Wall Street Breakfast: Oil Hits 2016 High Ahead Of Doha Meeting

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Includes: AA, AEMD, BA, BABA, BAC, BCRX, BHI, C, CBS, CEMI, CP, EADSY, FB, GOVX, GS, HAL, INO, ISNPY, JPM, MDIBY, MS, MT, NMR, NSC, QQQ, SNY, SPY, TKTDY, TMO, UNCFY, VIA, VIAB, VZ, XON
by: Wall Street Breakfast
Wall Street Breakfast
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Just five days ahead of the much anticipated oil producers' meeting in Doha, Iraq's OPEC governor Falah Alamri has extended his support for an output freeze agreement by stating "this is the only way" to boost crude prices. Although at least 15 major oil producers (that account for 75% of the world's oil production) are scheduled to attend the summit this weekend, several sticking points remain, including Iran and Saudi Arabia's participation and the level at which production should be frozen. The optimism boosted Brent crude futures to a 2016 high of $43.53/bbl overnight, while WTI gained $0.39 to $40.75 a barrel.

Economy

So what happened at yesterday's meeting between President Obama and Fed Chair Janet Yellen? The two agreed that there has been significant progress made in Wall Street reform, and discussed the U.S. growth outlook for both the short and long term. They also talked about the state of employment and economic risks both at home and overseas. "The president has been pleased with the way she has fulfilled what is a critically important job," White House spokesman Josh Earnest said at a news briefing.

More Fedspeak on tap: Philly Fed President Patrick Harper, who has urged his colleagues to "get on with" raising rates again, speaks in his district's hometown. San Fran Fed President John Williams will discuss U.S. monetary policy and the global economic outlook before the Lendlt USA 2016 Conference, while the Richmond Fed's Jeffrey Lacker speaks on "Economic Leadership in an Uncertain World" at Wilmington's Cameron School of Business.

A rare day of dollar strength led to a relief rally on the Nikkei overnight after Japan's finance ministers said world leaders must deal with any intervention in the yen. The currency's retreat against the greenback, now hovering around 108, sent major export stocks higher, with automaker shares leading the rally. A weaker yen is a positive for Japanese exporters as it increases their overseas profits when converted into local currency. Nikkei +1.1%.

U.K. inflation accelerated to a 15-month high in March as an early Easter boosted air fares and clothing costs increased. Consumer prices rose 0.5% from a year earlier, the fastest pace since December 2014, according to the Office for National Statistics. Core inflation, which excludes volatile food and energy prices, advanced by 1.5%, the most since October 2014.

"As developing countries continue to face strong economic headwinds, demand for lending from the World Bank has risen to levels never seen outside a financial crisis," the global lender said in a statement. Lending is now on track to climb to more than $150B in support between 2013 and the current fiscal year. The World Bank forecasts global economic growth to reach 2.9% in 2016, but notes that "conditions have generally deteriorated further since the start of the year."

Sweetening its restructuring proposal, Puerto Rico has outlined a plan that would reduce $49.3B of its total debt to between $32.6B-$37.4B by exchanging existing bonds for two new types of classes. The option would give holders of the island's general obligation bonds $0.74 on the dollar - up from $0.72 previously, while other debt holders would receive less. Puerto Rico's Government Development Bank risks defaulting on $422M in debt payments due May 1, and the island must repay $2B in July.

A committee in Brazil's lower house of Congress has voted to recommend President Rousseff's impeachment for allegedly manipulating public finances, a step that increases the chances of her removal from office. A vote in the full lower house is expected to take place on Sunday. If the proceedings continue to Brazil's Senate, the chamber could decide by a simple majority to put Rousseff on trial, suspending her position for up to six months, and VP Michel Temer would become acting president.

Stocks

Italy's strongest banks, insurers and asset managers have agreed to create a €5B backstop fund, dubbed "Atlas" after the mythological god who held up the sky, to bail out weaker lenders in an effort to calm growing concerns about the country's banking sector. In return for providing private funds, the government has agreed to bring the country's laggard bankruptcy laws in line with European norms which are seen as an impediment to the sale of bad loans. UniCredit (OTC:UNCFY) +3.6%, Intesa Sanpaolo (OTCPK:ISNPY) +2.1%, MedioBanca +1.2% (OTCPK:MDIBY), BMPS +7.5% in Milan.

Nomura Holdings is shutting down its European cash equities business, as it tries to stem years of heavy losses racked up by its long-term drive to become a major global industry player. A formal announcement of the move, along with job reductions in the Americas, may come as early as today, Bloomberg reports. Japan's biggest brokerage is not alone. Many large institutions have been scaling back their international cash equities due to sluggish trading volumes and rising regulatory costs. Nomura (NYSE:NMR) shares closed up 7.3% in Tokyo.

More mortgage settlements... Goldman Sachs (NYSE:GS) has agreed to pay $5B to settle federal and state investigations into its sale of MBSs prior to the financial crisis. A chunk of the money will go toward consumer relief, but most of it will land in several of the government's favored housing-related programs. The DOJ has reached settlements with four other major financial institutions since 2012: JPMorgan Chase (NYSE:JPM) for $13B, BofA (NYSE:BAC) for $16.6B, Citigroup (NYSE:C) for $7B, and Morgan Stanley (NYSE:MS) for $3.2B.

