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Wall Street Articles

Author: skywalker   |   Latest post: Fri, 14 Jun 2019, 11:44 AM

 

Wall Street Breakfast: IPO Market On Fire

Author: skywalker   |  Publish date: Fri, 14 Jun 2019, 11:44 AM


2019 has seen the hottest IPO activity in years as investors bet on extremely fast growth and large markets opportunities. Adding on to the 100%-400% gains seen by Beyond Meat (NASDAQ:BYND), Zoom (OTC:ZOOM), PagerDuty (NYSE:PD) and CrowdStrike (OTC:CRWD) following their listings, Fiverr (NYSE:FVRR) closed its first day up 90% on Thursday, while pet e-tailer Chewy (CHWY) upsized its IPO ahead of today's debut. There have been some disappointments as well, like ride-hailing giants Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT), but the Renaissance Capital IPO ETF (NYSEARCA:IPO), a basket of the 60 or so most recent large IPOs, is up 34% this year, more than twice the performance of the S&P 500.

Futures lower

Apparently reacting to economic data out of China, U.S. stock index futures have turned lower on the final trading day of the week, with DJIA and S&P 500 futures down 0.3%, while Broadcom's (NASDAQ:AVGO) forecast (see below) threw the Nasdaq off by 0.8%. China's industrial output growth slowed to a more than 17-year low of 5% in May, well below expectations, weighing on stocks across the globe as trade pressures pose concerns for the world economy. U.S. data also looms, with traders looking out for upcoming retail sales and industrial production data for May, as well as the consumer sentiment index for June.

Chipmakers stumble

Semis are feeling the heat after Broadcom (AVGO) cut its annual sales outlook, saying it would make $2B less than it expected following the U.S. ban on exports to Chinese telecom giant Huawei. The stock slumped 8.7% in AH trading, dragging many peers down with it, as it became one of the first big chipmakers to quantify the financial impact of the Trump administration's escalating trade dispute. The company may have been overly cautious, however, with broker Piper Jaffray saying Broadcom was "throwing out the entire kitchen with the kitchen sink."

Haven play

Set for its fourth weekly gain, gold overnight jumped as much as 1.2% to $1,359.50, surpassing the key $1,350 level for the first time since April 2018. "When the markets start waxing bearish economic data, it's the global recession they are concerned about, triggered by escalation of trade war," said Stephen Innes of SPI Asset Management. "With geopolitical risk premium ratcheting higher on the back of Middle East tensions and autonomy protest in Hong Kong, gold represents dependable insurance against those mounting geopolitical risks."

IEA cuts oil demand growth forecast

Following yesterday's bearish report from OPEC that trimmed its forecast for world oil demand, the IEA has also slashed its estimates for the second straight month. "Until recently, the focus has been on the supply side with the familiar list of uncertainties - Iran, Venezuela, Libya, and the Vienna Agreement," the agency wrote in its latest monthly report. "Now, the main focus is on oil demand as economic sentiment weakens." Revising down its estimate by 100K barrels, the IEA now expects oil demand growth to reach 1.2M bpd this year, before rebounding to 1.4M bpd in 2020. Crude futures -0.8% to $51.84/bbl.

Pressure on Xi

U.S. economic adviser Larry Kudlow is the latest to warn of consequences if Chinese President Xi Jinping refuses invitations for trade talks, as Beijing hiked anti-dumping duties on certain U.S. and EU-made alloy-steel tubes and pipes. Former PBOC governor Zhou Xiaochuan also issued a warning about a possible yuan devaluation, while the Chinese government has faced much criticism for its response to the mass protests in Hong Kong. If things couldn't get worse, Xi said overnight he would promote steady development ties with Iran "no matter how the situation changes," against the backdrop of yesterday's tanker attacks in the Gulf.

Repairing tarnished image

Reeling from U.S. litigation over claims its glyphosate pesticide causes cancer, Bayer (OTCPK:BAYRY) is investing €5B in weedkiller research and alternatives, while promising to reduce its environmental impact by 30% through 2030. "We listened. We learned," the company said on its website as it battles more than 13,000 lawsuits and billions of dollars in awards. Bayer shares recently tumbled to seven-year lows with a market valuation of $56B, less than the $63B price it paid for Monsanto, whose glyphosate-based weedkiller Roundup has caused it spiraling troubles.

