(GS) USA: President Trump Announces 10% Tariff on Remaining Imports from China

BOTTOM LINE: President Trump has proposed a 10% tariff on the remaining $300bn
of imports from China, effective September 1. The announcement further increases
the odds that these tariffs take effect, which was already our base case. However,
with one month until the effective date there is still some uncertainty as to whether
they will be implemented. The next step to watch will be the release of an order
including the final tariff list, effective date, and tariff rate, which we expect in 1-2
weeks. While we have not changed our baseline view that the Fed will cut by a total
of 50bps this year, the tariff announcement tilts the risks toward deeper cuts and
raises our subjective odds of a September cut from 60% to 80%.
MAIN POINTS:
1. President Trump announced plans to impose a 10% tariff on essentially all
remaining imports from China, effective September 1. This would affect roughly
$300bn of goods that currently face no extra tariffs, and would be in addition to the
$250bn in goods that already face 25% tariffs. The move comes following the return
of US negotiators from Beijing and likely signals that US-China talks did not make
sufficient progress to convince the White House that a deal was likely in the
near-term.
2. That said, there is still a chance that the tariffs could be called off. President
Trump’s announcement references “continuing our positive dialogue with China on a
comprehensive trade deal” and it is possible that this announcement could be a
means of applying additional pressure to extract concessions ahead of the next
scheduled visit of Chinese officials to Washington in September. If so, this seems
unlikely to succeed, in our view, but it suggests that these tariffs are not a foregone
conclusion. That said, we believe they are much more likely to be implemented than
delayed or called off.
3. The majority of imports on affected are consumer goods (62%), compared to
capital (28%) or intermediate (10%) goods, which constituted the bulk of the
previous three tranches. The value of imports on the proposed list is concentrated in
key sectors that have up until this point been nearly – if not completely – unscathed
by tariffs in the first three tranches. For example, apparel and footwear make up
nearly 20% of the value of goods on this list, having been untouched by previous
rounds. Toys account for roughly 10%, and cell phones alone comprise about 17%
of the value of goods on the list. Given the higher share of consumer goods in this
next round, firms may pass on a higher proportion of these forthcoming tariffs to

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance
:

  • GLUU -27.3%, NTAP -17.8%, TUSK -15.9%, FLR -14.3%, FLDM -11%, SGMS -11%, IOVA -9.9%, CC -8.6%, CBLK -8.2%, OTEX -8%, SQ -7.7% (also Square sells Caviar to DoorDash for $410 million in cash), MGI -7.7%, HLF -6.6%, ETSY -5.3%, RBS -5.1%, CRC -4.7%, OEC -4.7%, ANET -3.4%, XENT -3.2%, BT -3%, MTD -2.7%, GFI -2.4%, RACE -2.3%, BMRN -2%, SRE -2%, FBHS -1.8%, WU -1.8% (also announced new Global Strategy implementation - planned changes include an expected net headcount reduction of ~10%), LYB -1.8%, WIFI -1.5%, MERC -1.3%, GPOR -1.1%, SEE -1%, FSLR -0.7%, XRAY -0.7%

Other news:

  • PSTG -9.7% (following NTAP results)
  • VAPO -4.3% (prices offering of 3.1 mln shares of common stock at $14.50 per share)
  • CTST -3.7% (anticipates late filing of financial statements and proposed management cease trade order)
  • DELL -3.4% (following NTAP results)
  • HPE -2.8% (following NTAP results)

Analyst comments:

  • CODI -0.9% (downgraded to Mkt Perform from Outperform at Raymond James)
  • HGV -0.5% (downgraded to Underweight from Neutral at JP Morgan)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance
:

  • APHA +32.7%, PINS +15.8%, SVMK +11.8%, FTNT +11.6%, SCPL +10.6%, BL +10.5%, MTZ +10.2%, CATM +10.1%, TNDM +9.6% (also announces offering of no-cost software update for t:slim X2 insulin pump customers in the US through 2020), IMGN +9.2%, NWL +8.7%, RDFN +7.5%, FND +7.3%, CORT +7.3%, FTAI +7%, CDNA +6.6%, ZIXI +6.6%, IMMR +6.4%, BGS +6.1%, CERS +5.5%, BLDR +4.2%, ESNT +3.6%, HMSY +3.5%, OLED +3.4%, NOG +3.3% (Founder, President and Chairman Emeritus Michael Reger is departing the company to pursue opportunities outside the Williston Basin; reports Q2 results), GPRO +3%, XPO +2.7%, X +2.6%, PVG +2.5%, SHO +2.4%, HTGC +2.2%, LOCO +2.2%, ALEX +2%, QRVO +1.6%, DVA +1.4%, IPHI +1.3%, XOG +1.2%, EOG +1.1%, HIG +1.1%, QSR +1.1%, XOM +1.1%, NE +1%, PBA +1%

