Wall Street Breakfast: More Market Jitters As Japan Stocks Dive

by: Wall Street Breakfast
Wall Street Breakfast
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It looks like another ugly day for world shares. Investors are concerned that a protracted period of slowing global growth, plunging oil prices and rock-bottom interest rates will combine to inflict pain on the world's largest financial institutions, while the lofty valuations of tech stocks are further weighing on sentiment. The 'fear factor' in the markets is also being magnified by Fed Chair Janet Yellen's testimony this week, sending traders stampeding into safe haven assets.


With most other markets in Asia closed for the Lunar New Year, Japan decided to make headlines, with the Nikkei plunging 5.4% and yen soaring to a 15-month peak. Yields on Japan's benchmark 10-year government bonds also touched -0.01%, marking the first time a G7 nation's 10-year yields have turned negative (although German bunds have come relatively close).

The economic woes sparking turmoil for global equities are a boon for gold, as traders bet on a big comeback for the yellow metal. Spot bullion climbed as much as 2.3% to $1,200.97 during yesterday's session, its biggest intraday gain in two months and highest level since June 22. However, not everyone is a believer. Goldman Sachs predicts losses over the coming year as the Federal Reserve raises U.S. interest rates no fewer than three times.

German industrial production unexpectedly fell for a second month in December, in a sign that Europe's largest economy ended 2015 on weaker footing. Output, adjusted for seasonal swings and inflation, fell 1.2% from November, when it declined by a revised 0.1%. The pullback comes at a time when record-low unemployment and low fuel costs bolster consumer spending, but a slowdown in major export markets counteract the positive trends to rein in production.

Argentina bonds outperformed on Monday after two of six holdout investors agreed to accept a government offer to pay a total of $6.5B to them (a 25% haircut). Daniel Pollack, the special master presiding over the negotiations, said Dart Management and Montreaux Equity Partners "stood solidly behind the deal," praising President Macri for addressing the "long-festering problem."

Seeking to head off the spread of the Zika virus, President Obama is planning to ask Congress for $1.8B in emergency funding to combat the disease associated with birth defects in Latin America. "We're going to be putting up a legislative proposal to resource both the research on vaccines and diagnostics but also helping in terms of public health systems," Obama said during an interview with CBS. Separately, Kenya is the latest country to debate pulling out of this year's Rio Olympics due to concerns about the virus.

Michael Bloomberg has confirmed that he's considering a run for U.S. president, a move that could dramatically reshape the 2016 race for the White House. "I find the level of discourse and discussion distressingly banal and an outrage and an insult to the voters," Bloomberg told FT, adding that the U.S. public deserved "a lot better." The news comes as primary voters head to the polls in New Hampshire.

The surplus of supply over demand at the start of the year is "even greater" than initially expected, the International Energy Agency said in its latest monthly report. "With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term." Supply may exceed consumption by an average of 1.75M bpd in the first half of 2016, compared with an estimate of 1.5M last month, and the excess could swell if OPEC members bolster production.


Google Chief Executive Sundar Pichai has received a stock award valued at $199M, lifting his equity stake in Alphabet (GOOG, GOOGL) to more than $600M, while making him one of the world's highest-paid executives. The grant appears to be part of an effort to hold on to Pichai, who last year took responsibility for businesses that generate about 90% of Alphabet's revenue and an even larger percentage of its profit. Pichai's salary is not known, however, because he wasn't included as an executive officer in Google's annual proxy statement, although that may change next time around.

CBS fell short of setting a new U.S. television-watching record as its Sunday night broadcast of the 50th Super Bowl averaged 111.9M viewers. The Broncos' win over the Panthers ranked third in U.S. TV program history, behind last year's NBC (NASDAQ:CMCSA) broadcast of the game, which drew 114.4M watchers and the 2014 Super Bowl on Fox (FOX, FOXA), with an audience of 112.2M. Online streams of the game through CBS and the NFL averaged 1.4M viewers per minute.

Viacom is adding a new phase to a fledgling partnership with Snapchat (Private:CHAT), allowing it to sell advertising on the mobile app's behalf, WSJ reports. Under the deal, Viacom (VIA, VIAB) will have exclusive third-party rights to directly sell advertising surrounding Snapchat's owned and operated content, and will add two new channels to Snapchat Discover, the media-centric story section of the popular service.

So what happened at Chipotle's all-employee meeting? Co-Chief Executives Steve Ells and Montgomery Moran laid out plans to improve restaurant safety, such as central processing and increased testing of ingredients, while discouraging sick workers from coming to the restaurant by offering paid sick leave. Chipotle (NYSE:CMG) also said it would spend about $10M to help local suppliers adhere to the company's new safety measures. CMG shares have lost nearly a third of their value and sales have plunged about 30% since November, following reports of E. Coli sickness and two separate norovirus outbreaks.

Fiat Chrysler fell 7.6% to a 52-week low yesterday after the NHTSA released documents that suggested that some of its vehicles can roll away when a driver thinks the transmission has been set to park. The probe into three Fiat Chrysler (NYSE:FCAU) models affects about 856K cars; 121 incidents have led to crashes, with 30 leading to injuries. FCAU -1.5% premarket.

Energy news: Responding to an earlier report that has cut the share price in half, Chesapeake Energy (NYSE:CHK) declared it "has no plans to pursue bankruptcy," but is looking at its restructuring options "to maximize value for all shareholders." Meanwhile, Cheniere Energy (NYSEMKT:LNG) is closing its newly formed crude oil trading desk, just two months after the company's board ousted CEO Charif Souki and increased its focus on core businesses.

Swatch is reintroducing sunglasses under its namesake brand through a five-year alliance with Safilo (OTCPK:SAFLY), after a stint selling them in the 1990s. Swatch's (OTCPK:SWGAY) diversification comes as the Swiss watch industry struggles to sell more timepieces amid slowing economic growth in its largest market, China. Low-end brands have also had to contend with competition from an increase in smartwatch adoption.

Verizon has given Tim Armstrong, chief executive officer of its AOL unit, a leading role in exploring a possible bid for Yahoo (NASDAQ:YHOO), Bloomberg reports. Sources say Armstrong may be picking up on conversations he had with Yahoo CEO Marissa Mayer at the Sun Valley media conference in 2014 - before AOL was bought by Verizon (NYSE:VZ) - while exploring the idea of combining AOL and Yahoo. The two are both former Google (GOOG, GOOGL) executives.

Monday's Key Earnings

21st Century Fox (NASDAQ:FOXA) -4.4% AH on a downbeat full-year outlook.
Hasbro (NASDAQ:HAS) +1.4% after topping estimates.
Plains All American (NYSE:PAA) -1.5% AH after missing expectations.
Yelp (NYSE:YELP) -11% following heavy spending, CFO departure.

Today's Markets

In Asia, Japan -5.4% to 16085. Hong Kong closed. China closed. India -1.1% to 24021.
In Europe, at midday, London -0.1%. Paris -0.4%. Frankfurt -0.7%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude +2.4% to $30.40. Gold -0.7% to $1189.40.
Ten-year Treasury Yield +3 bps to 1.76%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
10:00 Wholesale Trade
10:00 Job Openings and Labor Turnover Survey
1:00 PM Results of $13B, 3-Year Note Auction

Companies reporting earnings today