Wall Street Breakfast: Brazil Assets Jump As Bolsonaro Takes Lead

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Includes: AAPL, ARMCO, BRZU, DIS, EADSY, EWZ, LYG, MGMB, NFLX, QQQ, SHNWY, SPACE, SPY, TGT, TSLA, UBS, WMT
by: Wall Street Breakfast
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Brazil-focused ETFs are leaping in response to the first round of Brazil's presidential election, which saw far-right, former Army captain Jair Bolsonaro take nearly half the votes. The closest second, Fernando Haddad, received 29% of the vote, due to his Workers' Party's tarnished image following a graft scandal and Brazil's deepest recession during its tenure in power. A second round of voting will take place on Oct. 28. EWZ +5.7%, BRZU +17.3% premarket.

Economy

U.S. traders looking to take a day off for Columbus Day will be disappointed to find out that the stock markets will remain open. While equity investors will have to keep their eyes on their portfolios, the majority of banks and credit unions, as well as bond markets, will be closed. The risk-off sentiment that surfaced last week amid rising Treasury yields is still active, with U.S. stock index futures declining overnight before a busy week of American government debt sales.

Chinese equities slumped almost 4% overnight as traders returned to their desks following a week-long national holiday, and a day after the PBOC moved to inject more cash into the financial system. The central bank's move, which will cut the reserve requirement ratio for most commercial lenders by 100 basis points, comes as policymakers worry about economic fallout from a trade row with the U.S.

Britain will be welcomed into the Trans-Pacific Partnership trade deal with "open arms" after it leaves the EU, according to Japanese Prime Minister Shinzo Abe. While the U.K. would lose its role as a gateway to Europe after Brexit, it would retain its "global strength", he added. The TPP is a trade agreement between 11 countries, including Japan, Australia and Canada.

The European Commission will not interfere in Italy's budget planning and will assess the budget without bias, according to President Jean-Claude Juncker, but will propose changes "without anger and fondness" if necessary. "It is up to Italian policy-makers to find rules and measures that will allow Italy to remain within the agreed budgetary targets," he told dailies Der Standard and Kurier and weekly Der Falter.

The U.S. will confront Iran at the U.N.'s top court today over billions in frozen assets, following a 2016 U.S. Supreme Court ruling that $2B should go to victims of terror attacks blamed on the Islamic Republic. In a separate case last week, the ICJ ruled the U.S. must ease sanctions reimposed on Tehran, triggering the Trump administration to pull out of a 1955 "Treaty of Amity" on which both lawsuits are based.

Crude fell overnight as two companies in India, a big buyer of Iranian oil, confirmed 9M barrels ordered for November, suggesting Tehran's exports will keep flowing even after the U.S. reimposes sanctions. Saudi Arabia's crown prince also said the kingdom can tap its spare production capacity immediately to offset any declines in Iranian crude and promised an Aramco (ARMCO) IPO by 2021.

Renewable energy will continue to grow rapidly over the next five years, but not enough to meet long-term climate and sustainability goals, according to a report from the IEA. The agency forecasts renewables will account for 18% of the world's energy by 2040, well below its sustainability target of 28%, and added that renewables in transportation and heating is a major "blind spot" towards a clean power future.

Stocks

In a letter to Congress, Apple's (NASDAQ:AAPL) top security officer, George Stathakopoulos, reiterated that the company had found no evidence that it had been penetrated in a sophisticated microchip attack on its supply chain. "Apple's proprietary security tools are continuously scanning for precisely this kind of outbound traffic," he declared. Bloomberg is standing by its story, which was based on 17 anonymous sources, but some allegations were based on fewer accounts or even a single unnamed source, Apple noted in its letter.

Walmart is partnering with U.S. movie studio MGM (OTC:MGMB) to create content for its video-on-demand service, Vudu, which the retailer bought eight years ago. An announcement will come at the NewFronts conference in LA on Wednesday. Media outlets had reported that Walmart (NYSE:WMT) was looking to launch a subscription streaming video service to rival that of Netflix (NASDAQ:NFLX), making a foray into producing TV shows, but Reuters sources said the company was not planning such a move.

The pay-per-view figures are still not in, but chaos ensued following the loss of Conor McGregor to Khabib Nurmagomedov in UFC 229 as a brawl broke out around the Octagon. With the possibility of parent company William Morris Entertainment going public, President Dana White thinks that the firm's potential IPO would be mutually beneficial for UFC. The league further signed a 5-year $1.5B media partnership deal with ESPN (NYSE:DIS) in May.

Accelerating a strategy to use separate brands for different demographics, Target (NYSE:TGT) plans to launch a new discount line called Smartly later this month, WSJ reports. The line will offer more than 70 household products such as dish soap and razors mostly priced under $2. Company executives say that pricing could be as much as 70% below traditional brands and fall below the pricing of some brands at Walmart (WMT).

Fines of up to €5B? UBS, its French unit and six top executives go on trial today after a long-running investigation into allegations they helped wealthy clients avoid taxes in France. The court case of the largest Swiss bank follows a similar judicial process in the U.S. where it accepted to pay a $780M settlement in 2009, and in Germany, where the company agreed to a €300M fine in 2014.

In what would be among the biggest wealth management partnerships in recent years, Lloyds (NYSE:LYG) is in talks to merge its £13B wealth unit into a new joint venture with Schroders (OTC:SHNWY), Sky News reports. The arrangement would be part of a three-pronged deal between the companies that includes Schroders taking on a £109B investment management contract from Lloyds-owned Scottish Widows and a separate tie-up involving Cazenove Capital.

"SCOOP: Bankers are inundating @Tesla w refinancing ideas as two major bond repayments near," Fox's Charles Gasparino tweeted, not saying where he obtained the information. "One idea floated with be to raise about $5b in new senior secured debt to make payment etc on the notion the $TSLA battery brand and car are worth at least $10b in a worst-case bankruptcy." TSLA +1.7% premarket.

Meanwhile, SpaceX aced its first-ever rocket landing in California after successfully delivering Argentina's SAOCOM-1A Earth-observation satellite to orbit. SpaceX (SPACE) has already pulled off more than two dozen first-stage landings during orbital liftoffs, with the boosters coming down on "drone ships" stationed in the Atlantic and Pacific oceans and on terra firma at Cape Canaveral Air Force Station in Florida.

Juggling a trio of pressures from management changes, industrial delays and a paralyzing corruption probe, the board at Airbus (OTCPK:EADSY) is scheduled to meet today to appoint Guillaume Faury as the successor to CEO Tom Enders, Le Figaro reports. Faury was promoted to head Airbus' core planemaking business last December after Fabrice Bregier agreed to quit amid a power battle with Enders. The shakeup also saw the latter draw back from plans to seek a third term in 2019.

Today's Markets

In Asia, Japan closed. Hong Kong -1.4%. China -3.7%. India +0.3%.
In Europe, at midday, London -0.6%. Paris -0.9%. Frankfurt -0.8%.
Futures at 6:20, Dow -0.4%. S&P -0.3%. Nasdaq -0.4%. Crude -1.1% to $73.51. Gold -0.7% to $1197.80. Bitcoin -0.2% to $6567.
Ten-year Treasury Yield +3 bps to 3.23%

Today's Economic Calendar

12:30 PM TD Ameritrade IMX

Companies reporting earnings today »