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Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 28 Feb 2020, 7:47 PM

 

Wall Street Breakfast: Virus Fears Spread To Global Markets

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Stocks dropped across the globe following a big selloff in Asia on concerns that a mysterious coronavirus emanating from China will spread through the region as travel heats up for the Lunar New Year holidays. The disease has already infected 224 people and killed six, and is reminiscent of the SARS epidemic that subtracted an estimated 0.8 percentage point from GDP growth in China in 2003. The World Health Organization will meet tomorrow to discuss whether to declare the outbreak an international public health emergency.

Davos 2020

The world's political and business leaders, plus the usual smattering of celebrities, are gathering for the World Economic Forum in the Swiss Alpine resort of Davos. The official theme of the 2020 meeting is "Stakeholders for a Cohesive and Sustainable World." According to forum founder and executive chairman Klaus Schwab, "business has now to fully embrace stakeholder capitalism, which means not only maximizing profits, but use their capabilities and resources in cooperation with governments and civil society to address the key issues of this decade."
Go deeper: IMF predicts sluggish global growth at Davos.

Digital tax truce

Averting another trade war - for now - the U.S. and France have agreed to put aside their digital tax dispute until the end of 2020. Negotiations at the OECD will continue during that period as France postpones the levy and the U.S. delays retaliatory tariffs. The measure had imposed a 3% tax on digital revenues of companies like Google (GOOG, GOOGL), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) - which have more than €750M in global revenue, including at least €25M in France - while the U.S. had threatened to place duties of up to 100% on $2.4B of French imports.

Netflix, IBM report earnings

Wall Street analysts are expecting Netflix (NASDAQ:NFLX) to have earned $0.52 per share (+73.3% Y/Y) in the fourth quarter and will pay close attention to subscriber growth in light of increased competition in the streaming space. Shares of Netflix have soared 15% in the past three months despite the launch of Disney+ in mid-November. IBM (NYSE:IBM) will also report results after the bell and will likely be asked about its cloud progress and Red Hat deal during a conference call with analysts.
Go deeper: David Lerner bets against Netflix going into earnings.

Boeing looks to borrow

Bloomberg reported that Boeing (NYSE:BA) is close to agreeing to a two-year credit facility with a group of banks led by Citigroup, while CNBC said the borrowing commitment could be as high as $10B. The figure would likely match the company's estimate for costs and compensation linked to the 737 MAX's two fatal crashes in 2017 and 2018 and the aircraft's global grounding. Boeing is also likely to take a significant MAX-related charge as part of its Q4 earnings report, scheduled for Jan. 29. BA -0.6% premarket.
Go deeper: Embraer ties new turboprop program to Boeing deal.

Human spaceflight coming back to U.S.

Since the end of the Space Shuttle program in 2011, the U.S. has paid Russia to fly NASA's astronauts to the International Space Station at a cost of as much as $86M per seat. That's about to change as SpaceX (SPACE) completed the in-flight abort test of its Crew Dragon capsule. The inaugural launch of NASA astronauts will likely take place in the second quarter of this year, according to CEO Elon Musk, with NASA expected to pay about $55M per astronaut to fly to the ISS.

Path to profitability

Uber (NYSE:UBER) has agreed to sell its Indian food delivery unit to local rival Zomato (FOOD), a deal that will give it a 9.99% stake in the latter (worth around $300M). CEO Dara Khosrowshahi has said the company would seek to be the No. 1 or No. 2 food delivery operator in any market where it competes, but if it can't reach that level, he would exit the market. Uber discontinued food delivery operations in Vienna in March, and in September, it pulled out of South Korea.
Go deeper: 'Uber: One Step From Greatness' by Bill Maurer.

Megxit deal

Are Prince Harry and Meghan Markle following the Obamas to Netflix (NFLX)? Ted Sarandos, Netflix’s chief content officer, said he would be interested in working together with the Duke and Duchess of Sussex, telling the Press Association over the weekend: "Who wouldn't be interested?" A video also emerged last week of Harry highlighting his wife's talents to Disney (NYSE:DIS) CEO Robert Iger during the European premiere of The Lion King in July.

Amazon Palm

Amazon (AMZN) is working to allow customers to connect their credit card information to their hands, WSJ reports, creating retail checkout terminals that could work with the technology. The company recently began partnering with Visa (NYSE:V) to test out transactions, and has discussed the project with Mastercard (NYSE:MA), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC) and Synchrony Financial (NYSE:SYF). Patent ready... Amazon has even filed an application for what it described as a "non-contact biometric identification system" that includes "a hand scanner that generates images of a user's palm."

Battle over facial recognition technology

Alphabet (GOOG, GOOGL) CEO Sundar Pichai has come out in support of an EU proposal for instating a temporary ban (for up to five years) on the use of facial recognition in public areas until officials beef up privacy regulations. Microsoft (NASDAQ:MSFT) President Brad Smith, on the other hand, has warned against pumping the brakes so quickly, arguing instead for methodical reform that addresses the issue "with a scalpel instead of a meat cleaver." While U.S. officials have adopted a less interventionist approach to the technology, their EU counterparts seem more concerned with protecting citizens' data and privacy.

Today's Markets

In Asia, Japan -0.9%. Hong Kong -2.8%. China -1.4%. India -0.5%.
In Europe, at midday, London -1%. Paris -0.9%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.3%. S&P -0.4%. Nasdaq -0.5%. Crude -1.3% to $57.85. Gold -0.4% to $1554.90. Bitcoin +0.1% to $8642.
Ten-year Treasury Yield -3 bps to 1.8%

Today's Economic Calendar

No event scheduled

 

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