a planned tariff increase on Tuesday. But the agreement was spoken and would take several weeks to write, doing little to remove the uncertainty surrounding the economic battle between Beijing and Washington.

Regardless of the companies’ reasons, the relative silence since their last reports means stock investors may be in for a lot of bad news all at once.

Then there’s the matter of the habitually overenthusiastic Wall Street analysts who rate stocks and try to predict where they’re heading. Stock prices hinge on expectations — not on what just happened — and the predictions look increasingly divorced from reality.

Right now, the collective forecast is that profits at S&P 500 companies will jump more than 10 percent in 2020, a view that defies expectations for the economy to slow further.

“It doesn’t look likely,” said Ralph Davidson, chief global equity strategist at BTG Pactual, a Brazilian investment bank, of the profit forecast. “We expect guidance to be coming down.”

It’s not that double-digit profit growth is unprecedented. In 2018, earnings jumped 22 percent after a sharp cut in corporate taxes. But it’s becoming clear that last year’s surge was a one-time jolt.

The current year offers an example of what may happen if it dawns on analysts that they’re being too rosy.

Last October, they were forecasting that profits would grow about 10 percent in 2019. Those targets came down fast at the end of the year because of sudden worry that the trade war and rising interest rates might tip the economy into a recession.

As the year progressed, and companies reported results, the analysts cut the forecast down, again and again.

Now, they expect that profits will have grown just under 2 percent once the year is done. For the third quarter, which ended in September, analysts expect S&P 500 companies to report that their profits fell 3 percent.

Lower profits aren’t necessarily bad news for the economy. One reason corporate earnings have been pinched is that wages have been rising. That reflects the strong job market and helps support consumer spending, which is the bedrock for economic growth in the United States.

Nor does a slowdown in profits definitely mean stocks will fall. The key reason that stocks haven’t done worse as growth targets have been reduced is the Federal Reserve’s decision to cut interest rates.

The central bank made its first cut in July and, most recently, announced that it would expand its balance sheet, a process that pumps money into financial markets. All of this has been good for stocks.

But eventually investors will have to turn their attention back to the fundamental question of whether profits are going to keep growing, and how fast. And that could make the next few weeks rocky.

“I think we’re going to see a wave of negative guidance on next year’s earnings,” said Ms. Subramanian of Bank of America. “And that might not be great for the market.”

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https://www.nytimes.com/2019/10/14/business/stock-market-earnings-season.html

2019-10-14 07:00:00Z
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WeWork opens new sites at breakneck speed despite cash-burn concerns - Reuters

NEW YORK (Reuters) - WeWork has opened almost as many new locations in the last 3-1/2 months as it did in the whole first half of this year, likely accelerating the speed with which the office-sharing company is burning through cash as increasingly hard-nosed investors scrutinize its prospects for going public.

FILE PHOTO: The WeWork logo is displayed outside of a co-working space in New York City, New York U.S., January 8, 2019. REUTERS/Brendan McDermid/File Photo

According to a Reuters analysis of information on the company’s website, WeWork had 622 sites open in 123 cities on Oct. 10. That compares with its footprint of 528 locations in 111 cities on June 30 that was outlined in the prospectus for its abandoned IPO.

The website also identifies 89 sites as “coming soon” and 117 sites as “just announced” - all new locations that are yet to open.

Altogether, WeWork says on the website that it will soon have 845 locations in 125 cities, but it is unclear whether all those will still open. A WeWork spokesman declined to comment on its plans.

The quickening pace of new office openings adds to the risks for WeWork, a company that has created a global brand for its shared workspace concept but was forced to halt plans to go public on Sept. 30 because of investor concerns about how it was valued and whether its business model is sustainable.

The company is now cutting back, including laying off some employees and closing or selling entities that are not essential to its core operations as it seeks to avoid running out of cash. On Friday, WeWork said it will shut down its WeGrow private school in New York City as it pares peripheral operations.

The 97 new locations WeWork added in the first half of this year on average cost $2.63 million each in design and construction costs, up 38% from the $1.91 million that 82 openings each cost in the first half of 2018, according to the IPO document. It added 94 new locations between the start of July and Oct. 10, according to its website.

Whether the average size of a new location in the latest burst of openings is similar to those in the first half of this year is unclear. A WeWork spokesman declined to comment.

