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Wall Street… Breakfast

Oil price advances for first time this year

Crude futures are on the rise for the first time in eight days, with U.S. oil pulling further away from the $30-level breached last session following data from the American Petroleum Institute. According to the industry group, oil inventories unexpectedly fell last week, sliding 3.9M barrels to 480M. Also on tap: The EIA publishes its weekly inventories data at 10:30 a.m. ET. Brent+2.5% to $31.63/bbl; WTI +2.4% to $31.17/bbl.

Today’s Markets

In Asia, Japan +2.9% to 17716. Hong Kong +1.1% to 19935. China -2.4% to 2950. India +0.7% to 24854.
In Europe, at midday, London +1%. Paris +1.3%. Frankfurt +0.8%.
Futures at 6:20, Dow +0.6%. S&P +0.6%. Nasdaq +0.7%. Crude +2.4% to $31.17. Gold -0.3% to $1081.80.
Ten-year Treasury Yield +3 bps to 2.13%

Tuesday’s Key Earnings

CSX (NASDAQ:CSX) -1.9% AH on sliding coal shipments.


Chinese shares have reversed back into the red (but shares are in the green elsewhere) in response to a surprise jump in the nation’s trade surplus. In yuan-denominated terms: December exports rose 2.3%, while imports dipped 4%. In U.S. dollar terms: Exports fell 1.4% from a year earlier, while imports dropped 7.6%, widening the December trade balance to $60B (and the full-year tally to $595B). Separately, the cost of borrowing renminbi plunged today in Hong Kong, suggesting China backed off from intervening in the currency markets after eliminating the gap between its onshore and offshore exchange rates.

“It’s one of the few regrets of my presidency, that the rancor and suspicion between the parties has gotten worse instead of better,” said President Obama in his State of the Union address last night. Regardless of the divide, Obama outlined a hopeful portrait of the nation after seven years of his leadership, describing a resurgent economy and better standing in the world despite inequality at home and terrorism abroad. The President also sought to pose and answer central questions about America’s future, including how to ensure opportunity for everyone, harness technological change, keep the country safe, and fix the nation’s broken politics.

The U.S. House of Representatives voted nearly unanimously on Tuesday to pass legislation that would broaden sanctions over North Korea’s nuclear program, days after Pyongyang announced it had tested a powerful nuclear device. Senate leaders will consider a similar bill shortly. Tensions between the two Koreas also got a kick today, after the South fired some warning shots upon spotting a UAV approaching its heavily militarized border from the North.

Iran has released ten U.S. sailors after holding them overnight, bringing a swift end to an incident that rattled nerves days ahead of the expected implementation of a nuclear accord between Tehran and world powers. “Examinations show that the entrance of U.S. soldiers in the territorial waters of Iran was due to broken [mechanics] and the issue is being solved,” Iranian naval commander Rear Admiral Ali Fadavi told state television. The two Navy boats were taken into custody near Farsi Island in the Persian Gulf.

Puerto Rican officials expect to host several meetings in New York over the next two weeks to present a proposal restructuring the island’s $70B of debt to advisers representing its creditors. Talks between Puerto Rico and one of its major creditor groups broke down in October, but the territory has since reached an agreement with creditors of the island’s main electricity provider, and has been fighting for U.S. bankruptcy protection.

The U.S. commonwealth is not the only one bargaining with lenders. Argentina’s President Mauricio Macri is also starting negotiations to end a long, bitter dispute with creditors and allow the country to tap financial markets for the first time in years. “We are ready to bring the matter to a close,” Macri declared. “I hope we can rapidly leave this issue behind because it limits our ability to grow.” Officials are poised to meet in New York with bondholders that had rejected previous debt restructurings following Argentina’s huge 2001 default.


Anheuser-Busch InBev is planning to sell roughly $30B in bonds today in a deal that would rank as the second largest on record. AB Inbev (NYSE:BUD), which is buying rival SABMiller (OTCPK:SBMRY) for $104B, could ultimately sell about $55B in new bonds to help pay for the acquisition, but the remainder would likely come from currencies overseas or at a later date. Verizon (NYSE:VZ) currently holds the record for the largest corporate bond sale ever, with a $49B trade from 2013.

