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Wall Street at Breakfast

Traders Eye U.S. Payrolls Data

  • US Treasury yields extend losses after big jobs report miss

  • Unemployment Rate At 5%

 

U.S. government debt prices extended gains Friday, as investors digested weaker-than-expected U.S. employment data.

The U.S. economy added 160,000 jobs in April. According to Thomson Reuters, economists forecast 202,000 jobs were added in April. The unemployment rate was expected to be unchanged at 5 percent, while average hourly wages were expected to have grown by 0.3 percent.

Economy

Atlanta Fed President Dennis Lockhart says he is “not going to panic” if the jobs number comes in below 200K. As for a June hike, he declares himself on the fence, noting the “disconnect between growth and employment numbers.” Lockhart also called Brexit a “big deal,” explaining that the U.K. referendum will take place after the FOMC’s next meeting, and will thus be a consideration.

Donald Trump would probably replace Janet Yellen as Federal Reserve chair if he wins the presidential election, saying that he agrees with her monetary policy, but she is “not a Republican.” “I love the concept of a strong dollar,” Trump added, but stated higher rates would make it more expensive for the U.S. to service its debt. The presumptive GOP nominee also called himself the “king of debt,” cautioning that it had to be handled with care.

The massive wildfire raging in Canada has grown to more than 300 square miles, increasing by ten-fold from Thursday. The impacts of the blaze remain unknown, but initial estimates from economists suggest that production cuts in Alberta’s oil sands could wipe out Canada’s growth in the second quarter. It is also seen as potentially adding up to $9B in insurance costs.

Japan’s Prime Minister Shinzo Abe will hold talks with Vladimir Putin today, in a rare meeting by a G7 leader that attempts to end Russia’s isolation since it intervened in Ukraine more than two years ago. According to the Kyodo news service, the Japanese leader rejected an appeal by President Obama not to go ahead with the visit. Abe has argued for more engagement with Putin to end territorial disputes, as well as tackling issues such as those in Syria.

Labour candidate Sadiq Khan looks set to become the first Muslim elected mayor of London, loosening the ruling Conservatives’ hold on Britain’s financial center. While the mayor doesn’t specifically run the business district, the post has outsized influence over the government in lobbying for the capital.

Meanwhile, sterling is suffering its biggest decline in six weeks amid Brexit concerns, making the pound the worst-performing G10 currency of 2016.

Today’s Markets

In Asia, Japan -0.3% to 16107. Hong Kong -1.8% to 20089. China -2.8% to 2913. India -0.1% to 25229.
In Europe, at midday, London -0.8%. Paris -1.1%. Frankfurt-0.8 %.
Futures at 6:20, Dow -0.2%. S&P -0.3%. Nasdaq -0.3%. Crude -0.8% to $43.98. Gold +0.8% to $1281.90.
Ten-year Treasury Yield flat at 1.74%

Thursday’s Key Earnings

3D Systems (NYSE:DDD) -6.4% on a widening net loss.
Activision Blizzard (NASDAQ:ATVI) +6.3% AH getting a lift from King Digital.
Alibaba (NYSE:BABA) +3.9% boosted by gross merchandise volume growth.
Chesapeake Energy (NYSE:CHK) +1.1% after in-line earnings, asset sale.
EOG Resources (NYSE:EOG) +2.4% flat AH following mixed results.
FireEye (NASDAQ:FEYE) -9.3% AH announcing soft guidance, CEO change.
GoPro (NASDAQ:GPRO) -4.5% AH as sales plunged 50% from the prior-year period.
Herbalife (NYSE:HLF) +13% AH entering advanced talks to settle FTC probe.
Merck (NYSE:MRK) -1.3% falling on generic competition, currency.
News Corp. (NASDAQ:NWSA) unmoved AH despite another quarterly drop in revenue.
Square (NYSE:SQ) -13.3% AH as operating expenses surged.
Yelp (NYSE:YELP) +9% AH on Q1 beat and solid guidance.

Stocks

A Brazilian judge has ratified the settlement Samarco and its owners, BHP Billiton (NYSE:BHP) and Vale (NYSE:VALE), signed with the government in March for last year’s deadly dam spill. The agreement will see the group pay an estimated 20B reais ($5.6B) over 15 years to cover and repair damages. The move could also sap some energy from a separate $44B lawsuit filed by federal prosecutors earlier this week who criticized the settlement as insufficient.

