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Wall Street at Breakfast

  • Canada Wildfire, Libya Crisis Boost Oil Prices
  • Futures Rebound As Crude Regains $45 On Canada Fears;

  • Turkey Hammered

It’s not just the massive wildfire in Canada that’s pushing up crude today. Supplies in Libya have been disrupted as fighting between rival factions in the country intensifies. Tripoli officials are warning the country’s output could fall by 120K barrels per day if tankers continue to be blocked. Meanwhile, 88,000 residents have fled Fort McMurray, a city in the the heart of Canada’s oil sands. While production facilities are not directly in the fire’s path, the blaze is likely to disrupt operations. Crude futures +3.1% to $45.12/bbl.

Today’s Markets

In Asia, Japan closed. Hong Kong -0.5% to 20429. China +0.2% to 2997. India +0.6% to 25262.
In Europe, at midday, London -0.1%. Paris -0.1%. Frankfurt +0.1%.
Futures at 6:20, Dow +0.2%. S&P +0.3%. Nasdaq +0.3%. Crude +3.1% to $45.12. Gold +0.2% to $1277.80.
Ten-year Treasury Yield flat at 1.78%

Wednesday’s Key Earnings

AB Inbev (BUD) -1.6% on unfavorable currency, Brazil turmoil.
Annaly Capital (NYSE:NLY) flat AH following in-line results.
Delphi Automotive (NYSE:DLPH) -4.2% despite doubling its profits.
Energy Transfer Partners (NYSE:ETP) unmoved AH after beating estimates.
Fitbit (NYSE:FIT) -10.4% AH following heavy spending.
Priceline (NASDAQ:PCLN) -7.5% hammered by weak profit guidance.
Shell (NYSE:RDS.A) -2.5% as tumbling oil prices took their toll.
Tesla (TSLA) +3.8% AH after a beat and strong guidance.
Time Warner (NYSE:TWX) +1.6% driven by Turner and HBO.
Transocean (NYSE:RIG) +1.1% AH after topping expectations.
Twenty-First Century Fox (NASDAQ:FOXA) swung AH following a mixed quarter.
Whole Foods (NASDAQ:WFM) +1.1% AH battling a traffic dip in FQ2.
Zynga (NASDAQ:ZNGA) +14.8% AH boosted by big ad gains.


Activity in China’s service sector expanded again in April, though the gains were slightly less robust than in March, as firms resumed adding staff following a rare decline the previous month. The Caixin services PMI dropped to 51.8 from 52.2, as new business climbed at the fastest pace since the beginning of the year, but expectations remained unchanged. The survey focuses on small- and medium-sized enterprises, while the official data tracks larger firms.

The European Central Bank anticipates the recovery in the eurozone to proceed, but states in its monthly bulletin that risks remain tilted to the downside. With regards to inflation, the central bank expects levels to remain around zero, reflecting the impact of strongly negative annual rates of change in energy prices. How about more stimulus? “Looking ahead, it is essential to preserve an appropriate degree of monetary accommodation as long as needed to in order to underpin the momentum of recovery…and accelerate the return of inflation.”

The ECB is also discontinuing production of the €500 note due to concerns that it could facilitate illegal activities. The currency has been nicknamed the “Bin Laden” because of its association with money-laundering and terror financing. Although the banknote will remain legal tender, the bank will stop issuing the denomination around the end of 2018, when it will bring in new €100 and €200 notes.

Ohio Governor John Kasich officially suspended his presidential campaign on Wednesday, making Donald Trump the presumptive GOP nominee. “I have always said that the Lord has a purpose for me as he has for everyone,” he told reporters in Columbus. Trump, meanwhile, informed the NYT that he’s forming his vice presidential selection committee to consider a short list – which currently doesn’t include Kasich.

Turkey’s Prime Minister Ahmet Davutoglu is expected to announce his resignation shortly, after what is reported as a falling out with President Recep Tayyip Erdogan. The move could complicate Ankara’s efforts to forge deeper ties with the U.S. and Europe, and could create concerns about the nation’s commitment to implementing its side of the EU migration deal. After the saga broke on Wednesday, the lira fell to its weakest vs. the dollar since February, and the iShares MSCI Turkey ETF (TUR -8.2%) posted its worst day in nearly five years.

iShares MSCI Turkey ETF stock chart

The U.S. and Russia have agreed to extend a fragile ceasefire in Syria to Aleppo, the city that has been the site of the fiercest fighting in recent weeks. The agreement follows days of frantic negotiations between the two countries, and is part of a new American-Russian effort to prevent February’s armistice from collapsing by piecing together localized truces in areas with the most hostilities.


