The expected day we’ve all been waiting for has finally arrived. The Federal Reserve is expected to hike interest rates when its two-day policy meeting concludes later today, marking the end of a decade of near zero interest rates. But how much and how fast could the Fed raise rates in the coming months? The answer to that question is likely to come from the triple-dose of news the central bank will issue this afternoon – a policy statement, economic forecasts and a news conference by Chair Janet Yellen. Stocks are green across the globe ahead of the big decision.
In Asia, Japan +2.6% to 19050. Hong Kong +2% to 21701. China +0.2% to 3516. India +0.7% to 25494.
In Europe, at midday, London +0.9%. Paris +0.9%. Frankfurt +0.9%.
Futures at 6:20, Dow +0.7%. S&P +0.6%. Nasdaq +0.7%. Crude -0.4% to $37.20. Gold +0.2% to $1063.50.
Ten-year Treasury Yield flat at 2.26%
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Housing Starts
9:15 Industrial Production
9:45 PMI Manufacturing Index Flash
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:00 PM FOMC Forecast
2:00 PM Chairman Press Conference
U.S. lawmakers have agreed to lift the four-decade-old ban on crude oil exports as part of a spending and tax package that will be voted on as early as Thursday. The spending measure also includes temporary wind and solar power tax credits that will expire in several years. Lifting the crude export ban has been a key goal for Republicans, who have said American oil producers should get expanded access to the international market at a time of low prices and new competition from Iranian oil. Crude futures -0.4% to $37.20/bbl.
China’s annual economic growth is likely to slip to 6.8% in 2016 from an expected 6.9% this year, the People’s Bank of China said in a working paper published today. Other projections for next year: Consumer price index +1.7%; Producer price index -1.8%; Fixed-asset investment +10.8%; Retail sales +11.1%; Exports +3.1%; Imports +2.3%.
French business activity slowed to near-stagnation in December, with the services sector suffering from last month’s terrorist attacks in Paris. Putting a halt to a 10-month expansion, Markit’s flash services sector PMI dropped to 50.0 from 51.0 in November. The composite PMI index, which combines services and manufacturing, dipped to 50.3 from 51.0 a month earlier, even though the manufacturing figure reached a 21-month high.
U.S. Secretary of State John Kerry was in Russia on Tuesday to discuss how to end Syria’s civil war, but it looks like the talks didn’t achieve much. “Serious differences remain between Russia and the United States over ways to resolve the Syria crisis,” Russian Foreign Ministry spokeswoman Maria Zakharova said in a statement. She added that Russian Foreign Minister Sergei Lavrov planned to attend an international meeting about the crisis in New York at the end of the week.
Meanwhile, the European Union is looking to make a formal decision on extending economic sanctions against Russia this Friday, once Italy’s prime minister has discussed the issue with his fellow leaders in Brussels. The measures, which would roll over the same sanctions for another six months, include cutting funding for major state-owned banks and energy companies as well as restrictions on Russia’s defense and energy sectors.
The recent U.S. corporate debt market turmoil has thrown up bargains that are attracting some big asset managers, who are betting that bearish investors are overly pessimistic on the outlook for high-yield debt. The HYGand JNK junk bond ETFs – which are together worth about $24B – bounced 1.6% and 1.2% respectively on Tuesday, their biggest one-day gains in a year, while the price of the CDX high-yield index (which gives investors insurance against the default of a basket of companies) fell below the 500 basis point mark again. Nonetheless, with creditworthiness eroding, the Fed about to raise rates and ongoing concerns about liquidity, few analysts are expecting a sharp comeback in the junk bond market.
Billionaire hedge fund investor Bill Ackman, whose Pershing Square funddropped 19.7% during the first 11 months of the year, has told clients that 2015 could be his firm’s worst year ever, even compared to 2008. Losses across the hedge fund industry have been significant this year (averagingaround 4%), but Ackman has also been hit by a big bet on Valeant Pharmaceuticals (NYSE:VRX). Valeant, on the other hand, may clear up some investor uncertainty at an analyst meeting today, at which the company is expected to discuss certain drug development programs.
Ahead of the big presentation, Valeant Pharmaceuticals (VRX) cut its earnings guidance for next year and said it will pay down debt as it tries to end questions about the distribution of many of its products. The drugmaker sees adjusted EBITDA of $6.9B-$7.1B, down from the $7.5B it predicted on Oct. 26. Fourth-quarter earnings per share are expected to be $2.55-$2.65, down from the $4.00-$4.20 it forecast on Oct. 19. VRX –4.2% premarket.
