Wall Street Breakfast: China Records 6.7% Growth In First Quarter

by: Wall Street Breakfast
Wall Street Breakfast
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The world's second-largest economy grew 6.7% in Q1, the slowest pace of expansion since the financial crisis. But the figure suggested China's target range of 6.5%-7% growth for 2016 is possible as long as it continues using its vast stimulus toolbox. Other data also reinforced previous signs the country may be finding traction with better-than-expected growth in retail sales, industrial output, fixed asset investment, export figures, and capital outflows.


All eyes are on Doha this weekend where a meeting between OPEC and non-OPEC oil producers is being held to discuss freezing output at current levels. Ahead of the big event, another Russian official poured cold water on hopes that a freeze would boost crude costs. "I want to say that we don't expect any changes in the price in spite of the negotiations which are being conducted currently with oil-extracting nations," Finance Minister Anton Siluanov told CNBC. Crude futures -1.7% to $40.79/bbl.

In the wake of the Panama Papers scandal, the EU's five biggest economies have struck a deal to crack down on tax avoidance, agreeing to exchange information on the beneficial owners of companies and trusts. "Today we deal another hammer blow against those who hide their illegal tax evasion in the dark corners of the financial system," Britain's George Osborne said at the annual IMF meeting in Washington. The U.K., Germany, France, Italy and Spain are now pushing for the rest of the G20 to follow suit.

The IMF and Eurogroup are butting heads over the Greek bailout, with Christine Lagarde calling Athens' fiscal targets "highly unrealistic" and saying the €86B rescue may need to be "completely renegotiated." "Flexibility is not an option," Jeroen Dijsselbloem said in response, promising that "if necessary we will do more to relieve their debt burden." A slow death? Germany has repeatedly warned it may no longer be able to support Greece's third bailout if the IMF quits.

Ukraine's parliament has selected presidential ally Volodymyr Groysman as its new prime minister, in the biggest political shakeup since the country's revolution two years ago. Many hope the appointment will bring an end to months of deadlock that has delayed billions of dollars in foreign loans needed to shore up Ukraine's war-battered economy and improve state management.

Ahead of a visit to the U.K. next week by Barack Obama, the White House is insisting that a Brexit decision should be determined by U.K. voters and the U.S. president would only offer his views as a "friend" if asked during his two days in London. The administration has so far backed David Cameron's position on the matter, stating "the British economy will be weaker, its international influence will be reduced and the EU will be damaged if the U.K. votes to leave the bloc in June."

Brazil's Supreme Court rejected a motion from the government early Friday requesting that the impeachment process against President Dilma Rousseff be suspended. A majority of justices voted against the petition from Attorney General Jose Eduardo Cardozo which stated the administration hadn't received the right to a proper defense. Brazil's full Chamber of Deputies is now scheduled to vote Sunday on whether to forward the impeachment process to the Senate.


As Yahoo prepares to accept first-round bids for its core Internet division on Monday, potential buyers have found themselves facing one big problem: How do you value a firm with a declining business when the company appears reluctant to share vital financial details? According to the NYT, Yahoo (YHOO) executives have refused to discuss the outlook for 2017 or answer questions about crucial aspects of the business in meetings and phone calls with potential bidders.

Apple is looking to add an advertising service to its App Store through which developers would pay to have their apps shown at the top of search results, sources told Bloomberg. Much like search ads on Google (GOOG, GOOGL) or Bing (NASDAQ:MSFT), advertisers would bid to receive placement when certain keywords (say, "photos" or "racing game") are searched for. About 100 employees are working on the project, including many engineers from Apple's (NASDAQ:AAPL) advertising group iAd.

Volkswagen's European market share reached a five-year low in the first-quarter as auto buyers snubbed the company's efforts to resolve its emissions-cheating scandal. According to the European Automobile Manufacturers' Association, VW brands accounted for 23.4% of new registrations in the three months ended March vs. 24.4% a year earlier. Volkswagen (OTCPK:VLKAY) demand also fell 1.6% last month, despite industrywide demand across the region rising 5.7% to 1.74M cars.

Bombardier is in the final stages of completing a deal to sell up to 125 CSeries jetliners to Delta Air Lines (NYSE:DAL), in what would be a major victory for the struggling Canadian company. A final agreement for 75 firm orders and options for another 50 is expected by the end of April, when the carrier's board meets to review the proposed purchase likely worth $5.3B-$6.2B. In February, Bombardier (OTCQX:BDRAF, OTCQX:BDRBF) cut nearly 10% of its global workforce and reported a fourth-quarter loss of $677M.

