Wall Street Breakfast: What Will December Bring?

by: Wall Street Breakfast
Wall Street Breakfast
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Financial markets are starting the month on uncertain footing following a dramatic November that featured a U.S. election, OPEC meeting and anticipation of Italy's upcoming referendum. Despite surging oil prices, U.S. futures are following yesterday's slight decline on Wall Street, while the dollar retreats from a nine-month high. The fixed income outlook today isn't looking great either, with European sovereign debt looking vulnerable and Treasuries still under pressure from the administration change.


The oil club is dizzy with its own success after a harmonious meeting in Vienna, where it surprised the world by agreeing to its first production cut in eight years. Crude prices up 12%? Check. Saudi Arabia and Iran in agreement? Check. OPEC and Russia working together? Check. The big question now is whether all these cuts will be implemented. Meanwhile, crude is up over $50 a barrel, lifting energy shares in its slipstream.

Manufacturing PMIs from around the globe: Chinese manufacturing grew more than expected in November, with the official Purchasing Managers' Index rising to 51.7, buoyed by a government infrastructure building spree. The eurozone also posted a strong figure, with IHS Markit's final manufacturing PMI registering 53.7, in-line with an earlier flash estimate. British manufacturing growth cooled, however, as soaring costs caused by sterling's slump led the U.K. number to fall from 54.2 to 53.4 in November.

Donald Trump has vowed to separate himself from running his global business empire. The President-elect announced via Twitter that he's taking steps to hand over management of his companies to his children in order to "fully focus on running the country." Trump gave few details but said he would expand on his plans at a press conference later this month.

Russia is ready to cooperate with the new U.S. leadership next year, President Vladimir Putin said during his annual state of the nation address in the Kremlin. He also stated that "internal problems" were the main reason for the country's economic malaise and GDP was on track to shrink 0.6% this year. Annual inflation is expected to fall below 6% and reach the central bank's target of 4% in 2017.

Colombian legislators ratified a peace agreement late Wednesday with FARC rebels, ending Latin America's longest armed conflict, which killed hundreds of thousands of people over the course of 52 years. The guerrillas will now have six months to abandon their weapons and start a political party, while the government can implement programs to further peace, such as improving conditions in the countryside.

Appealing to the unions? Prime Minister Matteo Renzi has hiked public sector pay for the first time in seven years just days ahead of the Italian constitutional referendum on which he has staked his political future. Public sector pay has been frozen since 2009, while Italy struggled to rein in its burgeoning public debt, the highest in the eurozone after Greece.


A new batch of companies may soon be able to operate in Cuba if the Obama administration can persuade Havana to finalize agreements before Donald Trump takes office, WSJ reports. If the White House succeeds, Google (GOOG, GOOGL), General Electric (NYSE:GE), Norwegian Cruise Line (NASDAQ:NCLH), Royal Caribbean (NYSE:RCL) and Pearl Seas Cruises could all announce deals in the upcoming weeks.

Holiday season rush for automakers? Carmakers are set to report U.S. vehicle sales for November, revealing whether Black Friday and early year-end deals can drive sales to the brink of another record year. Volumes will likely be up, but the annualized rate of sales could be down from the pace seen in 2015.

General Motors stands to lose $8K-$9K on every Chevrolet Bolt it sells when the all-electric subcompact starts rolling out, Bloomberg reports, shedding light on the lack of profitability of electric cars in the U.S. While taking a loss on any product is surely a bitter pill for GM to swallow, it's simply a cost of doing business due to zero-emissions regulations in some areas of the United States.

It looks like consolidation is coming to the wearables space with Fitbit (NYSE:FIT) set to acquire Pebble, the smartwatch pioneer and darling of crowdfunding site Kickstarter. Sources say a deal would see Fitbit take Pebble's intellectual property, such as its operating system, but the Pebble brand would be phased out. It could also be only valued at $34M-$40M, barely enough to cover the latter's debts to suppliers.

Late last year, Facebook (NASDAQ:FB) CEO Mark Zuckerberg and his wife, Priscilla Chan, said they would donate 99% of their Facebook stock toward a new financial vehicle for charitable purposes. Now, Zuck's chief lieutenant, Sheryl Sandberg, is making her own philanthropic move. The Facebook COO plans to transfer nearly $100M of her FB shares to a charitable fund that promotes women's rights and helps grieving families.

