Before the Open (Jan 11)

Good morning. Happy Friday.
The Asian/Pacific markets closed with a lean to the upside. Japan, China, Hong Kong, South Korea and Thailand led while the Philippines lagged. Europe, Africa and the Middle East are currently mixed. Poland, South Africa, Portugal and Saudi Arabia are up; France, Germany, Switzerland and the Czech Republic are down. Futures in the States point towards a down open for the cash market.
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Blog: 2018 – The Year the Quants Got Destroyed
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VIDEO: Current Trades – With a Brief Explanation
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Blog: Historically, What Is the Character of a Market Bottom
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The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
Volkswagen posted an annual sales record by selling 10.83M cars in 2018, an increase of 0.9% Y/Y and likely establishing the German group as the world’s largest carmaker. It comes despite a year of myriad headwinds, including trade tariffs and new emission standards to diesel bans in many German cities. In 2017, VW (OTCPK:VWAGY) contested the crown of world’s biggest automaker with the Renault-Nissan-Mitsubishi alliance (OTCPK:RNLSY, OTCPK:NSANY, OTC:MMTOY), which claimed the title with 10.6M and said Volkswagen should not have counted trucks.
Economy
U.S. stock index futures inched down overnight after Jerome Powell reiterated the Fed would be patient about interest rate hikes, but said the central bank’s balance sheet would be “substantially smaller.” Powell also said President Trump hasn’t asked for a meeting despite months of attacks against him. On the data front, investors today are likely to closely monitor the latest CPI figures as well as core CPI data for December at 8:30 a.m. ET.
The partial government shutdown is entering its 21st day, tying the record for the longest such one in American history. Visiting the U.S.-Mexico border yesterday, President Trump said he has “the absolute right to declare a national emergency” if a deal over funding for the barrier cannot be reached in Congress. The White House has asked the Army Corps of Engineers to examine potentially diverting money from other projects and is also exploring having Homeland Security request funds from the Pentagon.
China plans to set a lower economic growth target of 6%-6.5% in 2019 compared with last year’s target of “around” 6.5%, policy sources told Reuters. The proposed target will likely be unveiled at the annual parliamentary session in March. As the trade war takes its toll, U.S. Treasury Secretary Steven Mnuchin also said top trade negotiator Chinese Vice Premier Liu He will “most likely” visit Washington later in January for talks.
Britain’s economy cooled in the three months to November, expanding by 0.3% and marking its weakest pace in six months. Besides tough global trade conditions and weaker overseas demand, the future of trade with the EU hangs in the balance. Adding to the news, sterling soared overnight, before erasing some of those gains, following a Brexit delay report from the U.K.’s Evening Standard.
Saudi Arabia is now planning its long-delayed Aramco (ARMCO) IPO for 2021 after undertaking a series of moves that may give more transparency to potential investors. The kingdom has released the results of an independent audit that confirmed it controls more than 260B barrels in oil reserves and announced that Aramco will issue bonds next quarter. In order to tap the debt market, the oil giant will need to release additional financial information.
Stocks
Former Nissan Chairman Carlos Ghosn has been indicted on financial crimes for a second time in Japan. It’s the latest blow to the star executive, but the decision means he’ll be eligible for bail after two months in jail. Besides the fresh breach of trust charges against Ghosn, Nissan (OTCPK:NSANY) as a legal entity was charged with additional underreporting of income, from 2015 through fiscal 2017.
Another setback for Ford? The carmaker’s ride-share service Chariot, which it bought in 2016 to expand beyond auto manufacturing and into mobility, will cease all operations by the end of March. The news comes after Ford (NYSE:F) said it will cut thousands of jobs in Europe, as well as looking at plant closures and discontinuing loss-making vehicle lines as part of a turnaround effort.
General Motors is likely to disclose plans today that will position Cadillac and its upcoming “BEV3” platform as its lead EV brand in a mission to catch up to Tesla (NASDAQ:TSLA), sources told Reuters. GM had previously focused on making electric vehicles under its mass-market Chevrolet brand, including its battery Bolt and plug-in Volt, but ended production of the latter last year.
