Monday Morning Reads, News, Charts
- AMD: BofA sees 30% upside
- First U.S. approval of cannabis-based drug
- Futures fall as Trump targets Chinese investment
- GE nears deal to sell industrial engines unit to firm for $3B
- China, EU warn of global recession
- Drones as a service from AT&T, Verizon
- 'Fallen Kingdom' roars at the box office
- Global Net Lease declares $0.4531 dividend
Open Interest Changes:
Unusual Option Action
U.S. stock index futures are starting the week on the back foot as the WSJreported that the Trump administration was crafting twin initiatives against China that will be unveiled later this week. The first would block companies with at least 25% Chinese ownership from buying companies involved in "industrially significant technology." "Enhanced" export controls are also in the works to counter Beijing's drive to become a world leader in technology under policy "Made in China 2025."
"The U.S. is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the USA," President Trump added in a tweet. "Trade must be fair and no longer a one way street!" Meanwhile, China and the EU have vowed to oppose trade protectionism and unilateralism, saying those actions could push the world into recession.
China's central bank is cutting the amount of cash some lenders must hold as reserves, unlocking about 700B yuan ($108B) of liquidity by trimming the required reserve ratio for some banks by half a percentage point. The aim is to support small and micro enterprises, and to further promote the debt-to-equity swap program, but it will also likely cushion the impacts of a potential trade war with the U.S.
"If they decide to raise their import tariffs, we'll have no choice, again, but to react," EU Commission Vice President Jyrki Katainen told French newspaper Le Monde, after President Trump on Friday threatened to impose a 20% tariff on all imports of EU-assembled cars. "We don't want to fight (over trade) in public via Twitter... We should end the escalation."
Along with immigration headlines in the U.S., EU leaders gathered yesterday in an attempt to bridge their deep divisions over migration, an issue that now poses a fresh threat to German Chancellor Angela Merkel. Her longtime conservative ally, Bavaria's Christian Social Union, has threatened to start turning away all asylum seekers at the German border unless the bloc reaches an agreement on distributing them more evenly.
Women in Saudi Arabia took to the roads Sunday, ushering in the end of the world's last ban on female drivers. It's part of Crown Prince Mohammed bin Salman's liberalization and overhaul of the kingdom's oil-dependent economy. According to Bloomberg Economics, the move - expected to add as much as $90B to economic output by 2030 - could reap as much income as selling a 5% stake in Saudi Aramco (ARMCO), which at the most optimistic valuation could generate about $100B.
Recep Tayyip Erdogan secured 52.5% of the weekend presidential vote in Turkey, eliminating the need for a runoff election. Constitutional changes, approved by voters last year, will now take effect, giving him vastly expanded executive powers over legislation and the judiciary. Erdogan argued the new capabilities would better enable him to tackle the nation's mounting economic problems - the lira has lost 20% against the dollar this year - but critics say it's another step toward authoritarianism.
Iran is planning to establish a secondary market for foreign exchange to help get around a dollar shortage that has hurt trade and is likely to worsen as U.S. sanctions resume. According to Iranian Central Bank Governor Valiollah Seif, the market will allow exporters of non-oil commodities to sell their foreign currency earnings to importers of consumer products.
OPEC and non-OPEC members are already considering an oil output deal for 2019, according to Russia's energy minister, after the cartel of major crude producers agreed to raise production by 1M bpd from July. The draft agreement would be considered again at the next meeting of the monitoring committee in September, Alexander Novak added, "with the view to sign it at the ministerial meeting at the end of this year."
As part of an effort to revitalize the moribund conglomerate, General Electric (NYSE:GE) is nearing a deal to sell its industrial gas engines business to a private equity firm for $3B or more. Sources told WSJ that Advent International appears to have beaten out Cummins (NYSE:CMI) in an auction for the business. The move may also be the next step toward a major portfolio update expected by GE investors.
