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Top 5 Things to Know in the Market on Monday

Published 11/18/2019, 04:59 AM
Updated 11/18/2019, 05:00 AM
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Investing.com -- Saudi Arabia bows to the inevitable and scales down the Aramco IPO - but it could still be the world's biggest ever. Hong Kong's stock market defies the most violent clashes yet between police and students. HP rejects Xerox's bid, and sterling surges after weekend opinion polls show Boris Johnson's Conservatives on track to win a majority in parliament and break the Brexit deadlock. Here's what you need to know in financial markets on Monday, 18th November.

1. Saudi Aramco, the trimmed-down blockbuster

Saudi Arabia scaled down plans for the initial public offering of oil company Saudi Aramco in response to tepid demand from international investors.

Aramco is now aiming to sell only 1.5% of its shares on the domestic stock exchange, barely a quarter of initial hopes for a $100 billion deal. It also announced a price range valuing at between $1.6 trillion and $1.71 trillion, some 15% short of the hoped-for valuation even at the top end of the range.

Tellingly, plans to market the offering in the U.S., Canada and Japan have been scrapped. That leaves it highly dependent on selling to local investors. To make that easier, The Saudi Arabian Monetary Authority will allow smaller retail investors to borrow twice their cash investment, double the leverage it usually allows at IPOs, according to Bloomberg.

2. Police battle students in Hong Kong, but the stock market rises

Protests in Hong Kong escalated still further at the weekend, with police and protesters inconclusively battling for hours for control over one of the city’s university campuses. There were over 150 arrests.

“The police might not storm the campus but it seems like they are trying to catch people as they attempt to run,” Democratic lawmaker Hui Chi-fung told Reuters.

The Hong Kong stock index closed 1.4% higher, however, on hopes that the police action may break the back of student resistance without any further escalation in violence and casualties.

3. Stocks set to open higher

U.S. stock markets are set to open at fresh highs, extending an unbroken six-week rally, ostensibly reflecting confidence that the U.S. and China will reach some kind of trade deal before too long, despite the lack of fresh evidence to suggest an agreement is near.

By 6:15 AM ET, Dow futures were up 60 points, or 0.2%, while S&P 500 Futures were up 0.1% and Nasdaq 100 futures were up 0.2%.

With 92% of companies in the S&P 500 having now reported earnings for the quarter through September, the average annual decline in earnings is around 2.3%, according to FactSet. If that trend is confirmed, it will be the biggest annual drop in earnings since the middle of 2016 – and also complete the longest sequence of declining earnings in three year.

In other corporate news, HP's (NYSE:HPQ) board unanimously rejected a merger offer from Xerox (NYSE:XRX).

Read More: 5 Earnings Reports To Watch This Week: Retailers Edition

4. Pound surges as Conservatives extend poll lead

The British pound surged over the weekend to trade at close to a six-month high after a new round of opinion polls confirming a large lead for the Conservative Party of Prime Minister Boris Johnson.

Polls published over the weekend showed the Tories leading the left-wing Labour Party by between 15% and 17%, something that political scientists said should be enough to guarantee the party a majority despite the vagaries of the U.K.’s first-past-the-post electoral system.

Both sides are making more and more expensive promises on taxes and spending as the campaign runs into its last month. Johnson is scheduled to outline a cut in corporate income tax at a rally Monday, hoping to win over businesses that have stayed overwhelmingly skeptical about the benefits of Brexit. By 6:15 AM ET (1115 GMT), the pound was at $1.2967, up 0.5% from late Friday, and at 1.1720 against the euro, its highest in nearly seven months.

5. Trump reportedly delays decision on e-cigarettes

President Donald Trump put off a decision on threatened restrictions on e-cigarettes and vaping products in response to resistance from the industry and users, the Wall Street Journal reported, citing an administration official.

Trump had threatened to ban most vaping products from the U.S. marketplace in September on health grounds, sending all of the major tobacco groups' stock prices sharply lower on fears that the product on which they're building their strategies for the future could be outlawed.

He's due to meet with industry representatives sometime in the near future but it's not clear that that will have a clear result, the WSJ said.

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