Tuesday Morning Reads
- Bonds in $916 billion wipeout spark fear of worst run since 1976.
- 2018 echoes 1987 as central banks shift toward tighter policy.
- Big oil is about to bury skeptical investors in cash.
- Currency ‘cartel’ traders on trial for chats that cost billions.
- Tencent’s $214 billion rout is breaking all kinds of records.
- Is the reign of Glencore’s billionaire copper king near its end?
- Cocaine hippos.
All eyes are on U.S. Treasuries again as trading reopened in the wake of last week's selloff and a bond market holiday on Monday. The benchmark 10-year yield crept up to a fresh seven-year high, advancing past 3.26%, marking an increase of about 80 basis points from the start of 2018. U.S. stock index futures look poised for a fourth day of declines in response, down 0.5%, as traders gear up for $230B of Treasury auctions this week.
President Trump will not engage in trade talks with Xi Jinping at next month's G20 summit if China does not produce a detailed list of concessions, sources told the FT. The Chinese say they have such a list, but would not present it without some guarantee of it being received in a stable political climate in Washington, including a point person with a mandate to negotiate on behalf of the Trump administration.
Latest Brexit warning... As much as £41T of derivatives contracts maturing after Brexit are at risk unless European officials address regulatory uncertainty, according to the Bank of England. Unless a statement is forthcoming from the European Commission, clearing houses will have to tell their European members such as banks to move their books of businesses, or risk falling foul of European law.
Citing "further disruptions in trade policies" and instability in emerging markets, the IMF has lowered its global growth forecasts to 3.7% this year, down from its April estimate of 3.9%. "Two major regional trade arrangements are in flux (NAFTA and Brexit) and U.S. tariffs on China may disrupt established supply chains," said IMF chief economist Maurice Obstfeld. "The negative revisions for emerging market and developing economies are (even) more severe."
Pakistan's currency tumbled 7% to PKR134 to the dollar overnight after the nation's finance minister, Asad Umar, announced his government would approach the IMF for a bailout for the 13th time in its history. Pakistan's stores of foreign currency now stand at $8.4B - barely enough to cover imports until the end of the year, while the rupee is more than 25% lower vs. the greenback since the beginning of last December.
President Trump will visit Iowa today, where he is expected to deliver on his promise to lift a summer ban on higher ethanol blends of gasoline. The announcement - which will be coupled with restrictions on biofuel credit trading sought by merchant refiners like Valero (NYSE:VLO) and PBF Energy (NYSE:PBF) - could reshape the retail market, making gas with 15% ethanol the new consumer standard. The EPA currently prohibits E15 due to smog concerns.
After flashy product reveals from Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) earlier this fall, Google (GOOG, GOOGL) is now ready for its annual hardware showcase. It's expected to unveil two new Pixel 3 phones, a set of smart speakers with a screen display, rumored to be called the Google Home Hub, a new Chromecast and a Pixel tablet. The "Made by Google" launch starts at 11 a.m. EST in NYC. Watch the event live here.
RIP Google+. Seven years and hundreds of millions of dollars of investment into the social media effort, the tech giant has decided to kill off its social network for consumers. It follows reports that Google (GOOG, GOOGL) had exposed the private data of nearly 500K Google+ users, but opted not to disclose the issue in the spring. Google further said it was dropping out of the Pentagon's $10B JEDI cloud contract, in part because the project might conflict with its corporate values.
More Google news... In the latest step in its eight-year antitrust battle in Europe, the company is set to appeal the EU's record €4B fine it received for abusing the dominant market position of its Android mobile operating system. It has until tomorrow to file its case with the European Court of Justice. With more than 80% of the world's smartphones running on the Android operating system, the product is vital to Google's (GOOG, GOOGL) future revenues and profitability.
In a boost to its cloud computing business, Microsoft (NASDAQ:MSFT) is set to win unconditional EU antitrust approval for its $7.5B purchase of privately held coding website GitHub, Reuters reports. The deal would be Microsoft's largest acquisition since it bought LinkedIn for $26B in 2016. LinkedIn also announced the acquisition of Glint, a startup whose software helps human resources managers understand how workers feel about their employers.
Sony is working on a successor to the PlayStation 4 as speculation intensifies over whether traditional gaming consoles have a future in a world of VR, online streaming and smartphone gaming. "At this point, what I can say is it's necessary to have a next-generation hardware," said Kenichiro Yoshida, in an interview with the FT, but declined to formally name Sony's (NYSE:SNE) future console the "PlayStation 5."
CBS on the block? The cable company will look for potential buyers after a probe on its former CEO Leslie Moonves ends, according to a tweet from Fox's Charlie Gasparino. The board is planning a search for a CEO even with the presence of COO Joe Ianniello as a leading candidate for the job. Moonves had previously opposed efforts by controlling shareholder Shari Redstone and her father Sumner Redstone to merge CBS with Viacom (VIA, VIAB).
Papa John's shares jumped 17% AH amid reports that Nelson Peltz was considering a bid to take over the pizza chain. His Trian fund also invited former Papa John's (NASDAQ:PZZA) CEO John Schnatter to discuss a potential deal with leaders at Wendy's (NYSE:WEN), where Peltz is chairman. Several parties (including companies and private-equity firms) are also said to have expressed interest in an offer.
Perrigo has named Murray Kessler, former Lorillard Tobacco CEO, as its new chief executive, replacing Uwe Roehrhoff. The decision comes amid Perrigo's (NASDAQ:PRGO) shift toward a consumer focus: "Given the decision to separate the Rx pharmaceuticals business and pursue a consumer-focused strategy, the board is looking forward to partnering with (Kessler) to develop Perrigo's strategic plan."
EU environment ministers will seek a compromise today over how tough to be on curbing CO2 emissions from cars and vans. Germany, with its big auto sector, has backed the EU executives' proposed target of a 30% reduction by 2030, compared to 2021 levels, warning too tough targets could harm the industry and cost jobs. However, France, Netherlands and a number of other countries are pushing for a stricter limit of 40%.
Sources are telling Reuters that Volkswagen (OTCPK:VWAGY) is close to lining up some bankers for the IPO of its Traton truck business, including Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan. A flotation, anticipated to bring in close to $7B in proceeds, could allow Volkswagen Truck & Bus to build a war chest to completely buy out Navistar (NYSE:NAV), a U.S. truck maker in which it already owns a 16.85% stake.
Virgin Galactic is "more than tantalizingly close" to its first trip to space, according to billionaire founder Richard Branson. "We should be there within weeks, not months. And then we will be in space with myself in months and not years," he told CNBC. Earlier this year, Branson admitted Virgin Galactic was in a closely-fought commercial space race with Jeff Bezos's Blue Origin (BORGN).
Hurricane stocks are again on watch amid the rapid escalation of Hurricane Michael in the Gulf of Mexico, which is forecast to become a major hurricane by this evening and make landfall on Wednesday. The National Hurricane Center warning cone currently includes Florida, Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, New Jersey and Delaware. Related tickers: HD, LOW, DUK, ALL, CB, AIG, TRV, PGR, GNRC, CMI, BGG, WWD, CAT, RBC, CYD, WPRT, UQM, HYGS
In Asia, Japan -1.3%. Hong Kong -0.1%. China +0.2%. India -0.5%.
In Europe, at midday, London -0.3%. Paris -0.4%. Frankfurt -0.5%.
Futures at 6:20, Dow -0.5%. S&P -0.5%. Nasdaq -0.5%. Crude +0.7% to $74.81. Gold +0.1% to $1189.60. Bitcoin -0.2% to $6608.
Ten-year Treasury Yield +3 bps to 3.26%