ArcelorMittal narrowed its net loss in the first quarter, but cautioned that excess steel capacity in China still remains a concern. The world’s largest steelmaker reported a net loss of $416M in the three months ended March 31, compared with a $728M net loss in the same period a year earlier. Tough operating conditions will continue into the second half of the year, warned chief executive Lakshmi Mittal, but he kept the company’s forecast for 2016 earnings unchanged. ArcelorMittal (NYSE:MT) shares -5% in Amsterdam.

Teva Pharmaceutical is finalizing as much as $2B in asset sale agreements to win U.S. antitrust clearance for its $40.5B acquisition of Allergan’s (NYSE:AGN) generic drug portfolio, according to Reuters. Teva (NYSE:TEVA) said in March that a regulatory review of the deal by the Federal Trade Commission was taking longer than anticipated, and that it expected the transaction to be completed by June.

Valeant Pharmaceuticals’ new chief, Joseph Papa, has made his first move to reset the company’s strategy with the creation of a group responsible for drug pricing. “We are committed to ensuring those mistakes are not repeated,” he said in a statement. Valeant’s (NYSE:VRX) board will oversee the Patient Access and Pricing Committee, which will be chaired by Papa himself and include employees, doctors and scientists.

Another probe investigating Deutsche Bank is underway, this time for suspected market manipulation relating to the sale of €7B worth of Italian state debt as the country approached a crisis that eventually brought down the government of Prime Minister Silvio Berlusconi in 2011. A prosecutor in southern Italy is investigating five former managers of Deutsche Bank (NYSE:DB) as well as the bank itself.

Having partnered with IBM in 2014 and Cisco (NASDAQ:CSCO) in 2015, Apple (NASDAQ:AAPL) is now joining with SAP to enable iOS apps that can leverage the latter’s popular Hana in-memory database (used to power high-speed analytics and transaction processing applications). The partnership is part of Tim Cook’s strategy to sell more iPads and iPhones to corporations. The initiative is especially important following a quarter in which iPhone sales declined for the first time; iPad sales have fallen for nine consecutive quarters.

Looking to steer past the huge accounting scandal that hammered its reputation, Toshiba (OTCPK:TOSYY) has nominated Satoshi Tsunakawa, a former head of its medical equipment division, to be its next chief executive officer. The company publishes its full-year earnings next week, but has already warned of a ¥470B ($4.4B) net loss for the last fiscal year as it booked a massive write-down of its U.S. nuclear unit Westinghouse.

A SpaceX Falcon 9 rocket blasted off from Florida overnight to put a communications satellite into orbit, then made a swift return landing on a floating ocean platform. “Woohoo!!” Elon Musk wrote on Twitter. “May need to increase size of rocket storage hangar.” It was the second successful landing at sea for SpaceX (Private:SPACE), which intends to offer cut-rate launch services by re-using its rockets.

Aiming to reshape the taxi industry, General Motors (NYSE:GM) and Lyft (Private:LYFT) plan to begin testing autonomous Chevrolet Bolt electric cabs on public roads within a year as their partnership matures. Customers will have the opportunity to opt in or out of the pilot when hailing a Lyft car from the company’s mobile app. The new development extends on a busy week in the self-driving car industry, after Fiat (NYSE:FCAU) and Google (GOOG,GOOGL) established a manufacturing tie-up.

Kerrisdale Capital is preparing a negative report on Dish Network (NASDAQ:DISH), arguing that the spectrum holdings key to its worth are overvalued, Bloomberg reports. The firm further fanned the flames with a tweet stating, “we’re working on a $10B+ company that we believe is worth 60% to 80% less than its current trading value.” Dish shares have fallen 13%in the past week on speculation that it was in Kerrisdale’s crosshairs.

The trial to determine the mental competency of ailing media mogul Sumner Redstone will open with a blockbuster lineup of witnesses today, beginning with a video testimony from the 92-year-old himself. Manuela Herzer, a former companion and romantic partner of Redstone, initiated the court case in November by filing a petition that claimed Redstone was not competent when he removed her from his will and supervision of his healthcare. While the courtroom drama concerns Redstone’s personal life, it could have broad implications for Viacom (VIA, VIAB) and CBS, the two media companies he continues to control.

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