Big backers for FB's crypto

With the likely unveiling of its cryptocurrency next week, Facebook (NASDAQ:FB) has signed up more than a dozen companies in support, including Visa (NYSE:V), Mastercard (NYSE:MA), PayPal (NASDAQ:PYPL) and Uber (UBER), WSJ reports. Each company involved will invest about $10M into a consortium that Facebook has said would manage the currency. Reports last month had Facebook looking to gather about $1B for its "Project Libra" effort, including third-party governance and pegging it to a basket of government-issued currencies for stability.

Foldable trouble

Huawei's foldable phone will likely launch in September, later than it was reportedly set to, as it does extra tests following the debacle Samsung (OTC:SSNLF) went through with its Galaxy Fold. "We don't want to launch a product to destroy our reputation," a Huawei spokesperson confirmed to CNBC. The launch of the 5G-capable Mate X, which starts at around $2,600, is set to give the Chinese tech giant a boost after it was reportedly forced to scrap a planned laptop launch due to its recent placement on a U.S. blacklist.

More IPOs

Volkswagen (OTCPK:VWAGY) aims to raise up to €1.9B by floating a stake of at least 10% in its Traton trucks unit later this month, its second attempt to bring the business to market. The stake size is at the bottom end of a range of 10%-20% that sources had earlier indicated, and would be priced at €27-€33 per share. Amid an electrification push, VW plans to invest the proceeds in transforming its auto business and has also shown interest in U.S.-based truck maker Navistar (NYSE:NAV).

Today's Markets

In Asia, Japan +0.4%. Hong Kong -0.7%. China -1%. India -0.7%.
In Europe, at midday, London -0.6%. Paris -0.4%. Frankfurt -0.8%.
Futures at 6:20, Dow -0.3%. S&P -0.3%. Nasdaq -0.8%. Crude -0.8% to $51.84. Gold +1.1% to $1358.10. Bitcoin +2.4% to $8294.
Ten-year Treasury Yield -3 bps to 2.06%

Today's Economic Calendar
8:30 Retail Sales
9:15 Industrial Production
10:00 Business Inventories
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

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Wall Street Breakfast: Oil Spikes After Tanker Attacks

Author: skywalker   |  Publish date: Thu, 13 Jun 2019, 9:12 PM


For the last few sessions, crude prices have been flashing red as they neared the $50 level, but attacks on two oil tankers off the coast of Iran early Thursday have sparked a sudden turnaround. WTI futures are now ahead by 3% to $52.66/bbl, while Brent contracts jumped 3.4% to $62.03/bbl. Frontline (NYSE:FRO) said one of its vessels, Front Altair, was on fire, while the other ship, the Kokuka Courageous, was damaged but afloat. The incident comes one month after four tankers were sabotaged in the Gulf of Oman off the UAE port of Fujairah, in an attack the U.S. linked to Iran.

Futures rebound

The oil price surge has given a boost to U.S. stock index futures, which were in the red overnight before attacks on two tankers off the coast of Iran. Dow futures are indicating a positive open of 70 points, while futures on the S&P and Nasdaq were 0.4% and 0.8% higher, respectively. Also boosting sentiment: President Trump declined to set a deadline on levying new tariffs on another $325B of Chinese goods, while data yesterday showed the nation's inflation was weaker than expected, boosting chances of a Fed rate cut.

Deficit on watch, or not

The U.S. government racked up a deficit of $208B in May as it received $232B but spent $440B during the month, according to the monthly Treasury statement. That means for the first time in U.S. history, the federal government spent more than $3T in the first eight months of the fiscal year. The deficit's rise follows the 2017 GOP tax act, which the CBO projected would add some $1.9T to the debt over a decade, as well as bipartisan plans to increase spending on both the defense and domestic sides of the ledger.

Second listing for Alibaba

Following its record $25B float in New York in 2014, Alibaba (NYSE:BABA) has filed confidentially for a follow-on listing in Hong Kong, Bloomberg reports. The move, which could raise another $20B, would provide Alibaba with additional capital to fund its new initiatives, like cloud computing and Hema supermarkets. It will also give mainland investors their first direct access to one of China's biggest success stories, via the Stock Connect trading link between Hong Kong, Shanghai and Shenzhen.

Unrest in Hong Kong

The benchmark Hang Seng Index slid as much as 1.5% on Thursday, but closed back at the starting line, as thousands of protesters readied for more clashes with police over a planned extradition law. The one-month Hibor rate hit 2.63%, while three-month Hibor hit 2.56%, surging to their highest level in more than a decade. Analysts also attributed soaring rates to seasonally strong demand for the Hong Kong dollar ahead of upcoming corporate dividend payments and an expected raft of IPOs in the city.

