Market Outlook – May 9, 2018

Volatile Tuesday at Wall Street

 

The three main U.S. benchmarks managed to overcome losses in early trading on Tuesday before finishing the day flat. It was mostly a volatile session as the Dow Jones Industrial Average ended only 2.89 points higher while the Nasdaq Composite Index inched up 2.89 points. The S&P 500 Index closed 0.71 point lower.

Futures for the blue-chip Dow Jones showed a positive sign as it rose 123 points along with the S&P 500 which climbed 11.95 points. The tech-heavy Nasdaq-100 index gained 25 points. The rally in oil prices boosted the U.S.-listed energy companies and helped push the stock-index futures higher. Traders are evaluating the possible effects of Trump’s withdrawal from the Iran deal.

Plane Deals Collapse as U.S. Withdraws from Iran Deal

 

Europe’s Airbus faces greater risk than U.S. plane maker Boeing Inc. (BA) after United States President Donald Trump announced on Tuesday that America is withdrawing from the 2015 Iran nuclear accord.

This latest U.S. move signals the collapse of the $38 billion in plane deals between Tehran and Western companies. Iran ordered a total of 200 passenger aircrafts for state carrier IranAir worth $38.3 billion at list prices. Airbus will deliver 100, 80 will come from Boeing while 20 will be provided Franco-Italian turboprop maker ATR.

Losing the deal is a big blow to Airbus because of weakening demand plus the fact that Iran Air is its second-largest airline Meanwhile, Boeing’s CEO Dennis Muilenburg said last month they are no longer as dependent on the Iran orders because sales of its current-generation 777-300ER wide-body jets are picking up.

Comcast Plans to Outbid Disney on 21st Century Fox Assets

 

There are reports that Comcast Corp. (CMCSA) is negotiating with several investment banks to obtain bridge financing for the purpose of outbidding Walt Disney Co. (DIS) on its $52.4 billion deal to acquire majority of the assets of Twenty-First Century Fox Inc. (FOX).

Comcast is looking to propose a higher bid of $60 billion according to CNBC. A higher bid would effectively frustrate Disney’s plans to build out its streaming channels by buying some of Fox’s prized entertainment assets. Disney wants to add Fox’s movie and TV studios to its empire plus one-third of its stake in Hulu and 22 regional sports networks.

Liberty Global to Sell its Cable Operations to Vodafone

 

On Wednesday, American media mogul John Malone confirmed that Liberty Global PLC (LBTYA) has agreed to sell a huge portion of his cable and broadband empire to UK telecoms operator Vodafone for around $13 billion.

The purchase would cover operations in the Czech Republic, Germany, Hungary and Romania. Malone’s company will receive $12.8 billion in cash, including a $21.8 billion debt. Vittorio Colao, Vodafone’s CEO said, “The acquisition will make the company Europe’s leading next generation network owner, serving the largest number of mobile customers and households across the EU.”

Tesla Changes Borrowing Terms with Banks

 

Tesla Inc. (TSLA) moved to change it’s the existing terms of its borrowing agreement with bank creditors to allow the car maker to offer its Fremont auto factory as collateral. The factory is the production hub of its Model 3 sedan.

Tesla’s available credit is down to $543M from a total credit facility of $1.8 billion. Elon Musk’s firm continues to burn through cash forcing him to buy an additional $9.85 million Tesla stocks this week. Musk wants to demonstrate his commitment to the company which is currently experiencing deep cash flow problems.

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