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Wall Street at Breakfast

U.S. Futures Flat After Oil Erases Overnight Losses; Dollar In The Driver’s Seat

Evidence of falling U.S. production and a drop in supplies outside of OPEC will help the oil market “move close to balance” in the latter half of 2016, the International Energy Agency declared, stating world surplus would diminish to 200K barrels a day. Will the upcoming producer meeting in Doha help? According to the energy watchdog, the impact of an output freeze deal “will be limited” since a rebalancing is already taking place in the market. Russia’s energy minister also suggested today that only a framework, not concrete commitments, will be the focus of gathering on April 17. Crude pared losses on the IEA report, and is now flat at $41.75/bbl.

Wednesday’s Key Earnings
JPMorgan (NYSE:JPM) +4.2% after beating expectations.


Today’s Markets
In Asia, Japan +3.2% to 16911. Hong Kong +0.9% to 21338. China +0.5%to 3082. India +1.9% to 25627.
In Europe, at midday, London flat. Paris +0.3%. Frankfurt flat.
Futures at 6:20, Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude flat at $41.75. Gold -0.6% to $1241.40.
Ten-year Treasury Yield +1 bps to 1.77%



The People’s Bank of China weakened ( devalued) the daily yuan reference rate today by the most in three months after the dollar strengthened and a surprising easing by Singapore weighed on Asian currencies. The weaker fixing “is a reflection of the overnight dollar recovery,” one economist said. “Still, it’s slightly weaker than expected, making me feel like there is still a weakening bias.” The yuan fell 0.12% in Shanghai to 6.4847, marking a third straight day of declines.

The Asian Infrastructure Investment Bank has struck an agreement to undertake joint projects with the World Bank as the China-led institution attempts to counter the perception that it’s a rival to longer established lenders. China launched the AIIB last year with 57 countries joining as founding members, but the move prompted American misgivings over the potential for the bank to act as competition to decades old U.S.-dominated institutions.

The Bank of England looks set to keep interest rates on hold today amid concerns about a slowdown in the U.K. economy and the threat of Britain leaving the EU. “Little action is expected as always with no one voting for either a cut or a hike,” said Mic Mills, Head of Client Services at Capital Index. The BoE will reveal its rate decision and minutes at 7:00 a.m. ET.

Tax Day, which is April 18 this year, can be an annual reminder of how deeply the government reaches into citizens’ pockets. One great way to reduce the income tax burden? Switch states! Eight states have a flat tax, applying the same percentage levy across all incomes. Three states actually have regressive income taxes, where the mega-wealthy pay a lower percentage of their taxable income than those in the middle, and nine states have no income tax at all.

Legislation to help Puerto Rico climb out of a debilitating debt crisis has hit new resistance in Congress, prompting Republicans to cancel a planned work session today to discuss the measure. A spokeswoman for the House Natural Resources Committee also confirmed that the meeting hasn’t been rescheduled. Earlier this week, a bill released by the panel described the creation of a control board to facilitate some court-ordered debt restructuring, although it wouldn’t give the island broad bankruptcy authority.

A U.S. appeals court has cleared the way for Argentina to raise as much as $15B to pay holdout creditors, enabling the Latin American sovereign to re-enter the international capital markets after more than a decade on the sidelines. The ruling is another victory for President Mauricio Macri, who set about ending the country’s impasse with creditors when he was elected last year and already passed a wave of economic and financial reforms.


It looks like the fight over Yahoo (NASDAQ:YHOO) has boiled down to Verizon (NYSE:VZ) and SoftBank (OTCPK:SFTBY). According to NY Postsources, the former is considered the front-runner (interested in Yahoo’s core business and a 35.5% stake in Yahoo Japan), and appears to have the backing of key investors who like the idea of a simple cash deal. AOL CEO Tim Armstrong is also said to have offered CEO Marissa Mayer a graceful exit. While a Softbank bid would likely be on the whole of Yahoo, president Nikesh Arora seems to be hanging back to gauge what Verizon’s offer will be before he makes a move.

Seagate now anticipates disappointing demand and margins for its March quarter. The data storage company said fiscal Q3 sales were expected to hit $2.6B, compared to its prior forecast of $2.7B, due to reduced demand for both enterprise and silicon products, desktop software in China, and its failure to participate in the low capacity notebook market. Seagate plans to release its quarterly financial results on April 29. STX -7.2% premarket.

Nestle has confirmed its full-year outlook after Q1 underlying sales growth of 3.9% beat expectations as product volumes picked up. “As anticipated, the first quarter continued the positive momentum in real internal growth, with softer pricing,” the company said in a statement. Nestle’s (OTCPK:NSRGY) Maggi noodles also regained market share in India following a major product recall in 2015, though the comparison with the year-earlier period was difficult.

