Thursday Morning Reads

Economy

U.S. stock index futures mainly hugged the flatline overnight after the Federal Reserve and Jerome Powell on Wednesday sparked a late party on Wall Street. The Dow and S&P 500 both rose over 1.6%, while the Nasdaq scored gains of 2.2%. Combined with comments that the Fed's balance sheet would remain larger than previously expected, the central bank expressed it would be "patient" before making any further rate moves.

The American economy will also recover most of the economic output lost during the federal government’s partial shutdown, according to Powell. "We don't know the ultimate resolution of the shutdown, which will leave some sort of imprint on first-quarter GDP... [But] if the shutdown is gone and there isn't another shutdown, we’ll get most of [the lost growth] back in the second quarter."

Manufacturing activity in China contracted for the second-straight month in January - another sign the world’s second-largest economy is slowing. The official manufacturing PMI came in at 49.5 amid domestic headwinds and the ongoing trade dispute with the U.S. China's services sector posted stronger figures, recording a PMI of 54.7, helping cushion the impact of decelerating factory activity.

Italy is officially in a recession. Output in Europe's fourth largest economy contracted 0.2% in Q4, on the heels of a 0.1% drop in the quarter before that, marking a fresh setback for the new anti-establishment government. Italy's two-year government bond yield hit 0.243% on the news, falling 4 basis points to its lowest level since May 2018.

German retail sales plummeted by 4.3% Y/Y in December, the sharpest fall since 2007, sending a worrying signal about household spending. The decline was partly due to the comparison with a strong November which was boosted by pre-Christmas shopping and discount days, but also highlighted strong headwinds from the U.S.-Sino trade skirmish and broader economic troubles.

Stocks

Hit by a slowdown in demand for memory chips, Samsung Electronics (OTC:SSNLF) warned of weaker earnings in 2019 as it posted a 29% drop in Q4 operating profit. The company also expects "overall annual earnings to decline" this year, although sales of memory products would begin to revive in the second half. Excitement is building for Samsung's upcoming foldable smartphone and 5G-capable devices - and could help share prices, which tumbled 24% in 2018.

European overnight earnings: Royal Dutch Shell (NYSE:RDS.A) +3.7%after delivering a surge in cash flow that will underpin "world-class" returns for investors. Nokia (NYSE:NOK) -6% as its outlook pointed to a bumpier 5G rollout. Unilever (NYSE:UN) -1.5% hurt by flat volume growth in developed markets. Roche (OTCQX:RHHBY) inched up with strong demand for its new range of medicines, while Diageo (NYSE:DEO) +4.5% unveiled a £660M stock buyback plan after increasing sales growth.

Deutsche Bank -3.4% premarket on reports that the embattled German lender is gearing up for a potential merger with rival Commerzbank (OTCPK:CRZBY). Bloomberg noted the deal is being brokered by the German government and would happen by mid-2019 if efforts to restructure the bank fell short of targets. Last week in Davos, German Finance Minister Peter Altmaier said he was willing to lend "political support" toward Deutsche Bank's (NYSE:DB) recovery.

Sri Lanka has halted imports of Johnson & Johnson's (NYSE:JNJ) Baby Powder until the company proves it's free from asbestos. On Dec. 14, Reuters reported that the company knew for decades that the cancer-causing mineral lurked in the product, leading to tests in several countries, including in India. J&J has described the story as "one-sided, false, and inflammatory."

Puma is releasing self-lacing smart shoes to take on Nike (NYSE:NKE), which recently unveiled its Adapt BB with a price tag of $350. Puma's (OTCPK:PUMSY) high tech sneakers, called Fi, will cost $20 less and be available from Spring 2020. Each smart training shoe will have a battery based under its sole that can be charged through a wireless charging dock or by swapping out the batteries.

Amazon is hauling some cargo in Embark self-driving trucks on the I-10 interstate highway, according to CNBC sources and online photos. Amazon (AMZN) statement: "We are always innovating and working with innovative companies to improve the customer experience and safety of our team. We think successful over-the-road autonomy will create safer roadways and a better work environment for drivers on long-haul runs.”

Just days before the law is set to come into force, Lyft (LYFT) is suing New York City over its new $17.22/hour minimum wage for drivers, which it argues would put it at a disadvantage with Uber (UBER). The dispute centers around the utilization rate: Lyft would like the minimum wage to be calculated across a whole week of driving, rather than on a ride-by-ride basis that would result in less waiting time.

Amid the deep freeze gripping the U.S. Midwest, CMS Energy (NYSE:CMS) has asked automakers to suspend operations to allow the utility to manage supply issues and a fire at a compressor station. General Motors (NYSE:GM) is temporarily suspending operations at 11 Michigan plants and its Warren Tech Center, while Fiat Chrysler (NYSE:FCAU) and Ford (NYSE:F) have agreed to "interrupt" production schedules.