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Author: skywalker   |   Latest post: Fri, 20 Jul 2018, 11:46 AM

 

Wall Street Breakfast: High Stakes Trade War

Author: skywalker   |  Publish date: Fri, 20 Jul 2018, 11:46 AM


President Trump is willing to up the ante in the trade war with Beijing and could slap tariffs on every Chinese good imported to the U.S. "I'm ready to go to 500," he told CNBC, referencing the $505.5B of American imports from China in 2017, compared to the $129.9B the U.S. exported to the country last year. Meanwhile, the Chinese yuan slid overnight to its lowest in more than a year, stoking worries Beijing's currency management could be the next flash point in a trade dispute with the U.S.

Economy

Despite aggressive monetary easing by the Bank of Japan for more than five years, domestic prices have become sluggish again in recent months. The trend continued into June, with the core consumer price index, excluding fresh food prices because of their volatility, rising only 0.8% from a year earlier, from a 0.7% rise in May. That's well short of the 2% target set by the Bank of Japan.

Sanctions bite... GDP in North Korea last year shrunk 3.5% from the previous year, marking the biggest contraction since a 6.5% drop in 1997 when the isolated nation was hit by a devastating famine. The Seoul-based Bank of Korea, which is considered the most authoritative source for economic data on its neighbor, also said that the tighter sanctions imposed in 2017 will only show their full impact this year.

The White House has invited Vladimir Putin to the U.S. for another summit in the fall, coming on the heels of a controversial meeting between President Trump and the Russian leader earlier this week in Helsinki. The last official American visit by a Russian president was in June 2010, when Dmitry Medvedev, now Russian prime minister, visited the United States.

Departing from a convention in which presidents have refrained from speaking specifically on monetary policy, President Trump delivered a rare critique about the Federal Reserve. "I don't like all of this work that we're putting into the economy and then I see rates going up," he told CNBC. "At the same time I’m letting them do what they feel is best."

It's "too early" to say whether the Trump administration will move ahead with proposed tariffs of as much as 25% on imported vehicles and auto parts, according to Commerce Secretary Wilbur Ross. The comments came at the start of several Commerce Department hearings that will investigate whether the Trump administration can use a 1962 national security law to impose duties on foreign-sourced cars and parts.

Spain's Supreme Court has dropped a European arrest warrant for former Catalan leader Carles Puigdemont after Germany refused to extradite him on charges of rebellion. The move demonstrates the difficulty the country has faced in trying to persuade its EU partners to help it bring former members of Catalonia’s regional government to trial for declaring independence from Spain last year.

Stocks

Comcast has surrendered to Disney (NYSE:DIS) in a bidding war over Fox's (NASDAQ:FOX) film and cable assets, but managed to push up its rival's acquisition expenses by nearly $20B, a play that could constrain Disney's ammunition in future dealmaking. Comcast (NASDAQ:CMCSA) will now try to clinch a £26B acquisition of Sky (OTCQX:SKYAY) - in which Fox already owns a 39% stake - as the media industry undergoes a massive reshaping.

Walmart is eyeing a Q4 launch for a new subscription video service through its Vudu digital entertainment division, Variety reports. While the company is widely expected to undercut Amazon Prime (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) on pricing, an open-ended question is how much the Bentonville C-suite is willing to spend on content spending. Walmart (NYSE:WMT) picked up Vudu in 2010 and has slowly added to its content base.

More changes to Facebook (NASDAQ:FB) platforms... WhatsApp is rolling out a global test measure to rein in forwarded messages after rumors of child abductors led to several killings in India and sparked calls for action from authorities. WhatsApp did not say what the limit would be elsewhere, but in India specifically, they will be limited to five chats at a time, as well as removing the quick forward button placed next to media messages.

Echoing a decision last month that tossed out two similar California cases, a U.S. district judge has dismissed a lawsuit by New York City seeking to hold five of the world's biggest oil companies liable for their role in contributing to global warming. Among them: BP, Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP), Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (RDS.A, RDS.B). Problems associated with climate change should be tackled by Congress and the executive branch, according to the ruling.

Unable to determine how much of the cobalt used in batteries it makes for Tesla (NASDAQ:TSLA) comes from Cuba, a country subject to U.S. sanctions, Panasonic (OTCPK:PCRFY) has suspended relations with its supplier. Sources said the Canadian firm was Sherritt International (OTCPK:SHERF). Responding to earlier rumors, Tesla also confirmed that refunds of bookings for its Model 3 were not outpacing reservations.

Merck is the latest drugmaker to nod to public pressure on rising costs, cutting the price on hepatitis C treatment Zepatier by 60%, and a number of other medicines by 10%. Merck's (NYSE:MRK) new price change also included a commitment not to increase the average net price across its product portfolio by more than the inflation rate, but that pledge still leaves room for higher increases on individual drugs.

