- Futures Flat, Global Stocks Near Record High
- Inflation below target may delay a Hike in March
The FOMC Minutes guided to a rate hike “fairly soon”, but not soon enough in the eyes of the market (March hike odds dropped after the release), the dollar has posted minimal gains, while global stocks held near record highs on Thursday.
Fed officials aren’t losing patience fast enough to hike in March
US and euro zone government bond yields fell or held steady as concerns of an imminent rate hike faded.
The minutes showed many Fed policymakers said it may be appropriate to raise rates “fairly soon” if jobs and inflation data met expectations. But they also highlighted deep uncertainty over President Donald Trump’s economic program and wrestled with uncertainty on issues ranging from the Trump administration’s fiscal stimulus plans to the headwinds a rising dollar may pose.
French bonds advanced after a pact between independent presidential candidate Emmanuel Macron and centrist Francois Bayrou, which for now has helped ease fears the country could elect a leader who favors leaving the European Union.
In Asia, Japan flat. Hong Kong -0.4%. China -0.3%. India +0.1%.
In Europe, at midday, London -0.1%. Paris +0.1%. Frankfurt flat.
Futures at 6:20, Dow flat. S&P flat. Nasdaq flat. Crude +1.4% to $54.33. Gold +0.5% to $1239.50.
Ten-year Treasury Yield -1 bps to 2.4%
Wednesday’s Key Earnings
Energy Transfer (NYSE:ETP) +1.8% AH on higher revenues.
Fitbit (NYSE:FIT) +1.2% AH offering a turnaround strategy.
HP (NYSE:HPQ) +2.4% AH beating expectations.
Southern Co. (NYSE:SO) +1.5% despite higher costs.
Square (NYSE:SQ) +8.6% AH on new product growth.
Tesla (TSLA) +1.5% AH keeping Model 3 plans steady.
TJX Cos. (NYSE:TJX) +0.2% on solid comparable sales.
“Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations,” according to the minutes of the Fed’s last policy meeting. In December, the Fed forecast it would raise rates three times in 2017, but several policymakers are still awaiting details about new U.S. economic plans.
Speaking alongside Treasury Secretary Steve Mnuchin, President Trump announced plans to make the federal government more accountable, and said that it must “do more with less.” He also disclosed that a tax reform plan was “well finalized”, but will only be released after a successful repeal of the Affordable Care Act. Regarding a new version of a travel ban – that has likely been postponed until next week.
“I want to make it clear… the Mexican government and the people of Mexico do not have to accept measures unilaterally imposed on a government by another government,” Foreign Minister Luis Videgaray declared just hours before high profile talks with U.S. Secretary of State Rex Tillerson and Department of Homeland Security Secretary John Kelly. The bulk of the meetings, which will discuss security, immigration, trade and the border, will take place today.
South Korea’s central bank kept interest rates unchanged for an eighth straight month, opting for stability as it monitors uncertainties like North Korea and a political scandal at home. “I don’t think there is a large possibility of Korea being named a currency manipulator by the Treasury, although there is a possibility the U.S. may change its currency monitoring criteria,” Governor Lee Ju-yeol said in a statement.
President Xi is shaking up his economic team ahead of a major power shuffle later this year, as China’s top banking regulator, the commerce minister and top economic-planning official all reach the age of government retirement. The change is expected to be made public soon, sources told WSJ. It comes as China wrestles with rising financial risks at home and increased friction with its trading partners.
Greece must embrace further structural overhauls before the IMF can provide financial assistance, according to fund chief, Christine Lagarde. Speaking in an interview with German TV, she said Athens could not have a “special deal” and there was still a “lot of work that needs to be done before we can actually submit [a proposed program] to the board of the IMF.”
Aggressive restructuring is paying off for Barclays (NYSE:BCS), as the bank swung back into profit as it nears the end of its non-core asset disposal round. Full year net earnings came in at £1.6B, supported by a sharp recovery in investment bank revenue. The lender also made “strong progress” in refocusing itself as a “transatlantic, consumer, corporate and investment bank.” BCS +3.1% premarket.
