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Author: skywalker   |   Latest post: Fri, 22 Sep 2017, 11:44 AM

 

Wall Street Breakfast: U.S., China Strike Trade Deals

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Reshaping their trade relationship, the U.S. and China have revealed a new 10-point package that will see the latter open its market to American companies and agencies. Commerce Secretary Wilbur Ross said the import/export deals on beef, poultry, natural gas, agriculture, financial services and biotechnology will help reduce the massive trade deficit with Beijing.

Economy

Mexico has meanwhile sent a stark message to the U.S., saying an upcoming visit by government officials to China showed the country had other places to export to if NAFTA gets torn up. "We will use (the China visit) geopolitically as strategic leverage," declared Mexican Economy Minister Ildefonso Guajardo. "It sends the signal that we have many alternatives."

China's President Xi is also expected to detail plans for his "Belt and Road Initiative" at a forum this weekend. Over fifty agreements are set to be signed to advance the project, which aims to build a new Silk Road connecting Asia, Europe, the Middle East and Africa. The vast logistics and transport network would involve 65 nations that together account for one-third of global GDP.

French President-elect Emmanuel Macron's "En Marche!" has unveiled a list of 428 candidates ahead of a crucial parliamentary election next month. Most of the names put forward have never held elected office, in an attempt to shake up the political establishment. Recent polls suggest that Macron's party, along with his centrist allies, will receive the majority of votes.

Germany's economy accelerated in the first quarter, with GDP growing at a quarterly clip of 0.6%, or 2.4% in annualized terms. That means the U.K., Japan, France and Italy all recorded lower growth rates than in Q1. Canada is the only G7 country that may record a stronger first-quarter result when it publishes its estimate in late May.

Secretary of State Tillerson has signed an agreement recognizing the Paris climate accord at a meeting of Arctic nations in Alaska. But in opening remarks, he cautioned that the U.S. was not rushing to decide whether to leave or weaken American commitments to the pact. "We're going to work to make the right decision for the U.S.," he said.

The dollar is heading for its best week of the year. It comes ahead of reports forecast to show inflation and retail sales both increasing last month, backing the case for the Fed to keep raising interest rates this year. In addition to U.S. data, investors will be keeping an eye on a two-day meeting of G7 finance chiefs in Italy.

Stocks

Sprint has begun preliminary merger conversations with T-Mobile (NASDAQ:TMUS), Bloomberg reports, marking the latest attempt to consolidate in a market closely watched by U.S. regulators. M&A talks in the wireless industry had been on hold for almost a year because of an FCC spectrum auction that required participants to avoid negotiating deals until April 27. S +3%; TMUS +1% premarket.

According to an SEC filing, Apple (NASDAQ:AAPL) has wrapped up a sale of $7B in debt across various tranches. The tech giant has been using debt to pay shareholders while holding most of its $256B in cash overseas to avoid repatriation taxes. At last report, Apple's total debt had risen to $98.88B (some $85B of that in long-term debt).

Airlines around the world are bracing for a possible expansion of an electronics travel ban to include many routes from Europe to the U.S., but no decision has yet been made by DHS Secretary John Kelly. Representatives from Delta (NYSE:DAL), United (NYSE:UAL) and American (NASDAQ:AAL) met with national security officials late Thursday to discuss threats to aviation security and possible pre-emptive measures.

AstraZeneca +4.4% premarket after its immunotherapy drug durvalumab was shown to fight and reduce the risk of stage III lung cancer. The chemotherapy alternative, called by brand name Imfinzi, is hoped to become a blockbuster drug with sales in the billions of dollars. AstraZeneca (NYSE:AZN) intends to get regulatory approval "as soon as possible."

A judge has effectively killed off any practical chance of Cigna (NYSE:CI) merging with Anthem (NYSE:ANTM) by denying the latter's request for a preliminary injunction. A $1.85B break-up fee will still be thought about over the weekend. The judge stayed implementation of his ruling until Monday to give Anthem time to decide if it will pursue an appeal to the Delaware Supreme Court.

After the failed attempt by (NASDAQ:KHC) Kraft Heinz to acquire Unilever (NYSE:UL) - and Warren Buffett's defense of the offer - CEO Paul Polman offered a response, adding that Unilever tells a growth story. "My returns have been higher in the last eight years than Warren's returns. So I think it's better if he leaves us with what we know how to do well," he told Jim Cramer.

Looking to boost competitiveness and offset regulatory burdens, Goldman Sachs (NYSE:GS) will launch a new "dark pool" today that's run by exchange operator Nasdaq (NASDAQ:NDAQ). At first, only two stocks will trade on the new platform, dubbed Sigma X-Squared, but everything else will be shifted over within about a month from the older Sigma X system.

Wells Fargo is hoping to sell MBSs this year (without government guarantees) for the first time since the financial crisis, according to the head of the bank's consumer lending division. "There's been many many years since Wells Fargo (NYSE:WFC) has participated in any kind of private label market," Franklin Codel told investors. We are trying to "see what we can do there to help bring confidence back."

There's a fresh record high for Bitcoin as it soars past $1,800, only two days after breaking the $1,700 level. Drivers? Japan recently legalized the cryptocurrency as a payment method, and Russia is looking to do the same. This week, Minneapolis Fed President Neel Kashkari also talked up the potential of blockchain - the technology that underpins Bitcoin.

In an effort to regain its core customers, McDonald's (NYSE:MCD) wants its franchisees to help change everything, from the way customers order food to how employees provide service. The "unprecedented" initiative, called "Experience of the Future," will see McDonald's pony up a big chunk of the money for upgrades that can cost anywhere from $150K to $700K per location.

South Korea's transport ministry has issued its first compulsory recall, ordering Hyundai (OTC:HYMLF) and Kia (OTC:KIMTF) to recall 240,000 vehicles after a tip-off from a whistleblower. It's also investigating whether or not the automakers allegedly covered up the five flaws, which affect 12 models, including the Elantra, Sonata, Santa Fe and Genesis.

Uber's bid to shift its litigation with Waymo (GOOG, GOOGL) to arbitration has been rejected in court, in a win for Alphabet's self-driving car unit. UBER had pressed to move the case - a dispute centering on former Google engineer Anthony Levandowski, who left the company and sold his self-driving truck start-up to Uber shortly thereafter - behind closed doors.

More Dieselgate fallout... A federal judge has approved a roughly $1.2B payment by Volkswagen (OTCPK:VLKAY) for buybacks and repairs to U.S. diesel owners that weren't included in a first larger settlement. VW has made a string of settlements tied to the emissions cheating scandal, some of which included increased oversight and reforms on top of monetary penalties.

Thursday's Key Earnings

Nordstrom (NYSE:JWN) -4.1% AH on falling comps.
Macy's (NYSE:M) -17% as weak sales continued.
Teva (NYSE:TEVA) +2% with plans to offload assets.

Today's Markets

In Asia, Japan -0.4%. Hong Kong +0.1%. China +0.7%. India -0.2%.
In Europe, at midday, London +0.1%. Paris flat. Frankfurt +0.1%.
Futures at 6:20, Dow -0.2%. S&P -0.3%. Nasdaq -0.2%. Crude -0.2% to $47.76. Gold +0.4% to $1228.60.
Ten-year Treasury Yield -2 bps to 2.37%

Today's Economic Calendar

8:30 Consumer Price Index
8:30 Retail Sales
9:00 Fed's Evans: Monetary Policy
10:00 Business Inventories
10:00 Consumer Sentiment
12:30 PM Fed's Harker: Economic Outlook
1:00 PM Baker-Hughes Rig Count

 

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