Market Snapshot
Asia: : Japan +1.7% to 20383. Hong Kong +0.8% to 26908. China +0.3% to 5122. India -1.8% to 26371.
Europe: London +0.5%. Paris +0.7%. Frankfurt +0.7%.
Futures: Dow flat. S&P -0.1%. Nasdaq flat. Crude -1% to $60.84. Gold -0.7% to $1178.40.
Ten-year Treasury Yield +2 bps to 2.5%
Economic News
8:30 Initial Jobless Claims
8:30 Retail Sales
8:30 Import/Export Prices
10:00 Business Inventories
10:30 EIA Natural Gas Inventory
Key earnings after the close
KFY, LF, RH, RLD, XONE
Markets
U.S. stock futures look to open flat this morning, pausing after major indexes posting some of their biggest one-day gains in a month. The U.S. government will release reports on consumer spending and the labor market this morning. Retail sales are expected to rise 1.3% in May, while jobless claims in the most recent week are expected to slip to 275,000 from 276,000 in the previous period.
Greek stocks are headed for their biggest jump since February, pushing European equities higher for a second day, as Prime Minister Alexis Tsipras continues talks with his country’s creditors. After a new round of late-night talks with the leaders of Germany and France, Greek PM Alexis Tsipras pledged to work intensively with creditors in coming days to solve all open issues holding up the country’s access to bailout loans. Meanwhile, S&P lowered Greece’s credit rating to CCC from CCC+ yesterday, stating that Athens will likely default on its debt within twelve months.
Greece is not the only one in hot water. Ukraine’s leadership on Wednesday warned that the likelihood of prolonged conflict against Russian-backed separatists and deadlocked creditor negotiations could threaten the West’s $40B bailout program. Ukraine Finance Minister Natalie Jaresk said she’s seeking a 40% cut in the face value of the bonds but creditors won’t accept any reduction. Kiev also declared it’s ready to impose a moratorium on foreign debt payments if necessary.
German bunds fell again today, extending a sell-off that has pushed 10-year yields above 1% for the first time since September. The 10-year yield on German bunds edged higher to 1.02%, up sharply from the all-time low of 0.05% hit in April. U.S. 10-year yield +2 bps to 2.5%.
A deadly outbreak of Middle East Respiratory Syndrome (MERS) forced South Korea’s central bank to cut interest rates on Thursday after authorities reported 14 new cases of the virus. The 25 bps cut to a record-low 1.5% is the country’s fourth rate reduction in less than a year and the seventh since the current easing cycle began three years ago. South Korea already reported 122 cases and nine deaths due to the disease, and many fear Hong Kong might be next.
China’s fixed-asset investment grew at its slowest rate in nearly 15 years in May, arguing for Beijing to increase policy support to avert a deeper downturn. Fixed-asset investment rose 11.4% in the first five months of this year from the year-earlier period, missing expectations for a 12% gain. However, factory output and retail sales stabilized, growing 6.1% and 10.1%, respectively.
Due to a slowdown in emerging markets and softer output in the U.S., the World Bank downgraded its outlook for global economic growth this year, lowering its forecast by 0.2% to 2.8%. The bank expects growth of 3.3% in 2016. With regards to the U.S., the World Bank decreased its 2015 prospects by 0.5% to 2.7%, saying a brutal winter sapped output in Q1 despite the economy now gathering steam.
Joining Seattle and San Francisco, Los Angeles has officially approved a minimum wage hike to $15/hour by 2020. The measure faces uncertainty after labor union leaders encouraged last-minute changes that would make exceptions for companies with unionized workers. The current federal minimum rate is $7.25/hour.
Stocks
Delta Air Lines (DAL) has entered into an agreement with Boeing (BA) to purchase 40 737-900ER planes valued at about $4B at list prices, and will also acquire 20 Embraer (ERJ) 190s after it ratifies a tentative agreement with its pilots. The 737 order will take the total for the model to 140, Delta said in the statement.
New York law enforcement officials have written to eBay (EBAY) and PayPal (PYPL) this week, saying the companies’ revised user policies “raise issues” under consumer protection laws. The updated user agreements would allow the two firms to call or text their combined 322M users for offers and promotions, to collect a debt or to poll their opinions through questionnaires.
General Motors will make an announcement next week on a secondary use for electric vehicle batteries, according to the WSJ. GM’s initiative will involve extended use of EV batteries – instead of a direct entry into the stationary battery space like Telsa (TSLA), Daimler (DDAIY), and Nissan (NSANY).
Nike won an eight-year deal to make uniforms for the NBA, taking over from Adidas (ADDYY) after the latter’s contract runs out in 2017. The contract is worth more than $1B, and will give Nike (NKE), which already controls more than 90% of the basketball footwear market, the rights to supply the jerseys, shorts and other gear used by NBA teams.
U.S. auto safety regulators are looking into a possible seventh death linked to defective Takata (TKTDY) air bag inflators – a Louisiana woman who died after her 2005 Honda (HMC) Civic hit a utility pole on April 5. Her family filed a lawsuit this week claiming the car’s driver-side air bag exploded on impact, sending shards of metal into the passenger compartment. The lawsuit named both Honda and Takata as defendants.
Qualcomm has appointed old hand Frank Meng as its chairman for China, a market which accounts for half of the company’s overall revenues, and announced the departure of Wang Xiang, president of Qualcomm (QCOM) Greater China. The shakeup comes after a long stretch of turbulence for Qualcomm in the country. Following a 14-month government probe into antitrust practices, the company agreed to pay a fine of $975M, the largest in China’s corporate history.
Britain will start selling its £32B stake in Royal Bank of Scotland (RBS) in the coming months, Chancellor George Osborne said at his annual Mansion House speech, in a highly-anticipated move to show how the country has moved past the financial crisis. Osborne added that shares would be sold even at a loss (which seems certain for at least the initial sales).
At a hearing in Austin yesterday, Exxon Mobil (XOM) told Texas regulators it had no role in a string of recent earthquakes hitting the Dallas-Fort Worth area, saying geological data points to natural causes, not its operations. Earthquakes big enough to be felt were virtually unknown to Dallas-Fort Worth until this decade, when drilling and fracking activity soared in the area.