Nord Stream 2

Upping his criticism of Nord Stream 2, which is being led by Gazprom (OTCPK:OGZPY), President Trump said he's looking at sanctions to block the new 760-mile natural gas pipeline that would leave Germany "captive" to Russia. Eastern European, Nordic and Baltic Sea countries see the project as increasing Moscow's economic grip on Europe, but many politicians and energy companies in Germany support it because the country needs steady gas supplies as it seeks to wean itself off of coal and nuclear power.

Another chance for FCA-Renault?

French Finance Minister Bruno Le Maire will meet Renault (OTCPK:RNLSY) Chairman Jean-Dominique Senard, with the latter still furious over the government's interference in what led to the collapse of merger talks with Fiat Chrysler (NYSE:FCAU). Ahead of the meeting, Le Maire said an FCA-Renault merger remains an "interesting opportunity," but added he would tell Senard that strengthening the Renault-Nissan (OTCPK:NSANY) alliance was the priority. The French state is Renault's biggest shareholder.

Latest shot in delivery wars

Target (NYSE:TGT) is bringing its same-day delivery option to the masses, leveraging Shipt, a platform it acquired for $550M in 2017. Instead of a $99 annual membership, shoppers in 47 states across the country will have the option to get online items delivered the same day by paying a flat fee of $9.99 per order. It's the latest move in an ongoing and heated delivery war. Both Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) recently announced next-day delivery options, with Walmart promising to reach roughly 75% of American consumers by the end of 2019.

Next Pokémon GO?

Part of an ongoing push into the video game industry, Netflix (NASDAQ:NFLX) will release a mobile game in 2020 based on hit original series Stranger Things. The game will be in the style of a 1980s Saturday morning cartoon and will integrate Google Maps so players can "explore The Upside Down hidden around them in their daily travels and work with fellow fans to fight back its emerging evils." The company made the announcement at the E3 gaming conference, but made no reference to a rumored expansion into video game streaming.

High economy

Colorado has now generated more than $1B in total state revenue from the marijuana industry, another milestone for the state that legalized cannabis in 2014. "It's going very well... It’s creating tens of thousands of jobs, tax revenue for the state, filling up buildings for landlords and reducing crime," Governor Jared Polis said in May. Pot sales contribute to the state’s general reserve fund, as well as education and health care, including mental health services, and youth drug-prevention programs. Illinois recently became the 11th U.S. state to approve cannabis for recreational adult use.

Wednesday's Key Earnings

Lululemon (NASDAQ:LULU) +5.3% AH on strong comp sales, raising guidance.

Today's Markets

In Asia, Japan -0.6%. Hong Kong flat. China +0.1%. India flat.
In Europe, at midday, London +0.3%. Paris flat. Frankfurt +0.5%.
Futures at 6:20, Dow +0.3%. S&P +0.4%. Nasdaq +0.8%. Crude +3% to $52.66. Gold +0.2% to $1339.50. Bitcoin +1.3% to $8093.
Ten-year Treasury Yield -1 bps to 2.12%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Import/Export Prices
10:30 EIA Natural Gas Inventory
1:00 PM Results of $16B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

 

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Wall Street Breakfast: Protests Roil Hong Kong Markets

Author: skywalker   |  Publish date: Wed, 12 Jun 2019, 10:52 AM


The benchmark Hang Seng Index slid nearly 2% overnight as protests against Hong Kong’s controversial extradition law shut down key parts of the city, with police firing tear gas and rubber bullets to drive away thousands of demonstrators. Financial institutions also scrambled for liquid assets, triggering interbank interest rates in the territory to shoot up across the curve, with the one-month and two-month HIBOR reaching their highest level since late 2008. Hong Kong Chief Executive Carrie Lam argues the legislation is necessary to close a legal loophole that makes the city a refuge to criminals, but opponents say its approval would tear down the legal wall intended to keep Hong Kong's justice system separate from China's.

Winning streak snapped

Market focus is turning back to trade developments after President Trump said he was holding up a trade agreement with China and reiterated his stance that there might be no deal at all. The tough line on trade talks caused U.S. markets yesterday to close back at the starting line, while DJIA futures are now pointing to a 62-point decline at the open. Analysts are also starting to reassess the June market comeback, with some saying it doesn't quite make sense. "This rally is not fundamentally backed. Instead what we are seeing is a bunch of people getting swung around and now they are chasing stocks higher," said Tom Essaye, founder of The Sevens Report.

