Wednesday Morning Reads, News, Charts and More
- Trade Ideas
- New Oil Cuts
- Five Things For Today
- Moody’s Downgrades China Credit Ratings Economists See Little Magic in Tax Cuts
- ‘Food Revolution’
- Barriers to Entry in the Markets
- Risk and Startups
- Futures steady ahead of Fed minutes
- Lowe's tumbles after earnings miss
- China hit with Moody's downgrade
- SoftBank takes $4B stake in Nvidia
- Toshiba jumps on reports of WDC bid
- OPEC, non-OPEC hold informal talks
- Uber shortchanged NYC drivers
- Emissions woes spread to Daimler
History of “BTFD” from BAML. Not just a figment of our imagination apparently. $SPX $VIX pic.twitter.com/hgWayj4Cn7
— Matt Thompson, CFA (@dynamicvol) May 23, 2017
China's great wall of debt! Moody's has lowered the nation's credit rating to A1 from Aa3, citing Beijing's waning financial strength and rising liabilities. It marks the first time a major ratings agency has downgraded the country in more than 25 years. The move also received a backlash from China's finance ministry, which said the decision was "absolutely groundless" and was based on an "inappropriate calculation method."
The Fed is likely to tell markets today how it might start reducing its $4.5T balance sheet, which could affect the pace of future interest-rate increases. Minutes of the central bank's last meeting will be released at 2:00 p.m. ET. The Fed kept its benchmark interest rate steady earlier this month, but has hinted to two more rate hikes this year.
"NAFTA is a trilateral agreement, and that has worked because it's a trilateral North American trading relationship," Canada's Minister for Foreign Affairs Chrystia Freeland said in Mexico City, echoing views of Mexican Foreign Minister Luis Videgaray. "NAFTA can be modernized only with the agreement of the three parties... and I am confident that that will be how we go."
Philippines President Rodrigo Duterte has declared martial law in the southern province of Mindanao after Islamic State-aligned militants attacked Marawi and raised the black IS flag at its town hall. It follows a reported transcript cited by The Washington Post, in which President Trump praised Duterte for doing "an unbelievable job on the drug problem" in the Philippines.
Theresa May has deployed armed forces to key sites after raising the U.K.'s terror threat level to "critical," warning that another attack may be imminent. Salman Abedi, aged 22, has been named as the suspect behind the bombing in Manchester, but authorities are still assessing whether he had acted alone or with help from others.
Upon completing their first meeting at the Vatican, Pope Francis gave President Trump a medal featuring an olive branch, a symbol of peace, among other gifts. "We can use peace," he responded. Later today, Trump will sit down with Italian President Sergio Mattarella and Prime Minister Paolo Gentiloni, before flying to Brussels for a NATO summit.
Systemic stress indicators in the euro area are contained but remain significant and have even increased in some areas over the past six months, the ECB said in its latest Financial Stability Review. The warning comes as the eurozone enjoys its best economic run in a decade, raising expectations that the ECB could soon start to unwind its massive stimulus measures.
OPEC and non-OPEC ministers meet for informal consultations in Vienna today in a last-ditch bid to agree on the duration of oil output cuts. Seeking the perfect balance? The cuts have helped push oil back above $50 a barrel, but the price increase has also spurred growth in the U.S. shale industry, which is not participating in the output deal.
The fiduciary rule is due to take effect in just over two weeks after Labor Secretary Alexander Acosta warned there was little he could do legally to halt it - at least for the time being. Lobbyists for the U.S. retirement savings industry have vowed to continue to fight the rule, which requires retirement advisers to put clients' interests ahead of their own.
"Bitcoin up 100% in under 2 months. Shanghai down almost 10% same timeframe, compared to most global stocks up. Probably not a coincidence!" tweeted famed investor Jeff Gundlach. The theory is the Chinese search for safe investments outside the country when asset prices fall. The yuan's weakness in the last two years has also contributed to capital flight. Related tickers: COIN, OTCPK:BTCS
Royal Bank of Scotland is struggling to reach a deal with all the investors who allege the lender misled them during a £12B cash call in 2008, sources told Reuters. A trial over the matter had been due to start Monday, but has been adjourned for the past two days as lawyers said the two sides were optimistic they could strike a settlement. RBS +1.1% premarket.