“Investors don’t want to invest in a company with such a high cash-burn rate,” said Gina Szymanski, a portfolio manager at real estate-focused AEW Capital Management LP in Boston. “They have got to slow their growth down and focus a little bit more on profitability.”

BLEEDING CASH

WeWork has only about $2.5 billion of cash on hand as of June 30, according to the prospectus that was issued in August.

It will run out of money in the second quarter of next year if the company’s current trajectory doesn’t change, according to research by AllianceBernstein. Some media reports in recent days said it may run out of cash before the end of the year without a new lifeline.

As well as substantial costs for opening new sites, WeWork’s current operations are also still big loss makers. In the year to June 30, its expenses were $2.9 billion and revenue just $1.54 billion.

IFR reported banking sources as saying on Friday that WeWork is in talks with JPMorgan Chase to seek $1.75 billion in bank financing that would provide it with enough liquidity to see it through to the end of the year. Chase is in talks with other banks to syndicate the letter of credit, it said.

In addition, WeWork is in discussions with banks to issue $3.25 billion in secured and unsecured bonds with warrants, IFR added.

WeWork was locked in negotiations this week with its largest shareholder, Softbank Group Corp, over a new $1 billion investment to help the company go through a major restructuring, according to sources familiar with discussions.

WeWork has certainly slowed new leasing in response to investor feedback, said Szymanski, citing AEW’s analysis of WeWork’s market presence.

The leases for many of the recently opened sites would likely have been signed before August, which was when the company first became a punching bag for investors and analysts critical of how it was being valued and run.

WeWork owner, The We Company, said in the IPO document that it has mitigated expenses by refining its design and construction processes, which included investments in new technology to help WeWork quickly and efficiently develop a workspace. The new technology wasn’t defined and the company declined to comment.

Reporting by Herbert Lash; Additional reporting by Carrie Monahan in New York; Editing by Martin Howell and Daniel Wallis

Our Standards:The Thomson Reuters Trust Principles.

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2019-10-14 05:02:00Z
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Five things to watch for in the Canadian business world in the coming week - CTV News

The Canadian Press
Published Sunday, October 13, 2019 10:11AM EDT
Last Updated Sunday, October 13, 2019 12:23PM EDT

TORONTO -- Five things to watch for in the Canadian business world in the coming week:

Aphria call

Aphria Inc. will hold a conference call to discuss its first-quarter financial results on Monday. Cannabis company Aleafia Health Inc. announced on Oct. 8 that it is moving to terminate its wholesale pot supply agreement with Aphria, citing a "failure to meet its supply obligations."

September inflation numbers

Statistics Canada will release its Consumer Price Index for September on Wednesday. The agency reported last month that Canada's annual inflation rate slowed slightly to 1.9 per cent in August under the weight of declining gasoline prices. Economists are expecting a reading of 2.1 per cent, according to markets data firm Refinitiv.

Kinder's last hurrah

Kinder Morgan Canada hosts one of its last quarterly conference calls on Wednesday as its sale to Pembina Pipeline is expected to close late in the fourth quarter of 2019 or in the first quarter of 2020. Pembina's CEO said in August that the Trans Mountain pipeline system would fit neatly into his company's business model but he wouldn't want the "noise" associated with its controversial expansion project.

Where's the beef?

The A&W Revenue Royalties Income Fund releases its third-quarter results and holds a conference call with analysts to discuss the results on Wednesday. A&W Food Services of Canada's CEO said in July that the company could add more plant-based protein foods to its menus after the success it's seen with the Beyond Meat burger.

Corus call

Corus Entertainment will hold its Q3 conference call on Friday. In June, CEO Doug Murphy attributed a 10 per cent bump in second quarter advertising revenues to the harnessing of audience data that allows advertisers to target specific TV programs, rather than those with the top overall audiences.

This report by The Canadian Press was first published Oct. 13, 2019.

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October 13, 2019 at 09:11PM

US-China trade negotiators reach preliminary agreement short of a comprehensive deal - CNN

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1. US-China trade negotiators reach preliminary agreement short of a comprehensive deal  CNN
2. US, China said to reach partial deal, could set up trade truce  BNNBloomberg.ca
3. US stocks rise after trade talks  Sky News Australia
4. U.S., China reach partial deal in long-running trade war  The Globe and Mail
5. Saruhan Hatipoglu: US-China trade talks shifted by economic pain  CGTN America
6. View full coverage on Google News

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October 12, 2019 at 11:13AM

Car dealership to relocate to West Edmonton Mall - Global News

Posted October 13, 2019 5:42 pm

An Edmonton car dealership has announced it will be taking over a large space at West Edmonton Mall.

