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Wall Street Breakfast

Author: bmotrader   |   Latest post: Mon, 27 Jan 2020, 9:03 AM

 

Wall Street Breakfast: Traders Hail U.S.-China Trade Deal

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Stocks across the globe are going green again as investors digest the Phase One trade deal, which is expected to nearly double U.S. exports to China over the next two years. Shanghai is ahead by 0.6% and the Euro Stoxx 50 up 0.8%, while S&P 500 and Nasdaq futures are 0.4% higher and the Dow is expected to tack on 60 points at the open. Over in Britain, the FTSE 100 is advancing 2% for a second session on reduced uncertainty as Prime Minister Boris Johnson eyes a parliament vote before Christmas to "get Brexit done."

What's in the U.S.-China trade deal?

Besides agreeing to buy around $200B worth of American-made goods, China said it would crack down on intellectual property theft, forced technology transfers and deepen access to its financial markets. Beijing also suspended additional tariffs on some U.S. goods that were meant to be implemented on Dec. 15, as the U.S. held off on new duties and reduced existing levies. The deal, after proofreading and legal checks, will be signed in the first week of 2020.
Go deeper: 'How To Win A Currency War' by Lyn Alden Schwartzer.

Scottish referendum ruled out

"We have just seen what happens when politicians try to overturn a referendum result," senior cabinet minister Michael Gove told Sky News. "We were told in 2014 that would be the choice for a generation. We are not going to have an independence referendum in Scotland." "You cannot hold Scotland in the union against its will," SNP leader Nicola Sturgeon responded. "You cannot just lock us in a cupboard and turn the key and hope that everything goes away. If the U.K. is to continue, then it can only be by consent."
Go deeper: BlackRock examines what the Tory victory means for U.K. assets.

Fresh tensions over USMCA enforcement

Mexico is protesting the call for up to five U.S. attachés in Mexico to track the enforcement of its labor laws and ensure compliance with the new USMCA. The version of the deal President Trump sent to Congress on Friday to be ratified included the provision, but the draft that Mexico agreed to and signed did not, WSJ reports. Announcement coming? Mexico trade negotiator Jesús Seade traveled to Washington on Sunday to talk over the details with U.S. Trade Rep. Robert Lighthizer and other U.S. lawmakers.

Halting production of the 737 MAX?

Boeing (NYSE:BA) -2.4% premarket on reports that the planemaker could either suspend or cut back production of the 737 MAX after failing to meet its own deadline for FAA recertification for the grounded jet. A board decision, which could heap further pressure on airlines, could come today. Carriers are already paying higher rates to lease planes to make up for the loss in capacity, while delays to their expansion plans are holding back revenue growth, said Shukor Yusof of Endau Analytics in Malaysia.
Go deeper: Zoltan Ban talks the 'Greta Effect' in Boeing's long-term outlook.

Growing investor interest in space

Morgan Stanley held its second annual space summit last week, with analyst Adam Jonas telling CNBC the NYC event "tripled the investor count" compared to last year's conference, and "we ran out of room." "Investor interest in space is really, really growing," Jonas declared. "[But there are still] knowledge gaps and, in the public support for space, that's what had been lacking." The event featured multiple panels, including leaders from companies like Virgin Galactic (NYSE:SPCE), Viasat (NASDAQ:VSAT), Intelsat (NYSE:I), Maxar Technologies (NYSE:MAXR), Parsons (NYSE:PSN) and Jacobs Engineering (NYSE:J).
Go deeper: 'Virgin Galactic Establishes Its Trading Ranges' writes Cestrian Capital Research.

German car industry warned over Huawei

China's ambassador to Germany has threatened Berlin with retaliation if it excludes Huawei as a supplier of 5G wireless equipment, citing the millions of vehicles German carmakers sell in China. Chancellor Angela Merkel's government has been widely accused of bowing to Chinese pressure after she ruled out banning Huawei from the country’s 5G network. Lawmakers from her ruling coalition are seeking to overrule her decision with legislation that would impose a ban on "untrustworthy" 5G vendors.

DuPont nutrition unit to merge with IFF

DuPont (NYSE:DD) has reached a deal to combine its $26B nutrition business with International Flavors & Fragrances (NYSE:IFF), under a 55.4%-44.6% structure that will also see DuPont get a one-time cash payment of $7.3B. The company will be a major supplier of soy protein and binders for plant-based meat alternatives, as well as capsules for the pharma industry and scents for household cleaning products. It continues a multi-year strategy that saw the breakup of DowDuPont (after a merger in 2015) into three standalone companies - DuPont, Dow Inc. (NYSE:DOW) and Corteva (NYSE:CTVA). DD +1.9%; IFF -6% premarket.

'Frozen II' skates past the $1B mark

At the top of the box office for three weeks, Disney's (NYSE:DIS) Frozen 2 has lost its crown to Jumanji: The Next Level, but not before the film crossed the $1B milestone. The animated comedy is now the sixth Disney release of the year to join the billion-dollar club and the eighth title of 2019 thus far. Disney isn't done yet. This coming weekend will feature the debut of Star Wars: The Rise of Skywalker, another movie that's all but guaranteed to pass the $1B mark.

No deal at COP25

Sparring for two weeks in Madrid at the annual UN climate summit, delegates from nearly 200 nations failed to strengthen targets to cut emissions or to create a global carbon-trading system, two main goals of the 2015 Paris accord. Funding and financing to assist developing countries transition into less-polluting technology also proved contentious. The EU already committed to reaching net-zero emissions by 2050 on Friday, in an effort to counter the backtracking among major powers.

Today's Markets

In Asia, Japan -0.3%. Hong Kong -0.7%. China +0.6%. India -0.2%.
In Europe, at midday, London +2%. Paris +0.8%. Frankfurt +0.5%.
Futures at 6:20, Dow +0.2%. S&P +0.4%. Nasdaq +0.4%. Crude -0.1% to $60.03. Gold flat at $1481.70. Bitcoin -0.7% to $7051.
Ten-year Treasury Yield +2 bps to 1.84%

Today's Economic Calendar
8:30 Empire State Mfg Survey
9:45 PMI Composite Flash
10:00 NAHB Housing Market Index
4:00 PM Treasury International Capital

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