Economy
Traders are getting ready for the third and final reading of GDP for the second quarter - scheduled to be published this morning at 8:30 a.m ET. While the estimate was sharply adjusted upward to 3.7% in late August, most economists are not looking for another big revision. The report follows a terrible first quarter and comes in the wake of concerns that China's slowdown could hurt the U.S.
With only a few days left until a government shutdown, Congress is in overdrive to keep federal funds flowing despite partisan divisions over Planned Parenthood. The issue has ignited the latest crisis in U.S. budget wars and has forced the Obama administration to prepare for a potential repeat of the 2013 shutdown, which lasted 16 days and suspended the salaries of 800K federal employees.
Japan has dropped back into deflation for the first time since April 2013 in a symbolic setback to Prime Minister Shinzo Abe's economic stimulus. Core inflation, excluding fresh food, was down by 0.1% compared with a year ago in August, as slumping global energy prices outweighed headline prices. BOJ Governor Haruhiko Kuroda continues to insist Japan can reach a 2% inflation target by the middle of next year, but most analysts think that goal is now out of reach.
China, the world's biggest polluter, is poised to make a landmark announcement limiting its greenhouse gas emissions during a summit meeting today between President Xi Jinping and President Obama. The cap-and-trade initiative builds on a deal the two leaders reached last year in Beijing, where both set steep emissions-reduction targets. The move should also add pressure for a global climate change accord in Paris this December.
Senior officials from the U.S., Japan, and 10 other countries around the Pacific are scheduled to meet in Atlanta next week in another attempt to finish the Trans-Pacific Partnership. High-level discussions two months ago ended without a deal, with the talks souring over auto trade, dairy exports and monopoly periods for next-generation drugs. Top negotiators will gather in Atlanta on Saturday, with trade ministers joining them on Wednesday.
The real enjoyed a massive rally on Thursday after the governor of Brazil's central bank vowed to use "all instruments" available to policymakers to stem the currency's recent slide. Busting a five-day losing streak, the real rallied as much as 7% intraday, its biggest gain since November 2008. On Wednesday, the bank announced plans to auction $2B worth of currency swaps over two days - restarting a program that was scrapped earlier this year.
Stocks
Volkswagen's board is gathering to appoint its next CEO following the resignation of Martin Winterkorn over the automaker's emissions rigging scandal. Matthias Muller, the current boss of subsidiary Porsche (OTCPK:POAHY), is expected to be named chief executive in his place, sources close to the VW Supervisory Board said on Thursday. Volkswagen (OTCQX:VLKAY) shares have already plummeted 31% since Winterkorn resigned, but the probes don't stop coming. Global competition regulators and a majority of U.S. states have now begun their own investigations.
A selloff in Caterpillar weighed on the market yesterday after the industrial bellwether issued a deep cut to its revenue forecast for the year and announced up to ten thousand job cuts by year-end 2016. "We are facing a convergence of challenging marketplace conditions in key regions and industry sectors namely in mining and energy," CEO Doug Oberhelman said. Caterpillar's (NYSE:CAT) business lines, from construction to energy to commodities, are closely linked to the global economy, particularly demand from China. CAT +1.2% premarket, after tumbling 6.3% on Thursday.
The iPhone 6s and 6s Plus go on sale in many countries today, including the U.S., U.K., China, Australia, Canada and Germany. Shoppers who purchase the devices in an Apple store can opt in to the new iPhone Upgrade Program, which includes Apple's (NASDAQ:AAPL) warranty plan and the option to upgrade to a new handset every year. Analysts expect 12M-13M phones to fly off the shelves over the weekend, up from more than 10M last year - when the iPhone 6's launch was delayed in China. AAPL +1% premarket.
Facebook's Oculus and Samsung Electronics have unveiled a new version of Gear VR for $99, saying the virtual reality headset would ship in time for Black Friday. The new device is 22% lighter and will work with all of Samsung's (OTC:SSNLF) 2015 line of smartphones, in contrast to the highly anticipated Oculus Rift, which will need to be wired to an expensive gaming computer. Users will additionally be able to cast 360-degree videos from Facebook's (NASDAQ:FB) newsfeed into the Gear VR, and Netflix, (NASDAQ:NFLX) Vimeo and Hulu support is also on the way.
Sharp may finally have a suitor for a stake in its liquid-crystal display business: Foxconn Technology (OTC:FXCOF). The latter just signed a letter of intent to buy a stake giving it managing control of the unit as the Japanese electronics maker spins it off. Bloomberg reports that Sharp (OTCPK:SHCAY) and Foxconn still need to complete price negotiations and due diligence, and there is no guarantee a final deal will be reached.
Marvell Technology plans to lay off about 17% of its workforce as it restructures its mobile operations. The move is expected to save more than $170M-$200M annually, with most of the reshuffling taking place through the end of this fiscal year. Marvell's (NASDAQ:MRVL) mobile unit earned about $13M - on revenue of $122M - in the first half of fiscal 2016. MRVL +5%premarket.
Looking to expand outside its shrinking home market, Japan Tobacco (OTCPK:JAPAF) is in talks to buy about $5B in cigarette assets from Reynolds American (NYSE:RAI), sources told Bloomberg. The available assets could include some of the Natural American Spirit tobacco brand, which is facing pressure from the FDA. Last month, the health agency sent a letter to Reynolds stating it needed to prove that cigarettes labeled as "natural" or "additive-free" are less harmful in order to keep marketing them in such a manner. RAI +2.1% premarket.
European Union antitrust regulators have opened an extensive investigation into Staples' (NASDAQ:SPLS) $6.3B bid for rival Office Depot (NASDAQ:ODP). "The transaction could eliminate an important competitor and reduce the choice of suitable suppliers in already concentrated markets, which could lead to price increases," the European Commission declared. It will decide by February 10 whether to approve or block the deal.
British futures trader Navinder Singh Sarao will face a court hearing in London today to determine whether he will be sent to the U.S. to face charges over the 2010 Wall Street "flash crash." Sarao allegedly used an automated program to generate large sell orders that pushed down prices. He then canceled those trades and bought the contracts at a lower cost. The flash crash saw the Dow Jones plunge more than 1,000 points on May 6, 2010, temporarily wiping out nearly $1T in market value.
Today's Markets
In Asia, Japan +1.8% to 17881. Hong Kong +0.4% to 21186. China -1.6% to 3092. India closed.
In Europe, at midday, London +2.5%. Paris +3.4%. Frankfurt +2.8%.
Futures at 6:20, Dow +1.5%. S&P +1.4%. Nasdaq +1.2%. Crude +0.8% to $45.26. Gold -1% to $1142.80.
Ten-year Treasury Yield +4 bps to 2.16%
Today's Economic CalendarIn Europe, at midday, London +2.5%. Paris +3.4%. Frankfurt +2.8%.
Futures at 6:20, Dow +1.5%. S&P +1.4%. Nasdaq +1.2%. Crude +0.8% to $45.26. Gold -1% to $1142.80.
Ten-year Treasury Yield +4 bps to 2.16%
8:30 GDP Q2
8:30 Corporate Profits
9:15 Fed's Bullard: U.S. Monetary Policy
9:45 PMI Services Index Flash
10:00 Reuters/UofM Consumer Sentiment
1:25 PM Fed's George: Monetary policy and Economic Policy
Companies reporting earnings today8:30 Corporate Profits
9:15 Fed's Bullard: U.S. Monetary Policy
9:45 PMI Services Index Flash
10:00 Reuters/UofM Consumer Sentiment
1:25 PM Fed's George: Monetary policy and Economic Policy
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