Traders are poised to get some fresh reads on U.S. economic growth and data ahead of the holidays at the end of the week. Today's big statistic will be the final figure for third-quarter GDP, which is expected to fall to 1.9% from an earlier estimate of 2.1%. The downshift is most likely because of business inventory adjustments as well as fewer services purchases by consumers. Wednesday's economic calendar includes personal income numbers, durable goods orders and the new-home sales report.
Economy
"Moving up gradually means not at every meeting, in all likelihood," Atlanta Fed President Dennis Lockhart said in a interview on WABE radio on Monday. The more probable pace of upcoming interest hikes "will be more like every other meeting," though the actual pace will "depend on how the economy actually performs." Lockhart's opinion is especially notable as he's considered a centrist on the FOMC whose views typically mirror the consensus, although he will not be a voter on the Fed's rate-setting committee in 2016.
This month marks the first anniversary of President Obama's unilateral rapprochement with Cuba. Upon making the Dec. 17 announcement, the administration immediately moved to ease restrictions on American travel, with a promise to normalize relations. The U.S. then deleted Cuba from its list of state sponsors of terrorism in May, reopened a Havana embassy in August, and announced a bilateral agreement to restore direct flights between the two countries last week. So what's left of the embargo? A ban on access to bank credit, and legal claims for almost $8B in property stolen by the Cuban Revolution.
The Brazilian real and stock index both fell yesterday after President Dilma Rousseff named Nelson Barbosa as finance minister, replacing conservative Joaquim Levy. Despite a pledge from Barbosa to continue his predecessor's efforts, traders saw the appointment as a step back from the fiscal rigor pursued for most of the year following the loss of the country's investment grade credit rating. The real weakened past 4.0 and exited active trading at 4.02, while the Ibovespa index ended the day down 1.6%.
Italian prime minister Matteo Renzi is warning that German-driven eurozone austerity policies are fanning the flames of populism, leading to political paralysis across the continent and electoral setbacks for incumbent governments. In an interview with FT the day after voters in Spain slashed Mariano Rajoy's majority in parliament - leaving him struggling to form a new government - Renzi said there was one main lesson to be learnt. "Those who have been in the front line of being the faithful allies of the politics of rigor without growth have lost their jobs...it happened in Warsaw, it happened in Athens, it happened in Lisbon. Let's see what happens in Madrid."
The oil market is recovering slightly after a volatile start to the week when Brent crude touched lows not seen since 2004 and West Texas Intermediate sank below $34/bbl for the first time since 2009. Analysts are citing Wednesday's WTI contract rollover into February as a significant factor for the positive start to Tuesday's session, with traders and money managers preparing for the Western Hemisphere's harsher winter months. Brent +0.5%to $36.53; WTI +0.9% to $36.13.
Stocks
Bonds are poised to outperform stocks globally for a second year, as slowing growth in China drives demand for safer assets. The Global Broad Market Index from BofA Merrill Lynch has risen 1.3% this year, while the MSCI All Country World Index (NASDAQ:ACWI) has slumped 3.1% including reinvested dividends. In 2014, debt returned 7.8% and stocks advanced 4.8%. Warning signs? Bonds haven't outperformed equities for two straight years since 2001-2002 when the tech bubble burst.
Bloomberg sources say Deutsche Bank has identified another $4B in suspicious transactions related to its Russian operations, in addition to the $6B in mirror trades it's already examining. That means the Frankfurt-based lender flagged as much as $10B in total trades that may not have been vetted for money laundering. In October, Deutsche Bank (NYSE:DB) said it increased its litigation reserves by €1.2B, mainly to cover possible lawsuits over its Russia operations. DB -0.7% premarket.
Alibaba has hired a fakes-busting veteran to a new anti-counterfeiting role, following another warning from U.S. trade officials about fake and pirated goods. Matthew Bassiur will join the company next month as head of global intellectual property enforcement, Alibaba (NYSE:BABA) said in a news release. Bassiur previously oversaw anti-counterfeiting for Pfizer (NYSE:PFE) and Apple (NASDAQ:AAPL), and was a federal prosecutor for the U.S. Justice Department.
Samsung Electronics will begin making new chips for Advanced Micro Devices (NASDAQ:AMD) next year, South Korea's Electronic Times reports. The paper said Samsung's (OTC:SSNLF) foundry business and Globalfoundries will jointly start producing a central processing chip as well as a graphics processing chip for AMD using their 14-nanometre technology. The firm already makes chips for companies such as Apple (AAPL) and Nvidia (NASDAQ:NVDA).
It hasn't been the best of weeks for Toshiba. The conglomerate's shares have fallen more than 21%, it forecast a ¥500B loss and this morning its credit rating was downgraded to junk (from Baa3 to Ba2) by Moody's. "The downgrades were prompted by Toshiba's (OTCPK:TOSYY) announcement of its structural reform plan and financial forecast...indicating that earnings and cash flow generation will be significantly below our previous expectations."
