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Wall Street Breakfast

Author: bmotrader   |   Latest post: Wed, 3 Jun 2020, 11:48 AM

 

Wall Street Breakfast: Hopes Of A Coronavirus Slowdown

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In the latest bout of volatility, U.S. stock futures were nearly 'limit-up' at one point overnight after indexes slipped lower on Friday following the end of a record U.S. job growth streak. The latest? President Trump expressed hope the country was seeing a "leveling off" of the crisis, while VP Mike Pence said the coronavirus task force was seeing signs of virus cases "stabilizing." Equities aren't the only asset class experiencing wild swings. The energy sector has seen a chaotic last few days on reports of an oil production cut deal (more on that below).

Hope of rate peak

Italy posted its lowest daily coronavirus death toll in two and a half weeks, Spain's number fell for a third straight day, while fatalities dropped in the U.K. and France. In the U.S., New York reported its first decline in daily deaths, though Governor Andrew Cuomo said it was too early to tell if it's a plateau or just a blip. "Case growth deceleration in that group can help put further downward pressure on implied equity volatility and blunt the nature of a retest of the March equity price low," according to JPMorgan. "We suspected that markets could anchor to those statistics given the enormous uncertainties associated with a pandemic. So far, that has proved to be the case."
 

On the economy

St. Louis Federal Reserve President James Bullard does not believe the U.S. economy or job market is in "free fall" despite a 32% unemployment projection made in late March. "In some ways, the uptake on the unemployment insurance program is a good thing because it means you're getting the transfers to the people that are being disrupted by this health-ordered shutdown," he said told CBS's Face the Nation. "There's nothing wrong with the economy itself."
 

Oil news

Crude futures opened the session Sunday night by falling 9.2% to $25.72 per barrel after a delayed OPEC+ meeting signaled that a production agreement between Saudi Arabia and Russia may not be as imminent as President Trump suggested last week. Moscow and Riyadh are still "very, very close" to a deal on production cuts, according to Kirill Dmitriev, CEO of Russia’s sovereign wealth fund RDIF. The meeting is now likely to be held on Thursday, while Trump has suggested he could put crude import tariffs in place to "protect our tens of thousands of energy workers."

Majors seek to preserve dividends

Some of the world's biggest oil companies have raised more than $32B in recent weeks to ensure they have the cash to deal with the economic effects of the coronavirus, FT reports. Exxon Mobil (NYSE:XOM), Royal Dutch Shell (RDS.A, RDS.B), Equinor (NYSE:EQNR), Total (NYSE:TOT) and BP (NYSE:BP) have sold debt to raise dollars or euros since mid-March, while some have obtained new multibillion-dollar credit facilities. They're also paring capex, reducing costs, pausing stock buybacks and delaying project approvals.

Security first

"If we mess up again, it's done," Zoom (NASDAQ:ZM) CEO Eric Yuan said in an interview with WSJ. "I really messed up as CEO, and we need to win their trust back. This kind of thing shouldn't have happened." He's referring to the practice of "Zoombombing" - where people gain unauthorized access to a meeting - while user data has also been vulnerable to outsiders' exploitation. "I feel an obligation to win the users' trust back," Yuan added. "We need to slow down and think about privacy and security first. That's our new culture."

Turmoil in the mortgage market

Wells Fargo (NYSE:WFC) will reportedly only refinance jumbo mortgages with clients who hold at least $250K in liquid assets at the bank. In other words, a customer who already has a jumbo loan - which are too big to be sold to Fannie or Freddie etc. - can't refinance to take advantage of lower rates unless they keep their funds at the bank. Since 2018, the Fed imposed a cap on Wells Fargo's total assets in the wake of the fake-accounts scandal.
 

Diverging takes on monetary financing

The Bank of England won't resort to printing money to help fund government spending to mitigate the impact of the coronavirus. "Using monetary financing would damage credibility on controlling inflation," according to BOE Governor Andrew Bailey. He said the creation of central bank reserves to purchase £200B of bonds aren't being created to pay the government's deficit, but are the "consequence of independent central bank policy actions to deliver monetary and financial stability.

Big Tobacco joins hunt for vaccine

British American Tobacco (NYSE:BTI) is developing a potential vaccine grown in tobacco plants, while Medicago, a biotech firm partly owned by Philip Morris (NYSE:PM), is pursuing a similar effort, WSJ reports. The success of BAT's approach will depend on whether its product elicits the appropriate immune response to protect against future infection with the new coronavirus, said Beate Kampmann, director of the London School of Hygiene and Tropical Medicine’s Vaccine Centre. "What's promising is the scalability," she added.
 

End to sports hiatus

Speaking by telephone with league commissioners on Saturday, President Trump pushed for live sports to end their coronavirus interruption "soon, very soon." He wants to see fans back in the stadiums by August and September and for live sports to start without fans much sooner than that, according to a White House official. A few of the commissioners even suggested mid-to-late May as a starting point for live events without spectators. Related: DIS, T, CMCSA, VIAC, NKE, UA, LULU, FL, COLM, TSG, CHDN, SBGI, MSG, WWE

Today's Markets

In Asia, Japan +4.2%. Hong Kong +2.2%. China closed. India closed.
In Europe, at midday, London +2%. Paris +3.6%. Frankfurt +4.3%.
Futures at 6:20, Dow +3.7%. S&P +3.7%. Nasdaq +4%. Crude -4% to $27.21. Gold +1.1% to $1664.20. Bitcoin +5.2% to $7147.
Ten-year Treasury Yield +7 bps to 0.66%

Today's Economic Calendar
12:30 PM TD Ameritrade IMX

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