New drones from wireless telecom giants could help save lives this hurricane season by providing cell phone coverage to first responders and victims of natural disasters. The FCC has already granted AT&T (NYSE:T) permission to use its flying COW (Cell On Wings) to restore cellular services, while Verizon's (NYSE:VZ) drones are still in the testing phase but will be available later this year.
Meanwhile, before AT&T (T) CEO Randall Stephenson set his sights on Time Warner (NYSE:TWX), he expressed interest in acquiring CBS and met with Shari Redstone (but she kept chairman and CEO Leslie Moonves out of the loop). The WSJ report comes as CBS resists Redstone's efforts to recombine the company with Viacom (NYSE:VIA) and amid a legal battle between CBS and National Amusements over who should control the entertainment company.
Jurassic World: Fallen Kingdom opened to an estimated $150M in the U.S. and Canada over the weekend, posting the fourth-highest opening for any film this year and earning a massive $711.5M worldwide. While the Universal Pictures (NASDAQ:CMCSA) film could surpass $1B globally, it's unlikely to come close to the $1.67B total of its predecessor Jurassic World, which relaunched the 25-year-old dinosaur franchise in 2015.
The SEC has completed an investigation into Toshiba's (OTCPK:TOSYY) past financial practices - without fining the company - following a widespread accounting scandal that went back to around 2008. The wrongdoing led the company to recognize huge cost overruns at its now-bankrupt U.S. nuclear unit Westinghouse, and forced the conglomerate to sell its prized memory chip unit for $18B.
Ahead of its Hong Kong IPO on July 9, Xiaomi (BATS:XI) said on Saturday there is no time frame for a mainland share offering, casting doubt on Beijing's efforts to lure foreign-listed tech giants back home. The offering from the Chinese smartphone maker is set to be the first listing under new exchange rules designed to attract tech floats, as competition heats up between New York, Hong Kong and the Chinese mainland.
ZTE is expected to deposit $400M in an escrow account in a U.S. bank in the "next couple of days," the last step it must take before a ban on U.S. suppliers can be lifted. As part of a settlement ZTE (OTCPK:ZTCOY) reached on June 7 with the Commerce Department, the Chinese telecom equipment firm agreed to pay a $1B penalty and put $400M in escrow to regain access to American components.
The SEC has launched an investigation into whether or not companies have improperly rounded up their earnings per share to the next highest cent, WSJreports. The probe was prompted by an academic paper that notes the number "4" rarely appears in the tenth place of companies' reported earnings per share. If the number in the tenth place is "5" or higher, companies can round their EPS up to the next cent.
Bitcoin fell below the $6,000 mark on Friday for the first time since February after Japan's financial regulator ordered several cryptocurrency exchanges to improve business conditions to prevent future money laundering. It comes amid a significant bear market for cryptos, which have been hit by tax selloffs, multiple exchange hacks and about $10B in funding for initial coin offerings.
A drug to treat childhood epilepsy is expected this week to become the first medicine derived from cannabis to be approved for sale in the U.S., FTreports. GW Pharmaceuticals (NASDAQ:GWPH) has raised $1B from American healthcare funds during the past five years to develop Epidiolex. FDA clearance would pave the way for the drug to be launched nationwide by the fall.
Uber will appear in a London court today after regulators stripped it of a license last September that could halt its presence in the British capital. The ride-hailing service plans to acknowledge its past mistakes, but show that the company has made strides to address those problems with governance and policy changes. UBER has about 3.6M monthly active riders in London, about 5% of its global total.
In Asia, Japan -0.8%. Hong Kong -1.3%. China +1.1%. India -0.6%.
In Europe, at midday, London -1.1%. Paris -0.9%. Frankfurt -1.5%.
Futures at 6:20, Dow -0.8%. S&P -0.7%. Nasdaq -1%. Crude +0.4% to $68.86. Gold flat at $1270.70. Bitcoin +0.5% to $6178.
Ten-year Treasury Yield -2 bps to 2.87%