Wall Street Breakfast: Worries Resurface About China's Economy

by: Wall Street Breakfast
Wall Street Breakfast
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Chinese trade data for September came in well below expectations as anemic global demand dealt another blow to the world's second-largest economy. Exports tumbled 10% in dollar terms and imports fell 1.9%, resulting in a trade surplus of $42B. The data came against the backdrop of a recent decline in the yuan, which touched a six-year low against the greenback this week, and is putting pressure on global shares.


Sterling is back below $1.215 following an analysis by the FT, which found that Britain will face a divorce bill of up to €20B to cover its remaining financial obligations and liabilities with the EU. Separately, legal proceedings challenging the British government's right to trigger a Brexit without seeking parliamentary approval kick off today after Prime Minister Theresa May ruled out a vote for MPs on the matter.

Minutes from the September FOMC meeting... Many members thought raising rates would be warranted "relatively soon" if the U.S. economy continued to strengthen, but internal divisions remained over the timing of the next move. A few participants also raised concerns that waiting too long could trigger a recession, while more dovish officials wanted more evidence that inflation is firming before hiking interest rates.

The U.S. military launched cruise missile strikes overnight on three coastal radar sites in Houthi-controlled areas of Yemen, retaliating after failed missile attacks this week on a U.S. Navy destroyer. The strikes represent a potentially significant step for the U.S. in Yemen, where a bloody civil war has pitted Iranian-backed Houthi rebels against a Saudi-led coalition supported by the U.S.

Egypt received a $2B deposit from Saudi Arabia in September, bringing it closer to clinching a $12B IMF loan aimed at plugging the country's deficit and balancing its currency markets. The timing of the deposit makes clear it was received before a suspension of petroleum aid by Riyadh, which began on Oct. 1 and had raised questions over the fate of Saudi aid destined for Cairo.

U.S. Secretary of State John Kerry will meet his Russian counterpart in Switzerland on Saturday to discuss Syria, signaling the lack of options facing Western nations over the conflict. Kerry broke off talks with Sergei Lavrov last week over a major bombing campaign on the city of Aleppo, which has included air strikes on hospitals that the U.S. and France said amounted to war crimes.


Wells Fargo CEO John Stumpf has stepped down after succumbing to pressure from Congress over the bank's shady sales tactics. Tim Sloan, chief operating officer and president, will step into his shoes, but won't have much time to prepare his pitch for Wall Street. He's set to present third-quarter results tomorrow, less than 48 hours after taking the helm of the bank. WFC +1.2% premarket.

Deutsche Bank is implementing a company-wide hiring freeze as CEO John Cryan seeks to lower costs and shore up investor confidence, Bloomberg reports. The bank is struggling to reverse a slide in shares that eroded almost half of its market value this year, amid concerns about mounting legal costs after the DOJ requested $14B to settle a probe into faulty securities. DB -2.6% premarket.

September brought a much-needed reprieve for the global hedge fund industry following a year of mounting criticism and investor agitation over its high fees and disappointing performance. Aggregate hedge funds gained 0.91% in September, according to data provider Preqin, compared to 0.02% for the S&P 500 and 0.59% for a composite equity/bond benchmark composed of the MSCI World Index and the Citi World Government Bond index.

Samsung Electronics is offering financial incentives for customers in South Korea who exchange Galaxy Note 7 smartphones for other Samsung (OTC:SSNLF) models, and has begun sending fireproof boxes and protective gloves to U.S. customers returning potentially explosive Note 7s. "Industry experience, such as the decline of Nokia and BlackBerry, shows how successful manufacturers can lose market share particularly quickly in the handset business," Fitch ratings agency said in a report.

The bankruptcy court handling Hanjin Shipping's (OTC:HNJSF) insolvency proceedings plans to put the firm's Asia-U.S. operations up for sale as early as tomorrow, in an effort to raise funds and help rehabilitate the indebted company. The sale would reportedly involve the employees, customers and some of the assets, including vessels, in Hanjin's trans-Pacific network. Hanjin shares closed up 30% on the news.

Although sales of high-end virtual reality headsets have been slow, Sony (NYSE:SNE) will enter the market today with a cheaper product that could have a better shot at mainstream acceptance. Not only is the PlayStation VR, at $399, less expensive than other systems, but it is also powered by Sony’s PlayStation 4 console, which is owned by tens of millions of people.

