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Author: skywalker   |   Latest post: Mon, 20 Aug 2018, 11:31 AM

 

Wall Street Breakfast: Fed Day Comes Round Again

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With the Fed set to hike its benchmark interest rate for a second time this year, the focus today will turn to Chairman Jerome Powell's press conference. New projections could show the central bank tilting toward four increases in 2018, rather than the three hinted to in March. Investors may also render a "hawkish" view if the Fed sounds more optimistic on the economy, raises its interest rate forecast, or announces that Powell will hold press conferences after every meeting.

Economy

"[Crude] prices are unlikely to increase as sharply as they did from mid-2017 onwards and thus the dampening effect on demand will be reduced," according to the IEA's latest monthly report. Laying out its first forecast for 2019, the agency expects demand to grow by 1.4M barrels a day, on par with this year, but "potential losses from Venezuela and Iran could require others to produce more."

In North Carolina, Nevada and half a dozen other states, miners are working to revive the U.S. lithium industry, once the world’s largest until it fell off in the 1990s. According to Reuters, Piedmont Lithium (NASDAQ:PLLL), Albemarle (NYSE:ALB) and Lithium Americas (OTC:LAC) all see opportunity amid a surging EV market and increased battery demand. The U.S. produced only about 2% of the world's lithium last year, but has around 13% of the world's identified resources.

Theresa May has narrowly avoided defeat over the EU withdrawal bill after Conservative rebels accepted significant concessions from the government on the "meaningful vote" when it returns to the House of Lords next week. Separately, British consumer price inflation unexpectedly held at a one-year low of 2.4% in May, suggesting an interest rate hike may be on the way when the BoE meets in August.

Greece has agreed to recognize its northern neighbor under a new name, the Republic of North Macedonia, ending a long-running dispute that opens the way for the Balkan nation's membership in the EU and NATO. Greece's parliament is also preparing for a fast-tracked debate on a wide package of reforms, before a draft bill vote tomorrow that would unlock final bailout funds.

A controversial plan to split California into three new states has garnered enough signatures to qualify for the Nov. 6 ballot. The longshot proposal would create a new jurisdiction centered around Los Angeles and two others divvying up the counties to the north and south. It would be the first division of an existing U.S. state since the creation of West Virginia in 1863.

The Seattle City Council has repealed a newly enacted "head tax" on the city's largest companies in the face of opposition from Big Business like Amazon (NASDAQ:AMZN) and Starbucks (NASDAQ:SBUX). The measure would have levied a tax of roughly $0.14 per employee per hour worked within the city, with the revenues earmarked for affordable housing and homeless services.

Stocks

It's legal! U.S. District Court Judge Richard Leon has approved AT&T's (NYSE:T) $85.4B purchase of Time Warner (NYSE:TWX) without conditions, giving the pay-TV provider ownership of cable channels HBO and CNN, as well as film studio Warner Bros. The outcome could spur a wave of deals in the telecom and media industries, as well as clear the way for future vertical mergers. T -2%; TWX +4.7% premarket.

Following a $1B settlement with the U.S. government, ZTE (OTC:ZTCOY) fell around 40% in Hong Kong overnight after its shares resumed trading there and in Shenzhen. The Chinese telecom equipment maker will also have to put $400M in escrow, replace its entire board of directors (and the board of subsidiary ZTE Kangxun), and create a compliance committee.

Ahead of today's tech roundtable at 10 Downing Street, Salesforce (NYSE:CRM) announced it will be investing $2.5B in the U.K. over the next five years. The news will be welcomed by Theresa May, who is currently contending with a government split over Brexit and tech firms that have long been lobbying for clarity on the departure from the EU.

Rumor had it that Qualcomm was exploring whether to sell or shut down its server chip unit, but President Cristiano Amon has denied the reports. "We are not looking at strategic options. We are still focused on it," he told Reuters. Qualcomm's (NASDAQ:QCOM) push to enter the data center market puts it in direct competition with Intel (NASDAQ:INTC), which now draws half of its revenue from servers and other "data centric" chips.

Demand for Dutch fintech firm Adyen (ADYEN) saw shares surge over 100% at the market open in Amsterdam, in what was one of Europe's biggest technology IPOs in recent times. The stock hit a high of €503.9, giving the company a valuation of €14.8B. Adyen is a payments processing firm that works with customers including Netflix (NASDAQ:NFLX), Facebook (NASDAQ:FB) and Spotify (NYSE:SPOT), but also sells point of sale systems for physical stores.

It's the largest-ever investment by a carmaker in the global ride-hailing sector. Toyota (NYSE:TM) is pouring $1B into Southeast Asia's Grab (GRAB) as CEO Akio Toyoda attempts to ward off risks from self-driving and shared vehicles. The company will also install driving recorder devices in some Grab taxis to analyze driving patterns and develop automotive services.

Tesla is slashing 9% of its 46,000-person workforce as it seeks to reduce costs, become profitable and simplify its management structure. "These cuts were almost entirely made from our salaried population and no production associates were included," CEO Elon Musk declared, adding that it won't affect Tesla's (NASDAQ:TSLA) "ability to reach Model 3 production targets in the coming months."

Soccer lovers across the globe are waiting for the World Cup to kick off tomorrow in Moscow, but many North American fans are looking forward to today almost as much. FIFA is expected to award hosting rights for the 2026 tournament, which will decide between Morocco and a joint bid from Canada, Mexico and the U.S. The World Cup could boost Twitter (NYSE:TWTR) due to its history streaming sports, according to JPMorgan, which raised the stock's price target by another 16% to $50. Others that could benefit: FOXA, CMCSA, T, FB, DPZ, BUD, MGM, LVS, NKE, OTCQX:ADDYY

Today's Markets

In Asia, Japan +0.4%. Hong Kong -1.2%. China -1%. India +0.1%.
In Europe, at midday, London +0.5%. Paris +0.3%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq +0.3%. Crude -0.2% to $66.26. Gold -0.1% to $1298.30. Bitcoin -1.6% to $6443.
Ten-year Treasury Yield flat at 2.95%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Producer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:00 PM FOMC Forecast
2:00 PM Chairman Press Conference

 

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