Brazil’s newly installed President Jair Bolsonaro has approved the strategic partnership between Brazil planemaker Embraer (NYSE:ERJ) and Boeing (NYSE:BA). Under the deal terms, Embraer will sell 80% of its commercial aircraft division, its most profitable, for $4.2B. The tie-up still must be approved by shareholders and regulators, but winning the backing of Brazil’s government was considered the biggest hurdle.
Two shareholder lawsuits filed this week accused the board of Google parent Alphabet (GOOG, GOOGL) of playing a direct role in covering up sexual misconduct claims against Android creator Andy Rubin and former head of Google Search Amit Singhal. They also call for directors to pay damages to Alphabet for allegedly breaching their fiduciary duties and approving hefty exit packages for the executives.
Netflix rose 2.5% AH after UBS analyst Eric Sheridan hiked his rating on the stock to Buy from Neutral, and raised his price target to $410 (from $400), implying a 26% upside. “After six months of NFLX underperformance & key debates emerging about competition, margins & FCF, we think these debates are better understood by investors and reflected in the current stock price.”
Apple is planning to release three new iPhone models again this fall, including a successor to the struggling XR, which will include some new camera features, WSJ reports. Apple (NASDAQ:AAPL) is also considering dropping its only LCD model in 2020, marking a complete shift to OLED displays. It’s been a tough year for iPhones, including reductions to sales estimates, as well as recent reports that resellers in China have slashed prices for the smartphones by up to 22%.
Activision shares fell around 7% AH after the company announced a split from game studio Bungie, which developed the online-only Destiny game franchise. Activision (NASDAQ:ATVI) is also defending itself this week against discrimination accusations of a former employee, and has shuffled executives after losing its chief financial officer to Netflix (NASDAQ:NFLX).
William Barr, nominated by President Trump to become U.S. attorney general, plans to recuse himself from the AT&T-Time Warner antitrust case, which the DOJ appealed after losing a court battle to block the $85B deal. Among his holdings are $1.2M worth of shares in AT&T (NYSE:T), which he amassed as a private sector lawyer. Barr also served on the board of Time Warner from 2009 until 2018.
Popular workplace messaging app Slack Technologies is planning to go public through a direct listing next quarter, WSJ reports. In a direct listing, a company bypasses the traditional underwriting process, letting the open market play a greater role in setting the price instead of lining up investors ahead of time. Spotify (NYSE:SPOT) is the only large company that has done one, debuting last year on the NYSE.
Building the technology needed to support cash management services is underway at Goldman Sachs (NYSE:GS), which reportedly plans to start the service in the first half of 2020. The bank is considering paying big multinational corporations more for their deposits than other banks as it paves the way for its entry into the low-margin but prized business. Wholesale payments and cash management generated about $250B in global revenue for big banks in 2017.
Johnson & Johnson is the next drugmaker to raised prices on about two dozen prescription medicines, including psoriasis treatment Stelara, prostate cancer drug Zytiga and blood thinner Xarelto, all among its top-selling products. Most increases were in the 6-7% range, Reuters notes. The company does not plan to raise prices on any more drugs this year, J&J (NYSE:JNJ) spokesman Ernie Knewitz declared.
What’s going on with the shuttered stores that were previously home to Sears (OTCPK:SHLDQ), Kmart and other struggling retailers? Amazon-owned (NASDAQ:AMZN) Whole Foods is eyeing the sites, sources told Yahoo Finance. While Whole Foods currently has more than 470 stores around the country, it is still a far cry from its competitors in the grocery space, including Walmart (NYSE:WMT) and Kroger (NYSE:KR).
Today’s Economic Calendar
8:30 Consumer Price Index
1:00 PM Baker-Hughes Rig Count
2:00 PM Treasury Budget
Other…
today’s upgrades/downgrades from briefing.com
this week’s Earnings from Morningstar
this week’s Economic Numbers/Reports powered by ECONODAY