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

 

Wall Street Breakfast: Black Friday In Full Swing

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The biggest shopping weekend of the year is here and 69% of Americans - an estimated 164M people - are planning to shop or are considering shopping during the holiday, according to the National Retail Federation. From a stock market perspective, history suggests this is a very good time for retail stocks. Since 2007, the week before Black Friday to a week after, the sector usually gains 5%.

Economy

U.S. crude is back at two-year highs, with futures up 1.1% to $58.65/bbl, following the partial shutdown of Keystone XL and ahead of a likely output cut extension next week by OPEC and a group of other producers. In a sign of a tightening market, both WTI and Brent benchmarks are in backwardation, where spot prices are higher than those for future delivery, making it unattractive for traders to store oil for later sale.

Britain's parliament will debate a Brexit withdrawal bill on Dec. 4, and on a further four days in the month, according to Andrea Leadsom, leader of the House of Commons. The measure aims to sever political, financial and legal ties with the bloc and "copy and paste" many European rules and regulations into British law following Brexit.

Meanwhile, the Irish government is on the verge of collapse over a police scandal, ahead of an EU summit in which it will have an effective veto on whether Brexit talks progress. "This is... dangerous politically at a time when the country does not need an election," said Foreign Minister Simon Coveney, in an apparent reference to the summit on Dec. 14-15.

"The message from the latest eurozone PMI is clear: Business is booming," said Chris Williamson, chief business economist at IHS Markit. A survey covering both the services and manufacturing industries, a.k.a. the composite flash PMI, jumped to 57.5 this month, its highest since April 2011. "We thought we had reached a peak a few months ago, so this is a surprise."

Chinese equities saw heavy losses yesterday following new liquidity rules in the country. Authorities have also introduced other measures, such as restrictions in loans to the shadow banking sector, and there is a general view that China is stepping up the deleveraging of its domestic economy. Shanghai dropped 2.3%, while Shenzhen closed down 2.9%.

Strength in Singapore's manufacturing sector led the economy to expand at a faster pace than forecast in the three months to the end of September, with GDP growth hitting a three-year high at 5.2%. That was above an initial government forecast of 4.6% growth released on Oct. 13, and higher than the 5% growth expected by economists.

Zimbabwe's stock market has now shed $6B, while its main index has slumped 40% since last Wednesday, when the military seized power leading to the fall of Robert Mugabe. New leader Emmerson Mnangagwa said he wants to grow the economy, create jobs and re-engage the international community after facing isolation since 1999, when the country defaulted on its debt to the IMF.

Stocks

U.S. shoppers splurged more than $1.52B online by Thanksgiving evening, and more bargain hunters turned up at stores as they opened their doors early on the eve of Black Friday. According to Adobe, which tracks 80% of online transactions at the top 100 U.S. retailers, consumer spending rose 16.8% Y/Y until 5 p.m. ET. Shopper appetite has improved this year due to a stronger labor market, rising home prices and stocks at record highs.

Threatening to disrupt one of the busiest shopping days of the year, employees at Amazon's (NASDAQ:AMZN) main distribution hub in Italy are planning to strike for the first time today and are also walking out at six warehouses in Germany. Besides the Black Friday disruption, workers have decided not to do any overtime until Dec. 31, citing a dispute over pay, bonuses and conditions.

Hours after nearly 3M customers were unable to watch the Chargers-Cowboys Thanksgiving NFL game, Dish Network (NASDAQ:DISH) reached a multi-year carriage agreement with CBS. Terms of the deal that ended the three-day blackout across 26 states, a common occurrence of late between networks and cable/satellite operators, were not disclosed.

New Teva CEO Kare Schultz plans to fire as much as 25% of the company's Israeli workforce, according to the Calcalist, and will begin dismissals in the coming days. Michael Hayden, head of global research and development, is also expected to leave the drugmaker, along with 20% of Teva's staff worldwide. TEVA shares rose 4.6% in Tel Aviv yesterday on the news.

Matthew Westerman, the high-profile dealmaker brought in to overhaul HSBC's investment banking arm, is leaving less than two years after he was recruited from Goldman Sachs (NYSE:GS). Sources attributed the move to his brash management style. Robin Phillips, who was in charge of global banking when Westerman joined and worked alongside him, will continue running the unit.

Ant Financial has banned consumer loans with annual interest rates above 24% from its Alipay platform. It will continue to monitor and remove noncompliant businesses and has asked all to conduct self-checks by Nov. 30. The move by the Alibaba (NYSE:BABA) affiliate comes after the Chinese government took steps this week to tighten supervision of online lending.

Saudi Arabia has agreed to buy about $7B worth of precision-guided munitions from Raytheon (NYSE:RTN) and Boeing (NYSE:BA), Reuters reports, as part of a mega weapons agreement that coincided with President Trump's visit to the country in May. The deal comes as Saudi Arabia's Crown Prince called the Supreme Leader of Iran "the new Hitler of the Middle East" in an interview with the NYT.

The world's largest lithium-ion battery, which is being built in South Australia by Tesla (NASDAQ:TSLA), is about to enter final testing. The 100MW Powerpack system is expected to provide power to the state from Dec. 1 following regulatory approval. Elon Musk previously said that if he didn't get the project done in 100 days, he'd foot the bill, which could have been up to $50M.

With settlers arriving to Mars as soon as 2024, Budweiser (NYSE:BUD) has moved forward toward its goal of brewing beer on the Red Planet, announcing plans to study barley - a key ingredient - on the International Space Station. Budweiser will initiate two experiments via SpaceX's (Private:SPACE) upcoming cargo supply mission, which will depart from the Cape Canaveral on Dec. 4.

Self-driving vehicles belonging to Baidu (NASDAQ:BIDU) have been spotted on the streets of northern Beijing, in what appear to be the first public road tests of fully autonomous vehicles in China. While the country hopes to roll out self-driving regulations by February 2018, Baidu appears to be testing in a legal grey area - the vehicles have drivers in them but they aren't driving.

Global regulators are in contact with UBER about its massive data breach that saw data stolen from 57M riders and drivers. The ride-hailing service could face punishments in several key markets, which could include fines. It's also trying to complete a fundraising round with SoftBank (OTCPK:SFTBY), but some are now questioning whether the Japanese conglomerate will try to alter the price of the deal.

As Uber deals with its troubles, rival LYFT is raising an additional $500M in funding, according to a share authorization document filed in Delaware. The additional funding round, led by Alphabet's CapitalG (GOOG, GOOGL), is an extension of the $1B round announced in October, which boosted Lyft's valuation from $7.5B to $11B.

Unilever has begun working with executive search firm Egon Zehnder to help identify a successor to CEO Paul Polman, who is expected to step down in about 18 months. Possible internal candidates could include Unilever (UL, UN) finance director Graeme Pitkethly, although an extensive international search is likely to be carried out, Sky News reports.

eBay Australia and New Zealand managing director Tim MacKinnon has commented on competition as Amazon (AMZN) launched its operations Down Under. "Where you get players that try to use the data they get and then decide to go and retail those items themselves, that's where it becomes a little unfair. We will be watching that carefully." EBAY opened for business in Australia in 1999.

Today's Markets

In Asia, Japan +0.1%. Hong Kong +0.5%. China +0.1%. India +0.3%.
In Europe, at midday, London flat. Paris +0.8%. Frankfurt +0.7%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq +0.1%. Crude +1.1% to $58.65. Gold -0.4% to $1287.70. Bitcoin +3% to $8238.
Ten-year Treasury Yield

Today's Economic Calendar

9:45 PMI Composite Flash
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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