Friday Morning Reads
- The Trump Administration plans to slow international rules to power commercial ships with cleaner energy (TAN, DRYS, FRO, NAT). WSJ Report
- China's Q3 GDP increased 6.5% which was below expectations as country tries to reassure markets. (see 6:00 -- FXI). Bloomberg Report
- President Trump in interview reaffirmed that consequences should be severe related to likely murder of journalist Jamal Khashoggi (KSA, USO, XLE). NY Times Report
- EU has called Italy budget draft an unprecedented breach of EU fiscal rules (VGK). Reuters Report
- NY State considers blocking part of Aetna (AET) / Cigna (CI) M&A deal. Bloomberg Report
- Russia to enter talks with Exxon (XOM) regarding gas deals. Bloomberg Report
- Amazon (AMZN) has revisited several cities ahead of HQ2 decision. WSJ Report
- Northern Virginia most likely location for Amazon (AMZN) HQ2. NY Times Report
- U.S. wants WTO to get involved in metal tariffs dispute (SLX). Reuters Report
- Super Micro (SMCI) sees no evidence of China hack. Bloomberg Report
- Italy, EU face off over budget
- Futures point to a slight rebound
- Early premarket gainers include PYPL, YNDX, TSLA, UL, JD; losers include EBAY, STM, NOK, F
- Alibaba lines up 'largest-ever' Single's Day for 2018
- Clashes at the World Trade Organization
- Ford taps Bryan Cranston for ad campaign
- Vermont sued over net neutrality law
- Big rollout of Comcast's Xfinity service
Large equity outflows (arrows): pic.twitter.com/8qe32R3XbJ
— Urban Carmel (@ukarlewitz) October 18, 2018
Todays Open Interest Changes:
China's economic growth slowed to 6.5% year-over-year in the third quarter, marking the weakest pace since Q1 of 2009 amid pressure from the country's trade war with the U.S. While Chinese equities initially tumbled in response to the GDP figure, PBOC governor Yi Gang said stock valuations are not in line with economic fundamentals. The central bank further pledged targeted measures to help ease firms' financing problems and encourage banks to boost lending to private firms, pushing the Shanghai Composite up 2.6%.
Fears of rapidly rising rates have caused stock market chaos over the past week as volatility surges, with U.S. futures rising again this morning after a selloff on Thursday. "Some of this is the result of programmatic selling because as volatility goes up, some of these algorithms force people to sell," Goldman Sachs CEO David Solomon declared. Earnings season is also underway, which may cause more sudden moves as investors eye the quarterly results of big corporate names.
The gloves have come off in Italy's fight with the EU, driving Italian bond yields to four-year highs as the European Commission called its draft budget an "unprecedented" breach of EU fiscal rules. The move could lead to the issue of a negative opinion next week - essentially rejecting Italy’s budget - and asking the government to send it back with revisions, which has never happened before in the history of the bloc.
A Brexit deal with the U.K. is 90% done, according to EU chief negotiator Michel Barnier, although there is still a chance no accord will be reached due to ongoing stumbling blocks over the Irish border. Meanwhile, Theresa May's gamble to extend the post-Brexit transition period until 2021 is angering Tory MPs, with many from across the Brexit divide lining up to attack the plan.
Eyeing deeper ties to the Far East, the EU will sign a trade agreement today with Singapore, marking the bloc's first deal with a member of the 10-country Association of Southeast Asian Nations (ASEAN). "There are important themes on which we must work - first the fight against climate change, secondly we must push for fair and free trade, which has been cast into doubt by some in the world," said Austrian Chancellor Sebastian Kurz.
In addition to the latest GDP figures, China released a slew of other economic data. Growth in industrial output weakened in the quarter, retail sales held their ground, while growth in fixed asset investment expanded. Exports provided an unexpected bright spot in Q3, with Chinese companies' overseas shipments rising an average of 11.7% from a year earlier vs. 11.5% in the prior quarter.
China has also filed a request with the WTO to establish an expert group to determine the legality of tariffs imposed by the U.S. on imports of steel and aluminum, stating the dispute settlement mechanism had failed to resolve its concerns. The U.S. separately requested for a WTO dispute resolution panel to get involved in a clash over international retaliation over its metal tariffs.
President Trump has threatened to seal America's southern border with military force unless Mexico intervenes to stop the massive caravan flow of illegal immigrants traveling to the U.S. from Central America. He also renewed threats to stop all payments to Guatemala, Honduras and El Salvador, including humanitarian aid, if their governments "allow their citizens, or others, to journey through their borders and up to the U.S."
