Wednesday, November 4, 2015

Wall Street Breakfast: Asian Shares Lead Markets Higher

73 comments  |  Includes: ADM, AEGY, ALV, BUD, CMG, CNAB, DVN, ERBB, GLNCY,
Chinese stocks surged today on news the country would further open its markets to foreign investment by establishing a trading link between Shenzhen and Hong Kong by the end of the year. The People's Bank of China later clarified that the comments from Governor Zhou Xiaochuan were made in May, while plans for the link still need regulatory approval and a deal has not yet been made. That didn't stop Chinese markets from soaring: Shanghai+4.3%; Hang Seng +2.1%; Shenzhen +5.1%.
Economy
Meanwhile, the focus in Tokyo was on the trading debut of Japan Post - the country's mail-delivery operator - and on its savings bank and insurance subsidiaries. The three listings together fetched about ¥1.4T ($12B), making it Japan's largest stock offering since 1987 and the world's largest IPO this year. At the end of the session in Tokyo: Japan Post Holdings +26%; Japan Post Bank +15%; Japan Post Insurance +56% - boosting the Nikkei up 1.3% at the close.
The leaders of China and Taiwan plan to meet on Saturday for the first time since their civil war seven decades ago, shaking up the island's politics two months before an election that could lift the opposition to power. White House spokesman Josh Earnest told reporters that it was "too early" to call the meeting a turning point in relations, and reiterated U.S. support for a "stable and peaceful cross-strait relationship," as well as its one-China policy. Taiwan Stock Index +1.7%.
Speaking at the Forum on Banking Supervision in Frankfurt, ECB President Mario Draghi said it was "high time" that various aspects of the European banking union were completed to ensure deposits were "truly safe" across the eurozone. The single supervisory mechanism for Europe, which has now been running for a year, shows that reform is possible, he said, describing that initiative as a "yardstick" for others. Yesterday, Draghi reiterated that ECB policymakers would review the degree of monetary stimulus they have deployed when they meet in December and are willing and able to act if needed.
Ohio voters have rejected a measure that would have made it the first U.S. Midwestern state to legalize the recreational use of marijuana by nearly a two-to-one margin. Analysts said the proposal was criticized for granting main backers of the measure cartel-like powers over the industry in the state for several years, an arrangement that rubbed many voters who supported legalization of the drug the wrong way. Related tickers: OTC:AEGY,OTCQB:MDBX, OTCQB:CNAB, OTCPK:ERBB, OTCPK:GRNH, OTCPK:HEMP,OTCPK:HPNN, OTCPK:LATF, OTCPK:MJNA, OTCPK:PLPL, OTCQB:VAPE,OTCPK:VAPR, VPCO
The Commerce Department is set to report data on the nation's September trade balance this morning at 8:30 a.m. ET. Despite weakness in China and headwinds from a strong dollar, economists are expecting a net trade deficit of $41B, a significant improvement from the $48.3B gap in August. If the experts are wrong, however, it would not bode well for U.S. economic growth in the third and fourth quarters.
With stocks having just completed their best month in four years and starting off November with more gains, there's not a lot of demand for the safety of gold and Treasurys. Yesterday's 1.8% decline in gold brought its price back to $1,115 per ounce, pretty much canceling out the rally it began right around Labor Day which took the metal to nearly $1,200. Benchmark 10-year Treasury yields rose to trade at 2.2225% on Tuesday, breaking above 2.2% for the first time since September 22.
Stocks
Volkswagen shares dropped 8.8% at the market open in Frankfurt as the automaker's pollution problems took a costly new turn. VW (OTCQX:VLKAY) revealed it has understated carbon dioxide emissions for about 800K of its vehicles sold in Europe, and overstated the cars’ fuel economy, a move that could result in an estimated €2B in financial penalties. Those costs would be on top of the €6.7B the company has already set aside to address its central emissions crisis, which affects 11M diesel vehicles worldwide.
The NHTSA is imposing a fine of up to $200M on Japanese air bag maker Takata (OTCPK:TKTDY) for providing inaccurate information about its explosive safety devices that have so far been linked to eight deaths. Honda (NYSE:HMC) didn't take the news lightly. The automaker immediately dropped its longtime partner as an air bag provider, saying it had "misrepresented and manipulated test data." Inflator suppliers that could see a boost from the news: Autoliv (NYSE:ALV), TRW Automotive (NYSE:TRW) and Daicel.
