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Author: skywalker   |   Latest post: Wed, 14 Nov 2018, 11:12 AM

 

Wall Street Breakfast: Calm Returns To The Markets?

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U.S. stock index futures are pointing to a firmer open ahead of fresh economic data that includes numbers on industrial production, the Housing Market Index and JOLTS. Earnings season is also kicking into high gear as Netflix (NASDAQ:NFLX) becomes the first large technology company to report results. On the radar are also quarterly figures from BlackRock (NYSE:BLK), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Johnson & Johnson (NYSE:JNJ) and IBM.

Economy

The U.S. government closed out the 2018 fiscal year $779B in the red as tax cuts pinched revenues and expenses rose on a growing national debt. The deficit was also larger than any year since 2012, when it topped $1T. Adding to debt servicing costs, the Federal Reserve is raising interest rates roughly once per quarter in the face of a hot labor market and some signs of inflation.

China's factory-gate inflation cooled for a third straight month in September, rising 3.6% from a year ago, amid slowing domestic demand. The data points to more pressure on the world’s second-biggest economy as it remains locked in an intensifying trade war with the U.S. China's consumer inflation, on the other hand, picked up slightly in September from the previous month, led mainly by higher food prices.

Italy's government signed off on an expansionary 2019 budget late Monday - with planned measures that would boost welfare spending, lower the retirement age and cut taxes - in defiance of EU rules that require a shrinking deficit. The draft budget law has rattled financial markets in the past month, with investors demanding significantly higher interest rates to buy Italian bonds.

Spain's Socialist government is sticking to its pledge to loosen deficit targets in 2019, challenging the opposition People's Party to wield its Senate veto against plans to help voters weary of years of austerity. The administration will target a budgetary shortfall next year of 1.8% of GDP, compared with 1.3% reported to the European Commission by the former PP government.

Saudi Arabia's Tadawul All Share Index lost as much as 4% in the first six minutes of trading on Tuesday, while the riyal retreated to its weakest level in two years, as U.S. Secretary of State Michael Pompeo arrived in the kingdom to meet with King Salman bin Abdulaziz over the Khashoggi case. CNN said the kingdom was preparing a report saying the writer died as the result of an interrogation that went wrong, and that the operation was carried out without clearance.

Stocks

More Khashoggi fallout... Google cloud executive Diane Greene is the latest corporate leader to drop out of Saudi Arabia's upcoming "Davos in the Desert," set to begin on Oct. 23. In March, Saudi Aramco (ARMCO) announced a deal with Google (GOOG, GOOGL) for cloud-computing services, unveiled as part of an economic modernization push within the kingdom. Prince Mohammed bin Salman also visited Google in April during a Silicon Valley tour.

"If there is a major trade disruption involving Saudi Arabia, Clariant (OTCPK:CLZNY) will be affected and many others I may say even possibly more than Clariant will be affected," CEO Ernesto Occhiello told reporters. Clariant and anchor shareholder Saudi Basic Industries are merging their high-performance materials businesses, a move that will include the sale of some plastics and coatings activities.

Prior to its annual investors meeting, Walmart (NYSE:WMT) has lowered its fiscal year 2019 forecast for adjusted earnings per share to $4.65-$4.80 from an estimated range of $4.90-$5.05. "We're operating with discipline, balancing our short and long-term opportunities," said CEO Doug McMillon. "While we're excited about what we've done so far, we aren't satisfied." WMT -2.5% premarket.

British American Tobacco said revenue from smoking alternatives will miss expectations this year, citing a flat market in Japan and a product recall in the U.S. It now expects products such as vaping pens and tobacco heating devices to bring in £900M, down from a previous target of £1B. Heat-not-burn technology is "not going to sweep the world as some of our competitors say it will," said Ben Stevens, BAT's (NYSEMKT:BTI) financial director.

Video game stocks on watch... This fall's release slate is loaded with shooter titles, beginning with Activision Blizzard's (NASDAQ:ATVI) Call of Duty: Black Ops 4, which scored a launch day record on Friday. A new Battlefield from Electronic Arts (NASDAQ:EA) isn't far behind, with single player mode for the fifth edition being unveiled today, and Take-Two Interactive's (NASDAQ:TTWO) Red Dead Redemption 2 scheduled for release next week.

Google CEO Sundar Pichai has confirmed the company's leaked plans to create a censored search app for China, called Project Dragonfly, which could "serve well over 99% of queries." "I take a long-term view on this," he added, saying it could help China's 772M internet users find better information. Google (GOOG, GOOGL) initially withdrew its search service from China in 2010 due to increased concerns about censorship and cyber attacks.

Paul Allen, co-founder of Microsoft (NASDAQ:MSFT), died Monday at the age of 65 from complications of non-Hodgkin's lymphoma, according to a statement from his investment firm. Through Vulcan Inc., Allen supported research in artificial intelligence and new frontier technologies. He also owned two professional sports teams, the NFL Seattle Seahawks and NBA Portland Trailblazers.

Fidelity Investments is getting into the crypto scene with a new unit called Fidelity Digital Assets Services. "Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors," announced CEO Abigail P. Johnson. "We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use."

Twilio just spent $2B to buy SendGrid (NYSE:SEND), a company that offers cloud-based services for sending emails at a large scale. "We started Twilio by building voice, then SMS, video, web and mobile chat, channels like Facebook Messenger, WhatsApp. Along the way, email has been something that customers have asked us about," CEO Jeff Lawson said on a conference call explaining the acquisition. TWLO -3.5%; SEND +13.5% premarket.

German carmakers only have a 50% chance of surviving as leading players in the auto industry unless they transform to meet new regulations and adapt their supply chains, according to Volkswagen (OTCPK:VWAGY) CEO Herbert Diess. The need to produce batteries and EVs, and the emergence of new geopolitical threats, is forcing automakers to accelerate deep-seated reforms which pose an existential threat to some players. Related: OTCPK:DDAIF, OTCPK:BAMXF

Ford has released a new mid-sized SUV in China as the automaker contends with an aging product line and flagging sales in the world's biggest car market. The Ford Territory is aimed at customers in small but rapidly expanding cities across China, which is the country's fastest growing market. "Our onslaught of new vehicles has begun," said Peter Fleet, CEO of Ford China (NYSE:F).

"We are starting to bump up against the absolute true fact that Earth is finite," Blue Origin (BORGN) founder Jeff Bezos declared, predicting there will be 1T humans in the solar system one day. "The dynamism that I have seen over the last 20 years in the internet where incredible things have happened in really short periods of time... We need thousands of companies." Blue Origin is "the most important thing" that Bezos is working on, he said, edging out Amazon (NASDAQ:AMZN) and the Washington Post.

Today's Markets

In Asia, Japan +1.3%. Hong Kong +0.1%. China -0.9%. India +0.9%.
In Europe, at midday, London -0.3%. Paris +0.3%. Frankfurt +0.4%.
Futures at 6:20, Dow +0.6%. S&P +0.5%. Nasdaq +0.7%. Crude -0.9% to $71.14. Gold +0.2% to $1233. Bitcoin +0.1% to $6517.
Ten-year Treasury Yield flat at 3.17%

Today's Economic Calendar

8:55 Redbook Chain Store Sales
9:15 Industrial Production
10:00 NAHB Housing Market Index
10:00 Job Openings and Labor Turnover Survey
4:00 PM Treasury International Capital

 

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