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Author: skywalker   |   Latest post: Wed, 4 Sep 2019, 10:34 AM

 

Wall Street Breakfast: Oil Spikes After Tanker Attacks

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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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