Tuesday Morning Reads, News, Charts and More
U.S. stock markets look set to open higher, with the Dow Jones continuing to push towards new all-time highs, as a Trump-fueled equity bounce appears ready to cement a year-end rally. While recent gains are largely being attributed to the market getting more comfortable with his style and proposed policies, year-end rallies are common in most election years, with the Dow gaining 1.8%, on average, from Election Day thru Dec. 31.
What Trump Means for Interest Rates
Former New York mayor Rudy Giuliani has emerged as the favorite to serve as Secretary of State in Trump's incoming administration. An official said there was no real competition for the job and that it was Giuliani's if he wanted it, but another source cautioned that John Bolton, a former U.S. ambassador to the United Nations, remains in contention for the position.
Central bankers weigh in on Trumponomics... Richmond Fed President Jeffrey Lacker: Trump's plans to ramp up infrastructure spending could boost fiscal stimulus, prompting the Fed to raise rates. Dallas's Robert Kaplan: Trump should enact 'intelligent' fiscal policy to increase growth. San Francisco's John Williams: U.S. should maintain its commitment to free trade and open policies.
SEC Chairman Mary Jo White plans to step down around the same time President Obama exits the Oval Office, opening the door to a new Republican-appointed leader who could move to loosen rules on Wall Street. Those could include rolling back curbs required by the 2010 Dodd-Frank Act, relaxing mutual funds' use of derivatives, and limiting controls on algorithmic traders and dark pools.
Looking to "normalize U.S.-Russia ties," President-elect Donald Trump and Vladimir Putin spoke by telephone on Monday and agreed to work towards "constructive cooperation" and "combine efforts to tackle international terrorism." Meanwhile, Russia's economy minister has been detained over an alleged bribe relating to a mega domestic deal between two of the country's biggest oil companies - Rosneft (OTC:RNFTF) and Bashneft.
The greenback continues to gain strength on expectations of higher interest rates under Trump, pushing the yuan to a near 8-year low and taking its losses so far this year to more than 5%. The People's Bank of China set its daily fix at 6.8495 yuan against the dollar, compared with Monday's 6.8291 yuan, marking the weakest fix for the currency since 2008.
The decision to withdraw 500 and 1,000 rupee banknotes in India as an "anti-corruption drive" may have been applauded by many across the country, but low-income earners, tourists and those dependent on ordinary cash have been bearing the brunt of the new policy. "There have been massive lines outside banks to deposit cash, endless queues outside the ATM machines and these machines have run out of cash," Delhi-resident Sarita Das told CNBC.
GDP grew 0.3% in the eurozone in Q3, or 1.6% on an annual basis, according to official figures. Last week, the European Commission cut its GDP forecasts for the bloc on increased political uncertainty and weaker global trade. The EU expects the euro area to grow 1.7% this year and 1.5% in 2017, after climbing 2% in 2015.
U.K. inflation for October unexpectedly slowed to 0.9% on-year, driven down by the price of clothing and university tuition fees. The figures come as BoE Governor Mark Carney prepares to testify to lawmakers about the outlook for inflation. Officials earlier this month dropped plans to cut interest rates again and shifted to a neutral policy stance, saying their tolerance for faster price gains was limited.
Britain has no overall plan for Brexit and the strategy for leaving the EU might not be agreed for six months due to divisions in Theresa May's government, according to a leaked memo seen by BBC and The Times. The document, prepared for the Cabinet Office by a consultant, said government departments were discussing more than 500 Brexit-related projects and might require an additional 30K civil servants to cope with the immense workload.
Warren Buffett has taken an unexpected stake in four major U.S. airlines. According to regulatory filings, his holding company Berkshire Hathaway (BRK.A, BRK.B) invested $1.2B in American Airlines (NASDAQ:AAL), Delta (NYSE:DAL), United Continental (NYSE:UAL) and Southwest (NYSE:LUV). The Sage of Omaha did not share his rationale behind the trades, but he has long been bearish on the sector. In 2013 he described the industry as a "death trap".
Activist investors haven't gone away. They're just thinking smaller. Activists this year through October have launched just 14 campaigns at firms worth more than $10B, down from 26 over the same period last year, according to FactSet. However, they started campaigns at 202 companies worth less than $1B, just behind last year's record pace of 213.
Many multinationals sold their Venezuelan operations at hefty discounts earlier this year - or even gave them away - seeking to escape the nation's soaring inflation and chronic supply shortages. Six firms, including General Mills (NYSE:GIS) and Harvest Natural Resources (NYSE:HNR), offloaded their operations for as little as half their assessed value, while Clorox (NYSE:CLX) and Kimberly-Clark (NYSE:KMB) chose to abandon their local operations.