On Twitter, Mayfield Toyota said that it will be moving from its current location at 102 Avenue and 170 Street to a new space in Canada’s largest mall.

The rumours are true! We’re moving from our current location to Canada’s most iconic retail and entertainment destination, @Official_WEM! That makes us the ONLY full-service dealership in a shopping centre anywhere in Canada! #MovingOnUp #yeg #wem pic.twitter.com/vJ287B1h6H

— Mayfield Toyota (@mayfieldtoyota) October 11, 2019

The space the dealership will take over encompasses 317,000 square feet and will feature a full showroom and service centre.

“We have been looking for a bigger, better space … and we are thrilled for this move,” Mayfield Toyota’s general manager David Friesen said.

Mayfield Toyota has been located at its current location in west Edmonton since 1998. The company also serves as a sponsor for the ice rink at West Edmonton Mall.

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“Mayfield Toyota has been growing our relationship with WEM for several years, and it just seemed like the perfect place to call home,” Friesen said. 

West Edmonton Mall recently filled another large space in the building after The Brick opened up a new location there in early September.

READ MORE: Retail giant takes over former Sears in Canada’s largest mall, signals confidence in brick-and-mortar stores

Construction is set to start on the Mayfield Toyota dealership in March 2020, with completion expected in spring 2021.

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© 2019 Global News, a division of Corus Entertainment Inc.

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October 14, 2019 at 04:42AM

India’s property slump leaves beleaguered banks exposed - The Globe and Mail

While the Indian banking system could be hit by billions of dollars of additional soured debt, the cash crunch in the housing market has levied a toll in human misery.

Francis Mascarenhas/Reuters

India might have thought the worst of a bad loans crisis was past, but a severe cash crunch in the real estate industry could augur fresh strife for its banks.

A slump in the residential property market is leaving many builders struggling to repay loans to shadow lenders – housing finance firms outside the regular banking sector that account for over half of the loans to developers.

With about $13-billion of development loans coming up for repayment in the first half of 2020, according to Fitch Rating’s Indian division, the fallout could spread to mainstream banks that have lent money to the shadow lenders or invested in their bonds.

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Indian financial authorities, including the central bank and government, have said this year that the banking sector’s bad loans –- totalling almost $200-billion –- are on the decline for the first time in four years after ballooning during a debt crisis.

But the number of property developers falling into bankruptcy has doubled during the past nine months, piling pressure on non-banking finance companies (NBFCs), commonly known as shadow lenders.

Potential implosions of these NBFCs could expose banks, according to 12 banking and real estate sources.

A senior banking industry official, declining to be named due to the sensitivity of the matter, said banks would be affected by the property cash crunch in three ways: their lending to NBFCs, their own direct exposure to developers and also individuals who do not repay mortgages.

“It will be a triple-whammy,” he said.

While the Indian banking system could be hit by billions of dollars of additional soured debt, the cash crunch in the housing market has levied a toll in human misery.

Retired Squadron Leader Krishan Mitroo has paid 90 per cent of the cost of his house in Noida, northern India, to developer Jaypee, and the property was supposed to be handed over five years ago. However, Jaypee was forced to delay the project and went into insolvency in 2017.

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“The project has been stuck and there is no progress at all. Even the bankruptcy court has not been able to resolve the issue so far, it is just hanging in thin air,” Mr. Mitroo said. He did not say how much money he had paid, but properties in that project range from about $74,000 to $185,000.

Several such projects are stuck across the country and buyers are waiting for new developers to take interest and complete them with the hope that their hard-earned money, which has been stuck for years, won’t be lost forever.

The property sector has been battling a downturn for the last three to four years. Things have now, however, hit a critical point due to a liquidity crunch hitting shadow banks that are big lenders to both developers and property buyers.

As of June 30, 421 realtors were under the corporate insolvency resolution process (CIRP), up from 209 on Sept. 30 last year, data from the Insolvency and Bankruptcy Board of India shows.

Defaults by two housing finance companies, Dewan Housing Finance Corp. and Altico Capital, have increased fears of contagion to the banking system.

