Wall Street Breakfast: Markets Await Bank Of England Decision

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Wall Street Breakfast

The Bank of England is expected to cut its benchmark interest rate today to a new low in its 322-year history, as part of a package to cushion a likely post-Brexit downturn. Governor Mark Carney will present the central bank's latest policies and forecasts at a press conference scheduled for 7:30 a.m. ET and may unveil additional stimulus options as Britain's economy teeters on the brink of recession. The BoE's benchmark rate has been at 0.5% since early 2009.


The Philippines is eager to join the Trans-Pacific Partnership and has already held informal talks with the U.S. to do so. "If you don't take part in it you might lose some opportunities while other countries are enjoying them," Trade Secretary Ramon Lopez said in an interview with Reuters. The accord already includes 12 Pacific Rim nations, accounting for about 800M people and 40% of the global trade.

Despite an attack at Istanbul's main airport, a foiled coup and the country's debt getting downgraded, some of the best-performing investments in the global economy last week were Turkish stocks and bonds - up 6.6% and 3.8% in dollar terms. Emerging markets are known for their wild swings, but the mini-rally may highlight just how much risk yield-starved investors are willing to take on when government bonds around the world are offering up negative returns.

India's upper house of parliament has unanimously approved the creation of a national sales tax a decade after the move was first proposed, the biggest legislative victory for Prime Minister Narendra Modi since he took office in 2014. The GST bill now has to be endorsed by the lower house and then ratified by at least half of all states, a process projected to be concluded before the end of the year.

"I don't like bonds, I don't like most stocks," said Bill Gross, joining a chorus of big-name investors looking to mine yield in gold. The Janus (JNS) portfolio manager feels that current conditions, with global central banks keeping interest rates low and more than $11T in sovereign debt carrying negative yields, presents a challenging trading environment. Gold is up 29% so far in 2016, with prices currently at $1357 an ounce.


Tesla -1% premarket after falling far short of Wall Street estimates by reporting its 13th straight quarterly loss, but said it was on track to deliver 50K vehicles in the latter half of this year (reaffirming its previous guidance). The quarter's financials show a similar portrait as past reports: Tesla (TSLA) is pulling in more revenue, but a variety of spending programs at its vehicle and battery factories are outpacing gains on the top-line.

Taking a major hit from a stronger yen, Toyota (TM) has cut its full-year forecast for operating profit, expecting it to fall 44% to ¥1.6T ($15.8B) from a year ago. Net income in the three months through June dropped 15% to ¥552.5B. Every Toyota and Lexus model on sale in the U.S. has posted sales declines in 2016, a trend putting scandal-tarred Volkswagen on course to surpass its Japanese rival as the world's top-selling automaker.

Shares in Fiat Chrysler rose 9% on Wednesday following a report that Samsung Electronics (OTCPK:SSNLF) could buy its parts maker Magneti Marelli for more than $3B. Fiat's (FCAU) stock has been the worst performer among European auto makers so far this year, weighed down by one of the industry's weakest balance sheets and investor disappointment over CEO Sergio Marchionne's inability to find a merger partner.

European earnings roundup: Nokia (NOK) -7% premarket due to sharp drop in profits, prompting the company to up its cost cuts as it cautioned no near-term improvement is likely. Siemens (OTCPK:SIEGY) raised its full year guidance after engineering a beat in FQ3, despite chief executive Joe Kaeser warning of challenging conditions. Randgold Resources (GOLD) -10% premarket after reporting flat second quarter profit, as lower output and higher costs offset the benefit of a lift in gold prices.

After six years of effort and about $30M in investments, space-exploration startup Moon Express has become the first commercial venture to get U.S. regulatory authorization for a mission beyond Earth's orbit. The company expects to send a small robotic lander to the moon in late 2017, and eventually plans to send people there and may get involved in lunar mining. The announcement has been closely watched across the burgeoning commercial-space industry: SPACE, BA, LMT, OA, MDDWF

Fore! While it will continue to sell golf apparel and footwear, Nike (NKE) is getting out of the business of selling golf clubs, balls and bags, striking another blow to a pastime hurt by slowing participation rates in recent years. Sales at the Nike Golf division fell 8.2% to $706M in the fiscal year that ended in May, making it the company’s worst performing major category.

