Morning coffee

The SEC is suing Elon Musk, accusing the Tesla (NASDAQ:TSLA) CEO of securities fraud and seeking to ban him from serving as an officer of a publicly traded company. The SEC complaint alleges that Musk issued a series of "false and misleading" statements and failed to properly notify regulators of material company events last month when he tweeted about possibly taking Tesla private, saying “funding secured.” In response, Musk said, “Integrity is the most important value in my life and the facts will show I never compromised this in any way.” Tesla’s board says it is “fully confident” in its CEO, and Musk signals that he may not go away quietly. The Wall Street Journal reported that the SEC had crafted a settlement with Musk that it was preparing to file yesterday morning but Musk’s lawyers called off the agreement. Shares tumbled as much as 13% in after-hours trading.

Economy

Japan’s Nikkei index jumped to a 27-year intraday high overnight, aided by improving corporate profits, a healthier economy and a weaker yen, before closing +1.4% at 24,120. Today's rally puts the Nikkei on track to finish as Q3’s best-performing index, as its 6.7% gain in local currency terms is well ahead of the 2.5% increase for India’s Sensex, although neither benchmark has performed as well in dollar terms. Valuations remain attractive, with the Nikkei priced at just 13x forward earnings, said Tony Glover, Tokyo-based senior investment specialist at BNP Paribas Asset Management. Elsewhere in Asia, China’s Shanghai Composite closed +1%, while Hong Kong’s Hang Seng ended +0.2%.

European markets are weighed by political turmoil in Italy, where the new anti-establishment government proposed a 2019 budget with a much wider deficit than the previous administration’s target, setting up a clash with the European Commission. The government late Thursday night offered a budget with a deficit of 2.4% of GDP for the next three years, in a defeat for its economy minister, who had sought a deficit set as low as 1.6% next year, hoping to respect European Union demands that Italy progressively cut the fiscal gap to trim its debt. The full budget will be unveiled in October and will be scrutinized by the European Commission, which could reject it.

U.S. lawmakers are expressing deep reservations about any new North American trade deal that does not include Canada as the Trump administration prepares to advance a NAFTA deal with Mexico but not Canada. U.S. Trade Representative Robert Lighthizer met with key lawmakers yesterday to deliver what senators said was a pessimistic assessment of the state of negotiations with Canada. Congressional staff members cautioned that the administration would find little support on Capitol Hill for a deal that excluded Canada entirely and would be unlikely to move to a vote in the House if Democrats win control in November’s elections.

Mortgage rates in the U.S. jumped to the highest level in more than seven years during the past week, according to Freddie Mac's (OTCQB:FMCC) latest market survey. The 30-year fixed-rate mortgage rose for the fifth straight week, adding seven basis points to an average of 4.72% for the week ending September 27, up from 4.65% in the prior week, and the 15-year FRM averaged 4.16%, up from 4.11%. Homebuilder stocks posted broad losses, in part on the higher mortgage rates and the likelihood of continued increases with another Fed rate hike apparently set to come before the end of this year. ETFs: ITB, XHB, PKB, HOML.

Central banks have emerged as some of the biggest buyers of gold this year, buying a total of 264 metric tons this year to reach the highest level in six years, according to analysts at Macquarie. “The only unambiguously positive sector for gold at the moment is central banks,” Macquarie says, as the price of gold has tumbled 10% so far this year and slid near a six-week low at $1,187.40 per ounce. Poland added to its gold reserves last month, buying more than seven tons of gold, which followed its purchase of two tons in July, according to IMF data; gold buying has long been dominated by Russia, Turkey and Kazakhstan, and Poland's purchase, if confirmed, would be the first by a European Union member this century, according to Macquarie.

Stocks

Google CEO Sundar Pichai will meet today with Republican lawmakers who want to ask about bias against conservatives, antitrust violations and working with China, among other concerns. House of Representatives Majority Leader Kevin McCarthy will host the private meeting between Pichai and more than two dozen Republican lawmakers. Meanwhile, the Wall Street Journal reported that an audio recording of a Google (GOOG, GOOGL) internal meeting from earlier this year showed numerous employees raising objections to the company’s sponsorship of the Conservative Political Action Conference.

The U.S. Air Force selected Boeing (NYSE:BA) to build its next training jet in a contract worth as much as $9.2 billion, beating out competition from a joint bid by Lockheed Martin (NYSE:LMT) and Korea Aerospace as well as another group led by Italy’s Leonardo (OTCPK:FINMF, OTCPK:FINMY). The Air Force currently plans to buy 351 T-X jets and 46 simulators, and options on the contract could allow the purchase of as many as 475 jets and 120 simulators. The new planes will replace the service’s aging fleet of planes, which are nearly 50 years old, and analysts have said it eventually could buy up to 600 planes.

Jeff Bezos' Blue Origin space transport company has won a contract to supply engines for the massive Vulcan rocket built by United Launch Alliance, the joint venture between Boeing (BA) and Lockheed Martin (LMT). The potentially multi-billion dollar agreement is a significant milestone for Blue Origin as it strives to become a player in the market for lucrative U.S. military satellite launch contracts. Blue Origin's engines have strategic importance for the U.S. military because they are intended to end the use of Russian-built engines which now provide primary propulsion on United Launch’s Atlas V rockets.

The Food and Drug Administration approved Eli Lilly's (NYSE:LLY) Emgality injection for the preventive treatment of migraine in adults, one of three in a new class of drugs recently approved for migraines. LLY said it plans to sell the drug, known chemically as galcanezumab, at a list price of $6,900 per year, or $575 per month, identical to the list price for the other new migraine treatments, Aimovig from Amgen (NASDAQ:AMGN) and Novartis (NYSE:NVS), and Teva’s (NYSE:TEVA) Ajovy. Some 39M Americans suffer from migraine headaches, according to the Migraine Research Foundation.

After news that its chairman was indicted on charges of sabotaging union activities, Samsung (OTC:SSNLF) said he would keep his role. "His status remains unchanged," the company said of Lee Sang-hoon, who has led the board since March. It’s another headache for the company, as Samsung heir and Vice Chairman Jay Y. Lee is appealing a conviction for bribery in the scandal that led to the impeachment of South Korea's former president.

Thursday's Key Earnings CalAmp (NASDAQ:CAMP) +7.6% AH on Q2 earnings beat. Progress Software (NASDAQ:PRGS) -13.6% AH on mixed Q3 and downward Q4 guidance. iKang Healthcare (NASDAQ:KANG) +0.3% AH on Q1 revenue growth.

Today's Markets In Asia, Japan 1.36%. Hong Kong +0.26%. China +1.06%. India -0.30%. In Europe, at midday, London -0.19%. Paris -0.40%. Frankfurt -0.72%. Futures at 6:20, Dow -0.10%. S&P -0.09%. Nasdaq -0.12%. Crude +0.19% to $72.26. Gold -0.03% to $1,187. Bitcoin +2.76% to $6.656. Ten-year Treasury Yield -1.8bps to 3.037%.

Today's Economic Calendar 8:30 Personal Income and Outlays 9:45 Chicago PMI 10:00 Consumer Sentiment 1:00 PM Baker-Hughes Rig Count 4:45 PM Fed's Williams: Economic Outlook