"It certainly looks" like Saudi journalist Jamal Khashoggi is dead, President Trump added, saying the American response to Saudi Arabia will likely be "very severe," but that he still wanted to get to the bottom of what exactly happened. The U.S. appears to be in a tight spot, however, due to Riyadh's efforts to contain Iran, key oil sources, lucrative defense contracts and other business ties.
Tesla has introduced a new $45,000 version of its Model 3 sedan, launching the car as U.S. tax breaks for the automaker's EVs are about to decrease. "Costs $35k after federal & state tax rebates in California, but true cost of ownership is closer to $31k after gas savings," tweeted CEO Elon Musk. The rear-wheel-drive model has a "mid range" battery, which can cover a distance of 260 miles. TSLA +1.8% premarket.
With its stock at a nearly nine-year low, Ford (NYSE:F) has tapped Breaking Bad actor Bryan Cranston for an ad campaign that kicks off this weekend. The effort touches on the company's historical American roots and "Built Ford Tough" slogan of past campaigns. It comes at a crucial time for Ford, whose U.S. sales are down 2.4% YTD.
Despite Brexit uncertainty, Amazon (NASDAQ:AMZN) is opening its first office in Manchester, and will hire more than 1,000 new staffers to work on R&D in the U.K. The new engineers will further develop personalized shopping recommendations, machine learning, Alexa, AWS and Amazon's drone delivery project Prime Air.
Colgate-Palmolive has halted production at its detergent and dish soap plant in Venezuela because it lacked cardboard boxes to ship products. While the government's currency controls are making obtaining raw materials difficult, the company is attempting to import cardboard from neighboring Colombia. A separate Colgate (NYSE:CL) toothpaste plant is still operating but only has enough cardboard stock to cover one more month of production.
Four industry groups representing major internet providers and cable companies - including AT&T (NYSE:T), Comcast (NASDAQ:CMCSA) and Verizon (NYSE:VZ) - have filed suit seeking to block Vermont's state law barring companies that do not abide by net neutrality rules from receiving state contracts. It follows a lawsuit from the four groups earlier this month challenging a much broader California law mandating providers abide by net neutrality rules.
In other news, Comcast's (CMCSA) fastest-speed gigabit internet service now reaches more homes than any other provider in the U.S. after completing its rollout to nearly 58M homes and businesses. The bump, which widens its greater coverage over telecoms rivals like Verizon (VZ), comes at a time when consumers are starting to need added bandwidth for video streaming, TV programming and gaming - often to multiple devices.
Big charges... AIG tumbled more than 4% AH after the insurer said it expects to report between $1.5B-$1.7B in pre-tax Q3 catastrophe losses due to numerous weather events like the typhoons in Japan and Hurricane Florence. DowDuPont (NYSE:DWDP) fell 6% AH following the disclosure of a $4.6B impairment charge related to goodwill and other assets of its agriculture reporting unit.
Starbucks is restructuring its European operations following several years of slowing sales. The coffee chain is selling 83 company-owned stores to its longtime partner, Alsea, which will provide services to 177 other franchise Starbucks (NASDAQ:SBUX) locations in France, the Netherlands, Belgium and Luxembourg. The deal is similar to one made in 2016, when Starbucks sold off its stores in Germany.
American Express (NYSE:AXP) +1% AH on card member spending.
Blackstone (NYSE:BX) -2.2% amid Saudi funding concerns.
Paypal (NASDAQ:PYPL) +7.6% AH beating estimates, growth in Venmo.
Philip Morris (NYSE:PM) +3.5% on market share gains.
SAP (NYSE:SAP) -7.6% as its cloud unit dragged on margins.
In Asia, Japan -0.6%. Hong Kong +0.4%. China +2.6%. India -1.3%.
In Europe, at midday, London +0.2%. Paris -0.7%. Frankfurt -0.3%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.4%. Crude +0.7% to $69.17. Gold +0.1% to $1231.50. Bitcoin flat at $6449.
Ten-year Treasury Yield flat at 3.18%
Today's Economic Calendar
10:00 Existing Home Sales
12:00 PM Fed's Bostic: Economic Outlook
12:45 PM Fed's Kaplan Speech
1:00 PM Baker-Hughes Rig Count
11:30 Fed's Bostic Speech on Saturday