Wall Street Breakfast: Protests Roil Hong Kong Markets

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The benchmark Hang Seng Index slid nearly 2% overnight as protests against Hong Kong’s controversial extradition law shut down key parts of the city, with police firing tear gas and rubber bullets to drive away thousands of demonstrators. Financial institutions also scrambled for liquid assets, triggering interbank interest rates in the territory to shoot up across the curve, with the one-month and two-month HIBOR reaching their highest level since late 2008. Hong Kong Chief Executive Carrie Lam argues the legislation is necessary to close a legal loophole that makes the city a refuge to criminals, but opponents say its approval would tear down the legal wall intended to keep Hong Kong’s justice system separate from China’s.

Winning streak snapped

Market focus is turning back to trade developments after President Trump said he was holding up a trade agreement with China and reiterated his stance that there might be no deal at all. The tough line on trade talks caused U.S. markets yesterday to close back at the starting line, while DJIA futures are now pointing to a 62-point decline at the open. Analysts are also starting to reassess the June market comeback, with some saying it doesn’t quite make sense. “This rally is not fundamentally backed. Instead what we are seeing is a bunch of people getting swung around and now they are chasing stocks higher,” said Tom Essaye, founder of The Sevens Report.

Adapting to tariffs

Nintendo (OTCPK:NTDOY) is shifting some production of its Switch videogame console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, people who work on Nintendo’s supply chain told WSJ. It’s not alone. Taiwan’s Foxconn (OTC:FXCOF) Technology Group said yesterday that it was ready to move assembly of Apple’s (NASDAQ:AAPL) iPhones out of China if necessary, and Japan’s Sharp (OTCPK:SHCAY), which is controlled by Foxconn, said last week that it planned to move production of personal computers to Taiwan or Vietnam.

Highlights from Tesla meeting

“It won’t be long before we have a 400-mile range car,” Tesla (NASDAQ:TSLA) CEO Elon Musk said at the company’s annual shareholder meeting, outlining plans to unveil a pickup truck this summer and get into semi production toward the end of 2020. Tesla is also on target to grow its entire “fleet” by 60% to 80% in 2019, he added, saying “it’s hard to be profitable with that level of growth” but the company would still be cash-flow positive while growing at that rate. Auto insurance? Tesla will be able to offer policies after completion of an unspecified acquisition, as well as development of additional software.

Brexit leadership

Breaking his relative silence in the race thus far, British ex-foreign minister Boris Johnson will launch his campaign today for the Conservative Party leadership, with investors trying to gauge just how much appetite he has for a no-deal Brexit. His insistence on leaving the EU on Oct. 31, plus a threat to withhold payment of the U.K.’s divorce bill have all raised concerns among party moderates and in business, but they resonate with grass roots Tories who are firmly right-wing and anti-EU. Sterling +0.2% to $1.2743.

Qualcomm antitrust trouble

The FTC has asked District Judge Lucy Koh to deny Qualcomm’s (NASDAQ:QCOM) request to delay enforcement of an antitrust ruling handed down in May, announcing that it was in the public interest because an appeal could take years. LG Electronics (OTC:LGEAF) reiterated the view of the FTC, saying it could be forced into signing another unfair deal unless Koh’s protections remain in place. On May 28, Qualcomm asked to put the sweeping antitrust decision on hold as it would “radically restructure its business relationships” in ways that would be impossible to reverse if it wins an appeal. QCOM -3.3% premarket.

Mainstream adoption

Crypto exchange Coinbase’s (COINB) new Visa (NYSE:V) debit card is launching in six more European countries after debuting in the U.K. in April. Coinbase U.K. CEO Zeeshan Feroz told CNBC in an interview the goal of the card is to make payments with digital currencies as seamless as paying with cash. “You can buy groceries on bitcoin and then coffee on litecoin right after,” he added. The card works in stores and online at any merchant that accepts Visa.

Future of Vaca Muerta

Executives from major oil companies are expected to descend today on the southern province of Neuquen, Argentina, for a conference that will discuss the future of Vaca Muerta, a formation that could house one of the biggest reserves of shale gas and oil in the world. Businessmen want to confirm that the next government, which takes office in December, will respect current contracts and keep Vaca Muerta as a strategic resource to help the country become a net energy exporter. ExxonMobil (NYSE:XOM) yesterday proceeded with its Vaca Muerta expansion, detailing a project that’s expected to produce as much as 55,000 boe/d within 5 years.

Busy IPO market

Shares in the international unit of China National Tobacco – a state monopoly that accounts for 40% of global cigarette production – jumped as much as 10% in their trading debut in Hong Kong, on a limp day for Asian stocks. Cybersecurity group CrowdStrike (CRWD), which will begin trading today on the Nasdaq, priced its IPO above its expected price range at $34 per share, raising $612M and valuing the company at $6.8B. A Bloomberg report also suggested that Slack Technologies (WORK) will be valued by investors at $16B-$17B when it lists its shares publicly next week.

No new orders for Boeing

Boeing (NYSE:BA) reported no new commercial aircraft orders in May, marking the second straight month that the planemaker’s orders were at a standstill in the face of its 737 Max crisis. May deliveries meanwhile fell 56% Y/Y to 30 planes, as transfers of new 737 MAX jets remained halted. Investors’ next focus is the coming week’s Paris Air Show, which will determine if the trends will continue. Rival Airbus (OTCPK:EADSY) delivered 81 aircraft in May, up 59% Y/Y.

What else is happening…

Contributor Kirk Spano says oil stocks are priced for Armageddon.

3M (NYSE:MMM) to take $160M charge as it suspends Venezuelan operations.

Uber (NYSE:UBER) taps Melbourne for international launch of flying taxis.

GrubHub (NYSE:GRUB) investors cheer closure of Amazon Restaurants (NASDAQ:AMZN).

Veggie burger maker Beyond Meat (NASDAQ:BYND) tumbles 25% after JPMorgan cut.

CBD products hitting shelves in nearly 1,000 Kroger (NYSE:KR) stores.

Again? Mattel (NASDAQ:MAT) rejects another merger bid from MGA Entertainment

KKR seeks piece of German publishing giant Axel Springer (OTC:AXELF).

Not a fan… Ackman opposes United Technologies (NYSE:UTX)-Raytheon (NYSE:RTN) merger.

Citing consumer harm, ten U.S. states sue to stop Sprint (NYSE:S)-T-Mobile (NASDAQ:TMUS) deal.

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