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Author: skywalker   |   Latest post: Tue, 18 Sep 2018, 09:31 AM

 

Wall Street Breakfast: Bouncing Back From Trade Tremors

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U.S. stock index futures are starting the week on the right foot after President Trump predicted China will be the first to buckle in the run-up to a trade war that's rattled financial markets. "President Xi and I will always be friends... China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property." Dow +0.9%; S&P 500 +0.8%; Nasdaq +1%.

Economy

Crude price increases are translating into more expensive gasoline. According to the U.S. Energy Information Administration, average regular retail gas prices reached $2.70 a gallon last week - the highest level since 2015. Refiners are also starting to transition to summer-grade gasoline, which is more expensive to produce than winter-grade fuel.

There were hopes for a NAFTA announcement at this week's Summit of the Americas in Lima, but reports now suggest that negotiations are not advanced enough to announce a deal "in principle." President Trump, his Mexican counterpart Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau are all due to attend the gathering on April 13-14.

Brazil's Lula da Silva surrendered to police on Saturday to begin serving a 12-year jail sentence for corruption. The 72-year-old leftist icon has denied the charges, saying he's the victim of a witch hunt intended to stop him from running in the October presidential elections. "This will not be the end of me because I am no longer a human being, I am an idea," he told a crowd of supporters.

"President Putin, Russia and Iran are responsible for backing Animal Assad. Big price to pay," President Trump tweeted after a suspected chemical weapons attack in Syria. The Syrian American Medical Society, which operates in rebel-held areas, said 49 people had died. Russia's RTS stock is down 6.8% on the news, as well as from the recent round of U.S. sanctions.

China has banned exports of items to North Korea with potential dual use in weapons of mass destruction as Pyongyang told the U.S. that Kim Jong-un is prepared to discuss the denuclearization of the Korean Peninsula. China has accounted for around 90% of North Korea's foreign trade in past years, but has recently stepped up enforcement of UN sanctions in response to its repeated nuclear and missile tests.

Stocks

John Cryan is out as CEO of Deutsche Bank (NYSE:DB) following three consecutive years of losses at Europe's largest investment bank. Christian Sewing, retail specialist and deputy CEO, will take over immediately. "Following a comprehensive analysis we came to the conclusion that we need a new execution dynamic in the leadership of our bank," Chairman Paul Achleitner declared. DB +4.6% premarket.

Brexit fallout... Barclays (NYSE:BCS) is preparing to split its euro trading division and move part of the unit that trades eurozone government bonds and interest rate swaps away from its main trading floor in London, FT reports. CEO Jes Staley will also visit Dublin this week to discuss Brexit plans and view Barclays' new office in the heart of the city, which is planned to become its main EU hub outside the U.K.

PayPal has been reaching out to customers in recent months with an offer to add basic banking to their digital wallet, WSJ reports. Since it doesn't have a U.S. banking license, PayPal (NASDAQ:PYPL) is cutting deals with small banks that stay behind the scenes. Features include FDIC insurance, a debit card that can be used to withdraw cash at ATMs and the ability to direct-deposit paychecks.

Wide price gap? Viacom (VIA, VIAB) has reportedly asked CBS to sweeten its merger bid by about $2.8B, or almost a quarter more than the latter's offer, as negotiations proceed to the next round. It comes after CBS nominated Richard Parsons, a former chairman of Citigroup (NYSE:C) and Time Warner (NYSE:TWX), as an independent director. If elected, he would become the board's 14th member and 10th independent director.

Facebook CEO Mark Zuckerberg is set to meet U.S. lawmakers today ahead of Tuesday and Wednesday's Congressional hearings on the Cambridge Analytica scandal. They include some members from the committees before whom he is due to testify, according to Reuters. Facebook (NASDAQ:FB) is likely to come under fire for the improperly shared personal information of up to 87M users, mostly located in the U.S.

It's the latest bankruptcy in the retail industry. Nine West Holdings filed for Chapter 11 just before the weekend, listing debts of more than $1B. The company will use the bankruptcy to sell the Nine West and Bandolino businesses to Authentic Brands Group, while reorganizing around other brands including Anne Klein.

Flush with cash... Novartis (NYSE:NVS) has agreed to buy AveXis (NASDAQ:AVXS) for $8.7B, or $218 per share, after agreeing to sell its stake in a consumer healthcare joint venture for $13B. The deal would be slightly negative to its core operating income in 2018/19, mainly due to R&D investments, but by 2020, Novartis expects the acquisition to "strongly contribute" to earnings per share. AVXS +85% premarket.

Two U.S. Army soldiers have died after their Boeing (NYSE:BA) AH-64E Apache helicopter went down during a training exercise at Fort Campbell, Kentucky, marking the fourth American military aircraft mishap in less than a week. The Pentagon said that while the recent crashes are "not normal," the military is not considering it a "crisis."

With quality issues in the spotlight at Tesla (NASDAQ:TSLA), China's quality watchdog said the EV automaker would recall a total of 8,898 Model S vehicles in the country from June 28. Tesla has been voluntarily calling back the sedans built before April 2016 in order to replace bolts in their power steering components.

The Keystone oil pipeline leak in November in rural South Dakota was nearly double the original estimate at 9,700 barrels, according to a TransCanada (NYSE:TRP) spokeswoman, making it one of the largest U.S. inland spills since 2010. Meanwhile, Kinder Morgan (NYSE:KMI) has suspended most work on its Trans Mountain pipeline expansion and threatened to scrap the project if Canada's provincial and federal governments cannot resolve their differences by May 31.

More energy news... Saudi Arabia's crown prince Mohammed bin Salman rounded off a weeks-long U.S. tour with a deal signing in Texas. Saudi Aramco's Motiva Enterprises announced MoUs with Honeywell (NYSE:HON) and TechnipFMC (NYSE:FTI) worth $8B-$10B. They will explore opportunities for potential petrochemical projects that, if built, would represent multi-billion-dollar investments in the U.S.

Today's Markets

In Asia, Japan +0.5%. Hong Kong +1.3%. China +0.2%. India +0.5%.
In Europe, at midday, London flat. Paris +0.3%. Frankfurt +0.7%.
Futures at 6:20, Dow +0.9%. S&P +0.8%. Nasdaq +1%. Crude +0.3% to $62.25. Gold -0.4% to $1331.20. Bitcoin -3% to $6812.
Ten-year Treasury Yield +2 bps to 2.8%

Today's Economic Calendar

12:30 PM TD Ameritrade IMX

 

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