In related news, Philippine conglomerate San Miguel (OTCPK:SMGBY) is interested in acquiring SABMiller’s (OTCPK:SBMRY) Grolsch and Peroni labels, joining a number of international suitors for the beer brands. Several sources disclosed last month that AB InBev (BUD) was seeking to offload Grolsch and Peroni due its heavy presence in Europe through Corona, Stella Artois and other brews.

Although still under review by the Justice Department, Aetna (NYSE:AET) Chief Executive Mark Bertolini expects the company’s $37B acquisition of rival Humana (NYSE:HUM) to close this year. “So far, we have nothing to believe it will be any slower than that, or any faster,” Bertolini said in an interview at the JP Morgan Healthcare conference. Anthem (NYSE:ANTM) CEO Joseph Swedish also anticipates the firm’s $47B merger with Cigna (NYSE:CI) to close in 2016 – moves that will further consolidate the U.S. health insurance industry.

Meanwhile, MetLife soared 8% after the bell on Tuesday after it announced plans to separate its U.S. life insurance unit, saying that the “regulatory environment” helped drive its decision. The business sells life insurance and other financial products, generating at least one fifth of its earnings. MetLife (NYSE:MET) is considering various approaches for splitting off the business, including an initial public offering, a spinoff or a sale.

PC shipments suffered their biggest yearly decline ever in 2015 due to persistent challenges from longer computer lifecycles and competition from mobile phones and tablets. According to International Data Corporation, global PC shipments totaled 276,216 in 2015, a 10.4% plunge from the 308,365 recorded the year before. It also marked the first time shipments have dipped below 300K since 2008.

Google is “forming its own dedicated division for virtual reality computing,” and is moving Clay Bavor, the executive running its product management team, to run the new arm, Re/code reports. Google (GOOG, GOOGL) already has a healthy VR presence – Cardboard has received a measure of developer support, and YouTube has become a popular source for VR-friendly 360-degree videos.

According to government officials, the Obama administration will announce efforts to speed the introduction of self-driving vehicles on Thursday during a speech from Transportation Secretary Anthony Foxx in Detroit. A Google spokesman said the company will take part in Thursday’s announcement by Foxx. Other carmakers are also likely to participate.

The California Air Resources Board has rejected Volkswagen’s (OTCPK:VLKAY) plan to fix 2.0 liter diesel cars equipped with software that allows them to emit up to 40x legally allowable pollution. “The rejection is not a surprise. However, it is unfortunate because it continues to delay getting consumers the answers and solution they want, need and deserve,” said Kelley Blue Book analyst Rebecca Lindland. The move turns up the pressure on VW before talks this week between CEO Matthias Müller and the EPA’s Gina McCarthy.

Ford declared a $1B supplemental cash dividend on Tuesday, but its outlook for 2016 profit failed to exceed estimates, sending its stock down 2.7% in after-hours trading. The automaker said it expected its 2015 operating profit (excluding special items) to be in the upper half of a prior $10B-$11B guidance range, and 2016 operating profit to be at least as high. Ford’s (NYSE:F) “guidance is in line or below what was expected,” said Matthew Stover of Susquehanna Financial.

Halliburton faces a fresh hurdle for its $35B acquisition of rival Baker Hughes (NYSE:BHI) after European regulators opened a full-blown antitrust investigation into the deal, warning that it raises “serious potential competition concerns.” Even though the merger already faces a growing list of antitrust concerns in the U.S., Halliburton (NYSE:HAL) and Baker Hughes are calling the new investigation a “normal step” in the review process.

General Electric plans to cut 6,500 jobs in Europe over the next two years, including 765 in France, as it integrates Alstom’s (OTCPK:ALSMY) energy units into its operations. A spokesman added that GE was also sticking to its promise to create 1,000 net jobs in France in the next three years, which the company pledged to win government support for the deal.


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