Thursday's Key Earnings

Blackstone (NYSE:BX) -1.6% analyzing a C-Corp switch.
Microsoft (NASDAQ:MSFT) +3.3% AH as cloud revenue soared.
Philip Morris (NYSE:PM) -1.5% on weaker e-cigarette acceptance.
SAP (NYSE:SAP) -3.7% amid softness in legacy licenses.
Taiwan Semiconductor (NYSE:TSM) +3.6% on smartphone demand.
Unilever (NYSE:UN) +2.5% posting gross margin improvement.

Today's Markets

In Asia, Japan -0.3%. Hong Kong +0.8%. China +2.1%. India +0.4%.
In Europe, at midday, London -0.3%. Paris -0.7%. Frankfurt -0.5%.
Futures at 6:20, Dow -0.5%. S&P -0.4%. Nasdaq -0.1%. Crude +0.1% to $68.31. Gold flat at $1223.90. Bitcoin -0.3% to $7451.
Ten-year Treasury Yield flat at 2.85%

Today's Economic Calendar
8:20 Fed's Bullard: U.S. Monetary and Economic Policy
1:00 PM Baker-Hughes Rig Count

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Wall Street Breakfast: Race to $1T Market Cap

Author: skywalker   |  Publish date: Thu, 19 Jul 2018, 07:42 AM


Amazon reached a $900B market value for the first time on Wednesday, nipping at Apple's (NASDAQ:AAPL) heels as Wall Street's most valuable. The news comes after the company announced it sold more than $100M in products during its annual Prime Day sale. Shares are up over 57% so far this year, bringing Amazon's (NASDAQ:AMZN) increase to over 123,000% since it listed on the Nasdaq in 1997.

Economy

Britain's new Brexit secretary, Dominic Raab, is heading for a tough negotiating debut in Brussels today, with the EU side preparing to raise the pressure over deadlocked talks on the Northern Ireland border. The bloc's priority surrounds a potential backstop agreement and concerns that recent U.K. legislative amendments contradict past negotiating commitments made by Britain.

The EU will consider introducing tariffs on coal, pharmaceuticals and chemical products from the U.S. if President Trump imposes restrictions on European cars, Germany’s Wirtschaftswoche magazine reports. The potential trade measures will be decided based on the outcome of a meeting next week in Washington between European Commission President Jean-Claude Juncker and President Trump.

China's foreign ministry has blasted Larry Kudlow's "shocking" and "bogus" accusations that said lower-ranking Chinese officials wanted a trade deal, but President Xi refused to make changes to China's technology transfer and other policies. Meanwhile, China’s foreign exchange regulator said it was well-equipped to keep currency markets steady amid intensifying trade frictions, and would use "counter-cyclical" measures to deal with instability.

President Trump said the U.S. may hammer out a trade deal with Mexico, and then do a separate one with Canada later, sowing fresh doubts about the future of the NAFTA. The warming relationship and progress with Mexico could prod Canada on some areas of disagreement, according to political strategists. The administration is looking for a win on trade, since talks with China have stalled.

The so-called Cal3 measure - also known as Proposition 9 - which seeks to split California into three states, has been removed from the ballot in November following a ruling from the state's Supreme Court. Opponents argued that the initiative posed a "revision" of the state constitution, as opposed to an "amendment," and the justices need more time to review and decide the merits of the case.

Plunging drilling costs have sparked an explosion of production in Texas, and is making the state a global oil superpower. According to HSBC, The Permian Basin and Eagle Ford oilfields are expected to produce 5.6M barrels per day by 2019, topping the 4.8M bpd output of Iraq and 3M bpd of Iran. That would make Texas the world's No. 3 oil producer, behind only Russia and Saudi Arabia.

Stocks

The U.S. Justice Department has proposed an expedited schedule for an appeal of a judge's ruling that allowed AT&T (NYSE:T) to buy movie and TV show maker Time Warner. It argues that any delay in deciding the case "will make it increasingly difficult to unwind the merger." Final briefs are due in the appeal on Oct. 18, with oral arguments "as soon as practicable."

Marking its first commercial deal in Africa, Alphabet's (GOOG, GOOGL) Loon has sealed a contract with Telkom Kenya to deploy its system of balloons that beam high-speed Internet over rural and suburban populations. They float at 60,000 feet above sea level, well above air traffic, wildlife, and weather events. Kenya hopes the technology can help achieve full Internet coverage for its population.

Policy change... Facebook (NASDAQ:FB) will begin removing from its platform false information that is intended to incite violence and other physical harm, while passive false items will be de-emphasized in users' News Feeds. We shouldn't be "in the business of having people at Facebook who are deciding what is true and what isn't," Mark Zuckerberg declared, but clarified where "divisive information" was maliciously spread the company had a responsibility to step in.

Cisco shares climbed almost 4% in extended trading after Amazon Web Services (AMZN) said it's not planning to start selling network switches. That counters a story from last week that said AWS was looking to enter the market. "During a recent call between Cisco (NASDAQ:CSCO) CEO Chuck Robbins and AWS CEO Andy Jassy, Andy confirmed that AWS is not actively building a commercial network switch," MarketWatch reported.

The FCC has voted unanimously to refer Sinclair Broadcast Group's (NASDAQ:SBGI) $3.9B acquisition of Tribune Media (NYSE:TRCO) to an administrative law judge, a blow to the companies' chances of winning approval. The decision comes despite Sinclair's announcement to drop plans to divest three TV stations currently owned by Tribune after the FCC suggested the company would still control the networks.

While it's not the first marijuana company to list on Wall Street, Tilray will become the first cannabis cultivator to raise capital via a Nasdaq listing. Shares priced at $17 late Wednesday, above an indicated range of $14 to $16, raising $153M and giving the company a market value of $1.56B. The stock will begin trading this morning under the ticker symbol "TLRY."

Shares in Papa John's closed up 4% on Wednesday amid reports that founder John Schnatter held merger talks with Wendy's (NYSE:WEN) before the recent flap over a racial slur cooled off the discussions. Schnatter still sits on the board and owns 29% of Papa John's (NASDAQ:PZZA), the world's third-largest pizza-delivery company behind Domino's (NYSE:DPZ) and Pizza Hut (NYSE:YUM).

Unilever said it will make up some lost ground in the second half after a strike in Brazil over rising fuel prices held back sales growth. CEO Paul Polman also shook off criticism after Unilever's (NYSE:UN) Q2 sales growth came in below expectations. "When we had a lot of pricing (power), analysts were worried about us not having volume. Now we have four quarters in a row of continuous volume expansion (and) some analysts are worried about our pricing power. I just wonder if they are always worried."

Wednesday's Key Earnings

Abbott Laboratories (NYSE:ABT) +3.1% beating estimates.
Alcoa (NYSE:AA) -4% AH cutting its adjusted EBITDA forecast.
American Express (NYSE:AXP) -2.8% AH as revenue fell short.
eBay (NASDAQ:EBAY) -5.6% AH after lowering guidance.
Ericsson (NASDAQ:ERIC) +8.2% turning an operating profit.
IBM (NYSE:IBM) +3.1% AH as margins climbed higher.
Kinder Morgan (NYSE:KMI) +0.5% AH following mixed results.
Morgan Stanley (NYSE:MS) +2.8% on strong investment banking.
Novartis (NYSE:NVS) +2.9% topping expectations.
U.S. Bancorp (NYSE:USB) -1.1% falling short on revenues.

Today's Markets

In Asia, Japan -0.1%. Hong Kong -0.4%. China -0.5%. India -0.1%.
In Europe, at midday, London +0.1%. Paris -0.5%. Frankfurt -0.5%.
Futures at 6:20, Dow -0.2%. S&P -0.3%. Nasdaq -0.4%. Crude -1.3% to $66.88. Gold -1% to $1215.60. Bitcoin flat at $7377.
Ten-year Treasury Yield +2 bps to 2.9%

Today's Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
9:00 Randal Quarles: “Alternative Reference Rates Committee Roundtable”
9:45 Bloomberg Consumer Comfort Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

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Wall Street Breakfast: Google Faces Record $5B Fine Over Android

Author: skywalker   |  Publish date: Wed, 18 Jul 2018, 07:33 AM


Setting a record for antitrust penalties, Google (GOOG, GOOGL) is set to be fined about €4.3B ($5B) by the European Commission over using restrictive licensing practices to benefit its own services on Android devices. The EU's decision would bring the running total of Google fines to €6.7B after last year's penalty over shopping-search services. It could soon be followed by more fines from a probe into online advertising contracts.

Economy

Less than 24 hours after accepting four hostile amendments to her customs bill, Theresa May has maintained her fragile grip over the Brexit process. She narrowly survived an attempt by pro-European Conservative MPs to keep Britain in the EU customs union, meaning the U.K. will develop its own trade policy after Brexit. The pound plunged 1.2% vs. the dollar ahead of the vote, but has now rebounded to $1.3114.

Declaring themselves the "flag bearers of free trade," Japan and the EU have signed the world's largest bilateral trade pact covering about a third of global GDP. The deal, which involved significant concessions on both sides, will eventually reduce heavy Japanese tariffs on European wine, cheese and other foods and lift EU tariffs on Japanese cars and vehicle parts.

There is "no time limit" to denuclearize North Korea, according to President Trump, marking a shift in tone from when he said the process would start "very quickly." "The sanctions are remaining. The hostages are back. There have been no tests. There have been no rockets going up for a period of nine months, and I think the relationships are very good, so we'll see how that goes."

Trade war fears? According to the Treasury Department, Russia is no longer listed among the major foreign holders of U.S. government securities after falling below the $30B threshold for inclusion on its monthly report. Once among the top 10 foreign owners, Russia's holdings of U.S. bills, notes and bonds fell to $14.9B in May, after plunging to $48.7B from $96.1B in April.

Fed Chair Jerome Powell heads back to Capitol Hill today to give his semi-annual monetary policy testimony before the House Financial Services Committee. Yesterday, he stuck to an upbeat assessment on the U.S. economy while downplaying the impact of global trade risks on upcoming rate rises. The bullish outlook buoyed the dollar and put a squeeze on gold, which fell to $1,222/ounce - its lowest level in a year.

