By Joe Easton
Aramco Below Target
The financial world spent the weekend with one eye on the pricing of Saudi Aramco’s massive initial public offering. The state-owned oil giant was given a valuation of $1.6 trillion to $1.71 trillion, below the $2 trillion target initially sought. With Aramco set to sell just a 1.5% stake on the Riyadh stock exchange, an offering at the low end of the range would fall short of becoming the largest ever amount raised, exceeded by Alibaba Group Holding Ltd.’s $25 billion deal in 2014. Analysts think the pricing leaves room for a stock rally, but here’s why the shares could be a hard sell.
Disruption in Hong Kong that weighed on market sentiment throughout much of last week shows no sign of abating, with police on Monday threatening use of live ammunition if they face violence. But it wasn’t just Hong Kong rioting over the weekend: Paris authorities detained 173 people and deployed tear gas during unrest marking the first anniversary of the “Yellow Vests” movement, while in Iran, security forces detained hundreds protesting a sudden surge in fuel prices. With recent scenes in Latin America also testing the resilience of police and governments, protesting is now a theme on several continents.
Still All About Brexit
It’s just three-and-a-half weeks until Britons vote in a general election, and despite the Labour Party’s eye-catching policy pledges like free dental checks for all and a windfall tax on major oil companies, Brexit won’t stop being the key issue. Prime Minister Boris Johnson has announced that every candidate running for his Conservative Party has promised to back his divorce deal, while he’s set to try to win over business leaders later with a promise of lower taxes. Rival Jeremy Corbyn, meanwhile, is still refusing to say whether he’d campaign to leave the European Union or not during a potential second referendum.
Asian shares mainly edged higher, aided by the Chinese central bank lowering the interest rate on seven-day reverse repurchase agreements for the first time in four years in reaction to a string of poor economic data. Commerzbank AG called the move a “psychological massage.” Meanwhile, U.S. and Chinese negotiators had “constructive” discussions about each side’s core concerns on the phase-one trade deal over the weekend, after signals last week that discussions are in the final stages.
Earnings watchers have a leisurely start to the week with little on the corporate slate today. Meanwhile, for currency traders, there could be comments from euro-area rate-setters at various different events. Economists at JPMorgan on Friday abandoned its call for a cut this year, citing a lack of clarity on policy as during a period of transition to new President Christine Lagarde.