Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 10 Jul 2020, 7:55 AM


Wall Street Breakfast: Trouble Brewing Over Digital Taxes

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Things are escalating quickly on the digital tax front after the U.S. pulled out of international talks on the matter, saying the talks had failed to make any progress. France called the withdrawal a "provocation" and said it would apply the duties regardless, increasing the likelihood of a fresh trade and tariff dispute. Paris suspended its national digital tax earlier this year as part of a truce with the U.S., and in return, Washington held off on sanctioning French imports. At issue are current rules that base taxation on where a company’s value is generated, not where its customers are located, which can prove tricky in the digital age.

Central bank day in Europe

The Swiss National Bank stuck to its ultra-expansive monetary policy and kept in place negative interest rates, while the Norges Bank reaffirmed rates will remain at zero for the next couple of years. Decision day at the Bank of England will likely result in another bond buying program of at least another £100B, to complement the £200B stimulus announced in March, while there's been some talk that the BOE could impose yield-curve control. Big action is also expected after data showed U.K. inflation slowing to a quarter of the BOE's target in May, dampened by coronavirus lockdowns.

Jobless claims

Futures wavered between slight gains and losses overnight as investors track an uptick in new COVID-19 cases against the reopening of the economy. "Markets are probably going to remain range-bound here until we see some sort of significant breakthrough either on the medical front or on the economic front," said David Lebovitz, global market strategist at J.P. Morgan Asset Management. New jobless claims data are set to be published this morning, offering the latest update on the pace of the labor market's recovery. Economists expect a total of 1.3M new filings for the week ending June 13, a decline from 1.54M from the previous week and the 11th straight weekly drop since late March.

Hertz halts share plan

Bankrupt Hertz (NYSE:HTZ) has suspended a controversial plan to sell up to $500M in shares after the SEC voiced concern and launched a review of the deal. The rental car company wanted to use the sale to leverage interest in its stock, which had seen volatile trading since its bankruptcy filing. Hertz felt it was a better option than obtaining debtor-in-possession financing, a loan that the company would need to pay back.

Brand name and logos

As a debate over racial inequality ensues nationwide, PepsiCo (NASDAQ:PEP) is retiring the Aunt Jemima brand due to its racial stereotype that dates back to 1889. "While work has been done over the years to update the brand in a manner intended to be appropriate and respectful, we realize those changes are not enough," the company wrote in a statement. It's possible the clock could be ticking for ConAgra Brands' (NYSE:CAG) Mrs. Butterworth's syrup, while Mars Inc. said it will be "evaluating all possibilities" for its Uncle Ben's brand.

No overseas flights until the fall

Qantas Airways (OTCPK:QABSY) has canceled all international flights until late October - except for those to New Zealand - after the Australian government said the country's borders are likely to remain closed until 2021. Already 11 airlines, including Virgin Australia, have collapsed and many others are on the brink. Governments around the globe have poured billions into the industry to keep some of the largest names in aviation alive as the industry heads for its worst year on record.

JD.com raises nearly $4B in Hong Kong debut

Shares of JD.com (NASDAQ:JD) soared 5.7% at the open on their first day of trading in Hong Kong, in a secondary listing that will give the e-commerce giant proceeds of 30.05B Hong Kong dollars ($3.87B). It follows similar listings in the financial hub by rival Alibaba (NYSE:BABA) and gaming firm NetEase (NYSE:NETS) as rising U.S.-China tensions lead to more scrutiny of foreign firms listed on Wall Street. What's JD.com doing with the cash? It intends to "invest in key supply chain based technology initiatives to further enhance customer experience while improving operating efficiency."

Spotify adds a Kardashian

After a 7% advance on Wednesday, Spotify (NYSE:SPOT) shares are up marginally in premarket trade, but have tacked on 17 cents to hit $200 per share for the first time ever. Just weeks after locking down Joe Rogan in a deal worth more than $100M, Spotify is signing with Kim Kardashian West for a criminal-justice podcast, a topic that has come to the fore of the national conversation in recent weeks. It's part of a broader push by Spotify to fortify its business with nonmusical content, in part by investing in exclusive deals.

Google roundup

Australia's competition authority has become the first global regulator to voice concerns about Google's (GOOG, GOOGL) $2.1B purchase of Fitbit (NYSE:FIT) as it may give the tech giant too much of people's data and raise barriers to entry (a final decision will come on August 13). A new security weakness was also seen in Google Chrome due to a massive spyware effort that attacked users through extensions. Regarding diversity: Google announced a new hiring goal to dramatically boost the number of black executives, and by 2025, it intends to have 30% more of its leaders coming from underrepresented groups.

Saving the season

The NBA is looking to restart the 2019-2020 season in what is being described as "a bubble" at Disney's (NYSE:DIS) Wide World of Sports complex. Players will use "smart rings" that can reportedly predict the onset of coronavirus symptoms, and will be subject to extensive testing, quarantines and strict rules pertaining to social behavior. They'll also be given access to a Disney MagicBand - that will be required to wear at all times (except during workouts and games) - to check in at security checkpoints and coronavirus screenings. In baseball news, the MLB appears to be making headway towards resuming play for 2020, though tensions remain over the length of the season.

Today's Markets

In Asia, Japan -0.5%. Hong Kong -0.1%. China +0.1%. India +2.1%.
In Europe, at midday, London -0.2%. Paris -0.6%. Frankfurt -0.5%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq +0.1%. Crude +2% to $38.72. Gold -0.1% to $1733.20. Bitcoin -0.5% to $9447.
Ten-year Treasury Yield -2 bps to 0.71%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Fed's Kashkari: "Higher Ed: Who Pays?"
12:15 PM Fed's Mester Speech
4:30 PM Money Supply
4:30 PM Fed Balance Sheet


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