Monday Morning Reads
- EU expected to make decision on Italy budget Tuesday (EWI). Reuters Report
- The Trump Administration is considering changing definition of currency manipulation which could impact China (FXI). Bloomberg Report
- President Trump told reporters that a new tax cut might come before the midterms (Note: This will not be able to get 60 votes in the Senate —TAXES). CNN Report
- EU and Singapore have agreed to free trade deal (VGK, EWS). Bloomberg Report
- It could take years for EU lawmakers to approve trade framework with United States (VGK). WSJ Report.
- Saudi Arabia has admitted that journalist Jamal Khashoggi is dead following a fight, many are skeptical of this. President Trump finds this credible, but said he will work with Congress about potential sanctions (KSA, USO, XLE). NY Times Report
- In a follow up interview, President Trump criticized Saudi Arabia for deception and lies, however he is open to the possibility that Saudi Crown Prince Mohammed bin Salman did not order Saudi agents to kill Jamal Khashoggi (KSA, USO, XLE). Washington Post Interview
- Italy remains defiant on spending plans
- Saudis rule out oil embargo replay
- Aerospace roundup: Another F-35 customer, Bombardier lawsuit
- Alibaba opens new U.K. data centers
- Iraq lines up GE, Siemens for power work
- Accenture acquires DAZ Systems, Inc.
- Chinese stocks jump most in two years
- Polaris beats by $0.30, beats on revenue
From The Weekend:
- Positive views on BABA, TCEHY. Barron's Report
- Positive view on Berkshire (BRK.B). Barron's Report
- Positive view on Citizens (CFG). Barron's Report
- Positive view on Under Armour (UA, UAA). Barron's Report
- Positive views on YUM, YUMC, PBR. Barron's Report
- President Trump plans to pull out of nuclear weapons agreement with Russia, claiming that Russia violated the terms. Russia calls this move dangerous (RSX). Bloomberg Report
- UBS (UBS) has warned staff on China travel. Reuters Report
- Audi's (VWAGY) first electric SUV will be delayed by 4 weeks (TSLA). Reuters Report
- Colorado ballot measure in November could further restrict oil production (SRCI, APC, NBL, PDCE). WSJ Report
- Fiat (FCAU) plans to sell Magneti Marelli to KKR (KKR). FT Report
- Blackstone (BX) to purchase Ulterra for $700 mln. Reuters Report
- Oil producers want to increase export terminals (FRO, NAT). WSJ Report
- Tillman Fertitta offer to purchase Caesars (CZR) will likely be rejected. NY Post Report
Some implied moves for earnings next week:$CAT 5.7%$MCD 4.0%$VZ 3.4%$BIIB 6.7%$IRBT 14.9%$COF 4.3%$ILMN 7.2%$EW 7.7%$T 3.9%$BA 4.9%$UPS 5.2%$V 4.3%$F 5.6%$ALGN 8.8%$NOW 7.6%$INTC 5.9%$MSFT 5.6%$TWTR 13.1%$SHOP 9.7%$GRUB 12.5%$AMZN 7.6%$GOOGL 6.2%$CMG 7.9% https://t.co/HFgkT7i6BU
— Option Millionaires (@OMillionaires) October 20, 2018
Todays Open Interest Changes:
Yields on Italian debt fell sharply overnight as Moody's left the country's credit rating above "junk" status, while the nation's coalition government vowed to stay in the eurozone. The bond rally cooled off, however, after the Five Star and League parties showed no signs of backing down over their budget, which was criticized by the European Commission last week and dubbed "unprecedented in the history" of the EU. Italy faces a deadline to formally respond to the bloc's reprimand by midday.
Theresa May will face a last-ditch fight this week to save her leadership as it is thought that MPs may have enough support needed to trigger a no-confidence vote. The report comes as London experienced its second biggest demonstration in a century. About 670K protesters this weekend overflowed the streets for more than a mile, from Hyde Park Corner to Parliament Square, to demand a fresh Brexit referendum.
The Shanghai Composite closed up 4.1%, on track for its best day since March 2016, following a Friday jump spurred by signals of government support in the wake of weaker quarterly growth figures. President Xi further vowed "unwavering" support for non-state firms over the weekend, while the country's stock exchanges committed to help manage share-pledge risks and the government released a plan to cut personal income taxes.
"We're looking at a major tax cut for middle-income people... Not for business at all," President Trump told reporters on Saturday after a rally in Elko, Nevada. The proposal, which White House and Congressional leaders are "studying very deeply, round the clock," would be announced just before midterm elections and follow a landmark tax overhaul passed last year.
Riyadh changed its story over the weekend, acknowledging that Saudi journalist Jamal Khashoggi died over two weeks ago at its consulate in Istanbul. "It would be premature to comment on sanctions until we get further down the investigation and get to the bottom of what occurred," U.S. Treasury Secretary Steven Mnuchin told reporters. Germany is meanwhile urging EU member states to follow its example in stopping Saudi arms exports as long as uncertainty remains over the case.
"There is no intention" of unleashing a 1973-style oil embargo, Saudi Arabian Energy Minister Khalid al-Falih told Russia's TASS news agency amid a worsening crisis over the Khashoggi killing. "For decades we used our oil policy as responsible economic tool and isolated it from politics," he added. Will oil prices hit $100 per barrel again? Falih said he could not give a guarantee, because "I cannot predict what will happen to other suppliers."
