Wall Street Breakfast

Author: bmotrader   |   Latest post: Thu, 3 Dec 2020, 8:38 AM


Wall Street Breakfast: Retail Sales Shed Light On Economic Recovery

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The state of the consumer is in focus as the world's two largest economies release retail sales figures for July, in addition to the latest consumer sentiment index from the University of Michigan. Retail figures from China overnight failed to hit positive territory (see below) and numbers in the U.S. are expected to come in at a clip of 1.9%. While that would continue a rebound seen in previous months, it would not be as rapid of a pace seen in May (17.7%) and June (7.5%), and could suggest growth is cooling. Another consumer gauge will be seen next week as major U.S. retailers like Walmart (NYSE:WMT) and Target (NYSE:TGT) release quarterly results.

Recovery loses some momentum

China's economy returned to growth in Q2 following a deep plunge at the start of the year, but unexpected weakness in domestic consumption has failed to shake off wariness about the coronavirus. Marking the seventh straight monthly drop, retail sales unexpectedly slipped 1.1% in July from a year ago, worse than a predicted 0.1% rise. Industrial output advanced 4.8%, missing analyst forecasts for 5.1% growth, suggesting the recovery in the world's second-largest economy is still fragile.

Record remains elusive

It doesn't look like the S&P 500 is going to achieve a fresh record closing high this week as futures contracts tied to the benchmark slipped 0.4% in overnight action. Weighing on sentiment is the stalemate over economic stimulus in Washington, the seizure of Iranian fuel cargo, renewed travel restrictions in Europe and a fall in Chinese retail sales. Traders are also bracing for high-level trade talks between U.S. and Chinese officials over the weekend, with Vice Premier Liu He expected to bring up concerns over the executive orders against WeChat (OTCPK:TCEHY) and TikTok (BDNCE).

Digital dollar?

Fed Governor Lael Brainard gave some updates yesterday on the Fed's ongoing experimentation with central bank digital currencies (CBDCs). It has been conducting in-house experiments for the last few years, through means that include the Board's Technology Lab, Fed application developers and a collaboration with MIT. Studies are exploring the "implications of digital currencies on the payments ecosystem, monetary policy, financial stability, banking and finance, legal tender status and consumer protection."

Big court loss over product liability

Amazon (NASDAQ:AMZN) has been successful in the past at shielding itself from lawsuits surrounding third-party sellers, but a new court decision could make it harder for the e-commerce giant to avoid such legal action. The California Fourth District Court of Appeals has ruled that Amazon can be held liable for damages caused by a defective replacement laptop battery that gave a San Diego woman third-degree burns after exploding. Amazon Marketplace, which hosts millions of third-party sellers, now accounts for approximately 60% of the company's e-commerce sales.

If you thought Epic Games was bluffing...

After the game company sued Apple (NASDAQ:AAPL) Thursday night over Fortnite's removal from the App Store over payment cuts, Epic additionally sued Google (GOOG, GOOGL) following the game's removal the Play Store. "While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies," Google said in a statement, although it let Android customers know the game is available elsewhere. Now that Epic has stepped into the ring, allies like Spotify (NYSE:SPOT) and Match Group (NASDAQ:MTCH) are starting to speak up with words that could help fuel the antitrust case against Apple.

Alternative protein expansion

Impossible Foods (IMPF) has brought in another $200M as part of its latest funding round, taking total capital raised to $1.5B as it competes against Beyond Meat (NASDAQ:BYND). Coatue Management led the round, with Mirae Asset Global Investments, Temasek Holdings and XN Capital as investors. "We need to meet the incredible demand we're seeing," said CFO David Lee. "Our retails business has grown over 60x to over 8,000 grocery locations, so we're excited to deploy more capital against our mission."

Methane regulations lifted for oil and gas industry

The Trump administration has rolled back another Obama-era climate regulation, eliminating federal requirements for oil and gas companies to monitor and repair methane emissions from pipelines, storage facilities and wells. "EPA has been working hard to fulfill President Trump's promise to cut burdensome and ineffective regulations for our domestic energy industry," EPA Administrator Andrew Wheeler declared. Proponents of the rule include smaller oil and gas companies that argue the regulations are too expensive, though some of the larger industry players, like Exxon (NYSE:XOM), BP (NYSE:BP) and Shell (RDS.A, RDS.B), have opposed the decision due to their climate change pledges.

Thursday's Key Earnings

Applied Materials (NASDAQ:AMAT) +3.3% AH after beats, strong FQ4 guidance.
Baidu (NASDAQ:BIDU) -6.6% AH as revenues flag, SEC probes iQiyi.

Today's Markets

In Asia, Japan +0.2%. Hong Kong -0.2%. China -1.2%. India -1.1%.
In Europe, at midday, London -1.9%. Paris -1.8%. Frankfurt -1.2%.
Futures at 6:20, Dow -0.5%. S&P -0.4%. Nasdaq -0.2%. Crude -0.6% to $42.00. Gold -0.7% to $1955.90. Bitcoin +3.2% to $11760.
Ten-year Treasury Yield -2 bps 0.7%

Today's Economic Calendar

8:30 Retail Sales
8:30 Productivity and Costs
9:15 Industrial Production
10:00 Business Inventories
10:00 Consumer Sentiment
10:00 Fed's Kaplan Speech
1:00 PM Baker-Hughes Rig Count


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