Monday Morning Reads
- From the Weekend
- Japan Denies It
- Corporate America Sounds Alarm
- Fed’s Economic Experts
- Stay Calm and Buy Stocks
- The $6 Million Drug Claim
- Black Hole Monetary Economics
- Amgen to acquire Celgene's Otezla for $13.4B
- Futures bounce back after Trump says China "wants to make a deal"
- Seaport sees 25% upside in Canopy Growth in premarket analyst action
- Tesla inspecting sites for possible factory in Germany - report
- Disney to open stores in 25 Target locations, plan 40 more by late 2020
- UBS stays long gold, hikes price outlook to $1,600
- Johnson and Johnson opioid ruling expected today
- Pitney Bowes sells software solutions unit for $700M
- Trump 'ordered' U.S. firms to leave China, but his authority is limited
- Zogenix halted pending news
- Zogenix acquires Modis Therapeutics for up to $400M
- Lyft up 2% on Guggenheim upgrade
Open Interest Changes
Stock futures rebounded from early overnight losses of as much as 1.6% after Pres. Trump said Chinese officials had called him to say they want to restart trade talks. China "wants to make a deal," Trump said at the G-7 summit meeting, adding he had received "two calls from China." The Chinese government did not directly address Trump's comments, but Vice Premier Liu He said his side wants to "resolve the problems through negotiation and cooperation in a calm manner." The conciliatory tone follows additional threats over the weekend, including a White House statement that the president had regretted not escalating tariffs further on Chinese goods. However, the editor of China's Global Times said the country is preparing for a "scenario in which China-U.S. trade relations deteriorate further, even much worse than now."
The most worrisome - and confusing - part of President Trump's Friday tweetstorm may have been his declaration that U.S. businesses operating in China were "hereby ordered" to look for alternative locations. Trump claimed he could use the International Emergency Powers Act of 1977 to force companies to move their supply chains out of China, but he later said he has no plans to do so for now, a point emphasized on the Sunday TV talk shows by U.S. Treasury Secretary Mnuchin and economic advisor Kudlow. The president has no authority to simply order companies out of China, but the Act could allow him to block imports and freeze Chinese assets; such action would trigger an automatic override vote in Congress and prompt challenges in the courts. The tariff escalation already is a negative overhang for overall markets, particularly shares of semiconductor and retail companies, and an emergency declaration would further weigh on the markets.
China's yuan plunged to an 11-year low against the dollar in onshore trade and tumbled to a record low in offshore trade, as the U.S.-China trade war sparks wild swings with a resolution unlikely to be reached soon. The onshore yuan fell 0.9% to 7.1448 vs. the dollar, its weakest point since February 2008, while the offshore yuan - which trades more freely - dropped to as low as 7.1858 vs. the dollar, its weakest in the nine years since the Chinese government allowed the currency to trade in Hong Kong and elsewhere outside mainland China. "China's economy is slowing, so the yuan will only fall further unless authorities take steps to stop it," according to Takuya Kanda of Gaitame.com Research Institute in Tokyo.
The U.S. and Japan have reached a trade agreement in principle that would pave the way for more U.S. farm exports to Japan, President Trump announced after meeting with Japanese Prime Minister Abe at the G-7 summit in France. As part of the deal, Japan agreed to buy a significant portion of the U.S. corn surplus. U.S. tariffs on imported Japanese cars would remain but not increase, and other U.S. tariffs would be dropped. The deal also covers industrial tariffs and digital trade. Trump said a formal agreement could be signed next month at the United Nations General Assembly. It is not clear if an agreement would require ratification by Congress.
Gold will extend its recent gains as the U.S.-China trade dispute slows growth, risking a deeper slowdown and inviting more central bank easing, UBS analysts say in predicting the yellow metal may hit $1,600 per ounce within three months. "Gold has demonstrated its safe-haven qualities and we stay long the metal, a trade we initiated in mid-May," according to the latest report from UBS's wealth management unit. UBS has a three-month trading range of $1,450-$1,600, plus a six-month forecast of $1,600 and 12-month view of $1,650, after both the half-year and 12-month outlooks previously were set at $1,500 per ounce.
Walt Disney (NYSE:DIS) and Target (NYSE:TGT) have unveiled a collaboration that will open 25 Disney stores inside select Target stores across the U.S. on October 4, with plans for 40 additional locations by October 2020. The new Disney "shop-in-shop" stores will be operated by Target employees and carry more than 450 items, including toys, games and clothing. The move helps extend Disney's reach beyond its mall locations, says Bob Chapek, the company's chairman of parks, experiences and products. The new partnership with Target will boost Disney's total store count of 300 locations by about 22%.
Deutsche Bank (NYSE:DB) and UBS (NYSE:UBS) have explored ways to combine their businesses, including talks as recently as June to form an unusual alliance of investment banking operations, the Wall Street Journalreports. A deal never coalesced, as the two sides failed to sort out difficult issues such as how to structure and allocate capital to any joint operations, according to the report. But the talks between Germany and Switzerland's biggest lenders show how far European lenders are willing to go to address a punishing banking environment where European banks are struggling amid negative interest rates and slowing economic growth.
Johnson & Johnson (NYSE:JNJ) is bracing itself for a ruling today from an Oklahoma judge over whether it should be held liable in a lawsuit by the state's attorney general who argues the company sowed the seeds of the U.S. opioid crisis. The verdict, expected at around 4:00 p.m. Eastern Time will be the first on whether J&J's sales of opioids contributed to an epidemic described by the Oklahoma AG in his opening remarks as the "worst man-made public health crisis in the history of this country and this state." The state has asked for more than $17 billion to fix the epidemic over a 30-year plan; if the judge sides entirely with the state, the verdict would be the biggest monetary award handed down in a bench trial in U.S. history.
Faltering Ascena Retail Group (NASDAQ:ASNA) is raising new bankruptcy worries alongside a New York Post report that the company has not returned calls or emails for at least a month to a group of lenders who are collectively owed more than $1.4 billion. The group — owner of brands including Dressbarn, Ann Taylor, Loft, Lane Bryant and Justice — has not yet missed any payments, but "It's been radio silence from Ascena, and the lenders [are] just spooked at this point," a source told the Post. Also, there has been no new information about the company's attempts to shutter Dressbarn by demanding landlords release 650 stores from their lease obligations, which could come to $302 million if the landlords balk.
Tesla (NASDAQ:TSLA) is scouting out locations for a possible factory in Germany's North Rhine-Westphalia state, and first inspections have taken place, the Rheinische Post reports. NRW, Germany’s most populous state, shares borders with the Netherlands and Belgium, and CEO Elon Musk said last year that Germany was a leading choice to build a new Gigafactory, adding "the German-French border makes sense, near the Benelux countries." Tesla is also looking at Germany's Lower Saxony state, which shares a border with the Netherlands, its economy minister said last week.
In Asia, Japan -2.17%. Hong Kong -1.91%. China -1.17%. India +2.1%.
In Europe, at midday, London Closed. Paris +0.49%. Frankfurt +0.27%.
Futures at 6:20, Dow +1.1%. S&P +1%. Nasdaq +1.5%. Crude +1.20% to $54.82. Gold flat at to $1,573.30. Bitcoin +2.1% to $10,372.
Ten-year Treasury Yield -7.8 bps to 1.449%.