Elon Musk appears to have made the biggest strategic change in Tesla’s (NASDAQ:TSLA) history, bringing forward the firm’s delivery target by two years after earnings topped expectations. The EV automaker now plans to build 500K Model 3 sedans in 2018, but warned that spending will ramp up in tandem. Tesla also disclosed that two high-ranking executives involved with output – Production VP Greg Reichow and Manufacturing VP Josh Ensign – have already left or will be leaving the company. TSLA rose 3.8% in after-hours trading.

It’s official: Takata (OTCPK:TKTDY) is recalling 35M-40M more airbag inflators in the United States, more than doubling what is already the largest recall ever in America’s car industry. The call backs will be conducted by affected automakers in five phases starting this month. Regulators also determined a three-pronged root cause for Takata air bags rupturing: the age of inflators, prolonged exposure to moisture and fluctuating high temperatures.

Following several delays, the Australian Competition and Consumer Commission has cleared Anheuser Busch Inbev’s (NYSE:BUD) planned $100B takeover of rival SABMiller (OTCPK:SBMRY), stating the deal would not adversely affect the domestic market. AB Inbev still expects to complete the purchase by the end of 2016, but has to secure antitrust clearance in Europe, where both it and its target are headquartered.

California Governor Jerry Brown has signed a pack of bills that will raise the smoking age from 18 to 21, restrict the use of electronic cigarettes in public places and expand no-smoking areas at public schools. The new laws, which take effect June 9, are a big boost to a movement that is turning into the next major challenge for the $100B tobacco industry. Lawmakers in 10 other U.S. states are currently considering similar legislation. Related stocks:LO, PM, MO, VGR, RAI, OTCQX:ITYBF, OTCPK:JAPAY, BTI, OTCQB:ECIG,OTCQB:VAPE, OTCPK:HPNN, OTCQB:MCIG, OTCQB:NTRR, OTCPK:VAPR, VPCO,OTC:AHII

Another oil and gas bankruptcy? SandRidge Energy (NYSE:SD) is in discussions with creditors about reaching a restructuring deal ahead of a possible bankruptcy filing, Reuters reports. The company wants creditors to agree on how the debt would be reduced in the hope that it could limit the amount of time it stays in court if it files for Chapter 11. According to its annual report, SandRidge had $3.6B in debt at Dec. 31.

There are several banks shortlisted by Saudi Arabia’s stock exchange to help manage its initial public offering, sources told Bloomberg. Among them: Goldman Sachs (NYSE:GS), HSBC, JPMorgan Chase (NYSE:JPM) and Morgan Stanley (NYSE:MS). The Tadawul Stock Exchange IPO could raise more than $500M for a 30% stake in the company, and a decision could come as soon as this week.

YouTube is working on a paid subscription service called Unplugged that would offer customers a bundle of cable TV channels streamed over the Internet, Bloomberg reports. Talks have been held with TV network owners such as NBCUniversal (NASDAQ:CMCSA), Fox (FOX, FOXA) CBS, and Viacom (VIA, VIAB), but no rights have yet been secured. The project is slated to debut as soon as 2017, and arrives seven months after the launch of YouTube Red, a $10/month service that combines ad-free YouTube (GOOG, GOOGL) and Google Play Music.

BT will spend £6B on rolling out 4G mobile and superfast fiber in the next three years, increasing the supply of rapid broadband to a minimum of 10M homes and businesses, with an ambition to reach 12M. The investment plans come as BT reported a better-than-expected 6% rise in full-year earnings, boosted by its acquisition of mobile provider EE in the last two months of the year.

AT&T is unwinding a 15-year partnership with Yahoo (NASDAQ:YHOO) that has spanned the evolution of the Internet, from competing against AOL dial-up service to challenging cable companies in the high-speed broadband arena. Yahoo generated about $100M in annual revenue from the relationship. Instead, AT&T (NYSE:T) has awarded the contract to host its Web and mobile portals to Synacor (NASDAQ:SYNC), a company little-known outside of telecom circles. SYNC +127% premarket.

Striking Verizon workers and their supporters are holding a day of protest today. There will be over 400 actions throughout the country as the work stoppage enters its fourth week. Employees will also crash Verizon’s (NYSE:VZ) shareholder meeting in New Mexico, where the Communication Workers of America union (which holds an estimated $1.3B in company stock) will fight in favor of proposals to improve corporate governance and accountability.



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