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Author: skywalker   |   Latest post: Fri, 21 Sep 2018, 11:05 AM

 

Wall Street Breakfast: Jobs Data Brings On Risk Appetite

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Shares across the globe are starting the week with a bounce after a strong U.S. jobs report seemed to erase any potential concerns investors may have had about a looming trade war or inflation. Friday also marked the nine-year anniversary of the current bull market for U.S. stocks, which have logged more than 108 months without posting a decline of 20% that marks a retreat into bear territory.

Economy

The EU and Japan pressed the U.S. to exempt them from steel and aluminum tariffs on Saturday as the three sides met in Brussels as part of a trilateral effort to combat unfair trade practices. There was "no immediate clarity on the exact U.S. procedure for exemption however, so discussions will continue next week," EU Trade Commissioner Cecilia Malmstrom announced after the meeting.

President Trump is strongly considering Christopher Liddell, a former executive at Microsoft (NASDAQ:MSFT) and General Motors (NYSE:GM), to succeed his departing top economic adviser, Gary Cohn. Liddell is currently the White House's director of strategic initiatives and has worked closely with Jared Kushner on efforts to streamline and update government functions.

The recent volatility in global financial markets should not deter top central banks from lifting interest rates or ending years of unprecedented stimulus, according to the Bank for International Settlements. "Some volatility is healthy" after the "insidious... illusion of permanent calm," said the central bank of central banks, but those fears and trade war worries are making the "delicate task" of trying to normalize policy more complicated.

Japan's big political scandal just got worse. The finance ministry has admitted to tampering with records to remove references to Shinzo Abe, his wife and finance minister Taro Aso that related to a questionable real estate deal which became public last year. Abe has previously said he would resign if he or his wife were shown to be involved in heavily cutting the price of public land sold to a school operator in Osaka.

China's rubber-stamp parliament has passed a series of constitutional amendments, including one that removes presidential term limits, allowing President Xi to remain in office indefinitely. It comes after the U.S. reportedly asked China to import more cars, aircraft, soybeans and natural gas as part of a plan to cut its bilateral trade deficit by $100B and avoid placing tariffs on Chinese imports.

It's unlikely Greece will require a precautionary credit line after its bailout ends in August, according to the head of the European Stability Mechanism. "But it very much depends whether it's really needed," declared Klaus Regling. "If everything remains quiet, reforms continue and Greece continues to develop its market access, then based on what we know today it's probably not needed."

A new Polish law banning almost all trade on Sundays has taken effect, with supermarkets and most other retailers closed for the first time since liberal shopping laws were introduced in the 1990s. In Hungary, another ex-communist country, a ban on Sunday trade imposed in 2015 was so unpopular that authorities repealed it the next year. Elsewhere in Europe, including Germany and Austria, people have long been accustomed to a day of commercial rest.

Six decades of rule by the Castros is coming to an end in Cuba as the nation of 11M went to the polls on Sunday for pre-selected ruling party candidates to fill the 600-plus seat National Assembly. The members will then choose a successor to President Raul Castro when he steps down next month. All signs point to Miguel Diaz-Canel, current first vice president who is expected to stick to Cuba's economic and political path.

Stocks

Longtime Dow Chemical leader Andrew Liveris will step down next month, ending a nearly 14-year tenure that culminated with the company's combination last year with rival DuPont. Jim Fitterling, current COO of DowDuPont's (NYSE:DWDP) material sciences division, will take on the role of Dow CEO after the firm's breakup next year into three units: agriculture, specialty products and material sciences.

The IPO of Saudi Aramco could be delayed from this year until 2019 at the earliest, with advisors struggling to arrive at the $2T valuation sought by Crown Prince Mohammed bin Salman, FT reports. The wait could also represent a setback to Saudi efforts in reforming its economy, as the Aramco (Private:ARMCO) listing, which would likely be the world's biggest IPO, is seen as a linchpin of its strategy.

South Korea held an initial meeting today for its due-diligence of General Motors' (GM) local unit to decide whether to provide funds for the troubled operations. GM said last month it would shut one of its factories in South Korea and decide on the fate of the three remaining plants in the coming weeks, unless it received government support and wage concessions from unions.

Tesla has confirmed a temporary Model 3 production suspension during a week in late February as it targets 2,500 units per week by the end of the first quarter and 5,000 a week by the end of Q2. "These periods are used to improve automation and systematically address bottlenecks in order to increase production rates. This is common in production ramps like this," said a Tesla (NASDAQ:TSLA) spokesperson.

Top managers at Deutsche Bank will forgo their annual bonuses, according to CEO John Cryan, after coming under fire for awarding big incentive payouts despite the bank's third annual loss in 2017. Variable compensation will still be paid to other staff as planned. Deutsche Bank (NYSE:DB) will release more details when it publishes its annual report on Friday.

Thomson Reuters is launching a bitcoin sentiment gauge for crypto traders, with a new version of its MarketPsych Indices scanning over 400 websites to capture market-moving sentiment and themes. "News and social media are driving the investment and risk management process more than ever with the continuing rise of passive and quant-driven trading," said Thomson Reuters' (NYSE:TRI) Austin Burkett.

Black Panther is continuing its winning streak. This weekend it crossed the $1B global box office mark in just 26 days of release, with a little help from a solid Friday debut in China, making it Disney's (NYSE:DIS) 16th movie to hit the milestone, as well as the fifth Marvel film. Black Panther's U.S. total is also good enough for ninth-biggest film of all time.

Pricing pressures in the drug industry... Regeneron (NASDAQ:REGN) and Sanofi (NYSE:SNY) are willing to grant discounts of up to 69% for their potent cholesterol drug if insurers and PBMs expand their coverage of the medicine. That would bring Praluent's net price within a range of $4,500 to $8,000 annually per patient, down from its list price of $14,600. The drug had U.S. sales of $131.4M in 2017.

The DOJ formally submitted a regulation on Saturday to ban "bump stocks," a modification to rifles that lets them fire automatically. The White House also pledged help from the Justice Department for training armed American teachers and adopting so-called "red flag" laws, but dropped an earlier idea of raising the age limit on gun purchases from 18 to 21. Related tickers: AOBC, RGR

Israel is selling state-owned IMI Systems, maker of the Uzi submachine gun, to Elbit Systems (NASDAQ:ESLT) in a deal that would likely see the latter top Israel Aerospace Industries as the country's biggest defense contractor. The sale price was set at NIS 1.8B ($520M), with an added NIS 100M ($29M) to be paid by Elbit later if IMI reaches specified overseas sales goals in 2018.

"I think we will be able to do short flights, short up and down flights, probably in the first half of next year. This is a very big booster and ship," said SpaceX (Private:SPACE) CEO Elon Musk, commenting on an upcoming Mars mission. The rocket system (codenamed BFR) is also expected to have the capability of return trips to the Moon with in-space refueling and space station resupply missions.

Today's Markets

In Asia, Japan +1.8%. Hong Kong +1.9%. China +0.6%. India +1.8%.
In Europe, at midday, London flat. Paris +0.2%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.4%. S&P +0.3%. Nasdaq +0.6%. Crude -0.5% to $61.71. Gold -0.5% to $1317.90. Bitcoin +3.1% to $9827.
Ten-year Treasury Yield flat at 2.89%

Today's Economic Calendar

11:30 Results of $28B, 3-Year Note Auction
1:00 PM Results of $21B, 10-Year Note Auction
2:00 PM Treasury Budget

 

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