1

MARKET RECAP at 4 pm ET

The fourth quarter got off to a weak start for U.S. stock investors, with banks and utilities pulling the S&P 500 lower. Gold prices slipped as the dollar gained on stronger-than-expected U.S. manufacturing data, boosting expectations of economic growth before Friday's highly anticipated jobs report, while Treasury yields rose on the same market sentiment. Oil rose, with Brent settling above $50 a barrel the first time since August, after Iran exhorted the need for other oil producers to join OPEC in supporting the market.

Coming Up

Micron Technology Inc's forecast will be the focus when the chipmaker reports fourth-quarter results. Analysts currently expect a return to profitability amid signs of stabilization in the industry. Investors will also closely look at the performance of the company's PC and server DRAM chip manufacturing business, particularly after top chipmaker Intel raised its forecast earlier this month, citing an improvement in the PC market. Alphabet Inc's Google unit is expected to unveil new hardware products at a San Francisco event. Richmond Federal Reserve President Jeffrey Lacker, who has said the case for interest rate increases is growing stronger, will discuss the economic outlook at a speech in Charleston, West Virginia.

Federal Reserve Bank of Chicago President Charles Evans speaks on current economic events and monetary policy before the CFA Society, New Zealand Luncheon, in Auckland. Privately held commodities trader Cargill Inc reports first-quarter results. Weak commodities prices and slumping farm incomes have dragged down earnings for Cargill and rival grain companies, including ADM and Bunge. Cargill, which has seen revenue declining for three straight years, is in the midst of a restructuring. Brazil's industrial data is expected to show weakness after car output disappointed, fueling expectations the economy will not return to growth until the fourth quarter. Industrial output likely dropped 3.10 percent in August. LIVECHAT - FED WATCH with Jonathan Spicer of Reuters Reuters reporters and editors tracking the Federal Reserve take questions on the economics, politics, trade matters and rates policies facing America's central bank and others whose decisions drive markets day in and day out. (0930ET/1330GMT) To join the Global Markets Forum click here