Select cannabis related names showing strength:

  • OGI +6.2%, ACB +6%, CRON +3.8%, CGC +2.5%, TLRY +2.1%, NBEV +2%, . 

Other news:

  • CLDR +15.6% (Carl Icahn discloses 12.62% active stake)
  • FIZZ +6.1% (to join S&P SmallCap 600)
  • GRUB +4.2% (to join S&P MidCap 400)

Analyst comments:

  • FLS +3.9% (upgraded to Outperform from Neutral at Credit Suisse)
  • FMC +1.1% (upgraded to Buy from Neutral at Goldman)

>>> US Early premarket gappers



Early premarket gappers

Gapping up:

  • APHA +30.6%, CLDR +17.6%, PINS +14.8%, SVMK +11.8%, FTNT +11.6%, TNDM +11.2%, SCPL +10.6%, BL +10.5%, MTZ +10.2%, CATM +10.1%, NWL +9.2%, OLED +7.7%, FND +7.3%, CORT +7.3%, FTAI +7%, CDNA +6.9%, ZIXI +6.6%, OGI +6.2%, ACB +6%, CERS +5.5%, GPRO +4.8%, RDFN +4.7%, X +4.3%, BLDR +4.2%, GRUB +3.9%, HMSY +3.5%, FIZZ +3.4%, BGS +3.4%, CRON +3.3%, KERN +2.7%, NOG +2.7%, XPO +2.7%, IMGN +2.6%, PVG +2.5%, SHO +2.4%, HTGC +2.2%, LOCO +2.2%, TLRY +2%, ALEX +2%, QRVO +1.9%, DVA +1.4%, XOG +1.2%, IPHI +1.2%, HIG +1.1%, CGC +1%, NE +1%, PBA +1%

Gapping down:

  • GLUU -27.5%, NTAP -19%, TUSK -15.9%, FLR -14.5%, FLDM -11%, SGMS -11%, PSTG -9.9%, IOVA -9.9%, CC -9.1%, CRC -8.4%, SQ -8.3%, CBLK -8.2%, OTEX -8%, HLF -6.6%, MGI -6.1%, OEC -4.7%, CTST -3.7%, DELL -3.4%, ANET -3.4%, XENT -3.2%, GFI -2.4%, RBS -2.3%, RACE -2.2%, HPE -2.1%, BMRN -2%, IEX -1.9%, FBHS -1.8%, WU -1.8%, LYB -1.8%, ETSY -1.7%, WIFI -1.5%, MERC -1.3%, GPOR -1.1%, FSLR -1.1%

FT : US pulls out of nuclear arms control pact with Russia Pompeo says Moscow ‘s

US pulls out of nuclear arms control pact with Russia
Pompeo says Moscow ‘solely responsible’ for collapse of 1987 treaty

The US has withdrawn from a critical 1987 nuclear arms control treaty with Russia after Moscow refused to destroy a new intermediate-range missile that Washington and its Nato allies said violated the Cold War-era pact.

US President Donald Trump withdrew from the Intermediate-Range Nuclear Forces Treaty on Friday, six months after the US told Russia that failing to destroy its SSC-8 cruise missile would spark the collapse of the treaty.

Mike Pompeo, US secretary of state, said Russia was “solely responsible” for the demise of the pact, which was signed by Ronald Reagan and Mikhail Gorbachev at the White House more than three decades ago. The INF was a landmark treaty that paved the way for a number of arms control pacts between the US and then Soviet Union.

The US spent six years urging Russia to return to compliance with the INF after the Obama administration first raised concerns about the SSC-8 missile, which Washington says has now been deployed in western Russia.

“Over the past six months, the US provided Russia a final opportunity to correct its non-compliance. As it has for many years, Russia chose to keep its non-compliant missile rather than going back into compliance,” Mr Pompeo said.

