Highlights

Wall Street Breakfast

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

 

Wall Street Breakfast: Bear Over Or Bear Trap?

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Stock futures are pointing to another opening jump in early morning trade, up about 4%, following a steep rebound in the previous session that saw major U.S. indexes rally more than 7%. In a press conference Monday, President Trump said there's "tremendous light at the end of the tunnel" with ten different therapeutic agents in active trials amid a slew of coronavirus headlines pointed to a potential stabilization in the U.S. The Federal Reserve also moved to bolster a new small business lending program by allowing financial institutions to turn those loans over to the U.S. central bank for cash.

DAX exits bear market; S&P 500 to follow

Building on recent gains, Germany's benchmark DAX Index soared another 4.6% overnight to technically leave a bear market it entered in March. A bounce for the export-heavy gauge, which fell as much as 40% during the recent selloff, comes amid signs that infection rates in parts of Europe may be nearing a peak. "It makes sense to see the DAX gauge to do better," said Frederik Hildner, a portfolio manager at Salm-Salm & Partner. "However, not retesting the lows in the absence of major medical progress would simply be astonishing to me."
 

Brexit trade deal is getting harder

British Prime Minister Boris Johnson received oxygen support overnight, but was not put on a ventilator, after being moved to intensive care as his coronavirus symptoms worsened. Foreign Secretary Dominic Raab, another supporter of the "Vote Leave" campaign, is taking the helm for the time being, in the latest turn in Brexit developments. Many are now questioning whether the U.K. will be able to meet that deadline of end 2020 to set a free-trade deal with the EU, after which Britain said it would leave the single market with no deal or revert to WTO rules.

Mega stimulus

Japan is finalizing plans for a massive stimulus package worth ¥108T ($990B) - equal to 20% of its economic output - to counter the fallout from the coronavirus pandemic. That exceeds 11% of output for the U.S. stimulus package laid out by President Trump and 5% for that of Germany. "I think the coronavirus has given a final blow to Japan's economy," said Jun Saito of the Japan Center for Economic Research. GDP already started to slow down since late 2018, and the impact of Sino-U.S. trade tensions was further exacerbated by a consumption tax rate hike in Oct. 2019 (the postponement of the Tokyo Olympics also didn't help the situation).

Slashing crude production

Plunging oil demand and dwindling storage options not a coordinated supply cut with the Saudis and Russia, will force U.S. producers to voluntarily cut production 30%-35%, Continental Resources (NYSE:CLR) Executive Chairman Harold Hamm told S&P Global Platts. President Trump suggested last week that American producers might agree to curtailments to help break the oil price war between Riyadh and Moscow, but "U.S. producers don't need to coordinate between themselves," Hamm said. "That's unnecessary. Each one of them will have his own situation to deal with."

Easing listing rules

While the SEC rejected its initial proposal, the New York Stock Exchange (NYSE:ICE) is again in talks with the regulator to temporarily ease its listing requirements. That would take the strain off companies that may have fallen out of compliance due to the recent market rout. The last time the exchange temporarily suspended the ongoing listings standards - which stipulate a share price of more than $1 and an average global market cap above $50M for 30 consecutive trading days - was during the financial crisis in 2009.
 

Luckin scandal

Banks stand to lose more than $100M from a loan they made to the chairman of Luckin Coffee (NASDAQ:LK), whose share price plunged more than 80% last week after the Chinese coffee chain said much of its 2019 sales were fabricated. A margin call earlier against Chairman Charles Zhengyao Lu and Chief Executive Jenny Zhiya Qian led to the loss of control of 515,355,752 class B shares and 95,445,000 class A shares. "In hindsight, Wall Street probably shouldn't have let Luckin Coffee's chairman have more or less unfettered access to half a billion dollars with now-plunging Luckin shares as collateral," tweeted WSJ's Jonathan Cheng.

Forwarding limits

"We are now introducing a limit so that messages can only be forwarded to one chat at a time," WhatsApp (NASDAQ:FB) said in a new blog post. "We believe it's important to slow the spread of these messages down to keep WhatsApp a place for personal conversation" and curb the "spread of misinformation." Since last year, users have been able to forward a message to only five individuals or groups at once, down from an earlier limit of 20. The app also labeled any messages that had been forwarded more than five times.

Social distance tracking

Amazon (NASDAQ:AMZN) will issue a written warning to warehouse workers violating social distancing guidelines, according to a document viewed by CNBC. The second violation could result in the employee being fired. In addition to the new rules, Amazon said it has instituted temperature checks at its facilities, taken steps to increase cleaning at its warehouses and has supplied workers with face masks, sanitizer and disinfectant wipes.

Trump reaches "amicable" agreement with 3M

"So the 3M saga ends very happily," President Trump concluded at a White House press briefing on the coronavirus. Under the terms of the new deal, 3M (NYSE:MMM) will import 166.5M respirator masks to the U.S. over the next quarter, supplementing the 35M masks 3M produces domestically each month. "I want to thank President Trump and the Administration for their leadership and collaboration," 3M CEO Mike Roman said in the statement.

Today's Markets

In Asia, Japan +2%. Hong Kong +2.1%. China +2.1%. India +9%.
In Europe, at midday, London +3.9%. Paris +3.3%. Frankfurt +4.2%.
Futures at 6:20, Dow +4.1%. S&P +3.6%. Nasdaq +3.2%. Crude +3.7% to $27.05. Gold +0.4% to $1700.90. Bitcoin +4.1% to $7407.
Ten-year Treasury Yield +7 bps to 0.74%

Today's Economic Calendar
8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
3:00 PM Consumer Credit

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