Wall Street Breakfast: General Motors Bows Out Of Europe

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Includes: AAL, ABDNY, ALK, BNPQF, BORGN, BTC-USD, BTCS, COIN, DAL, DB, DBOEY, DEUPF, F, FCAU, GBTC, GM, HMC, JBLU, LNSTY, LUV, PEUGF, QQQ, SAVE, SLFPY, SPY, SSNLF, SSYS, TM, UAL, UBER
by: Wall Street Breakfast
Wall Street Breakfast
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Following almost two decades of losses, PSA Group (OTCPK:PEUGF) has agreed to buy Opel and Vauxhall for €2.2B, while General Motors (NYSE:GM) will get warrants to purchase 4.2% of Peugeot's capital. For GM, exiting Opel will lead to a non-cash charge of $4B-$4.5B. The combination is expected to generate annual savings of €1.7B by 2026 and will see BNP Paribas (OTCQX:BNPQF) jointly manage the financing arm of the European operations.

Economy

China has lowered its annual economic growth target to "around" 6.5%, compared to last year's range of 6.5% to 7%. "At present, overall systemic risks are under control," Premier Li Keqiang told the National People's Congress. "But we must be fully alert to the build-up of risks, including risks related to non-performing assets, bond defaults, shadow banking and Internet finance." GDP officially grew 6.7% in 2016, the slowest pace in a quarter-century.

Japan moved to the highest possible alert level after Pyongyang fired four ballistic missiles into nearby waters, three of which landed in the country's exclusive economic zone. "This clearly shows North Korea has entered a new stage of threat," Prime Minister Shinzo Abe declared. The launches come as South Korea and the U.S. conduct their annual military drills and war games.

Investor sentiment in the euro area improved more than expected in March. The Frankfurt-based Sentix research group's eurozone index rose to 20.7 points, reaching its highest level in almost a decade. It comes as Germany's DAX zooms in on its record high of 12,374 set in April 2015. The index has gained about 14% since the U.S. election.

Former French Prime Minister Alain Juppe won't replace the embattled presidential candidate Francois Fillon, leaving the campaign of France's conservatives in limbo. Recent surveys have shown one-time favorite Fillon on track to get knocked out in the first match of the two-round election after his campaign was hobbled by an investigation into allegedly fake jobs undertaken by his family.

More problems in Greece? GDP shrank 1.2% in Q4 of 2016, marking the worst quarterly performance for the embattled country since the heart of its debt crisis in the summer of 2015. A previous first estimate of GDP in the quarter suggested the economy shrunk just 0.4%, but the final figure is significantly worse.

The FBI has asked the Justice Department to publicly rebut President Trump's accusation that he was wiretapped by his predecessor, stating the claim is false and must be corrected, NYT reports. On Sunday, White House Press Secretary Sean Spicer issued a statement calling on Congress to look into whether the Obama administration "abused" its investigative powers before leaving office.

OPEC Secretary General Mohammad Sanusi Barkindo said it's "premature" to say whether OPEC and non-OPEC producers will extend their production cuts after May, but for now it's "so far, so good." He was speaking on the sidelines of the CERAWeek energy conference in Houston. Oil ministers from Saudi Arabia, Russia and Iraq are among speakers at the annual gathering, as are major oil company CEOs.

Stocks

Deutsche Bank -2% premarket after CEO John Cryan tore up his 17-month-old turnaround plan as Sky News reported new legal actions over forex trading. The lender will raise €8B to boost its capital position, reunite its trading unit and corporate finance division, reintegrate Postbank (OTC:DEUPF) and sell a piece of its asset-management business. Deutsche (NYSE:DB) also named two deputy CEOs who may now be positioned to succeed Cryan.

The £11B merger between Aberdeen Asset Management (OTC:ABDNY) and Standard Life (OTCPK:SLFPY) will lead to some job losses but not the 1,000 figure that has been cited in the media. "I don't know where that figure has come from, that is way, way exaggerated," said Aberdeen CEO Martin Gilbert. The two firms set out the terms of their proposed deal today, stating they expected to be able to save up to £200M in costs.