KEY ECONOMIC EVENTS

Redbook mm 0855 -- -0.5 pct

Redbook yy 0855 -- 0.2 pct

ISM New York Index for Sep 0945 -- 719.9

ISM New York Business Conditions for Sep 0945 -- 47.5

Events ET Poll Prior

STOCKS Close %Chng Yr-high Yr-low Chng

DJIA 18252.89 -55.26 -0.30 18668.40 15450.60

Nasdaq 5300.87 -11.13 -0.21 5342.88 4209.76

S&P 500 2161.05 -7.22 -0.33 2193.81 1810.10

Toronto 14689.04 -36.82 -0.25 14855.69 11531.22

FTSE 6983.52 84.19 1.22 6955.34 5499.51

Eurofirst 1350.74 0.08 0.01 1436.12 1191.74

Nikkei 16598.67 148.83 0.90 18951.12 14864.01

Hang Seng 23584.43 287.28 1.23 24364.00 18278.80

TREASURIES Yield Price

10-year 1.6238 -5 /32

2-year 0.7976 -2 /32

5-year 1.1800 -4 /32

30-year 2.3419 -6 /32

FOREX Last % Chng

Euro/Dollar 1.1211 -0.24

Dollar/Yen 101.61 0.28

Sterling/Dollar 1.2849 -0.97

Dollar/CAD 1.3106 -0.16

TR/HKEX RMB 94.69 0.03

COMMODITIES ($) Price Chng % chng

Front Month Crude /barrel 48.66 0.42 0.87

Spot gold (NY/oz) 1313.38 -2.42 -0.18

Copper U.S. (front month/lb) 0.0218 -0.0002 -0.79

Reuters/Jefferies CRB Index 188.02 0.72 0.39

S&P 500 Price $ Chng % Chng

GAINERS

Versum Materials 25.50 2.80 12.33

Cognizant Technology 50.40 2.69 5.64

News Corp 14.93 0.71 4.99

LOSERS

Transocean Ltd 9.85 -0.81 -7.60

Centene Corp 63.31 -3.65 -5.45

Teradata Corp 29.44 -1.56 -5.03

NORTH AMERICA For Tuesday, October 4, 2016

REUTERS/Regis Duvignau

2

THE DAY AHEAD

Top News

Deutsche Bank shares slip again in race to reach U.S. settlement Deutsche Bank shares resumed falling after recovering from a record low at the end of last week, as hopes faded of a swift deal with U.S. authorities over a multi-billion dollar penalty. The German lender is throwing its energies into reaching a settlement before next month's U.S. presidential election, with the Department of Justice demanding a fine of up to $14 billion for mis-selling mortgage-backed securities. A media report late on Friday that Deutsche and the DOJ were close to agreeing a much lower penalty of $5.4 billion lifted the stock 6 percent higher, but on Monday that report remained unconfirmed. The Wall Street Journal reported on Sunday that the bank's talks with the DOJ were continuing. Details are in flux, with no deal yet presented to senior decision makers for approval on either side, the paper said, citing people familiar with the matter. Deutsche Chief Executive John Cryan will be in Washington this week for the annual meeting of the IMF, and the Frankfurter Allgemeine Zeitung reported that other executives would join him to try to negotiate a settlement with the U.S. authorities. The U.S. listed shares of the company fell 0.84 percent. Henderson ties up with Janus to form $6 billion fund firm London-based asset manager Henderson Group agreed to buy U.S. rival Janus Capital Group in an all-share $6 billion deal to cut costs and boost profits in the face of growing competition from index funds. The combined company, Janus Henderson Global Investors, will be headquartered in London and manage $320 billion in assets, potentially making it the 39th largest asset manager. If the companies can tame an operation that will span Denver to London to a venture in Japan, that new heft could help thwart expanding regulatory scrutiny in the industry and a move toward low-cost passive investing. "The combined product line-up will be much more balanced and diverse," Henderson Chief Executive Andrew Formica told a media call, adding

Henderson had strength in British and European markets while Janus, which hired Pimco co-founder Bill Gross as fund manager in 2014, was strong in the United States and Japan. Henderson and Janus shareholders are expected to own approximately 57 percent and 43 percent, respectively, of Janus Henderson Global Investors' shares, with the merger completing in the second quarter of 2017, subject to regulatory approvals. Bass Pro Shops hooks Cabela's in $5.5 billion deal Bass Pro Shops said it will acquire Cabela's for $5.5 billion, combining two meccas for outdoor enthusiasts, even as the deal may face antitrust scrutiny given that the hunting and fishing retailers overlap in several U.S. states. Bass Pro Shops will nearly double its store count in North America through the addition of Cabela's 85 stores. Elliott stands to make $419.2 million from the deal, or nearly double of what the hedge fund paid for its stake, according to regulatory filings. Cabela's has struggled with declining sales of apparel and footwear and has reported

same-store sales growth in only one quarter in more than three years. Bass Pro Shops, founded by Johnny Morris as a fishing gear shop in his dad's liquor store in the 1970s, expects the deal to help it offer a one-stop shop for entertainment, expert advice and shopping. Morris will be the Chief Executive of the combined company. Bass Pro Shops will finance the deal through preferred equity financing commitments of $1.8 billion from Goldman Sachs and $600 million Pamplona Capital Management. J.P. Morgan Chase & Co advised Bass Pro Shops and Guggenheim Securities advised Cabela's. September U.S. auto slide down 0.5 percent even as discounts rise Major automakers reported lower September U.S. sales despite high consumer discounts, as pickup truck volumes fell for both General Motors and Ford Motor. Research firm Autodata Corp showed total industry sales at 1.44 million vehicles, down 0.5 percent for a seasonally adjusted annualized rate of 17.76 million from 18.05 million in September 2015. GM showed sales down 0.6 percent. Ford >>>

The headquarters of Germany's Deutsche Bank is seen in Frankfurt, Germany, September 29, 2016. Picture taken September 29, 2016. REUTERS/Kai Pfaffenbach

