Wall Street Breakfast: Crisis In Europe

Brexit drama returns - The United Kingdom and European Union are back at the negotiating table today in an attempt to dodge a looming trade war. While Britain officially left the EU in January 2020, a number of hard-fought trade arrangements that have been inked since then have been criticized for disrupting trade. Specifically, the U.K. feels there are difficulties in implementing required checks on goods moving from Great Britain to Northern Ireland, which lies just across the Irish Sea to the west.Backdrop: Last month, the European Commission proposed to adapt certain parts of the trade deal in an effort to make it easier for these checks to take place. However, EU officials have since complained that the government of U.K. Prime Minister Boris Johnson is not showing a willingness to negotiate and its proposals mark "a significant difference" from the original trade deal.In fact, U.K. Brexit Minister David Frost feels that all checks on goods moving from Great Britain to Northern Ireland should come to an end. Businesses would instead be trusted to inform authorities if products will stay in Northern Ireland or continue to the Republic of Ireland, which is part of the EU. The European Commission does not want to leave the trust up to companies due to worries that products (that don't meet European standards) could end up in the EU's single market.Tough talk: Frost has gone a step further, threatening to trigger Article 16 of the Northern Ireland protocol, which could lead to the suspension of part of Brexit trade deal on the basis that it's causing "economic, societal, or environmental difficulties." The EU is meanwhile preparing a package of retaliatory measures in case that scenario should play out. "Senior EU officials are extremely gloomy about the outlook and believe escalation in the form of a trade war, probably early in the new year, is now almost unavoidable," according to analysts at consultancy group Eurasia.

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Trade Brexit drama returns Shutterstock The United Kingdom and European Union are back at the negotiating table today in an attempt to dodge a looming trade war. While Britain officially left the EU in January 2020, a number of hard-fought trade arrangements that have been inked since then have been criticized for disrupting trade. Specifically, the U.K. feels there are difficulties in implementing required checks on goods moving from Great Britain to Northern Ireland, which lies just across the Irish Sea to the west. Backdrop: Last month, the European Commission proposed to adapt certain parts of the trade deal in an effort to make it easier for these checks to take place. However, EU officials have since complained that the government of U.K. Prime Minister Boris Johnson is not showing a willingness to negotiate and its proposals mark "a significant difference" from the original trade deal. In fact, U.K. Brexit Minister David Frost feels that all checks on goods moving from Great Britain to Northern Ireland should come to an end. Businesses would instead be trusted to inform authorities if products will stay in Northern Ireland or continue to the Republic of Ireland, which is part of the EU. The European Commission does not want to leave the trust up to companies due to worries that products (that don't meet European standards) could end up in the EU's single market. Tough talk: Frost has gone a step further, threatening to trigger Article 16 of the Northern Ireland protocol, which could lead to the suspension of part of Brexit trade deal on the basis that it's causing "economic, societal, or environmental difficulties." The EU is meanwhile preparing a package of retaliatory measures in case that scenario should play out. "Senior EU officials are extremely gloomy about the outlook and believe escalation in the form of a trade war, probably early in the new year, is now almost unavoidable," according to analysts at consultancy group Eurasia.       Top News Crisis in Europe Tensions are also flaring in Eastern Europe, where a buildup of Russian forces is amassing near the Ukrainian border. The U.S. has sounded the alarm, warned EU allies that Moscow may be planning to invade Ukraine, though Russia said the military deployments are on its territory and denies any aggressive intentions. Back in 2014, Russian special forces were deployed to occupy Crimea during the Ukrainian Maidan revolution, though they ended up taking over government buildings and the republic was annexed by Russia following a disputed referendum. Forex movement: The ruble weakened on the latest developments, slipping 0.5% against the dollar to a six-day low. The currency also came under pressure this week after data showed that U.S. inflation had accelerated to a level not seen in more than 30 years. Fears of higher interest rates are expected to have a negative impact on emerging market currencies. The fresh warning over Ukraine comes on top of a bigger standoff between Poland and Belarus, which is a close Russian ally. Top EU officials say President Alexander Lukashenko is luring thousands of migrants and refugees to Minsk - with the promise of helping to get to western Europe - after sanctions were imposed on his regime following a contested election to a sixth term and a crackdown on internal dissent. The problem is being compounded by migration policy that has divided EU member states and has seen the European Commission so far resist calls to fund walls and barriers. Freeze or lift sanctions: "We are heating Europe, and they are threatening to close the border," Lukashenko declared, referring to the Yamal-Europe pipeline. "What if we cut off gas to them... We should not stop at anything to defend our sovereignty and independence." Tight supplies before winter have already led to feats of shortages in Europe, sending natural gas contracts soaring. Gazprom (OTCPK:OGZPY) had just started filling up storage tanks in Europe as Vladimir Putin seeks to leverage his country as an oil and gas superpower and pressure European regulators into approving Nord Stream 2. (23 comments)       Sponsored One of the Hottest Markets on Earth? The global wealth of billionaires has soared 70% in the last 19 months, and they know exactly what they want: more art. A lot more. Take Jeff Bezos—he reportedly spent $70 million last year on two paintings alone. Billionaires have nearly unlimited access to stocks, homes and private equity, but their art holdings could have the biggest payday, market watchers say. WSJ declared that "art is among the hottest markets on Earth," with works selling for fifteen times their asking prices. Masterworks.io gives you exposure to the lucrative art market. Their tech platform, recently valued at over $1B, lets you invest in multimillion-dollar paintings by Warhol, and Picasso, similar to company stock. Wall Street Breakfast Readers get priority access* *See important disclosures Healthcare To profit or not? AstraZeneca (NASDAQ:AZN) is moving away from the non-profit model it used during the pandemic by signing its first money-making deals for its COVID-19 vaccine. The announcement could help out with earnings as shares of the Anglo-Swedish drugmaker slid 4% in premarket trade following the release of its third quarter results. AstraZeneca's vaccine contributed $0.01 to earnings per share in Q3, though the company lost $0.03 per share from its development since the start of the year. Bigger picture: Despite being a lot cheaper and easier to transport, vaccine production delays and worries about blood clotting resulted in AstraZeneca losing market share in developed countries to rivals using new mRNA technology. The company generated $1B in COVID vaccine revenue during the third quarter, which is far less than amount seen by its rivals. Pfizer (PFE), which split profits with partner BioNTech (BNTX), notched $13B in sales from its vaccine, while Moderna (MRNA) reported revenue of $5B. "AstraZeneca's scientific leadership continues to provide strong revenue growth and exceptional pipeline delivery, with eight positive late-stage readouts across seven medicines since June, including our long-acting antibody combination showing promise in both prevention and treatment of COVID-19," added CEO Pascal Soriot. Note: AstraZeneca's shot, developed with the University of Oxford, will remain non-profit for developing countries. While the vaccine isn't yet cleared for use in the U.S., the company also hopes to eventually seek full authorization from the FDA.       Outlook Toshiba breakup Siemens (OTCPK:SIEGY) did it. General Electric (NYSE:GE) did it. Now, Toshiba (OTCPK:TOSYY) is thinking of doing it. The once-championed diversified conglomerate is losing its sheen, with many seeing more risk than reward for sprawling companies with numerous sub-divisions. The trend has been going on for several years, as companies try to simplify their businesses with unique mission statements and let individual assets fend for themselves in the markets. What caused the change? There has been a strong shift towards leaner cost structures and away from the idea that central management can never fully offset the downsides that conglomerates can bring. This is particularly strong for industrial businesses, which are no longer the talk of the town, and have market caps that come nowhere close to their technology rivals. As a result, they must have a more focused story to tell investors, especially in the current information age and investing landscape.

