Friday Morning Reads
- China auto sales plummet
- Futures rise as earnings season begins
- JPM kicks off earnings season with a beat
- Oregon retrieves Tesla solar tax credits
- Canada unveils steel safeguards
- REITs punished along with rest of market
- PNC Financial beats by $0.09, beats on revenue
- Verizon alters exit package for workers it was outsourcing
- Goldman Whistleblower
- Oregon has clawed back $13 mln in SolarCity tax credits (TAN). Oregon Live Report
- Tencent (TCEHY) Music plans to put IPO on hold at least until November amid market sell off (IPOXX). WSJ Report
- U.S. plans to put new restrictions on nuclear exports to China (NLR, CCJ, UEC). WSJ Report
- Disney (DIS) resort will be exempted from minimum wage increase. WSJ Report
- Automakers running into slowing sales in China (TSLA, KNDI, GM, F, FCAU, CARZ). FT Report
- Full Tesla (TSLA) tax credits will be available for orders placed prior to October 15. Reuters Report
- Intel (INTC) plans to reduce stake in ASML (ASML) to below 3%. Reuters Report
- TSMC (TSM) plans to be a supplier for Apple (AAPL) A13 chip. Digitimes Report
- Softbank (SFTBY) has selected Goldman Sachs (GS) and Deutsche Bank (DB) for IPO underwriters. Bloomberg Report
- KKR (KKR) wants to buy portfolios from distressed lenders in India. Bloomberg Report
- Dina Powell has withdrawn herself from considering for UN ambassador (GS). Reuters Report
- Blackstone (BX) close to GBP 800 mln buyout of NEC Group. Sky News Report
The third quarter earnings season kicks off in earnest today on the heels of a backup in interest rates and a selloff on Wall Street. JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C) and PNC Financial (NYSE:PNC) will all report before the bell, with U.S. futures getting a big bump overnight pending the results. Corporate tax cuts, strength in the U.S. economy, rising oil prices and share buybacks are expected to fuel double-digit earnings growth, but analysts will also be watching how often companies mention tariffs hurting their profits.
China's export engine kicked into high gear in September, producing a record trade surplus of $34.13B with the U.S. that could intensify an already heated trade dispute between the world's two largest economies. The figure further surged to $225.79B over the January-September period as President Trump threatens an additional $267B of tariffs.
"I can tell you that personally I think I feel more optimistic today than I did a couple of weeks ago [about a Brexit deal], because we have been frankly complaining for some time that the other side wasn't really engaging with us, didn't seem to share our sense of urgency," said Philip Hammond, U.K. Chancellor of the Exchequer. "That has gone away. It is absolutely clear now that the other side is trying to move this forward."
As overseas steelmakers shut out of the U.S., Canada is imposing new quotas and tariffs on imports of seven categories of steel to head off a potential rise in imports seek new customers. A tariff of 25% will apply starting Oct. 25, 2018 to imports "in cases where the level of imports from trading partners exceeds historical norms," and cover products like heavy plate, concrete reinforcing bar and energy tubular products.
"Our position is that expensive energy is back... And it poses a threat to economic growth," the IEA wrote in its closely watched monthly report. As a result of soaring energy prices, the agency revised down its demand outlook over the next two years to 1.3M bpd in 2018 and 1.4 bpd in 2019. Oil prices have surged more than 25% this year, with President Trump repeatedly blaming OPEC for rising gasoline costs.
North Carolina pastor Andrew Brunson will likely be handed back his passport today following a court case in Turkey, where he has faced terrorism charges. His release could help improve relations between President Trump and Recep Tayyip Erdogan. The U.S. slapped sanctions on Turkish government officials this summer over the case, sending the country's financial markets into a tailspin.
Corporate sponsors and leaders, including the New York Times (NYSE:NYT), Viacom (VIA, VIAB) and UBER, are pulling out Saudi Arabia's three-day conference known as "Davos in the desert," set to begin on Oct. 23. Richard Branson has also suspended Saudi discussions over a proposed $1B investment in Virgin's space companies, although President Trump said he saw no reason to block investment in the U.S. over the Jamal Khashoggi case.
SEC Chairman Jay Clayton said he is in no rush to change quarterly reporting requirements for large public companies. It comes two months after President Trump ordered his agency to study the matter upon hearing from business leaders it would allow for "greater flexibility & to save money." A move to semiannual reporting would mark a significant shift from decades of quarterly stats and put the U.S. in line with EU and U.K. rules.
The recent stock selloff is weighing on the IPO market, with shares of lithium producer Livent (NYSE:LTHM) closing flat in their public debut. Other companies, like LeasePlan and Sonae SGPS (OTC:SGPMY), are canceling their planned U.S. listings. Tencent Music (TME) has even delayed its $2B IPO until at least November as the owner of China's most popular music apps waits for things to stabilize.
Verizon has changed up the exit package for about 1,000 U.S. employees it planned to "rebadge" to Infosys (NASDAQ:INFY) as the market for cellphones passes the point of saturation. The Verizon (NYSE:VZ) workers had been told they weren't eligible for severance under the $700M outsourcing deal, but they now have the choice of taking the exit package or moving to Infosys with a two-year guarantee of comparable pay and benefits.
After two of its joint venture partners put their stakes up for sale, UBS (NYSE:UBS) may be a step closer towards holding majority ownership of its Chinese investment banking operations. If it purchases the holdings, UBS would become the first global investment bank to secure majority ownership since a surprise decision by China late last year to open the sector to foreign control.
A New Jersey jury has cleared Johnson & Johnson (NYSE:JNJ) of liability in a case involving a woman who alleged that the company's talc-based products contain asbestos and caused her cancer. The company has been fighting talc cancer lawsuits for several years, but the litigation shifted in recent months to include asbestos allegations. JNJ +0.4% premarket.
The state of Oregon has recovered $13M it paid to Tesla (NASDAQ:TSLA) for solar power projects, after an investigation concluded that SolarCity inflated prices by 100% to qualify for higher tax credits, OregonLive reports. The news comes as Tesla announced that all vehicles placed by Oct. 15 are eligible for full federal tax credits of $7,500 as the rebate expires this quarter due to the EV maker hitting the 200K delivery mark.
As part of its aggressive efforts to stop misinformation, Facebook (NASDAQ:FB) has taken down hundreds of U.S. pages and accounts that were spreading false or misleading political content ahead of the midterm elections. The information "consistently broke our rules against spam and coordinated inauthentic behavior," such as making content appear more popular on the network than it actually was (virtually all of the pages were from the U.S.).
Elon Musk's Neuralink is not alone. Starting as early as January 2017, the staff of a secret Facebook (FB) initiative called Building 8 have been working to make the world's first brain-computer interface, Business Insider reports. The initiative includes at least two major publicly reported projects: a noninvasive brain sensor designed to turn thoughts into text and a device that essentially lets you "hear" with your skin.
In Asia, Japan +0.6%. Hong Kong +2.1%. China +0.9%. India +2.2%.
In Europe, at midday, London +0.6%. Paris +0.4%. Frankfurt +0.4%.
Futures at 6:20, Dow +0.6%. S&P +0.8%. Nasdaq +1.3%. Crude +0.5% to $71.34. Gold -0.3% to $1224.50. Bitcoin +1% to $6236.
Ten-year Treasury Yield +4 bps to 3.17