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

 

Wall Street Breakfast: Trade Optimism Resurfaces

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U.S. stock index futures are continuing a pre-Labor Day rally, with the DJIA up by 228 points, as China indicated it wouldn't immediately retaliate against the latest U.S. tariff increases set for Sept. 1. The two countries are also discussing face-to-face talks to be held in the U.S. in September, according to China's Commerce Ministry, which said it's willing to resolve the trade war with a "calm attitude." On the economic calendar, a second reading of U.S. GDP growth will be released this morning that's expected to be revised down slightly to 2.0%, after showing a 2.1% growth in its earlier estimate.

Ultra-long bonds

The 30-year U.S. Treasury yield surged almost 8 basis points to 2.048% late Wednesday on news that the Treasury Department was assessing market demand for 50-year or 100-year bonds. Issuing the long-term debt would limit the cost to taxpayers of plugging the almost $1T annual budget deficit and could provide returns to pension funds despite falling yields. "If the conditions are right, then I would anticipate we'll take advantage of long-term borrowing," Treasury Secretary Steven Mnuchin told Bloomberg.

Reprieve on methane rules

A sweeping proposal from the Trump administration would erase Obama-era rules on methane emissions from the oil-and-gas industry, marking the latest attempt to further boost record crude and natural gas production by easing regulations. Some companies have asked for the rollback, while others, including Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (RDS.A, RDS.B), have warned that a lack of government-backed minimum requirements to curb emissions could undermine the argument that natural gas is a cleaner fuel. Legal wrangling could lead to years of uncertainty before deregulation would lower costs.
Go deeper: Williams Equity Research makes the case for buying XOM.

New coalition in Italy

Italian Prime Minister Giuseppe Conte has been given a mandate to form a new government as the opposition Democratic Party set aside its differences with the anti-establishment 5-Star Movement to form a coalition. In an early, basic draft of a coalition policy platform, the two sides would ask the EU for flexibility on the 2020 budget deficit to "reinforce social cohesion" in the country, according to Il Sole 24 Ore. It caps an extraordinary three weeks that could mark a turning point in Italy's frayed relations with the EU.
Go deeper: Holdings of iShares MSCI Italy Capped ETF (NYSEARCA:EWI).

Ninth sovereign default?

Argentina is looking to restructure its debt with the IMF and bondholders in an effort to stem a confidence crisis that has upended the country’s financial markets. The nation will now delay $7B of payments on short-term local debt due this year and will seek a "voluntary reprofiling" of $50B of longer-term debt, as well as postponement on the repayment of $44B of loans from the IMF. The move will probably be judged as another sovereign default, although Argentina is at the moment only seeking a voluntary extension of repayment times, rather than "haircutting" interest payments or the size of its debt.

Options to save Iran deal

Europe should either ask Washington to restore sanctions waivers for Iran's oil or provide a credit line to the Islamic Republic if it wants to save the nuclear deal, the country’s deputy foreign minister, Abbas Araghchi, said in an interview to state TV. Iran has previously said a "third step" of fresh nuclear deal breaches will be taken on Sept. 6 unless a new understanding between Tehran and the European sides is achieved.

Tesla insurance

Model X, Model 3 and Model S owners in California will now have the option of taking out auto insurance through Tesla (NASDAQ:TSLA), an alternative the company declared will "expand to additional U.S. states in the future." Although it did not provide specific costs, Tesla said its offering may be as much as 30% less than other insurance plans. Warren Buffett has criticized the venture, and predicted that the EV maker will struggle as it heads into auto insurance, a field in which Berkshire Hathaway (BRK.A, BRK.B) thrives.
Go deeper: Michael Murphy discusses the Tesla bulls and bears.

Retail roundup

Things are getting harder in the retail landscape as Forever 21 reportedly considers filing for bankruptcy, in a move that could put pressure on mall owners Simon Property Group (NYSE:SPG) and Brookfield Property Partners (NASDAQ:BPY). Struggles also saw Hudson's Bay (OTCPK:HBAYF) offload Lord & Taylor on Wednesday to clothing rental startup Le Tote for $100M. Not everything is so bleak, however, as sneaker retailer Puma (OTCPK:PUMSY) opened its first U.S. flagship store today on the corner of Fifth Avenue and 49th Street in Manhattan.
Go deeper: Historical performance of Simon Property Group.

Tightening privacy rules

Apple (NASDAQ:AAPL) will no longer automatically save audio recordings of customers' interactions with Siri after temporarily suspending the practice following a Guardian report that contractors frequently heard personal information. "We realize we haven’t been fully living up to our high ideals, and for that we apologize," the company wrote in a blog post. Siri audio review will be strictly opt-in in an upcoming software update and only Apple employees (not contractors) will be able to review the recordings.
Go deeper: Quant, SA, Sell Side ratings of Apple.

Political ads

Facebook (NASDAQ:FB) is continuing to get ready for the 2020 U.S. election with new rules for political advertising. The company said it's strengthening the authorization process for U.S. advertisers, showing more info about each advertiser and updating its list of social issues. An update to social issues will also bring Facebook's U.S list to 10 categories rather than 20 distinct subject areas - a change in line with its lists for countries that have recently held elections.

Wednesday's Key Earnings
Box (NYSE:BOX) -7.9% AH despite beats, in-line outlook.
Brown-Forman (NYSE:BF.B) -0.2% on mixed results.
Coty (NYSE:COTY) +6% selling its stake in Younique.
Nutanix (NASDAQ:NTNX) +19.3% AH following a Q4 surprise.
PVH Corp. (NYSE:PVH) -0.9% AH cutting full year guidance.
Tiffany & Co. (NYSE:TIF) +3% posting a profit beat.

Today's Markets

In Asia, Japan -0.1%. Hong Kong +0.3%. China -0.1%. India -1%.
In Europe, at midday, London +1.2%. Paris +1.5%. Frankfurt +1.2%.
Futures at 6:20, Dow +0.9%. S&P +0.8%. Nasdaq +1.1%. Crude +0.6% to $56.06. Gold -0.2% to $1546.10. Bitcoin -6.6% to $9473.
Ten-year Treasury Yield +3 bps to 1.47%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 GDP Q2
8:30 International Trade in Goods
8:30 Retail Inventories (Advance)
8:30 Wholesale Inventories (Advance)
8:30 Corporate profits
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
1:00 PM Results of $32B, 7-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

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