Wall Street Breakfast: End Of Era As ECB Winds Down QE

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Includes: AAPL, BORGN, BT, ERIC, GE, NOK, NSANY, QQQ, SFTBY, SPACE, SPY
by: Wall Street Breakfast
Wall Street Breakfast
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The European Central Bank is all but certain to formally end its three-year, €2.6T monetary stimulus scheme today, which will be followed by a news conference with President Mario Draghi and Vice President Luis de Guindos, as well as updated growth and inflation projections. The economic picture is still fragile, however, and the ECB could struggle to bring interest rates back up to zero percent, especially if the U.S. Federal Reserve pauses its rate hike cycle.

Economy

It's a busy central bank day across Europe. The Swiss National Bank kept its ultra-loose monetary policy in place, citing a delicate exchange-rate situation, weakening inflation and international tensions as reasons to maintain its expansive course into a fourth year. Also on the radar today are rate decisions in Norway, Turkey and Ukraine.

U.S. stock index futures are holding on to yesterday's gains as China resumed buying U.S. soybeans, making its first major purchase since President Trump and Xi Jinping struck a trade war truce. In another sign of concessions, China appears to be easing its high-tech industrial push, dubbed "Made in China 2025," and told state oil trader Unipec to buy U.S. oil. Beijing is also expected to cut tariffs on American autos and car parts.

Theresa May is heading to Brussels for an EU summit, the day after surviving a no-confidence vote. While the EU will not renegotiate the current Brexit deal, it may be willing to give greater assurances on the temporary nature of the Irish backstop. May's 11th-hour effort might also gain some clarifications or addendums, or some kind of promise of a future comprehensive trade and political agreement.

Italian Prime Minister Giuseppe Conte is targeting a smaller budget deficit for next year, totaling 2.04% of GDP, down from 2.4%, the level his government had previously earmarked to finance expansionary and costly measures. Italy's new plan is unlikely to satisfy the European Commission, but it will allow for more talks to proceed and postpone any decision about disciplinary proceedings.

"Time will tell how effective the new [OPEC] production agreement will be in rebalancing the oil market," the IEA said in its closely-watched monthly report. "Stocks have been building with the potential for significant oversupply next year. For 2019, our demand growth outlook remains at 1.4M bpd even though oil prices have fallen back considerably since the early October peak."

Escalating diplomatic row... Canadian businessman Michael Spavor is being investigated on suspicion of harming China's state security, days after Chinese authorities detained former Canadian diplomat Michael Kovrig. The news follows the recent arrest of Huawei CFO Meng Wanzhou in Vancouver on allegations of evading Iranian sanctions. "Our partners should not seek to politicize the extradition process," warned Canadian Foreign Minister Chrystia Freeland.

Stocks

Japanese mobile carrier SoftBank (OTCPK:SFTBY) will be replacing its hardware from Huawei in its 4G and upcoming 5G infrastructure - and will instead be using equipment from Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK), the Nikkei reports. Pushed by a U.S. initiative, Australia, New Zealand and Britain's BT Group (NYSE:BT) have already blocked Huawei from building 5G networks amid fears that the equipment could contain "backdoors" for use by spies.

Apple is investing $1B in a new campus in Austin, Texas, that will have capacity for 15K employees and make it the largest private employer in the city. The company also announced plans to establish new sites in Seattle, San Diego and Culver City and expand in Pittsburgh, New York and Boulder, Colorado. Apple (NASDAQ:AAPL) added 6K jobs to its American workforce in 2018, employs 90K people in all 50 states, and intends to create 20K new U.S. jobs by 2023.

In recent years, Apple (AAPL) has hired 40 to 50 doctors to work across teams on health tech, according to CNBC sources. The number suggests the tech giant plans to help customers "with serious medical problems" rather than focusing on general wellness, as it seeks to develop and integrate health technologies into the Apple Watch, iPad and iPhone. Last week, the Apple Watch Series 4 was enabled to work as an electrocardiograph.

U.S. solar installations in Q3 fell 30% to 678 megawatts from a year ago as the Trump administration's tariffs on overseas-made panels forced developers to put off large projects. That's according to a report by Wood Mackenzie for the U.S. Solar Energy Industries Association. Current weakness in the utility-scale market, however, will be offset by larger volumes of projects than had been expected over the next five years because solar energy is now "cheaper than ever."

Bottom being put in? Longtime GE bear, JPMorgan analyst Stephen Tusa, has finally raised his rating on the embattled conglomerate to Hold from Sell, citing balanced risk/reward. In the past, Tusa has been critical about many areas of General Electric, including the industrial company's balance sheet, cash flow, future estimates, gas turbine and technology troubles, and its leverage situation. GE +9% premarket.

Nissan reportedly plans to boost the number of external board members and set up a committee to oversee compensation as part of its effort to improve governance following the arrest of former Chairman Carlos Ghosn. Critics have said Nissan (OTCPK:NSANY) lacked adequate corporate controls, with few truly independent voices on the board capable of questioning Ghosn and looking out for regular shareholders' interests.

Virgin Galactic will attempt to reach the edge of space for the first time today with a test flight that could mark a turning point in its long-delayed efforts to create a space tourism industry. If the flight performs as planned, the company will probably need only "two or three" more powered tests to prove it is capable of taking paying customers into space, according to CEO George Whitesides. Related: SPACE, BORGN

Today's Markets

In Asia, Japan +1%. Hong Kong +1.3%. China +1.2%. India +0.4%.
In Europe, at midday, London -0.2%. Paris -0.2%. Frankfurt flat.
Futures at 6:20, Dow +0.1%. S&P +0.3%. Nasdaq +0.6%. Crude -0.3% to $50.98. Gold -0.3% to $1246.50. Bitcoin -2.1% to $3360.
Ten-year Treasury Yield -1 bps to 2.89%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Import/Export Prices
10:30 EIA Natural Gas Inventory
1:00 PM Results of $16B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Companies reporting earnings today »