3

THE DAY AHEAD

>>> reported an 8 percent drop, and Fiat Chrysler Automobiles was down 1 percent. Toyota Motor showed a 1.5 percent increase; Honda Motor, a decline of 0.1 percent; and Nissan Motor, a 5 percent rise. While Ford said its F-Series pickup truck had its best month of 2016, sales were still down 3 percent from a year earlier. GM said pickup sales fell 15.5 percent for its Chevrolet Silverado and 8.5 percent for its GMC Sierra. As the market shrinks, automakers are hiking incentives to entice consumers to spend. September industry incentive spending is tracking at an average $3,923 per new vehicle sold, which would surpass the previous high of $3,753 from December 2008. Chevron supports director Stumpf despite Wells Fargo morass Chevron said it stands behind John Stumpf, a member of its board and the chief executive of bank Wells Fargo, despite growing concerns about his leadership during a customer service scandal. Pressure has mounted on Stumpf in recent days to resign as CEO of Wells Fargo, the largest U.S. bank by deposits, after revelations the bank for years opened checking, savings and credit card accounts without customer approval to satisfy managers' demands for new business. Chevron executives had cited his experience and reputation as a major benefit to its shareholders when recommending him to the board. The company's board also noted his position at the Fed when it nominated him to the board. "John (Stumpf) is a valued member of our board," Chevron spokesman Kent Robertson said in an emailed statement to Reuters. "Given the investigations that are underway, it would be inappropriate for us to comment further." EU resumes probe into DuPont, Dow mega deal, to rule by Feb 6 EU antitrust regulators have resumed their investigation into the $130 billion merger of U.S. chemicals giants Dow Chemical and DuPont after the companies provided key data. The European Commission, which halted its scrutiny in early September, will now decide by Feb. 6 whether to approve the deal. Commission spokesman Ricardo Cardoso confirmed in an email that the companies had

submitted important information requested by the EU competition enforcer. The Commission opened a full investigation into the case in August, concerned that the deal to create the world's largest integrated crop protection and seeds company might reduce competition in these sectors as well as certain petrochemicals. Facebook launches Marketplace for local buying and selling Facebook launched Marketplace to allow people to buy and sell items locally as the social media network tries new ways to keep users engaged. The feature will appear as a "shop" icon at the bottom of the Facebook app and will allow users to list or search for items on sale in their neighborhood. The company will not facilitate the payment or delivery of items and will not take a cut from any transactions, Facebook said. The new service will be rolled out in the United States, the UK, Australia and New Zealand for iPhone and Android users over the next few days, the company said in a blog post, adding that the feature will be available on the desktop version in the coming months. More than 450 million people already visit Facebook groups that have items to buy and sell each month, the company said.

Google has until Oct 31 to reply to EU's Android antitrust charges Alphabet's Google has been given until the end of October, the fourth extension, to rebut EU antitrust charges that it uses its dominant Android mobile operating system to block competitors, the European Commission said. The Commission in April said the U.S. technology giant's demand that mobile phone makers pre-install Google Search and the Google Chrome browser on their smartphones to access

other Google apps harms consumers and competition. The EU watchdog had initially set a July 27 deadline for Google to respond to the charges. The new deadlines are Oct. 31 for the Android case and Oct. 26 and Oct. 13 for cases relating to online search advertising and shopping. "In each of these cases, Google asked for additional time to review the documents in the case file. In line with normal practice, the Commission analysed the reasons for the request and granted an extension allowing Google to fully exercise its rights of defence," Commission spokesman Ricardo Cardoso said in an email. Winnebago shares soar after its biggest deal ever Winnebago Industries said it would buy privately held Grand Design Recreational Vehicle, a maker of towable recreational vehicles, in its biggest-ever deal. The cash-and-stock deal, valued at $500 million, will give Winnebago a bigger foothold in the growing towables market and create a company with revenue of about $1.4 billion. About 37 percent of Winnebago's revenue will come from towables as a result of the deal compared with about 10 percent now, Chief Executive Michael Happe said on an analysts' call. Winnebago said shareholders of Grand Design, which has been in business for less than five years, would own about 14.5 percent of its shares after the close of the deal. Winnebago also forecast revenue of $263.3 million for the fourth quarter. Shares of the company ended 23.67 percent higher. Cardtronics to buy DirectCash Payments in $460 million deal Cardtronics, which describes itself as the world's biggest operator of non-bank ATMs, said it would buy independent Canadian ATM owner DirectCash Payments (DCPayments) in a deal valued at about $460 million including debt to boost its presence in Canada and the United Kingdom. Cardtronics said it would pay C$19 per share for Calgary-based DCPayments, a premium of 48 percent to DCPayments' close on Friday. The deal, which includes debt of about $53 million, is expected to be immediately accretive to adjusted net income per share, UK-domiciled Cardtronics said.

