Wall Street Breakfast: Fed, BOJ Meetings Begin

by: Wall Street Breakfast
Wall Street Breakfast
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U.S. futures are heading higher as traders focus on the upcoming policy announcements from the Federal Reserve and Bank of Japan. While the Fed is widely anticipated to leave interest rates unchanged, expectations for the BOJ are more mixed, with investors split on whether it will cut rates further into negative territory, alter its bond purchase program or signal a shift in monetary policy. Both decisions will come tomorrow.


Downing Street met Wall Street late Monday as Theresa May landed in New York to consult with some of America's largest firms over how her country should proceed with Brexit. The prime minister held two gatherings: a roundtable discussion with big investors in the U.K. including Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BlackRock (NYSE:BLK), IBM, and Amazon (NASDAQ:AMZN). She then hosted a reception for about 60 American executives, as well as British businesses that invest in the U.S.

Following North Korea's fifth nuclear test, President Obama and Chinese Premier Li Keqiang have agreed to step up cooperation in the U.N. Security Council and law-enforcement channels, and target the finances of a sprawling Chinese conglomerate. Meanwhile, Pyongyang said it had successfully tested a high-powered rocket engine for launching satellites, elevating concerns it's making progress in developing a long-range ballistic missile.

The suspect in the NY and NJ bombings is in custody and being treated for gunshot wounds after a shootout with police yesterday. Ahmad Khan Rahami, a 28-year-old naturalized U.S. citizen born in Afghanistan, has been charged with five counts of attempted murder. According to sources, he may have become radicalized after a string of recent trips to both Afghanistan and Pakistan.

Members of the International Syria Support Group, including the U.S., Saudi Arabia, Iran and Russia, will meet today after an agreement the U.S. had framed as the "last chance" for a united Syria appeared to be unraveling. The gathering will take place alongside the U.N. General Assembly Meeting in New York, and comes in the tumultuous aftermath of yesterday's airstrike on an emergency aid convoy outside of Aleppo.

Oil prices are trading lower amid fears of oversupply in the crude market. According to Venezuela's energy minister, global supplies will have to come down by around 10% from a current 94M bpd for output to meet consumption levels. Meanwhile, Saudi Arabia keeps pumping... the world's biggest oil exporter produced 10.6M bpd in July, rising by more than 120K from June and hitting a fresh high, but the kingdom's output may have dipped slightly in August.


It's a big season for hardware launches and Google (GOOG, GOOGL) doesn't want to be left out. The company is slated to launch its new flagship "Nexus" phones at an Oct. 4 event, though several media reports suggest that the device could now carry the name "Pixel" or may just be branded with the multicolored "G" logo. Also expected by observers: Details on Google Home, an Android-powered VR-platform, chat app Allo and possibly a new Chromebook or Chromecast.

Samsung Electronics has denied any battery problems with the Galaxy Note 7 sold in China, after several consumers complained their smartphones overheated and caught fire. Samsung (OTC:SSNLF) attributed the incidents to "external heating" rather than battery problems, and said it was unable to determine the cause of a third case because the owner refused to return the charred device for testing.

GlaxoSmithKline has promoted Emma Walmsley, head of consumer healthcare, to be its new chief executive, after considering internal and external candidates. Walmsley, who joined Britain's biggest drugmaker in 2010 from L'Oreal, will replace Andrew Witty, who previously announced his decision to retire on March 31, 2017. GSK -0.5% premarket.

The official launch of the S&P 500 real estate sector - the first subdivision to be added since 1999 - was off to a good start on Monday, rising 0.75%. The sector, which is made up of 28 components, was led higher by a 1.8% gain in Equinix (NASDAQ:EQIX). Real estate also outperformed financials, the sector it was once part of, which ended up 0.71%.

A federal judge in New York has ruled that bitcoin (COIN, OTCQB:BTCS) constitutes a form of money. The ruling comes from the ongoing case involving the now-defunct bitcoin exchange Coin.mx and one of its former operators. Anthony Murgio, who was indicted for money laundering, sought to dismiss the charges against him in part by arguing that bitcoins don't count as "funds" in the context of U.S. law.

