Market Snapshot
Asia: Japan +0.3% to 20264. Hong Kong +1.7% to 27992. China +2.8% to 4658. India +0.5% to 27958.
Europe: London +0.3%. Paris -0.3%. Frankfurt -0.5%.
Futures: Dow flat. S&P flat. Nasdaq flat. Crude -0.5% to $60.43. Gold +0.7% to $1212.90.
Ten-year Treasury Yield -1 bps to 2.16%
Economic News
8:30 Consumer Price Index
1:00 PM Janet Yellen speech
Key earnings before the open
ANN, CPB, DE, FL, HIBB, MENT, TNP
Markets
U.S. futures have slipped on the back of the release of CPI data, as the markets digest a surprising jump in the number. The Labor Department said the core consumer price index, which strips out volatile food and energy costs, jumped 0.3% in April, the fastest rate since January 2013. Still in the docket a speech by Fed Chair Janet Yellen later today, giving some juice to what might otherwise be a sluggish session ahead of Memorial Day weekend. Despite trading desks being lightly staffed, they will be primed for Yellen’s 1 p.m. ET speech on the economy.
ECB President Mario Draghi reiterated his call this morning for euro zone countries to reform their economies, warning that future growth would remain modest. “It should…be clear that the argument that accommodative monetary policy constitutes an excuse for governments and parliaments to postpone their reform efforts is incorrect,” Draghi declared, stating that the ECB’s money printing would have to be accompanied by an economic overhaul.
China’s stock market burst back to life this week, continuing a year-long rally in the world’s second-largest economy as Beijing steps up monetary easing and money floods in from overseas due to the new trading link with Hong Kong. The rally took a brief pause recently on worries it had gone too far and too fast, but it seems like the bulls have returned. The Shanghai Composite advanced 2.8% today, taking gains to 8.9% this week while Shenzhen rose 1.1% to bring its rally to a 12.2% gain over the past five days.
As a three-day meeting of the China-backed AIIB comes to a close, it looks like Asian countries will be taking a 72%-75% stake in the $100B lender, while European and other nations will own the rest. China and India will become the bank’s two biggest shareholders, with a 25%-30% stake and 10%-15% stake, respectively. The meeting also aimed at finalizing the draft articles of agreement and operational policies for the establishment of the institution.
As widely expected, the Bank of Japan kept its massive ¥80T monetary stimulus program intact on Friday, and revised up its assessment of the economy, despite inflation still hovering around zero. Data last week showed GDP grew an annualized 2.4% in the first three months of 2015, as consumption climbed for a third straight quarter and companies boosted spending for the first time in a year.
With time running out for a deal to unlock the last €7.2B tranche of Greek bailout funds, talks between Prime Minister Alexis Tsipras, President Francois Hollande and Chancellor Angela Merkel broke up shortly before 1 a.m. on Friday with the three deciding only to stay in close contact. The leaders agreed that “significant progress” had been made, but “open issues” such as pensions, sales-tax rates and targets for a primary budget surplus remained.
Stocks
French billionaire and controlling shareholder of Altice (ATCEY) Patrick Drahi met in New York Wednesday with Time Warner Cable (TWC) CEO Rob Marcus to talk about a cash-and-stock takeover, WSJ reports, suggesting that a bidding war for TWC may be shaping up. Charter Communications (CHTR) is also in talks with Time Warner Cable about a bid that is likely to be well north of the $170 a share previously speculated by some analysts.
Will Takata survive the biggest auto recall on record? Mazda (MZDAY), Subaru (FUJHY) and Mitsubishi (MMTOY) have now added 720K more cars equipped with Takata (TKTDY) air bag inflators to the global recall, which has seen more than 50M vehicles called back since 2008. The billions in recall costs will not put an end to Takata’s troubles: the company faces legal action in the U.S. and Canada, which analysts concede potentially pose an even bigger risk.
After pricing its 7.7M-share IPO at $17 (above an elevated range of $14-$16), Shopify (SHOP) opened at $28.00 yesterday and closed at $25.68. Shopify’s cloud-based software and related services help 160K+ businesses run their online and offline storefronts and is valued at $1.9B.
Uber Technologies is seeking a $1B credit facility and has recently contacted a number of large banks asking them how much they would be willing to commit, and at what terms. While negotiating a credit line is a move that often signals the early stages of preparation for an IPO, a source said a debut wasn’t expected until next year at the earliest.
Reynolds American and Lorillard are expected to receive antitrust clearance for their planned merger as soon as next week, with few changes in the companies’ settlement, WSJ reports. To address antitrust concerns, Reynolds (RAI) and Lorillard (LO) already agreed to sell $7.1B in cigarette brands, including Winston, Salem and Kool, along with other assets to U.K.-based Imperial Tobacco (ITYBY).
Shares of burger chain Shake Shack (SHAK) soared 8.5% yesterday after a report suggested the company is mulling opening a chicken restaurant. CNBC reported that a unit of the company filed a trademark application for “chicken shack”, which it said would sell chicken sandwiches.