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Wall Street Breakfast

Author: bmotrader   |   Latest post: Thu, 14 Nov 2019, 10:23 AM

 

Wall Street Breakfast: China's Economy Cools Off In Q3

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Asian markets were mixed after China reported GDP of 6.0% in Q3 vs. the 6.2% pace recorded in Q2 and the consensus forecast for a 6.1% gain. The GDP print was the weakest in more than 26 years. While industrial production and retail sales in China perked up a bit by quarter's end amid the trade war, investment in fixed assets was soft, and investment in the agriculture, manufacturing and industrial sectors fell off in September. Hong Kong's Hang Seng Index fell 0.5%, while the Shanghai Composite Index shed 1.3% and the smaller-cap Shenzhen Composite was flat. Japan's Nikkei rose 0.2% after inflation rose 0.3% in September as expected. South Korea's Kospi was flat on the day, while Australia's ASX 200 dropped 0.8% higher. Meanwhile, European stocks are having a softer day with the Stoxx 600 Index slipping 0.1% as the good cheer over Brexit fades just a bit. U.S. stock futures are pointing slightly lower ahead of the trading day, with Coca-Cola (NYSE:KO), American Express (NYSE:AXP) and State Street (NYSE:STT) all due to step up to the earnings confessional.

Tariff day in Europe

The U.S. is slapping tariffs on $7.5B worth of European goods today. Aircraft produced in the European Union will be slapped with 10% tariffs, while a group of consumer products that includes wine, whiskey and cheese will be slapped with 25% tariffs. Earlier this week, the World Trade Organization cleared Washington to take action after concluding that Airbus (OTCPK:EADSF) received billions of dollars in illegal subsidies over the years.

Spotlight on oil

Oil prices continue to look for direction after some cooling off of Middle East tension and a tentative Brexit deal offset concerns over cooling growth in China and a fifth straight weekly rise in U.S. crude supplies. Looking ahead, ANZ Research sees downward pressure on prices. "Concerns about softer growth in the demand for oil and doubts about OPEC’s ability to rebalance the market on the current production cut rate will be key drags on prices in the near term," noted the firm. In today's early action, WTI crude oil futures +0.7% to $54.32/bbl and Brent crude +0.2% to $60.02/bbl.

Fedheads to talk

Investors will get a steady dose of Federal Reserve talk today as Robert Kaplan, Esther George, Neel Kashkari and Richard Clarida all have speeches scheduled. The burning question at the moment is if the Fed will cut rates again at the FOMC meeting on October 29-30 or hit the pause button. Some Fed watchers think policymakers will want to see what effect the current stimulus has on the economy before continuing with rate cuts. The speeches today also give Fed officials the chance to stress again the importance of the central bank maintaining its independence into an election year.

Credit Suisse goes negative in Switzerland

A new policy by Credit Suisse (NYSE:CS) will see wealthy clients with large cash deposits in Swiss francs charged a fee to hold cash balances at the bank. Individual and business customers will be charged a rate of -0.75% on cash balances above 2M Swiss francs, while balances of less than 2M francs will be unaffected. A rate of -0.85% will be imposed on business customers with balances above 10M francs. Other banks in Switzerland have already adopted a negative interest rate policy.

AT&T reportedly talking with Elliott over activist campaign

AT&T (NYSE:T) is in talks with Elliott Management over the latter's activist campaign for change in the telecom/media giant's management, board and asset mix, the WSJ reported. AT&T delayed its earnings report a week to Oct. 28, a move that gets it more time for an agreement with Elliott beforehand. Items under discussion include a strategic review of assets for disposal, a push for better margins, stock buybacks and/or board moves on which Elliott would consult (and peace now would likely head off a proxy fight that could come next year).

Schwab goes with fractions

Charles Schwab (NYSE:SCHW) will enable investors to buy and sell fractions of shares, in a move aimed at attracting millennials. The move by Schwab is the first for a major incumbent brokerage. Earlier this month, Schwab rocked the discount trading world by eliminating trading commissions, leading to quick actions by TD Ameritrade (NASDAQ:AMTD), Interactive Brokers (NASDAQ:IBKR), E*Trade (NASDAQ:ETFC), TradeStation and Fidelity to keep pace.
Go deeper: Sell-side ratings on Schwab.

Spotlight on Sanderson Farms

Sanderson Farms (NASDAQ:SAFM) is due to hold an analyst day event in New Orleans today. Heading into the presentation by Sanderson execs, there has been a lot of discussion over the ongoing impact of African swine fever. The last read from Sanderson Farms was that it expected a shortage of pork in China to raise prices globally for chicken and beef. The company is also expected to provide an update on current marketing initiatives, the export markets and the domestic retail grocery/food service market. Shares of Sanderson Farms are up 46% YTD.
Go deeper: See a breakdown of Sanderson Farms' profitability grade.

Zuckerberg address takes on free speech, China

Mark Zuckerberg used a major speech at Georgetown University to stake out Facebook's (NASDAQ:FB) position on free expression, with both China's crackdown in Hong Kong and U.S. electoral politics running at a higher pitch. Social media forms a "fifth estate" (beyond the "fourth estate" of the press), he says, and he wants his company to be a beacon of speech. But despite worrying about an "erosion of truth," the company won't ban political ads even though they're small business. And China's censorship on TikTok is "one of the reasons" Facebook won't operate in China.

Under Armour to ride in space

Under Armour (UAA, UA) unveiled a new line of spacesuits and boots that it created as part of a long-term partnership with Virgin Galactic. The gear is for future space travelers on Virgin Galactic's spaceflights, which are expected to start next year. Under Armour CEO Kevin Plank said the company used its patented technology to develop a suit to keep passengers warm, dry, comfortable and safe. While space tourism isn't likely to be volume UA business anytime soon, Plank said the publicity from successful space flights will be priceless.
Go deeper: Read the latest analysis on Under Armour.

Thursday's Key Earnings
Intuitive Surgical (NASDAQ:ISRG) +3.5% PM on Q3 earnings beat.
Atlassian (NASDAQ:TEAM) -0.5% PM after Q1 beats, Code Barrel acquisition.
E*Trade (ETFC) +4.2% PM on earnings beat, operating margin growth.
Bank OZK (NASDAQ:OZK) -2.7% AH on earnings shortfall.
WD-40 Company (NASDAQ:WDFC) -5.3% PM on lower-than-expected FY20 guidance.
Vicor (NASDAQ:VICR) -6% AH on earnings miss, contracting revenue.

Today's Markets

In Asia, Japan +0.18%. Hong Kong -0.48%. China -1.32%. India +0.51%.
In Europe, at midday, London -0.16%. Paris -0.27%. Frankfurt +0.24%.
Futures at 5:40, Dow -0.11%. S&P -0.10%. Nasdaq -0.19%. Crude +0.72% to $54.32. Gold -0.45% to $1,491.60. Bitcoin -1.62% to $7,951.
Ten-year Treasury Yield +1.1 bps to 1.766%.

Today's Economic Calendar

9:00 Fed's Kaplan: “Disentanglement of the Global Economy”
10:00 Fed's George Speech
10:00 Fed's Kaplan Speech
10:00 Leading Indicators
10:30 Fed's Kashkari Speech
11:30 Fed’s Clarida: Economic Outlook and Monetary Policy
1:00 PM Baker-Hughes Rig Count
5:10 PM Fed's Kaplan Speech

 

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