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

 

Wall Street Breakfast: A Nervous Market Eyes Mounting U.S.-China Trade Tensions

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U.S. market futures are in the red amid escalating trade tensions between the U.S. and China. The Trump administration has imposed another $50B worth of 25% tariffs on China imports, to which China has responded with 25% tariffs on another 106 American products. The newest U.S. tariffs will impact some 1,300 Chinese products, including medical devices, batteries and machine tools, as well as some consumer products like television sets. They “would target products that benefit from China’s industrial plans while minimizing the impact on the U.S. economy,” said the office of the U.S. trade representative, Robert Lighthizer. China's latest tariffs, designed to affect up to $50B worth of goods annually, will hit such U.S. products as cars, whisky and soybeans. The moves follow China’s Monday retaliatory tariffs on $3B worth of U.S. imports to its country, which themselves were a response to the White House's opening salvo of tariffs on Chinese aluminum and steel.

Economy

In a sign that inflation pressures are easing in the U.K., shop prices in the country fell 1% year over year in March - their fastest retreat since February of last year - per the British Retail Consortium. The price drop was "driven by a substantial slowdown in food inflation, which reached its lowest rate for a year," said BRC Chief Executive Helen Dickinson.

India is rushing to complete its ambitious infrastructure plan before the next elections, and is spending a record $18B this year to build highways and improve roads across the nation. With elections a year away, Prime Minister Narendra Modi and his administration are increasing government spending and had promised 10M new jobs a year to accelerate economic growth.

Japan's services sector stayed on the positive side of the ledger but just barely, as it registered its limpest growth in 17 months. The headline Business Activity Index in the Markit/Nikkei Japan Services PMI came in at 50.9 for March, down from 51.7 in the prior month; the 50 level demarcates the line between growth and decline.

Stocks

Swiss Re, still in strategic discussions with Japan's SoftBank (OTCPK:SFTBY), says any minority investment SoftBank takes in Swiss Re (OTCPK:SSREY, OTCPK:SSREF) is not anticipated to breach 10%. The reinsurance giant says the ongoing talks - which it emphasizes are at an early stage - are also "exploring areas of potential strategic cooperation" with SoftBank.

India's Mint newspaper reports that Amazon (NASDAQ:AMZN) may offer to acquire Indian e-commerce firm Flipkart (Private:FPKT), according to two anonymous sources. The bid would rival overtures by Walmart (NYSE:WMT), which already is in advanced talks for a 55% purchase of the company in a deal that could imply a $21 billion valuation for Flipkart. The sources believe the Walmart deal is the more likely of the two.

Enbridge is denying conflict of interest claims following a New York Times report that the head of the U.S. Environmental Protection Agency had been paying just $50/day for a Washington, D.C., property linked to the chairman of a lobbying firm that represents the Canadian company. The New York Times reported that EPA head Scott Pruitt had been renting a condominium from the wife of the chairman of Williams & Jensen at around the time the agency approved Enbridge’s (NYSE:ENB) controversial Line 67 replacement project.

Southwest Airlines is considering an order for “more than a handful” of Boeing's (NYSE:BA) 737 Max aircraft, says Southwest (NYSE:LUV) CEO Gary Kelly, as the carrier benefits from lower tax rates and expanding travel demand. LUV - the largest operator of Boeing 737s - has 227 unfilled orders for the Max, according to Boeing’s website; the carrier, which was the launch customer for the upgraded 737, has taken deliveries of 13 of the aircraft so far.

The European Union is poised to settle its seven-year-old antitrust case against Gazprom (OTCPK:OGZPY) after the Russian state-owned gas company agreed to price reforms and to allow rivals to gain a foothold in eastern Europe, Reuters reports. A settlement, which would allow Gazprom to avoid a possible fine of as much as 10% of its global turnover, could come as early as this month, although the timing could still slip, according to the report.

Facebook saw its price target trimmed by Deutsche Bank, now "less optimistic" that changes to the social network's ad targeting will have a minimal impact on revenues. DB is staying at a Buy rating for Facebook (NASDAQ:FB) but cut its target to $200 from $235, which still implies 28% upside from current pricing (which has taken a 16% hit over the past two weeks).

Ad giant WPP - under pressure both from clients and rivals amid lackluster performance - is probing potential misuse of assets and personal misconduct by its CEO Martin Sorrell, the Wall Street Journal reports. The WPP (NYSE:WPP) board has hired a law firm to look into some issues. Sorrell himself sits on the board.

India-based Jet Airways has disclosed an agreement to buy 75 Boeing (BA) 737 MAX narrowbody jets from the aerospace name. The jets are listed at $8.8B, though the dollar amount of the agreement was not disclosed.

Tuesday's Key Earnings

Cloudera (NYSE:CLDR) -29% AH after Q4 beats, mixed guidance.
Dave & Buster's Entertainment (NASDAQ:PLAY) -6.4% AH on below consensus guidance.
Aehr Test Systems (NASDAQ:AEHR) +6.2% AH on Q4 earnings beat.

Today's Markets

In Asia, Japan +0.13%. Hong Kong -2.19%. China -0.18%. India -1.14%.
In Europe, at midday, London -0.43%. Paris -0.61%. Frankfurt -1.28%.
Futures at 6:20, Dow -1.77%. S&P -1.36%. Nasdaq -1.79%. Crude -1.86% to $62.33. Gold +0.77% to $1,347.90. Bitcoin -4.05% to $7,060.
Ten-year Treasury Yield -2 bps to 2.763%.

Today's Economic Calendar
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
10:00 Factory Orders
10:30 EIA Petroleum Inventories

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