Adapting to tariffs

Nintendo (OTCPK:NTDOY) is shifting some production of its Switch videogame console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, people who work on Nintendo's supply chain told WSJ. It's not alone. Taiwan's Foxconn (OTC:FXCOF) Technology Group said yesterday that it was ready to move assembly of Apple's (NASDAQ:AAPL) iPhones out of China if necessary, and Japan's Sharp (OTCPK:SHCAY), which is controlled by Foxconn, said last week that it planned to move production of personal computers to Taiwan or Vietnam.

Highlights from Tesla meeting

"It won't be long before we have a 400-mile range car," Tesla (NASDAQ:TSLA) CEO Elon Musk said at the company's annual shareholder meeting, outlining plans to unveil a pickup truck this summer and get into semi production toward the end of 2020. Tesla is also on target to grow its entire "fleet" by 60% to 80% in 2019, he added, saying "it's hard to be profitable with that level of growth" but the company would still be cash-flow positive while growing at that rate. Auto insurance? Tesla will be able to offer policies after completion of an unspecified acquisition, as well as development of additional software.

Brexit leadership

Breaking his relative silence in the race thus far, British ex-foreign minister Boris Johnson will launch his campaign today for the Conservative Party leadership, with investors trying to gauge just how much appetite he has for a no-deal Brexit. His insistence on leaving the EU on Oct. 31, plus a threat to withhold payment of the U.K.'s divorce bill have all raised concerns among party moderates and in business, but they resonate with grass roots Tories who are firmly right-wing and anti-EU. Sterling +0.2% to $1.2743.

Qualcomm antitrust trouble

The FTC has asked District Judge Lucy Koh to deny Qualcomm's (NASDAQ:QCOM) request to delay enforcement of an antitrust ruling handed down in May, announcing that it was in the public interest because an appeal could take years. LG Electronics (OTC:LGEAF) reiterated the view of the FTC, saying it could be forced into signing another unfair deal unless Koh's protections remain in place. On May 28, Qualcomm asked to put the sweeping antitrust decision on hold as it would "radically restructure its business relationships" in ways that would be impossible to reverse if it wins an appeal. QCOM -3.3% premarket.

Mainstream adoption

Crypto exchange Coinbase's (COINB) new Visa (NYSE:V) debit card is launching in six more European countries after debuting in the U.K. in April. Coinbase U.K. CEO Zeeshan Feroz told CNBC in an interview the goal of the card is to make payments with digital currencies as seamless as paying with cash. "You can buy groceries on bitcoin and then coffee on litecoin right after," he added. The card works in stores and online at any merchant that accepts Visa.

Future of Vaca Muerta

Executives from major oil companies are expected to descend today on the southern province of Neuquen, Argentina, for a conference that will discuss the future of Vaca Muerta, a formation that could house one of the biggest reserves of shale gas and oil in the world. Businessmen want to confirm that the next government, which takes office in December, will respect current contracts and keep Vaca Muerta as a strategic resource to help the country become a net energy exporter. ExxonMobil (NYSE:XOM) yesterday proceeded with its Vaca Muerta expansion, detailing a project that's expected to produce as much as 55,000 boe/d within 5 years.

Busy IPO market

Shares in the international unit of China National Tobacco - a state monopoly that accounts for 40% of global cigarette production - jumped as much as 10% in their trading debut in Hong Kong, on a limp day for Asian stocks. Cybersecurity group CrowdStrike (OTC:CRWD), which will begin trading today on the Nasdaq, priced its IPO above its expected price range at $34 per share, raising $612M and valuing the company at $6.8B. A Bloomberg report also suggested that Slack Technologies (WORK) will be valued by investors at $16B-$17B when it lists its shares publicly next week.

No new orders for Boeing

Boeing (NYSE:BA) reported no new commercial aircraft orders in May, marking the second straight month that the planemaker's orders were at a standstill in the face of its 737 Max crisis. May deliveries meanwhile fell 56% Y/Y to 30 planes, as transfers of new 737 MAX jets remained halted. Investors' next focus is the coming week's Paris Air Show, which will determine if the trends will continue. Rival Airbus (OTCPK:EADSY) delivered 81 aircraft in May, up 59% Y/Y.

