Good morning! Here’s what you need to know.
Xi Cracks Down. The Chinese Communist Party has announced a corruption probe into the most high-ranking official to date, looking into unspecified charges against former security chief Zhou Yongkang. From the NYT’s Chris Buckley: “Charges against Mr. Zhou could well center on the fortunes made by members of his family, often in sectors once under his sway. An investigation by The New York Times showed that Mr. Zhou’s son, a sister-in-law and his son’s mother-in-law held assets worth some $US1 billion, much of it in the oil and gas sector that was Mr. Zhou’s political fiefdom, where he could shape decisions and promotions.”
Russia In Violation Of Missile Treaty. The U.S. declared Russia had transgressed a Reagan-era arms treaty by illicitly testing a cruise missile in the past few years. It’s not exactly clear what the consequences of the violation will be. U.S. President Barack Obama “has determined that the United States will not retaliate against the Russians by violating the treaty and deploying its own prohibited medium-range system, officials said,” The New York Times’ Michael Gordon reported. “So the responses might include deploying sea- and air-launched cruise missiles, which would be an allowable under the accord.”
Goldman: Consumer Spending Trends Are Plateauing. In a new note tweeted by CNBC’s Carl Quintanilla, the bank downgrades Wal-Mart to neutral, saying consumers are shying away from everything-store types like the Bentonville-based giant, and Target, in favour of e-commerce. Goldman also says: “We expect consumer spending trends to plateau at or near current levels as our discretionary cash flow measure essentially holds its recent clip.”
Morgan Stanley Wage Hike. Bloomberg reports Morgan Stanley is raising junior bankers’ salaries 25% to improve working conditions. They have also introduced time-management guidelines. “Morgan Stanley’s move is intended to aid younger employees with their cash flow amid higher bonus deferrals since the financial crisis, said one of the people,” Michael Moore and Leslie Picker write. “The salary increases won’t necessarily mean a similar jump in bonuses. Wall Street firms have been cutting hours for junior bankers as they seek to prevent defections to rivals such as private-equity funds. Investment banks including Credit Suisse Group AG and Bank of America Corp. have sought to improve working conditions for junior employees by encouraging them to take time off on weekends.”
BP Falls. Shares were down 1.2% pre-market after the British oil giant’s profit climbed year-over-year but off from the prior quarter. They also warned they could yet be affected by sanctions against Russia. They own a 19.75% stake in Rosneft. Second-quarter profits hit $US3.64 billion versus a $US3.42 billion forecast.
Merck, Pfizer Climb. The drug giants were up 1% after topping earnings forecasts. Merck’s adjusted earnings came in at $US0.85/share versus $US0.81/share expected, and revenue hit $US10.93 billion versus $US10.59 billion expected. Pfizer came in at $US0.58/share versus $US0.57 expected on revenues of $US12.77 billion versus a $US12.47 billion forecast.
Aetna Surges. The insurance provider was up 5% pre-market after reporting record revenues that topped forecasts and announcing record membership. Receipts came in at $US14.49 billion.
Data. At 9 a.m. we get the latest Case-Shiller home price index reading. Consensus is for a month-over-month gain of 0.4%. Then at 10 a.m. we get Conference Board Consumer Confidence — expectations are for a reading of 85.5, up from 85.2 prior.
Earnings. Before the bell: Aetna, BP, Deutsche Bank, Honda, Merck, New York Times, Pfizer, UBS, UPS, and Wynn. After: AmEx, Buffalo Wild Wings, Marriott, and Twitter.
Markets. Stocks are up around the world. European markets are up with Britain’s FTSE, France’s CAC, and Germany’s DAX each up 0.3%. Japan’s Nikkei gained 0.5%. U.S. futures are marginally higher.