Forget about delivery...drones may soon have a bigger role in social media. Twitter (NYSE:TWTR) was granted a patent last week for an unmanned aerial vehicle, which is capable of snapping photos and videos, before sharing those items on user accounts. The company declined to comment on possible production or roll-out plans for the device, but a spokesman did say the following, "Two words: Drone selfies."
Recording the biggest acquisition in its history, NetApp (NASDAQ:NTAP) has agreed to buy SolidFire, a flash-storage systems maker, for $870M in cash. The deal, which is expected to close in the April quarter, puts the company on better competitive footing in the flash array market relative to leaders EMC (XtremIO and soon DSSD), HP (NYSE:HPQ) (3PAR), IBM, and Pure Storage (NYSE:PSTG). NTAP -1.3% premarket
General Electric has signed an agreement to sell a 23.3% stake of Hyundai Capital Services to Hyundai (OTC:HYMLF) and Kia Motors (OTC:KIMTF) for 703B won ($600.8M). GE's transaction, which represents aggregate ending net investment of approximately $0.9B, is part of a broader deal to exit its entire 43.3% ownership in the 11-year-old auto financing JV over the following months.
Buried in the details of a new 20-year distribution agreement between Valeant Pharmaceuticals (NYSE:VRX) and Walgreens Boots Alliance (NASDAQ:WBA) is a $150M financial hit to Valeant that underscores the unusual nature of the deal (which will see the firm buy back its own drugs from Walgreens and then resell them on consignment to the pharmacy). The pact will help Valeant replace a controversial mail-order pharmacy, Philidor, which had close ties to the drug company and used aggressive tactics to win insurance payments.
Martin Shkreli has been ousted from his second pharmaceutical company - KaloBios Pharmaceuticals (NASDAQ:KBIO). Last week, he was removed as chief executive of Turing Pharmaceuticals, a privately held company in New York that he co-founded late last year. Shkreli, who is free on $5M bail, maintains he is not guilty of operating a quasi-Ponzi scheme and misleading investors.
Chipotle shares hit a new 52-week low in Monday's regular trading session after the Centers for Disease Control said it's investigating a possible new E. coli outbreak linked to restaurants in Kansas, North Dakota, and Oklahoma. The five illnesses, reported between November 18 and November 26, have not been part of any of the prior CDC tallies. Chipotle (NYSE:CMG) shares are down 18.1% since the first E. coli cases were reported last month.
BHP Billiton has raised the death toll from its catastrophic dam burst in Brazil to 17, pledging to release the findings from an external investigation into the cause of the disaster. However, two people who were working on theBHP dams are still missing. Yesterday, a Brazilian judge ruled that iron-ore producer Vale (NYSE:VALE) shares responsibility for the breach because it was using the facility to store its own mine waste.
SolarCity will be pressed to "cease sales and installation operations in Nevada" if a proposal on solar charges is approved by the state's Public Utilities Commission today. The plan includes a two-part tariff consisting of a fixed service charge and a volume-based commodity charge, and would apply retroactively to all net metering customers. SolarCity (NASDAQ:SCTY) CEO Lyndon Rive: "There is so much wrong with the decision, the only option for the PUC is to reject it.
The force is powerful everywhere except for Disney (NYSE:DIS) shares. Despite a record-breaking opening for Star Wars: The Force Awakens that surpassed even the media giant's own estimates, the stock fell for the third day in a row on Monday, closing down nearly 1.1% at $106.59. Some on Wall Street remain concerned about cord-cutting pressures on ESPN and recent analyst downgrades.
Google is in talks with Ford (NYSE:F) about a joint venture that will build self-driving cars using its technology, Automotive News reports. The manufacturing deal is expected to come during the annual International Consumer Electronics Show in Las Vegas during the first week of January. Alphabet (GOOG, GOOGL) previously suggested it doesn't want to be an auto manufacturer itself, but rather a hardware/software supplier to third-party carmakers.
Today's Markets
In Asia, Japan -0.2% to 18887. Hong Kong +0.2% to 21830. China +0.3% to 3652. India -0.6% to 25591.
In Europe, at midday, London +0.7%. Paris +0.4%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq flat. Crude +0.9% to $36.13. Gold -0.3% to $1077.
Ten-year Treasury Yield flat at 2.20%
Today's Economic CalendarIn Europe, at midday, London +0.7%. Paris +0.4%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq flat. Crude +0.9% to $36.13. Gold -0.3% to $1077.
Ten-year Treasury Yield flat at 2.20%
8:30 GDP Q3
8:30 Corporate Profits
8:55 Redbook Chain Store Sales
9:00 FHFA House Price Index
10:00 Richmond Fed Mfg
10:00 Existing Home Sales
Companies reporting earnings today8:30 Corporate Profits
8:55 Redbook Chain Store Sales
9:00 FHFA House Price Index
10:00 Richmond Fed Mfg
10:00 Existing Home Sales
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