Wall Street Breakfast: China Data Adds Pressure To Trade Deal

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Economy

A partial U.S. government shutdown over President Trump’s demand for border funding entered its 22nd day on Saturday, making it the longest in U.S. history. Unless the impasse is resolved before Friday, the shutdown could slash job growth by as much as 500K in January and lift the unemployment rate above 4.0%. Federal workers would be considered employed, however, if Congress decides to pay them retroactively.

The Q4 earnings season kicks off in earnest today, with Citigroup (NYSE:C) becoming the first of the big U.S. banks to put forward its results. Firms in the S&P 500 were projected back in September to report quarterly earnings growth of 17% Y/Y, according to FactSet, but dimmer expectations for global growth and disappointing holiday sales have forced many companies to slash their forecasts, pushing the estimated growth rate closer to 11%.

Theresa May will make a statement to parliament at 10:30 a.m. ET, which will focus on new assurances from the EU about a “temporary” Irish backstop, before lawmakers continue their debate on her Brexit deal. She’s also expected to argue that if the deal is rejected tomorrow, it’s more likely that Brexit will be thwarted than the no-deal outcome feared by business but championed by hardline Conservative euroskeptics.

Greek Prime Minister Alexis Tsipras has called a confidence vote in his government after a coalition partner quit, leaving him bereft of a parliamentary majority and raising the possibility of snap elections. Greece’s defense minister resigned, along with six cabinet ministers, over a naming agreement with neighboring Macedonia that will allow it to begin talks this year on joining NATO and the EU.

Turkey’s lira slipped 1% to 5.5183 per dollar after President Trump warned Turkey not to attack Kurdish forces in Syria following a planned U.S. pullout, outlining that the NATO ally would be economically devastated if it did so. Previous U.S. sanctions over the detention of American pastor Andrew Brunson brought Ankara to the brink of a full-blown currency crisis in 2018.

OPEC’s largest oil producer is willing to work this year with all parties to balance the crude market, and that could include President Trump, Saudi Energy Minister Khalid al-Falih told an oil conference in Abu Dhabi. He also saw no need for an extraordinary OPEC meeting before April and said the oil market is “on the right track” and will quickly return to balance.

Stocks

Combining two gold industry leaders, Newmont Mining (NYSE:NEM) is buying its smaller rival Goldcorp (NYSE:GG) in an all-stock deal valued at $10B. The exchange ratio equals 0.3280 of a Newmont share and $0.02 for each Goldcorp share. In addition to providing shareholders the largest gold reserves per share, Newmont Goldcorp will “offer the highest annual dividend among senior gold producers.” NEM -2.6%; GG +12.5% premarket.

Sears will start considering bids today for its assets, debating between liquidator proposals and a last-ditch $5B bid by chairman and controlling shareholder Eddie Lampert. Complicating the case are creditors that claim Lampert’s hedge fund, ESL Investments, controlled Sears (OTCPK:SHLDQ) and loaned money to its entities to get an unfair advantage over them in what is called “equitable subordination.”

As the utility faces billions of dollars in potential wildfire liabilities, PG&E (NYSE:PCG) CEO Geisha Williams has stepped down, with General Counsel John Simon named interim chief executive in her place. PG&E (PCG) also announced plans to initiate voluntary reorganization proceedings under Chapter 11 and intends to supply natural gas and electric service without disruption during the process.

With rapidly growing amounts of plastic waste in the oceans, businesses could soon have a reputation problem – destroying not only their image and environment – but also growth prospects. As a result, German firms BASF (OTCQX:BASFY) and Henkel (OTCPK:HENKY) are the latest to join forces with DowDuPont (NYSE:DWDP) and two dozen multinational corporations to set up the Alliance to End Plastic Waste. To start, they will provide $1.5B to a new non-profit promoting recycling and waste management.

New York Governor Andrew Cuomo has proposed raising the state’s minimum sales age for tobacco and electronic cigarette products to 21 from 18, according to an official statement. The legislation would also ban the sale of tobacco and e-cigarette products in pharmacies, restrict their display in retail stores that are not adult-only, and require that e-cigs be sold only by licensed retailers. Related: PM, MO, BTI, TPB, VGR

Poland may be the next country to exclude Huawei Technologies from its market following Friday’s arrest of a Chinese employee of Huawei and a former Polish security official on spying allegations. The world’s biggest producer of telecom equipment currently faces intense scrutiny in the West over its relationship with the Chinese government and U.S.-led allegations that its devices could be used for spying.

Aiming at further expansion, Euronext (OTCPK:EUXTF) +6.2% premarket after officially launching its $729M bid for Oslo Bors (OTC:OSBHF) just hours after the Norwegian operator’s board said it had found alternative bidders. “The board is working to find the best solution for shareholders and the Norwegian capital market,” Oslo Bors spokesman Per Eikrem declared. “We don’t yet know which offer may ultimately be the best.”

China’s central bank has refused to acknowledge applications submitted by Visa (NYSE:V) and Mastercard (NYSE:MA) to process renminbi payments, despite rules in 2017 that removed formal obstacles to participate in the market. In November, American Express (NYSE:AXP) became the first foreign card scheme to win initial approval from the PBOC, but the decision raised eyebrows because the new entity is a 50-50 Chinese joint venture, despite policies permitting wholly foreign-owned enterprises.

More than two months after Flight 610 fell into the Java Sea, killing all 189 people on board, the cockpit voice recorder of the Lion Air jet has been found. Together with the aircraft’s second black box, the device will provide more insight into the world’s first crash of a Boeing 737 MAX (NYSE:BA) and the deadliest of 2018. Meanwhile, a Boeing 707 cargo plane with 16 people on board crashed overnight near Iran’s Fath airport, west of the capital, Tehran.

Previously taking a leave of absence, top Nissan (OTCPK:NSANY) executive José Muñoz has now resigned, marking the first official shakeup at the Japanese automaker since the arrest of former Chairman Carlos Ghosn. Munoz was widely considered as a close ally of Ghosn and a possible successor to lead the automaking partnership between Nissan and France’s Renault (OTCPK:RNLSY). New reports also suggest Ghosn unlawfully received $8M through a Dutch entity, earlier than top directors were supposed to receive bonuses.

The Detroit Auto Show kicks off today, but the flagship exposition isn’t what it used to be. Luxury carmakers Audi (OTCPK:AUDVF), BMW (OTCPK:BMWYY), Mercedes (OTCPK:DDAIF), Volvo (OTCPK:VOLVY), Porsche (OTCPK:POAHY), Jaguar (NYSE:TTM) and Land Rover are skipping the show this year, and there are fewer than 10 debuts that remain on the official exhibitor docket (with more auto manufacturers opt to demonstrate their latest improvements at the LA Auto Show that runs right after Thanksgiving or CES in Las Vegas). The industry, however, still expects there to be one big announcement in Detroit: A global alliance between Ford (NYSE:F) and Volkswagen (OTCPK:VWAGY).

Today’s Markets

In Asia, Japan closed. Hong Kong -1.4%. China -0.7%. India -0.4%.
In Europe, at midday, London -0.7%. Paris -1.1%. Frankfurt -0.9%.
Futures at 6:20, Dow -0.9%. S&P -0.9%. Nasdaq -1.2%. Crude -1.4% to $50.87. Gold +0.5% to $1295.40. Bitcoin -2.6% to $3522.
Ten-year Treasury Yield -3 bps to 2.67%

Today’s Economic Calendar

No events scheduled

Companies reporting earnings today »

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