Wall Street Breakfast: Chinese Growth Holds Steady At 6.7%

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by: Wall Street Breakfast
Wall Street Breakfast
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China's GDP growth remained at 6.7% on year in Q3, as expected, boosted by yet more government spending, record bank lending and an over-heating property market, all of which are adding to the massive debt in the country. "Economic activity seems to be holding up reasonably well," said economist Julian Evans-Pritchard. "Nonetheless, the recent recovery is ultimately on borrowed time given that it has been driven in large part by faster credit growth and a property market boom, both of which policy makers are now working to rein in."

Economy

The U.K.'s unemployment rate held steady at an 11-year low of 4.9%, as expected, in the three months to the end of August. The number of people in work rose 106,000, although that's down from increases of above 170,000 in recent months. While the data will probably be scrutinized for what it says about the impact of the Brexit vote, it's still way too early to tell. The pound was +0.15% at $1.2317 at the time of writing.

Stocks

Intel's Q3 earnings topped expectations as EPS of $0.80 beat by $0.08 and revenue climbed 9.1% to $15.78B, while net profit jumped 21% to $3.9B. The long slide in Intel's (NASDAQ:INTC) PC business reversed and the chip manufacturer enjoyed record sales at its data-center and Internet-of-Things groups. However, shares tumbled 4.9% premarket on a disappointing revenue forecast.

Well this is juicy: the WSJ has got hold of - or was sent - a wish list of Salesforce's (NYSE:CRM) potential acquisitons targets. Those targets include Adobe Systems (NASDAQ:ADBE), whose market cap of $53.7B is above that of Salesforce, and Pegasystems (NASDAQ:PEGA), whose valuation is $2.3B. The list was part of a cache of hacked emails sent to Colin Powell, who sits on Salesforce's board.

Yahoo's Q3 profit beat expectations as EPS came in at $0.20 while revenue rose 6.5% to $1.31B and met forecasts. Net income attributable to Yahoo (NASDAQ:YHOO) jumped to $162.8M from $76.3M. Revenue at Yahoo's key "Mavens" (mobile, video, native and social) operations increased 24% to $524M. The earnings are somewhat overshadowed by fears that the massive data breach at Yahoo recently will cause Verizon (NYSE:VZ) to drop its $4.83B purchase of the company. Yahoo's shares were +0.8% premarket.

Starbucks plans to more than double the number of outlets in China to 5,000 over the next five years as it looks to further exploit what has become a key market, where it has 2,300 cafes in over 100 cities. In what seems like a symbolic move more than anything else, Starbucks (NASDAQ:SBUX) has also promoted Belinda Wong, the president of its Chinese operations, to become the division's first CEO.

Apple is set to introduce new Macs next Thursday at an event to reportedly be held in Cupertino. Though refreshes across Apple's (NASDAQ:AAPL) Mac lineup are entirely possible, a long-awaited overhaul of the MacBook Pro will be most closely watched for.

Activist investor Jonathan Litt wants Taubman Centers (NYSE:TCO), one of the largest operators of shopping malls in the U.S., to cut costs and reverse its expansion or consider selling itself, the WSJ reports. Litt, whose Land & Buildings Investment Management firm owns around 1% in Taubman, is frustrated at the latter's poor stock price. The share is down 7% this year and closed at $71.17 yesterday, well below the $99.62 a share that analysts estimate is the net asset value of Taubman's properties. Its market cap is $4.3B.

American Express, Citrix, eBay and Mattel are among the companies releasing results after the bell today as earnings season continues to ramp up. American Express' (NYSE:AXP) Q3 EPS is estimated to have dropped to $0.96 from $1.24 a year earlier and revenue 5.8% to $7.71B. Analysts forecast that Citrix's (CTX) EPS grew to $1.19 from $1.04 as revenue rose 1.7% to $827.2M. eBay's (NASDAQ:EBAY) EPS is seen as having increased to $0.44 from $0.43 and revenue 4.1% to $2.19B. Mattel's (NASDAQ:MAT) EPS is expected to come in flat at $0.71 and revenue to have slipped 1% to $1.77B.

Alibaba affiliate Ant Financial, which operates the Alipay payments service and is valued at $60B, is "closer to an initial public offering," CNBC reports. There has been much media speculation that Ant has pushed back the hotly anticipated flotation to 2017 from 2016, although CNBC's source says that the Alibaba (NYSE:BABA) affiliate hasn't set a timetable as it's in a long line of firms waiting for approval from Chinese authorities to list. Alipay has 450M active users and processes 170M transactions a day.

Blackstone is the lead bidder to acquire physician-services company Team Health (NYSE:TMH), Reuters reports. The agency couldn't say what Blackstone (NYSE:BX) has offered, although Team Health closed +7.2% at $40.25 yesterday, giving it a market cap of $2.93B. Blackstone has already owned Team Health before - from 2005-2009 - and its second pursuit of the company comes amid consolidation in the sector.

Nissan CEO Carlos Ghosn will become chairman of Mitsubishi Motors (OTCPK:MMTOF) after Nissan (OTCPK:NSANF) completes the $2.3B acquisition of a 34% stake in its smaller rival, Nikkei reports (via Reuters). Current Mitsubishi Chairman Osamu Masuko will retain his role as President. Nissan's purchase of the holding comes after Mitsubishi admitted to falsifying the mileage in some of its vehicles. Mitsubishi jumped 8.05% in Tokyo while Nissan closed +0.5%.

In its latest Latin American move, AT&T (NYSE:T) has launched roaming service in Cuba, joining other telecom operators in taking advantage of liberalization on the island nation. Subscribers can talk, text and use their data while in Cuba.

Tuesday's Key Earnings

Goldman Sachs (NYSE:GS) closes +2.15% after earnings beat, helped by jump in trading revenue
Cree (NASDAQ:CREE) collapses 9.7% AH following FQ1 earnings miss
Johnson & Johnson (NYSE:JNJ) ends -2.6% despite earnings beat, improved EPS guidance
UnitedHealth (NYSE:UNH) finishes +6.9% following strong Q3 report
Domino's Pizza (NYSE:DPZ) closes +4.9% after blazing sales growth
Harley-Davidson (NYSE:HOG) ends +9%, boosted by new engine, cost cuts
Philip Morris (NYSE:PM) finishes +1.1% as profit rises despite volume fall
United Continental (NYSE:UAL) closes +1.3% as earnings top expectations
Intuitive Surgical (NASDAQ:ISRG) -2.5% AH despite sales up 2%, net income up 14%
BlackRock (NYSE:BLK) finishes +0.6% following mixed results

Today's Markets

In Asia, Japan +0.2% to 16999. Hong Kong +0.6% to 23260. China -0.1% to 9748. India -0.2% to 27984.
In Europe, at midday, London -0.1%. Paris -0.1%. Frankfurt -0.2%.
Futures at 6:20, Dow flat. S&P -0.05%. Nasdaq -0.2%. Crude +1.45% to $51.02. Gold +0.7% to $1271.25.
Ten-year Treasury Yield -1 bps to 1.74%.

Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Housing Starts
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
2:00 PM Fed's Beige Book Companies reporting earnings today »