Wall Street Breakfast: Markets Go Red After Doha Deal Collapses

by: Wall Street Breakfast
Wall Street Breakfast
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World shares are following crude lower, after the world's largest oil exporters failed to reach an agreement in Doha to freeze output at January levels. The major sticking point during the meeting was the heightened tension between Saudi Arabia, the de facto OPEC leader, and Iran, which made a last-minute decision not to attend the gathering. Although no one expected Tehran to freeze production after its international sanctions were lifted, it wasn't clear if the Saudis would demand that Iran immediately join the pact. Crude futures -3.1% to $40.42/bbl.


The Nikkei suffered on two fronts today as a stronger yen post Doha hurt equities, while Japanese exporters like Toyota (NYSE:TM) and Sony (NYSE:SNE) suspended production in the aftermath of a major earthquake. A 7.3 magnitude tremor struck the island of Kyushu early Saturday morning, killing at least 42 people, injuring about 1,000 more and causing widespread damage. Japan wasn't alone. Ecuador over the weekend was hit with its biggest quake in decades, which killed at least 272 people and injured over 2,000. Nikkei -3.4%.

Saudi Arabia has told the Obama administration that it will sell up to $750B in treasuries and other American assets if Congress passes a bill that would allow the Kingdom to be held responsible in U.S. courts for any role in 9/11. The threats have been the subject of intense discussions in recent weeks between lawmakers, the State Department and the Pentagon, and the Obama administration has lobbied Congress to block the measure's passage.

The U.S. Supreme Court will take up a case today probing the limits of presidential powers as justices weigh whether President Obama overstepped his authority with unilateral action to protect millions of people in the country illegally from deportation. With the court evenly divided between liberals and conservatives following the February death of Antonin Scalia, there is a possibility a 4-4 split would leave in place a 2015 lower-court ruling that threw out the president's executive action which bypassed the Republican-led Congress.

Brazil's financial markets are expected to get a big boost today after the lower house of Congress backed impeachment proceedings against President Dilma Rousseff. If the Senate votes by a simple majority in early May to continue with the impeachment, Rousseff will be suspended from her post and replaced by Vice President Michel Temer. Hopes of political change have already helped lift the Bovespa benchmark stock index more than 20% this year to its highest level since mid-2015.

In a bid to bridge differences between Europe and the IMF over bailout requirements, Greece's creditors are considering extra austerity measures that would be triggered if Athens misses its fiscal targets. Under the proposal, Greece would have to sign up to so-called contingency measures of up to €3B, on top of the €5B package made up of tax increases and spending cuts the country and its lenders are currently negotiating.

Britain would be permanently poorer if it left the EU, according to a U.K. government's long-term assessment of the economic costs of a British exit from the bloc. George Osborne, Treasury chief, told the BBC that leaving the EU would cost households £4,300 ($6,106) a year, and the economy would be 6% smaller by 2030. "That's a fact everyone should think about as they consider how to vote...As chancellor, I'm clear, we're stronger, safer and better off in the European Union."

The IMF's steering committee on Saturday urged member countries to boost "growth-friendly" spending and said that it should explore new measures to help deal with the slowing world economy. Using all policy tools "is vital to stimulate actual and potential growth, enhance financial stability and avert deflation risks," according to the communique from the panel. The IMF cut its global growth forecasts last week for the fourth time in a year.


Verizon's attempts to snag Yahoo look even more likely after several potential bidders exited the race. Citing people familiar with the matter, the WSJ reported that rumored suitors Time (NYSE:TIME), Alphabet (GOOG, GOOGL), Comcast (NASDAQ:CMCSA) and AT&T (NYSE:T) would not submit bids for Yahoo's (NASDAQ:YHOO) core assets ahead of today's deadline for preliminary offers. According to the media outlet, Verizon (NYSE:VZ) may still face competition from private equity companies including Bain Capital, Advent International and TPG.

Alibaba's finance affiliate is planning an initial public offering on Shanghai's main board as early as this year, in what could be the country's highest valued IPO since the Agricultural Bank of China in 2010. The company is currently targeting a private round of fundraising for at least $3.5B at a valuation of about $60B, and prefers a dual listing with Hong Kong if it gets regulatory approval. According to a 2014 SEC filing, Alibaba (NYSE:BABA) is entitled to about one-third of Ant Financial's stake. Until then, it receives 37.5% of Ant's pre-tax profits.

UnitedHealth will stop offering Affordable Care Act plans in Michigan in 2017, marking the third in a growing tally of states where the biggest U.S. insurer will exit from the health law's marketplaces. The withdrawals come as no surprise. UnitedHealth (NYSE:UNH) previously said it expects to lose more than $500M on its 2016 exchange business, though it booked a large chunk of the loss as part of its 2015 results.

