Asia: Japan -0.2% to 19983. Hong Kong +1.3% to 28433. China +3.1% to 4528. India -1% to 27177.
Europe: London -0.1%. Paris +0.4%. Frankfurt +0.3%.
Futures: Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude -0.7% to $56.76. Gold +0.6% to $1182.30.
Ten-year Treasury Yield -3 bps to 1.92%
9:45 PMI Services Index Flash
10:30 Dallas Fed Manufacturing Outlook
Key earnings before the open
ACW, BPOP, CYOU, HAE, LH, MCY, ONB, OSIS, PDS, PLT, QSR, ROP, SILC, SOHU, STNG, TEN
Key earnings after the close
AAPL, ABX, ACC, AFG, AGNC, ALSN, AMKR, ARE, AVB, BRX, BXP, CDNS, CHDN, CHRW, CMP, CR, CUDA, DAC, GGP, GIG, HIG, HMST, HT, IPHS, JJSF, JLL, MSA, OLN, OMI, OSTK, PCL, PMCS, PRE, RCII, RE, RTEC, SIMO, SSNC, SSW, SWFT, TCS, UDR, UHS, WCN, WNC, WRB
Stock futures showed slow going for Wall Street, at least early Monday, with investors ignoring a drop in European stocks and a rally in Asia as Apple results loom for later.
The economic calendar heats up midweek, with a preliminary reading on first-quarter gross domestic product due on Wednesday. On that same day, a Federal Open Market Committee announcement will come at the conclusion of the central bank’s two-day meeting. While Interest rates won’t likely be moving higher, investors will still be watching the language of the statement for signs on when such a rate hike might be expected.
The spotlight in Asia this week falls on Japan, where a flurry of data releases and a central bank decision could provide clarity on the direction of the world’s third largest economy. Following its meeting, the Bank of Japan is expected to cut its 2015 inflation forecast by several tenths of a percentage point from 1%, and shave its growth forecast from the current 2.1%. Despite inflation dropping back to zero, governor Haruhiko Kuroda has argued strongly that the BOJ’s existing QE program is on track, leading many economists to think further easing is unlikely for now.
Red-hot mainland Chinese shares soared again today, propelling the Shanghai Composite Index up 3.1% (+39% YTD) to its highest level since late 2007. “Funds of various mandates are underweight the market in a range of 140-600bp, and thus have marked benchmark stress and a need to raise exposure to China,” Goldman Sachs said in a note, citing EPFR data. “With active fund managers still underexposed to the market, the rally isn’t over.”
The finance ministers of Slovenia and Germany on Saturday acknowledged for the first time that they are considering plans on what to do if a Greek deal is not reached by the end of June, breaking their long-held stance of insisting that the country must stay in the eurozone. The issue of a “Plan B” was raised during Friday’s Eurogroup meeting in Riga, where Athens was strongly criticized for delaying the list of reforms needed to unlock its next round of funding.
As the monetary easing by central banks across the globe keep yields at rock-bottom, investment officers predict that Japanese demand for U.S. debt won’t ease up in the months ahead given the lack of alternatives. Japanese life insurers – some of the world’s largest institutional investors – plan to keep pouring money into U.S. debt this year. Of note: Japan even overtook China in Q1 as the largest foreign holder of U.S. Treasurys. While the current 2% yield on the U.S. 10-year is a far cry from yields of 5% or more before the financial crisis, it is still miles apart from the 0.16% yield on German bunds and the 0.29% yield on the 10-year Japanese equivalent.
Applied Materials (AMAT) and Tokyo Electron say they will scrap plans for a merger that would have created a company with a market value of $29B, citing problems with the U.S. Department of Justice. “It has become apparent that such gap will not be able to be bridged,” Tokyo Electron said in a statement.
The British government has told BP (BP) it would oppose any potential takeover of the company, which was seriously weakened by the huge bill incurred after the Deepwater Horizon disaster and a recent plunge in oil prices. Authorities acknowledge that the U.K. would have few formal powers to block a bid, but a senior City figure briefed on the government thinking said declaring its clear opposition may deter any foreign company from making an offer.
Looking to make North America its largest market, Cap Gemini (CGEMY) plans to buy U.S.-based iGATE (IGTE) for $4B, or $48 per share. The deal, which has been agreed on by both boards, will be financed through a combination of the French company’s cash, debt and an equity portion that will not exceed a 6% dilution of its share capital. Cap Gemini also expects the acquisition to enhance earnings by 12% in 2016 and 16% in 2017.
Celladon (CLDN) slides in premarket trade after the biotech company said over the weekend that a trial of its heart failure treatment missed its primary and secondary endpoints. Shares are set to open at the lowest level since the company went public in January 2014.
Chipotle (CMG) has finished removing genetically engineered ingredients from its foods, becoming the first major restaurant chain to do so amid growing concerns about the agricultural technology. The company has been working for more than two years to eliminate ingredients made with GMOs, hoping to be done by the end of 2014, but the transition “took a little longer” than previously thought, a Chipotle spokesman said.
Coca-Cola (KO) announced it doesn’t have plans to change the sweetener for Diet Coke away from aspartame despite other beverage sellers shifting their focus to the use of natural sweeteners. Sales of Diet Coke fell 6% Y/Y in Q1 to trail the pace seen by the Sprite, Coke, and Fanta brands. On last week’s earnings call, Coca-Cola executives said finding the right path to grow Diet Coke sales was still a “work in progress.”
Outlining its “next phase of strategy,” Deutsche Bank (DB) announced its much-anticipated strategic overhaul this morning, designed to close the gap with rivals for profitability and capital adequacy. The German lender said it would target €3.5B in annual savings by scaling back its investment bank and retail operations, floating a majority stake in Postbank and increasing automation. Yesterday, Deutsche said hefty legal charges (including its recent $2.5B Libor settlement) halved its first-quarter net profit to around €559M. DB -4% premarket.
Nokia (NOK) squashed rumors it was planning a return to mobile-device manufacturing, which it exited last year by selling its once-dominant handset business to Microsoft (MSFT). Earlier this month, Nokia launched a $16.6B bid to acquire French rival Alcatel-Lucent (ALU), looking to solidify its position in the wireless infrastructure industry.
As the nation looks to reduce its reliance on foreign technology, Qualcomm (QCOM) has launched a division to help Chinese smartphone makers sell units overseas, looking to build stronger relationships following its record $975M antitrust fine. Qualcomm, which draws about half of its revenue from customers in China, established an office in Shenzhen last quarter to assist both small and large Chinese handset manufacturers build global businesses.
Royal Bank of Scotland (RBS) has sold another portfolio of North American loans to Mizuho Financial Group (MFG), as it continues to sell off international assets to focus on domestic lending. The agreement swaps $5.6B of loan commitments for $500M in cash, generating an overall disposal loss of around $30M. Back in February, RBS agreed to sell different U.S. and Canadian loan commitments to Mizuho under a deal worth $3B, marking the biggest move overseas by one of Japan’s top banks.
Volkswagen (VLKAY) Chairman Ferdinand Piech announced his resignation over the weekend in an unexpected twist to the leadership crisis at the automaker. Volkswagen’s Deputy Chairman Berthold Huber will take on the position until the board can elect a replacement.