Wall Street Breakfast: Stocks Sluggish Ahead Of ECB

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Global stocks are in a sluggish trend just ahead of today’s European Central Bank meeting. Japan’s Nikkei average fell 0.7%, while Hong Kong’s Hang Seng dropped 0.9% and South Korea’s Kospi declined 0.5%. Chinese blue chip names also snapped a four-day winning streak. Meanwhile, across the pond, European stocks have started the day off in negative territory, with the Stoxx 600 Index posting a 0.4% loss at midday. Traders think global markets are taking a pause after riding good news on U.S.-China trade talks for the last two weeks. U.S. stock futures are pointing slightly lower, with just enough earnings reports still due out to keep traders on their toes. Today’s list of reporters includes Costco (NASDAQ:COST), Kroger (NYSE:KR), Marvell Technology (NASDAQ:MRVL), Barnes & Noble (NYSE:BKS) and American Outdoor Brands (NASDAQ:AOBC).

Economy

Seasonally adjusted GDP rose by 1.1% in the euro area and by 1.4% in the EU28 in Q4 of 2018, according to revised data from Eurostat. GDP was up 1.6% in the euro area and 1.8% in the EU28 during Q3. Household final consumption expenditure had a positive contribution to GDP growth in both the euro area and the EU28 during the quarter. Among member states with data for Q4, Estonia (+2.2%) recorded the highest growth compared to the previous quarter, followed by Lithuania (+1.3%), Latvia and Sweden (both +1.2%). Decreases were observed in Greece and Italy (-0.1%), while GDP in Germany remained static.

Oil prices are tracking higher after a choppy day of trading yesterday when a weekly report on U.S. crude stockpiles showed a surge. Energy traders think a big rebound in U.S. crude oil imports in combination with a drop in exports led to the large increase in domestic inventories. Oil is up more than 20% this year after OPEC and its allies held back output in an effort to balance the market, while sanctions against Venezuela and Iran have worked to keep supplies tight. In today’s early action, WTI crude oil futures +0.6% to $56.53/bbl and Brent crude +0.8% to $66.53/bbl.

Crucial votes are scheduled in the U.K. next week that will determine the immediate course of Brexit and the U.K.’s relationship with the EU. If lawmakers vote against Prime Minister Theresa May’s Brexit deal, they will then vote on leaving the 28-member bloc without a deal (hard Brexit). JPMorgan doubts May can achieve victory at this stage, predicting an extension of Article 50 by two or three months with May securing passage of the deal by early April. May and other Brexit officials are in Brussels in a last-ditch effort to score more concessions from European Union leaders before the key votes.

A House Appropriations subcommittee hearing is scheduled today on Capitol Hill on gun violence prevention research. It’s the first hearing in more than 20 years for the Labor-HHS panel on the topic of gun violence research. Earlier this week, gun stocks American Outdoor Brands (AOBC) and Sturm, Ruger (NYSE:RGR) turned lower on weak background check data for February.

The Fed will cut back its use of qualitative objections in its CCAR stress tests for the 2019 cycle. “The changes eliminate the qualitative objection for most firms due to the improvements in capital planning made by the largest firms,” according to the Fed. Firms that are newer to the CCAR tests, and thus may have less-established capital planning capabilities, will remain subject to a possible qualitative objection.

A report on consumer credit is due out later today from the Federal Reserve. Economists expected the report to show a monthly change of $17.3B after steady growth of $16.6B was recorded in December. Economists will be closely watching the level of revolving credit change for the month after recent data from the Fed indicated that credit card debt is rising faster than mortgage debt, student loan balances and auto debt. Credit card debt at the end of December topped $870B and re-touched the “nominal peak” level of 2008.

Stocks

Spotlight on tech: U.S. Attorney General William Barr will hold a forum today with Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL) execs to ask for help in preventing technical scams, especially those targeting senior citizens. The DOJ wants to crack down on scams, including imposters posing as workers from tech companies. The scammers convince targets to provide remote access to computers, which can be used to drain bank accounts or access sensitive information.

Huawei has filed suit against the United States, claiming that a ban on government procurement from the world’s largest network equipment maker is unconstitutional. The part of the National Defense Authorization Act with the ban makes it a “bill of attainder,” Huawei says – an unconstitutional singling-out of a group or individual without due process. A court could invalidate just the section involving Huawei, but expect a national security defense to come up.

China syndrome: Facebook (NASDAQ:FB) doesn’t see a path forward in China, a company source told BuzzFeed in the wake of CEO Mark Zuckerberg’s note outlining a privacy-focused future for the company. Zuckerberg asserted that the company has chosen not to build data centers in countries that have a track record of violating human rights like privacy or freedom of expression. China represented one of the last major unconquered frontiers for the company, which has 2.7B users across its services.

It is full speed ahead for Boeing (NYSE:BA) on plans for a new mid-sized jet that would be the company’s first all-new jet program in more than a decade. Air Lease (NYSE:AL), one of the largest aircraft lessors, says it is seeing interest in Boeing’s proposed mid-market aircraft from airlines. Asian carriers are looking at a longer-range version of the new jet, while other carriers seek the lowest possible cost per seat kilometer. Boeing says it will make a decision in 2020 on whether to launch the mid-sized plane.

The latest twist in the race for the regional sports networks owned by Twenty-First Century Fox (FOX, FOXA) involves a stepped-up bid from rapper/actor Ice Cube, the New York Post reports. His Big3 league is reportedly teaming up with Macquarie, entrepreneur Carolyn Rafaelian and Centerbridge Partners on a bid to acquire the 21 nets that aren’t YES Network (still expected to go to the New York Yankees). Disney (NYSE:DIS) must divest the RSNs to complete its $71B asset deal with Fox.

Samsung has denied reports that it’s reviewing a potential acquisition of NXP Semiconductors (NASDAQ:NXPI). Reports that the Korean chipmaker was considering a bid of 50T won (about $44.3B) were pegged to a meeting between Samsung’s strategic president and NXP’s CEO, but Samsung (OTC:SSNLF) said a trip by Ahn Jung-hyun to the United States involved business negotiations with subsidiary Harman instead.

In the spotlight: Iridium (NASDAQ:IRDM) hosts its analyst day today. The event will feature presentations from CEO Matthew Desch and CFO Thomas Fitzpatrick. The company says participants can expect to gain unique insights and knowledge about Iridium’s business activities and outlook. Futu (FHL) is expected to price its IPO. The Hong Kong-based brokerage platform already downsized the expected size of the offering to $120M from $300M. Proceeds from the IPO are slated to be used for general corporate purposes – including research and development, funding working capital and to cover increased regulatory capital requirements in Hong Kong and other jurisdictions.

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