Target has agreed to pay $18.5M to 47 states and the District of Columbia as part of a settlement related to a massive data breach that compromised the retailer's customers. It ends a yearslong investigation into how hackers obtained names, credit card numbers and other information about tens of millions of people in 2013. TGT rose slightly AH on the news.
Chief executives from major U.S. steel producers will speak at a public hearing in Washington today about the effects of steel imports on U.S. national security. Commerce Secretary Wilbur Ross and the heads of Nucor (NYSE:NUE), AK Steel (NYSE:AKS), ArcelorMittal (NYSE:MT) and TimkenSteel (NYSE:TMST) will be among those participating in the Section 232 investigation.
A New York state appeals court has ruled that Exxon Mobil (NYSE:XOM) must turn over records in the state attorney general's investigation into how much the company knew about global warming while publicly downplaying the effects on its business. "We respect, but disagree with the court's decision and are assessing our options and potential next steps," said Exxon spokesman Scott Silvestri.
Boilermaker? Shares of Brown-Forman (BF.A, BF.B) went on a wild ride yesterday afternoon after CNBC reported that Constellation Brands (NYSE:STZ) made an offer to acquire the company. That would pair the maker of Corona and Modelo beers with the owner of Jack Daniel's. Sources say Brown-Forman turned down the proposal and talks between the two alcohol companies have broken off.
U.S. grains trader Bunge is not in talks with Swiss commodities group Glencore (OTCPK:GLNCY), after the latter said it had made an informal approach to discuss "a possible consensual business combination." BG -5% premarket after surging over 16% yesterday on reports of a takeover. Merger talk in the ag sector has been rising for months as commodity prices remain stubbornly low.
Toshiba shares closed up 8% in Tokyo on reports that Western Digital (NYSE:WDC) and its partners were prepared to offer ¥2T ($17.9B) for the Japanese conglomerate's memory chip business. The two are already in the midst of a fierce legal dispute, with Western Digital threatening to block a Toshiba (OTCPK:TOSYY) sale without its consent as it would represent a breach of the pair's joint chip venture.
SoftBank has quietly amassed a $4B stake in Nvidia (NASDAQ:NVDA) making it the fourth-largest shareholder in the graphics chipmaker, according to Bloomberg. The holdings fit with SoftBank (OTCPK:SFTBY) founder Masayoshi Son's plans to become the biggest investor in technology over the next decade. NVDA +3% premarket.
More troubles at Uber? The ride-sharing giant has admitted to underpaying its New York City drivers for the past two-and-a-half years. UBER said it had been calculating its commission based on the gross fare rather than the net fare, the latter of which is its national policy. The back pay could run at least $45M, based on an estimate of 50,000 drivers.
German police have raided a number of Daimler's (OTCPK:DDAIY) offices as part of a probe into possible diesel-emissions fraud, as the automaker confirmed that "well known and unknown employees" were under investigation. Yesterday, the DOJ filed an emissions lawsuit against Fiat (NYSE:FCAU) and said it could face a fine of more than $45,000 on over 100,000 vehicles it sold before 2015.
In Asia, Japan +0.7%. Hong Kong +0.1%. China +0.1%. India -0.2%.
In Europe, at midday, London +0.3%. Paris -0.3%. Frankfurt -0.3%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq +0.1%. Crude +0.1% to $51.52. Gold -0.3% to $1252.30.
Ten-year Treasury Yield flat at 2.25%
Today's Economic Calendar
7:00 MBA Mortgage Applications
9:00 FHFA House Price Index
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories
11:30 Results of $13B, 2-Year FRN Auction
1:00 PM Results of $34B, 5-Year Note Auction
2:00 PM FOMC minutes