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

 

Wall Street Breakfast: ECB, Debt Ceiling, Irma

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The ECB will make its latest policy decision today as investors wait to hear the thoughts of Mario Draghi. While he's expected to lay the groundwork regarding the central bank's stimulus program, most investors believe he will hold off until October to make any major announcements. The euro is making gains ahead of the event, and has soared 13% this year, marking the strongest performance among major currencies.

Economy

Miami is preparing for its largest evacuation in more than a decade as Hurricane Irma threatens to turn into the most expensive storm in U.S. history. U.S. orange juice and sugar futures are rallying on the news, as well as home improvement retailers like Home Depot (NYSE:HD) and Lowe's (NYSE:LOW), while insurers including Progressive (NYSE:PGR) and Allstate (NYSE:ALL) have stopped issuing policies in some Florida counties. U.S. airlines have meanwhile capped ticket prices for evacuees, and insurers are bracing for sharp losses from the Category 5 destruction.

U.S. stock index futures are mixed, following gains in the previous session, which came as a result of President Trump agreeing with Democrats to keep the government operating and raise the U.S. debt ceiling. The Dow saw its fifth positive session in six, the S&P saw its seventh positive session in eight and the Nasdaq saw its eighth positive session in nine. The proposed extension is tied to a Hurricane Harvey relief package.

If the UN does not put additional sanctions on North Korea, U.S. Treasury Secretary Steve Mnuchin said he has an executive order ready that would impose penalties on any country that trades with Pyongyang. The White House has also temporarily set aside its consideration of terminating the U.S. trade agreement with South Korea, according to senior officials with the Trump administration.

Overambitious? Saudi Arabia is redrafting its main reform plan just over a year after its much-hyped launch, FT reports, stripping out some areas earmarked for change and extending the timeline of other targets. The partial privatization of Saudi Aramco (Private:ARMCO) sits outside the National Transformation Plan, but it's still critical to Crown Prince Mohammed bin Salman's agenda.

Voters in the prosperous Catalonia region will be asked on Oct. 1 if they want to secede from Spain, setting it on a collision course with Madrid, which has vowed to stop the vote. The referendum, approved by the Catalan regional parliament, is in open defiance of the Spanish government as well as the country's judiciary, and has been ruled illegal by the constitutional courts.

President Trump now has more power to chart the course of the Fed after Vice Chair Stanley Fischer announced his decision to step down in mid-October. Meanwhile, the putative front-runner to replace Janet Yellen atop the central bank, Gary Cohn, is unlikely to be nominated for the role, WSJ reports. The cooling followed the chief economic advisor's criticism of Trump's response to Charlottesville.

Stocks

Western Digital is in talks to gain voting rights of just under 16% in Toshiba's (OTCPK:TOSYY) memory chip unit on the assumption that it will be listed in the future, Kyodo news agency reports. Sources told Reuters earlier this week that Western Digital (NYSE:WDC), which jointly invests in Toshiba's key chip plant, offered to instead drop out of a group bidding for the unit to take a stronger position in their JV.

IBM is spending $240M to open a Watson-branded artificial intelligence research lab in collaboration with long-time partner MIT. "AI as a field has been going on for many decades, but it is quite obvious right now it has raised to a level of centrality for every major technology company," said Dario Gil, VP of AI and Quantum at IBM Research.

Sign of the times? Sanofi (NYSE:SNY) has ended its development of two Zika vaccines, citing a decline in new infections and limits on U.S. government funding. The drugmaker had been part of a big push to find new medicines after the mosquito-borne virus spread rapidly in Brazil and elsewhere in the Americas in 2015/16, however, the WHO lifted its public health emergency for the outbreak last November.

Significantly reducing its Obamacare business, Anthem (NYSE:ANTM) will cut in half the number of counties in Kentucky where it sells individual health plans next year. It follows similar decisions in nine out of the 14 states where it offers the coverage, and comes more than two months after the insurer filed proposed rates for health plans in 2018.

The U.S. Transportation Department has told United Continental (NYSE:UAL) it will not face fines for dragging a 69-year-old passenger, David Dao, from a flight after he refused to give up his seat to make room for a crew member. House and Senate bills are now under consideration for new passenger protections and banning the practice of bumping boarded airline passengers.

Toys "R" Us has hired a law firm to help restructure its roughly $400M in debt due in 2018, a move that could include the marquee toy store filing for bankruptcy protection, sources told CNBC. The development will be closely watched by toymakers Hasbro (NASDAQ:HAS) and Mattel (NASDAQ:MAT) with the holiday season a few months away.

Hoping to jolt Procter & Gamble (NYSE:PG) shares, Nelson Peltz's Trian Partners has released its long-awaited plans to streamline and rejuvenate the consumer goods giant. According to the 93-page white paper, the company's operations would be divided into beauty, grooming and healthcare; fabric and home care; and baby, feminine and family care. Shareholders will also vote on Oct. 10 on whether to add Peltz to the board.

Facebook has turned over information about U.S. election ads to investigators probing Russian meddling in American politics. It found that an operation likely based in Russia spent $100,000 on political ads with what it called "divisive social and political messages." Facebook (NASDAQ:FB) further said that thousands of ads and hundreds of fake accounts were active around the U.S. presidential campaign.

Russia may resolve a tax dispute with Exxon Mobil (NYSE:XOM) over the Sakhalin-1 oil and gas project in September, according to Energy Minister Alexander Novak. The company, which is the operator of the facility and works in partnership with Rosneft (OTCPK:RNFTF), is demanding that Russian authorities reimburse part of its overpaid profit tax for the last six years for the sum of $500M.

ABB is planning to expand its U.S. industrial robot factory in Michigan, which delivered its first bot in March, as it counts on continued demand growth for the machines from automakers and other sectors. CEO Ulrich Spiesshofer made the comments in an interview with Reuters, but declined to comment on reports that ABB is weighing the purchase of GE's industrial solutions business.

Speaking of robots, Deere (NYSE:DE) is bringing them to the farm with the acquisition of Blue River Technology for $305M. The startup makes "see-and-spray" robots that affix to tractors. They use computer vision to identify plants in the field in need of fertilizer, pesticides or other costly "inputs" used to manage crops.

Today's Markets

In Asia, Japan +0.2%. Hong Kong -0.3%. China -0.6%. India flat.
In Europe, at midday, London +0.5%. Paris +0.9%. Frankfurt +1%.
Futures at 6:20, Dow -0.2%. S&P flat. Nasdaq +0.2%. Crude -0.4% to $48.97. Gold +0.4% to $1344.10.
Ten-year Treasury Yield -2 bps to 2.08%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Productivity and Costs
9:45 Bloomberg Consumer Comfort Index
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
12:15 PM Fed's Mester: Monetary Policy and Economic Outlook
7:00 PM Fed's Bostic Speech
7:00 PM Fed's Dudley: Economic Outlook and Monetary Policy
7:00 PM Fed's George: Economic Outlook

 

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