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Wall Street at Breakfast

Stocks points to 2016 highs

  • World shares are heading higher after oil prices stabilized and the Dow Jones closed above 18,000 for the first time since July.
  • Stocks seems to also be getting a lift from the ongoing first-quarter corporate earnings season. Analysts had forecast a pretty poor batch of results and many companies are managing to beat these expectations.
  • The FTSE All-World equity index has now gained 0.7% to 268.9, its highest level since early December.

Monday’s Key Earnings

Hasbro (NASDAQ:HAS) +5.8% on a big boost from Disney toys.
IBM (NYSE:IBM) -4.5% AH after the worst quarterly revenue in 14 years.
Morgan Stanley (NYSE:MS) -0.2% following a tough quarter.
Netflix (NASDAQ:NFLX) -7.4% AH as subscriber growth underwhelmed.
PepsiCo (NYSE:PEP) flat after a set of mixed results.

 

Today’s Markets

In Asia, Japan +3.7% to 16874. Hong Kong +1.3% to 21436. China +0.3%to 3042. India closed.
In Europe, at midday, London +0.4%. Paris +1%. Frankfurt +2.2%.
Futures at 6:20, Dow +0.4%. S&P +0.5%. Nasdaq +0.8%. Crude +1.6% to $40.41. Gold +0.8% to $1244.30.
Ten-year Treasury Yield +1 bps to 1.78%

Economy

Oil prices have regained some ground as a result of an oil worker strike in Kuwait that has reduced output to 1.1M barrels per day from 2.8M. However, the gains may be short-lived. Russia’s Deputy Energy Minister Kirill Molodtsov told reporters the country is considering raising its production this year, and a level of 540M tonnes of crude is “quite realistic,” following the collapse of the Doha deal. Brent +1.6% to $43.63/bbl; WTI +1.6% to $40.41/bbl.

Argentina has officially returned to the global bond markets following a 15-year hiatus, unveiling the biggest sovereign issuance by an emerging-market nation in two decades. The country is raising up to $15B, but demand for the bond issue (which will pay an interest rate of between 6.4% and 8%) was strong and attracted orders worth $65B. Most of the cash raised will go toward paying off a small number of holdout creditors, led by U.S. hedge funds Elliott Management and Aurelius Capital.

Japanese stocks soared overnight as a weaker yen lifted pressure off exporters and a bounce in oil prices helped the market reverse Monday’s steep decline. “Yesterday’s falls were a bit too much,” said Soichiro Monji, general manager of economic research at Daiwa SB Investments. The Nikkei Stock Average jumped 3.7%, the highest daily percentage gain since February 2.

German investor confidence climbed for a second month in April, advancing to 11.2 points from 4.3 points last month, but still stayed below its long-term average of 24.5 points. In the breakdown of its survey, ZEW said growth prospects in China remained a drag on the German economy and worries about the U.K. potentially leaving the European Union were also on the rise.

Republican Donald Trump and Democrat Hillary Clinton hope to emerge victorious at today’s primaries in New York, contests that offer big delegate hauls and an opportunity to inch closer to their parties’ nominations. The front-runners expect to win in part on the strength of their local ties. Clinton was twice elected senator from NY, while Trump was born in Queens and is known for his real estate in Manhattan.

Stocks

Anheuser-Busch InBev has accepted Asahi Group Holdings’ (OTCPK:ASBRF) offer to buy the Peroni, Grolsch and Meantime beer brands for €2.55B ($2.9B), clearing another hurdle in its efforts to win regulatory approval for its $100B-plus takeover of SABMiller (OTCPK:SBMRY). The purchase is conditional on the SABMiller deal going through, AB InBev (NYSE:BUD) said in a statement. The companies announced on February 10 that Asahi had made a binding offer. BUD +2.4% premarket.

A consortium backed by sovereign fund China Investment Corp. has expressed interest in buying a majority stake in Yum! Brands’ (NYSE:YUM) China business, which runs more than 7,100 KFC and Pizza Hut eateries across the nation. The investor group, which also includes KKR and Baring Private Equity Asia, is currently conducting due diligence on the unit. According to Bloomberg, a deal could value Yum! China at $7B-$8B.

Partnering with Cisco Systems, Hyundai (OTC:HYMLF) has joined the ranks of global automakers turning to new technologies as the race to develop internet-connected cars picks up pace. The alliance with Cisco (NASDAQ:CSCO) comes after the South Korean carmaker revealed a road map this month toward developing “hyper-connected intelligent cars” as part of a long-term push into driverless vehicle technology.