Today's Markets

In Asia, Japan -0.3%. Hong Kong -1.9%. China -0.6%. India -0.5%.
In Europe, at midday, London -0.6%. Paris -0.6%. Frankfurt -0.4%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.4%. Crude -2.6% to $51.91. Gold +0.6% to $1338.80. Bitcoin +2.2% to $7986.
Ten-year Treasury Yield -2 bps to 2.12%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $24B, 10-Year Note Auction
2:00 PM Treasury Budget

 

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Wall Street Breakfast: Equities March Higher

Author: skywalker   |  Publish date: Tue, 11 Jun 2019, 8:51 AM


It looks like there is another session of gains in store for Wall Street, with DJIA futures up by 120 points and the S&P 500 and Nasdaq ahead by over 0.5%. The advance comes despite the latest trade war comments from President Trump, who said that if Chinese President Xi Jinping did not attend the G-20 meeting later this month, there would be additional duties "immediately" levied on Chinese goods. "The China deal is going to work out. You know why? Because of tariffs," he told CNBC. "Right now, China is getting absolutely decimated by companies that are leaving China, going to other countries, including our own, because they don’t want to pay the tariffs."

Big Tech on trial

Congress will begin its scrutiny of America's tech giants this afternoon amid growing discomfort in Washington over the power that the companies wield over the industry and public life. An inaugural hearing by the House Judiciary Committee will analyze anti-competitive practices among Silicon Valley’s biggest names, starting with a look at the impact of their platforms on news content, the media and the spread of misinformation online. The committee has already put Amazon (NASDAQ:AMZN), Google (GOOG, GOOGL), Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL) on alert, and members made clear that the tech titans will go under the microscope.

Tesla annual meeting

Tesla (NASDAQ:TSLA) is gearing up for its annual shareholder meeting - set to kick off today at 5:30 p.m. ET - amid recent wild stock fluctuations driven by sudden sentiment changes on Wall Street. This year, shareholders will consider the re-election of two board members, new equity incentive and employee stock purchase plan, as well as recertification of the company's outside accounting firm, a public policy committee and a proposed simple majority rule to replace the current super majority. After swinging to a loss in Q1, Elon Musk insisted that the company will return to profitability in the second half of 2019, meaning investors will focus on any updates to those predictions.

Amazon Go is loving The Big Apple

Just a month ago, Amazon (AMZN) opened its first cashier-free convenience store in New York. This morning it will open another. 300 Park Avenue in Midtown will also be the second Amazon Go location to serve brewed coffee and espresso drinks, something the company has been testing back in Seattle in a deal with Starbucks (NASDAQ:SBUX). Cameron James, VP of physical stores at Amazon, wouldn't comment on how many stores Amazon ultimately plans to bring to New York, but it's been reported the company could open as many as 3,000 locations across the country by 2021.

Beijing support and PBOC action

China equities outperformed overnight, with the Shanghai Composite jumping 2.6%, after Beijing encouraged local governments to use special bonds for infrastructure projects in a bid to shore up economic growth. That helped offset President Trump's threat to raise tariffs again if President Xi Jinping doesn’t meet with him at the G-20 summit at the end of June. The onshore yuan also bounced off its closing low of the year as the PBOC set its reference rate higher than forecast and announced plans to sell bills this month after the currency was hit in May.

Disciplinary procedures for Italy?

Representatives of the EU's national governments are gathering today to decide whether to start disciplinary procedures over Italy's rule-breaking debt levels. Deputy Prime Minister Matteo Salvini has chosen, for now, to play the stand-off softly, insisting that he didn't want to "pick up a fight with Europe" and that a compromise could be found. Easing concerns about a snap election, heads of the ruling parties are set to meet with finance minister Giovanni Tria to set out a shared budget package acceptable to the EU Commission.

CVS-Aetna deal on the rocks

Federal judge Richard Leon appears to be on track to derail CVS's (NYSE:CVS) $69B plans to buy health insurer Aetna, amid concerns the deal would give the nation's biggest drug store too much power and result in higher drug prices, sources told the New York Post. After sparring with lawyers and witnesses for two days last week, Judge Leon scheduled oral arguments for July 17 and is expected to rule soon after that. A rejection would likely set the stage for an appeal by DOJ, which has recommended that the deal be approved.

