Let's be friends? China, Mexico signal willingness to talk on trade, global markets still skittish, futures lower
Jun 03, 2019
Market data as of 7am EST
US Stocks Preview Ahead of the Open
- Trade tensions continuing to weigh on global markets as they open the week lower, front-month Dow Jones minis are -0.29%, S&P 500 minis -0.31% and Nasdaq 100 minis -0.53%
- Both China and Mexico have expressed a willingness to talk with the US to resolve trade issues as tariffs bite
- China published a white paper on Sunday saying the blaming the US for a breakdown in talks and saying the trade war has not "made America great again"
- China highlighted in its white paper the damage being done to the US economy via higher production costs, saying all sides lose
- China said it will create a list of "unreliable" company-its own blacklist-in retaliation for the US moves against its tech companies; the vague language China used will allow it to target any US company it wants to
- Read more on China: You have your blacklist, we'll make ours! China creating list of "unreliable entities" from the US, saying "Necessary means will be taken"
- Morgan Stanley is warning clients that investors are underestimating the potential pain from the trade war, saying a recession will happen in 9 months if the US places 25% tariffs on $300 billion more of Chinese goods
- Fed Funds futures show the market expects 2 rates cut by year's end-what would it take to cut rates? Fed Vice Chairman Richard Clardia: We Could Cut Rates if Growth Outlook Worsens
- The VIX is little changed this morning and is currently at 18.91 after closing at 18.71 last week
- iShares iBoxx $ High Yield Corporate Bond ETF (HYG) June 29 OTM Calls and August 16 OTM Calls, Johnson Controls (JCI) June 14 OTM Calls & Puts and iShares MSCI Brazil ETF (EWZ) June 21 OTM Puts are the most actively traded options in today's pre-market
- US 10-Year Treasury Bonds are higher with yields down -2.77 basis points to 2.0969%
- The US Treasury 2s-10s Spread has widened 2.67 basis points to 0.23%
- WTI Crude is currently down -5.46% to USD$53.5/bbl with the Brent-WTI spread up USD$6.75 to USD$10.24/bbl
- Gold is currently up 0.86% to USD$1316.78/oz
Stocks Trending in the News
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Global Consumer Stocks Trending in the News
- Constellation Brands (STZ) suffered greatly after the US announced potential tariffs on imports from Mexico. Constellation Brands’ imports Corona and Modelo products and hiking tariffs on its products are sure to cause it pain. Two-thirds of Constellation Brands’ revenue come from beer and alcohol it produces in Mexico. Constellation Brands is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas.
- Johnson & Johnson (JNJ) was ordered by a NYC jury to pay an additional $300 million in punitive damages to a woman who blamed her rare cancer on its talc powder. The actual damages verdict in the trial was $25 million, so with the punitive damages award the total is $325 million that Johnson & Johnson has been ordered to pay. The lawsuit is one of thousands that Johnson & Johnson faces over its talc powder alleging causing cancer. Johnson & Johnson is rated “Neutral” in our US Large-Cap Global Top Stock Ideas
- Lyft (LYFT) shares rose sharply in the wake of JP Morgan reiterating its buy rating and $86 price target. JP Morgan sees 50+% upside for Lyft and recommended the present price level, ~$40, as a good entry point. Lyft has a number of high-growth, high-margin opportunities in its business and expects the market to reward it for them. Lyft is not rated in our Global Top Stock Ideas
Global Information Technology Stocks Trending in the News
- Alphabet’s (GOOGL) Google is gearing up for a legal battle with the US Justice Department. The US government has indicated it is preparing to investigate the company over potential anti-trust concerns. As Google has grown larger and more powerful in the age of data, many critics think it’s too powerful, especially with its internet search dominating the market. No idea how long this could last. Alphabet is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
- AT&T (T) is making its plans to take on Netflix (NFLX) clear, Bloomberg reports, and it will be “more.” AT&T’s media properties will produce considerably more content than they do presently. AT&T is trying to unify the various media assets that it has in order to effectively attack Netflix’s position in the market. AT&T is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas. Netflix is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
- Cree Inc (CREE) was downgraded to neutral from buy at BMO Capital Markets. Cree has its price target maintained at $55. Cree shares have run up 60% since October and BMO notes that the shares are fairly valued at this point, hence the downgrade. Cree continues to execute well on its transformation, BMO adds. Cree is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
- Infineon Technologies AG (XTRA:IFX) agreed to acquire Cypress Semiconductor (CY) in a deal valued at $10.1 billion. Infineon said after completing the deal it will be a the largest supplier of chips to the automotive sector. Infineon said the acquisition will also give it new growth avenues in industrial and consumer devices. Infineon Technologies AG is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas. Cypress Semiconductor is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
- Softbank (TSE:9984) is having trouble raising a second $100 billion for a second Vision Fund. Softbank is looking to maintain its torrid pace if deal making and needs fresh investments to be able to continue. WSJ reports the fundraising is being met with a chilly reception in an environment of choppy markets. WSJ adds that many investors approached plan zero or very limited investments. Softbank is rated “Top Buy” in our Japan Large-Cap Global Top Stock Ideas.