New York, Connecticut, Maryland and New Jersey have sued the federal government to void the new $10K cap on federal deductions for state and local taxes included in the Trump administration's 2017 tax overhaul. Taxpayers have long typically enjoyed the benefits, known as SALT deductions, while critics have said the cap would disproportionately harm "blue" states that tilt Democratic.

Chicago may become one of the first U.S. cities to implement a universal basic income program. The proposal, introduced by Chicago Alderman Ameya Pawar, would provide 1,000 families with a $500 monthly stipend - no strings attached. The bill already has the backing of the majority of city lawmakers, and Pawar hopes to soon work with Mayor Rahm Emanuel to implement the pilot program.

Stocks

Swiss drug maker Novartis is voluntarily joining Pfizer (NYSE:PFE) in shelving "any further U.S. price increases this year," after criticism from President Trump over rising costs. Bolstered by strong Q2 results, which saw core operating profit rise 7% to $3.54B, CEO Vas Narasimhan said he still expects Novartis (NYSE:NVS) to hit the top of its 2018 sales guidance. NVS +1.1% premarket.

Cryptocurrencies extended their rebound overnight as Bitcoin (BTC-USD) traded above $7,500 for the first time in a month, while rivals including Ripple (XRP-USD), Ether (ETH-USD) and Litecoin (LTC-USD) also advanced. Despite shrugging off some security and regulatory concerns that have plagued cryptos for much of this year, Bitcoin still remains more than 60% below its all-time high from last December.

Newly appointed Goldman Sachs CEO David Solomon will be getting an 8% increase in base pay (to $2M) after stepping into the role. His total compensation totaled $21M in 2017 vs. the $24M Lloyd Blankfein received in pay, bonus and incentives last year. After reporting earnings yesterday, Goldman (NYSE:GS) pledged $5B more in annual revenue by growing its fledgling consumer bank and changing how it approaches trading.

Texas Instruments CEO Brian Crutcher has resigned after spending less than two months in the role. "The code-of-conduct violations are related to personal behavior that is not consistent with our ethics and core values, but not related to company strategy, operations or financial reporting," according to a statement. He will be replaced by Chairman Rich Templeton. TXN -1.2% premarket.

Nest, the "smart home" company that was once seen as the model for how Alphabet (GOOG, GOOGL) would build significant free-standing businesses, has finally been fully submerged inside Google, FT reports. The latest shakeup will also see the replacement of Marwan Fawaz, who served as Nest's CEO – a title that had already become moot after Nest lost its status as a separate Alphabet subsidiary earlier this year.

MGM Resorts is suing the victims from the Las Vegas music festival mass shooting in an effort to block any potential compensation demands against it. MGM claims a 2002 federal statute wipes out liability for any company that adopts "anti-terrorism technology," which it did through the hiring of a certified DHS firm to provide security at the Route 91 Harvest Festival.

U.S. tourism in Cuba bounced back in June from a months-long slump, with about 68K Americans, not including Americans of Cuban origin on family trips, traveling to the island. That's an increase of 5% from a year ago. The figure was bolstered by increased visits from cruise ships, with operators such as Norwegian (NASDAQ:NCLH), Carnival (NYSE:CCL) and Royal Caribbean (NYSE:RCL) adding more Cuba stops to their itineraries.

Tesla CEO Elon Musk has apologized after calling a British diver involved in the Thai cave rescue a pedophile. "My words were spoken in anger after Mr. Unsworth said several untruths & suggested I engage in a sexual act with the mini-sub... Nonetheless, his actions against me do not justify my actions against him." The comments triggered a rout in Tesla's (NASDAQ:TSLA) share price on Monday, as traders digested the negative publicity.

Boeing has been awarded a $3.9B contract to build two 747-8 aircraft for use as Air Force One, due to be delivered by December 2024 and painted red, white and blue. The contract appears to follow the outlines of the informal agreement reached between Boeing (NYSE:BA) and the White House in February, which came after President Trump objected to the $4B price tag of a previous deal.

Tuesday's Key Earnings

Charles Schwab (NYSE:SCHW) +3.6% amid new assets and accounts.
CSX (NYSE:CSX) +3.2% AH powering past Q2 estimates.
Goldman Sachs (GS) -0.2% on legal costs, underwhelming trading.
Johnson & Johnson (NYSE:JNJ) +3.5% beating expectations.
UnitedHealth (NYSE:UNH) -2.6% despite raising guidance.
United Continental (NYSE:UAL) +4% AH upping its full-year outlook.