John Stumpf will face questions today from the Senate Banking Committee over the widespread creation of sham bank accounts and credit cards by Wells Fargo (NYSE:WFC) employees trying to meet strict sales goals. The CEO is expected to take "full responsibility" and say the unethical activity was not an "orchestrated effort," but committee members will likely ask him why more wasn't done to stop the practices, which have gone on since at least 2013.

The world's biggest IPO this year is getting off to a lukewarm start. Postal Savings Bank of China is planning to price its Hong Kong listing at the lower end of its marketed range, raising between $7B-$8B, with around three quarters of shares going to just six anchor investors. The bank has 40K branches throughout China, 505M retail customers and is the nation's fifth largest lender by assets.

Chesapeake Energy tumbled 5% in extended trading after Carl Icahn reduced his stake in the company to 4.6% from 9.4%. "We believe that over the last few years Doug Lawler and his team have done an admirable job, especially in light of the circumstances. We reduced our CHK position to recognize a capital loss for tax planning purposes," Icahn said in a statement.

General Electric will invest $10B in Argentina over the next decade, the latest foreign company to announce new plans since President Mauricio Macri took office. GE has already invested $1.2B alongside local partners and customers in the past four months, including $900M to build thermal power plants and a $280M loan to the state-run airline to finance plane purchases.

Battling shrinking attendance at its theme parks, Seaworld Entertainment (NYSE:SEAS) dropped more than 10% in AH trading after cutting its quarterly dividend by more than half and suspending future payouts. Shareholders of record as of Sept. 29 will receive $0.10 a share, payable on Oct. 7, and then future payments will be stopped. The previous dividend had been $0.21.

United Parcel Service has been sued over shipments that contained more than 683K cartons of untaxed cigarettes and for repeatedly ignored signs that showed its deliveries came from American Indian reservations. New York lost millions of dollars as a result, according to Attorney General Eric Schneiderman, who is demanding that UPS pay $872M for the illegal activity.

FedEx will raise shipping rates starting next year, including an average increase of 3.9% at its air-shipping Express division and 4.9% for its ground and home-delivery services. The shipping giant's plan comes after UPS unveiled an average rate increase of 4.9% to help pay for system upgrades and expansion. Starting in February, FedEx (NYSE:FDX) also will adjust its fuel surcharges weekly instead of monthly.

In its most comprehensive statement yet on autonomous vehicles, the Obama administration said it would consider seeking the power to approve technology for self-driving cars and said U.S. states should not issue separate rules. The U.S. Transportation Department also included a 15-point set of "safety assessment" guidelines, covering issues like cybersecurity, black box recordings and how a vehicle would deal with potential ethical conundrums.

Takata shares fell 12% in Tokyo as bidders for the company were said to consider the possibility of some form of bankruptcy proceedings for the air bag maker behind the auto industry's biggest ever safety recall. Takata (TKTDY) suitors have been asked to submit their proposals by early this week, and include Carlyle (NASDAQ:CG), Daicel Corp. and KKR, sources told Bloomberg.

The least expensive Chevy Bolt will start at $37,495 before a $7,500 federal tax credit, meaning it will sell for $29,995. The car will come with standard features, such as a rear vision camera, a 10.2-inch color touchscreen, and a steering wheel paddle that lets the driver brake and regenerate the battery. A premier version of the Bolt (NYSE:GM), which will include standard DC fast charging and other extras, starts at $40,905 before incentives.

Narrowly averting a strike by 3,900 Canadian workers, General Motors (GM) and Unifor have reached a tentative contract agreement that will bring new products to the Oshawa assembly plant and an engine factory in St. Catherines. Union President Jerry Dias said workers will also get raises and lump-sum payments, and about 700 temporary employees at the plants will go full-time if the deal is ratified by members.

Today's Markets

In Asia, Japan -0.1% to 16492. Hong Kong -0.1% to 23530. China -0.1% to 3023. India -0.4% to 28523.
In Europe, at midday, London +0.4%. Paris +0.6%. Frankfurt +0.6%.
Futures at 6:20, Dow +0.3%. S&P +0.4%. Nasdaq +0.4%. Crude -0.6% to $43.04. Gold flat at $1318.
Ten-year Treasury Yield flat at 1.69%

Today's Economic Calendar

FOMC meeting begins
8:30 Housing Starts
8:55 Redbook Chain Store Sales

Companies reporting earnings today »