AstraZeneca and Gilead Science to merge?

How likely is deal?

How likely is deal? 
Bloomberg reported that AstraZeneca contacted Gilead last month about a potential $232 bln pharma powerhouse merger. According to Jefferie analysts the merger is unlikely:

While Gilead may look cheap with its price-to-earnings ratio of 12 times and AstraZeneca may be attracted by the potential cost-cutting and decent free cashflow, Jefferies analysts said they do not view a deal as likely. “We think Gilead believes its HIV business is very underappreciated,” they said in a note, adding that the company “would prefer to build value over time and do its own tuck-in deals

US weekly oil inventories -4985K vs +2150K expected

Weekly US petroleum inventory data:

  • Prior was -745K
  • Cushing -5587K
  • Gasoline +2830K
  • Distillates +3832K
  • Production estimate 11.5 mbpd vs 11.6 mbpd
API data from yesterday:

  • Crude -4800K
  • Cushing -5000K
  • Gasoline -651K
  • Distillates +5100K

Nikkei 225 closes lower by 1.72% at 22,977.75

The Nikkei falls back below the 23,000 mark

Nikkei 30-01

Fears surrounding the coronavirus outbreak continue to reverberate across markets and risk trades are largely suffering as a result. The fact that Facebook earnings wasn’t good enough – slower growth and profits guidance – only adds oil to the risk-off fire today.

US futures are down by 0.5% while Treasury yields are marked lower across the board following a sharp drop yesterday. 10-year yields are now at 1.568%, down by 1.5 bps.
As a result of the softer risk mood, USD/JPY is sitting around 108.92 currently – with focus turning to the 100-day moving average @ 108.75 once again.

The major US indices snap their two-day slide

Major indices close higher on the day

The major US indices not there today slide and are closing near the days highs in the process. Chair Powell’s view that it would take significant and persistent inflation before the next Fed hike, gave traders the green light to take stock higher.  Ahead, however, will be the US China tariffs scheduled to be hiked on December 15. That along with the UK election on the next key events for not only the US stock market but global stocks.
The final numbers are showing:
  • S&P index, +9.09 points or 0.29% at 3141.61. The high reached 3143.98. The low extended to 3133.21
  • NASDAQ index rose and 37.867 points or 0.44% at 8654.05. The high reached 8658.48. The low fell to 8622.355
  • The Dow rose 29.37 points or 0.11% to 27911.09. The hi reached 27925.50. The low extended to 27801.80

China’s Global Times on trade talks with the US – says there “isn’t a quick fix for this prolonged conflict”

A piece in the Global times, an interview with Hans-Paul Bürkner, chairman of Boston Consulting Group (BCG)

The headline to this post is an editorial opinion from the GT editor, but it fits with the theme of the interview.
  • The situation between China and the US involves more conflict than the world has seen before, but eventually we’ll resolve it because this is the best way for both. 
  • There will be a trade deal. There will be one deal after another, and one issue after another will be resolved but it can take a lot of time.

Nikkei reports: China is doubling down on demands that may threaten trade deal

Cold feet again?

The Nikkei is reporting that Beijing has double down on demands that may threaten to delay a preliminary trade agreement with the US.
The report says that China is digging in on insisting that US withdrawal all tariffs levied since summer of last year before entering an agreement.  Pres. Trump is likely not thinking along those lines in Phase I of what will be a drawn out process.
Phase 1 is intended to focus on expanding American imports into China, but does not address the key structural issues like IP theft.
Trade deals sound good on paper but once the rubber meets the road and both parties dig in a bit more, the risks of a deal break down are real.
The US stock market is taking it in stride. The major indices are trading little changed on the day.
Gold meanwhile is down $25 or -1.67% which suggests no worries/be happy.
If the rhetoric becomes more pervasive, however, we could see a reversal of the market forces going forward.
CLICK HERE for the story

Trump warns he will obliterate Turkey if they go offside

Trump talks about his “great and unmatched wisdom”

Another tweet on Turkey:
As I have stated strongly before, and just to reiterate, if Turkey does anything that I, in my great and unmatched wisdom, consider to be off limits, I will totally destroy and obliterate the Economy of Turkey (I’ve done before!). They must, with Europe and others, watch over…the captured ISIS fighters and families. The U.S. has done far more than anyone could have ever expected, including the capture of 100% of the ISIS Caliphate. It is time now for others in the region, some of great wealth, to protect their own territory. THE USA IS GREAT!
The Turkish lira is under pressure today on speculation they will launch offensives into Turkey.

Big Tech wins US talent war as Trump visa policy hurts Indian IT

While the immigration policies of U.S. President Donald Trump give the impression of slamming the door on foreign talent, a closer look at visa data shows that the big four American tech companies are accelerating their drive to attract and retain highly skilled professionals.

In contrast, the biggest losers are Indian information technology companies, such as Cognizant Technology Solutions, Infosys and Tata Consultancy Services, who had long been the biggest employers of foreign IT talent in the U.S.

At issue is the H-1B visa, the permit that allows foreign talent with specialized skills to reside and work in the U.S. for up to six years. People from India, especially with computer skills, account for the biggest percentage — 74% — of H-1B visa applicants, followed by those from China at 11%.

Workers who enter the U.S. under the H-1B have the opportunity to apply for permanent residency and start their own business. The prospect of the American dream has enabled the U.S. to attract some of the best minds in the world and has been the engine of innovation in the country.

Continue reading »

Platts on the oil price impact of the Saudi attack

Via Platts now, in brief from their analysis:
  • Attacks increases concerns on about supply security in the Middle East
  • Oil price risk premium should heighten
  • sudden change in geopolitical risk warrants elimination of the $5-10 a barrel discount on bearish sentiment and also adds potential $5-10 a barrel premium to account for threats to supply, sudden elimination of spare capacity
  • prices are likely to break out of the current $55-65 a barrel options range
  • test high $70s
  • could move higher still if Saudi output is curtailed for a more substantial period
Note, exports from Saudi are expected to remain around normal levels this week as inventory is drawn upon. Evidence of prolonged curtailment of supply due to damage to production facilities is what to watch for.
ICYMI, oil prices will jump at the open on the attacks over the weekend:

EBITDA-Humour or Making Fool ?

EBITDA (earnings before interest expenses, taxes, depreciation and amortization): Earnings before I tricked the dumb auditor.

EBIT (earnings before interest expenses and taxes): Earnings before irregularities and tampering.