Unilever reported a rise in organic growth for the first quarter despite grappling with lower prices and ebbing demand for its goods around the globe. The group’s underlying sales – which strip out forex impacts – grew 4.7%, meeting analyst estimates. “With markets remaining volatile, we continue to focus on driving agility and resilience in our business,” said Unilever (NYSE:UL) CEO Paul Polman.

McDonald’s is targeting private equity firms, including Bain Capital, MBK Partners, TPG Capital Management and China Resources, for its planned sale of 2,800 restaurants in North Asia, Reuters reports. McDonald’s (NYSE:MCD) is adopting a new business model in the region by planning to bring in partners to own the restaurants within a franchise operation. A formal sales process is expected to kick off in about three to four weeks.

U.S. health authorities have finally concluded that infection with the Zika virus in pregnant women is a cause of birth defects and other severe brain abnormalities in babies. “There isn’t any doubt that Zika causes microcephaly,” said Tom Frieden, director of the U.S. Centers for Disease Control and Prevention. The mosquito-borne disease was assumed to be responsible for the alarming rise in birth defects among the Zika-hit areas of Brazil, but it had not been declared as the definitive cause until now. Related tickers: SNY, INO,AEMD, XON, CEMI, BCRX, TMO, OTCQB:GOVX

Total spending on prescription drugs in the U.S. rose 12.2% to nearly $425B in 2015, continuing a steep climb fueled by the introduction of expensive new treatments for cancer and infections, as well as price hikes for older medicines. The annual report from IMS Health is likely to further fuel the fire of criticism from politicians, healthcare providers, and patients, stating drugs are out of reach and straining budgets.

The hits keep piling up for celebrity entrepreneur Elizabeth Holmes, founder of upstart blood-testing firm Theranos (Private:THER). After concluding that the company failed to fix the problems at its Newark, CA site, the U.S. Centers for Medicare and Medicaid Services said it plans to revoke the business’ federal license and prohibit Holmes and President Sunny Balwani from owning or operating a clinical lab for at least two years. The action would also shut down the company’s site in Arizona.

The Obama administration is expected to issue sweeping new regulations on offshore drilling today, imposing potentially costly requirements for coastal wells and emergency equipment needed to prevent environmental disasters. The oil industry has warned that such measures would impose potentially tens of billions of dollars in new costs and threaten to limit drilling in the Gulf of Mexico, which accounts for approximately 17% of U.S. crude production.

Energy XXI has filed for Chapter 11 bankruptcy, becoming the latest victim of the squeeze in the energy sector. “Over the last several months, we have worked to actively manage our balance sheet, and after thoroughly evaluating our options…we determined that this is best course of action for Energy XXI (NASDAQ:EXXI) and all our stakeholders,” the company said in a statement. The oil and gas explorer intends to eliminate about $2.8B worth of debt from its balance sheet through the restructuring.

SunEdison fell 16% in extended trading following a Bloomberg report that stated it missed a $2.6M convertible bond payment earlier this month. Not making the payment “means SunEdison is likely in technical default,” CreditSights said, and failure to cure the deficiency by the end of the grace period on May 1 “could potentially trigger cross-default provisions in other debt obligations.” SunEdison (NYSE:SUNE) already faces technical defaults on at least $1.4B in loans and credit facilities because of its failure to file its 2015 annual report.

Despite delays in the jets’ computer-based logistics system, the U.S. Air Force still expects to declare an initial squadron of Lockheed Martin (NYSE:LMT) F-35s ready for combat between August and December. The fighter jet has three main models: the F-35A conventional takeoff and landing variant, the F-35B short take-off and vertical-landing version, and the F-35C carrier-based Catapult Assisted Take-Off But Arrested Recovery type.

According to U.S. auto safety regulators, there are still about 85M unrecalled Takata (OTCPK:TKTDY) air bag inflators in American vehicles that would eventually need to be serviced unless the company can prove they are safe. The figure represents the first nationwide public accounting by the U.S. government regarding the total number of Takata inflators, which can explode with too much force and spray metal shards inside vehicles.

Relatives of those killed on a Germanwings flight last year are suing a training unit of the airline’s parent, Deutsche Lufthansa (OTCQX:DLAKY), in Arizona for wrongful death. Andreas Lubitz flew his jet into the French Alps on March 24, 2015, killing 150 passengers and crew. The families maintain Lufthansa’s Airline Training Center Arizona was negligent in failing to discover the pilot’s medical history before admitting him to the program in 2010.


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