Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Mon, 6 Apr 2020, 8:53 AM

 

Wall Street Breakfast: Coronavirus Takes Bite Out Of Apple

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Apple slipped 3.3% premarket after becoming the first major U.S. company to say it won't meet its revenue projections for the current quarter due to the coronavirus outbreak. "Work is starting to resume around the country, but we are experiencing a slower return to normal conditions than we had anticipated," the company announced, adding that "stores which are open have been operating at reduced hours and with very low customer traffic." Apple (NASDAQ:AAPL) had forecast revenue of $63B-$67B for the fiscal second quarter ending in March, ahead of estimates of $62.4B.

Futures retreat

Nasdaq futures are down 0.8% on the warning from Apple, though the shockwaves weren't limited to the tech sector, with Dow and S&P 500 futures falling back 0.5%. Shanghai, meanwhile, inched up following a big day yesterday that saw shares recoup all their losses from a record $720B selloff earlier this month. Authorities in Beijing are responding to the coronavirus threat by ramping up the economic stimulus, and said they will accept tariff exemption requests on nearly 700 U.S. imports from March 2.
Go deeper: U.S. weighs limits to China's chip technology access.

'Severe' worker shortage

While about 90% of the 109 U.S. manufacturers in the Yangtze River Delta Economic Zone expect to resume production this week, 78% of them don't have enough staff to run at full speed due to travel restrictions and quarantine requirements. According to the survey by AmCham, nearly 60% of the firms expect demand to be lower than normal over the next few months, about half said their global supply chain had already been affected by the business shutdown, while almost a third of them will consider moving operations out of the country if the situation continues.

Major overhaul at HSBC

Facing substantial challenges in its key markets, HSBC (NYSE:HSBC) is cutting 35,000 jobs and $100B in assets over the next three years, and will incur $7.2B of costs because of the restructuring. "Around 30% of our capital is currently allocated to businesses that are delivering returns below their cost of equity," said interim CEO Noel Quinn, adding that net profit at the bank fell 53% to $5.97B in 2019. HSBC will also suspend buybacks for two years (but maintain its dividend) and close around a third of its 224 underperforming U.S. branches. HSBC -5% premarket.

Active consolidation

Amid an industry shift toward passive investing and unprecedented pressures on fees, active asset managers have been hunting for new sources of revenue and ways to slash expenses, such as mergers. The latest: Franklin Resources (NYSE:BEN) is reportedly nearing an all-cash deal for Legg Mason (NYSE:LM) that would value the latter at $50 per share, or a 23% premium to the company's closing price on Friday. A deal would clear up uncertainty that had shrouded Legg Mason's future for nearly a year since activist investor Trian Fund Management took a stake in the firm and secured representation on its board. LM +10.8% premarket.

Facebook regulation?

Mark Zuckerberg toured Brussels on Monday, meeting with senior EU officials over the way online content and his social network should be regulated. While most of the meetings took place behind closed doors, Thierry Breton, the French commissioner overseeing the bloc's data strategy, came out strongly against the plans. "It's not enough. It's too slow, it's too low in terms of responsibility and regulation," he said, following a weekend announcement from Zuckerberg that welcomed regulation but said the platform should be treated like a telco-newspaper hybrid. The case is significant, as Facebook (NASDAQ:FB) is the only U.S. tech giant that has escaped antitrust action or formal competition investigations by the EU.

NY won't appeal T-Mobile merger ruling

New York Attorney General Letitia James has decided not to appeal a federal judge's decision to allow T-Mobile (NASDAQ:TMUS) and Sprint (NYSE:S) to merge, removing another hurdle for the cell phone carriers' long-planned combination. "Instead, we hope to work with all the parties to ensure that consumers get the best pricing and service possible, that networks are built out throughout our state, and that good-paying jobs are created here in New York," she said. A spokeswoman for California AG Xavier Becerra, who also led the AG coalition suing to block the deal, said the state is still reviewing its options.

GM pulls out of Australia, NZ and Thailand

Continuing a years-long global restructuring, General Motors (NYSE:GM) said it will wind down sales, design and engineering operations in Australia and New Zealand, and retire the Holden brand by 2021. The company also announced that it had signed a binding term sheet with Great Wall Motor (OTCPK:GWLLY) to purchase GM's Rayong vehicle manufacturing facility in Thailand and would withdraw Chevrolet from the domestic market by the end of 2020. GM expects to take $1.1B in charges mostly in the first quarter as a result of the actions, including $300M in cash.

Court halts forest clearance for Giga Berlin

The Higher Administrative Court for Berlin-Brandenburg has ordered Tesla (NASDAQ:TSLA) to stop clearing forest land near Berlin to build its first European Gigafactory until it considers an environmental group's appeal. While a lower court in Germany ruled last week that Tesla could clear the trees for its factory, a final construction permit has not yet been issued. Germany's environment ministry had only given Tesla permission to begin work "at its own risk," and complaints against the factory can still be filed up until March 5.
Go deeper: Tesla explores cobalt-free batteries.

Bombardier scales back to focus on business jets

Alstom (OTCPK:ALSMY) has reached a $8.2B deal to acquire Bombardier's (OTCQX:BDRAF, OTCQX:BDRBF) train business as the latter looks to radically shrink its business amid production problems, order delays and rising costs. The planned sale would more than halve Bombardier's current debt of $9B and reduce the once-sprawling transportation manufacturer to a business jet maker of brands such as the Challenger, Learjet and Global aircraft. In 2017, Alstom tried to merge with the train business of Siemens (OTCPK:SIEGY), but the European Commission blocked the proposed tie-up two years later.

Today's Markets

In Asia, Japan -1.4%. Hong Kong -1.5%. China +0.1%. India -0.4%.
In Europe, at midday, London -1%. Paris -0.5%. Frankfurt -0.8%.
Futures at 6:20, Dow -0.5%. S&P -0.5%. Nasdaq -0.8%. Crude -1.1% to $51.46. Gold +0.3% to $1590.50. Bitcoin -0.9% to $9728.
Ten-year Treasury Yield -5 bps to 1.54%

Today's Economic Calendar

8:30 Empire State Mfg Survey
10:00 NAHB Housing Market Index
2:00 PM Fed's Kashkari Speech
4:00 PM Treasury International Capital

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