Happy Birthday S&P 500! The world's biggest stock index turned 60 on Saturday with almost $2.4T indexed to it (nothing else comes remotely close). Why so popular? It's widely regarded as the most accurate gauge of large-cap American equities since it's weighted by market capitalization, as opposed to the Dow, which is weighted by price, or other indexes, which have an equal weighting.

Digital currency advocates had plenty to crow about last week when bitcoin's price overtook gold (it has gained more than 60% since mid-January to $1282). Now comes a chance for bitcoin to take another step toward legitimacy. At some point this week, the SEC is likely to rule on a request to bring a bitcoin ETF to market, meaning investors won't have to go to the exchanges where the currency is traded. Related tickers: COIN, OTCQX:GBTC, OTCQB:BTCS

Listing trouble... Deutsche Boerse (OTCPK:DBOEY) Chairman Joachim Faber has put the blame for a failed tie-up with the London Stock Exchange (OTCPK:LNSTY) on the Brexit vote, which had created strong headwinds for the €29B deal. "We didn't know for months what the British wanted. And in the end, the dual headquarters that we wanted was an absolute no-go," he told Frankfurter Allgemeine Sonntagszeitung.

South Korean prosecutors have provided their most detailed account yet of bribery charges against Samsung (OTC:SSNLF) leader Jay Y. Lee, who took steps to cement his transition to power and secure finances to pay an inheritance-tax bill. The actions include a sophisticated web of corporate reshuffling, including publicly listing one Samsung affiliate, and paying $37M for government backing of a contentious merger between two other units.

The EPA is expected to review emissions requirements this week issued by the Obama administration for 2022 to 2025. A walking back of future standards has been highly anticipated since the U.S. election. President Trump is also expected to direct EPA administrator Scott Pruitt to begin the complex and lengthy process of dismantling the Clean Power Plan. Related stocks: GM, F, TM, HMC, FCAU

Becoming the first automaker to pilot the technology, Ford (NYSE:F) is testing large-scale 3-D printing for car parts, which could allow drivers to customize vehicles for a lower price. The plastic parts would also be lighter than current materials leading to greater fuel efficiency. For its tests, Ford is using the Stratasys (NASDAQ:SSYS) Infinite Build 3-D printer, which was one of two new industrial machines announced last fall.

Uber for years has used a secret tool to avoid authorities in markets where its service faced resistance by law enforcement or competitors attempting to disrupt its operations. The program, called Greyball, was identified by the NYT. Meanwhile's, UBER's best-known security researcher and vice president of product and growth resigned on Friday, without giving reasons.

Bookings for arrivals to the U.S. over the next three months are down 0.4% on last year, according to ForwardKeys, whereas they had been 3.4% ahead the day before President Trump's recent travel restrictions were imposed. Trump will likely sign a revised version of his executive order today, scaling back a policy that prompted widespread protests and court challenges. Related tickers: AAL, ALK, DAL, JBLU, LUV, SAVE, UAL

While Elon Musk focuses on colonizing Mars, Jeff Bezos is aiming to inhabit a closer target. His company, Blue Origin (BORGN), has circulated a seven-page white paper to NASA leadership and President Trump's transition team that would help enable "future human settlement" of the moon. Bezos will also unveil further details this week on space tourism and his strategy to create a family of reusable rockets.

Today's Markets

In Asia, Japan -0.5%. Hong Kong +0.2%. China +0.2%. India +0.8%.
In Europe, at midday, London -0.3%. Paris -0.4%. Frankfurt -0.4%.
Futures at 6:20, Dow -0.2%. S&P -0.3%. Nasdaq -0.2%. Crude -0.7% to $52.94. Gold +0.3% to $1230.50.
Ten-year Treasury Yield -2 bps to 2.47%

Today's Economic Calendar

8:30 Gallup US Consumer Spending Measure
10:00 Factory Orders
12:30 PM TD Ameritrade IMX
3:00 PM Fed's Kashkari speech

Companies reporting earnings today »