Global Industrials Stocks Trending in the News
- Boeing (BA) suffered fresh bad news after US regulators said up to 150 parts in Boeing’s 737 Max aircraft’s wing may be defective. Regulators said the parts do not pose an imminent crash threat. Regulators said Boeing altered a manufacturing process that may make the parts weaker than they should be. Boeing said it has yet to be notified of any problems with a batch of parts in questions. Boeing is rated "Top Short" in our US Large-Cap Global Top Stock Ideas and "Unattractive" in our US Industrials Global Top Stock Ideas.
- FedEx (FDX) is being investigated by the Chinese government for “wrongful delivery of packages” in what is being considered the start of targeted retaliation against US companies as the trade war rages on. Chinese state media made clear the actions are part of its blacklisting efforts against US companies active in China. FedEx is rated "Unattractive" in our US Large-Cap Global Top Stock Ideas and "Top Buy" in our US Industrials Global Top Stock Ideas.
- Johnson Controls (JCI) announced the results of its modified Dutch auction tender offer. Johnson Controls expects to accept for payment about 102.32 million shares. Johnson Control said its aggregate cost will be about $4.02 billion for the shares tendered. Johnson Controls is not rated on our Global Top Stock Ideas
Global Financial Stocks Trending in the News
- Blackstone Group (BX) has agreed to acquire $18.7 billion in logistics assets from GLP Pte (SGX:MC0) of Singapore. Blackstone seeks to leverage the growing e-commerce business’ needs for logistics services. Blackstone will double its industrial footprint in the US with the acquisition. Blackstone will gain 179 million square feet of warehouse space in the deal. Blackstone Group is rated “Neutral” in our US Large-Cap Global Top Stock Ideas
Global Commodities & Energy Stocks Trending in the News
- El Paso Electric (EE) has agreed to be acquired by an investment vehicle of JP Morgan (JPM) in a deal valued at $2.78 billion. JP Morgan is paying $68.25 per shares, a 17% premium to Friday’s closing price. With the economy in Texas booming and the grid operator warning of a lack of supply, the El Paso acquisition looks to benefit from that strength. El Paso Electric Alphabet is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas
International Stock Markets Recaps
- The Euro Stoxx 600 is currently down -0.27%, the FTSE 100 is down -0.4%, the DAX is down -0.22%, and the CAC 40 is down -0.18%
- Telecommunications (-0.34%), Utilities (+0.33%), and Real Estate (-0.26%) stocks are the top performers in the Euro Stoxx 600 today
- Basic Resources (-0.37%), Technology (-0.72%), and Oil & Gas (-0.17%) stocks are the worst performers in the Euro Stoxx 600 today
- Investor sentiment for European stocks is negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.34x
- 17 stocks in the Euro Stoxx 600 are at 4-week highs while 258 stocks are at 4-week lows
- 7 stocks in the Euro Stoxx 600 are overbought while 70 stocks are oversold according to the 16-day RSI Measure
- The Nikkei 225 finished down --0.92%, the Hang Seng ended down -0.03%, the Hang Seng China Enterprise up +0.42%, and the CSI 300 was +0.06%
- Investor sentiment for Japanese stocks finished negative with the advance/decline ratio for the Nikkei 225 closing at 0.4x
- 2 stocks in the Nikkei 225 hit 4-week highs while 46 stocks reached 4-week lows
- 2 stocks in the Nikkei 225 closed overbought while 54 stocks closed oversold according to the 16-day RSI Measure
- Investor sentiment for Hong Kong stocks finished negative with the advance/decline ratio for the Hang Seng closing at 0.79x
- 0 stocks in the Hang Seng hit 4-week highs while 19 stocks reached 4-week lows
- 0 stocks in the Hang Seng closed overbought while 16 stocks closed oversold according to the 16-day RSI Measure
*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio