Wednesday Morning Reads
- ECB to debate ending QE next week
- Force majeure on PDVSA's oil exports?
- U.S.-China trade developments in focus
- Reuters: ZTE back in business
- India's first rate hike in four years
- More on Facebook's data partnerships
- Social Security to dip into trust fund
- Tesla nixes separation of Musk roles
Open Interest Changes:
Unusual Option Action:
Central bankers gathering in Berlin have confirmed that the ECB is ready to consider ending its massive bond-buying program, a move President Mario Draghi has so far refused to publicly acknowledge. "Both the underlying strength in the euro area economy and the fact that such strength is increasingly affecting wage formation supports our confidence that inflation will reach a level of below, but close to, 2%," ECB chief economist Peter Praet declared, adding that the decision will be discussed on June 14. The euro rose to a ten-day high, climbing 0.4% to 1.1754, following the hawkish comments.
For the first time in more than four years, India's central bank has raised its key repo rate - by 25 basis points to 6.25% - but kept its policy stance at "neutral." The increase was in response to rapid consumer price growth, which is already above the RBI's 4% medium-term goal, and to calm financial markets as policy tightening in the U.S. rattles emerging markets.
China has offered to purchase nearly $70B of U.S. farm, manufacturing and energy products if the Trump administration abandons its threat for $50B in duties on China-made products. The White House, which is looking to reduce its trade deficit with China by $200B, has said it plans to move ahead with the tariffs shortly after June 15 as a way to pressure Beijing to make more sweeping changes in its economy.
For the first time since 1982, Social Security this year will have to tap into its nearly $3T trust fund to cover benefits of the program. That is three years sooner than expected a year ago, partly due to lower economic growth projections, according to the latest annual report. The program's income comes from tax revenue and interest from its trust fund.
California Democrats overcame the state's open primary system and managed to mount challenges to Republicans in most key Congressional races as voters in eight U.S. states chose candidates for midterm elections. The same quirk also threatened to eliminate Republican John Cox from the race for California governor, but the final vote will see him face Democratic candidate Gavin Newsom in November.
Dozens of American companies are preparing to pull out of Iran as the Trump administration shuts a narrow legal window that allowed firms to operate there without violating U.S. sanctions. They include Honeywell (NYSE:HON), Dover (NYSE:DOV), General Electric (NYSE:GE), Albemarle (NYSE:ALB), Eaton (NYSE:ETN), Chubb (NYSE:CB) and Ecolab (NYSE:ECL), which together had booked Iran-linked revenues of more than $175M since January 2016.
Venezuela has raised the prospect of declaring force majeure on contracts with major crude buyers amid plummeting output from its oil fields and tanker bottlenecks at ports, Reuters reports. The OPEC member's export terminals have grown overcrowded since ConocoPhillips (NYSE:COP) last month won court orders freezing PDVSA's key Caribbean operations, where the company used to ship large cargoes to Asian destinations.
More data sharing partnerships... Facebook (NASDAQ:FB) struck deals with at least four Chinese electronics firms, including Huawei Technologies, a telecom equipment company that has been flagged by U.S. intelligence officials as a national security threat. The partnerships, which aimed to create device-integrated APIs, have remained in effect since at least 2010, but Facebook said it would wind down the Huawei deal by the end of the week.
Amazon's answer to Google X? It's called "Grand Challenge," according to CNBC sources, which said the secretive group is working on cancer research, medical records and last-mile delivery. Also operating under the monikers 1492 and Amazon X (NASDAQ:AMZN), Grand Challenge has added over 50 people since 2014, when Babak Parviz left Google X (GOOG, GOOGL) to head up the effort.
Back to business? ZTE (OTC:ZTCOY) has signed an agreement in principle that would lift a U.S. Commerce Department ban on buying from American suppliers, sources told Reuters. The preliminary deal includes a $1B fine, plus $361 from an earlier settlement and $400M in escrow to cover any future violations, allowing the U.S. to claim a total penalty of as much as $1.7B.
Volkswagen has promised to no longer support the use of animals in testing the effects of diesel exhaust as the automaker tries to move past an emissions-cheating scandal in which it was found to have helped finance experiments on monkeys. The new standard will be added to the company's code of conduct this year and it will apply to all 12 of Volkswagen's (OTCPK:VLKAY) brands and all 640K of its employees.
Tesla is "quite likely" to meet the Model 3's output goal of 5,000 per week by the end of June, according to CEO Elon Musk, as the company’s production lines were now demonstrating the ability to make 3,500 vehicles on a weekly basis. The announcement comes after Tesla (NASDAQ:TSLA) shareholders rejected two proposals that would have changed up the company's board, including one that would have removed Musk from the chairman's seat.
Ready for blastoff... The Federal Trade Commission has approved Northrop Grumman's (NYSE:NOC) proposed $7.8B purchase of Orbital ATK (NYSE:OA) with conditions. Northrop must supply solid rocket motors to competitors and separate the two companies' operations with a firewall. The transaction is expected to be completed after the market close today.
Looking to become a truly multi-modal transport service, UBER will launch its recently purchased electric bicycle sharing service - JUMP Bikes - in Europe by the end of the summer. The company is aiming to be the go-to app for urban transportation options, be it buses, bikes or cars, allowing people to book trips across a range of services.
In Asia, Japan +0.4%. Hong Kong +0.5%. China flat. India +0.8%.
In Europe, at midday, London +0.4%. Paris flat. Frankfurt +0.3%.
Futures at 6:20, Dow +0.4%. S&P +0.2%. Nasdaq +0.1%. Crude -0.4% to $65.24. Gold -0.2% to $1299.10. Bitcoin -0.1% to $7608.
Ten-year Treasury Yield +3 bps to 2.95%