Wednesday Morning Reads
- Oil halts slide on report of larger output cut
- May tries to sell her Brexit deal
- German economy contracts for first time since 2015
- More trouble in Japan as economy contracts
- Italy rejects EU calls to revise budget
- Canopy Growth EPS of -$1.52
- Pfizer loses Lyrica patent fight
- Ford, Walmart to test driverless delivery
- FaceTime coming to the Apple Watch?
- Klarman exits AT&T, adds YPF
- U.S. expected to hold off on auto tariffs (for now)
- FAA denies report on new Boeing probe
While details are not yet known, the U.K. and EU are reported to have reached a draft deal on Brexit. Theresa May will hold a Cabinet meeting today at 2:00 p.m. London time (9:00 a.m. ET) in a bid to persuade her closest ministers to back the "technical agreement," which likely centers on the Irish border and temporary customs arrangement. It's a long road ahead. Even if she gets their support, she'll have to get the majority of parliament to back the proposal.
Looking to avert an oversupply that has weakened prices, OPEC and its partners are reportedly discussing a proposal to cut crude output by up to 1.4M bpd for 2019, a larger figure than officials have previously mentioned. Oil prices are now experiencing the "normal volatility that comes in the run up to our conference [on Dec. 6]... it's a period of anxiety for all stakeholders," OPEC Secretary General Mohammed Barkindo told CNBC. Crude futures +0.3% to $55.83/bbl.
"We won't change," Italian deputy premier Luigi Di Maio declared after a cabinet meeting late Tuesday night. "We believe that this is the budget the country needs to start up again." The maneuver could risk a fine from the EU, totaling 0.2% of Italy’s annual GDP of €1.7T and the freezing of some funding, but that process is likely to get dragged out and would require input from EU governments. The euro is under pressure on the news, while Italian debt sold off.
The German economy shrank for the first time since early 2015, posting a contraction of 0.2% in Q3, weighing on growth across the eurozone. While the hope is that the setback is related largely to new emissions tests that temporarily disrupted auto production, the figures are likely to feed into fears that the euro area's expansion is running into trouble. Weaker exports to China have also stung the region's economy.
Angela Merkel is next to call for the creation of a "real, true" European army, following a similar speech from France's Emmanuel Macron. The German leader said the new force would work in conjunction with NATO, but added that "only a stronger Europe is going to defend Europe." President Trump railed against Macron yesterday, calling for more NATO payments and prompting trade tensions fears with France over wine tariffs.
There may be a role for the state to supply digital currency to the economy, according to IMF head Christine Lagarde. This would aid financial inclusion and avoid a situation where "too much power could fall into the hands of a small number of outsized private providers." Payments would also be "immediate, safe, cheap and potentially semi-anonymous... And central banks would retain a sure footing."
China delivered a mixed economic report card for October. Softening retail sales pointed to a consumption slowdown, though a pickup in industrial output and fixed-asset investment suggested support measures in the world’s second-largest economy may be starting to take hold. Meanwhile, MSCI said it would add several onshore Chinese stocks to its widely duplicated emerging-markets index as part of its semi-annual review.
More trouble for Japan... The country's economy contracted an annualized 1.2% in Q3, lashed by strong typhoons and a powerful earthquake that halted factories and stifled consumption. A decline in exports was also worrying, suggesting trade protectionism is starting to take its toll on overseas demand. If a recovery is not seen next quarter, pressure may increase on policymakers to turn to fiscal stimulus.
A woman in Northern California, Betsy Ann Cowley, has revealed that Pacific Gas & Electric (NYSE:PCG) contacted her about "problems with sparks" in power lines on her property one day before the deadly wildfire in Paradise began. Fire investigators have declared her property a crime scene, while California authorities have launched a probe targeting PG&E to "assess the compliance of electric facilities with applicable rules and regulations."
The DOJ and SEC have subpoenaed Snap (NYSE:SNAP) for information about its March 2017 initial public offering, and the company said it is responding to the requests. The federal inquiries follow an ongoing shareholder lawsuit in which investors allege that Snap misled the public about how competition from Facebook (NASDAQ:FB) Instagram service had affected the company’s growth.
Amazon has more than 10,000 employees working on its Alexa virtual assistant and the Echo devices it powers, double the staff in that division a little more than a year ago. The comments came from Dave Limp, SVP of Amazon Devices, at the WSJ Tech D.Live conference. According to Loup Ventures, Amazon (NASDAQ:AMZN) has sold an estimated 47M+ devices in the Echo family since its launch in late 2014, giving it a roughly 51% share of the smart-speaker market.
Huawei has revealed plans for augmented reality smart glasses that could debut in the next one or two years. The wearables have not really taken off among consumers, but there appears to be renewed interest in the concept among major consumer electronics companies. Last year, Bloomberg reported that Apple (NASDAQ:AAPL) is working on an AR headset, and in August, the tech giant acquired Akonia Holographics.
FaceTime may be coming to the Apple Watch (AAPL), allowing users to leave handheld equipment behind when playing sports, working out or performing other activities. A fresh patent shows the company is considering placing a wide-angle lens in the watch's band, or using twin cameras and automatic image processing software to generate photo and video.
While rumors have been circulating for months, Spotify (NYSE:SPOT) has officially launched its service in 13 new areas in the Middle East and North Africa, bringing the service to 78 markets in total. Spotify's chief rival Apple Music already operates in the region, but it will gain a leg up on YouTube Music Premium (GOOG, GOOGL), a younger music streaming service that is not yet available in the Middle East.
Layoffs in the food industry: Starbucks (NASDAQ:SBUX) is slimming down its corporate workforce by 5%, firing about 350 employees in order to become nimble and focus on fewer priorities. No store employees will be impacted. Blue Apron (NYSE:APRN) fell 1.6% in late trading on Tuesday after its Q3 results showed revenues that dropped nearly 29%, while the company announced a 4% cut to its global personnel.
Britain's Supreme Court has ruled against Pfizer (NYSE:PFE) in a the final round of a long-running patent battle involving its $5B-a-year pain drug Lyrica. The decision marks a win for generic drug companies Actavis, now renamed Allergan (NYSE:AGN), as well as Mylan (NASDAQ:MYL). Lyrica was originally developed for epilepsy but further research showed it could also help patients suffering from neuropathic pain, which became its main market. PFE -0.5%premarket.
The FAA has denied reports suggesting it had launched a new probe of the safety analyses performed over the years by Boeing (NYSE:BA) on its 737 MAX models, following the crash of a Lion Air jet in Indonesia last month. "As we have previously said, we have issued an (airworthiness directive) and will continue to take appropriate action based on what we learn from the investigation. This has not changed."
Ford is partnering with Walmart (NYSE:WMT) and Postmates (POSTM) to test delivering goods like groceries and pet food using self-driving vehicles. The pilot project is focused on Miami-Dade County, where the automaker is already testing a driverless business model with Domino's and local merchants. As part of the initial phases of that program, Ford (NYSE:F) has already completed more than 1,000 deliveries .
In Asia, Japan +0.2%. Hong Kong -0.5%. China -0.9%. India flat.
In Europe, at midday, London flat. Paris -0.4%. Frankfurt -0.3%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq -0.3%. Crude +0.3% to $55.83. Gold -0.1% to $1200.10. Bitcoin -1.3% to $6201.
Ten-year Treasury Yield flat at 3.13%
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
9:00 Fed's Reserve Vice Chairman for Supervision Governor Quarles Semi-Annual Testimony