More Brexit woes... Tesco (OTCPK:TSCDY) is pulling dozens of Unilever (NYSE:UL) branded products off of its website following a dispute over costs. The consumer product group has reportedly been attempting to raise the price it charges on a range of goods to Britain's big four grocers by around 10%, saying it needs to offset higher prices of imported commodities. Are the economic ramifications of Brexit moving from Parliament to the kitchen table? UL -1.9% premarket.

Meanwhile, the company reported third-quarter sales growth that beat estimates thanks to increased demand for its Magnum and Ben & Jerry's ice creams in the U.S. and Europe during the summer months. Unilever (UL) also said it was on track for another year of volume growth ahead of markets, steady improvement in core operating margin and strong cash flow.

America's dairy farmers are crying over spilled milk - the 43M gallons of it they have dumped in fields and elsewhere over the first eight months of the year. The reason for the discarded liquid is that a glut has cut milk's price 22% since spring, to $16.39 per hundred pounds. At that price, some farmers can’t afford to truck the dairy staple to market, sources told the WSJ. Related tickers: WWAV, DF, LWAY, KHC

Amazon is hiring more than 120K seasonal employees across its fulfillment centers, sortation centers and customer service sites in the United States for the upcoming holiday season. More than 14,000 seasonal positions were transitioned to regular, full-time roles after the holidays last year, and Amazon (NASDAQ:AMZN) expects to increase that number in 2016.

The SEC is conducting an investigation into SunEdison (OTCPK:SUNEQ) "seeking information and documentation relating to various matters," according to a new regulatory filing. SunEdison said the notice was accompanied by a subpoena seeking emails and other electronic communications sent or received by current and former directors of the company and of spinoffs TerraForm Power (NASDAQ:TERP) and TerraForm Global (NASDAQ:GLBL).

Under the sea: Facebook (NASDAQ:FB) and Alphabet (GOOG, GOOGL) are joining with China's Pacific Light to lay an ultrafast internet cable between Los Angeles and Hong Kong, the latest sign of its U.S. backers' insatiable appetite for bandwidth. Meanwhile, Nokia's (NYSE:NOK) Alcatel Submarine Networks has set a new record for cable transmission capacity for communications traffic - doubling its previous levels - as the company responds to a pick-up in demand from Internet firms.

After an earlier version blew up in October 2014, Orbital ATK's (NYSE:OA) new, larger Antares rocket is scheduled for lift-off on a cargo mission to the International Space Station at 21:13 ET from Wallops Island, Virginia. It will be the sixth cargo mission to the ISS for Orbital ATK that will be packing about 2,400 kilograms of crew supplies and research gear inside its Cygnus spacecraft.

Snap has reportedly picked Morgan Stanley and Goldman Sachs as lead underwriters for its IPO. According to various media reports, the messaging app has appointed the two banks to lead the estimated $25B float, with JPMorgan, Deutsche Bank, Allen & Co., Barclays and Credit Suisse acting as joint bookrunners. Snap (Private:CHAT) could list as soon as March.

The Victoria Racing Club and Twitter (NYSE:TWTR) have entered an agreement to live stream this year's Melbourne Cup as the social media platform pushes further into the world of live sports broadcasting. In a bid to counter stagnant user growth, Twitter has signed several deals with sports organizations in the U.S., but its tie-up with VRC will mark its first international deal.

Wednesday's Key Earnings

CSX Corp. (NYSE:CSX) +2.6% AH as cost cuts boosted Q3 results.

Today's Markets

In Asia, Japan -0.4% to 16774. Hong Kong -1.6% to 23031. China +0.1% to 3061. India -1.6% to 27643.
In Europe, at midday, London -0.6%. Paris -1.2%. Frankfurt -1.2%.
Futures at 6:20, Dow -0.6%. S&P -0.6%. Nasdaq -0.6%. Crude flat at $50.16. Gold +0.6% to $1260.90.
Ten-year Treasury Yield -3 bps to 1.74%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Import/Export Prices
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
12:15 PM Fed's Harker: Economic Outlook
1:00 PM Results of $12B, 30-Year Note Auction
2:00 PM Treasury Budget
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Companies reporting earnings today »