The ECB's governing council is meeting in Frankfurt to set monetary policy, and president Mario Draghi has plenty of excuses to institute more stimulus measures. With inflation at just 0.1%, unemployment still over 10% and bank lending disappointing, economists expect the central bank to extend or add to its quantitative easing program and lower interest rates deeper into negative territory. The decision comes at 12:45 p.m. GMT, followed by Mario Draghi's press conference 45 minutes later. Euro -0.5% to $1.0558.
Economy
Although the eurozone has its eyes set on fresh stimulus, the U.S. is reinforcing the case for a rate hike later this month. Fed Chair Janet Yellen said yesterday she was "looking forward" to a U.S. interest rate increase and she's set to speak again today before the Joint Economic Council in Washington. "Rates in Europe and the United States will move in opposite directions for the first time in a long time which is being dubbed as 'the great monetary divergence,'" announced Jim Bianco, president of Bianco Research. Besides Yellen's testimony, there are also speeches today from Fed officials Loretta Mester and Stanley Fischer. U.S. Dollar Index +0.3% to 100.38.
Saudi Arabia has thrown down a challenge to big rival oil producers ahead of tomorrow's OPEC meeting, saying it would back output cuts as long as they were supported by countries both inside and outside the cartel. The move indicates a further softening in tone from the world's largest oil exporter which led the cartel's landmark shift in policy a year ago (arguing that keeping the taps open would pressure high-cost rival producers). Although oil prices settled below $40 a barrel on Wednesday, crude futures are now up 1.5% at $40.53/bbl.
The Obama administration expects to start lifting sanctions on Iran as early as January, after the United Nations' nuclear watchdog found no credible evidence that Tehran recently engaged in atomic-weapons activity. However, the International Atomic Energy Agency did find that the country had pursued a program in secret until 2009, longer than previously believed. The first batch of sanctions relief would end most U.S., European and U.N. financial and energy curbs and free up around $100B in Iranian oil revenue that's being held overseas.
Russia's defense ministry announced that it has "hard evidence" Turkey is involved in illegal oil trade with ISIS, exacerbating the tensions between the two countries since the downing of a Russian warplane by Turkey last week. Officials presented satellite images and videos that they said show links between Turkey and oil refineries in ISIS-controlled territory in Syria. "No one had the right to slander Turkey by accusing it of buying oil from Islamic State," Turkish President Erdogan said in response, outlining that he would step down if such allegations were proven to be true.
Greek unions today are holding their second general strike in less than a month, to protest austerity measures underpinning the country's third international bailout. The 24-hour walkout by Greek workers is expected to shut down public services and disrupt public transportation and flights. Greece's efforts to reform the economy and to deal with the European refugee crisis are also expected to top the agenda during a planned visit to Athens tomorrow by Secretary of State John Kerry.
Stocks
Eight of the biggest U.S. banks have been downgraded by Standard & Poor's, following a rule approved by the Fed in October that will require large institutions to hold a stockpile of debt that can be converted into equity if they falter. "We now consider the likelihood that the U.S. government would provide extraordinary support to its banking system to be uncertain," the credit ratings agency said in the statement. Firms affected include JPMorgan (NYSE:JPM), BofA (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BNY Mellon (NYSE:BK) and State Street (NYSE:STT).
General Electric has signed a memorandum of understanding with the Credit Mutuel Group for the potential sale of its Equipment Finance and Receivable Finance businesses in France and Germany. The potential transaction would represent an ending net investment of $7.5B, and is yet another part of GE's (NYSE:GE) plan to become a simpler industrial business and return as much as $90B to shareholders.
Meanwhile, Barclays is selling its retail banking business in Italy to CheBanca, a unit of Mediobanca Group (OTCPK:MDIBY). The deal marks the latest retail banking exit by Barclays (NYSE:BCS) in Continental Europe as it seeks to reshape itself by selling underperforming businesses and focus on its core operations. New CEO Jes Staley is also said to have approached his former JPMorgan (JPM) colleague Blythe Masters to run the company's investment bank.
After settling multiple class-action lawsuits earlier this week, Anthem (NYSE:ANTM) and Cigna (NYSE:CI) could take a step toward consummating their merger today as shareholders of both companies vote on whether to proceed with the $54B deal. But even if shareholders give the go-ahead, the merger must survive intense scrutiny among federal and state regulators. The tie-up is one of two mergers being proposed that would combine the five largest U.S. insurers into three companies; the other deal is one announced between Aetna (NYSE:AET) and Humana (NYSE:HUM).
