Monday Morning Reads
- Worst Decline on Record
- Big Oil Companies Are Turning Electric
- Goldman Boosts S&P 500 Target by 20%
- Hedge Funds Are Short on Dollar
- Sweeping Cuts
- A Boon and a Headache
- Upend Gig Economy
- ‘Beer Riot’
- Investment Opportunity?
- We’re Not So Different, You And I
President Trump has signaled that he is considering punitive action against more Chinese firms as the acrimony between Washington and Beijing continues unabated. Many China experts believe he will ratchet up the pressure leading into the election. Recent executive orders targeted ByteDance (BDNCE), Tencent (OTCPK:TCEHY) and Huawei.
Home improvement behemoths Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) are expected to report same-store sales growth of 10.9% and 14.3%, respectively, this week for fiscal Q2. The surge in demand, which surprised even veteran executives, is being driven by people remaining at home during the pandemic who are devoting time and resources to home upgrades. Foot traffic at HD is up 35% since April.
Stoked by the surge in online commerce during the pandemic, certain car manufacturers are rolling out direct car sales via the internet, bypassing their traditional dealer networks who have been forced to shut down showrooms. Peugeot parent PSA expects to deliver more than 100K vehicles via the direct channel. Volkswagen (OTCPK:VWAGY) is pursuing the same strategy for its electric cars. It plans to release 75 battery-powered models in the next 10 years. Rather than allowing its dealers to set their own prices, VW will sell its flagship ID.3 car at a standardized price in Germany regardless of how it is purchased. Daimler (OTCPK:DDAIF), already selling autos directly in South Africa and Sweden, plans to roll out in Austria next year.
Google (GOOG, GOOGL) is in talks to invest in India-based social-media firm ShareChat, the Economic Times reports. ShareChat is looking to raise $150M-$200M to help it step up to fill the gap left by banned Chinese apps such as ByteDance's (BDNCE) TikTok and Helo; ShareChat owns a short-video app, Moj, as well as a social-media platform competing with now-banned Helo. Microsoft (NASDAQ:MSFT) has also reportedly held its own ShareChat investment talks.
Virgin Galactic (NYSE:SPCE), the space tourism brainchild of billionaire Richard Branson, has pushed the date of its maiden voyage into 2021. The trip, originally planned for this year, will transport six passengers into the lower thermosphere on the SpaceShipTwo during which they will experience a few minutes of weightlessness. About 700 customers have made prepayments on the $225K discounted flights, but this is hardly a rounding error compared to the ~$108M it consumed in H1. Predictably, short-sellers are circling the cash-hungry firm, currently valued at $3.9B. Its long-term plan to enter the traditional airline market with a supersonic jet that can travel between distant cities in just a few hours.
ByteDance (BDNCE) is literally caught in the middle of the U.S./China squabble over TikTok. Chinese users and observers perceive that submitting to U.S. demands to divest the short-form mobile video platform's U.S. operations within 90 days would be a face-losing sign of weakness. Last week, it announced that it may seek legal action against President Trump's executive order but it is unclear if management intends to follow through. The company's sole realistic option, according to one observer, is to ensure that it receives a reasonable price for TikTok's U.S. business.
The People's Bank of China rolled over maturing medium-term loans at unchanged rates for the fourth straight month. In a one-off for the month, though, it's rolling 700B yuan worth (about $100.7B) of one-year medium-term lending facility loans; that amount exceeds the two batches of MLF loans expiring in August (about 550B yuan total). It also injected another 50B yuan into the market via seven-day reverse repos. It's a signal that the central bank means to keep liquidity rates healthy for commercial lenders to manage upcoming government bond sales.
Gold miners are enjoying an extended rally, exclusive of the COVID-19 sell-off in March, as the price of the ore continues to climb, up ~28% this year. Prices topped $2,000 per ounce before running into profit-taking. The bad news is the expected long-term rise in mining costs due to the difficulties in extracting the precious metal in less-hospitable places. The grade of ore being mined, the amount of metal per ton of rock extracted, is also falling, now 1.46 grams per ton, far below more than 10 grams in the early 1970s. Executives, wary of the costly overexpansion during the last run-up, have used the bull market to pay down debt and increase dividends rather than start new projects.
What else is happening...
FDA OKs quick saliva test for COVID-19.
Intelsat (OTCPK:INTEQ), with Northrop Grumman (NYSE:NOC), launches first four-frequency satellite.
U.S. Postal Service halts delivery box removal until after election.
CureVac (NASDAQ:CVAC) vows "ethical" profit margin on COVID-19 vaccine.
U.S. health officials fear "twindemic" as flu season nears.
Utilities cash in on green energy subsidies before expiration.
In Asia, Japan -0.83%. Hong Kong +0.65%. China +2.34%. India +0.11%.
In Europe, at midday, London +0.34%. Paris +0.18%. Frankfurt +0.13%.
Futures at 6:15, Dow +0.27%. S&P +0.33%. Nasdaq +0.59%. Crude -0.12% to $41.89. Gold +0.53% to $1,960.20. Bitcoin -0.09% to $11,883.00.
Ten-year Treasury Yield -13 bps to 0.696%
Today's Economic Calendar