REUTERS/Regis Duvignau

4

Big Pharma vs Big Pharma in court battles over biosimilar drugs The line dividing makers of brand-name drugs and copycat medicines is blurring as companies known for innovative treatments queue up to peddle copies of rivals' complex biological medicines. These drugmakers are now increasingly straddling both sides of the courtroom, too, protecting their high-price products from biosimilars - biopharmaceutical drugs with the treatment properties of medicines they seek to mimic - while simultaneously challenging rivals' patent claims. Biologics, manufactured in living

cells, then extracted and purified, are more complex than traditional medicines and cannot be copied with precision, and so their knock-off versions are called biosimilars instead of generics. BREAKINGVIEWS-Nutanix debut jams open IPO window – temporarily Nutanix has jammed open the window for U.S. initial public offerings. The cloud data-storage firm's stock popped a whopping 131 percent on its debut on Friday, for a market capitalization above $5 billion. The warm welcome extended to new companies in September, combined with

decreased venture-capital funding, may lead others to pull the trigger. The upcoming U.S. presidential election means they'd better hurry. It's true that Nutanix got lucky. A general market rally on its first day of trading - partly on the back of reduced concern about the stability of Deutsche Bank as the German lender negotiates a big settlement with U.S. prosecutors - put the wind behind stocks. But Nutanix's business, selling cheap and easy ways to build out data centers, is also at the center of the latest tech wave.

THE DAY AHEAD

An Afghan refugee girl returning from Pakistan looks on after she arrives at a United Nations High Commissioner for Refugees (UNHCR) registration centre in Kabul, Afghanistan September 27, 2016. REUTERS/Mohammad Ismail

Insight and Analysis

5

MARKET MONITOR Coming Up

Top News

Canada tightens mortgage, tax rules in latest bid to cool housing Canada will close a tax loophole and introduce a stress test to insured mortgage lending in an effort to boost the stability of the housing sector, the government said, its latest move to cool a market that some have called a bubble. The key tax change is aimed at foreign investors who critics believe have inflated housing prices, particularly in Vancouver and Toronto. British Columbia in August introduced a 15 percent tax on overseas buyers in Vancouver that has already slowed sales. Finance Minister Bill Morneau said that while believes the overall housing market is "sound," he wants to ensure rules that allow a capital gains tax exemption are being used fairly and only by homeowners selling a primary residence. Goldcorp shuts biggest gold mine after week-long blockade Goldcorp said it was temporarily shutting down its Peñasquito gold mine in Mexico as it was unable to safely continue operations due to a week-long blockade by a trucking contractor The world's third-biggest gold producer by market value said it did not expect the shutdown at its biggest mine to impact overall production

or cost estimates for 2016. Goldcorp said it had taken legal steps, including filing criminal charges against the protesters but that it also was ready to talk with the contractor's representatives.

