President Trump may finally get the rate cut he has been demanding as top Fed officials began warning this week that the global trade war may force them to respond. Chair Jerome Powell made a subtle move in that direction on Tuesday, dropping his standard reference to the Fed being "patient," and said it is prepared to "act as appropriate to sustain the expansion" amid intensifying trade tensions. Futures are now pointing to opening gains in the U.S., up about 0.6%, after the major indexes yesterday had their second-best day of 2019. The DJIA rose 512 points, while the S&P 500 jumped 2.1% and Nasdaq Composite surged 2.7%.

Potential effects of Mexican tariffs

The U.S. and Mexico are scheduled to start official talks in Washington this afternoon after President Trump threatened to impose punitive tariffs on Mexican products on June 10. Where would the levies hit hardest? Mexico is the world's biggest exporter of beer (BUD, STZ), selling $3.6B worth to the U.S. last year, along with $2B in avocados (CVGW, FDP) and $2B in tomatoes. Corporations are also speaking out. Chipotle (NYSE:CMG) estimated a $15M hit, but said it could cover that by raising burrito prices by around 5 cents, while auto parts maker Aptiv (NYSE:APTV) said a 5% tariff would cost the company $17M per month.

Retaliation against Apple?

Apple (NASDAQ:AAPL) shares are up nearly 2% premarket after CEO Tim Cook told CBS News that he didn't "anticipate" his company would be targeted by China should the ongoing trade war escalate further. "We've had a company in China for a long time. And so, there is a, I believe, a healthy level of respect for both sides," he added. Cook also dismissed the idea that Apple was "too big" and took issue with suggestions from presidential candidate Elizabeth Warren that it had a monopoly position that would warrant action from either lawmakers or the DOJ.

China phone output cut

Samsung Electronics (OTC:SSNLF) is cutting production and laying off workers at its only remaining smartphone plant in China as it continues to shift production to lower-cost Asia locations. The world's biggest smartphone maker has only about 1% market share in the country, down from about 20% in 2013. The intervening years have seen a bout of anti-South Korean sentiment following a diplomatic spat, as well as a shift to local champions like Huawei at a time of deteriorating Sino-U.S. relations.

Walmart shareholder meeting

There are likely to be some fireworks at Walmart's (NYSE:WMT) annual shareholders meeting in Bentonville, Arkansas, as Bernie Sanders gatecrashes the "celebration" with calls to raise wages and and for hourly associates to have a seat on the retailer's board. Walmart currently pays an $11 minimum wage, but says its average hourly total compensation and benefits total more than $17.50 an hour. Shareholders will also vote on whether to strengthen Walmart's sexual harassment policies and approve executives' pay.

Ashtray evacuation

The Beverly Hills City Council has unanimously approved a ban on the retail sale of most tobacco products with a sweeping ordinance that is believed to be the first of its kind in the nation. The ban, which is set to begin in 2021, prohibits the sale of cigarettes, cigars, pipe tobacco, chewing tobacco and electronic cigarettes sold in gas stations, convenience stores, pharmacies and grocery stores. Only exemption: Tobacco sales will be permitted at high-end cigar lounges and hotels. Related tickers: MO, BTI, PM, JUUL

Another EV partnership

The next industry alliance has been formed to lower the costs of developing EVs as BMW (OTCPK:BMWYY) said it would develop its next-generation electric motors, transmission and power electronics with Jaguar Land Rover (NYSE:TTM). "We've proven we can build world beating electric cars but now we need to scale the technology to support," said Nick Rogers, Jaguar Land Rover's engineering director. Volkswagen (OTCPK:VWAGY) also announced a mega investment overnight, allocating €4B over the years to 2023 to digitalize its administration and production.

No special treatment

General Motors (NYSE:GM) is not getting a pass on tariffs snagging its Chinese-built Buick Envision. The Trump administration has refused to grant the automaker an exclusion for the SUV, keeping in place a 25% duty on the import. According to the Office of the U.S. Trade Representative, the vehicle is "strategically important or related" to Chinese industrial programs such as "Made in China 2025," which it views as a national security risk. Separately, China has fined Ford's (NYSE:F) Changan joint venture $24M for violating anti-monopoly law.

Disciplinary action is warranted

Recommending the launch of disciplinary procedures, the European Commission has escalated its debt level battle against Italy as the country has only made limited progress in hitting European budget targets and backtracked on structural reforms. The Commission, however, has not yet opened an "excessive deficit procedure" - EU states must first have their say in two weeks' time - though it's still a significant move in the long clash between Brussels and Italy's coalition government.

Tuesday's Key Earnings
Ambarella (NASDAQ:AMBA) +16.4% AH on strong guidance, buyback.
GameStop (NYSE:GME) -29.7% AH amid double-digit sales decline.
Salesforce (NYSE:CRM) +2.7% AH following a beat-and-raise.
Tiffany & Co. (NYSE:TIF) +2.6% reaffirming FY revenue outlook.

Today's Markets

In Asia, Japan +1.8%. Hong Kong +0.5%. China flat. India -0.5%.
In Europe, at midday, London +0.5%. Paris +0.6%. Frankfurt +0.5%.
Futures at 6:20, Dow +0.6%. S&P +0.6%. Nasdaq +0.8%. Crude -0.8% to $53.08. Gold +1% to $1341.30. Bitcoin -1.8% to $7806.
Ten-year Treasury Yield +1 bps to 2.13%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
9:45 Fed’s Clarida: “Monetary Policy Strategy, Tools, and Communication Practices“
9:45 Fed's Bostic Speech
9:45 PMI Services Index
10:00 ISM Non-Manufacturing Index
10:00 Fed’s Bowman Speech
10:30 EIA Petroleum Inventories
1:15 PM Fed's Rosengren: "Transmission of Monetary Policy to the Economy: Beyond the Headlines"
2:00 PM Fed's Beige Book