Shutterfly taken private

Shutterfly (NASDAQ:SFLY) has reached a deal to be acquired by private-equity firm Apollo Global (NYSE:APO) for $2.7B. The $51 per share cash consideration represents a premium of 31% when compared to Shutterfly’s unaffected closing stock price of $38.91 on April 23, 2019, the last trading day before a media report was published about the transaction. According to the WSJ, Apollo will also buy Snapfish, which it plans to combine with Shutterfly to create a bigger player in online-photo services.

Nissan seeks peace with Renault

Nissan (OTCPK:NSANY) must "make our peace" with Renault (OTCPK:RNLSY), according to CEO Hiroto Saikawa, after a feud threatened to rip apart the 20-year alliance between the two companies. It's not merely a cross-shareholding or board member exchange structure, he added, but a "cradle" for cooperation and value creation. The future of the partnership was thrown into doubt after last year’s arrest of Carlos Ghosn, then chairman of Nissan and chief executive of Renault, and became more difficult after Renault and Fiat-Chrysler (NYSE:FCAU) last week held abortive merger talks.

More Iran sanctions

A European payment system, known as INSTEX, designed to circumvent U.S. sanctions on Iran will be ready soon, German Foreign Minister Heiko Maas announced as he met Iranian officials in Tehran. The deal has the Trump administration weighing additional penalties against the Special Trade and Finance Institute, an Iranian financial body set up as a go-between for humanitarian trade with Europe. Punishing the STFI could doom INSTEX because it raises the possibility of sanctions risk to anyone who's a part of the European mechanism.

Today's Markets

In Asia, Japan +0.3%. Hong Kong +0.8%. China +2.6%. India +0.5%.
In Europe, at midday, London +0.5%. Paris +0.8%. Frankfurt +1.3%.
Futures at 6:20, Dow +0.5%. S&P +0.5%. Nasdaq +0.7%. Crude +0.4% to $53.49. Gold -0.2% to $1326.20. Bitcoin +2.8% to $7936.
Ten-year Treasury Yield +3 bps to 2.17%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:30 Producer Price Index
8:55 Redbook Chain Store Sales
1:00 PM Results of $38B, 3-Year Note Auction

 

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Wall Street Breakfast: Aerospace And Defense Merger Monday

Author: skywalker   |  Publish date: Mon, 10 Jun 2019, 11:19 AM


United Technologies and Raytheon have agreed to an all-stock merger, creating the second-largest defense-and-aerospace company in the U.S. after Boeing (NYSE:BA) with combined annual sales of around $74B. The deal won't include United Tech's (NYSE:UTX) elevator (Otis) and air conditioning units (Carrier), which it plans to spin off in 2020. Raytheon's (NYSE:RTN) Tom Kennedy will become executive chairman of the combined company, to be called Raytheon Technologies, while UTX's Greg Hayes will be named CEO. Two years after the deal closes, Hayes will assume the role of chairman and CEO. RTN +2.8%; UTX +4.4% premarket.

Mexico tariffs averted

President Trump's decision to suspend planned tariffs against Mexico is driving a 0.4% advance for U.S. equity futures ahead of the open, while the peso rose 2% overnight to 19.2285 on the dollar. Stock gains were capped, however, as uncertainty remained if Mexico will enforce the deal that intends to stem the flow of illegal Central American migrants into the U.S. On Friday, the Dow closed 263 points higher at 25,984 to post its best week since November on hopes that the Fed would move to slash interest rates (nonfarm payrolls came in at just 75,000 in May, far below the consensus forecast of 180,000).

At ease

The Bank of Japan could deliver more big monetary stimulus if necessary, but needs to take care with its side effects on the financial system, according to Governor Haruhiko Kuroda. The comments come after Fed Chair Jerome Powell signaled a willingness to act if the economy needs it, ECB President Mario Draghi vowed to support growth and PBOC Governor Yi Gang said that he has "tremendous" policy options to stoke demand. While it doesn't need to act now, the BOJ's options would be cutting the -0.1% negative rate further, lowering the target for 10-year yields, increasing the monetary base, or boosting asset purchases.

Sterling under $1.27

Figures overnight showed GDP in the United Kingdom fell by 0.4% in April, pushing the pound down 0.3% to below $1.27 and increasing concerns about the health of the economy. The Office for National Statistics pointed to a "dramatic fall" in car production due to planned shutdowns put in place around the original Brexit deadline of March 29. Along with broader manufacturing weakness, stockpiling faded as the date of Britain's departure from the EU was pushed back again to October 31.