AstraZeneca held internal talks about a bid for cancer treatment maker Medivation (NASDAQ:MDVN) over the last six months, but has not yet made a formal offer, sources told the Sunday Times. An AZN deal could be worth more than $10B. In March, Reuters reported that Medivation was working with JPMorgan to handle interest from other companies in a potential acquisition, and less than a week ago, the company was said to rebuff a takeover bid from French drugmaker Sanofi (NYSE:SNY). MDVN +2% premarket.

As Volkswagen scrambles to meet a deadline this week to finalize a fix for almost 600K American cars equipped with its test-cheating software, many industry insiders are still skeptical that an engineering solution is possible. Another extension to the deadline from the U.S. court will likely not help VW (OTCPK:VLKAY), since under German law, the automaker must release its delayed results for 2015 by April 28.

Tesla Chief Executive Elon Musk's total compensation last year was valued at $37,584, reflecting the minimum wage requirements in California. But that doesn't include the 5.27M in stock options he received in 2012 that were intended to compensate him for 10 years. As of Dec. 31, Musk owned about 37.2M Tesla (NASDAQ:TSLA) shares, a 26.5% stake, worth roughly $9.47B based on Friday's closing price. New CFO Jason Wheeler's compensation was valued at $20.9M, almost entirely from a new-hire stock-option grant (only $46,154 was in salary).

A British vote to leave the EU could be a threat to any rival U.S. bidder for the London Stock Exchange (OTCPK:LDNXF) but would not undermine the planned $30B merger between Deutsche Boerse (OTCPK:DBOEY) and LSE, the German exchange's finance chief declared. "The merger makes sense regardless of Brexit. That is why it is not a risk for us," Gregor Pottmeyer said in an interview with Euro am Sonntag.

Spain's Caixabank is launching a second takeover bid for the 56% of Banco BPI (OTCPK:BBSPY) that it doesn't already own. The €1.113 per share offer, which values the lender at €1.62B, is dependent on acceptance topping 50% and the Portuguese bank eliminating a 20% shareholder rights limitation. The deal comes after CaixaBank (OTCPK:CAIXY) and Santoro Finance (controlled by Angolan investor Isabel dos Santos), were unable to conclude a deal over BPI's Angolan assets on Sunday.

HSBC CEO Stuart Gulliver is preparing to step down in two years, according to the Sunday Times, completing a boardroom shake-up at Britain's largest bank. His departure will come soon after the exit of Douglas Flint, the chairman, who is set to leave next year. Since 2011, Gulliver and Flint have announced more than 87K job cuts, exited more than 80 businesses and reduced HSBC's sprawling global footprint to 71 countries and territories from 88.

Corporate borrowers across the world have defaulted on $50B of debt so far this year as the number of delinquent companies accelerates at its fastest pace since the financial crisis in 2009. Nearly half of the defaults have occurred in the oil/gas and mining industries, spurred by the sharp decline in commodity prices, slowing global growth and lackluster demand for base metals and crude. Latest defaults: Peabody Energy (BTU), Energy XXI (EXXI) and Goodrich Petroleum (OTCPK:GDPM).

Chevron is putting all of its Myanmar gas block stakes up for sale, which at a combined likely valuation of $1.3B, would be the biggest deal involving Myanmar assets to date, sources told Reuters. The sale, part of Chevron's (NYSE:CVX) efforts to preserve cash and retreat from non-core assets in the wake of sliding oil prices, is seen as setting the tone for future deals in a country that is slowly opening up for business. CVX -2.3% premarket.

Amazon is going monthly with a stand-alone option for its Prime Video, upping the competitive stakes with Netflix (NASDAQ:NFLX) and Hulu. Prime Video was previously given as a value-add to Amazon's (NASDAQ:AMZN) $99/year Prime membership, but it will now be offered to customers as a separate purchase for $8.99/month, a dollar less than Netflix. Hulu - co-owned by Disney (NYSE:DIS), Comcast (CMCSA) and Fox (FOX, FOXA) - offers its limited commercials plan for $7.99/month, and a no-commercials plan for $11.99/month.

It looks like Europe is preparing for another legal showdown with Google (GOOG, GOOGL), this time over its Android mobile operating system. "Our concern is that, by requiring phone makers and operators to preload a set of Google apps, rather than letting them decide for themselves which apps to load, Google might have cut off one of the main ways that new apps can reach customers," EU antitrust chief Margrethe Vestager declared. The comments come a year after she accused the company of favoring its shopping service in delivering search results at the expense of rivals.

Today's Markets

In Asia, Japan -3.4% to 16276. Hong Kong -0.7% to 21162. China -1.4% to 3033. India +0.7% to 25816.
In Europe, at midday, London -0.3%. Paris -0.2%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.2%. S&P -0.3%. Nasdaq -0.2%. Crude -3.1% to $40.42. Gold +0.4% to $1239.70.
Ten-year Treasury Yield flat at 1.74%

Today's Economic Calendar

8:30 Fed's Williams speech
10:00 NAHB Housing Market Index
7:00 PM Fed's Rosengren speech

Companies reporting earnings today