GM, Ford Canada auto sales rise in September General Motors and Ford Motor reported higher September vehicle sales in Canada on Monday, boosted by strong demand for pickup trucks. Ford's sales rose 6.9 percent to 30,170 vehicles even as car sales dropped 25 percent. Sales of F-Series pickup trucks rose 21 percent to 15,659 vehicles. "Our investment in building the toughest, smartest, most capable trucks is paying off," said Ford of Canada Chief

Executive Dianne Craig in a statement. GM said its dealers delivered 25,466 vehicles during the month, up 2 percent from a year earlier, its strongest September performance since 2008. Chevrolet sales rose 5 percent, helped by growth in Chevrolet crossovers and a 58 percent jump in sales of the Colorado pickup truck. Spectral Medical's sepsis treatment fails late-stage study Spectral Medical said its experimental treatment for sepsis - a common, oft-deadly complication of infection - failed a late-stage study, stymieing the company's plans to bring to market the first FDA-approved device for the condition. The trial did not meet the main goal of absolute reduction in mortality rate at 28 days but did demonstrate beneficial treatment effects, Spectral said. "We proved beyond doubt that endotoxin is bad and taking it out is good," and Spectral will discuss with the U.S. Food and Drug Administration the next steps, Chief Executive Paul Walker told Reuters. A smaller-than-expected decrease in endotoxin adversely affected the rate of mortality reduction, he said. If we can show "more columns take out more endotoxin, then I think we can get approved."

THE DAY AHEAD

TSE's S&P/TSX composite Price $ chng % chng

GAINERS

Air Canada 11.28 0.68 6.42

Enerplus Corp 8.78 0.36 4.28

Canadian Energy Services & Technology 5.39 0.20 3.85

TMX Group 62.51 2.26 3.75

Tourmaline Oil 36.80 1.26 3.55

LOSERS

Osisko Gold Royalties 13.71 -0.65 -4.53

Goldcorp 20.68 -0.97 -4.48

Eldorado Gold 4.96 -0.20 -3.88

Sierra Wireless 18.27 -0.65 -3.44

Detour Gold Corp 27.56 -0.98 -3.43

No major events are scheduled. Canada's main stock index ended lower, as major gold miners weighed heavily and banks also fell after the federal government tightened mortgage and tax rules in a bid to cool the housing market. Royal Bank of Canada fell 0.38 percent and Bank of Nova Scotia was down 0.13 percent. The Toronto Stock Exchange's S&P/TSX composite index dropped 0.25 percent, to 14,689.04. Shares in fashion retailer Aritzia were trading at C$17.71 in their market debut, after they were priced at C$16 last week. Meanwhile, shares in Spectral Medical slumped 85.09 percent. The dollar fell 0.14 percent at C$1.3109.

REUTERS/Francois Lenoi r

6

FACTORY ACTIVITY GROWS U.S. factories rebound, resisting global downward pull U.S. factories ramped up activity in September, shaking off a one-month contraction in a sign America was resisting the downward pull of the sluggish global economy. The Institute for Supply Management (ISM) said its index of national factory activity rose to 51.5 from 49.4 the prior month, beating analyst expectations in a Reuters poll. Levels above 50 indicate the sector is expanding. Factory output was a weak spot for the U.S. economy early in the year as a global slump weighed on American factories. More recently, net exports added to economic growth in the second quarter and Monday's report showed signs factories' future sales could increase, with the ISM index for new orders rising to 55.1 from 49.1 in August.

THE DAY AHEAD

MORGAN STANLEY CHARGED Morgan Stanley charged with running unethical sales contests -regulator Morgan Stanley was charged with "dishonest and unethical conduct" by Massachusetts' top securities regular for having pushed its brokers to sell loans to their clients.

SINGLE-FUND STRESS TEST BlackRock backs single-fund stress tests, Vanguard against hard rule BlackRock has told an international financial watchdog it supports plans to stress test individual mutual funds to make sure they function properly during extreme market conditions.

FED'S DUDLEY REMARKS Fed would have less policy leeway in face of recession -Dudley The Federal Reserve would probably not be able to cut interest rates as aggressively as the last time around if it were faced with a U.S. recession in the next few years, New York Fed President William Dudley said.

RBS SETTLES RBS to pay $120 million to resolve Connecticut mortgage bond probe Royal Bank of Scotland Group will pay $120 million to resolve a Connecticut state investigation into the bank's underwriting of toxic mortgage-backed securities ahead of the 2008 financial crisis, authorities said.

