Thursday Morning Reads
- Surging Euro Dilemma
- Pushing Vacancies to a Record
- More Americans Are Quitting Their Jobs
- Wall Street Sees A Bright Side
- When ‘Buy American’ and Common Sense Collide
- Can the 60/40 Portfolio Still Work?
- Democracy Has Failed
Currency traders are preparing for a key meeting at the ECB, which has seen the euro appreciate heavily over the past few months, especially after the Fed signaled a willingness to allow inflation to overshoot its target. The dovish stance, which gives more weight to the labor market and less weight to inflation, has added to the downward pressure on the U.S. dollar, and the ECB's Christine Lagarde is expected to talk down the euro as much as she can. Normally, a central bank would cut interest rates to deal with this kind of situation, but rates are already deeply negative across the eurozone. Instead, the ECB may stress that the €1.35T envelope of the PEPP (pandemic emergency purchase program) is not a ceiling, and that it is prepared to increase its pace and size.
U.S. equity index futures are pausing for breath, with the Nasdaq nominally higher and the Dow and S&P 500 inching lower, after Wall Street snapped its tech losing streak on Wednesday. Tesla (NASDAQ:TSLA) shares rebounded nearly 11% after suffering their biggest one-day percentage drop in history, while Apple (NASDAQ:AAPL) gained 4% to bring its market cap back to $2T. On the economic calendar today is the release of U.S. weekly jobless claims as Congress remains deadlocked over a fresh coronavirus stimulus package. While Senate Republicans have united around a "skinny" bill, Democrats oppose the measure, and it isn't expected to clear its first procedural hurdle in the Senate today.
The EU and the U.K. are holding emergency talks after the latter published its Internal Market Bill, which would undercut parts of the Withdrawal Agreement agreed to in January. The news could also damage trade talks as both sides work to secure a new deal. Without an agreement, nearly $1T in trade could be thrown into chaos at the beginning of the year, but some say the "game of Brexit chicken" may be part of the negotiating strategy. Adding to the turmoil, U.S. House Speaker Nancy Pelosi said any potential U.S.-U.K. trade deal would not pass Congress if Britain undermines the Good Friday peace agreement.
TikTok owner ByteDance (BDNCE) and the U.S. government are in discussions over possible ways allowing for something less than a full sale of TikTok's U.S. operations, WSJ reports. The talks follow acts by China's government that throw some roadblocks at such a sale (like new restrictions on the export of AI technology) and with a nearing deadline for TikTok to agree to a sale or be shut down. ByteDance has been considering options that include a sale to a team of Microsoft (NASDAQ:MSFT) and Walmart (NYSE:WMT), or to a group including Oracle (NYSE:ORCL).
The number of U.S.-listed Chinese companies securing secondary listings in Hong Kong is growing, as Yum China (NYSE:YUMC) joined the group after raising the equivalent of $2.2B by selling new stock. Nasdaq-listed hotelier Huazhu Group (NASDAQ:HTHT) has also started taking orders for a $970M stock sale ahead of its planned secondary listing in Hong Kong on Sept. 22. Why the alternative listings? The U.S. Senate passed a bill in June that could ban many Chinese companies from listing on American exchanges amid escalating tensions between the world's two largest economies. A Hong Kong listing also means a company's stock can be traded during Asian hours, broadening its investor base, while shares can be added to the Hong Kong Stock Connect, giving access to mainland investors
Go Deeper: Alibaba, JD.com and NetEase have also completed listings in Hong Kong.
BP (NYSE:BP) is continuing its seismic strategy shift in abandoning the oil major business model, making its first venture into offshore wind power with a $1.1B purchase of U.S. assets from Norway's Equinor (NYSE:EQNR). The British firm will receive a 50% stake in the Empire Wind and Beacon Wind developments off New York and Massachusetts, respectively, while Equinor will retain 50% in both, and continue to act as the operator. Just six months after taking the helm, BP CEO Bernard Looney said in August he'd shrink oil and gas output by 40% over the next decade and spend as much as $5B a year building one of the world's largest renewable power businesses.
Partnering with end-to-end delivery firm Flytrex, Walmart (WMT) launched a pilot program this week to test using drones to deliver groceries and household essentials in Fayetteville, North Carolina. Even though it is expected to be a long time before drones are widely used for deliveries, the company hopes to gain insight by using the technology. Besides mirroring Amazon's (NASDAQ:AMZN) Prime Air program, Walmart also announced its Walmart+ membership program last week that will take on Amazon Prime.
There were more than 15,000 empty rental apartments in Manhattan in August, up from 5,600 a year ago, as more New Yorkers fled the city amid the coronavirus crisis, according to a report from Douglas Elliman and Miller Samuel. The inventory of empty units is the largest ever recorded since data started being collected 14 years ago, dashing hopes for a rebound in the fall or the end of 2020. While REITs and real estate companies have more access to capital, smaller landlords may have trouble paying their mortgages and property taxes, which could impact banks and lenders.
Dubbing it the "largest single transport challenge ever," the International Air Transport Association called on governments to start "careful planning with industry stakeholders" for the large-scale delivery of a coronavirus vaccine. "Just providing a single dose to 7.8B people would fill 8,000 (Boeing) 747 cargo aircraft," according to the air transport body. The IATA also cautioned that "while there are still many unknowns (number of doses, temperature sensitivities, manufacturing locations, etc.), it is clear that the scale of activity will be vast, that cold chain facilities will be required and that delivery to every corner of the planet will be needed."
Go Deeper: The end of COVID-19 airport screenings for international travelers?
What else is happening...
MLB in the final stages of postseason bubble.
Is Bitcoin the next generation's version of gold?
Wednesday's Key Earnings
In Asia, Japan +0.9%. Hong Kong -0.6%. China -0.6%. India +1.7%.
In Europe, at midday, London -0.8%. Paris -0.2%. Frankfurt +0.2%.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq +0.2%. Crude -1.5% to $37.48. Gold +0.1% to $1956.70. Bitcoin +1.1% to $10289.
Ten-year Treasury Yield flat at 0.70%
Today's Economic Calendar
8:30 Initial Jobless Claims
8:30 Producer Price Index
10:00 Wholesale Inventories (Preliminary)
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
1:00 PM Results of $23B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet