Equities across the world are rallying after a historic rate hike from the Fed signaled a mark of confidence in the world's largest economy. Markets were also soothed by Janet Yellen's assurance that future tightening would be "gradual" and dependent on higher inflation. What else happened following the quarter-point increase? A slew of banks announced they would increase their prime rates, while commodity prices fell due to a stronger U.S. dollar.
Economy
Argentina has lifted capital controls and will allow practically unlimited access to foreign currency in a process that will allow the peso to float more freely and result in a sharp devaluation when the market opens for trading today. The move is one of a series of reforms promised by President Mauricio Macri, who took office last week. He has also pledged to regain investor trust and confidence in order to increase exports and spur economic growth.
A controversial congressional vote that stacked an impeachment committee with opponents of President Dilma Rousseff has been found to be legitimate by Brazil's Supreme Court justice which suspended proceedings against her last week. As a result, the full court will vote on whether to open an impeachment trial this afternoon. The move comes after Fitch downgraded Brazil's credit rating to BB+, becoming the second major credit rating agency to strip the country of its investment-grade status.
More Puerto Rican drama....Governor Alejandro Garcia Padilla has announced that the island will either default on its debt in January or May, after a provision that would have granted the territory access to Chapter 9 bankruptcy was left off a U.S. spending bill. Puerto Rico's electric power authority also faces a deadline today to reach a deal with its creditors over a debt restructuring.
The IMF has handed a victory to Russia's Vladimir Putin in his fight to force Ukraine to repay a $3B bond that matures on Sunday. The decision means that Ukraine will now have to demonstrate "good faith" in attempting to negotiate a restructuring if it wants to secure the next installment of a $17B IMF-led rescue program. Putin on Wednesday also announced that he was suspending a free-trade agreement with Ukraine because of the lack of progress in talks over Kiev's signing of a separate trade deal with the European Union.
Meanwhile, EU leaders are set to meet for a two-day European Council summit in Brussels, where they will discuss migration, security, Russian sanctions and British demands to reform the bloc. The last topic is expected to generate heated conversation as no member state has ever left the 28-nation union. The U.K.'s "Brexit" referendum on whether to stay or abandon the EU could happen as soon as mid-2016.
German business confidence fell slightly in December, but still remains at high levels, reflecting the ongoing resilience of Europe's largest economy in the face of numerous challenges. Ifo's business climate index slipped to 108.7 from 109.0 in November. "Sentiment in the German economy weakened slightly this month...but optimism about future business developments remained unchanged," said Ifo president Hans-Werner Sinn.
Stocks
Microsoft is looking to strengthen its position in China again, this time by providing Windows 10 directly to the Chinese government. Through a joint venture with China Electronics Technology, the company will license, manage and provide technical support for the operating system in the public sector's many agencies and institutions. Relations between Microsoft (NASDAQ:MSFT) and Beijing have been rocky in recent years, with China banning Windows 8 use on government computers in May 2014 and then raiding the company's offices a few months later in an antitrust investigation.
Is Alibaba dipping further into traditional publishing? Company spokesman Rico Ngai just shot down a rumor from the Australian Financial Review that stated the company was in discussions to buy Hong Kong's Ming Pao newspaper. Alibaba (NYSE:BABA) bought the territory's South China Morning Post and other media assets of SCMP Group for HK$2.06B ($266M) last week.
A U.S. copyright board on Wednesday raised the music royalty rates that Pandora (NYSE:P) and Internet radio stations will have to pay, setting new prices at a range Pandora called "balanced" and sending its shares up 20% in after-hours trade. The new rate, which will cost $0.17 (instead of $0.14) per 100 plays, will come into effect on Jan. 1 and be valid for the period of 2016-2020.
Cerberus Capital Management is nearing a deal to buy 80% of Avon Products' (NYSE:AVP) North American business for $170M and take a nearly 17% stake in the parent for an additional $435M, WSJ reports. As part of the deal, Cerberus will designate a new chairman and take three seats on Avon's board along with naming two new independent directors. The company has been struggling to reverse a decline in sales for nearly four years, as it loses representatives - the "Avon Ladies" - and faces an increase in online shopping.
AstraZeneca has agreed to acquire a 55% stake in biotech firm Acerta Pharma for $4B, giving it access to acalabrutinib, a new kind of drug for fighting blood cancers. The drugmaker also has the option to buy the rest of Acerta for a further $3B subject to certain milestones. After spurning a $120B takeover bid from Pfizer (NYSE:PFE) last year, AstraZeneca (NYSE:AZN) CEO Pascal Soriot said he would consider small and midsize deals to further boost the company's drug pipeline. AZN -0.8% premarket.