Lockheed Martin expects to close its $9B acquisition of Sikorsky Aircraft from United Technologies (NYSE:UTX) on Friday, after it received final regulatory approval from China. "With this final regulatory approval, we are one step closer to completing this historic acquisition," said Chief Executive Marillyn Hewson. Separately, Lockheed (NYSE:LMT) won a preliminary contract valued at up to $5.37B to build a ninth batch of F-35 jets for the U.S. military and its allies.
President Obama wants to rule on the long-pending Keystone XL oil pipeline by the end of his presidency, the White House said on Tuesday, calling a request by the project's Canadian developer to delay a review "unusual." Press Secretary Josh Earnest did not offer an estimate of when it would respond to TransCanada, but said the Obama administration would examine what was "motivating" the application.
Mylan has received FTC approval for its proposed acquisition of Perrigo (NYSE:PRGO) under the condition it divests certain products following the close of the deal. There is a bit of work remaining, though, since Perrigo has repeatedly stated that Mylan's (NASDAQ:MYL) offer is grossly inadequate and continues to urge its stockholders not to tender shares. The deadline to do so is 8:00 a.m. ET on November 13. MYL +1.3%; PRGO +1.3% premarket.
Glencore said it expects net debt to fall to $25B by the end of the year from $29.6B at June-end, in one of the first official updates from the company since its share price plummeted in September. The firm also revealed it was working on a second so-called streaming deal – selling the long-term rights to buy precious metal in return for an upfront payment - and reiterated guidance for its trading arm, the company's main cash generator. Glencore (OTCPK:GLNCY) shares rose 6% on the news in London, but have fallen almost 60% YTD.
Japan's SoftBank reported weaker-than-expected net profit for its fiscal second quarter, as it worked to turn around Sprint (NYSE:S), the U.S. wireless carrier it bought in 2013. Net income fell 56% from a year ago to ¥213B, missing analyst expectations of ¥262B. At a news conference following the results, SoftBank (OTCPK:SFTBY) Chairman Masayoshi Son said the company would slash thousands of jobs at Sprint in an effort to cut more than $2B of fixed annual costs from the struggling unit.
Chipotle has hired food-safety consulting firms and is batch-testing ingredients after closing 43 restaurants over the weekend due to an E. colioutbreak that has so far infected 37 people. Authorities believe fresh produce is the likely culprit, but the exact source of the contamination hasn't been identified. It's still unclear if the contamination occurred at the farm level or at a Chipotle (NYSE:CMG) distribution center.
High-frequency trader Michael Coscia has become the first to be found guilty of "spoofing" commodity futures markets in a landmark criminal case for authorities attempting to clamp down on the deceptive practice. Spoofing is rapidly placing orders with the intent to cancel them before they trade in order to trick other investors by creating the illusion of demand. The verdict may energize prosecutors to pursue other market manipulation cases and spur some high-speed traders to review their strategies.
Another extension? The U.K. Takeover Panel has agreed to delay the deadline for AB InBev's (NYSE:BUD) $106B takeover of SABMiller (OTCPK:SBMRY) for a third time to allow the companies to finish complex paperwork and continue talks about the sale of SABMiller's U.S. business. Since last week, the two brewers have made good progress in agreeing to terms of a deal, and AB InBev now has until 12:00 ET on Nov. 11 to make a formal offer.
Tuesday's Key Earnings
Archer Daniels Midland (NYSE:ADM) -6.7% after a drop in ethanol margins.
Devon Energy (NYSE:DVN) +5% AH on record oil production.
Groupon (NASDAQ:GRPN) -24.3% AH following weak guidance; CEO change.
Herbalife (NYSE:HLF) -2.8% AH on sliding sales.
Sprint (S) -7.2% on disappointing profits.
Tesla (NASDAQ:TSLA) +8% AH after staying largely on track with guidance.
Zynga (NASDAQ:ZNGA) +1.2% AH after beating estimates.
Today's Markets 
In Asia, Japan +1.3% to 18927. Hong Kong +2.1% to 23042. China +4.3%to 3460. India -0.1% to 26553.
In Europe, at midday, London +1.1%. Paris +0.9%. Frankfurt flat.
Futures at 6:20, Dow +0.2%. S&P +0.1%. Nasdaq +0.2%. Crude +0.1% to $47.96. Gold +0.3% to $1117.40.
Ten-year Treasury Yield flat at 2.21%
Today's Economic Calendar
Companies reporting earnings today
Source: http://seekingalpha.com/article/3642856-wall-street-breakfast-asian-shares-lead-markets-higher
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