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Author: skywalker   |   Latest post: Fri, 17 Nov 2017, 06:53 AM

 

Wall Street Breakfast: Landslide French Election Win

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Emmanuel Macron is set to become the youngest president in French history after winning 66% of Sunday's runoff vote vs. National Front leader Marine Le Pen. "I will fight with all my strength against the divisions that are undermining us," he declared. While his victory strengthens France's place in the EU, he'll soon have to prove his fledgling political party, En Marche, is capable of winning a majority in June's legislative elections.

Economy

Market reaction? While the euro topped $1.10 for the first time since November, it's now slipping on profit-taking. Stocks in Asia also saw some traction after the results, but equities across Europe and U.S. futures are flashing red. As part of his election manifesto, Emmanuel Macron pledged to reform France's labor market, unify the country's pension plans and reduce the budget deficit.

High demand from abroad boosted German industrial orders in March, a rise analysts see as a sign the sector is overcoming past volatility and will contribute to growth in coming months. Adjusted for seasonal swings and inflation, contracts for "Made in Germany" goods were up by 1% from February, the first time since November 2015 that new orders increased for two months in a row.

North Korea detained U.S. citizen and Professor Kim Hak Song over the weekend, raising to four the number of Americans being held by the nation's authoritarian regime. According to experts, Kim Jong-Un is holding U.S. citizens as part of a new form of "hostage diplomacy" amid fears of an American attack targeting his nuclear and missile programs.

China's forex reserves rose for a third straight month in April, climbing $21B to $3.03T, after President Trump backed away from labeling China a currency manipulator and said the greenback was "getting too strong." The State Administration of Foreign Exchange said the reserves grew due to balanced forex supply and demand and the appreciation of currencies against the dollar.

"The [OPEC/non-OPEC] producer coalition is determined to do whatever it takes in bringing stock level to five years average," Saudi Energy Minister Khalid Al-Falih told the 19th Asia O&G Conference. "Based on the consultation I have had with participating members, we are confident that the agreement will be extended to the second half of the year and beyond."

President Trump is urging Senate Republicans to "not let the American people down," as the debate about overhauling the U.S. healthcare system shifts to Congress's upper chamber. Among the hurdles? There are concerns about potential higher costs for older people and those with pre-existing conditions, as well as the likelihood the Senate will draft its own bill from scratch.

U.S. Commerce Secretary Wilbur Ross said on Saturday that threats of retaliatory trade actions from Canadian officials "are inappropriate" and will not influence final U.S. import duty determinations on Canadian softwood lumber. The "recent preliminary decision was based on the facts presented, not on political considerations," he announced. "We continue to believe that a negotiated settlement is in the best interests of all parties."

St. Louis Fed President James Bullard is poised to kick off a busy week of speeches by U.S. central bank officials with a talk in Florida on low interest rates. Other regional Fed bank presidents speaking over the coming days include Eric Rosengren, Robert Kaplan and William Dudley. Their appearances come after the FOMC last week decided not to raise interest rates, but signaled future increases.

Stocks

Highlights from Capitalist Woodstock: Warren Buffett spoke at length about his failure to pounce on opportunities in technology stocks, the challenge of lining up large deals and his frustration with a cash pile approaching $100B. Other topics included airlines, autonomous vehicles and China. "I can't think of anything that can harm Berkshire (BRK.A, BRK.B) in a material, permanent way except weapons of mass destruction," he declared.

Grab the remote... Sinclair Broadcast Group (NASDAQ:SBGI) will reportedly acquire Tribune Media (NYSE:TRCO) for $4B today, buying one of the largest U.S. television station operators. That would mean prevailing over a bid from Nexstar Media (NASDAQ:NXST), as well as a team of Blackstone (NYSE:BX) and Twenty-First Century Fox (FOX, FOXA).

Facebook is closer than expected to making a big push into television, according to Business Insider, with plans to premiere its slate of programming in mid-June. The company will have roughly two dozen shows of two types: shorter ones of five-to-10 minutes in length and others similar to traditional TV entertainment. Facebook (NASDAQ:FB) is also hiring for positions more familiar to Hollywood than Silicon Valley.