“Russia’s non-compliance under the treaty jeopardises US supreme interests as Russia’s development and fielding of a treaty-violating missile system represents a direct threat to the US and our allies and partners.”

Lori Esposito Murray, an arms control expert at the Council on Foreign Relations, said Russia was to blame for the outcome but stressed that the collapse of the INF could return Europe to the “hair-trigger instability” of the 1980s.

“This really is a crossroads in terms of what is going to happen with these nuclear systems. Right now the best hope is to hold the line and keep [current] reductions in place while we try to figure what happens next,” she said.

António Guterres, UN secretary-general, said the demise of the INF meant “the world will lose an invaluable brake on nuclear war”. It banned nuclear and conventional missiles with a 500-5,500km range, cutting the threat that the Soviet Union and now Russia or the US could fire missiles that would hit their targets in less than 10 minutes.

European members of Nato have swung publicly behind the US decision, but they have also warned against a new arms race between east and west on the continent. There are also fears over whether the US and Russia will be able to extend the New Start agreement on cutting nuclear warheads that comes up for renewal in 2021.

The collapse of the INF treaty comes 17 years after President George W Bush abrogated the Anti-Ballistic Missile treaty, as his administration pushed ahead with plans to install a missile defence shield in Europe. Russia has denied US accusations that the SSC-8 missile violates the INF treaty. It says that the US deployment of missile defence capabilities in eastern European states breaches the pact — an argument that Washington denies.

The demise of the INF also comes as Tehran takes steps to breach the 2015 Iran nuclear deal following the decision by Mr Trump in May 2018 to withdraw from the landmark agreement. Mr Trump’s efforts to convince North Korea to abandon its nuclear programme have also run into big obstacles as Kim Jong Un, the North Korean dictator, shows few signs of being willing to following through on his 2018 pledge to denuclearise the peninsula.

European diplomats say most EU countries would be in range of the new missiles that Russia has deployed in the west of the country. A senior US official said the missiles could target the entire territory of western Europe.

Europe may now face an uncomfortable choice over whether to host extra US missiles in response to the Russian moves. Deployment of US nuclear weapons in the 1980s triggered public protests in several European countries.

Bruno Lété, a security expert at The German Marshall Fund of the United States, said Europe was again at “risk of being back in the line of fire — and left to suffer the consequences in case of a crisis”.

“The fact that great powers no longer see eye to eye on mid-range cruise missiles will undoubtedly raise questions about the future of New Start and other arms treaties,” he added.

A senior US official said the Pentagon was preparing to conduct a flight test of a conventional (non-nuclear) cruise missile that would be fired from a mobile launcher. He said the Pentagon had “undertaken treaty compliant research on non-compliant systems” but that the end of the INF would allow the Pentagon to start testing the missile. But he added that the US was “years away from having an effectively deployable capability”.

US officials said Mr Trump wanted to work with Russia and China to craft a trilateral arms control pact that would address nuclear-armed missiles of all ranges. One official said the president had raised the issue with both Chinese president Xi Jinping and Mr Putin when the leaders met on the sidelines of the G20 summit in Osaka in June. Beijing has given no positive response so far and many analysts doubt it would be interested.

Mr Pompeo said Mr Trump had tasked his administration “with beginning a new chapter by seeking a new era of arms control that moves beyond the bilateral treaties of the past” and added that America “calls upon Russia and China to join us in this opportunity to deliver real security results to our nations and the entire world”.

>>> Europe Brokers Upgrades & Downgrades - 2nd of August 2019 (V2)

>>> Up
* Equinor Upgraded to Neutral at Goldman; Price Target 210 Kroner
* Kone Oyj Upgraded to Neutral at JPMorgan; PT 48.50 Euros
* LSE Upgraded to Add at AlphaValue
* Nexans Upgraded to Buy at Oddo BHF
* Prysmian Raised to Outperform at Mediobanca SpA; PT 22.50 Euros
* SocGen Upgraded to Buy at Citi
* Taylor Wimpey Upgraded to Buy at Citi
* XP Power Upgraded to Buy at Stifel; PT 24 Pounds

