Monday Morning Reads
- Trade War Bites
- IBM and Red Hat Are Much Better Together
- Another Crisis At GE?
- Investors Queasy
- Guess What?
- Sitting in Cash
- What do the Mid-Term Elections Mean for Financial Markets?
- Apple (AAPL) will investigate illegal student labor at Apple Watch factory. FT Report
- NY AG will increase investigation into T-Mobile (TMUS) / Sprint (S) amid concerns over price increases. NY Post Report
- Fiat (FCAU) execs reconsidering plan to stop pickup production in Mexico. Reuters Report
- Tesla's (TSLA) largest shareholder is willing to invest more cash into the company. Times UK Report
- Futures begin week with fresh start
- Auto stocks rally with China considering sales tax cut
- Tech giants may face billions in new taxes
- Goldman Sachs sees +30% upside on Ford
- ViiV Healthcare's cabotegravir and rilpivirine regimen shows durable treatment effect in mid-stage HIV study
- IBM acquires Red Hat for $34B
- Novartis teams up with Pfizer in NASH
- Sam's Club ups cashierless game
From The Weekend:
- Positive views on BABA, BIDU, YUMC. Barron's Report
- Positive view on Bank of America (BAC). Barron's Report
- Positive view on At Home (HOME). Barron's Report
- Positive views on KMI, EPD, LNG. Barron's Report
- Cautious views on CAT and LII. Barron's Report
- Cautious view on Texas Instruments (TXN). Barron's Report
- Positive views on RDS.A, and TOT. Barron's Report
- Whirlpool (WHR) requested that Sears (SHLD) stop selling appliances. NY Post Report
- Qualcomm (QCOM) has accused Apple (AAPL) of being $7 bln behind in royalty payments. Reuters Report
- Johnson and Johnson (JNJ) has lost Zytiga patient case. Bloomberg Report
- 11 people were killed following shooting in Pittsburgh (AOBC, RGR). NY Times Report
- UK plans to make more broadband investments (XLK). Telegraph UK Report
- Countries in Asia and Latin America are pushing for new taxes on internet cos (GOOG, FB, AMZN, TWTR, SNAP). WSJ Report
Marking its largest deal ever, IBM has agreed to buy Red Hat (NYSE:RHT) for $33B, or $190 per share, a 63% premium to its closing price on Friday. Big Blue will finance the transaction through a mixture of cash and debt as it seeks to diversify into higher-margin products and services. "It changes everything about the cloud market," said CEO Ginni Rometty. "IBM will become the world's No. 1 hybrid cloud provider." IBM -5%; RHT +51% premarket.
Jair Bolsonaro has comfortably won Brazil's presidential election with 55% of the vote, in a victory that reflected widespread anger at the political class after years of corruption, an ailing economy and never-ending "Car Wash" scandal. The real currency has strengthened 9.7% against the dollar in last 30 days on the prospects of a Bolsonaro win, while the benchmark Bovespa stock index has climbed 13.5% since mid-September.
Sunday's election in one of Germany’s wealthiest states further exposed Chancellor Angela Merkel to a potential challenge to her leadership of the Christian Democratic Union, after both her party and its coalition partner absorbed heavy losses. The vote in Hesse, home to Germany’s financial industry, marks the second major setback in recent weeks for both parties, which suffered similar losses in Bavaria earlier this month.
A political crisis in Sri Lanka took a deadly turn yesterday. One person was killed when a sacked cabinet minister tried to re-enter his office, days after the president removed the prime minister and installed a powerful Chinese ally in his place. Ratings agency Moody's has flagged concern over Sri Lanka's policy uncertainty and future debt repayments, while Nomura said the country is most at risk of an exchange rate crisis.
U.S. stock index futures are staging a comeback despite lingering concerns over rate hikes, earnings and global growth. Stocks fell sharply on Friday as investors slogged through another volatile session on Wall Street, which saw the S&P 500 end at its lowest level since early May and flirt with correction territory. Traders are now eyeing reports from about a quarter of S&P 500 companies, which will release earnings in what will be the last big week for Q3 results.
The dispute resolution body of the WTO will hear a complaint today filed by the U.S. accusing Chinese firms of breaking patent laws by pilfering technologies after licensing agreements with American companies end. According to WTO rules, China is able to block the first intellectual property rights hearing, but cannot block a second one from being held, which would probably take place as early as next month.
The Shanghai Composite slipped 2.2% overnight on fresh signs of cooling in the world’s second largest economy. Chinese data over the weekend showed slowing profit growth at industrial firms for the fifth consecutive month in September as sales of raw materials and manufactured goods ebbed. An escalating trade war with the U.S. has also added to pressure on overall output.
The Bank of Japan is considering tweaking its bond buying operations to allow the government debt market to better reflect fundamentals, which many participants say has been heavily skewed by central bank buying. The BOJ currently buys debt in the open market one day after the finance ministry auctions new bonds, but could push back the purchases a few days to allow bonds to circulate in the market longer.