Looking to get a piece of the cutthroat business, Comcast (NASDAQ:CMCSA) and Charter (NASDAQ:CHTR) are striking a wireless partnership, WSJ reports. As part of the deal, the two have agreed not to make a material merger or acquisition in wireless without the other's consent for one year, but they might come together to make a play for a carrier like Sprint (NYSE:S) or T-Mobile (NASDAQ:TMUS).

Akzo Nobel has rejected a third unsolicited takeover proposal from U.S. rival PPG - valued at €26.9B - stating it undervalues the firm, faces antitrust risks and doesn't address shareholder concerns such as "cultural differences." Under Dutch securities laws, PPG must now decide whether it will move to a formal bid ahead of a June 1 deadline without the support of Akzo's (OTCQX:AKZOY) boards.

Shareholder adviser Ivox Glass Lewis has called on Linde (OTCPK:LNEGY) investors to vote against signing off on the actions of its supervisory board due to problems in the handling of a planned merger with Praxair (NYSE:PX). The $65B all-share merger of equals would reunite a global industrial gases company that split in WWI and would create a market leader to rival Air Liquide (OTCPK:AIQUY).

More M&A? KKR is discussing a preemptive bid for Toshiba's (OTCPK:TOSYY) memory chip unit that would end negotiations with other potential acquirers, Bloomberg reports. The firm and its partners, which include INCJ and Development Bank of Japan, have indicated they would pay ¥1.8T to ¥2.1T ($16B to $18.6B) for the business. Western Digital (NYSE:WDC) is also in talks to join the group.

Struggling to shake off its fake accounts scandal, Wells Fargo (NYSE:WFC) has warned its litigation bill could be $200M higher than previously thought as it sheds new light on a series of lawsuits. In a quarterly filing, the bank said "reasonably possible" losses from legal actions could exceed its existing provisions by $2B - up from a $1.8B figure it disclosed three months ago.

Canada's Hudson's Bay has hired a debt restructuring adviser to review potential options for combining its business with debt-laden Neiman Marcus (Pending:NMG), sources told Reuters. Evercore Partners (NYSE:EVR) has asked it to come up with ways the two companies can combine without Hudson's Bay (OTC:HBAYF) assuming the full burden of the U.S. department store operator.

A big boost for Nike's $250 carbon-plate running shoes? The company's attempt to stage the first sub-two-hour marathon fell just short Saturday as Kenya's Eliud Kipchoge crossed the finish line with a time of 2:00:25. Nike (NYSE:NKE) invested years of research and had more than a dozen employees working on the project, dubbed Breaking2, to engineer sophisticated footwear for breaking the iconic time barrier.

As it redirects its attention to battery-powered vehicles, the VW brand (OTCPK:VLKAY) is confident it will "leapfrog” the competition and become a leader in electric cars by 2025. "Anything Tesla (NASDAQ:TSLA) can do, we can surpass," declared company head Herbert Diess. "Tesla comes from a high-priced segment, however they are moving down... It's our ambition, with our new architecture, to rein them in."

"Rexnord of Indiana made a deal during the Obama Administration to move to Mexico. Fired their employees. Tax product big that's sold in U.S.," President Trump wrote in a tweet, extending his criticism of the industrial company. Rexnord (NYSE:RXN) announced the relocation of its bearing plant - which employs 350 people - in October, saying the move south of the border will save it $30M per year.

Today's Markets

In Asia, Japan +2.3%. Hong Kong +0.4%. China -0.9%. India +0.2%.
In Europe, at midday, London flat. Paris -0.9%. Frankfurt -0.3%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude +0.1% to $46.26. Gold +0.5% to $1233.30.
Ten-year Treasury Yield -2 bps to 2.33%

Today's Economic Calendar

8:35 Fed's Bullard speech
8:45 Fed's Mester: Monetary Policy and Economic Outlook
10:00 Labor market condition index
12:30 PM TD Ameritrade IMX

 

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