Royal Dutch Shell's takeover of BG Group may look less attractive after the slide in oil prices but the fact the same investors own nearly half of both firms means the deal is still likely to go through. According to Reuters data, investors holding about 43% of Shell's (RDS.A, RDS.B) shares also hold 53% of BG (OTCQX:BRGYY). Shareholders will be voting separately on the deal at meetings expected next month.
Key beneficiaries of a $1.83B U.S. arms sale to Taiwan (the first major arms sale to Taiwan in more than four years) include Raytheon (NYSE:RTN) and Lockheed Martin (NYSE:LMT), a distinction that could earn the companies sanctions from China. The country protested the sale, though the U.S. reiterated that it is staying consistent with its approach across six administrations and a "one-China policy." China considers Taiwan a rogue province.
Third Avenue Management has received approval from the SEC to temporarily suspend redemptions from its $788.5M high-yield bond fund - the Third Avenue Focused Credit Fund (MUTF:TFCVX) - as long as it puts in place investor and market protections. The firm said last week it was going to move the assets to a liquidating trust after losses and redemptions left it unable to repay redeeming clients without resorting to fire sales.
Hilton shares jumped on a report just before yesterday's market close, stating that the company could spin off its hotel properties into a real estate investment trust in 2016. The stock spiked as high as 10% following the Dow Jones report before dropping back down around 5%. HLT shares flat premarket.
Don't close Messenger! Facebook (NASDAQ:FB) has updated the platform to allow users to hail UBER rides without leaving the app or downloading other ride-hailing software. The service is initially launching in the U.S, and more ride-hailing services (LYFT?) will be added in the coming months. Messenger claims over 700M monthly active users.
Fiat Chrysler, which lags the auto industry in fuel efficiency, has purchased U.S. greenhouse gas emissions credits from rival automakers Toyota (NYSE:TM), Tesla (NASDAQ:TSLA) and Honda Motors (NYSE:HMC). The EPA said that Fiat (NYSE:FCAU) purchased about 8.2M megagrams of emissions credits (a megagram is equal to 1,000 kilograms and is calculated on emissions saved over legal requirements).
Google plans to make its self-driving cars unit, which will offer rides for hire, a stand-alone business under the Alphabet (GOOG, GOOGL) umbrella next year, Bloomberg reports. The service could be launched in San Francisco and Austin, where it has tested the cars extensively, and could be first deployed in confined areas like college campuses, military bases or corporate office parks. Alphabet's driverless car project started in 2009 with the aim of building a self-driving vehicle by 2020.
More on the industry...California has proposed rules that would require drivers in the state to apply for a special driver's license before being allowed to use an autonomous car. The self-driving vehicles would also have to pass a test administered by a third party before being leased (as they cannot yet be sold). Who's at fault in the case of accidents? Motorists would be held responsible for obeying traffic laws, regardless of whether they are at the wheel, but where insurance liability will fall is still being hashed out.
Today's Markets
In Asia, Japan +1.6% to 19354. Hong Kong +0.8% to 21872. China +1.8%to 3580. India +1.2% to 25803.
In Europe, at midday, London +1.5%. Paris +2.6%. Frankfurt +3.5%.
Futures at 6:20, Dow +0.4%. S&P +0.4%. Nasdaq +0.5%. Crude -0.4% to $36.59. Gold -1% to $1065.60.
Ten-year Treasury Yield -4 bps to 2.24%
Today's Economic CalendarIn Europe, at midday, London +1.5%. Paris +2.6%. Frankfurt +3.5%.
Futures at 6:20, Dow +0.4%. S&P +0.4%. Nasdaq +0.5%. Crude -0.4% to $36.59. Gold -1% to $1065.60.
Ten-year Treasury Yield -4 bps to 2.24%
8:30 Initial Jobless Claims
8:30 Current Account
8:30 Philly Fed Business Outlook
9:45 Bloomberg Consumer Comfort Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Companies reporting earnings today8:30 Current Account
8:30 Philly Fed Business Outlook
9:45 Bloomberg Consumer Comfort Index
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Source:http://seekingalpha.com/article/3761956-wall-street-breakfast-stocks-fly-after-feds-historic-liftoff
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