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

 

Wall Street Breakfast: Trade Headwinds Blow Stronger

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Equities across the globe are flashing red, with oil and the dollar under pressure, following Beijing's rapid retaliation after the U.S. pushed ahead with $50B in tariffs. "China does not want the trade war, but facing a capricious Washington, China has no choice but to fight back vigorously in defense of its national interests, the trend of globalization and the world's multilateral trading system," according to commentary in the state media Xinhua. "When it comes to defending national interests, China means business."

Economy

A magnitude 6.1 earthquake shook Osaka this morning, killing three people and injuring more than 230 others, while halting factory lines in an important industrial area of central Japan. Daihatsu Motor (OTCPK:DHTMY), a unit of Toyota (NYSE:TM), and Honda (NYSE:HMC) suspended local production as they inspected their factories for damage. The news comes as Japan reported a trade surplus with the U.S. that fell 17.3% Y/Y to ¥340.7B ($3.08B) in May.

Greece's prime minister has survived a no-confidence motion in parliament, brought by the opposition, which accused Alexis Tsipras of making too many concessions over a naming agreement with Macedonia. The motion was rejected by 153 MPs, with 127 in favor, allowing the two countries to proceed with a deal that could eventually admit the "Republic of North Macedonia" into NATO and the EU.

The Christian Social Union will decide today whether to defy German Chancellor Angela Merkel by implementing a plan to limit immigration at the German border. She blocked the proposal last week, starting a spat with her interior minister and chairman of the CSU, Horst Seehofer. Merkel's party (CDU) and the CSU have long been allies, but the recent move risks destabilizing her three-month-old coalition.

Sweeping aside leftist candidate Gustavo Petro, Ivan Duque won a decisive victory in Colombia's runoff presidential elections on Sunday. The business friendly protégé of hardline former President Alvaro Uribe has promised to toughen the landmark peace accord with FARC - imposing tougher punishments on rebels for war crimes - while keeping fiscal policies intact in Latin America's fourth-largest economy.

Clashes are breaking out ahead of a closely-watched OPEC meeting in Vienna this week. "We as Iran, and I hear Iraq and Venezuela, are against any increase in OPEC production," Iranian OPEC representative Hossein Kazempour Ardebili told Bloomberg. "If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity. If the two want to act alone, that's a breach of the cooperation agreement."

Cryptocurrencies are not scalable and are more likely to suffer a breakdown in trust and efficiency the greater the number of people using them, according to the Bank for International Settlements. "Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value," warned the central bank of central banks.

Stocks

General Electric should be fined if it fails to meet the job creation goals at Alstom (OTCPK:ALSMY) agreed to when it purchased its energy subsidiary in 2015. "Sanctions must set an example," French government spokesman Benjamin Griveaux told France 3 television. GE said last week that the 1,000 net new job target was "out of reach" because of difficult market conditions.

As part of a strategic partnership, Google (GOOG, GOOGL) is investing $550M in JD.com (NASDAQ:JD), China's second-largest e-commerce player, in return for more than 27M newly issued Class A ordinary shares. The two will work together to develop better retail infrastructure in multiple markets and boost the selection of JD.com items on Google Shopping. JD +8.5% premarket.

Following the purchase of a seven-story building in the city's downtown area, Foxconn (OTC:FXCOF) said it will establish its North American corporate headquarters in Milwaukee, Wisconsin. The announcement comes after the company disclosed plans to invest $10B over four years to build a LCD panel plant in the state that could eventually employ up to 13K people.

Headquarters of the future? Chinese drone giant DJI Innovations (DJI) is designing a "floating community in the sky" for its new home base in Shenzhen, China. The building will feature twin towers connected by a sky bridge that will be used to show off new drone technology. It will also be home to several drone testing labs and a theater for holding formal product launches.

A tweet and video from actress Mary McCormack over the weekend called attention to her husband's Tesla Model S (NASDAQ:TSLA) that caught fire while he was driving in the Los Angeles area. "No accident, out of the blue, in traffic on Santa Monica Blvd," wrote McCormack, best known from The West Wing and Murder One. It comes after Elon Musk pushed for "radical improvements" in the next two weeks to hit quarterly targets for the Model 3. TSLA -1.3% premarket.

Audi CEO Rupert Stadler has been arrested, according to a spokesman for parent company Volkswagen (OTCPK:VLKAF). He's the highest sitting executive to be taken into custody since the decade-long diesel cheating scandal was exposed by U.S. regulators nearly three years ago. The arrest follows a raid of the Audi (OTCPK:AUDVF) chief's private apartment by Munich prosecutors.

Coca-Cola is mulling a £3B swoop for Horlicks after GlaxoSmithKline (NYSE:GSK) hoisted a "for sale" sign above the 145-year-old brand, the Telegraph reports. Other potential bidders include Kraft Heinz (NASDAQ:KHC) and Nestle (OTCPK:NSRGY). A move by Coca-Cola (NYSE:KO) would see the company continue its efforts of offering healthier beverage options other than soft drinks.

In the next several days, Fujifilm (OTCPK:FUJIY) is expected to ask a judge to enforce Xerox's (NYSE:XRX) $6.1B merger despite efforts from activist shareholders to scuttle the deal, the New York Post reports. Carl Icahn and Darwin Deason had won control of the board, stating they were seeking higher offers, but Xerox has not yet paid Fujifilm a breakup fee - a move that would signify the agreement is off.

Southern California biotech billionaire Patrick Soon-Shiong's purchase of the Los Angeles Times from Tronc (NASDAQ:TRNC) is slated to close later today, according to a report by the Los Angeles paper. Soon-Shiong also gets the San Diego Union-Tribune in the half-billion-dollar deal, along with smaller local publications including an edition of the Spanish-language daily Hoy.

Fresh off its takeover of Time Warner (NYSE:TWX), AT&T (NYSE:T) said it will be launching a "very, very skinny bundle" of programming called "AT&T Watch TV." Think TBS and TNT minus any basketball, plus CNN and Cartoon Network (smaller acquisitions will enable the ad-supported efforts). AT&T's unlimited wireless customers will get the service for free, while other can pay $15 per month.

An incredible opening for Incredibles 2... The Disney (NYSE:DIS)-Pixar film scored a record-breaking launch of $180M in 4,410 locations, easily landing the superhero sequel the best debut of all time for an animated film. The movie also landed the eighth-biggest domestic opening ever, as well as the best debut for a PG-rated film.

Perry Ellis has agreed to be taken private by its founder, George Feldenkreis, who has been critical about the current board amid a long-term view on the challenges facing the clothing industry. The $437M deal will see investors get $27.50 a share in cash, below Perry Ellis' (NASDAQ:PERY) closing price on Friday. However, it's about 19% more than the price on Feb. 6, when Feldenkreis's efforts became public.

Today's Markets

In Asia, Japan -0.8%. Hong Kong -0.4%. China -0.7%. India -0.2%.
In Europe, at midday, London -0.4%. Paris -1.2%. Frankfurt -1.4%.
Futures at 6:20, Dow -0.7%. S&P -0.6%. Nasdaq -0.7%. Crude -0.9% to $64.46. Gold +0.4% to $1283. Bitcoin -0.1% to $6439.
Ten-year Treasury Yield flat at 2.92%

Today's Economic Calendar

10:00 NAHB Housing Market Index
1:00 PM Fed's Bostic Speech

 

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