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Author: skywalker   |   Latest post: Tue, 12 Dec 2017, 09:01 AM

 

Wall Street Breakfast: Safe Havens Maintain Gains As Diplomacy Churns

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Investors continued a move to safe havens amid global tensions that ranged from Moscow to the Korean peninsula. Secretary of State Rex Tillerson is in Moscow to discuss topics including Syria and Ukraine, while a U.S. carrier group moves on waters around North Korea. With U.S. stock futures in a holding pattern, gold continued its advance, hitting a five-month high, and Treasury yields were at this year's lows.

Economy

While Tillerson is on the ground in Moscow, other White House officials are pressing rhetoric, arguing that Russia tried to cover up what it says was a sarin gas attack in Syria last week. It's "implausible" that Russia wouldn't know about the attack, officials say, given the close working relationship on a military level between the two countries.

Chinese President Xi Jinping and President Trump spoke by telephone about the continuing ramp-up in tension with North Korea, even as U.S. naval forces headed to the region as a show of force. Xi stressed that China is committed to denuclearization and peace on the Korean peninsula. Asian stocks were mostly lower and the Nikkei was off 1% due to strength in the yen.

In data ahead, investors are looking to the release of import/export prices this morning and Treasury budget data later in the day. Import prices are expected to have declined 0.2%, with export prices up 0.1%, after both measures increased a month ago. Meanwhile, a slightly narrower budget deficit of $167B is expected for March, vs. a prior $192B.

Stocks in London moved higher led by energy and auto issues, and despite a 3.4% drop in supermarket leader Tesco (OTCPK:TSCDY), which reported earnings that beat expectations (see below). BP and Royal Dutch Shell (RDS.A, RDS.B) rose in London trading, and BMW (OTCPK:BMWYY) and Volkswagen (OTCPK:VLKAY) reported brand sales gains of 5% and 2.5% respectively. The FTSE is up 0.3%.

Stocks

Bidders for the highly valued chip unit at Toshiba (OTCPK:TOSYY) are down to four, Reuters says: Broadcom (NASDAQ:AVGO), Western Digital (NYSE:WDC), Foxconn (OTC:FXCOF) and SK Hynix. Broadcom and Foxconn were previously reported to have submitted bids of ¥2T -- about $18.2B. Meanwhile, Western Digital is warning Toshiba that a split of the business may violate a joint venture contract the two share; it wants exclusive talks.

Hundreds of additional jobs are headed for the chopping block at Wal-Mart (NYSE:WMT), which will reportedly reduce headcount in its international and technology businesses along with its warehouse chain Sam's Club. That follows more than a thousand cuts to corporate positions (mainly in human resources) earlier this year, among other cuts over the past year.

Meanwhile, on the forward-looking front, Wal-Mart is working to combat e-commerce inroads by Amazon.com (NASDAQ:AMZN) with an initiative to offer discounts for online orders picked up in store by customers. That's on top of free shipping it already offered for in-store pickups; the company says it should make a material impact on online transactions as well as in-store traffic.

Despite fiscal year results that beat expectations and solidified an ongoing operational recovery, shares in Tesco (OTCPK:TSCDY) were significantly lower in London. The company still faces challenges, with fines and compensation for misstating its 2014 profits, along with a possible rise in pension contributions and imported food inflation.

A new, later apology from Oscar Munoz, CEO of United Continental (NYSE:UAL), sought to mitigate damage caused by a viral video of a bumped passenger being physically dragged off a flight -- and an earlier, softer apology from Munoz that referred to the company's "re-accommodation" of the passenger, drawing derision. Shares closed yesterday down 1.1%; they're down 0.6% premarket today.

Shipments of personal computers are stabilizing, though whether they're up or down on a year-to-year basis depends on whether the data come from IDC or Gartner. IDC (which counts Chromebooks) says shipments were up 0.6%, while Gartner says they were down 2.4%. Both saw a renaissance from HP (NYSE:HPQ), and IDC says HP retook the lead. Gartner notes business buying is key, with Lenovo, HP, Dell (NYSE:DVMT) and Apple (NASDAQ:AAPL) each in positions of strength.

The chief executive at Organovo (NYSEMKT:ONVO) is stepping down to pursue his own entrepreneurial activities, the company says. Keith Murphy will remain on the board as chairman; he'll be replaced by Taylor Crouch, previously CEO of eStudySite.

Today's Markets

In Asia, Japan -1% to 18,553. Hong Kong +0.9% to 24,314. China -0.5% to 3,274.
In Europe, at midday, London +0.2%. Paris +0.2%. Frankfurt +0.1%.
Futures at 6:35, Dow -0.01%. S&P -0.07%. Nasdaq -0.04%. Crude +0.6% to $53.72. Gold +0.13% to $1,276.
Ten-year Treasury Yield flat.

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Import/Export Prices
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $12B, 30-Year Note Auction
2:00 PM Treasury Budget

 

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