Today's Markets

In Asia, Japan +0.4%. Hong Kong -0.2%. China -0.4%. India -0.4%.
In Europe, at midday, London +0.6%. Paris +0.5%. Frankfurt +0.6%.
Futures at 6:20, Dow +0.1%. S&P flat. Nasdaq -0.1%. Crude -2% to $66.74. Gold -0.4% to $1222.40. Bitcoin +0.8% to $7374.
Ten-year Treasury Yield flat at 2.86%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Housing Starts
10:00 Powell to deliver the semi-annual monetary policy testimony before the House Financial Services Committee
10:30 EIA Petroleum Inventories
2:00 PM Fed's Beige Book

 

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Wall Street Breakfast: Powell Heads To Capitol Hill

Author: skywalker   |  Publish date: Tue, 17 Jul 2018, 07:13 AM


The spotlight will be on Fed Chair Jerome Powell this morning as he delivers his semi-annual monetary policy testimony on Capitol Hill. The questioning rarely breaks new ground, typically reviewing the Fed's recent policy statements and economic forecasts, but some inquiries may revolve around steps the Fed has taken to relax certain financial regulations. Investors are also paying close attention to discussion on the yield curve - which compares long- and short-term interest rates.

Economy

A U.K. Customs Bill related to Brexit has narrowly passed the House of Commons, with Downing Street previously concluding that all four amendments were "consistent with the Brexit white paper." One clause would prevent the U.K. from collecting taxes on behalf of the EU, unless the the bloc does the same, while another would ensure the U.K. is out of the EU's VAT regime.

The U.S. has filed separate claims with the World Trade Organization against China, the EU, Canada, Mexico and Turkey after the countries lodged complaints over the Trump administration's steel and aluminum tariffs. President Trump has repeatedly raised the prospects of withdrawing from the WTO, although this month he said that no withdrawal was planned for now. Amid the trade tensions, Chinese mainland stocks are down almost 30% since their peak in January.

Despite months of negative trade headlines, the IMF expects the global economy to grow 3.9% this year and next. That's unchanged from its April forecasts, and would represent the best back-to-back years of growth since 2010 and 2011 when the world enjoyed a fleeting snapback from the financial crisis. The fund is still cautious on the road ahead, stating the "risks to the outlook are mounting."

The IEA is sounding the alarm over a "worrying" pause in the shift to clean energy after global investment in renewables fell 7% to $298B last year. Electricity generation still attracted more capital than oil and natural gas for the second year in a row, taking in $750B thanks to robust spending on grids, compared to the $715B that flowed into the latter category.

Russia is prepared to extend the New START nuclear treaty that expires in 2021, according to Vladimir Putin, which calls for deployable nuclear warheads and bombs to be capped at no more than 1,550. While President Trump has criticized the treaty as a bad deal negotiated by his predecessor, proponents of the accord say it's important because it created a new monitoring regime.

Stocks

Netflix tumbled 14% AH after a sizable miss with new subscriber growth. The company disclosed 670K domestic streaming additions vs. 1.21M consensus and guidance for 1.20M - blaming its miss on faulty internal forecasting and not on business reasons, like recent price increases. Netflix (NASDAQ:NFLX) has missed forecasts three times in the past 10 quarters.

Shares of Sinclair (NASDAQ:SBGI) and Tribune Media (NYSE:TRCO) also tanked on Monday after FCC Chairman Ajit Pai signaled his intention to refer the merger to an administrative law judge, a likely death knell for the broadcasting behemoth. The issue is whether divestitures promised by Sinclair include too many joint-operating setups that would leave the company still in effective control of the stations.

A five-year cloud and artificial intelligence agreement has been signed between Walmart (NYSE:WMT) and Microsoft (NASDAQ:MSFT) that includes algorithms for purchasing and sales-data sharing with vendors. The rivalry with Amazon (NASDAQ:AMZN) "is absolutely core to this," Microsoft CEO Satya Nadella declared. "How do we get more leverage as two organizations that have depth and breadth and investment to be able to outrun our respective competition."

It comes as Jeff Bezos shatters more wealth records - now the richest man in recent history (adjusted for inflation). His fortune just crossed the $150B mark, more than $55B richer than Bill Gates, at number two. The milestone was recorded in the heat of Prime Day, which could ring up at least $3.4B within a 36-hour window. Wall Street expects a higher share price for Amazon (AMZN) as a result.

IBM has asked a U.S. jury to award it $167M in a patent lawsuit accusing Groupon (NASDAQ:GRPN) of infringing foundational e-commerce technology, which has already been licensed to Amazon (AMZN), Facebook (NASDAQ:FB) and Google (GOOG, GOOGL). Securing more U.S. patents than any other company for the past 25 years, Groupon argued IBM was overreading the scope of its patents and claiming ownership of building blocks of the internet.

Papa John's founder John Schnatter said "it was a mistake" to resign as chairman after using a racial slur during a training session and is questioning how the company investigated him. He remains a board member, but will no longer be featured in any advertising or marketing materials. As of March, Schnatter owned 29% of Papa John's (NASDAQ:PZZA) shares, currently worth about $500M.

Chinese ride-hailing giant Didi Chuxing (DIDI) is planning to spin off its car services unit ahead of the parent company's planned IPO. About $1B-$1.5B is expected to be raised from the deal, which includes investor SoftBank (OTCPK:SFTBY), Reuters reports. The unit is mainly involved in car rental and maintenance services and provides drivers with optimized gas station deals.