One of the bond market’s most exclusive clubs has a new member. Wells Fargo (NYSE:WFC) has become the 23rd primary dealer, which trades directly with the NY Fed and is obligated to underwrite U.S. government debt sales. It’s the first addition to the list since February 2014, when the Toronto-Dominion Bank (NYSE:TD) was included. The roster of primary dealers has now grown to 23 firms from as low as 17 in 2008, although it remains below its 1988 peak of 46.

UBS is going to trial over $2.1B in losses that investors incurred on mortgage-backed securities, the latest in a series of lawsuits over the shoddy financial products at the heart of the financial crisis. The non-jury trial in Manhattan stems from a lawsuit being pursued by U.S. Bancorp (NYSE:USB) on behalf of three trusts, who claim UBS refused to buy back the MBSs when pervasive defects emerged.

A SunEdison bankruptcy could drag in its two publicly traded holding company units, TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL), and will likely be “messy” due to their IPOs and the company’s financing web of loans and credit lines. A bankruptcy also has the potential to trigger defaults on multiple wind and solar farms that are generating revenue from selling electricity. SunEdison (NYSE:SUNE) had total debt of $11.7B as of September 30, according to the last comprehensive figure reported.

Federal prosecutors from the U.S. Attorney’s office and the SEC are investigating Theranos (Private:THER) over whether it misled investors, sources told the WSJ. Walgreens Boots Alliance (NASDAQ:WBA) and the NY State Department of Health have received subpoenas in recent weeks seeking documents and testimony about representations made to them by the blood-testing startup. “The company continues to work closely with regulators and is cooperating fully with all investigations,” Theranos spokeswoman Brooke Buchanan told CNBC.

United Continental is close to reaching an agreement with activist investors that would include replacing Chairman Henry Meyer as part of a broader board overhaul, Bloomberg reports. Meyer’s ouster would allow United (NYSE:UAL) to name a successor with substantial airline experience, one of the changes sought by Altimeter Capital Management and PAR Capital Management, which together control 7.2% of the airline’s stock.

Pressured by a competitive job market and labor groups calling for higher wages, Target (NYSE:TGT) has started raising employee wages to a minimum of $10 an hour, Reuters reports. The move marks the company’s second pay hike in a year, and comes as a union-led push for a $15 minimum wage, the so-called “Fight for Fifteen” movement, gains traction across the country. “This move will make it difficult for Target to meet its aggressive profit projections,” said Burt Flickinger, managing director of Strategic Resource Group.

Verizon has confirmed that its joint venture with Hearst, Verizon Hearst Media Partners, is acquiring Complex Media. It’s a “continuation of our media strategy, which is focused on disruption that is occurring in digital media and content distribution, and involves building a portfolio of the emerging digital brands of the future for the millennial and Gen-Z audience,” Verizon’s (NYSE:VZ) Brian Angiolet said. Although terms of the deal weren’t disclosed, the WSJ reported a purchase price of $250M-$300M.

Technology companies have long coveted classrooms, attempting over the years to persuade schools to adopt their devices and specialized software, with mixed success. Amazon (NASDAQ:AMZN) this week will find out whether it will be accepted into the nation’s largest school district. The online retailer is in line to be awarded a contract to sell e-books to New York City schools worth as much as $64.5M over five years.

Who wants Yahoo? The deadline to bid for the beleaguered tech group has passed with YP Holdings (formerly Yellowpages.com) the latest name in the fray, although Verizon (VZ) is still considered the front-runner. “There are all kinds of complications with Yahoo, including its Chinese assets and Alibaba, which have still not been spun off yet….and at the core, it’s a business that’s dying slowly by the day…so it’s not the easiest purchase in the world,” Re/code’s Kara Swisher reports. Will Yahoo (NASDAQ:YHOO) make an announcement together with its Q1 results due this afternoon?

The battle over encryption is heading to Capitol Hill again as Apple’s (NASDAQ:AAPL) general counsel, Bruce Sewell, and FBI officials appear before House members to defend their positions. The company’s court battle with the government over a phone used by one of the San Bernardino shooters was recently resolved, but the two parties continue to fight over unlocking an iPhone used in a New York drug case.

World shares are heading higher after oil prices stabilized and the Dow Jones closed above 18,000 for the first time since July.Stocks seems to also be getting a lift from the ongoing first-quarter corporate earnings season. Analysts had forecast a pretty poor batch of results and many companies are managing to beat these expectations.The FTSE All-World equity index has now gained 0.7% to 268.9, its highest level since early December.

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