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Author: skywalker   |   Latest post: Tue, 23 Apr 2019, 9:46 AM

 

Wall Street Breakfast: Historic Vote For Brexit Future

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Sterling is expected to steal the limelight later in the day as the U.K. parliament votes on Theresa May's Brexit deal. The odds currently looked stacked against her, setting the stage for further political turmoil just 10 weeks before Britain's scheduled departure from the bloc. While the scale of the expected defeat is unclear, it will be crucial to what happens next. Among the options: Brexit extension, a general election, renegotiating a new proposal, a second Brexit referendum or leaving the EU with no deal on March 29.

Economy

Stocks gained ground overnight as China announced it would start implementing a package of stimulus measures to boost its economy. They include a cut to VAT rates for selected industries and tax rebates for others, helping brighten the outlook for its economy and easing fears about a global slowdown. Senior policy officials also pledged that tax reductions on a "larger scale" are in the pipeline, which JPMorgan Chase economists estimate will impact around 2T yuan ($300B), or 1.2% of GDP.

There are more signs of gloom for Europe's economic powerhouse following last week's dismal industrial production figures. According to flash data, German GDP grew 1.5% in 2018, compared with 2.2% in 2017, pointing to the weakest growth rate in five years. Reasons include a trade war-induced economic slowdown, delays in auto output due to tougher pollution standards and a warmer-than-expected November that held down energy production.

The EU's executive body will meet today to firm up the bloc's parameters for U.S. trade talks, which would allow the two sides to meet as soon as mid-February. The stakes are high for the negotiations, given the EU's wish to exclude agriculture, as well as prior U.S. threats of European auto tariffs and a viewpoint that its car exports may pose a "national security risk."

Italian banks plunged in Milan following a report that the European Central Bank told the lenders it oversees to cover all of their existing non-performing loans by 2026. The article in Il Sole 24 Ore focused in particular on Italian banks, saying the country's lenders were burdened by the highest amount of impaired loans in Europe.

Ivanka Trump is helping in the search for a candidate to run the World Bank, but is not a contender for the position herself, according to the White House. She has already worked with the World Bank and departing President Jim Yong Kim over the past two years, jointly launching a $1.6B women’s entrepreneurship fund with 13 other donor nations to raise capital for female entrepreneurs in developing countries.

Canada's Justin Trudeau has voiced extreme concern at China's sentencing of a Canadian to death over methamphetamine smuggling. Legal experts have called the hurried retrial of Robert Schellenberg a maneuver by Beijing to gain leverage for the arrest of a prominent Huawei Technologies executive. CFO Meng Wanzhou has been out on bail in Vancouver since Dec. 11 following charges related to Iranian sanctions violations.

The U.S. is evaluating whether to impose tougher sanctions against Venezuela’s military and vital oil industry, as it seeks to ratchet up pressure on Nicolas Maduro. The newly inaugurated president boosted the minimum wage 300% yesterday to 18,000 bolivares [around $6.52] amid the country's relentless battle against hyperinflation. In 2018, the minimum wage was raised five times.

Stocks

It's a moment of truth for the financials sector as bank earnings get into full swing today, with JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) reporting results before the bell. Citigroup (NYSE:C) kicked things off for the group yesterday, rallying 4% despite missing on revenue thanks to weak trading. BofA (NYSE:BAC) and Goldman (NYSE:GS) are set to disclose results tomorrow, while Morgan Stanley (NYSE:MS) rounds out big bank earnings when it reports Thursday.

Detroit Auto Show... Ford (NYSE:F) is expected to unveil a trans-Atlantic alliance with Volkswagen (OTCPK:VWAGY) this morning that will first focus on commercial vehicles and moves that will save the companies billions of dollars. The combination isn't likely to include ownership stakes for either carmaker, but will instead focus on fresh investments into the self-driving and EV sector, which many in the industry feel is the key driver of future profits.

Autonomous vehicle startup Zoox has named veteran Intel (NASDAQ:INTC) executive Aicha Evans as its new CEO, recruiting a seasoned manager to replace its ousted founder. In 2017, Evans became responsible for Intel's long-term strategy, including a push into autonomous vehicles. Zoox's vision is to create a vehicle - that can be summoned via smartphone - with an interior that looks like a lounge, for traveling within urban areas.

While the decision is being appealed by his lawyer, the Tokyo District Court has rejected Carlos Ghosn's request to be released on bail, meaning the former Nissan (OTCPK:NSANY) chairman could remain in jail for at least several months awaiting trial. Meanwhile, Nissan said it expects alliance partner Renault's (OTCPK:RNLSY) board to back its ousting of Ghosn once it sees evidence from the Japanese carmaker's investigation.

California politicians are in a quandary regarding the path forward for utility PG&E (NYSE:PCG), which supplies 40% of the state with electricity and filed for bankruptcy on Monday. "We would like to see it (bankruptcy) avoided, but we are not naive (about financial assistance)," Governor Gavin Newsom declared. "I think there's less chance, less thought of a bailout this year than we saw last year, certainly,” added State Senator Jerry Hill. PCG -9.3% premarket.

Canopy Growth jumped 11% on Monday after it was granted a license to produce hemp in New York State. Canopy (OTC:CGC) plans to invest between $100M-$150M for the operations, which will be "capable of producing tons of hemp" on an annual basis. Marijuana is still illegal in the U.S. at the federal level, though many states have passed laws legalizing its use for medical or recreational purposes.

Ending several long-running lawsuits, FedEx's (NYSE:FDX) ground-delivery unit has agreed to pay NYC and New York State $35M to settle allegations that the company knowingly transported hundreds of thousands of untaxed cigarettes. "Not only did FedEx violate laws created to protect the public from the serious health risks, but they also swindled New York City and State out of millions of dollars in tax revenue," state Attorney General Letitia James said in a statement.

A patent lawsuit filed by Qualcomm (NASDAQ:QCOM) against Apple (NASDAQ:AAPL) was been thrown out by a German regional court, which said the copyright in question was not violated by the installation of its chips in some iPhones. Qualcomm, waging a worldwide patent battle with Apple, said it would appeal after winning a separate case before a court in Munich in December that enabled it to enforce a local ban on the sale of older iPhones.

Shares in the U.K.'s biggest gambling groups fell overnight after the U.S. Justice Department issued a legal opinion that could further restrict online gambling even as some states have been moving to embrace it. The view comes as gambling companies face regulatory pressure on both sides of the Atlantic, with a recent cap on stakes on fixed odds betting terminals in the U.K. expected to slash annual revenue by as much as £1.8B. In London: 888 Holdings (OTCPK:EIHDF) -7.5%, Paddy Power Betfair (OTCPK:PDYPY) -1.8%, William Hill (OTCPK:WIMHY) -1.2% and GVC -2.9%

Monday's Key Earnings
Citigroup (C) +4% beating profit estimates, despite weak trading.

Today's Markets

In Asia, Japan +1%. Hong Kong +2%. China +1.4%. India +1.3%.
In Europe, at midday, London +0.2%. Paris +0.5%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.5%. S&P +0.5%. Nasdaq +0.6%. Crude +1.5% to $51.29. Gold -0.2% to $1289.20. Bitcoin +3.5% to $3639.
Ten-year Treasury Yield -2 bps to 2.69%

Today's Economic Calendar

8:30 Producer Price Index
8:30 Empire State Mfg Survey
11:30 Fed's Kashkari Speech
1:00 PM Fed's Kaplan Speech
1:00 PM Fed's George Speech

 

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