By Sam Potter
The situation in the Middle East took an unexpected turn this weekend when Iran admitted it mistakenly shot down a Ukrainian passenger jet carrying 176 people. The country has since witnessed two nights of protests as its leadership is put on the back foot again after only recently quelling nationwide protests. Videos posted on social media, which couldn’t immediately be verified by Bloomberg News, showed clashes between protesters and riot police, trails of blood on a main street, chants in opposition to Supreme Leader Ayatollah Ali Khamenei and calls to rid the country of the Islamic Revolutionary Guards Corps. Oil was steady after the biggest weekly drop since July.
With events in the Middle East proving so difficult to second-guess, investors will be glad of some distractions this week, and there will be plenty. The U.S. and China remain on course to sign an initial trade accord on Wednesday, and since that is apparently a done deal, thoughts are starting to turn to boring stuff like enforcement. More interesting will be fourth-quarter earnings season, which gets under way in the coming days starting with the big banks. Corporate profits overall likely dropped for a second straight quarter at the end of 2019, dragging down annual earnings growth to the smallest in three years. But a lot of investors are fine with that. Other items this week: Brexit legislation meanders through U.K. Parliament and there will be another Dems debate. Yay.
Corporate headlines galore
A host of corporate headlines have greeted the week, concentrated especially in the automaker segment. Porsche AG shrugged off widespread industry malaise, reporting record deliveries for last year and predicting that its first all-electric model Taycan will foster further growth in 2020. Speaking of which, shares of Chinese electric-vehicle makers jumped after the government signaled it won’t continue reducing subsidies for the industry at the same pace this year. Aston Martin Lagonda Global Holdings Plc is making a last-ditch effort to bring in fresh funding, with billionaire Lawrence Stroll closest to committing. Nissan Motor Co. executives have stepped up contingency planning for a possible split from Renault SA after the whole Ghosn thing, the FT reported. Beyond cars, Woodward Inc. will combine its operations with Hexcel Corp. in an all-stock transaction that gives it a controlling stake in the merged entity, creating one of the world’s biggest aerospace and defense suppliers. U.K. regional airline Flybe Group Plc is in crunch talks with the British government for emergency financing.
Overnight, the MSCI Asia Pacific ex-Japan Index climbed 0.9%, with Tokyo closed for a holiday. In Europe, the Stoxx 600 Index had gained 0.1% by 6:00 a.m. as investors showed mild optimism ahead of both the beginning of earnings season and the signing of a partial China trade deal. S&P 500 futures pointed to a higher open, the 10-year Treasury yield was at 1.84% and gold fell.
A busy week it may be, but Monday will get us off to a slow start. The only data event is the Treasury’s monthly budget statement at 2:00 p.m. Eastern Time. We get two talking Fed heads, with Boston Fed President Eric Rosengren speaking at an event at 10:00 a.m., and Atlanta Fed President Raphael Bostic discussing the economic outlook and monetary policy at 12:40 p.m. If you see anything else please give us a call.