Wall Street Breakfast: The Big Tech Crackdown

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Once lauded as an engine of economic growth, Big Tech has increasingly been on the defensive over privacy lapses and its outsized market control. On Friday, a group of seven states led by New York Attorney General Letitia James launched an antitrust investigation into Facebook (NASDAQ:FB), focused on the company’s dominance in the industry. A second probe today will likely be announced by Texas and include up to 40 other states, examining Google’s (GOOG, GOOGL) impact on digital advertising and information markets.

Futures advance

Heightened expectations of central bank stimulus are pointing to a positive open for Wall Street, with U.S. stock index futures starting the week up 0.2%. U.S. jobs growth slowed more than expected in August, while Jerome Powell reiterated that the Fed will continue to “act as appropriate” to sustain the U.S. economic expansion. Data overseas also saw China’s exports unexpectedly contract and the ECB is expected to unleash a barrage of stimulus measures on Thursday to shore up economic growth.
Go deeper: Jeff Miller asks if it’s time to worry about crowded trades.

Brexit delay becomes law

Boris Johnson will face a major setback today when an opposition measure blocking a no-deal Brexit on Oct. 31 becomes law. The prime minister has said passage of the bill leaves him with no choice but to try again to call a general election, but given the lack of support, it may prompt him to take some bizarre alternatives. Besides a vote of no-confidence in his own government, Johnson could resign and ask to be replaced with Labour leader Jeremy Corbyn, thereby prompting a no-confidence vote in that administration and forcing an election.

Energy strategies

The World Energy Congress kicks off today in Abu Dhabi amid a big shakeup on Saudi Arabia that put one of the country’s princes in charge of the energy ministry. The move saw crude rise 1% to $57.09/bbl, as Prince Abdulaziz bin Salman is not expected to change the kingdom’s oil policy, and even helped negotiate the current supply cut agreement between OPEC and non-OPEC countries. While the Congress – attended by BP (NYSE:BP), Total (NYSE:TOT), Eni (NYSE:E) – won’t be focused on oil, it is set to look into a future beyond hydrocarbons and explore themes in sustainability, notably renewables, nuclear and electric vehicles.
Go deeper: Robert Boslego comments on the new Saudi energy minister.

Aramco IPO

JPMorgan (NYSE:JPM) is close to winning the lead advisory role for the initial public offering of Saudi Aramco (ARMCO), the world’s most profitable corporation, edging out rivals for the plum assignment, CNBC reports. Saudi officials, who are large owners of Uber (NYSE:UBER) through the country’s sovereign wealth fund, were said to be displeased with Morgan Stanley (NYSE:MS) after its bankers misjudged demand for the ride-sharing giant’s stock in May. Shares tumbled 18% in the first two days of trading and are still well below the IPO price of $45.

More deaths linked to vaping

Three more deaths linked to vaping have been reported in Indiana, California and Minnesota, bringing the total number of such U.S. deaths to five. Some type of chemical irritation is likely associated with the illnesses, but more information is needed to determine the exact cause. U.S. health officials are now investigating more than 450 cases of possible vaping-related illnesses in 33 states, while last week, the governor of Michigan announced the state will become the first to ban flavored e-cigarettes.
Go deeper: Related tickers include MO, PM and BTI.

WeWork’s slipping valuation

Planning to launch its IPO roadshow today, WeWork’s parent is eyeing another valuation cut as some existing investors push the workspace company to shelve its upcoming offering, Dow Jones reports. A valuation below the $20B level would be an even steeper drop from the $47B mark where We Co. (WE) last raised private capital this year. Should We yank or postpone the IPO, it stands to miss out on nearly $10B (from the offering and debt that is contingent on the IPO), and would either need to find more cash or scale back its plans for further growth.
Go deeper: SA authors are bearish on WE ahead of its potential IPO.

Nissan CEO succession

Nissan Motor’s (OTCPK:NSANY) nominations committee discussed potential successors for Hiroto Saikawa at a meeting this morning and a press conference is on tap for 7:00 a.m. ET. Saikawa apologized last week and vowed to return any improperly paid funds after admitting he had wrongly received stock-related compensation under “a scheme of the Ghosn era.” Pressure has also been building on Nissan following a collapse in profits, a string of scandals and a 36% fall in its share price during Saikawa’s tenure.

Apple breaks Chinese labor laws

Following a report by China Labor Watch, Apple (NASDAQ:AAPL) and manufacturing partner Foxconn (OTC:FXCOF) confirmed they violated a Chinese labor rule by using too many temporary staff in the world’s largest iPhone factory. More than half of the workforce employed in August at the facility in Zhengzhou, China, were “dispatch” workers, including student interns, though temporary hires cannot exceed 10% of total employed workers. Other alleged violations included overtime hours, false bonuses, inadequate protective equipment and not reporting work injuries.
Go deeper: Stay tuned for Apple’s “iPhone week.”

Meet the ‘Volfefe Index’

Looking to quantify the impact of Trump’s tweets on the bond market, JPMorgan has created the “Volfefe Index” – named after the mysterious ‘covfefe’ tweet – which analyzes how the president’s messaging is influencing volatility in U.S. interest rates. Analysts found that the index can account for a “measurable fraction” of moves in implied volatility, seen in interest rate derivatives known as swaptions. It’s particularly apparent at the shorter end of the curve, with two- and five-year rates more impacted than 10-year securities.

Today’s Markets

In Asia, Japan +0.6%. Hong Kong flat. China +0.8%. India +0.5%.
In Europe, at midday, London -0.4%. Paris flat. Frankfurt +0.3%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +1% to $57.09. Gold +0.2% to $1517.80. Bitcoin -2.8% to $10230.
Ten-year Treasury Yield +5 bps to 1.6%

Today’s Economic Calendar

12:30 PM TD Ameritrade IMX
3:00 PM Consumer Credit

Companies reporting earnings today »

Seeking Alpha has launched The Policy Market, where we discuss today’s top policy-related news stories with potential market impact.

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