Wednesday, June 3, 2015

Wall Street Breakfast: Investors Await ECB Decision And Conference

  51 comments  |  Includes: AAPL, ADDYY, AMBA, AMZN, ANET, BUD, DG, EBAY, F, FB, G
Economy
The markets are prepped for the ECB's monthly interest rate announcement today, following the many recent headline events in the eurozone. Although the ECB is expected to keep rates on hold and confirm its growth forecasts, there will be plenty to discuss over Mario Draghi's news conference at 8:30 a.m. ET. Will the ECB be worried about a backup in yields and Greek tensions, or comforted by rising inflation expectations?
The OECD, which has a history of cutting its growth outlooks, has done it again, reducing its global forecast due to lagging investment and risks, including a possible Greek default. Despite "monetary accommodation, less fiscal drag and a reduction in oil prices," we're not getting growth that is "matching the average of the past two decades," Chief Economist Catherine Mann said in an interview. The OECD now expects the world economy to expand 3.1% in 2015, down from 3.7% predicted in October. Last year, the world economy grew 3.3%.
Greek Prime Minister Alexis Tsipras will come under intense pressure for a debt deal today as Friday's deadline for a €300M repayment to the IMF goes down to the wire. Yesterday, the country's international creditors reportedly drafted the broad lines of an agreement that amounts to a take-it-or-leave-it offer, following months of fruitless dialogue with the Athens government. Tsipras will travel to Brussels later in the day to meet with European Commission President Jean-Claude Juncker.
Australia's economy expanded 2.3% in the first quarter from the year-ago period, beating forecasts and pushing up the Australian dollar. The internals of the report were less convincing, as the quarterly increase was seen driven by a jump in inventories (+0.3%) and growth in export volumes (+0.5%). Final consumption expenditure, the biggest contributor to Australian economic growth, added just 0.4% to quarterly growth. "The outlook for business investment, both mining and non-mining remains weak," said ANZ economist Felicity Emmett.
"There is consensus among Gulf OPEC countries, and others, to keep the ceiling unchanged," a senior Gulf OPEC delegate told Reuters following an informal OPEC meeting on Tuesday. "Nobody wants to rock the boat. The meeting (on Friday) is expected to be smooth sailing." The statement marks a change in tone from OPEC's last meeting in November 2014, when Venezuela and others mounted an unsuccessful bid to convince Saudi Arabia and its Gulf allies to tighten the taps on supply. Crude futures -2.2% to $59.94/bbl.
According to Ben Bernanke, Beijing was pushed into launching the Asian Infrastructure Investment Bank by U.S. lawmakers' refusal to give China greater clout in existing multilateral institutions. America's legislature blocked a 2010 IMF agreement to shift 6% of quota - and voting rights - to emerging economies, which would have "better reflected the increasing role of China" and other nations, the former Fed Chairman said. "So I understand why other countries say, 'well let's take our marbles and go home'."
Stocks
FIFA president Sepp Blatter's decision to resign amid corruption allegations at soccer's governing body is a relief for corporate sponsors who have called for more transparency at the organization. "FIFA needs profound restructuring," Blatter declared. "Although the members of FIFA gave me a new mandate, this mandate does not seem to be supported by everyone in the world." Sponsors Coca-Cola (NYSE:KO), Visa (NYSE:V), Adidas (OTCQX:ADDYY), Hyundai (OTC:HYMLF) and Anheuser-Busch InBev (NYSE:BUD) called the resignation a positive step, but some sponsors said they expected FIFA to do more to clean up its act.
Looking to expand its user base and rev up its revenue engine, Pinterest is planning to launch "buyable pins," enabling users to buy items they see directly via Pinterest. Although Pinterest won't take a cut of each transaction, merchants will have the option to pay for "promoted pins" - giving the company an important revenue source following its $11B valuation. Instagram (NASDAQ:FB) has also announced a similar feature, permitting advertisers to add a button to encourage viewers to click through to their website.