More Takata fallout... Ford (NYSE:F) has agreed to an almost $300M so-called economic loss settlement covering at least 6M U.S. vehicles with potentially faulty Takata (OTCPK:TKTDQ) air bag inflators. Meanwhile, comments from Elon Musk are still weighing on Tesla shares, down almost 1% premarket, after the CEO lashed out at at one of the British divers involved in Thai cave rescue last week.

There's already big news at Farnborough amid commercial aircraft orders of $43.6B (and engine contracts worth $2.8B), more than double the first day of orders at the 2016 Farnborough Air Show. Airbus (OTCPK:EADSY) led the day, securing commitments for 186 planes compared to 175 for Boeing (NYSE:BA), with the battle significantly focused on the narrowbody market: The A320neo earned 159 orders and options compared to 145 for the 737 Max.

Today's Markets

In Asia, Japan +0.4%. Hong Kong -1.3%. China -0.6%. India +0.5%.
In Europe, at midday, London -0.2%. Paris -0.4%. Frankfurt -0.1%.
Futures at 6:20, Dow -0.1%. S&P -0.2%. Nasdaq -0.3%. Crude flat at $68.03. Gold +0.2% to $1242. Bitcoin -0.2% to $6716.
Ten-year Treasury Yield flat at 2.85%

Today's Economic Calendar

8:55 Redbook Chain Store Sales
9:15 Industrial Production
10:00 Powell to deliver semi-annual monetary policy testimony
10:00 NAHB Housing Market Index
4:00 PM Treasury International Capital

 

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Wall Street Breakfast: Taking Flight At Farnborough

Author: skywalker   |  Publish date: Mon, 16 Jul 2018, 07:20 AM


The most important aviation trade show of the year has begun, attracting about 100,000 trade visitors from 100 countries. Alternating every year with the Paris Air Show in France, the Farnborough International Air Show runs until July 22. In 2016, the last time Farnborough played host, more than $124B in sales and commitments were placed at the exhibition (see more below).

Economy

President Trump is sitting down with Russian counterpart Vladimir Putin in Helsinki today, with Crimea, Syria and election meddling likely on the summit's agenda. No aide or official from the U.S. delegation will be present during the meeting's initial stages, which comes on the tails of a tense NATO summit during which Trump lambasted allies for not meeting their defense spending commitments.

"Our Brexit deal is not some long wish-list from which negotiators get to pick and choose. It is a complete plan with a set of outcomes that are non-negotiable," Theresa May wrote in The Mail on Sunday newspaper. "This is the scale of the opportunity before us and my message to the country this weekend is simple: we need to keep our eyes on the prize. If we don't, we risk ending up with no Brexit at all."

President Trump has also signaled the United States could strike "a tremendously big deal" with Britain, if the latter country successfully negotiates its exit from the European Union. In 2017 the U.S. ran a modest trade surplus with the U.K., Census Data figures show, a stark contrast to the massive trade deficit the world's largest economy runs with the EU.

Chinese shares started the week on the back foot following softer economic data and more fears of scuffles with trading partners. While the GDP figure was in line with market expectations, the 6.7% growth rate in Q2 cooled from the 6.8% expansion registered in each of the previous three quarters. China also said it wants to seek more balanced trade with the EU as Premier Li Keqiang met Donald Tusk and Jean-Claude Juncker in Beijing.

Cuba is planning a series of potentially far-reaching changes, with a new constitution set to recognize the free market and private property, while dividing political powers between a president and a prime minister. The fundamental means of production will remain under central control, but foreign investment will be recognized as an important spur to development. The Communist Party will also remain "the superior leading force of society and of the state."

A Norwegian union for workers on offshore oil and gas drilling rigs has stepped up a six-day walkout that has hit crude output after employers did not respond to demands for higher wages and pension benefits. The union is adding another 900 employees to the currently striking 700 workers, but the expanded action is not expected to have any immediate extra impact on production beyond the closure last week of Shell's (RDS.A, RDS.B) Knarr field.

Oil back under $70... Saudi Arabia is said to have offered extra crude to some customers, extending additional cargoes of its Arab Extra Light crude to at least two buyers in Asia, Bloomberg reports. The Trump administration is also actively considering tapping into the U.S.'s 660M-barrel Strategic Petroleum Reserve as political pressure grows to rein in rising gas prices before November elections.

Stocks

The battle at Farnborough has begun. Boeing (NYSE:BA) kickstarted the exhibition with a $4.7B deal for freight planes with delivery company DHL and the firm purchase of 30 737 MAX 8s with leasing firm Jackson Square. Airbus (OTCPK:EADSY) is already plotting its revenge. It's working on a blockbuster agreement to sell $23B worth of aircraft to AirAsia, as well as confirming a $9B order from StarLux and Sichuan Airlines.

More from the Air Show... Lockheed Martin (NYSE:LMT) is helping take Britain into the commercial space age after claiming government grants totaling £23.5M to launch small satellites from a remote area of the Scottish Highlands. The new spaceport is expected to be used mainly for earth observation and other data-gathering tasks, with the goal of having launches from the early 2020s.

