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- Barclays, JPMorgan, RBS, UBS and Citigroup are being sued by investors over allegations they rigged the global foreign exchange market. (Reuters)
- In one of the largest bank data breaches, a hacker accessed the personal information of around 106 million card customers and applicants through Capital One Financial. (WSJ)
- Citigroup plans to slash hundreds of jobs across its fixed-income and stock-trading operations over the course of 2019. (Bloomberg)
- Shares of Beyond Meat fell as much as 14% after the company announced plans to sell an additional 3.25 million shares in a secondary offering, despite strong earnings and quadrupling its year-over-year sales. (Marketwatch)
1 big thing: The fast-food revolution
Investors are scrambling to get their hands on next-generation meatless and agrifood technology companies, but the past couple of years have proven very lucrative for old-fashioned fast-food chains.
Why it matters: While legacy brands like Kraft Heinz and Campbell's are losing market share as consumers' tastes and shopping habits change, fast-food legacy names like McDonald's and KFC/Taco Bell owner YUM! Brands are seeing all-time high stock prices.
- It's thanks in large part to investments in digital engagement and third-party delivery that have turbocharged sales and revenue in recent quarters.
By the numbers: Restaurant stocks have outperformed the S&P 500 by 13% over the last 12 months and valuations are up 16% year over year, analysts at Goldman Sachs said in a Monday note to clients.
- Quick service and fast-casual restaurants — including traditional fast-food and pricier chains like Chipotle and Shake Shack — are doing even better, outperforming the S&P by 14% year-to-date and 27% over the last 12 months, Goldman analysts led by Katherine Fogertey said in the note.
- McDonald's has seen its stock hit all-time highs 18 times in 2019, according to ETFTrends.com.
- Even last year, when the S&P fell 6.2% overall, 5 companies from the fast-casual restaurant sector posted annual gains of 30% or more, led by Wingstop, which rose 65%.
The big picture: Even better for investors, "fundamentals are accelerating," Goldman analysts say, calling for 28% upside for Chipotle's stock — it touched a record high just last week — to $1,000 a share.
- "Restaurants is a rare sector in the market that doesn’t yet face Amazon encroachment — digital is helping to drive growth and profits."
Between the lines: The fast-food industry's biggest tailwind is coming from a surprising source — the increased pay of low-wage workers.
- After trailing higher-paid workers for years since the financial crisis, earnings for the bottom 25% of workers have been growing at a rate much faster than the national average, and weekly earnings for the bottom 10% of full-time workers have grown even faster, data shows.
- Generally, rising wages would be seen as a negative for the industry, but coupled with stable gas prices, the increasing paychecks of low-wage workers means more money spent at fast-food and fast-casual restaurants.
Be smart: Goldman's research team estimates 70% of the industry's sales growth over the past 5 years can be explained by rising wages, lower gas prices and a boost from third-party apps like GrubHub and Uber Eats.
2. Britain's new government is scaring investors
Currency traders are aggressively pricing in a no-deal Brexit scenario after remarks over the weekend from the U.K.'s new leadership coalition, headed by Prime Minister Boris Johnson, and are selling the pound as a result.
What's happening: Michael Gove, who is in charge of planning for a possible no-deal exit from the EU, has said the British government is "working on the assumption" that it will leave without a deal.
- The pound on Monday dropped 1.3%, and fell further Tuesday morning, touching its lowest level against the dollar in close to 3 years.
What they're saying: "The new UK government wants to show its determination to leave the EU without a deal in less than 100 days to bolster its negotiating position," Marc Chandler, chief market strategist at Bannockburn Global Forex, said in a note to clients.
- "It does not appear to be scaring European officials but is scaring investors who are leaving sterling."
3. A big reason central banks can't seem to control inflation
Long seen as a straightforward calculation, more research is beginning to show that controlling inflation is quite complicated, WSJ's Paul Kiernan writes.
What's happening: "Recent studies have shown prices in some sectors—such as housing—do indeed rise faster when growth is in full swing, unemployment low and markets frothy. But a large chunk of the economy, from health care to durable goods, appears insensitive to rising or falling demand."
- It's not just those sectors. "Prices accounting for nearly half of the Fed’s preferred inflation gauge, the personal-consumption-expenditures price index, don’t respond to changes in economic activity," according to a recent paper from economists at Harvard and Princeton.
Why it matters: "The Fed influences inflation by lowering rates to spur demand or raising them to curb it. The new research suggests that to lift overall inflation the Fed may have to stimulate larger price increases in sectors where the Phillips curve still exists to compensate for subdued inflation in those where it doesn’t."
- "Lately, it’s been a losing battle."
4. Boeing better "get their shit together"
Ryanair, Europe’s largest low-cost airline, reported a 21% drop in after-tax profits for the first quarter, blaming fierce price competition and higher fuel and staff costs.
The big picture: The company also warned job cuts may be coming and future growth projections may be lowered because of issues with U.S. airplane manufacturer Boeing.
Ryanair ordered 58 of Boeing's 737 Max jets for summer 2020, but that order may change since all of the planes have been grounded following 2 fatal crashes.
“It may well move to 20, it could move to 10, and it could well move to zero if Boeing don’t get their shit together pretty quickly with the regulator."— Ryanair CEO Michael O’Leary on the company's earnings call
The worldwide grounding of the 737 Max is now in its fifth month, and FAA regulators have yet to say when they will allow the plane to fly again.
5. Trump ups the ante on his Fed feud
Axios' Courtenay Brown writes: Just as the Fed seems poised to announce the first interest rate cut since the financial crisis, President Trump took his feud with the central bank one step further, saying it "has made all the wrong moves."
Why it matters: Even though Trump may have gotten everything he's wanted from the Fed so far, he is pushing for even more. On Monday, he tweeted: "A small rate cut is not enough, but we will win anyway!"
Trump has used the Fed as a scapegoat, asserting how much stronger he thinks the economy would be if the Fed had halted policy tightening.
- The clearest indication came Friday, when Trump tweeted that 2% GDP growth — a drop from the prior quarter's 3.1% growth — was "not bad considering we have the very heavy weight of the Federal Reserve anchor wrapped around our neck."
The bottom line: "If the market thinks that the Fed is just going to do whatever Trump wants, this could have very serious consequences," Brian Rose, an economist at UBS, tells Axios.
- "The dollar is the world’s reserve currency and very widely held, but if there is a sense that the Fed will cave into political pressure, it will undermine the foreign investors’ willingness to hold dollars."