More European earnings: British American Tobacco (NYSEMKT:BTI) posted a slight increase in full-year sales volume as it looks to double its vaping products markets. Buoyed by higher commodity prices, Glencore (OTCPK:GLNCY) swung into the black last year, posting net income of $1.4B vs. billions in losses in 2015. Orange (NYSE:ORAN) upped its dividend after posting a mixed set of results, while Deputy CEO Ramon Fernandez said consolidation is on everyone’s mind.
Brussels and the ECB are at odds over the capital plans of Monte dei Paschi (OTCPK:BMDPY), throwing doubt on details of the rescue of Italy’s most troubled lender. The two-month stand-off involves fundamental questions over the level of state support allowed, the amount of losses that creditors will suffer and the depth of restructuring needed to make the bank viable.
“We firmly believe that the rights of preferred shareholders in these two enormously profitable, publicly traded companies will be upheld one way or another,” said Fairholme CIO Bruce Berkowitz, one of the major holders of preferred shares in Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). After a 30% plunge the day before, shares in FNMA and FMCC soared around 10% on Wednesday.
Extremely low energy prices during 2016 forced Exxon Mobil (NYSE:XOM) to lower its estimate of its so-called proved oil and gas reserves. The company had to shave off nearly 15%, or 3.3B barrels of oil equivalent, of untapped crude. It comes a day after ConocoPhillips (NYSE:COP) de-booked more than a billion barrels of its oil sands bitumen reserves, citing weak global energy prices.
Confirming media reports, a spokeswoman from French waste and water group Suez (OTCPK:SZEVY) said the company was considering an acquisition of General Electric’s (NYSE:GE) water business. The conglomerate put the unit on the block when it announced it was merging its power business with Baker Hughes (NYSE:BHI) in October. GE Water earns $250M-$300M a year before interest, taxes, depreciation and amortization.
Bayer is sticking to its plan to raise $19B in equity before moving on to a rights and bond issue, providing more details on the financing for its takeover of Monsanto (NYSE:MON). Should the company decide to go for a large or “very large” rights issue, Bayer (OTCPK:BAYRY) would wait until there was more visibility on the regulatory outlook for the deal, CFO Johannes Dietsch declared.
McDonald’s diners will soon be able to quench their thirst for as little as a dollar. Starting in April, soft drinks of any size will cost a buck, while McCafe specialty drinks will sell for $2. McDonald’s (NYSE:MCD) has been looking for ways to boost profits and sales, making its popular breakfast items available all day, and recently rolling out a smaller and jumbo-sized version of its iconic Big Mac.
Known as “Le Cost Killer,” Carlos Ghosn is stepping aside at Nissan (OTCPK:NSANY), with co-CEO, Hiroto Saikawa, taking full control of the reins. But he’ll still remain involved with charting the path of the alliance linking Nissan with Renault (OTCPK:RNLSY) and Mitsubishi (OTC:MMTOY). “There’s a point in time where you have to be realistic about how much things you do and you can do well,” he told Bloomberg, suggesting his plate was getting too full running a trio of major automakers.
PSA Group’s proposed acquisition of Opel would swiftly create savings and value from the General Motors (NYSE:GM) European division’s turnaround and complementary brands, according to the French carmaker. While there’s still no certainty over ongoing acquisition talks, Peuegot’s (OTCPK:PEUGF) chairman spoke with Theresa May yesterday about the “shared goal” of strengthening the U.K.’s supply chain and protecting jobs at Vauxhall plants.
The Model 3 electric sedan remains on schedule and will reach production of about 5,000 units per week by the end of the year, Tesla (NASDAQ:TSLA) said after the company posted a wider-than-expected Q4 loss. CEO Elon Musk also announced he will likely seek more capital from investors. Meanwhile, former chief financial officer, Deepak Ahuja, will return to the company next month, replacing Jason Wheeler, who plans to leave at the end of April. TSLA +1.5% AH.
Vetting policies at SolarCity? In dozens of cases over the last three years, the company reached long-term lease agreements with homeowners shortly before or even after they defaulted on mortgages, NYT reports. In at least 14 cases, the homeowners were already in default, or had other liens on the property, by the time SolarCity (TSLA) filed paperwork about the panels with the government.