Philip Hammond, Britain's Chancellor of the Exchequer, will release the annual U.K. budget later today, but warned that a no-Brexit deal could derail his best laid plans and require new taxes and spending. "We would need to look at a different strategy and frankly we'd need to have a new budget that set out a different strategy for the future," he told Sky News.
Inspired by EU proposals - to impose a tax based on the revenue of tech companies rather than their profit - South Korea, India, Mexico, Chile and other countries across Asia and Latin America are contemplating new taxes on foreign tech firms, WSJ reports. Such taxes, which are separate from corporate income taxes many companies already pay, are broadly known as digital taxes and could add billions of dollars to companies' tax bills.
If Qualcomm ever prevails in its patent dispute with Apple (NASDAQ:AAPL), it could have significant compensation coming its way. The chip designer disclosed in San Diego federal court that Apple was allegedly $7B behind in device royalty payments, revealing the scale of claims against its former customer. Apple sparked the legal battle in early 2017 with a $1B lawsuit accusing Qualcomm (NASDAQ:QCOM) of double-dipping on patent royalties.
Twitter has apologized for failing to act on threats made by Cesar Sayoc, the man charged Friday with a string of attempted mail bombings that targeted prominent members of the Democratic party. While media companies have been in the spotlight for perceived failure to respond quickly, other abusive and hateful discourse has moved to other platforms. Robert Bowers, the shooter in Saturday's Pittsburgh synagogue massacre, communicated over Twitter (NYSE:TWTR)-alternative Gab.
Amid reports that Amazon (NASDAQ:AMZN) could open as many as 3,000 of its Go stores by 2021, Sam's Club (NYSE:WMT) has unveiled a location in Dallas that will allow customers to use a new "Sam's Club Now" app to scan and pay for their groceries, plot out their journey and make suggestions. At 32K square feet, Sam's Club said the new store will be about a quarter of the size of a traditional club, with a focus on produce, meat and alcohol.
Microsoft regained its spot as the second most valuable U.S. company on Friday after a disappointing quarterly report from Amazon (AMZN) wiped $65B off the online retailer's market capitalization. Amazon had held the title since April, and was on its way to the $1T club, but the company is now worth less than its major cloud rival at $803B. At the end of the day Friday, Microsoft's (NASDAQ:MSFT) market cap stood at $821B.
HSBC +5.1% premarket after adjusted pre-tax profit beat expectations and rose 16% Y/Y to $6.19B in Q3. "These are encouraging results that demonstrate the revenue potential of HSBC," CEO John Flint declared. "We are doing what we said we would - delivering growth from areas of strength, and investing in the business while keeping a strong grip on costs."
The Boston Red Sox are once again World Series champions. Capping one of the best seasons in baseball history Sunday night, the BoSox claimed the championship title by beating the Los Angeles Dodgers, 5-1, in Game 5. The first four games brought the lowest ratings in four years for Fox (NASDAQ:FOX), which has broadcast the World Series since 2000, though that was reflective more of the general decline in broadcast TV viewership.
Making moves... New Fiat Chrysler (NYSE:FCAU) CEO Mike Manley is reconsidering a decision announced in January to stop building Ram heavy-duty pickups at a plant in Saltillo, Mexico. That would free up manufacturing capacity to make even more new trucks to eat into sales of Ford's (NYSE:F) F-Series or GM's Chevrolet Silverado and GMC Sierra. “We need to get ourselves into second" place, he told Reuters. "Frankly, I don’t care which of the two I take share from.”
Before logging off of Twitter "for a few days," Tesla's (NASDAQ:TSLA) Elon Musk appeared to suggest that the "420" tweet that cost him and the company $20M each was "Worth It." Under the settlement with the SEC, Musk was forced to step down as Tesla's chairman for at least three years and Tesla was required to rein in Musk's communications with investors. Tesla must appoint an independent chairman by Nov. 13.
A Chinese carrier rocket, developed by Beijing-based Landspace, failed to reach orbit after lifting off on Saturday, in a blow to the country's nascent attempts by private companies to rival Elon Musk's SpaceX (SPACE). Since coming to office in 2012, President Xi has made becoming a "space flight superpower" a priority for the government, which has a goal of sending a permanent manned space station into orbit by around 2022.
A Lion Air passenger jet with 188 people on board crashed into the sea early this morning, just minutes after takeoff from the Indonesian capital, Jakarta. The plane, a Boeing 737 MAX 8 (NYSE:BA), was made in 2018 and had only been operated by the airline since Aug. 15. Safety record? Several Lion Air crashes have taken place since 2004, while there were a spate of incidents a few years ago where pilots were found in possession of methamphetamines.
In Asia, Japan -0.2%. Hong Kong +0.4%. China -2.2%. India +2.2%.
In Europe, at midday, London +1.5%. Paris +0.3%. Frankfurt +1.9%.
Futures at 6:20, Dow +0.3%. S&P +0.6%. Nasdaq +0.9%. Crude -0.3% to $67.39. Gold -0.3% to $1232.20. Bitcoin -0.2% to $6416.
Ten-year Treasury Yield +1 bps to 3.09%