Rift appears to be worsening

Exposing the deepening strain between Renault (OTCPK:RNLSY) and Nissan (OTCPK:NSANY), the French carmaker has signaled it will block its Japanese alliance partner from adopting planned governance reforms unless the company gets a seat on new board committees. It comes amid reports that the revival of the collapsed Fiat Chrysler-Renault deal hinges on a reduced stake in Nissan. Meanwhile, Fiat (NYSE:FCAU) is joining forces with Amazon (NASDAQ:AMZN)-backed driverless startup Aurora, a move that could align its strategy with Renault on innovations like EVs and self-driving cars if it's able to get the merger over the line.

Digital tax rules

G20 finance ministers agreed to close corporate tax loopholes used by global tech giants like Facebook (NASDAQ:FB), Google (GOOG, GOOGL) and Amazon (AMZN) "by 2020," according to a final communique issued after their weekend meeting in Fukuoka, Japan. Combating lower-tax jurisdictions, the U.K. and France are already bringing in digital services taxes based on the local sales of search engines and digital marketplaces, but because they target sales and not profits, there is a risk of double taxation. While both have vowed to scrap their digital taxes as soon as there was an agreed G20 approach, there are also big differences to resolve with the U.S.

New Xbox console coming 2020

Known as "Project Scarlett," Microsoft (NASDAQ:MSFT) has unveiled its next-generation Xbox console, which is set to hit store shelves during the 2020 holiday season. The device will be four times more powerful than the Xbox One X and be powered by an Advanced Micro Devices (NASDAQ:AMD) chip, the company announced during its Xbox E3 conference in Los Angeles. Microsoft also said it will begin publicly testing its new "Project xCloud" videogame-streaming initiative in October, just ahead of when Google's (GOOG, GOOGL) Stadia competing service is slated to launch.

Emergency breakup

Two of Europe's biggest tech titans, Nokia (NYSE:NOK) and Ericsson (NASDAQ:ERIC), have started drawing up emergency plans to move some of their most sensitive operations out of China and split up their supply chains to counter increasing national security concerns, sources told The Sunday Telegraph. The drastic steps would include changes to their corporate structures, including setting up separate units in the Eastern and Western Hemispheres, in a bid to protect themselves against the escalating global trade war. Both companies make equipment used to run 5G networks.

China warning

It doesn't stop there. The Chinese government summoned major technology companies last week, including notable semiconductor firms, according to a new report from the NYT. The purpose was to warn them that they will face repercussions if they respond too aggressively to U.S. trade restrictions that ban sales of American technology to Chinese companies. Among the firms called in were chipmakers Intel (NASDAQ:INTC), Qualcomm (NASDAQ:QCOM), ARM Holdings (OTCPK:ARMHF) and SK Hynix (OTC:HXSCF), as well as Microsoft (MSFT), Samsung Electronics (OTC:SSNLF), Dell Technologies (NYSE:DELL), Nokia (NOK) and Cisco Systems (NASDAQ:CSCO).

Today's Markets

In Asia, Japan +1.2%. Hong Kong +2.3%. China +0.9%. India +0.4%.
In Europe, at midday, London +0.5%. Paris +0.3%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.4%. S&P +0.4%. Nasdaq +0.4%. Crude +0.2% to $54.10. Gold -1% to $1332.10. Bitcoin -2.9% to $7669.
Ten-year Treasury Yield +5 bps to 2.14%

Today's Economic Calendar

10:00 Job Openings and Labor Turnover Survey
12:30 PM TD Ameritrade IMX

 

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Wall Street Breakfast: Another Stellar Jobs Report?

Author: skywalker   |  Publish date: Fri, 7 Jun 2019, 9:56 AM


With trade war drums beating loudly, a strong employment report from the Labor Department this morning will probably do little to dial back market expectations that the Fed will cut interest rates this year. Nonfarm payrolls probably increased by 185,000 jobs last month after surging 263,000 in April, a figure that's well above the roughly 100,000 needed per month to keep up with growth in the working age population. Average hourly earnings are forecast to have increased 0.3% after rising 0.2% in April, while the unemployment rate is expected to have remained near a 50-year low of 3.6%.

More gains

Wall Street futures are ahead by 0.3%, pointing to a fourth consecutive session gain, as investors anticipate a near-term immigration agreement between the U.S. and Mexico, and extend bets on further central bank easing around the world. While the White House still intends to impose tariffs on Mexican imports this Monday, reports suggest "significant progress is being made" in negotiations. Investors are also continuing to digest yesterday's ECB decision day, including revelations that policymakers have been discussing potential rate cuts and an extra bout of quantitative easing.