Under a new program called Fulfillment by Amazon Small and Light, the e-commerce giant will provide free shipping for many popular items weighing 8 ounces or less, including ones whose prices fall well short of Amazon's (NASDAQ:AMZN) $35 free shipping minimum. Items covered by the program will arrive in 4-8 business days. To a large extent, the move takes aim at eBay (NASDAQ:EBAY), which does considerable business handling sales of small/low-cost goods that come with free shipping.
Synchronoss +17% premarket following a WSJ report stating the company is exploring a sale that could be valued at over $2B. Sources state Synchronoss (NASDAQ:SNCR) is working with investment bank Qatalyst Partners on the deal, and has already "drawn interest from a number of private-equity firms."
At the company's annual Discover conference yesterday, Hewlett-Packard (NYSE:HPQ) co-chief executive Meg Whitman said the separation of HP and Hewlett-Packard Enterprise would be effective November 1. Last October, HP announced it would split into two listed companies, separating its printer unit from its hardware and services operations. HP has also used the event to announce a partnership with fast-growing data center switch vendor Arista (NYSE:ANET). ANET +1.2% premarket.
Lawyers for Monsanto and Syngenta are quietly working together to discuss regulatory hurdles that would arise from the potential combination of the two companies, Bloomberg reports. Syngenta (NYSE:SYT) may consider entering formal negotiations if Monsanto (NYSE:MON) sufficiently raised its offer and provided a multi-billion dollar termination fee (perhaps about 10% of the purchase price at the current bid) to compensate for the risks of completing a deal. SYT +0.4% premarket.
Raising additional legal concerns, Teva Pharmaceutical (NYSE:TEVA) is reportedly looking to purchase more shares in Mylan (NASDAQ:MYL), sources told Reuters. Teva last week disclosed a 1.8% stake in Mylan, which blasted the move as breaching U.S. antitrust laws as companies that acquire stakes worth more than $76.3M in rivals must first obtain regulatory approval. The strategy is a sign of Teva's commitment to acquire Mylan as the latter presses on with its own $34B hostile bid for Perrigo (NYSE:PRGO).
Takata will "rapidly" reduce its use of ammonium nitrate as an air bag propellant after it appeared "to be one of the factors" contributing to inflator ruptures, Takata (OTCPK:TKTDY) executive Kevin Kennedy told a congressional subcommittee on Tuesday. However, Representative Michael Burgess, the Texas Republican who chaired the hearing, said he "couldn't believe" what he was being told. "They are still making an air bag with ammonium nitrate as a propellant without a desiccant and they're putting that in replacement and new vehicles," Burgess said. "It almost seems like there should be a warning label stamped on the car."
Toyota and Ford may join forces to maintain control of their vehicle dashboards as Apple (NASDAQ:AAPL) and Google (GOOG, GOOGL) introduce technology targeting the car industry. Toyota (NYSE:TM) is now exploring collaboration for the implementation of Ford's (NYSE:F) SmartDeviceLink technology, an open source platform that integrates smartphones apps with cars, in future Toyota and Lexus vehicles.
Tuesday's key earnings
Ambarella (NASDAQ:AMBA) +1% AH on strong FQ2 guidance. (link)
Dollar General (NYSE:DG) +2.2% following a profit beat and increasing same-store sales. (link)
Medtronic (NYSE:MDT) +0.2% after topping expectations. (link)

Today's Markets:
In Asia, Japan -0.3% to 20473. Hong Kong +0.7% to 27657. China flat at 4910. India -1.3% to 26837.
In Europe, at midday, London +0.1%. Paris +0.4%. Frankfurt +0.6%.
Futures at 6:20: Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude -2.2% to $59.94. Gold +0.2% to $1188.70.
Ten-year Treasury Yield flat at 2.27%
Notable earnings before today's open: BF.B, VRA
Notable earnings after today's close: FIVE, LF, VRNT
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