Wall Street Breakfast

Author: bmotrader   |   Latest post: Mon, 3 Aug 2020, 9:54 AM


Wall Street Breakfast: USMCA Trade Deal Replaces NAFTA

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The U.S.-Mexico-Canada Agreement includes tighter North American content rules for autos, new intellectual property protections, prohibitions against currency manipulation and new laws for digital commerce. American companies can also launch disputes with Canada and Mexico over access to dairy, energy and the biotech market. It comes as all three countries are mired in a deep recession, cutting their April goods trade flows - normally about $1.2T annually - to the lowest monthly level in a decade. USMCA will replace the North American Free Trade Agreement, or NAFTA, which took effect in 1994 and has been lambasted by President Trump as the "worst trade deal ever made."

Where are stocks headed for the third quarter?

Many traders and investors have been asking that question over the past few weeks, but the moment has finally arrived. So far equities appear to be starting on a tepid note, with futures largely unchanged for most of the night following the best three months in more than 20 years (the massive rally has been fueled by the Fed's aggressive support for financial markets and signs of an early recovery in economic activity). Later in today's session we'll get minutes of the FOMC's most recent monetary policy meeting, when the central bank signaled plans to keep rates close to zero for years, as well as the latest monthly data on U.S. manufacturing.

Record amount of unemployment benefits

The U.S. Treasury paid $108.5B in unemployment benefits in June, the highest amount for a single month since the COVID-19 pandemic started. For the government's fiscal YTD, it has paid out $267.2B. The average weekly claim amounts to a little less than $1,000, which includes a temporary $600 pandemic benefit that is set to expire on July 31. If the benefit is extended, payouts could continue to climb into August and beyond.

Sweden launches probe of controversial COVID-19 response

Taking a different path compared to most European countries, Sweden has kept much of its society open by recommending social distancing and self-isolation rather than imposing a lockdown. The strategy has resulted in a much higher death rate than in neighboring countries, according to Johns Hopkins University data. Sweden's top epidemiologist, Anders Tegnell, has defended the strategy, arguing that it's the only practical way to handle the pandemic in the long run, and that lockdowns come at an avoidable cost and won't prevent the virus from returning.

New York adds eight states to quarantine list

"You must self-quarantine for 14 days," New York Governor Andrew Cuomo told prospective travelers to the Empire State. The list of those so-warned now includes California, Georgia, Iowa, Idaho, Louisiana, Mississippi, Nevada, and Tennessee. New U.S. coronavirus cases rose by more than 47,000 on Tuesday according to a Reuters tally, the biggest one-day spike since the start of the pandemic, while Dr. Anthony Fauci warned lawmakers that daily COVID-19 infections could climb to 100,000.

Midas Touch

Gold's rally continued yesterday as the yellow metal changed hands above $1,800 an ounce. The safe haven asset last traded above that level in 2011, and bulls are hoping history doesn't repeat (the cross over $1,800 then was roughly the peak of a major, multi-year run higher - four years later it fell to just above $1,100). Demand appears to be driven by fresh coronavirus outbreaks, as well as a need for inflation hedges due to expansionary monetary policy.

First arrest under new security law

"#BREAKING: A man was arrested for holding a #HKIndependence flag in #CausewayBay, Hong Kong, violating the #NationalSecurityLaw. This is the first arrest made since the law has come into force," according to a tweet from the Hong Kong Police Force. The new law stipulates that a person who "undermines national unification" of Hong Kong with the mainland will face punishment of up to life in prison, depending on the severity of the offense. The development is likely to add to the recent tensions seen between the U.S. and China. Overnight, the FCC officially designated Huawei and ZTE (OTCPK:ZTCOY) as national security threats to "America's communications networks - and to our 5G future."

...And Beyond

Beyond Meat (NASDAQ:BYND) is entering grocery stores in mainland China through a partnership with Alibaba (NYSE:BABA), which will begin selling the meatless burger patties at its innovation-driven Freshippo chain. The company already entered the mainland via a restaurant deal with Starbucks (NASDAQ:SBUX) back in April and has expanded its products to Yum China's (NYSE:YUMC) KFC, Taco Bell and Pizza Hut. The news may go some way in helping shares of Beyond Meat, which have slipped about 10% over the past week after McDonald's (NYSE:MCD) ended a trial of its meatless burger in Canada.

Brand names and logos

"Mrs. Butterworth's was really architected to resemble a loving grandmother, but we can understand how some people may view it differently, may find it offensive," Conagra Brands (NYSE:CAG) CEO Sean Connolly told CNBC, explaining the company's brand review. "The horrific violence, the racial justice, we and other companies have to up our game when it comes to diversity and inclusion, and that starts with listening and it starts with being more aware and sensitive." Aunt Jemima (NASDAQ:PEP), Uncle Ben's and Cream of Wheat (NYSE:BGS) have also revealed plans to rebrand in recent weeks, while several companies have either pulled or said they will alter the names of their skin-lightening creams.

Tuesday's Key Earnings

Conagra Brands (CAG) +4.4% with organic volumes up 21% on at-home demand.
FedEx (NYSE:FDX) +9.1% AH as residential deliveries boosted results.

Today's Markets

In Asia, Japan -0.8%. Hong Kong +0.5%. China +1.4%. India +1.4%.
In Europe, at midday, London -0.6%. Paris -0.7%. Frankfurt -0.6%.
Futures at 6:20, Dow -0.1%. S&P flat. Nasdaq flat. Crude +2.8% to $40.38. Gold +0.3% to $1805.50. Bitcoin flat at $9161.
Ten-year Treasury Yield +3 bps to 0.68%

Today's Economic Calendar

7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
9:45 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 EIA Petroleum Inventories
2:00 PM FOMC minutes


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