>>> Down
* AMS Downgraded to Neutral at Oddo BHF
* BAE Downgraded to Hold at SocGen; PT 5.93 Pounds
* Belimo Downgraded to Reduce at Kepler Cheuvreux; PT 4,400 Francs
* Fresnillo Downgraded to Hold at HSBC; PT 6.90 Pounds
* Galp Downgraded to Sell at Goldman; Price Target 18 Euros
* Intertek Cut to Reduce at Kepler Cheuvreux; PT 51.90 Pounds
* Intertek Downgraded to Sell at SocGen; PT 54 Pounds
* LafargeHolcim Upgraded to Hold at SocGen
* MS Industrie Downgraded to Hold at Montega; PT 3.30 Euros
* PhotoCure Downgraded to Hold at Norne Securities; PT 65 Kroner
* Pirelli Downgraded to Neutral at Mediobanca SpA; PT 6 Euros
* Premier Oil Cut to Equal-weight at Barclays; PT 1.20 Pounds
* Scibase Downgraded to Hold at Pareto Securities; PT 6.40 Kronor
* Vinci Cut to Sell at Insight Investment Research; PT 113 Euros

>>> Initiation
* Codemasters Rated New Buy at Peel Hunt; PT 3.10 Pounds
* Digital Value Rated New Outperform at Mediobanca SpA
* Fevertree Drinks Rated New Neutral at Citi; PT 26 Pounds
* FOPE SpA Rated New Outperform at MainFirst; PT 12 Euros
* Strix Rated New Buy at Stifel; PT 1.98 Pounds

>>> Call
* Fevertree Material Further Upside ‘Hard to Justify,’ Citi Says

>>> TRadeGate Pre-Market Indications

DAX:
  • Allianz (ALV TH) +0.1%
    • Allianz Profit Climbs as Pimco Attracts $25 Billion New Money
  • Vonovia (VNA TH) -0.6%
    • Vonovia 1H FFO Rises; Still Sees 2019 FFO EU1.17-1.22b
  • Fresenius Medical (FME TH) -0.7%
  • Deutsche Telekom (DTE TH) -1%
  • Munich Re (MUV2 TH) -1.1%
  • Daimler (DAI TH) -1.9%
  • VW (VOW3 TH) -2.2%
  • Deutsche Post (DPW TH) -2.2%
  • Covestro (1COV TH) -2.4%
  • Infineon (IFX TH) -2.5%
    • Trade-Sensitive Sectors in Focus as Trump Announces New Tariffs
  • Deutsche Bank (DBK TH) -2.6%
MDAX:
  • Telefonica Deutschland (O2D TH) -0.6%
  • ProSieben (PSM TH) -1.3%
  • K+S (SDF TH) -1.4%
  • Deutsche PBB (PBB TH) -1.6%
  • MorphoSys (MOR TH) -1.7%
  • Evotec SE (EVT TH) -2.2%
  • Zalando (ZAL TH) -2.6%
  • Puma (PUM TH) -2.8%
  • Dialog Semi (DLG TH) -3.6%
  • Siltronic (WAF TH) -4.7%
SDAX:
  • Steinhoff (SNH TH) +1.5%
  • SAF Holland (SFQ TH) -0.3%
  • Borussia Dortmund (BVB TH) -0.5%
  • ADVA Optical (ADV TH) -0.7%
  • Deutz (DEZ TH) -1.4%
  • Nordex (NDX1 TH) -2.4%
  • Heidelberger Druck (HDD TH) -2.5%
  • Jungheinrich (JUN3 TH) -2.8%
  • Aumann (AAG TH) -3.5%
  • Aixtron (AIXA TH) -4.2%

>>> EuroStoxx 600 Pre-MArket Indications

  • BP (BPE5 TH) +0.1%
  • Rheinmetall (RHM TH) -2.7%
  • Covestro (1COV TH) -2.8%
  • Zalando (ZAL TH) -2.8%
  • Nemetschek (NEM TH) -2.9%
  • Continental (CON TH) -2.9%
  • Ericsson (ERCB TH) -3.1%
  • Puma (PUM TH) -3.2%
  • Hella (HLE TH) -3.5%
    • Trade-Sensitive Sectors in Focus as Trump Announces New Tariffs
  • Lanxess (LXS TH) -4.1%
    • Lanxess Second Quarter Adjusted Ebitda 1.8% Above Estimates
  • AMS (DQW1 TH) -5.4%