Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Thu, 5 Dec 2019, 6:49 PM

 

Wall Street Breakfast: Powell Heads To Capitol Hill

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Another big speech is on the horizon today, this time from Federal Reserve Chairman Jerome Powell, who will speak to the Congressional Joint Economic Committee about the current economic outlook. DJIA futures are off 113 points ahead of the 11 a.m testimony. The last time we heard from Powell the Fed had cut interest rates for the third time this year and he signaled that moves to ease monetary policy could be nearing a pause. On the data front, there will be closely-watched CPI numbers this morning, though they are not expected to show inflation rising enough to change the Fed's outlook.

Trump speech & auto tariff deadline

Investors on Tuesday were focused on comments from President Trump, who spoke at the Economic Club of New York, but didn't deliver any specifics on trade developments. He said a "significant Phase One" deal could happen soon, but reiterated that the U.S. will substantially raise tariffs on Chinese goods if no agreement is struck between the two countries. Trump also criticized EU trade policies before a deadline tomorrow to decide on whether to raise tariffs on European and Japanese carmakers.
 

'Made in Germany'

Just weeks after beginning trial production of cars in China, Tesla (NASDAQ:TSLA) announced the location of its second factory outside the USA: Berlin, Germany. The facility, to be named Gigafactory 4, will build batteries, powertrains and vehicles, "starting with the Model Y." Watching the news closely is Volkswagen (OTCPK:VWAGY), as the new plant will be built in the automaker's backyard. The German group previously announced plans to invest €30B to electrify its entire product lineup over the next four years.
 

Green light for Alibaba secondary listing

Hong Kong Exchanges & Clearing has reportedly approved a secondary listing for Alibaba (NYSE:BABA) in the city, a share sale that could raise $10B-$15B. A weeklong roadshow may begin as soon as this week, with pricing and the start of trading in the weeks after that. Alibaba reported a 40% rise in quarterly sales earlier this month and on Monday set another record for its annual Singles' Day event, selling $38.3B worth of merchandise.
 

Mega bond offering

Encouraged by low funding costs amid narrowing credit risk premiums, U.S. drugmaker AbbVie (NYSE:ABBV) sold the largest block of bonds of the year to finance its $83B takeover of rival Allergan (NYSE:AGN). $30B was raised from investors clamoring for investment-grade debt, in an offering split across 10 different maturities from 18 months to 30 years. The deal was the biggest bond sale since CVS (NYSE:CVS) raised $40B in March last year to fund its takeover of Aetna and ranked as the fourth-largest ever completed. ABBV -1.5% premarket.
 

Nike breaks up with Amazon

The sneaker giant is going to stop selling directly on Amazon.com (NASDAQ:AMZN), ending a pilot program that began in 2017 (in exchange for stricter counterfeit policing and restrictions on unsanctioned sales). Retail unease? Signals suggest the company is going even more aggressively after e-commerce following the hiring of ex-eBay (NASDAQ:EBAY) chief executive officer John Donahoe as its next CEO. Nike (NYSE:NKE) will still continue to use Amazon Web Services to power its apps and Nike.com services.

Battle over digital information economy

German Chancellor Angela Merkel is urging the EU to claim "digital sovereignty" by developing its own platform to manage data and reduce its reliance on cloud services run by Amazon (AMZN), Microsoft (NASDAQ:MSFT) and Google (GOOG, GOOGL). "So many companies have just outsourced all their data to U.S. companies," she told German business leaders. "I'm not saying that's bad in and of itself - I just mean that the value-added products that come out of that, with the help of artificial intelligence, will create dependencies that I'm not sure are a good thing."

Unrest weighs on Hong Kong

The Hang Seng Index sank another 2% today as the five-month-old anti-government movement takes an increasingly violent turn. Gasoline bombs and fires lit up the night at the prominent Chinese University of Hong Kong, while tear gas was again fired in the heart of the business and financial district. Chief Executive Carrie Lam said last night the protesters wouldn't achieve their goals through violence and Security Chief John Lee warned of "unthinkable consequences" if it continues.

OPEC under pressure from U.S shale

The U.S. shale revolution will reshape global energy markets in the years to come, according to the IEA's annual World Energy Outlook. In fact, the country will account for 85% of the increase in global oil production to 2030, which will rise to 19M barrels a day and push down the share of the global oil market held by OPEC members and Russia to 47% (from 55% in the mid 2000s). "Countries whose economies are exclusively reliant on oil-and-gas reserves are facing serious challenges," said Fatih Birol, the IEA's executive director.

Tuesday's Key Earnings
Cronos (OTC:CRON) -3.1% following a revenue miss.
SmileDirectClub (NASDAQ:SDC) -8% AH after first earnings report since IPO.
Skyworks Solutions (NASDAQ:SWKS) -4.6% AH despite beats, upside EPS view.
Tilray (NASDAQ:TLRY) -2.4% AH with net selling price down 48%.
Tyson Foods (NYSE:TSN) +7.4% on stronger guidance.

Today's Markets

In Asia, Japan -0.9%. Hong Kong -1.8%. China -0.3%. India -0.6%.
In Europe, at midday, London -0.5%. Paris -0.5%. Frankfurt -0.8%.
Futures at 6:20, Dow -0.4%. S&P -0.4%. Nasdaq -0.5%. Crude -0.7% to $56.40. Gold -0.8% to $1465.60. Bitcoin +0.3% to $8751.
Ten-year Treasury Yield -3 bps to 1.88%

Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
11:00 Powell To Testify Before The Congressional Joint Economic Committee
12:30 PM Fed's Barkin: “The New Environment for Monetary Policy”
1:30 PM Fed's Kashkari Speech
2:00 PM Treasury Budget
7:30 PM Fed's Harker: Economic Outlook

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