British jet engine maker Rolls-Royce (OTCPK:RYCEY) has designed a propulsion system for a flying taxi and is starting a search for partners to help develop the project. The EVTOL aircraft could carry four to five people at speeds of up to 250 miles per hour for approximately 500 miles. Re-charging would also not be required because the battery is charged by the gas turbine, allowing it to use existing infrastructure.

The U.S. Defense Department has reached a "handshake deal" with Lockheed Martin (LMT) to buy a batch of 141 F-35 combat jets likely to be worth more than $12B after months of wrangling over price and other terms. In other news, executives at CFM international said they are confident that the JV between General Electric (NYSE:GE) and Safran (OTCPK:SAFRY) will meet its target to deliver 1,100 LEAP engines this year.

Amazon is planning a smart television set and its own TV service, according to The Telegraph. The device is being confidentially tested by DTG, which maintains technical standards in the U.K.'s digital terrestrial broadcasts. Amazon (NASDAQ:AMZN) turned to the broadcast technology after its attempts to convert Prime Video into a viable alternative to satellite or cable pay-TV fell flat.

Trade movement in Hong Kong: ZTE (OTCPK:ZTCOY) climbed as much as 17% after the U.S. formally lifted a ban on its American technology purchases, resolving a months-long moratorium on the Chinese telecom equipment maker. Meanwhile, shares in smartphone maker Xiaomi fell by almost a tenth after mainland Chinese investors were barred from buying into Hong Kong-listed companies that issue dual-class shares.

France clinched its second World Cup title last night with a 4-2 win over Croatia, but investors appear to be more focused on the final game statistics of Nike (NYSE:NKE) vs. Adidas (OTCQX:ADDYY). Of the total 169 goals scored leading up to the finals, Nike cleats were worn for over 100 of them. Nike also sponsored both teams in the final and shelled out about $56M on the French national team.

Major League Baseball is getting into the crypto game, launching MLB Crypto Baseball. Gamers will pay an ether to buy a digital avatar, which are tied to specific moments in recent games. Ethereum (ETH-USD), launched in 2015, runs on a blockchain, the same peer-to-peer, immutable, public ledger technology used by bitcoin.

Goldman Sachs is expected to name its president, David M. Solomon, as its next chief executive early this week, the New York Times reports. He would succeed Lloyd C. Blankfein, one of the longest-serving CEOs and most powerful executives on Wall Street. Blankfein, who presided over record earnings during his 12 years atop Goldman (NYSE:GS), will also stay on for an interim period.

Deutsche Bank +7.4% premarket after saying it expects to report Q2 pretax profit of about €700M and net income of approximately €400M, which is "considerably above the average consensus estimate." The latest figures appear to be good news for new CEO Christian Sewing, and company management "believes that these results demonstrate the resilience of the franchise." Deutsche (NYSE:DB) will report full earnings on July 25.

End of an era... Sears's (NASDAQ:SHLD) presence in Chicago ended on Sunday, with the closing of its Six Corners store, which opened in the Irving Park neighborhood 80 years ago. The retailer has lost $11.2B since 2010, its last profitable year. Sears launched its first stores in 1925 in the city, but now has fewer than 1,000 outlets nationwide.

Today's Markets

In Asia, Japan +1.9%. Hong Kong +0.1%. China -06%. India -0.6%.
In Europe, at midday, London -0.8%. Paris -0.2%. Frankfurt +0.1%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq +0.1%. Crude -1.6% to $69.87. Gold +0.2% to $1243.40. Bitcoin +2.8% to $6527.
Ten-year Treasury Yield flat to 2.83%

Today's Economic Calendar

8:30 Empire State Mfg Survey
8:30 Retail Sales
10:00 Business Inventories

 

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Wall Street Breakfast: Bank Earnings On The Radar

Author: skywalker   |  Publish date: Fri, 13 Jul 2018, 10:25 AM


A slew of Wall Street banks are reporting quarterly results before the bell today, unofficially kicking off the second-quarter earnings season. Markets could pick up steam if a positive print is recorded at JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), First Republic Bank (NYSE:FRC) and PNC Financial (NYSE:PNC). Overall S&P 500 companies are expected to post second-quarter profit growth of around 21%, according to Thomson Reuters.

Economy

President Trump will meet with U.K. Prime Minister Theresa May again today in what could prove to be an awkward exchange after he said her soft Brexit strategy risks killing a trade deal with the U.S. The president also told The Sun that Brexiteer Boris Johnson would "make a great prime minister," although he wasn't "pitting one against another." Sterling -0.7% to $1.3116.

Ratcheting up trade tensions, Italy will not ratify the EU's free trade agreement with Canada, which needs to be approved by all 28 member states in order for it to take effect. "If so much as one Italian official ... continues to defend treaties like CETA (the Comprehensive Economic and Trade Agreement) they will be removed," added deputy Prime Minister Luigi Di Maio.