Pre-orders for the Tesla Model 3 are approaching 400K, Vice President Diarmuid O'Connell said at the AVERE E-mobility Conference in Amsterdam. "It delivers a message to the industry that there's incredible demand for great electric vehicles out there," he declared. O'Connell also said the automaker plans to expand its lineup following the Model 3, emphasizing the Tesla (NASDAQ:TSLA) pickup truck that's been talked about before by CEO Elon Musk.

Fiat Chrysler Automobiles sees Toyota (NYSE:TM), Volkswagen (OTCPK:VLKAY) and Ford (NYSE:F) as the remaining potential merger candidates after its attempt to tie up with GM was rebuffed, Sergio Marchionne announced this morning. The Fiat Chrysler (NYSE:FCAU) chief also said he would be the one doing the merger if it happens during his tenure, which runs until the end of 2018, but if it is later than that, it would be "other people's problem."

Valeant Pharmaceuticals is calling in the investment banks to go over its options, sources told Reuters, highlighting the clearest signal yet that divestments are coming as the drugmaker faces down $30B in debt. Bidders are apparently kicking the tires on its biggest gastrointestinal product, Xifaxin, as well as aesthetics products Obagi and Solta and skin care product CeraVe. The inquiries come after CEO Michael Pearson and board member Bill Ackman said Valeant (NYSE:VRX) would consider unloading noncore assets.

Baxalta shares fell more than 5% in extended trading after the company announced a special shareholders meeting on May 27 to vote on its merger with Shire (NASDAQ:SHPG). Baxalta (BXLT) would benefit from a lower tax rate if taken over by Shire, and the enlarged company could generate $20B in sales by 2020, with as many as 30 new drugs to launch over five years.

Despite a new push by plaintiffs, a judge has ruled that mogul Sumner Redstone won't face a deposition in a conflict over his healthcare. Judge David Cowan listened to both sides - Manuela Herzer, Redstone's ex-girlfriend challenging her removal as his healthcare agent, as well as Redstone's team. Herzer has questioned Redstone's mental competence in the fight, an issue that's material to Viacom (VIA, VIAB) and CBS investors.

Carlyle Group is in serious talks to buy assets from Halliburton (NYSE:HAL) and Baker Hughes (BHI) that could be valued at more than $7B, Dow Jones reports. Carlyle's (NASDAQ:CG) negotiations would mark a shift for the oil field services companies, which have focused on overcoming Justice Department objections to their planned merger by attempting to sell assets to General Electric (NYSE:GE). The latter remains in the mix, but reaching an agreement on a price for the assets has been difficult.

Mitel Networks has agreed to buy Polycom (NASDAQ:PLCM), a provider of communications networks, software and other products, for approximately $1.96B. Under terms of the agreement, Polycom stockholders will be entitled to $3.12 in cash and 1.31 Mitel (NASDAQ:MITL) shares for each PLCM common stock they own. The combined company will be headquartered in Ottawa, Canada, and will maintain Polycom's strong global brand while operating under the Mitel name. PLCM +8.8% premarket.

Despite being banned on the mainland since 2009, Twitter (NYSE:TWTR) has hired a new head for its China division, as it looks to court local businesses for advertising. "A big welcome to Twitter, @KathyChen2016! She joins us as our MD for China!" Jack Dorsey said in a tweet. The microblogging service has seen 340% growth in the number of Chinese advertisers over the past year after opening a new office in Hong Kong.

In the latest fight between Silicon Valley and Washington, Microsoft (MSFT) has filed suit against the Department of Justice. The tech giant argues the government is violating the Fourth Amendment by preventing it from notifying thousands of customers about requests for their emails and other documents. "Just as Apple was the company in the last case and we stood with Apple, we expect other tech companies to stand with us," Microsoft's (MSFT) Chief Legal Officer Brad Smith said in a phone interview.

Thursday's Key Earnings

BofA (NYSE:BAC) +2.5% following assurances from CEO Brian Moynihan.
BlackRock (NYSE:BLK) +1.9% on upcoming restructuring efforts.
Delta (DAL) +1% as fuel savings padded its bottom line.
Wells Fargo (NYSE:WFC) -0.5% on slipping income, rising provisions.

Today's Markets

In Asia, Japan -0.4% to 16848. Hong Kong -0.1% to 21316. China -0.1% to 3078. India closed.
In Europe, at midday, London -0.4%. Paris -0.5%. Frankfurt -0.6%.
Futures at 6:20, Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude -1.7% to $40.79. Gold +0.4% to $1231.80.
Ten-year Treasury Yield -1 to 1.76%

Today's Economic Calendar

8:30 Empire State Mfg Survey
9:15 Industrial Production
10:00 Reuters/UofM Consumer Sentiment
12:50 PM Fed's Evans speech
1:00 PM Baker-Hughes Rig Count
4:00 PM Treasury International Capital

Companies reporting earnings today