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Daily from Wall Street, Jan 18

 

 

  • Most US Stocks Fall On Wednesday
  • European Bourses end soft
  • Gold and Japanese yen poised to end seven day winning streak
  • Euro steady while dollar strengthens after Tuesday plunge

 

Wall Street traded mainly lower on Wednesday amid a dollar recovery, better-than-expected inflation and industrial production data and mixed results for banks: earnings for Goldman Sachs beat while revenues for Citigroup disappointed. In addition, investors await Fed Yellen speech later in the afternoon. The Dow Jones declined 68 points or 0.3% and the S&P 500 fell 2 points or 0.1% while the the Nasdaq gained 5 points or 0.1% around 10 minutes after the opening bell.

European Equities Close Mostly In The Green On Earnings The DAX 30 advanced 59 points, or 0.5%, to 11,599 on Wednesday. In Europe, stocks closed mostly higher as strong earnings reports from ASML Holding and Burberry boosted sentiment while Pearson shares tumbled 29% after the company warned of lower future dividends and profit. The FTSE 100 closed up 27 points, or 0.4%; and the FTSE MIB gained 62 points, or 0.3%. Meanwhile, the CAC 40 fell 6 points, or 0.1%; and the IBEX 35 declined 9 points, or 0.1%.

Tuesday’s Key Earnings

CSX Corp. (NYSE:CSX) -4% AH on a set of in-line earnings.
Morgan Stanley (NYSE:MS) -3.8% despite an impressive quarter.
United Continental (NYSE:UAL) -1.7% AH predicting flat Q1 revenues.
UnitedHealth (NYSE:UNH) -0.7% amid Obamacare uncertainty.

 

Global Markets end of European Trade time:

18jan

 

Economy

  • President-elect Donald Trump’s comments suggesting the greenback is “too strong” sent the dollar index tumbling to its lowest level in more than a month, but the currency recovered some of that weakness in trading overnight. Adding to the dollar’s weakness was sterling strength, which surged 3% – the biggest one-day climb since 1998 – following Theresa May’s Brexit speech. She pledged to walk away from negotiations if Britain didn’t get a good deal from Brussels.
  • India seems set for four consecutive quarters of sub-7% growth for the first time since at least 2011, according to Societe Generale, as the government’s demonetization drive triggers a shortage of cash. The program, introduced in November, impacted 86% of India’s currency in circulation by replacing existing 500 ($7.35) and 1,000 ($14.70) rupee notes.
  • “If we don’t make a dramatic adjustment, there could be a total collapse in upcoming months,” said Elias Sanchez, the governor’s representative to a federal control board created last year to oversee Puerto Rico’s finances. The Secretaries of the U.S. Treasury and Health and Human Services also called for fast congressional action, saying a bipartisan task force report failed to go far enough on recommending a low-income tax credit for the commonwealth.
  • Billionaire businessman Wilbur Ross is expected to have more influence over trade policy than many of his predecessors if confirmed as Donald Trump’s pick for Commerce Secretary. That’s likely to be the No. 1 issue for several members of the Senate Commerce Committee when the private-equity investor seeks their backing at a confirmation hearing scheduled for 10 a.m. ET.
  • In his final major speech in his post, U.S. Vice President Joe Biden issued a “call to action” to Europe and the U.S. to defend the “liberal world order,” decrying a growing impulse in the West toward “isolationism and protectionism.” Biden also acknowledged at the World Economic Forum in Davos that he’ll hold his post for only another 48 hours, and quipped: “Then I can start to say what I think.”
  • Investors are awaiting Janet Yellen’s speech to the Commonwealth Club in San Francisco later today, which could offer clues about the direction of policy. The Fed looks poised to pick up the pace of interest-rate hikes this year, especially if incoming President Donald Trump makes good on his promise to deliver tax cuts and fiscal stimulus that could spur growth.

