Wednesday Morning Reads
- One Big Problem
- Employment Rises
- Up and Down
- ‘Soft Brexit’ Deal For Britain
- Japan’s New Crime Wave
- IMF Raises China 2017 Growth Forecast Again
- Bond Traders’ Roadmap to the Fed
- Which ETF To Pick
- All-Time High
- IEA: Arab rift is causing problems
- Call for a 'softer' Brexit calms pound
- Restructuring continues at Sears
- Lights out for Waymo's Firefly
- Senate supports Saudi weapons sale
- Trump plans Cuba policy rollback
- Death of the human investor?
- Ericsson's mobility report on 5G
— Credit Suisse (@CreditSuisse) June 14, 2017
The Federal Reserve is widely expected to raise interest rates by a quarter point to a target range of 1%-1.25% when it concludes its policy meeting today. A hike would be the second this year, and the fourth of the cycle it began in December 2015. Markets are also focused on what the Fed will say about reducing its $4.5T balance sheet and when and how the process will begin.
The ongoing dispute between several Middle East countries and Qatar is causing "logistical headaches", the IEA warned in its latest oil market report. "Abu Dhabi swiftly enforced a ban on oil tankers linked to Qatar... which could lead to a backlog of cargoes and increased shipping costs." What about supply cuts? "Output from members bound by the production deal edged lower, which kept YTD compliance strong at 96%."
Calling the allegation a "detestable lie," U.S. Attorney General Jeff Sessions has denied collusion with the Russians during the presidential election and defended his recusal from the investigation as a procedural matter. Meanwhile, nearly 200 Democratic lawmakers are suing President Trump, stating he violated the Constitution by accepting gifts from foreign leaders without Congressional approval.
The pound appears to have stabilized amid calls to adopt a "softer" Brexit. A host of senior figures within the Conservative Party, including former Prime Minister David Cameron, are urging Theresa May to "listen to other parties" on how to leave the EU. French President Emmanuel Macron also raised the prospect of the U.K. abandoning Brexit altogether in a speech at Elysee Palace.
The IMF has raised its growth estimate for China for the second time this year, while cautioning that deep reforms are still needed to break away from its debt-fueled expansion. According to the fund, the world's second-largest economy will expand by 6.7% in 2017. That's up from a 6.6% estimate released in April and 6.5% forecast in January.
President Trump on Friday will scale back policy changes he believes have benefited the Cuban government while preserving some of the increased commercial activity that began under the Obama administration. "We think we have achieved very little in terms of changing the behavior of the regime in Cuba... and it has little incentive today to change that," said Secretary of State Rex Tillerson.
Quantitative investing based on computer formulas and direct trading by machines is leaving the traditional stock picker in the dust and now dominating the markets. "The majority of equity investors today don't buy or sell stocks based on stock specific fundamentals," according to JPMorgan, which estimates "fundamental discretionary traders" account for only about 10% of trading volume in equities.
The restructuring goes on... Sears (NASDAQ:SHLD) is slashing 400 jobs at its corporate offices as part of its previously announced plans to save $1.25B in costs a year. More woes? Sears Canada (NASDAQ:SRSC), which was partially spun off from Sears Holdings, has cast doubt on its own ability to continue operating after struggling to cobble together necessary financing.
After receiving the backing of some key creditors, J. Crew has disclosed terms of a debt restructuring deal that would roughly cut in half the value of its nearly $567M in bonds, as well as extend their maturity by two years. The move comes after Reuters reported last month that GSO Capital Partners (NYSE:BX) and Anchorage Capital were snapping up J. Crew's debt to facilitate such a deal.
EU antitrust regulators have opened an investigation into Nike (NYSE:NKE), Universal Studios (NASDAQ:CMCSA) and Hello Kitty owner Sanrio (OTCPK:SNROF) to see if the companies are illegally blocking online sales in the bloc. The European Commission said the probe will focus on the three companies' licensing and distribution practices related to their merchandise.
"Our goal in sitting down with him [Alex Jones] was to... discuss the considerable falsehoods he has promoted with near impunity," said Megyn Kelly, defending her upcoming interview with the face of Infowars. Insiders told Page Six that NBC (CMCSA) staff were having panicked meetings as sponsors, like JPMorgan (NYSE:JPM), pulled out. "It's a s--t show. No one wants to withstand a whole week of criticism over this."
North America and Asia Pacific are tipped to beat Europe in 5G adoption, according to Ericsson's latest "Mobility Report, which expects more than half a billion 5G subscriptions worldwide by 2022. "In North America, there's great interest from the major operators... we've seen statements from both Verizon (NYSE:VZ) and AT&T (NYSE:T) to deliver as early as possible," declared Magnus Ewerbring, Asia Pacific CTO at Ericsson (NASDAQ:ERIC).
Nintendo shares are up some 50% so far this year on surprisingly strong sales of its Switch console and new game lineup. As for Microsoft's (NASDAQ:MSFT) recent announcement of the XBox One X, the company believes it doesn't pose a threat. "Our demographic is much wider. We want consumers from 5 to 95 playing our games," said Reggie Fils-Aime, President of Nintendo America (OTCPK:NTDOY).
Deepening its move into passenger vehicles, IBM is pairing with BMW (OTCPK:BMWYY) to provide cloud-based data management for the automaker's recently launched connected car initiative. Last year, IBM announced a similar deal with General Motors (NYSE:GM). BMW officially launched its CarData program last month, which is designed to link some 8.5M vehicles equipped to transfer data.
Fiat Chrysler is widening its search for a successor for CEO Sergio Marchionne, with a group of second-tier managers joining company veterans on a growing list of candidates, Bloomberg reports. While Fiat's (NYSE:FCAU) Europe chief Alfredo Altavilla and CFO Richard Palmer are under consideration, the search has broadened to some younger candidates as the board casts a wide net.
"The auto industry is undergoing big changes, and issues and ideas which we may have thought were far off in the future could affect us tomorrow," President Akio Toyoda said at Toyota's (NYSE:TM) annual shareholders meeting. The company is now considering M&A to procure new auto technologies, like self-driving cars and electric vehicles, conceding it may have focused too much on preserving the status quo until now.
Waymo has retired its self-driving prototype dubbed the "Firefly," a tiny test car with no steering wheel or pedals, to focus on building autonomous technology into mass-produced vehicles like the Chrysler Pacifica. The move confirms that Alphabet's (GOOG, GOOGL) driverless-car unit has come to terms with the high regulatory and societal hurdles of selling vehicles without traditional controls.
More turmoil at Uber... Board member David Bonderman has stepped down after an uproar about a remark he made, apologizing for saying that more women on a company board leads to "more talking" in meetings. Yesterday, CEO Travis Kalanick took a leave of absence following a damning report by Eric Holder criticizing UBER's "dysfunctional" corporate culture.
The Senate has voted 53-47 to defeat an effort that would bar part of President Trump's highly touted arms deal with Saudi Arabia. At issue were $500M of Boeing-made (NYSE:BA) Joint Direct Attack Munitions, which would be used in Yemen's civil war. It comes as Boeing restructures its defense division into smaller units and eliminates 50 executive positions.
In Asia, Japan -0.1%. Hong Kong +0.1%. China -0.7%. India +0.2%.
In Europe, at midday, London +0.6%. Paris +0.9%. Frankfurt +0.9%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -1.1% to $45.95. Gold +0.1% to $1269.60.
Ten-year Treasury Yield -1 bps to 2.19%Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
8:30 Retail Sales
10:00 Business Inventories
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:00 PM FOMC Forecast