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Author: skywalker   |   Latest post: Fri, 15 Dec 2017, 09:58 AM

 

Wall Street Breakfast: Asia Edgy As Korean Tensions Flare

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Asian markets were edgy Tuesday amid growing tensions around the Korean peninsula. After the United States sent an aircraft carrier group in as a show of force, North Korea responded it was "ready for war" if there were further military moves. Some observers think the country will pursue another nuclear test this week. The Nikkei closed down 0.3% and Hang Seng -0.7%, while in Shanghai, stocks rose 0.6%. Meanwhile, U.S. Secretary of State Rex Tillerson was set to head to a meeting with Russia while the U.S. hinted at a tougher approach to Russian ally Syria.

Economy

The economy's doing pretty well and doesn't necessarily need a step on the accelerator from the Fed, Chairwoman Janet Yellen says, but the "neutral" ending spot for short-term interest rates is "pretty low." Speaking at the University of Michigan late yesterday, she didn't tip the Fed's approach either way, but characterized the central bank as near its twin goals of full employment and inflation control.

Crude oil has backed off yesterday's gains after the G-7 world leaders met with Middle Eastern allies, a gathering at which the U.S. approach to Syria was the key topic. The group made a show of togetherness on the issue in part to pressure Russia's Vladimir Putin to break ties with Syria's Bashar al-Assad. Yesterday, crude made gains amid a shutdown of Libya's biggest oil field; currently, WTI crude is off 0.24% to $52.95/bbl, while Brent Crude is down 0.2% to $55.87.

The consumer price index in the UK remains steady, but still at its highest year-on-year rate since September 2013. Inflation was at 2.3% on a yearly comparison, and at 0.4% on a month-on-month basis; that's still above the Bank of England's target inflation rate, which is (like the U.S.) at 2%.

Germany's economy was robust in the first quarter and it looks likely to continue, according to ZEW Institute's review of the economic situation there. The group's current conditions index rose to 80.1 points from last month's 77.3; meanwhile, investor sentiment rose to 19.5 points from a month-ago 12.8. The euro is up 0.2% against the dollar.

Stocks

An unprecedented step as Toshiba (OTCPK:TOSYY, OTCPK:TOSBF) filed a twice-delayed quarterly report without sign-off from its auditor, PricewaterhouseCoopers Aarata. The report showed deep losses, affected by writedowns at its U.S. nuclear unit Westinghouse, and a going-concern warning. Toshiba says it has negative shareholders equity of nearly ¥226B.

In its legal battle with Apple (NASDAQ:AAPL), Qualcomm (NASDAQ:QCOM) has fired back, saying the iPhone maker has sicced international regulators on the chipmaker and is mischaracterizing its business. Apple wouldn't have an iPhone business if it weren't for Qualcomm's fair approach to licensing, Qualcomm says. Apple has filed suits worldwide charging Qualcomm with pursuing excessive royalties.

In a major grocery combination, Supervalu (NYSE:SVU) is acquiring grocery/specialty distributor Unified Grocers in a deal at about $375M including debt, with $114M in cash. That will merge two complementary grocery wholesalers with a combined $16B in 2016 sales, and Supervalu says the deal will be accretive to EPS in the first full fiscal year after the closing.

Amid a continuing dispute over pay raises for senior officials, Bombardier (OTCQX:BDRAF, OTCQX:BDRBF) says it's agreed to cut 2016 pay for its executive chairman, Pierre Beaudoin. He'll get his 2015 pay of $3.8M rather than $5.2M. The company's been under fire for raising compensation for Beaudoin and the top five execs to $32.7M from $21.9M following rounds of layoffs and hundreds of millions of dollars in government support.

A luxury goods rebound is under way and LVMH (OTCPK:LVMHF) is benefiting. The company's stock hit record highs in Paris after Q1 revenues grew 15% and easily beat expectations. The company warned, though, that it may not be able to replicate strong first quarter growth all year; that would depend on good sentiment continuing in China and improvement in the U.S.

German chipmaker Dialog Semiconductor (OTC:DLGNF) has slid in Europe after investment bank Bankhaus Lampe downgraded it on worries that Apple may not need Dialog's battery-saving chips. Signs show that Apple may be working on its own power management integrated circuits, and could drop some part of Dialog's business as soon as 2019, Lampe suggests. Dialog reportedly gets more than 70% of its revenues from Apple.

A significant find in Texas' Permian basin may be one of that area's best ever, SunTrust says, and that could mean a boost for companies drilling in the region - not just EOG Resources (NYSE:EOG), which made the discovery, but also Concho Resources (NYSE:CXO), Energen (NYSE:EGN), Matador Resources (NYSE:MTDR) and WPX Energy (NYSE:WPX).

Australia's National Broadband Network has an "under-utilized asset" in its fixed wireless network, Vodafone (NASDAQ:VOD) says, and NBN should use it to offer wholesale mobile service. Vodafone has the least network coverage in rural and remote parts of the country vs. competitors Optus and Telstra (OTCPK:TLSYY), but says it doesn't make sense for each carrier to duplicate infrastructure in such areas.

Today's Markets

In Asia, Japan -0.3% to 18,747.87. Hong Kong -0.7%% to 24,088.46. China +0.6% to 3,288.19.
In Europe, at midday, London +0.6%. Paris +0.1%. Frankfurt -0.1%%.
Futures at 6:48, Dow +0.01%. S&P -0.01%. Nasdaq +0.00%. Crude -0.2% to $52.98. Gold +0.4% to $1,259.40.
Ten-year Treasury Yield -0.018% to 2.343%.

Today's Economic Calendar

Tuesday's economic calendar:
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $20B, 10-Year Note Auction

 

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