 

Stocks

  • HSBC will relocate staff generating around 20% of its trading revenue to Paris following Britain’s exit from the EU, CEO Stuart Gulliver said on the sidelines of the World Economic Forum. HSBC has all the licenses it needs for such a move and would only need to set up a so-called intermediate holding company in France, a move that should take only a matter of months.
  • Deutsche Bank expects a negative impact of $1.2B on its Q4 pretax profit from a civil monetary penalty of $3.1B agreed with the DOJ, which came as part of an overall $7.2B settlement. “Our conduct in this matter, which occurred from 2005 to 2007, falls short of our standards and is unacceptable. We apologize unreservedly for it,” Deutsche (NYSE:DB) CEO John Cryan said in a statement.
  • Looking to boost its capital base, Toshiba (OTCPK:TOSYY) is in talks to sell a minority stake of its flash memory business to Western Digital (NYSE:WDC) following a $1.3B accounting scandal and looming multi-billion-dollar writedown. The company had been considering various options for its core semiconductor unit, including a spinoff, but nothing concrete has yet been decided.
  • Caesars Entertainment has wrapped up the $18B bankruptcy of its main operating unit, allowing the casino company to focus on restoring the tarnished Harrah’s, Caesars and Horseshoe brands after two years of Chapter 11 proceedings. “The new Caesars (NASDAQ:CZR) will be a stronger company,” CEO Mark Frissora declared after the ruling, calling the approval a “major milestone.”
  • Mark Zuckerberg disclosed that beyond the $2B price tag for Oculus, that was widely reported, Facebook (NASDAQ:FB) paid an additional $700M to retain employees and another $300M earnout for hitting key milestones. Oculus originally wanted $4B. The revelation came in a Dallas courtroom, where Zuck denied an allegation by ZeniMax Media that the VR technology of Oculus was stolen.
  • Walking away? Amazon (NASDAQ:AMZN) and Flipkart (Private:FPKT) have withdrawn from talks to acquire Dubai-based Souq.com after disagreeing over price, Bloomberg reports. The deal was said to have been worth about $1B. The e-commerce giant is now seeking other potential investors and is negotiating with Majid Al Futtaim, a shopping mall-operator in the Middle East and North Africa.
  • Qualcomm +1.4% premarket after arguing that a complaint by U.S. regulators was “based on a flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry.” Qualcomm (NASDAQ:QCOM) shares tumbled 4% on Tuesday, when the FTC charged the company with using anti-competitive tactics over licensing and claimed it maintained a monopoly on a type of chip used in cellphones.
  • Hewlett Packard Enterprise has bought notable Nutanix (NASDAQ:NTNX) competitor and storage startup SimpliVity for $650M in cash, although at the time of its last fundraising, the company had declared its value at “more than $1B.” HPE’s discounted purchase price isn’t an encouraging sign for the viability of “unicorn” startups. In 2017, companies like Snap (Private:CHAT), Spotify (Private:MUSIC), and Dropbox (Private:DROPB) will likely have to justify their enormous valuations to Wall Street.
  • Describing “an unprecedented decline” in its U.S. business, Pearson shares (NYSE:PSO) dived 27% premarket, after the company issued its fifth profit warning in four years, lowered its 2017 dividend and announced plans to sell its stake in publisher Penguin Random House. The education group’s stock price has almost halved in the past three years as the company laid off thousands of employees amid trading pressures in key markets.
  • Theranos has failed a second major U.S. regulatory inspection of its laboratory facilities, WSJ reports, a setback the Silicon Valley blood-testing firm hasn’t disclosed to investors or patients. The failed regulatory inspection – at its one active lab at the time – has put Theranos (Private:THERA) at risk of a new round of sanctions and comes after it recruited a new technology advisory board.
  • President-elect Donald Trump has asked Lockheed Martin (NYSE:LMT) to reduce costs on the $379B F-35 program by “many percent, into double digits”, according to the chairman of BAE Systems (OTCPK:BAESY), which is a key subcontractor on the program. “We respect that and we’ll work towards a contribution towards that,” Roger Carr said from the World Economic Forum in Davos.
  • More price cuts… Boeing (NYSE:BA) CEO Dennis Muilenburg had a “very productive” meeting with Trump on Tuesday and was encouraged by progress in talks on the Air Force One replacement fleet and fighter planes. “We made some great progress on simplifying requirements on AF1, streamlining the process… all that is going to provide a better airplane at a lower cost. I’m pleased with the progress there.”
  • An autonomous roadway management system? Amazon (AMZN) recently filed a new patent designed to help self-driving vehicles identify the driving lanes best-suited for their individual needs based on things like speed and destination, or time of day and traffic flow. The new system could also help autonomous cars spot reversible lanes, which let vehicles travel in either direction depending on the displayed overhead signal.
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