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Wall Street Breakfats now

Oil is on track to post its third weekly loss

with U.S. crude down 2.2% and Brent off by 2%. U.S. inventory builds, a global glut and a Fed rate hike are still the usual story, but two new factors could crank up more pressure. The IEA predicted today that oil markets will remain oversupplied at least until the end of 2016 – due to sluggish demand and OPEC’s failure to curb production – and the U.S. looks likely to lift its four-decade-old crude export ban (see below) in another few hours. Crude futures -1.3% to $34.48/bbl.

Thursday’s Key Earnings
Accenture (NYSE:ACN) -5.3% after light guidance.
General Mills (NYSE:GIS) -3.3% on slumping net sales.
Red Hat (NYSE:RHT) +6% AH on an earnings beat.
Rite Aid (NYSE:RAD) -0.3% following in-line profits.

 

Today’s Markets
In Asia, Japan -1.9% to 18987. Hong Kong -0.5% to 21756. China flat at 3579. India -1.1% to 25519.
In Europe, at midday, London -0.3%. Paris -0.6%. Frankfurt -0.2%.
Futures at 6:20, Dow -0.3%. S&P -0.3%. Nasdaq -0.1%. Crude -1.3% to $34.48. Gold +0.6% to $1055.60.
Ten-year Treasury Yield -2 bps to 2.21%

Today’s Economic Calendar
9:45 PMI Services Index Flash
10:00 Atlanta Fed’s Business Inflation Expectations
11:00 Kansas City Fed Mfg Survey
1:00 PM Baker-Hughes Rig Count

Economy

The U.S. House is poised to pass a bipartisan $1.1T bill to fund the government until next September, with GOP and Democratic leaders going into overdrive to boost their numbers before the vote. What else is in the package? A whole lot. The lifting of a U.S. crude export ban, alternative energy tax credits, Dodd-Frank clauses, restrictions on Syrian refugees, blocking federal funding for abortions, a delay to portions of Obamacare, and many others topics.

The White House is also calling for “common sense steps” to help Puerto Rico claw out of its $72B debt crisis. House Speaker Paul Ryan has instructed committees to work with the island for a solution to its financial woes, calling for a plan to be crafted by the end of March, while U.S. Treasury Secretary Jack Lew added that any solution should include a mechanism for the territory to restructure its debt.

Beijing has issued a second pollution red alert, little more than a week after the first ever such warning. A wave of smog is due to settle over the city of 22M from Saturday to Tuesday, triggering vehicle restrictions and forcing schools to close. Levels of PM2.5, the smallest and deadliest airborne particles, are set to top 500, more than 20x the level considered safe by the World Health Organization.

Concluding a two-day policy meeting, the Bank of Japan surprised markets this morning by announcing plans to expand the range of its asset buying program. What’s changing? The central bank is increasing purchases of ETFs and lengthening the maturity of bonds it buys to encourage investment in the economy. The move follows the Fed’s recent decision to raise interest rates for the first time in almost a decade, underscoring a divergence between the U.S. and other wealthy economies which still face a heavy risk of deflation.

The Argentine peso fell by as much as 30% against the dollar on Thursday after Mauricio Macri, the country’s newly elected president, lifted capital controls to kick-start the economy. The challenge now is to make sure that the devaluation does not lead to a spiraling of already high inflation. To that end, finance minister Alfonso Prat-Gay has made clear that the central bank will intervene if the peso falls too far too fast in what he described as a “dirty float” system.

Brazil’s Supreme Court has cleared the way for impeachment proceedings to move forward against President Dilma Rousseff, but under conditions that may increase her chances of surviving an ouster from office. Under the new ruling, a congressional special committee that formed earlier this month must be disbanded and re-formed in a move that will likely produce a group more favorable to the president. Rousseff will be allowed to remain in office while the process plays out.

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