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Author: skywalker   |   Latest post: Tue, 18 Jun 2019, 10:40 AM

 

Wall Street Breakfast: U.S.-China Wrap Up Trade Meeting

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U.S. futures appear to be looking at the glass half full again as the world's two largest economies conclude talks to resolve their ongoing trade dispute. U.S. Commerce Secretary Wilbur Ross has predicted Beijing and Washington could reach a trade deal that "we can live with," while China's foreign ministry said it had "good faith" to work with the U.S. Ten-year U.S. Treasury yields have recovered on the news, with crude and the dollar also posting gains.

Economy

In a first for his presidency, President Trump will address the nation tonight from the Oval Office as the latest government shutdown stretches into its third week. With no breakthrough in sight, the administration is weighing a national emergency declaration to circumvent Congress and force construction of Trump's long-promised southern border wall. According to data from LPL Financial, markets have shown modest weakness during shutdowns, with the S&P 500 falling an average of 0.6% over the period of closure.

The big Brexit headline overnight was a Telegraph story suggesting U.K. officials have "put out feelers" about an extension to Article 50, a part of the Lisbon Treaty which sets out the conditions for leaving the EU. "We are leaving on the 29th of March," British Brexit Secretary Stephen Barclay declared, shooting down the report. The U.K. assembly may also vote today on an attempt by lawmakers to cut off government funding in the event of a no-deal Brexit.

A simple mapping between German industrial production and GDP growth points to a recession, according to Jamie Murray, Bloomberg's Chief Economist of Europe. Factory output unexpectedly slipped 1.9% in November, marking the third straight month of decline for the eurozone's economic powerhouse. The euro fluctuated after the report, but is currently down 0.3% to $1.1444.

"At this stage, most central banks appear to have clarified the challenges of launching central bank-backed digital currencies (CBDC), but they are not yet convinced that the benefits will outweigh the costs," according to a survey by the Bank for International Settlements. 85% also said they are unlikely to issue a CBDC in the next three years. Sweden's central bank has been working on an "e-Krona" project since 2017, while the ECB and BOJ are collaborating on "Project Stella."

Stocks

Startups and the biggest names in the industry are unveiling their latest technologies as CES 2019 gets into full swing in Las Vegas. IBM revealed the world's first standalone quantum computer, Samsung (OTC:SSNLF) showed off a 98-inch 8K TV, and Intel (NASDAQ:INTC) and Facebook (NASDAQ:FB) said they would put the final touches on a new AI chip in the second half of 2019. Textron's (NYSE:TXT) Bell division, a partner of Uber Elevate (UBER), also unveiled its design for a full-scale VTOL air taxi. Other innovations: Robot delivery dogs, language-translating earpieces and non-invasive diabetic alert devices.

Ending a weekslong reign by Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) is the latest tech titan to claim the title of world's most valuable public company, with a market cap of $796.78B. According to analysts, Amazon's 25% slide last quarter - its largest such drop in a decade - has pushed investors to scoop up the beaten-down shares. The e-commerce giant is also projected to show Q4 sales up 20% from a year earlier when it reports earnings in the coming weeks.

The chip supercycle is fizzling. Samsung Electronics (OTC:SSNLF) estimates its quarterly profit dropped 29% in Q1, adding to investor worries after Apple (NASDAQ:AAPL) took the rare move of cutting its quarterly sales forecast on poor iPhone sales in China. Samsung expects profit to remain subdued in Q1, but the market is likely to improve as new smartphones are released during the second half of 2019.

IBM kept the U.S. patent crown for the 26th straight year in 2018, receiving 9,100 patents in areas like artificial intelligence, cloud computing and cybersecurity. "IBM is committed to leading the way on the technologies that change the way the world works - and solving problems many people have not even thought of yet," CEO Ginni Rometty said in a statement.

Deepening its partnership with Data Artisans, Alibaba (NYSE:BABA) has paid €90M to acquire the Berlin-based startup, which provides distributed systems and large-scale data streaming services for enterprises. This deal is reminiscent of Alibaba's 2017 investment in MariaDB, an open source startup known for offering the most popular alternative to MySQL, a database management system.