China's trade surplus with the U.S. swelled to a record in June, a result that could further inflame trade tensions with Washington. Exports to the world's largest economy rose 5.7%, while imports from the U.S. rose 4%, resulting in a trade surplus of $28.97B. Separately, an explosion at a chemical plant in China overnight killed 19 people and injured 12, marking the latest deadly industrial incident in the country.

"The (Trump) administration says that what it's trying to achieve is lower tariffs. So if it works out that way, then that'll be a good thing for our economy," Fed Chair Jerome Powell told the ECB Forum. "If it works out other ways, so that we wind up having high tariffs on a lot of products, goods and services... and that they become sustained for a long period of time, then yes, that could be a negative for our economy."

American officials are on their way to Mexico to meet president-elect AMLO and the current administration, adding to speculation that the U.S. may be looking for a NAFTA victory while trade tensions escalate with China. Ahead of the meeting, Mexico reportedly opposed a deal known as a "Safe Third Country Agreement," which would make people seeking asylum in the U.S. apply in Mexico instead.

The U.S. has rejected a French waiver request for companies operating in Iran, according to Finance Minister Bruno Le Maire, adding that "Europe must provide itself with the tools it needs to defend itself against extra-territorial sanctions." The exemptions would be critical for Total (NYSE:TOT) to continue a multi-billion-dollar gas project in Iran and PSA Group (OTCPK:PUGOY) to pursue its joint venture.

Germany is holding up the final €15 bailout disbursement for Greece as the nation looks to exit an eight-year bailout regime in August. The snag came after Greek Prime Minister Alexis Tsipras decided to push back a value-added tax hike on a handful of islands that have been hit hard by an influx of migrants.

Ireland is set to become the first country to stop public investments in fossil fuels. The bill is expected to pass relatively quickly through the Seanad (Senate), and will force the Ireland Strategic Investment Fund to end any investments in non-renewable energy. The ISIF is worth €8.9B, of which more than €300M is invested in oil, gas, coal and other fossil fuels.

Stocks

In a mild surprise, the Justice Department is appealing its loss in the trial it launched to prevent AT&T (NYSE:T) from acquiring Time Warner. The company closed the megamerger on June 14, just two days after the case ended. U.S. District Judge Richard Leon had ruled that combining AT&T's wireless and satellite businesses with Time Warner's movies and television shows was legal under antitrust law.

Streaming takes the crown... Netflix (NASDAQ:NFLX) has scored 112 Emmy Awards nominations, more than any other television network and breaking a streak that HBO (T) held onto for 17 years. Game of Thrones, which sat out the awards last year because it missed the eligibility window, received 22 nominations, the most of any show. It will be up against last year's winner, Handmaid's Tale, which was the first streaming TV series to win best drama.

A Missouri jury has ordered Johnson & Johnson (NYSE:JNJ) to pay a record $4.69B to 22 women who alleged the company's talc-based products, including its baby powder, contain asbestos and caused them to develop ovarian cancer. Facing some 9,000 talc cases, J&J has denied the claims - saying decades of studies show its talc to be safe - and has successfully overturned prior verdicts on technical legal grounds.

The Iowa and Illinois health departments are investigating over 100 cyclospora infections linked to salads at McDonald's (NYSE:MCD) restaurants, causing shares to fall 1.4% AH on Thursday. Other food trouble? The FDA is recalling Kellogg's (NYSE:K) Honey Smacks cereal still being sold at retail outlets and warned consumers not to purchase the product due to the potential for Salmonella contamination. K -1.7% premarket.

Northrop Grumman operating chief Kathy Warden will take over as CEO in January as Wes Bush prepares to leave the defense giant. She'll take the reins at a time of considerable transformation. Northrop (NYSE:NOC) recently closed the blockbuster $7.8B acquisition of Orbital ATK, and is ramping up work on the next U.S. stealth bomber after winning a pivotal 2015 contract.

Shooting down recent rumors, Walmart (NYSE:WMT) said it has not decided to sell its Japanese supermarket chain Seiyu. "We continue to build our Japan business towards the future to meet the changing needs of customers there,” a company spokesperson told Reuters. Seiyu, with more than 300 stores, would be a large asset for a Japanese retailer to absorb.

A Twitter policy change that no longer counts "locked accounts suspected of fraud" cost its 100 most popular users about 2% of their followers, on average, according to data firm Keyhole. Twitter (NYSE:TWTR) CEO Jack Dorsey alone lost 200,000 followers. While the service is looking to increase its credibility, locked accounts had already been kept out of Twitter's daily and monthly active user figures.

Today's Markets

In Asia, Japan +1.9%. Hong Kong +0.2%. China -0.2%. India flat.
In Europe, at midday, London +0.5%. Paris +0.4%. Frankfurt +0.2%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq flat. Crude -0.5% to $70. Gold -0.4% to $1241.90. Bitcoin -0.1% to $6239.
Ten-year Treasury Yield flat at 2.84%

Today's Economic Calendar

8:30 Import/Export Prices
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
Fed to release semiannual monetary policy statement

 

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