A pact that 15 U.S. states signed to jointly investigate Exxon Mobil (XOM) for allegedly misleading the public about climate change sought to keep prosecutors' deliberations confidential and was broadly written so they could probe other fossil fuel companies. The agreement, which had not been made public until now, says signatories should keep discussions private and "refuse to disclose any shared information unless required by law."

Freeing up roughly $1.5B in cash, Bill Ackman has exited his hedge fund's remaining 9.8M share investment in Canadian Pacific (CP), representing a 6.51% stake. The sale marks the end of one of Ackman's most profitable and successful investments, but comes at a time when the prominent activist investor is facing double-digit losses in his highly concentrated portfolio. Canadian Pacific fell 2.7% in extended trading on the news.

Daily fantasy sports games are resuming in New York after Gov. Andrew Cuomo likened the contests to a "game of skill" rather than "based on chance" and signed a bill that will allow operators like DraftKings (Private:DRAFT) and FanDuel (Private:DUEL) to obtain registrations. The law requires them to pay an annual fee of as much as $50,000 with a 15% tax on their revenue. It also bars anyone younger than 18 years old from playing and prohibits college and high school matches.

Bitfinex has temporarily halted trading for a second day following a security breach that led to a massive plunge in the value of Bitcoin (COIN, BTCS). The exchange has disabled core functions including trading, deposits and withdrawals as it attempts to make its operations secure and restore limited access.

Goldman Sachs has agreed to pay $36.3M over allegations that former employees obtained confidential documents from the Federal Reserve in a settlement that requires the bank to beef up its policies to prevent another lapse. The Fed is also pursuing a $337,500 fine and a permanent banking ban against a former Goldman Sachs (GS) managing director, Joseph Jiampietro, over his unauthorized use and disclosure of Fed secrets.

After its MegaBrew deal is completed, AB Inbev (BUD) plans to adopt a leadership team that will be composed of zone presidents and functional heads reporting to CEO Carlos Brito. The brewer will continue to be based in Leuven, Belgium, while managing its day-to-day operations from New York, and existing SABMiller (OTCPK:SBMRY) hubs in Miami, Hong Kong and Beijing will be phased out within a few months after completion of the combination.

U.S. government researchers have begun their first clinical trial of a Zika vaccine while the Obama administration told lawmakers funds to fight the virus would run out in the coming weeks due to congressional inaction. The number of locally spread Zika cases has jumped to 15 in Florida and the number of U.S. states affected has reached 45. As of July 27, 1,658 travel associated cases of Zika were reported across the continental U.S. and Hawaii. Related tickers: SNY, INO, AEMD, XON, CEMI, BCRX, TMO, GOVX

Wednesday's Key Earnings

Annaly Capital (NLY) -1.1% AH reporting in-line earnings.
Herbalife (HLF) +1.7% AH raising full-year guidance.
Square (SQ) +14% AH on a narrower-than-expected loss.
Tesla (TSLA) -1% AH following its 13th straight quarterly loss.
Time Warner (TWX) +2.7% on Q2 beat, Hulu stake.
Transocean (RIG) +1.4% AH after cutting operating costs.
Twenty-First Century Fox (FOX) -3.3% AH as revenue fell short.

Today's Markets

In Asia, Japan +1.1% to 16255. Hong Kong +0.4% to 21832. China +0.1% to 2982. India +0.1% to 27714.
In Europe, at midday, London -0.1%. Paris +0.4%. Frankfurt +0.7%.
Futures at 6:20, Dow flat. S&P flat. Nasdaq -0.1%. Crude -0.8% to $40.50. Gold -0.6% to $1357.
Ten-year Treasury Yield flat at 1.54%

Today's Economic Calendar

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

Companies reporting earnings today »

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