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Wall Street Breakfast

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

 

Wall Street Breakfast: Brexit Hangs In The Balance

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Done with Brexit headlines? Not yet. Boris Johnson will finally put his Withdrawal Agreement to a vote in Parliament today, in the first test of whether he has won over enough lawmakers to his plan to pull the U.K. out of the EU. The agreement lays out conditions for an orderly exit from the bloc, detailing treatment of citizens, a financial settlement and a plan to avoid a border on the island of Ireland. While many hurdles still lay ahead, the long-term case for the pound appears strong, while U.K. stocks are "investable" again, according to Morgan Stanley.

Futures search for direction

U.S. stocks wavered between slight gains and losses overnight as traders continue to assess whether the two major themes dominating sentiment all year – the U.S.-China trade war and Brexit – will turn out all right. Early indications also suggest S&P 500 companies might avoid a first annual aggregate profits contraction since 2016, for the third quarter in a row. What's going on in the bond market? 10-year Treasury yields are at their highest level in almost a month as the yield curve between three months and 10 years moves further back into positive territory.
 

Rescue strategy

After pulling plans in September for an initial public offering, WeWork (WE) faces a real threat of running out of cash as early as next month without new financing. Confronted with the possibility, the We Company's board will meet today to evaluate SoftBank's (OTCPK:SFTBY) $5B debt financing versus an alternative proposal from JPMorgan (NYSE:JPM). SoftBank is also proposing to accelerate a previous $1.5B equity commitment and launch an up-to-$3B tender offer to acquire WeWork shares in a move that would lead to the exit of Chairman Adam Neumann.
 

Earnings underway for big European banks

Despite a "challenging environment," UBS (NYSE:UBS) reported third-quarter net income of $1.05B versus a consensus estimate of $971M. Investment banking revenues were down 59% on "persistent" negative rates, but the firm got a boost from its affluent clients, who added $15.7B in new money last quarter. The inflows give a boost to star hire Iqbal Khan as he seeks to revitalize the key wealth management unit. UBS +1.7% premarket.

Effects of going sub-zero

Negative interest rates have "adverse consequences which we do not fully understand," JPMorgan (JPM) CEO Jamie Dimon told CNBC-TV18. "I think when they did it earlier on, there was a notion that we are saving the EU, the monetary union, which is one thing. I think as a permanent part of policy, it is a really bad idea... If you want to have growth you better really think through with the policies, not just on negative rates but capital allocation et cetera," he added. "So, I hope it doesn’t happen in United States."

Opioid talks set to resume

Four large drug distributors, Teva (NYSE:TEVA), McKesson (NYSE:MCK), AmerisourceBergen (NYSE:ABC) and Cardinal Health (NYSE:CAH), could resume talks today on reaching a $48B settlement of all opioid litigation against them. It follows yesterday's $260M deal with two Ohio counties that averted the first federal trial over their role in the U.S. opioid epidemic. According to data from S3 Partners, October has been a rough month for short sellers betting against companies at the heart of the opioid crisis, although those traders still have paper profits of almost $600M for the year.
 

Stamps.com inks partnership with UPS

Stamps.com (NASDAQ:STMP) +27.8% premarket following the announcement of a deal with UPS (NYSE:UPS) that will give its customers access to specially discounted shipping rates. "This new collaboration will make attractive discounts of up to 55 percent off daily rates, including various waived surcharges," UPS said in a statement. Stamps.com dissolved its partnership with the U.S. Postal Service in February in place of a big bet on Amazon (NASDAQ:AMZN) gaining a larger market share in the shipping space.
 

Force is strong with the Mouse House

Disney's (NYSE:DIS) Rise of Skywalker sold 45% more tickets during its first hour on Atom Tickets than Avengers: Endgame did during its first hour earlier this year (and the latter turned out to be the highest grossing film of all time). Both Marvel and Lucasfilm have been a big blessing for Disney, with combined gross earnings at the box office of over $20B since it bought the franchises in 2009 and 2012, respectively. That doesn't include money made from toys and other merchandise, as well as revenue from the new Galaxy's Edge areas at Disney's theme parks.
 

Up in Canada

Prime Minister Justin Trudeau will remain in power with a minority government, the Canadian Broadcasting Corp. projected after polls closed across the country, following an election campaign marred by the SNC-Lavalin scandal and blackface controversy. Canada's economy has been on a general upswing in 2019. The loonie has been the best performing G10 currency this year, rising more than 4% against the greenback, while the economy added jobs at a robust pace and inflation stayed close to the BoC's 2% target.

Monday's Key Earnings
Halliburton (NYSE:HAL) +6.4% pledging to cut costs.
SAP (NYSE:SAP) +2.8% on a three-year cloud deal.
TD Ameritrade (NASDAQ:AMTD) +4.3% AH following strong guidance.

Today's Markets

In Asia, Japan closed. Hong Kong +0.2%. China +0.5%. India -0.9%.
In Europe, at midday, London +0.4%. Paris flat. Frankfurt +0.2%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq +0.1%. Crude +0.5% to $53.77. Gold +0.2% to $1490.70. Bitcoin +0.4% to $8260.
Ten-year Treasury Yield -1 bps to 1.78%

Today's Economic Calendar

8:55 Redbook Chain Store Sales
10:00 Existing Home Sales
10:00 Richmond Fed Mfg.
1:00 PM Fed's Kaplan Speech
1:00 PM Results of $40B, 2-Year Note Auction

 

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