Close but no cigar... Reynolds American (NYSE:RAI) has rejected British American Tobacco's (NYSEMKT:BTI) $47B takeover bid, but the latter may be willing to up its offer. More M&A? Estee Lauder (NYSE:EL) is buying millennials-focused makeup brand Too Faced for $1.45B and Regency Centers (NYSE:REG) has agreed to acquire Equity One (NYSE:EQY) for about $5B, creating the largest shopping center REIT by market cap.
Vodafone +2% premarket after investors cheered its European organic growth in H1 and full-year goals despite the mobile operator reporting a sharply wider net loss. As a result of a €5B write-down on its Indian business - due to cutthroat competition in the populous country - Vodafone (NASDAQ:VOD) will not launch the unit's highly anticipated IPO before March next year.
"We are not Ericsson, Ericsson (NASDAQ:ERIC) is in crisis" warned rival Nokia (NYSE:NOK), however, its own shares hit a 3-year low as it projected a 2% decline in its network market next year. The Finnish company set out its outlook at an investor meeting in Barcelona, but expects the market and its business to return to modest growth in 2018. It's also planning to slightly increase its dividend. NOK -4.2% premarket.
With the U.S. election finally over, is America ready for some football? In a season marked by across-the-board ratings declines, Fox's (NASDAQ:FOX) broadcast of Sunday's Cowboys-Steelers game drew the highest rating of any NFL game this season - a 17.8 overnight rating. Meanwhile, NBC (NASDAQ:CMCSA) got a 14.3 rating for its night game matching the Seahawks and Patriots, the highest for any prime-time game since opening weekend.
Rejecting diesel cheating claims, Fiat Chrysler (NYSE:FCAU) and Cummins (NYSE:CMI) said they will fight a class-action lawsuit filed against them on Monday. Lawyers representing owners of older 2500 and 3500 Dodge Ram trucks assert the companies "conspired to knowingly deceive consumers and regulators of illegally high levels of diesel emissions in their vehicles." FCAU +5.2% premarket.
Jaguar Land Rover is jumping on the electric SUV bandwagon. Jaguar (NYSE:TTM) plans to deliver its I-Pace vehicle in 2018, with other luxury carmakers close behind. Audi (OTCPK:AUDVF) expects to market an electric SUV in 2018, Mercedes-Benz (OTCPK:DDAIF) is gearing up to show an electric, midsize SUV in 2019, and BMW (OTCPK:BAMXF) aims to offer a battery-powered X3 SUV in 2020.
Hours after Google announced it would ban sites that peddle fake news stories from using its advertising network, Facebook (NASDAQ:FB) has followed suit. The social network is adding fake news sites to the list of sources already barred from using its Facebook Audience Network ads - a directory that previously included misleading, illegal, and deceptive sites. Google's (GOOG, GOOGL) policy changes will affect its AdSense advertising network.
WhatsApp is finally launching video calling for all of its one billion users (the service will be fully encrypted). It's pretty simple - one just clicks the call icon to make a voice call then selects "video call" to activate it. A major plus point of WhatsApp's (FB) video calling is cross-platform support, unlike FaceTime, which only works with Apple (NASDAQ:AAPL) devices, and Google Duo (GOOG, GOOGL), which isn't compatible with older versions of iOS.
iGlasses? Apple is considering expanding into wearable glass headsets and has talked about the project with potential suppliers. While still in an exploration phase, the device would connect wirelessly to iPhones, show images and other information in the wearer's field of vision, and may use augmented reality, Bloomberg reports. Should Apple (AAPL) ultimately decide to proceed with the device, it would be introduced in 2018 at the earliest.
In Asia, Japan flat at 17668. Hong Kong +0.5% to 22323. China -0.1% to 3207. India -1.9% to 26304.
In Europe, at midday, London +0.6%. Paris +0.3%. Frankfurt flat.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq +0.2%. Crude +2.7% to $44.48. Gold +0.3% to $1225.30.
Ten-year Treasury Yield -2 bps to 2.2%
Today's Economic Calendar
7:30 Fed's Rosengren: Economic Outlook
8:30 Empire State Mfg Survey
8:30 Import/Export Prices
8:30 Retail Sales
8:55 Redbook Chain Store Sales
9:05 Daniel Tarullo speech
10:00 Business Inventories
1:30 PM Stanley Fischer speech