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Author: skywalker   |   Latest post: Wed, 18 Jul 2018, 07:33 AM

 

Wall Street Breakfast: Trade War Fears Rattle Investors

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Equity markets are under pressure amid news that President Trump will sign a memorandum this afternoon "targeting China's economic aggression." Tariffs on Chinese imports worth as much as up to $60B could be unveiled, stoking fears of a global trade war. According to several sources, China is already preparing to retaliate with tariffs of their own focused on U.S. exports of soybeans, sorghum and live hogs.

Economy

"The U.S. stands ready to defend our producers that may be harmed by foreign country retaliation, in particular farmers and ranchers who are often the first to be targeted by trade actions," according to the USDA. Besides China, more worries could be on the horizon if the Trump administration pulls out of NAFTA. Mexico and Canada together represent nearly one-third of total U.S. agricultural exports.

Congressional leaders reached reached an agreement last night on a spending bill that would fund the government until October, which must pass by Friday to avert another shutdown in 2018. The $1.3T measure boosts defense spending by $80B and domestic spending by $63B above limits set in 2011, as well as $1.6B for a border wall with Mexico and $100M for autonomous car research and testing.

The eurozone private sector expanded at the weakest pace in more than a year in March, according to flash data from IHS Markit's composite output index, which dropped to 55.3 from 57.1 in February. Are trade concerns delivering a blow to business and consumer confidence and what will that mean for policymakers at the ECB?

Making decisive steps towards a Brexit transition deal earlier this week, including legal terms of citizens' rights and a financial settlement, the EU and U.K. are set to meet for a two-day summit in Brussels to discuss the last major issue. Analysts at ING believe if a transition agreement is reached on the Irish border, "this will open the door even further to a near-term rate hike from the Bank of England."

Speaking of which... The BoE will release its March monetary policy decision today, just days after U.K. Treasury chief Philip Hammond presented new forecasts showing U.K. economic growth should be modestly higher in 2018. The central bank is expected to keep its main interest rate unchanged, but investors will be looking for signs of an upcoming hike to keep a lid on inflation.

Stocks

"This was a major breach of trust... and I'm really sorry that this happened," Facebook's (NASDAQ:FB) Mark Zuckerberg told CNN with regards to the Cambridge Analytica data scandal. Will he testify before Congress? "What we try to do is send the person at Facebook who will have the most knowledge. I am happy to go." "I'm not sure we shouldn't be regulated," he continued. "There are things like ad transparency regulation that I would love to see."

Amid heightened scrutiny on Chinese tech firms, Best Buy (NYSE:BBY) will reportedly cut ties with Huawei, ending sales of its smartphones in its stores. The move comes several weeks after AT&T (NYSE:T) and Verizon (NYSE:VZ) were said to have ditched Huawei phones under pressure from the U.S. government, which is concerned that company might use its devices to spy on behalf of China.

Facing growing pressure to limit the promotion of firearms, YouTube (GOOG, GOOGL) is banning videos relating to the sale or assembly of guns and certain accessories. Instructions on upgrading firearms to automatic or simulated automatic firing will also be outlawed. In other company news, Google is reportedly working on blockchain-related technology for its cloud business.

Add another company to Blackberry's (NYSE:BB) roster of automaker partners. The tech firm will license its car infotainment and security software to Jaguar's (NYSE:TTM) next-generation EVs as it seeks to expand its QNX operating platform. Though car software is still a relatively small part of BlackBerry's business, it's becoming an important growth area after jettisoning its smartphone unit.

Tesla shareholders have approved a mighty 10-year pay package for their CEO by a 73% majority of votes, excluding shares owned by Elon Musk and his brother Kimbal Musk, a director of the company. Although nominally valued at $2.6B in stock options, the pay package could generate $55B or more for Musk if Tesla (NASDAQ:TSLA) hits a series of aggressive financial goals.

GlaxoSmithKline is the frontrunner to win the race for the consumer healthcare business of Pfizer (NYSE:PFE) after Reckitt Benckiser (OTCPK:RBGLY) pulled its bid stating it "did not fit our acquisition criteria." Pfizer hopes to secure as much as $20B for the unit, which sells branded over-the-counter brands like Advil, Centrum and Chapstick. For Glaxo (NYSE:GSK), a deal would be the boldest move to date for new CEO Emma Walmsley.

Sign of the times? Meredith (NYSE:MDP) has confirmed it will "explore the sale of the Time, Sports Illustrated, Fortune, and Money brands" following a portfolio review. About 200 employees have been notified about their termination and 1,000 more positions will be eliminated over the next 10 months. Meredith acquired Time last year for $2.8B.

Chevron supports scientific conclusions that humans are causing climate change, according to an attorney for the company, but the scientific consensus did not fully form until the past decade. The statement was in response to a lawsuit that accuses five major energy producers - Chevron (CVX, Exxon (NYSE:XOM), ConocoPhillips (NYSE:COP), Shell (RDS.A, RDS.B) and BP - of misleading the public for years about their role in global warming.

Wednesday's Key Earnings

General Mills (NYSE:GIS) -8.9% after guiding below consensus.

Today's Markets

In Asia, Japan +1%. Hong Kong -1.1%. China -0.5%. India +0.4%.
In Europe, at midday, London -0.8%. Paris -1.1%. Frankfurt -1.2%.
Futures at 6:20, Dow -0.8%. S&P -0.8%. Nasdaq -1.2%. Crude -0.5% to $64.83. Gold +0.6% to $1329.80. Bitcoin -1.7% to $8742.
Ten-year Treasury Yield -5 bps to 2.85%

Today's Economic Calendar

8:30 Initial Jobless Claims
9:00 FHFA House Price Index
9:45 PMI Composite Flash
9:45 Bloomberg Consumer Comfort Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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