Investing.com -- Saudi Aramco is finally listing, oil prices are falling and stocks are pulling back a little from Monday's record highs as the Federal Reserve's two-day policy meeting begins. Plus, Boeing (NYSE:BA) CEO Dennis Muilenburg starts two days of testimony in front of Congress about the 737 MAX. Here's what you need to know in financial markets on Tuesday, 29th October.
1. The Saudi Aramco IPO is here (probably)
Saudi Aramco, the world’s most profitable company, is finally set to being marketing its initial public offering on Sunday, Saudi state TV reported.
The news triggered selling in European stock markets Tuesday, as portfolio managers made room in their portfolios for what is expected to be a large block of shares by paring existing holdings.
Questions still remain about the company’s valuation. While the country’s de facto ruler Crown Prince Mohammed bin Salman had sought a valuation of $2 trillion, reports suggest bankers have guided for somewhere between $1 trillion and $1.5 trillion. If the deal does go ahead, it will represent a substantial payday for Wall Street banks involved in it.
The Al-Arabiya channel said the company intends to start trading on the local Tadawul market on Dec. 4.
2. Oil prices slip on Russian comments; API data due
Crude oil prices fell to their lowest in nearly a week after Russian deputy energy minister Pavel Sorokin said it was still too early to commit to additional measures to stabilize a market haunted by the threat of oversupply.
Sorokin said in an interview with Tass that the existing output restraint agreement, which has held 1.2 million barrels a day of crude back from world markets, has been effective so far. It’s consistent with previous official Russian comments suggesting that they expect this year’s slide in prices to stop any further loss of market share to U.S. shale producers.
Oil traders didn’t lose any time remarking that the planned Dec. 4 stock market debut of Aramco is just one day before Russia, OPEC and other major exporters meet in Vienna to review the output restraint deal, which is scheduled to run through the end of March.
Later Tuesday, the American Petroleum Institute will release its weekly data for U.S. crude oil inventories. Analysts expect the official government data to show a build of 729,000 barrels.
3. Stocks set for lower open as Fed meets
U.S. stock markets are set to open lower, with the start of the Federal Reserve's two-day policy meeting deterring bets on new record highs.
By 6:30 AM ET, Dow futures were down 55 points or 0.2%, while S&P 500 Futures were down 0.1% and Nasdaq 100 Futures were flat.
Tuesday’s earnings parade is a cast of thousands, with the following companies all set to report: Mastercard, Merck, Pfizer, Amgen, Stryker, Mondelez, ConocoPhillips(NYSE:COP), S&P Global Inc (NYSE:SPGI), Marsh McLennan, AMD, Shopify, Allstate, Electronic Arts, Corning, Edison, Kellogg, KKR, Martin Marietta, Mattel and FireEye.
In Europe, BP (LON:BP) kicked off earnings season for Big Oil with a 41% drop in underlying net profit that kept its debt levels slightly above its targeted range.
4. Alphabet's rising cost problem
Alphabet (NASDAQ:GOOGL), the parent company of Google, said revenue grew 20% to $40.5 billion in the third quarter but profits still disappointed due to rising costs, not least the cost of bulking up its cloud-computing business, where it has much ground to make up on rivals Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). The shares fell 2% in after-hours trading.
Overall profit of $7.1 billion was down 23% from a year earlier and some 15% below analysts’ expectations.
Together with disappointing results from Amazon (NASDAQ:AMZN), the numbers suggest that Big Tech is starting to suffer from cost inflation, even if it’s still churning out healthy amounts of cash. The company’s payroll expanded by some 6% in the quarter to over 114,000.
Elsewhere after Monday’s closing bell, Beyond Meat (NASDAQ:BYND) fell 10% despite posting its first quarterly profit and raising its revenue outlook. The post-IPO lockup on investors expires today.
5. Boeing's Muilenburg due before Congress
Boeing (NYSE:BA) chief executive Dennis Muilenburg is due to start two days of testimony before Congress regarding the 737 MAX scandal.
In prepared statements for his Senate testimony later today, Muilenburg will admit “mistakes” and repeat promises that the company will never let similar mistakes happen again.
How convincing Muilenburg’s testimony is could have a big influence on the regulatory backlash coming its way. Peter DeFazio, the chairman of the House of Representatives transport committee, told reporters on Monday said he would propose a new law overhauling the regulatory system, which lets the Federal Aviation Administration pass on responsibility for approving design changes to aircraft manufacturers such as Boeing (NYSE:BA).