Friday Charts, News, and Reads
Faced with the biggest crisis in its history, Volkswagen (OTCPK:VLKAY) and its labor unions have agreed to a turnaround plan that will boost profitability and fund a post-Dieselgate shift to electric and self-driving cars. The agreement foresees €3.7B in savings every year through 2020 and 30,000 job cuts worldwide at VW's namesake brand. The business "needs a real shake-up and that is exactly what the future pact has turned out to be," said CEO Matthias Mueller.
Iraq would have to compensate international oil companies for limits placed on their production, according to industry sources, further reducing the prospect it will join any OPEC deal to curb the group's output. A strengthening U.S. dollar is also weighing on prices. A stronger greenback makes oil, which is priced in dollars, more expensive to buyers in other currencies. Crude futures -1.5% to $44.72/bbl at time of writing.
Mario Draghi has sent a strong signal that the ECB will extend its €1.7T bond purchase program next month, warning that the eurozone's weak economy remains clouded by risks and heavily reliant on the central bank's stimulus. "We cannot yet drop our guard," he said at the European Banking Congress in Frankfurt. "The ECB will continue to act, as warranted, by using all the instruments available" until inflation picks up sustainably.
Greece is warning Germany and other creditors to agree on a debt restructuring in the coming weeks, or miss the best chance to bring its seven-year crisis to an end. "If we kick the can down the road and say we will decide in two years about how to make Greece's debt sustainable, then investors will also postpone decisions about investing in Greece," Finance Minister Euclid Tsakalotos declared.
Fedspeak will continue today with speeches from James Bullard, Esther George, William Dudley, Robert Kaplan, Charles Evans and Jerome Powell. Yesterday, Janet Yellen's congressional testimony took the spotlight. The Fed Chair signaled a December move, suggesting a rate hike could come "relatively soon," and downplayed rumors that a Trump administration could push her out of her job early.
Mexico's central bank hiked interest rates to their highest in over seven years on Thursday and warned that the election of Donald Trump had cast doubt on the direction of Latin America's second-largest economy. The decision to raise its key rate by 50 bps to 5.25% "seeks to counteract inflationary pressures," Banxico said in a statement, adding that it stood ready to take further action if needed.
Amid fears a Trump administration will tear up NAFTA, the Canadian Manufacturers and Exporters group is lobbying the government to protect the U.S.-Canada trade relationship, even if that means losing the trilateral partnership with Mexico. As a result, Mexican and Canadian leaders will hold talks this weekend on the potential impacts Trump could have on the free trade agreement.
Meanwhile, leaders of Pacific Rim nations are gathering in Peru to salvage hopes for regional trade as prospects dwindle for the U.S-led Trans-Pacific Partnership. Discussions at the Asia-Pacific Economic Cooperation summit will be dominated by fears of rising anti-globalization sentiment in the West and China's burgeoning role in global trade.
Donald Trump has offered the job of National Security Adviser to retired Lt. Gen. Michael Flynn, the former head of the Defense Intelligence Agency and key military surrogate throughout his campaign. In surprising news, Mitt Romney is scheduled to meet with the President-elect this weekend to discuss the Secretary of State position, while Newt Gingrich confirmed he won't serve in any official role in the Trump administration.
"Your faith will be rewarded," said Elon Musk after Tesla (NASDAQ:TSLA) got the green light for its SolarCity (NASDAQ:SCTY) acquisition, with 85% of shareholders approving the $2.6B deal. "We're trying to make an integrated product... You have an integrated solar roof with a Powerwall and an electric car, and you just go into a Tesla store, just say yes, it just happens. It all works, it's seamless and you love it." SCTY +3.6% premarket.
In its biggest strategic shift to date, Airbnb (Private:AIRB) is launching tours and immersive trips in a dozen cities. Booking flights, renting cars and concierge services such as restaurant reservations and grocery delivery will also be offered, pushing the company towards becoming an all-inclusive travel platform. Airbnb had about $900M in revenue last year from its accommodation business alone.
"Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky - no Mexico," President-elect Trump wrote on Twitter. The automaker confirmed that MKC crossover output will remain at its assembly plant in Louisville, but others took aim at the statement saying Ford (NYSE:F) only planned the move to boost production of the Escape SUV and never intended to relocate the entire plant.
Shot down? The U.S. House of Representatives has voted to effectively block Boeing (NYSE:BA) from selling or leasing jetliners to Iran, reflecting broad Republican opposition to the Obama administration's Iran nuclear deal. The measure would prevent the Treasury Department from authorizing U.S. bank transactions for sales of aircraft to the Islamic Republic and would bar the U.S. Export-Import Bank from financing any exports to that country.
Coca-Cola has reached a definitive agreement to divest its bottling stakes in China for roughly $1B, part of a broader strategy to focus on its more profitable concentrate-making business. The beverage giant currently owns roughly a third of its bottling in China, with the rest split roughly between China Foods and Swire Beverage Holdings. China is Coke's (NYSE:KO) third-largest market by volume.
Amazon is on the verge of a massive global rollout of its streaming video service, taking direct aim at rival Netflix (NASDAQ:NFLX). While Prime Video is currently only available in the U.S., U.K., Germany, Austria and Japan, the e-commerce giant is likely to expand it into about 200 countries and territories. The source of the expansion theory – Jeremy Clarkson, the high-profile star of the forthcoming Amazon (NASDAQ:AMZN) show "The Grand Tour."
After strongly rebutting antitrust charges, Google's (GOOG, GOOGL) CEO Sundar Pichai will meet with the EU's Margrethe Vestager today, marking their first face-to-face discussion since February. The bloc has charged the tech giant with denying consumers a wider choice of mobile apps and services and stifling innovation.
Twitter CEO Jack Dorsey has apologized after the microblogging service let through an ad promoting a white supremacist group. "We made a mistake here. Our automated system allowed an ad promoting hate. Against our policy. We did a retro and fixed!" The company also suspended accounts this week from a number of alt-right supporters as it cracks down on hate speech on its platform. TWTR +1% premarket.
iPhones might one day soon carry "Made in America" labels. "Apple (NASDAQ:AAPL) asked both Foxconn (OTC:FXCOF) and Pegatron (OTC:PGTRF), the two iPhone assemblers, in June to look into making iPhones in the U.S.," sources told the Nikkei Asian Review. "Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns." The issue is of particular relevance due to Donald Trump's numerous comments saying he'd try to force Apple into manufacturing its products in the U.S.
Applied Materials (NASDAQ:AMAT) -2.1% AH disappointing with new orders.
Best Buy (NYSE:BBY) +13.7% expanding its online business.
J. M. Smucker (NYSE:SJM) -3.9% on falling net sales.
Gap (NYSE:GPS) -4.3% AH as a sales slump continued.
Salesforce (NYSE:CRM) +6.3% AH following a big earnings beat.
Staples (NASDAQ:SPLS) +3.9% after meeting expectations.
Wal-Mart (NYSE:WMT) -3.1% on disappointing Q3 results.
In Asia, Japan +0.6% to 17967. Hong Kong +0.4% to 22344. China -0.5% to 3192. India -0.3% to 26150.
In Europe, at midday, London -0.5%. Paris -0.5%. Frankfurt -0.3%.
Futures at 6:20, Dow -0.1%. S&P -0.2%. Nasdaq -0.1%. Crude -1.5% to $44.72. Gold -0.7% to $1208.40.
Ten-year Treasury Yield +3 bps to 2.3%