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Author: skywalker   |   Latest post: Thu, 18 Jan 2018, 09:11 AM

 

Wall Street Breakfast: The Bond Market Is Growling

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Concerns have been emanating from the bond markets as the benchmark 10-year U.S. Treasury dipped further overnight, with yields rising as much as 5 bps to 2.6%. Many well-known investors have warned that this could be signaling a new era for fixed income, with bond guru Bill Gross saying a "bond bear market is finally upon us after more than 25 years." There's also speculation the BOJ could start to withdraw its stimulus after tapering its bond purchases this week.

Economy

President Trump will attend the World Economic Forum in Davos later this month, Press Secretary Sarah Huckabee Sanders confirmed, stating he will use the platform to talk about his "America First" agenda. It comes against the backdrop of this year's WEF theme "Creating a Shared Future in a Fractured World." Trump will be the first U.S. leader to attend the summit since Bill Clinton in 2000.

The week of Fedspeak continues today following the last minutes from the FOMC, which showed the central bank had not factored in the economic effect of a U.S. tax overhaul on monetary policy forecasts. Fed Presidents Charles Evans and Robert Kaplan will take the podium this morning, while James Bullard will give a presentation on the "U.S. economy and monetary policy" later this afternoon.

A federal judge in San Francisco has temporarily barred the Trump administration from scrapping the DACA immigrant program. "This would tear authorized workers from our nation's economy... not to mention paying taxes to support our nation," wrote U.S. District Judge William H. Alsup. The ruling capped a day in which President Trump held nearly an hour of negotiations with Democrats and Republicans on immigration.

A tsunami advisory was in effect for Puerto Rico and the U.S. Virgin Islands after a strong earthquake struck the Caribbean yesterday evening, but subsequent model forecasts indicate no threats to those areas. Mother Nature also lashed out at Southern California, causing mudslides and leaving at least 13 people dead from a storm that wreaked havoc from Santa Barbara to Los Angeles counties.

"I think President Trump deserves big credit for bringing about the inter-Korean talks," South Korean President Moon Jae-in said at his New Year's news conference. "It could be a resulting work of the U.S.-led sanctions and pressure." Separately, the U.S. government has approved the sale of Raytheon-made (NYSE:RTN) anti-ballistic missiles to Japan to defend itself against growing threats from North Korea.

Stocks

After shuttering local bitcoin exchanges and banning ICOs, China is moving to eradicate the country's bitcoin mining industry over concerns about excessive electricity consumption and financial risk, FT reports. Another crackdown? The SEC has asked ProShares, as well as Van Eck Associates and First Trust Advisors, to shelve applications for bitcoin-related ETFs, marking a similar rejection issued to the Winklevoss twins last March.

A crypto moment... Shares of Eastman Kodak (NYSE:KODK) more than doubled on Tuesday and are now up another 50% premarket after the company became the latest to jump on the cryptocurrency bandwagon. Kodak is partnering on a blockchain platform for photographers to "democratize" photography. It will also launch an ICO, called "KODAKCoin," on Jan. 31.

Canada's banking regulator is introducing fresh capital rules - with the more risk-sensitive Basel 2 floor, calibrated at 75% - before new global regulations are phased in over a five-year period from 2022. The country's five biggest banks - Royal Bank of Canada (NYSE:RY), TD Bank (NYSE:TD), Bank of Nova Scotia (NYSE:BNS), Bank of Montreal (NYSE:BMO) and Canadian Imperial Bank of Commerce (NYSE:CM) - will be affected by the decision.

After leading the pizza chain for eight years, Domino's (NYSE:DPZ) CEO Patrick Doyle is stepping down in June, and will be replaced by Richard Allison, currently president of international business. Doyle presided over a turnaround that improved the taste of the company’s namesake product, invested in online ordering and fueled explosive share gains. He's also seen by some industry experts as a potential candidate for the CEO job at Chipotle (NYSE:CMG).

Alabama will be the site of a new $1.6B Toyota (NYSE:TM) and Mazda (OTCPK:MZDAY) assembly plant that's expected to employ about 4,000 workers and make about 300,000 vehicles a year, sources told CNBC. It's a victory for President Trump who had prodded manufacturers to build new U.S. facilities and threatened tariffs on foreign production.

Confirming earlier reports, the Renault-Nissan-Mitsubishi Alliance (OTCPK:RNLSY, OTCPK:NSANY, OTC:MMTOY) is creating one of the largest automotive venture-capital funds. It will commit $200M annually over five years - for a total of $1B - to a variety of startup technologies, including battery and self-driving efforts. The spending comes on top of the €8.5B annually the alliance invests in research and development.

China will finalize orders for 184 Airbus (OTCPK:EADSY) A320 aircraft soon, French President Emmanuel Macron said after talks with Xi Jinping. China, which purchases its jets collectively before distributing them to various carriers, now accounts for almost a quarter of the European planemaker's deliveries. The nation also pledged to respect share parity on orders between Airbus and Boeing (NYSE:BA).

Sony's new pet dog "Aibo," goes on sale in Japan tomorrow, but it's just the beginning of the company's return to robotics, Sony (NYSE:SNE) CEO Kazuo Hirai told Bloomberg TV. "The technology we incorporated into Aibo - A.I., robotics, and that combination - in different form-factors can manifest itself in other robots that can be a part of transportation, education and healthcare."

Manufacturing of premium solar roof tiles started last month at Tesla's (NASDAQ:TSLA) Buffalo facility and the company has started surveying the homes of customers who made a $1,000 deposit for a reservation. Tesla had announced the product could be rolled out as soon as the summer of 2017, but in November Elon Musk said the product was going through a six-month testing process.

Citing a "heavy reliance on tourism," Florida won't be included under the Trump administration's plan to expand offshore drilling across most U.S. coastal waters. The exemption may leave the door open for other governors to seek similar prohibitions for their states. Separately, the EPA said it will replace the Obama-era Clean Power Plan and open up a national debate on climate change in 2018.

Today's Markets

In Asia, Japan -0.3%. Hong Kong +0.2%. China +0.2%. India flat.
In Europe, at midday, London flat. Paris -0.4%. Frankfurt -0.9%.
Futures at 6:20, Dow -0.5%. S&P -0.4%. Nasdaq -0.5%. Crude +0.9% to $63.55. Gold +0.9% to $1326. Bitcoin -2.8% to $14032.
Ten-year Treasury Yield +5 bps to 2.6%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Import/Export Prices
9:00 Fed's Evans: Monetary Policy
10:00 Atlanta Fed's Business Inflation Expectations
10:00 Wholesale Trade
10:30 EIA Petroleum Inventories
1:00 PM Results of $20B, 10-Year Note Auction
1:30 PM Fed's Bullard: U.S. Monetary and Economic Policy

 

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