AstraZeneca has agreed to buy Takeda Pharmaceutical’s (OTCPK:TKPYY) respiratory business for $575M, including expanded rights to roflumilast (Daliresp), a treatment for chronic obstructive pulmonary disease. Annual global sales of the three core medicines acquired, excluding sales of Daliresp in the U.S., were $198M for the period ending in March 2015. AZN +0.4%premarket.
Adena Friedman has been named to the newly created position of chief operating officer at Nasdaq (NASDAQ:NDAQ), in a move likely to rekindle speculation that she’s the frontrunner to eventually succeed Bob Greifeld as chief executive. During Greifeld’s tenure since 2003, Nasdaq has expanded from a single equity exchange to include 26 exchanges, three clearing houses, an arm that sells exchange technology and another that handles investor relations for listed companies.
The tax-free treatment of the spinoffs Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD) plan to carry out after they merge their businesses is a prime driver of the deal, potentially saving tens of billions of dollars, industry experts told Reuters. Unlike last month’s Pfizer (NYSE:PFE)-Allergan (NYSE:AGN) merger, where tax savings are the result of Pfizer redomiciling to Allergan’s home base of Ireland in an inversion, the Dow-DuPont tax savings hinge on the deal structure as a merger of equals, a rare event that requires companies of the same size and scope.
The U.S. Justice Department has informed Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI) that the remedies they’ve offered so far to mitigate their proposed merger’s affect on competition are inadequate, although it would continue to assess further proposals. As a result, the companies have agreed to extend the deadline for the deal to April 30, 2016.
Charif Souki, who was ousted over the weekend as chief executive of Cheniere Energy (NYSEMKT:LNG), won’t be around to see the facility ship the first-ever cargo of liquefied natural gas from the U.S. mainland next month, but he’s still not leaving empty handed. Souki’s termination triggered payments of stock and other compensation that are currently worth about $165M, WSJ reports, stating that he will receive half of it now, and the other half upon certain milestones tied to the company’s export terminal. LNG -0.8%premarket.
Apartment owners – including Equity Residential (NYSE:EQR), AvalonBay (NYSE:AVB), and Camden Property Trust (NYSE:CPT) are in discussions about allowing tenants to market rooms through Airbnb’s (Pending:AIRB) network in exchange for a slice of the revenue, WSJ reports. “You just can’t turn your head or keep your head in the sand over what’s going on,” Equity Residential COO David Santee said. “While it’s a little scary, we do think there’s a play there,” Camden Property CIO Kristy Simonette declared. Already at odds with Airbnb, hotel owners may not be too pleased with even more apartments in big cities being essentially converted into hotel rooms.
Global Payments is buying smaller rival Heartland Payment Systems (NYSE:HPY) in a $4.3B cash-and-stock deal. Heartland Payment owners will be receiving 0.6687 shares of Global Payments (NYSE:GPN) and $53.28 in cash for each share of HPY they hold, thus valuing HPY at $100 per share vs. Tuesday’s close of $85.16. Global Payments sees the deal as being mid-single digit accretive to cash EPS in fiscal 2017, and double-digit accretive thereafter. GPN -3.4%; HPY +11.7% premarket.
The European Union has agreed on a sweeping overhaul of fragmented data protection laws that will force companies to report breaches and face huge fines for misusing personal information. Under the new regulations, companies will face tighter restrictions on how they reuse Europeans’ data, be forced to observe the “right to be forgotten,” and will face fines of up to 4% of revenues if they don’t, which could mean billions of dollars for big tech firms like Alphabet (GOOG, GOOGL), Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB).
Engine maker Rolls-Royce has announced an overhaul of its senior management to revive its fortunes and growth following five profit warnings. As of January 1, the company will operate as five market facing businesses, with the presidents of Civil Aerospace, Defense Aerospace, Marine, Nuclear and Power Systems reporting directly to CEO Warren East. The decision will bring an end to Rolls-Royce’s (OTCPK:RYCEY) current divisional structure of Aerospace and Land & Sea, removing a layer of senior management.
Toyota expects group-wide global vehicle sales to stay flat in 2016 at 10.11M vehicles, likely keeping it ahead of rivals Volkswagen (OTCPK:VLKAY) and General Motors (NYSE:GM) as the world’s top-selling automaker. Global sales at the group, which includes mini-vehicle maker Daihatsu (OTCPK:DHTMY) and truck maker Hino Motors (OTCPK:HINOY), will likely total 10.10M vehicles this year, while Toyota’s (NYSE:TM) group-wide production will likely rise about 1% to 10.20M vehicles.
More self-driving dreams? Ford (NYSE:F) has received a permit to begin tests of its fully autonomous Fusion Hybrid models on California’s public roads. The state is one of a handful that have passed legislation enabling testing of self-driving cars on public roads. Since opening its Palo Alto Research and Innovation Center in January, Ford has conducted serious research on virtual test driving, where it has more than 100 employees working on the project.