Trouble in the eurozone

Further signals of an economic slowdown are continuing to build, with Germany reporting a staggering 3.7% plunge in April exports - the most in nearly four years - alongside a 1.9% contraction in industrial output. The figures were severe enough for the country's central bank, the Bundesbank, to slash its 2019 GDP forecast in half to just 0.6%. "For economic growth and, to a lesser extent, for the rate of inflation, it is the downside risks that predominate as things stand today," the central bank said in a biannual update of its projections.

China's policy arsenal

If the trade war with the U.S. deepens, "we have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous," PBOC Governor Yi Gang declared. The yuan has stabilized in recent weeks as authorities voiced support for the currency, following a rapid selloff that pushed it near 7 per dollar - a level not breached since the global financial crisis. It still lost about 2.5% in May, among the worst in Asia.

Mayday

After 1,059 days in charge, U.K. Prime Minister Theresa May has officially stepped down as leader of the ruling Conservative Party. The race has already started to replace her, with 11 contenders and Boris Johnson the current favorite. Starting next week, the party's 300 or so MPs will whittle down the field of candidates to two through successive rounds of voting. After that, the party’s rank-and-file members, an estimated 124K people, will decide which of those two finalists gets to be leader.

Grocery battle hits next level

As the delivery wars continue to heat up, Walmart (NYSE:WMT) is restarting a service that brings grocery orders inside shoppers' homes and into their kitchen refrigerators. This time, Walmart will use its own employees - who have been with the retailer for at least a year - and use its own vehicles. Workers will also be required to wear wearable cameras and enter the home by putting in a one-time code on a smart lock. The service will begin this fall across three cities - Kansas City, Missouri; Pittsburgh, Pennsylvania; and Vero Beach, Florida.

Barnes & Noble on the block

Seeking a new owner after years of decline, Barnes & Noble (NYSE:BKS) is nearing a deal to be bought by Elliott Management, WSJ reports. The news sent shares of the nation’s largest bookstore chain up 30% to $5.96 on Thursday (the hedge fund is expected to pay $6.50 per share). The acquisition, which could be imminent, wouldn't be the first foray into bookstores for Elliott after the firm scooped up U.K. book chain Waterstones in 2018.

Huawei crackdown

Facebook (NASDAQ:FB) is no longer allowing pre-installation of its apps on Huawei phones, the latest blow for the Chinese tech giant as it struggles to keep its business afloat in the face of a U.S. ban on its purchase of American parts and software. Meanwhile, Google has (GOOG, GOOGL) warned if the U.S. administration moves ahead with sweeping ban on Huawei, it risks compromising national security, FT reports. While the sanctions are expected to hurt Huawei in the short term, industry experts say it could force the company to develop more home-grown technologies, hurting the dominance of American companies.

Emissions compromise

With an "extended period of litigation and instability" on the line, a group of 17 major automakers, including General Motors (NYSE:GM), Toyota (NYSE:TM), Honda (NYSE:HMC) and Volkswagen (OTCPK:VWAGY), have come out in support of an emissions deal aimed at heading off a confrontation between California and the Trump administration. In a letter to Governor Gavin Newsom, the companies urged a compromise "midway" between Obama-era standards that require annual decreases of ~5% in emissions and Trump's proposal that would freeze vehicle emissions requirements at 2020 levels through 2026.

Thursday's Key Earnings

DocuSign (NASDAQ:DOCU) -21% AH with signs of subscription deceleration.
J. M. Smucker (NYSE:SJM) -2.3% seeing a sales growth slowdown.
Beyond Meat (NASDAQ:BYND) +18.1% AH giving rosy revenue guidance.
Zoom Video (NASDAQ:ZM) +11.8% AH on upside full-year outlook.

Today's Markets

In Asia, Japan +0.5%. Hong Kong closed. China closed. India +0.2%.
In Europe, at midday, London +0.9%. Paris +1.5%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +0.8% to $53. Gold -0.4% to $1338. Bitcoin +2.2% to $7969.
Ten-year Treasury Yield flat at 2.13%

Today's Economic Calendar

12:00 Fed's Daly Speech on Sunday
8:30 Non-farm payrolls
10:00 Wholesale Trade
1:00 PM Baker-Hughes Rig Count
3:00 PM Consumer Credit

 

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