More than a year after it suspended its dividend, Glencore (OTCPK:GLCNF) is planning to reinstate payouts and distribute $1B to investors in 2017, another sign of how this year's sharp recovery in commodity prices is healing the wounds of the mining industry. "We have delivered on our commitments and done so in a way that has preserved the long-term earnings capability of the company," CEO Ivan Glasenberg said in a statement.

ChemChina is setting up a fund that will aim to raise $5B for its purchase of Syngenta (NYSE:SYT) and is targeting about $25B in overall equity commitments, Reuters reports. The financing structure entails investors committing to the fund, which would in turn own equity in Syngenta - a move that would help ChemChina lower the debt burden of its planned $43B acquisition.

Linde supervisory board chairman Wolfgang Reitzle is still in favor of a tie-up between the German industrial gases maker and U.S. rival Praxair (NYSE:PX), which has made a renewed merger proposal. Recent concessions to Linde (OTCPK:LNAGF) include giving the company's Munich headquarters a bigger role than initially planned and as well as providing some job guarantees, sources told Handelsblatt.

With pressure building to make healthier products, Nestle (OTCPK:NSRGY) has devised a new technology that has the potential to reduce sugar in some of its products by up to 40% without affecting the taste. By hollowing out the structure of sugar crystals, each particle dissolves more quickly on the tongue, so less sugar can be used.

The EU plans to boost its defense budget to its highest level in over a decade, setting up a €5B fund and sending a signal to Donald Trump that it intends to pay for its own security. "This is not about an EU army," European Commission Vice President Jyrki Katainen said. "We face multiplying threats and we must act." Related tickers: LMT, RTN, GD, NOC, OA, HII, HON, UTX, ITT, TXT, LLL, COL

What were the "incentives" that led Carrier to stay in Indiana? While most of the details haven't been unveiled, a Reuters source said it was a fraction of the $65M the company planned to save by moving production to Mexico. The United Technologies (NYSE:UTX) unit also said it received a pledge from President-elect Trump to improve the climate for business in the U.S.

Rockwell Collins +2.6% premarket following a report that it's under pressure from Starboard Value to reconsider its purchase of B/E Aerospace (NASDAQ:BEAV). A deal would add the largest supplier of equipment for aircraft cabins to Rockwell's (NYSE:COL) portfolio. Starboard has instead asked the company to explore alternative options, including selling itself.

The plane that crashed in Colombia on Monday night killing almost an entire Brazilian soccer team was running out of fuel, had no electrical power, and was preparing for an emergency landing. The BAe 146, made by BAE Systems (OTCPK:BAESY), slammed into a mountainside in the Andes after a chaotic exchange with the air traffic tower, but failed to make a formal early distress call.

Pledging to come clean about secret assets, Credit Suisse (NYSE:CS) has frozen dozens of accounts as it tries to determine if U.S. clients are hiding money from the IRS, sources told Bloomberg. The bank is looking at indicators such as phone numbers or powers of attorney to determine whether Americans are the true owners of accounts not disclosed to the tax agency.

A massive network of high-speed fiber optic internet is coming to 20 states over the next five years, according to an announcement from Altice (OTCPK:ATCEY), the cable company behind Optimum, Lightpath and Suddenlink. Altice's planned 10-gigabit per second connection far outpaces Google Fiber's (GOOG, GOOGL) current 1-gigabit per second connection, as well as Verizon Fios (NYSE:VZ).

Today's Markets

In Asia, Japan +1.1%. Hong Kong +0.4%. China +0.7%. India -0.4%.
In Europe, at midday, London -1.1%. Paris -0.6%. Frankfurt -0.8%.
Futures at 6:20, Dow flat. S&P -0.1%. Nasdaq -0.2%. Crude +1.2% to $50.04. Gold -0.3% to $1170.30.
Ten-year Treasury Yield +4 bps to 2.41%

Today's Economic Calendar

Auto Sales
Chain Store Sales
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Gallup Good Jobs Rate
9:45 PMI Manufacturing Index
9:45 Bloomberg Consumer Comfort Index
10:00 ISM Manufacturing Index
10:00 Construction Spending
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Companies reporting earnings today »