Following a week packed with product launches, Facebook's (NASDAQ:FB) developer conference, F8, is set to shed new light on the company's recent developments. While Facebook has been mum so far on the announcements in store for the event, these items may be unveiled based on recent roll-outs and rumors: chatbots, features for small business owners, DIY virtual reality, and live video/payment apps. The annual pow wow for technologists commences early this morning in San Francisco.

Alibaba has agreed to buy a controlling stake in Southeast Asian online retailer Lazada to tap into the region's lucrative consumer market. Under the deal worth approximately $1B, Alibaba (NYSE:BABA) will buy around $500M worth of newly issued shares in Lazada, as well as acquire stakes from some existing shareholders. Lazada was founded in 2012 and serves regional markets including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Viacom mogul Sumner Redstone has expressed that he doesn't want the company to sell a minority stake in Paramount, contrary to reports from now-chairman Philippe Dauman, sources told WSJ. Dauman thought Redstone (who has trouble speaking) said "yes" to such a deal when he visited the home of 92-year-old in February. Redstone's health has become a key sticking point among activist investors who wonder about his mental competence and succession plans at Viacom (VIA, VIAB) and CBS.

Unions representing more than 39,000 Verizon (NYSE:VZ) landline phone and cable workers are threatening a strike starting tomorrow morning if the company doesn't agree to a new contract. The unions, the Communications Workers of America and the International Brotherhood of Electrical Workers, say Verizon wants to freeze pensions, make layoffs easier and rely more on contract workers. A work stoppage would affect FiOS TV as well as telephone and broadband.

According to research firm Gartner, global shipments of personal computers fell 9.6% to 64.8M units during Q1, marking the first time since 2007 that shipments dropped below 65M units (IDC reported similar results worldwide). In the U.S., PC shipments totaled 13.1M devices, representing a 6.6% decline from a year earlier and the lowest volume in three years. The sector has faced headwinds in recent quarters which include an economic slowdown in China, the strong U.S. dollar and the growing popularity of smartphones.

EU competition regulators have resumed their scrutiny of Halliburton's (NYSE:HAL) plan to acquire smaller rival Baker Hughes (NYSE:BHI), a deal which U.S. authorities say is uncompetitive and want to block. The European Commission, which halted its investigation into the $35B deal last month while waiting for more details from the companies, will now decide by Aug. 11 whether to clear or veto the takeover.

ArcelorMittal +2.2% premarket after the stock was added to Goldman Sachs' Conviction Buy list. The investment bank also upgraded the company's target price to €5.40. Yesterday, ArcelorMittal (NYSE:MT) launched two tender offers to buy back bonds in euros and dollars with cash raised from its recent $3B rights issue.

Zika news roundup: Dr. Anne Schuchat, a deputy director of the Centers for Disease Control and Prevention, told reporters the type of mosquito in which the virus is carried is present in a wider number of U.S. states, calling the revelation "scarier than we thought." Anthony Fauci, director of the U.S. National Institute of Allergy and Infectious Diseases, announced at a White House briefing that the first Zika vaccine candidate should be available in September. Related tickers: SNY, INO, AEMD, XON, CEMI, BCRX, TMO, OTCQB:GOVX

Takata has begun looking for a financial backer amid a global recall of its potentially lethal air bags, and plans to draw up a list of candidates by August, Reuters reports. It's still not clear how much funding Takata (OTCPK:TKTDY) is looking for, or how any aid would be structured, but according to industry experts, it could face a bill topping $3.5B. That's far more than the embattled air bag maker's end-2015 assets of about $1.3B.

After five months of pressure, three merger offers and one rejection from regulators, Canadian Pacific (NYSE:CP) has abandoned efforts to combine with its American railroad counterpart Norfolk Southern (NYSE:NSC). "With no clear path to a friendly merger at this time, we will turn all of our focus and energy to serving our customers and creating long term value for CP shareholders," CEO Hunter Harrison declared. Canadian Pacific's (CP) board will meet next week to consider using the cash lying around for a possible buyback or dividend instead.

Boeing has opened talks to sell airliners to Iran in what would be one of the highest-profile deals between a U.S. company and Tehran since the West lifted nuclear sanctions on the country. No formal agreements on aircraft or services sales were made during the recent meetings, but Boeing (NYSE:BA) discussed "passenger payloads, plane range, cabin configurations, fuel economy and flight deck systems." In January, Airbus (OTCPK:EADSY) agreed to sell Iran 118 planes worth $27B, but the pact has not been finalized.

Monday's Key Earnings

Alcoa (NYSE:AA) -4.4% AH hurt by weak aluminum prices.

Today's Markets

In Asia, Japan +1.1% to 15929. Hong Kong +0.3% to 20504. China -0.3% to 3024. India +0.5% to 25146.
In Europe, at midday, London flat. Paris +0.2%. Frankfurt +0.4%.
Futures at 6:20, Dow +0.2%. S&P +0.3%. Nasdaq +0.3%. Crude +0.9% to $40.75. Gold +0.1% to $1258.70.
Ten-year Treasury Yield +3 bps to 1.76%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:30 Import/Export Prices
8:55 Redbook Chain Store Sales
9:00 Fed's Harper: Economic Outlook
1:00 PM Results of $24B, 3-Year Note Auction
2:00 PM Treasury Budget
3:00 PM Fed's Williams: Monetary Policy
4:00 PM Fed's Lacker speech

Companies reporting earnings today