TENET RESOLVES CRIMINAL CHARGES Tenet Healthcare to pay more than $513 million over fraud scheme U.S. hospital chain Tenet Healthcare and two of its Atlanta-area units will pay more than $513 million to resolve criminal charges and civil claims relating to a scheme to defraud the United States and pay kickbacks in exchange for patient referrals, the Justice Department said.

CDPQ PARTNERS WITH EDELWEISS Canadian fund Caisse partners with Edelweiss for India stressed assets investment Canada's second-biggest pension fund Caisse de depot et placement du Quebec said it had partnered with Indian financial services firm Edelweiss Group to invest up to $700 million over the next four years in stressed assets and private debt opportunities in India.

7

THE DAY AHEAD

ON THE RADAR

Events ET Poll Prior

Wed: MBA mortgage application 0700 -- -0.7 pct

Mortgage Market Index 0700 -- 527.1

MBA Purchase Index 0700 -- 222.8

Mortgage Refinance Index 0700 -- 2273.2

MBA 30-year mortgage rate 0700 -- 3.66 pct

ADP national employment for Sep 0815 169,000 177,000

International trade mm for Aug 0830 -$39.3 bln -$39.5 bln

Markit Services PMI Final for Sep 0945 -- 51.9

Markit Composite Final PMI for Sep 0945 -- 52.0

Durables ex-defense, R mm for Aug 1000 -- -1.0 pct

Durable goods, R mm for Aug 1000 -- 0.0 pct

Factory orders mm for Aug 1000 -0.1 pct 1.9 pct

Durables ex-transport R mm for Aug 1000 -- -0.4 pct

Nondefense cap ex-air R mm for Aug 1000 -- 0.6 pct

Factory ex-transport mm for Aug 1000 -- 0.2 pct

ISM N-Manufacturing PMI for Sep 1000 53.0 51.4

ISM N-Manufacturing Business Activity for Sep 1000 52.1 51.8

Thu: Challenger layoffs for Sep 0730 -- 32,188

Initial jobless claims 0830 256,000 254,000

Jobless claims 4-week average 0830 -- 256,000

Continued jobless claims 0830 -- 2.062 mln

Fri: Non-Farm payrolls for Sep 0830 172,000 151,000

Private payrolls for Sep 0830 170,000 126,000

Manufacturing payrolls for Sep 0830 -5,000 -14,000

Government payrolls for Sep 0830 -- 25,000

Unemployment rate for Sep 0830 4.9 pct 4.9 pct

Average earnings mm for Sep 0830 0.3 pct 0.1 pct

Average workweek hours for Sep 0830 34.4 hrs 34.3 hrs

Labor force participation for Sep 0830 -- 62.8 pct

U6 underemployment for Sep 0830 -- 9.7 pct

Wholesale inventory, R mm for Aug 1000 -0.1 pct -0.1 pct

Wholesale sales mm for Aug 1000 0.2 pct -0.4 pct

ECRI Weekly Index 1030 -- 139.0

ECRI weekly annualized 1030 -- 8.8 pct

Consumer credit for Aug 1500 16.50 bln 17.71 bln

Company Name* Quarter ET EPS Estimates** Year Ago Rev Estimates (mln) Smart Estimates

KEY RESULTS

Darden Restaurants Q1 BMO $0.83 $0.82 $0.68 $1,717.99

Micron Technology Q4 -- -$0.08 -$0.12 $0.37 $3,148.98

*Includes companies on S&P 500 index. **Estimates may be updated or revised; release times based on company guidance or past practice.

EPS and Revenue estimates are according to Thomson Reuters I/B/E/S. Smart Estimates are according to Thomson Reuters StarMine.

8

THE DAY AHEAD

The Day Ahead - North America is compiled by Hardik Vyas and Riniki Sanyal in Bengaluru.

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Revolutionary Armed Forces of Colombia (FARC) rebel leader Rodrigo Londono smokes a Cohiba cigar while watching a live transmission of the referendum on a peace deal, in Havana, Cuba October 2, 2016. REUTERS/Enrique de la Osa