Due to Russian violations and breaches, President Trump is exiting a Cold-War era treaty that eliminated ground-launched intermediate-range nuclear missiles. However, he would be open to making a new arrangement with both Russia and China, which is not a signatory to the deal. Russian Deputy Foreign Minister Sergei Ryabkov responded by saying a unilateral U.S. withdrawal would be "very dangerous" and lead to a "technical military" retaliation.
Fiat Chrysler is selling its Magneti Marelli division to KKR's Calsonic Kansei (OTC:CLKNF) in a €6.2B transaction, marking the first big decision for new CEO Mike Manley, who took over in July after the death of Sergio Marchionne. The long-time boss, who had initially favored separating the car parts unit by distributing shares to investors, had said Fiat (NYSE:FCAU) was open to changing its mind for a "big check."
Audi's first electric SUV will hit showrooms four weeks later than planned because the carmaker needs new regulatory clearance for a piece of software that was modified during the development process. Audi (OTCPK:AUDVF) staged a global launch of the e-tron in San Francisco last month as part of its effort to expand the market for premium EVs and grab a share from California-based Tesla (NASDAQ:TSLA).
Uber Eats getting into drone delivery? A job ad titled "flight standards and training" spotted over the weekend suggested the meal-delivery service hopes to drop off its first drone-delivered dinners as early as 2021. However, in response to a WSJ inquiry, an unnamed spokesperson at UBER said the posting "does not fully reflect our program, which is still in its very early days."
As Europe looks to levy tax on U.S. tech giants, German Finance Minister Olaf Scholz told Welt am Sonntag he backed a global minimum fiscal regime for multinationals "to counter the shifting of profits to fiscally beneficial regions." The current proposed EU tax on "big tech" has some countries worried, however, over items that could inadvertently snag European companies and potential consequences that could come amid a brewing EU-U.S. trade war. Related: GOOG, GOOGL, AMZN, FB, AAPL
Sears Chairman Eddie Lampert is in talks with Cyrus Capital to contribute to a $300M bankruptcy loan the U.S. retailer is seeking, which would be separate from another $300M bankruptcy loan that Sears' banks have offered to provide, Reuters reports. Through his hedge fund, Lampert has invested billions of dollars in Sears (NASDAQ:SHLD) since a merger with Kmart in 2005 and is the department store operator's largest shareholder and creditor.
Interim CBS chairman Richard Parsons has resigned because of ill health, after only about a month in the position, and will be replaced by board member Strauss Zelnick, who is also the current CEO of Take-Two Interactive (NASDAQ:TTWO). The departure is the latest shakeup on the CBS board, which has been going through a transition phase since CEO Leslie Moonves was forced to resign in early September due to allegations of sexual harassment.
Further expanding its cloud footprint in Europe, Alibaba (NYSE:BABA) is opening its first data centers in the U.K., with two facilities in London. They will provide elastic computing - a means to manage usage spikes in a network - storage, database, network, application services and big data analytics. Alibaba's cloud unit now has 52 data center zones across 19 different regions.
The NYPD is removing nearly 3,000 Vievu LE-5 body cameras from use after one of the gadgets worn by a Staten Island officer exploded into flames. The recall could delay the department's plan to outfit all 23,000 of its patrol officers as law enforcement agencies nationwide embrace the devices. A spokeswoman for Axon (NASDAQ:AAXN), which acquired Vievu in May 2018, said the company is working closely with the NYPD to investigate this issue.
Aerospace roundup: After deliberating the multi-billion-dollar purchase for months, Belgium has chosen Lockheed-Martin's (NYSE:LMT) F-35 jets instead of the Eurofighter Typhoon (OTCPK:EADSY, OTCPK:BAESY, OTCPK:FINMY) as a replacement for its ageing F-16s, Belga reports. Meanwhile, Bombardier (OTCQX:BDRAF, OTCQX:BDRBF) has sued Japan's Mitsubishi Heavy Industries (OTCPK:MHVYF), saying former Bombardier employees passed on trade secrets to help the company's oft-delayed regional jet project.
The shakeup continues in the engineering services industry as Australia's WorleyParsons agreed to buy Jacobs Engineering's (NYSE:JEC) energy, chemicals and resources division for $3.3B. "Hydrocarbons and minerals and metals are both coming off the bottom and are well below their peaks of 2013. We think this is an exciting time for the sector,” WorleyParsons CEO Andrew Wood told analysts on a conference call.
Iraq has signed agreements with Siemens (OTCPK:SIEGY) and General Electric (NYSE:GE) over potential deals to develop the country's power infrastructure following "heavy pressure by the Americans." Siemens had been favorite to win the possible $15B contract, though the FT reported last week that the German group may have to share the work after the Trump administration intervened, reminding Baghdad of U.S. casualties in the Iraq War.
In Asia, Japan +0.4%. Hong Kong +2.3%. China +4.1%. India -0.5%.
In Europe, at midday, London +0.7%. Paris +0.3%. Frankfurt +0.5%.
Futures at 6:20, Dow +0.3%. S&P +0.3%. Nasdaq +0.6%. Crude +0.3% to $69.49. Gold -0.2% to $1226.40. Bitcoin -0.2% to $6443.
Ten-year Treasury Yield flat at 3.2%
Today's Economic Calendar
8:30 Chicago Fed National Activity Index