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Wall Street Breakfast

Author: bmotrader   |   Latest post: Thu, 2 Jul 2020, 7:42 AM

 

Wall Street Breakfast: Protests Add To Market Uncertainty

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The worst civil unrest in decades erupted across the nation over the weekend as protests turned violent following the death of George Floyd in police custody. "The direct economic impact of the protests is small, at least so far," said Mark Zandi, chief economist of Moody's Analytics, but warned that the near-term damage to consumer and business sentiment may be more extensive. Wavering between gains and losses overnight, U.S. stock index futures have turned red again, as the mass demonstrations could also cause a major setback for controlling the coronavirus.

Relief rally in Asia

Things fared a lot better over in the Far East, with shares in Hong Kong and Shanghai surging 3.4% and 2.2%, respectively. Hopes of a V-shaped recovery were on display as China's manufacturing activity unexpectedly expanded in May (Caixin/Markit's PMI came in at 50.7). There was also relief that while President Trump began the process of ending special U.S. treatment for Hong Kong, the measures fell short of withdrawing from a Phase One trade agreement or issuing sanctions directly against China.

Retail closures

American retailers already hit by the coronavirus pandemic have shuttered stores nationwide as violent protests included looting in many U.S. cities. Target (NYSE:TGT), Walmart (NYSE:WMT), Apple (NASDAQ:AAPL), Nike (NYSE:NKE), Nordstrom (NYSE:JWN) and Whole Foods (NASDAQ:AMZN) closed hundreds of locations and adjusted store hours to accommodate citywide curfews. U.S. retail sales already posted record declines due to COVID-19, putting the economy on track for its biggest contraction since the Great Depression.

Giant leap for the space industry

Nineteen hours after SpaceX's (SPACE) Falcon 9 rocket lifted off Saturday from Florida on a historic voyage, the Crew Dragon capsule docked with the International Space Station. It was the first-ever private spacecraft to attain orbit with people on board and marks the final test flight before the company begins flying astronauts every few months. SpaceX competitor Boeing (NYSE:BA) even congratulated the company, saying the mission to the ISS "marked a new era in human spaceflight. Welcome, #CrewDragon!"

OPEC+ meeting may happen Thursday

Russia has no objection to the next OPEC+ meeting being brought forward to June 4 from the following week, sources told Reuters, in a move that could facilitate oil sales for countries like Saudi Arabia, Iraq and Kuwait. "We might see a cautious pullback in (crude) prices given that downstream prices haven't caught up... but if OPEC+ does come up with a three-month extension, there's a possibility that prices may hit the $40 level," said OCBC economist Howie Lee. North America supply is also falling as data from Baker Hughes showed that the U.S. and Canada rig counts dropped to a record low in the week to May 29.

Social media showdown

As President Trump wages war with Twitter (NYSE:TWTR), Facebook (NASDAQ:FB) appears to be keeping diplomatic relations with the White House. CEO Mark Zuckerberg held a call with Trump on Friday, in a discussion that was described by both sides as productive, Axios reports. "I disagree strongly with how the President spoke, but I believe people should be able to see this for themselves, because ultimately accountability for those in positions of power can only happen when their speech is scrutinized out in the open," Zuckerberg later wrote in a Facebook post.

Strong encryption

Zoom Video (NASDAQ:ZM) has announced plans to strengthen encryption on video calls made by paying clients and institutions such as schools, but not for users of its popular free accounts. The plan is drawing mixed reactions from privacy advocates, with some saying Zoom should offer protected video more widely. From a business perspective, it's hard to make money when offering a sophisticated and expensive encryption service for free (especially when the service is the company's only business).

Four CEOs in less than four years

Reports suggest that Peter Harf, Coty's (NYSE:COTY) current chairman, will also assume the CEO role as soon as today. The surprise move will leave the company's fortunes directly in the hands of its largest shareholder, JAB Holding, of which Harf is one of two managing partners. Coty previously announced in February that Jimmy Choo boss Pierre Denis would replace CEO Pierre Laubies this summer after the conclusion of a strategic review of its professional beauty unit.

Today's Markets

In Asia, Japan +0.8%. Hong Kong +3.4%. China +2.2%. India +2.7%.
In Europe, at midday, London +1%. Paris +1%. Frankfurt closed.
Futures at 6:20, Dow -0.3%. S&P -0.3%. Nasdaq -0.6%. Crude -0.9% to $35.16. Gold -0.1% to $1749.40. Bitcoin -0.4% to $9525.
Ten-year Treasury Yield +1 bps to 0.66%

Today's Economic Calendar

9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending

 

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