SoftBank is slashing its planned WeWork (VWORK) investment from $16B to $2B, according to the FT. The investment, which could value WeWork at $20B, will also no longer involve SoftBank's (OTCPK:SFTBY) unprecedented $100B Vision Fund. The cut follows the recent tech sector rout and concerns among Vision Fund investors about the large financial commitment.

A group of financial firms, including Morgan Stanley (NYSE:MS), Fidelity Investments, and Citadel Securities, are planning to start a low-cost stock exchange to compete with the NYSE (NYSE:ICE) and Nasdaq (NASDAQ:NDAQ), WSJ reports. The Members Exchange, or MEMX, raised $70M in its initial funding and plans to add other investors later this year, however, it's likely to take at least a year for the new exchange to get SEC approval.

The rapidly changing pharmaceutical landscape reached another milestone today as Takeda (NYSE:TAK) became a top 10 global drugmaker by completing its $62B acquisition of Shire (NASDAQ:SHPG). A flurry of multibillion-dollar pharma deals is happening as traditional companies turn to acquisitions to replenish their drug pipelines and combat expiring patents. Already in 2019, Eli Lilly (NYSE:LLY) agreed to buy Loxo Oncology (NASDAQ:LOXO) for $8B, just days after Bristol-Myers Squibb (NYSE:BMY) scooped up Celgene (NASDAQ:CG) for $74B.

A lawyer for Johnson & Johnson will make his opening remarks today in the latest trial over the company's talc-based products. He'll argue that J&J's (NYSE:JNJ) Baby Powder "is safe" and has "repeatedly been tested and found not to contain asbestos." The lawsuit brought by Terry Leavitt is the first in over a dozen J&J talc cases scheduled for trial in 2019.

It's lights out for Sears today unless Chairman Eddie Lampert can sweeten his $4.4B bid to save the 125-year-old retailer and 50,000 jobs. Sears (OTCPK:SHLDQ) advisors this past Friday told a bankruptcy judge it planned to announce a liquidation on Monday, but then decided to give Lampert's ESL Investments until Tuesday morning before coming to and announcing a conclusion.

S&P Global Ratings has stripped PG&E Corp. (NYSE:PCG) of its investment-grade credit rating, reflecting the board of the California power utility's recent announcement to review the company's management, finances, governance and structural options. "We assess this announcement as the culmination of a decisive souring of the political and regulatory environment," S&P said in a statement.

Indonesia will attempt to launch a renewed search effort today to find the cockpit voice recorder from a Lion Air jet that crashed into the Java Sea in October. The accident, the world’s first of a Boeing 737 MAX (NYSE:BA) and the deadliest of 2018, killed all 189 people on board. The other black box, the flight data recorder, was recovered three days after the crash.

"I have been wrongly accused and unfairly detained based on meritless and unsubstantiated accusations," ousted Nissan (OTCPK:NSANY) Chairman Carlos Ghosn told the Tokyo District Court after spending the last 51 days detained in a Japanese jail. "I never received any compensation from Nissan that was not disclosed, nor did I ever enter into any binding contract with Nissan to be paid a fixed amount that was not disclosed."

The head of Canadian auto union Unifor will meet with General Motors (NYSE:GM) executives in Detroit today to discuss saving the automaker's Oshawa, Ontario, assembly plant, scheduled to shut down in December 2019. The closure is part of a broad restructuring announced in November. GM also plans to close four U.S. plants, eliminating a total of about 15,000 jobs in North America.

Today's Markets

In Asia, Japan +0.8%. Hong Kong +0.2%. China -0.3%. India +0.4%.
In Europe, at midday, London +1.1%. Paris +1.4%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.7%. S&P +0.7%. Nasdaq +0.7%. Crude +1.7% to $49.33. Gold -0.5% to $1284. Bitcoin +0.3% to $4030.
Ten-year Treasury Yield +2 bps to 2.7%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:30 International Trade
8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $38B, 3-Year Note Auction
3:00 PM Consumer Credit

 

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