Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 14 Aug 2020, 7:19 AM


Wall Street Breakfast: U.S.-China Trade Deal Reveal

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Despite the signing of a "Phase One" trade deal this morning, it looks like some tensions between the U.S. and China will persist, triggering stocks to dip across the globe overnight. Existing tariffs on Chinese imports will remain until the completion of a second phase trade agreement, meaning the duties are likely to stay in place until after the American presidential election in November. The period of review is intended to give the Trump administration time to verify China's adherence to the terms of the pact, which will likely require Beijing to buy at least $200B of goods and services over two years, and to go beyond prior commitments made on IP and technology theft.

Day 2 of earnings season

Get ready for another slew of bank results. Scheduled to report today are Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), U.S. Bancorp (NYSE:USB) and PNC Financial (NYSE:PNC). A healthy U.S. economy pushed up Q4 profits at JPMorgan (NYSE:JPM) (+21% to $8.52B) and Citigroup (NYSE:C) (+15% to $4.98B) on Tuesday - allowing them to grow even despite falling interest rates - while escalating expenses and costs weighed on Wells Fargo (NYSE:WFC).

Repo interventions continue

Although the year-end cash squeeze passed without any jump in borrowing costs, the New York Fed plans to maintain its interventions in short-term funding markets at an elevated level. On Tuesday, banks gobbled up $82B in temporary liquidity in the form of overnight and two-week repo loans. "History has shown us that whenever these sorts of programs are introduced, they tend to last longer than what the Fed expects," said Nick Maroutsos, co-head of global bonds at Janus Henderson, comparing the case to the unwinding of QE.

Boeing hands over planemaker crown

Boeing (NYSE:BA) has officially lost the title of world's largest planemaker as the 737 MAX grounding sent the company to its biggest defeat in its decades-long duel with Airbus (OTCPK:EADSY). Deliveries tumbled to just 380 jetliners last year, less than half of Airbus's tally of 863 planes. It also posted negative orders for the first time in at least 30 years, losing orders for 87 commercial airplanes for all of 2019, compared with the 768 orders of its French rival.

Amazon lifts ban on FedEx Ground

Weeks after the Christmas rush, Amazon (NASDAQ:AMZN) is saying FedEx (NYSE:FDX) service levels have improved. The retail giant will now allow its third-party merchants to once again use FedEx's Ground network to ship orders placed under Amazon’s Prime membership program. Amazon instituted the ban in mid-December due to slipping on-time marks for Prime orders, which generally are guaranteed to arrive within a day or two.

Media access to market data

The Trump administration plans to restrict the news media's ability to prepare advance stories on sensitive U.S. economic data such as inflation and employment, Bloomberg reports. "Lockups" lasting 30 to 60 minutes are currently hosted in Washington for major reports, where journalists receive data in a secure room and transmit them when connections are restored at release time. The change, which could remove computers from the lockup room, would transform how critical market-moving information is distributed to investors and the public.

Reining in Huawei dominance

A bipartisan group of U.S. senators is proposing the Utilizing Strategic Allied Telecommunications Act, which would steer more than $1B toward companies developing 5G to counter advances from China's Huawei. The money would come from auctions of wireless-spectrum licenses by the FCC, as well as a Multilateral Telecommunications Security Fund. A draft version of the law didn’t name specific companies, but Huawei's closest rivals in the cellular radio market are Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK).

Bezos offers an olive branch

The 21st century is "going to be the Indian century," Jeff Bezos said at a company event in New Delhi, amid local criticism from small business owners over unfair business practices. He also detailed plans for Amazon (AMZN) to invest $1B in digitizing small- and medium-sized businesses in India and expects to export $10B worth of India-made goods by 2025. The industry alleges Amazon is driving them out of business by offering sharply discounted products and favoring select big sellers on its platform.

Worrying sign for the eurozone?

Germany's GDP growth expanded at just 0.6% in 2019, ending a year in which manufacturing took a battering and the country almost tipped into recession. The troubles are far from over as the domestic car industry faces a critical period as they push sales of electric vehicles, while manufacturers are under pressure to adapt to climate change standards. Trade tensions and continued risk of a disruptive Brexit are also weighing on sentiment and momentum.

More trade talk

Senate Majority Leader Mitch McConnell expects his chamber to approve the USMCA trade deal this week after the House passed it last month. The U.S. has also cleared procedural hurdles to slap levies on $2.4B of French goods over a digital tax the country has adopted, but will hold off as Paris and Washington try to resolve the issue by next week when they meet on the sidelines of the World Economic Forum in Davos.

Tuesday's Key Earnings
Citigroup (C) +1.6% gaining in consumer, i-banking units.
Delta Air Lines (NYSE:DAL) +3.3% following an earnings topper.
JPMorgan (JPM) +1.2% impressing on NII, trading revenue.
Wells Fargo (WFC) -5.4% on escalating expenses, weak fee income.

Today's Markets

In Asia, Japan -0.5%. Hong Kong -0.4%. China -0.5%. India -0.2%.
In Europe, at midday, London +0.2%. Paris -0.1%. Frankfurt -0.1%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude -0.4% to $58.00. Gold +0.6% to $1554. Bitcoin +3.1% to $8746.
Ten-year Treasury Yield -3 bps to 1.79%

Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Empire State Mfg Survey
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
11:00 Fed's Harker: “Monetary Policy Normalization: Low Interest Rates and the New Normal”
12:00 PM Fed's Kaplan Speech
2:00 PM Fed's Beige Book

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