Dewan and Altico did not respond to requests for comment.

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Shadow lenders will be highly exposed when loans worth roughly 700-billion rupees ($13-billion) come up for repayment in the first half of 2020, as many builders may struggle to repay, Fitch’s India Ratings said last month.

“The number of stressed assets in real estate are huge,” said Rohit Poddar, managing director at Poddar Developers. “The stress now is just the start, only the mid-sized to large developers will survive, others will die.”

If three-quarters of the high-risk category of outstanding real estate loans is not repaid, that could lead to additional bad debt of nearly $20-billion on banks’ books in the next few years, according to confidential research conducted by one of India’s leading real estate consultancies for an international financial client, and provided to Reuters.

The Nifty Bank index, which surged in late September after the government moved to slash corporate tax rates, gave up more than half those gains as of Friday. Concerns about real estate loans were one factor, according to analysts, but the fall was also driven by low growth in the economy and the overall worsening asset quality of certain lenders.

Banks’ gross non-performing assets fell to 9.3 per cent of total loans as of March, from 11.5 per cent a year earlier, according to the Reserve Bank of India (RBI).

The improvement was bigger than the RBI had expected, having forecast a drop to 10.3 per cent by March and saying last December the ratio had fallen for the first time since 2015. The central bank said in June it expected bad loans to continue to fall in the current financial year, both the ratio and absolute sum.

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But India still has the highest bad-loan ratio among major economies; by comparison Italy, which has endured a major banking crisis, had a ratio of 9 per cent at the end of last year.

Yes Bank and IndusInd Bank have the largest direct exposure to the commercial real estate sector and would be susceptible to “asset-quality difficulties” if the real estate sector continues to slow, according to a Moody’s report in mid-September, which also said other banks such as ICICI Bank and Axis Bank are likely to feel the pinch.

The four banks did not respond to requests for comment on potential difficulties arising from the real-estate exposure covered in the Moody’s report.

The chief financial officer of a large public-sector bank said the problems emerging in real estate loan repayments were a major cause of worry.

It is unclear what individual banks will do to address the problem. State-owned banks, which dominate the sector, have already received tens of billions of dollars from the government in recent years to shore up their finances.

International banks have a very small presence in the Indian market.

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Indian banks’ bad debt pile ballooned as a result of out-of-control lending in the 2006-11 period when the economy grew rapidly, and beyond that. They under-reported their bad loans for years until they were forced by the central bank to recognize and address the issue in 2015.

RBI Governor Shaktikanta Das touched on the real estate issue this month, saying the central bank would be looking at the sector as part of its six-monthly report on the stability of the financial system. The next report is due to be released in December.

The RBI declined to make any further comment on banks’ exposure to bad real estate loans.

A rebound in the real estate market could alter the situation, but the outlook is looking increasingly bleak.

Several industry sources said builders were struggling to off-load properties, even though they are ready to offer buyers up to 25-per-cent discounts on listed rates. The situation now is so severe that real estate inventories across India are at an all-time high of nearly four years and property prices have not risen in most parts of the country in more than four years.

Projects worth 1.8-trillion rupees ($28-billion) are stalled across India, according to property consultancy firm Anarock.

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As developers go to the wall, more than half a million direct jobs may be lost in the coming months, the National Real Estate Development Council said. The number of indirect job losses from related industries like cement and steel may be even higher.

Slowing sales are piling on the pain, with buyers staying away because they increasingly can’t afford properties.

The house price-to-income ratio, which measures the cost of housing versus the change in income levels, rose from 56.1 in March, 2015, to 61.5 in March, 2019, indicating home purchases have become less affordable.

While consumers are staying away, investors are also wary of residential purchases due to low rental yields and meager-to-negative capital appreciation.

“Sluggishness in sales is further raising concerns of the borrowers defaulting on the interest and EMI payments,” Parth Mehta, managing director of Paradigm Realty, said.

As the sector is further stressed, repayments to lenders are likely to be further hit and banks will be increasingly unwilling to lend to property financiers and developers.

Pankaj Kapoor, chief executive of real estate consultancy firm Liases Foras, described the cash crunch in the sector as a “bloodbath” that would deteriorate further.

“This situation is likely to continue for another two years, which means builders may have to offer more discounts.”

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October 14, 2019 at 12:21AM