Flavin Nooney & Person Market Flash 7.14.14
courtesy of @seekingalpha
Sending oil prices lower, Iran and major world powers have sealed a historic nuclear accord after more than two weeks of negotiating in Vienna. The deal will curb Tehran’s nuclear program in return for an easing of sanctions, enabling the oil-rich nation to ramp up its energy exports, access international finance and open the doors to global investors. Full implementation of the agreement will likely take months and is contingent on the pace at which Iran meets its obligations. Crude futures -2.1% to $51.13/bbl.
Prime Minister Alexis Tsipras appears to be facing open rebellion in his coalition as he attempts to push creditor reforms through Greece’s parliament ahead of Wedneday’s deadline. With dozens of MPs in Syriza threatening to defect, Tsipras will need the support of the opposition to pass the €86B package, putting the future of his government in doubt. European stocks are little changed awaiting the outcome of the vote. Meanwhile, Athens missed another payment due to the IMF late Monday, slipping further into the debt morass (about €2B in arrears) that’s devastated the economy.
In the first meeting with investors since calling its $72B debt pile “not payable”, Puerto Rico said it was still premature to discuss how creditors would be affected, but made the case for a restructuring. The island’s crisis is being broadly felt because Puerto Rico bonds are held by many U.S. investors, who bought the securities because they’re tax-exempt nationwide and offered higher yields than comparable debt.
After a month-long rollercoaster ride, China’s stock market is showing some signs of stabilizing, suggesting Beijing’s bundle of support efforts are having the intended impact. Last week, Chinese officials allowed more than half of all listed companies to suspend their shares from trading and prohibited major stakeholders from selling at all, pushing the Shanghai market up 13% between Thursday and Monday. The measures have still raised eyebrows, and it remains to be seen what direction the market will now take. Is more support on the way?
Led by prices for food and clothing, Britain’s inflation rate fell back to zero in June, prompting concerns after a mere 0.1% increase in May. The core rate fell to 0.8% from 0.9%, the same as April, which was the lowest since March 2001. Bank of England governor Mark Carney has previously said he anticipates inflation to remain low in the short term, but expects prices to pick up later this year as 2014’s oil price plunge works itself out of the numbers.
The nation’s largest banks report their second-quarter results this week, beginning today with JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC). Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) are due to report later in the week, along with private equity firm Blackstone (NYSE:BX) and asset manager BlackRock (NYSE:BLK). Despite the stable economy in the U.S., analysts are expecting relatively ho-hum results.
The Federal Reserve has set a July 20 open board meeting to discuss and vote on final rules of risk-based capital charges for systemically important financial institutions (SIFIs). The meeting will also discuss the potential regulation and final order on enhanced prudential standards of GE Capital, despite the firm’s attempts to shrink.
State-owned Chinese tech firm Tsinghua Unigroup is preparing a $23B bid for U.S. memory chip maker Micron Technology (NASDAQ:MU), in what would be the biggest Chinese takeover of a U.S. company. Unigroup would be willing to pay $21 a share for Micron, a 19.3% premium over its Monday closing price, despite the latter’s shares falling by nearly half in the past year. Any deal is likely to face close scrutiny by U.S. officials in Washington. MU +11.3% premarket.
Apple Pay, the contactless payment service, will launch in the U.K. today, marking the first time the “tap-and-pay” system will be available outside the U.S. Many major brands and most big banks have signed up to support the offering, with more than 250,000 locations – ranging from subway stations to supermarkets – ready to accept the service. Next steps: Apple (NASDAQ:AAPL) is reportedly working on extending Apple Pay to China, South Korea and Canada.
Nokia may re-enter the mobile phone market through licensing handsets under its brand name in late 2016, when the restrictions in place from its Microsoft (NASDAQ:MSFT) sale come to an end. The company clarified that the partner they are looking for should be able to do all the “heavy lifting” and would work closely with Nokia (NYSE:NOK) to deliver a product.
FedEx is in talks to buy at least 25 more 767 freighters from Boeing (NYSE:BA) for about $5B, Bloomberg reports, stating the shipping company’s directors met in Seattle over the weekend to discuss the deal. “We constantly work on aligning our fleet plans with our business needs,” FedEx (NYSE:FDX) spokesman Jim McCluskey said by e-mail. Marc Birtel, a Boeing spokesman, said the Chicago-based planemaker had no comment.
As U.S. demand remains plagued by political uncertainty, Valero Energy (NYSE:VLO) is preparing to sell ethanol for export for the first time. The move will pit the company against Archer Daniels Midland (NYSE:ADM), privately-held Marquis Energy, and Pacific Ethanol (NASDAQ:PEIX). For now, Valero will sell the material on a freight-on-board basis for shipment overseas, although it eventually plans to sell its output and third-party production directly to buyers.
Analysts seem to believe the merger of Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) will still go through, after the two companies agreed to extend the period for a DOJ review to the later of Nov. 25, 2015 or 90 days. Oppenheimer’s James Schumm says the extension “does not change our thinking or have any impact on our estimates” for a year-end 2015 closing. Sterne Agee analysts also believe the deal will close around year-end and expect the deal spread to close gradually over the next several months.
South Africa’s Taste Holdings, which recently licensed global pizza giant Domino’s (NYSE:DPZ) in the country, has signed an exclusive deal to bring Starbucks (NASDAQ:SBUX) to local shores from 2016. “For the first time in sub-Saharan Africa, Starbucks will open full-format stores bringing the entire range of its food and beverages,” Taste said in a statement. The model follows one Starbucks has turned to for most of Europe, the Middle East and Africa, where it uses licensees to run all its stores.
In Asia, Japan +1.5% to 20385. Hong Kong -0.4% to 25120. China -1.1% to 3924. India -0.1% to 27933.
In Europe, at midday, London -0.3%. Paris -0.5%. Frankfurt -0.3%.
Futures at 6:20: Dow -0.1%. S&P -0.1%. Nasdaq +0.1%. Crude -2.1% to $51.13. Gold -0.2% to $1152.60.
Ten-year Treasury Yield flat at 2.43%
Today’s economic calendar:
6:00 NFIB Small Business Optimism Index
8:30 Retail Sales
8:30 Import/Export Prices
8:55 Redbook Chain Store Sales
10:00 Business Inventories
8:15 PM Fed’s George: Monetary policy and Economic outlook
Notable earnings before today’s open: AIR, CBSH, FAST, JNJ, JPM, WFC
Notable earnings after today’s close: ADTN, CSX, PPHM, YUM