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

 

Wall Street Breakfast: Showdown Over No-Deal Brexit

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Sterling fell below $1.20 overnight, hitting its lowest level since the October 2016 flash crash, as U.K. lawmakers returned from their summer recess. A cross-party group is expected to apply for an emergency debate and seize control of the Brexit agenda in the House of Commons, marking the first effort to stop a no-deal Brexit on October 31. If parliament votes in favor of the opposition's amendment and allows it to go ahead, Boris Johnson will call a snap general election for October 14.

Uncertainty weighs on futures

Trade war gloom is pointing to a 200-point decline for the DJIA at the open as China lodged a tariff case against the U.S. at the WTO, a day after the world's two largest economies imposed new duties on each other's goods. The Chinese yuan also fell to its lowest level in more than a decade in offshore trading, nearing 7.2 versus the greenback. More trouble? Sources told Bloomberg that Chinese and U.S. officials are struggling to agree on scheduling for a planned meeting later this month.
Go deeper: Is the stock market in a precarious position?

Hurricane Dorian

The storm has been downgraded to a Category 3 as it remained stationary over the Bahamas, prolonging the islands' battering and killing at least five people. It's forecast to approach dangerously close to Florida late Tuesday through Wednesday, and then turn north, skirting the coast and coming perilously near Georgia and South Carolina Wednesday night and Thursday. UBS analysts have updated their model to reflect a wider potential industry insured loss range of $5B-$40B and raised their base case to $25B from $15B, with solvency capital at risk.
Go deeper: Regional property insurers include UIHC, HCI, HRTG, FNHC and UVE.

Italian parties agree on agenda

Italy's 5-Star Movement and Democratic Party have unveiled a shared policy program for their mooted coalition, putting an expansionary 2020 budget at the top of their platform. Supporters of 5-Star are meanwhile holding an online ballot on whether to support the proposed coalition and results are due by 1:30 p.m. ET. Italian benchmark 10-year bond yields hit record lows on the news as investors believed the new administration would take office and head off the risk of an early election.

Currency controls

The spiraling economic crisis in Argentina has prompted the central bank to slap capital controls on businesses as the peso lost more than a quarter of its value since primary elections last month. Exporters will face limits of five days to repatriate foreign currency, while institutions will need authorization of the bank to buy dollars in the forex market, except in the case of foreign trade. The decision reverses one of the first big achievements of President Macri who removed strict capital controls after taking power in December 2015 (the restrictions had prompted the MSCI index to strip Argentina of its status as an emerging market, demoting it to a frontier market).

Aramco chairman replaced

Saudi Arabia has removed its energy minister, Khalid Al-Falih, as chairman of Saudi Aramco (ARMCO) and replaced him with Yasir al-Rumayyan, head of the country's sovereign wealth fund. Separating the Ministry of Energy from Aramco will avoid conflicts of interest as the company prepares for a blockbuster stock market listing. The IPO has been a centerpiece of Vision 2030, a plan to diversify the Saudi economy away from oil, championed by Crown Prince Mohammed bin Salman.

MAX cancellations

American Airlines (NASDAQ:AAL) is extending cancellations of Boeing (NYSE:BA) 737 MAX flights through Dec. 3, but remains confident that the aircraft will be cleared to fly again for the Christmas travel season. It follows a similar step by United Airlines (NASDAQ:UAL), which on Friday said it would take the planes out of its schedule until Dec. 19, while Southwest Airlines (NYSE:LUV) - the largest 737 Max customer in the U.S. - has removed the planes from its schedules until early January. Regulators haven't said when they expect the planes to take to the skies, but even after they sign off, airline executives have said it will take more than a month for them to make Boeing’s software changes and to train their pilots.
Go deeper: Underlying metrics of BA.

No. 1 in 5G?

Huawei has scored more than 50 commercial 5G contracts globally despite being blocked from some major markets amid continued pressure from the U.S. This puts the company ahead of its closest competitors, with Nokia (NYSE:NOK) in July saying it had 45 commercial 5G deals, while Ericsson's (NASDAQ:ERIC) latest published number was 24. Europe has become a key battleground with several countries still weighing up their 5G position on Huawei, which is already blocked in the U.S., Japan and Australia.
Go deeper: Compare Nokia and Ericsson side by side.

Fight for speedy shipping

The latest move will see Walmart's (NYSE:WMT) Mexico unit offer delivery within three hours for about 12,000 products ordered online after it opened two local distribution centers in its largest overseas market. Rival Amazon (NASDAQ:AMZN), which launched in Mexico in 2015, offers same-day delivery within Mexico City for some items. The delivery wars have already prompted Walmart to offer free next-day delivery in the U.S. in May, shortly after Amazon announced a similar offer.
Go deeper: Growth report card of WMT.

Today's Markets

In Asia, Japan flat. Hong Kong -0.4%. China +0.2%. India -1.7%.
In Europe, at midday, London flat. Paris -0.4%. Frankfurt -0.3%.
Futures at 6:20, Dow -0.8%. S&P -0.7%. Nasdaq -0.9%. Crude -1.1% to $54.52. Gold +0.7% to $1540.20. Bitcoin +5.7% to $10348.
Ten-year Treasury Yield -3 bps to 1.48

Today's Economic Calendar
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
5:00 PM Fed's Rosengren Speech

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