Market Morning: Trade Nukes, Pfizer Caves, Microsoft Goes, Fox In the Sky, Yield Curve Plummets

Stock Market Roundup

The Trade War Is Getting Serious, Folks

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As sure as a frog’s rear end is watertight, US President Donald Trump fired again in the ongoing trade war with China, announcing tariffs on another $200 billion of imported Chinese goods in response to China’s response to America’s response to China’s response to America’s initiation of tariffs on Friday. 10% tariffs will be instituted following a two month review process targeting clothing, baseball gloves, bicycles, refrigerators and seafood, among other things. Surprisingly, the European Union will side with the US in ganging up against China at a meeting in Geneva concerning the World Trade Organization that China is a part of. Meanwhile, Trump is busy mouthing off at Germany saying that it is controlled by Russia because it engages in unfair energy deals with Putin, according to Trump, who for some reason cares about Germany’s energy policies. It’s like an MTV reality show out there. Stocks and stock futures are down all over the world. Treasuries are up as risk off seems to be the theme of today.

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Pfizer Gives In to Trump Tweet, Agrees to Keep Prices Steady…Until Year End

Yesterday, President Trump tweeted his distaste for Big Pharma giant Pfizer’s (NYSE:PFE) hiking of 100 drugs including Viagra and Xalkori, a lung cancer drug. Trump apparently sat down with Pfizer CEO Ian Read and convinced him not to hike prices, making him an offer he couldn’t refuse. When would prices be rolled back to pre July 1 levels? “As soon as technically possible,” which means that nobody really knows. And how long will they stay there? About 5 months. After which prices are going to go higher again, because it costs over $2 billion to bring a drug to market according to the FDA.

Microsoft Steps In To Cheap Tablet Market with “Go”

Microsoft (NASDAQ:MSFT) wants to compete with low end iPads, and has launched the Microsoft Surface Go, with which one can go, and do other things like keep going. The new Surface Go is 19 inches and weighs just over 1 lb. It has a list price of $399. Reportedly, Microsoft is going after the student classroom niche, dominated by Alphabet’s (NASDAQ:GOOGL) Google Chromebook.

Fox Makes Higher Bid for Sky News

Fox (NASDAQ:FOX) wants Sky News (OTCMKTS:SKYAY) and it’s willing to put up $32.5 billion to get it. Sky has agreed to the buyout, which means Fox has successfully sniped Comcast (NASDAQ:CMCSA) after Disney (NYSE:DIS) sniped Comcast also for a big chunk of Fox, the leftover bits of which that are still not Disney are now buying Sky. Fox already owns about 39% of sky, and its latest bid is 30% higher than its bid made in late 2016.

Yield Curve Narrows to 27 Basis Points

The spread between 2Y and 10Y treasury rates narrowed again today as futures are down, when 10Y rates fell faster than 2Y rates. The spread between the two is now a positive 27 basis points, but has been falling fast. The yield curve could go negative by the end of the year or the first time since 2007. A negative yield curve has signaled impending recession every time since the 1970’s. As long as the Fed continues on a rate hike path, the spread is likely to continue to narrow and eventually break the zero plane.

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