Target has agreed to reimburse MasterCard (NYSE:MA) and other U.S. financial institutions a total of about $39M to settle claims in connection with its massive data breach - which exposed 40M payment cards to fraud - during the 2013 holiday season. The settlement comes on the heels of a $67M agreement Target (NYSE:TGT) struck with Visa (NYSE:V) in August on behalf of banks and other firms that issue credit and debit cards.
AB InBev has confirmed it's exploring the sale of a number of SABMiller (OTCPK:SBMRY) European premium brands to address regulatory issues ahead of a proposed tie-up. The company will contact potential buyers in the coming weeks regarding beer brands Peroni, Grolsch and Meantime (a craft brewer bought by the British firm earlier this year). Any sale would be conditional upon closing of the acquisition of SABMiller by AB InBev (NYSE:BUD). BUD+1.4% premarket.
Chipotle is tightening its supplier standards in the wake of an E. colioutbreak last month, putting its longstanding promise to buy food locally in jeopardy. The company has now updated its website by taking down that description and replacing it with a message on long-term supplier relationships. Chipotle (NYSE:CMG) began the prior program in 2008 in a bid to support local farms and sustainable agriculture.
EU antitrust regulators are likely to widen their crackdown on corporate tax dodging with an investigation into a deal between fast-food chain McDonald's (NYSE:MCD) and Luxembourg. The investigation could be announced as early as today. Separately, McDonald's is expected to announce a new debt issuance of as much as $6B, following a record $4.3B issuance by the company in May. MCD -0.6% premarket.
Pandora slumped 5.3% in after-hours trading after announcing the sale of $300M worth of convertible senior notes due in 2020. Aside from capped called transactions related to the offering, net proceeds will be used for "general corporate purposes." Pandora (NYSE:P) recently struck a $450M half-cash/half-stock deal to buy Ticketfly, as well as a $75M deal to buy assets from Rdio.
Royal Dutch Shell has won final approval from Australia's Foreign Investment Review Board for the company's proposed $70B takeover of BG Group (OTCQX:BRGYY). "I am very pleased to receive this news," said Shell ((RDS.A, RDS.B)) CEO Ben van Beurden. "The FIRB approval is an important step towards deal completion." When finished, the merger will create the U.K.'s largest public company.
Petrobras has lost as much as 29B reais ($7.6B) from a cartel of suppliers who bribed company officials to win contracts at inflated prices, far surpassing an internal estimate of 6.2B reais, Brazil's audit court said in a statement. Petrobras's (NYSE:PBR) massive scandal has crippled Brazil's economy and has left President Dilma Rousseff fighting for her political life. Impeachment proceedings were opened against her on Wednesday, but the process could take months.
Looking to cover fines, lawsuits and vehicle refits, Volkswagen (OTCQX:VLKAY) has agreed on terms of a €20B ($21B) bridge loan with banks to help shoulder the costs of its emissions scandal. The crisis has wiped billions of euros off the automaker's stock market value and hammered its bonds - making it much more expensive for the company to borrow through its traditionally preferred route of the debt market. Lawyers also expect the United States Judicial Panel on Multidistrict Litigation to decide today whether to consolidate plaintiffs' lawsuits against Volkswagen into one court.
Wednesday's Key Earnings
Avago Technologies (NASDAQ:AVGO) +8.9% on positive earnings and guidance.
Today's Markets
In Asia, Japan flat at 19940. Hong Kong -0.3% to 22417. China +1.4% to 3585. India -0.9% to 25887.
In Europe, at midday, London +0.3%. Paris +1.2%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.6%. S&P +0.6%. Nasdaq +0.7%. Crude +1.5% to $40.53. Gold -0.4% to $1049.20.
Ten-year Treasury Yield +1 bps to 2.19%
Today's Economic CalendarIn Europe, at midday, London +0.3%. Paris +1.2%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.6%. S&P +0.6%. Nasdaq +0.7%. Crude +1.5% to $40.53. Gold -0.4% to $1049.20.
Ten-year Treasury Yield +1 bps to 2.19%
Chain Store Sales
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Gallup Good Jobs Rate
9:45 PMI Services Index
9:45 Bloomberg Consumer Comfort Index
10:00 Factory Orders
10:00 ISM Non-Manufacturing Index
10:00 Yellen testifies before the Joint Economic Committee
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Companies reporting earnings today7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Gallup Good Jobs Rate
9:45 PMI Services Index
9:45 Bloomberg Consumer Comfort Index
10:00 Factory Orders
10:00 ISM Non-Manufacturing Index
10:00 Yellen testifies before the Joint Economic Committee
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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