Under threat by activist investors in Japan, Toshiba now plans to split into three independent companies. It will spin off two core businesses - energy, infrastructure and heavy engineering, as well as electronic devices, AI and quantum computing - leaving its flagship name to manage a 40.6% stake in memory chipmaker Kioxia and other assets. As for the timeline, Toshiba hopes to complete the reorganization by the second half of fiscal 2023.

Under fire: Turmoil at the company began with a 2015 accounting scandal and has continued this year. A report released in June found that Toshiba executives and officials at Japan's Ministry of Economy, Trade and Industry had collaborated to stifle foreign shareholders' voices ahead of an annual shareholder meeting in July 2020. The new decision to split up may not fully satisfy some of those foreign investors, which have called for Toshiba to be taken private after an offer was made by U.K.-based CVC Capital in April.

     

Today's Markets

In Asia, Japan +1.1%. Hong Kong +0.3%. China +0.2%. India +1.3%.
In Europe, at midday, London -0.5%. Paris +0.3%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.2%. S&P +0.2. Nasdaq +0.3%. Crude -1.6% at $80.30. Gold -0.8% at $1849.70. Bitcoin -2.5% at $63565.
Ten-year Treasury Yield +2 bps to 1.58%

Today's Economic Calendar

10:00 Consumer Sentiment
10:00 Job Openings and Labor Turnover Survey
12:10 PM Fed's Williams Speech
1:00 PM Baker-Hughes Rig Count
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Alibaba (NYSE:BABA), JD.com (NASDAQ:JD) score Singles Day shopping records.

Goldman Sachs (NYSE:GS) builds thematic ETF lineup with new disruptive funds.

Court rejects Apple's (NASDAQ:AAPL) request in Qualcomm (NASDAQ:QCOM) patent case.

Another breakup... Johnson & Johnson (JNJ) plans to split into two public companies.

Moderna (NASDAQ:MRNA) offers to sell COVID-19 vaccine to Africa at $7 per shot.

U.S. will not open trade probe into Asian solar manufacturers.

Gold sees new momentum as U.S. inflation surges to 30-year high.

General Mills (NYSE:GIS) considers $3B sale of Progresso, Helper brands.

DiDi Global (NYSE:DIDI) prepares to restart apps in China by year's end.

Lordstown Motors (NASDAQ:RIDE) pushes pickup production to later in 2022.

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