Global Economic and Market Updates
A slump in euro-area consumer prices eased in March, offering respite to the ECB after it pledged to buy €1.1T of assets through September 2016 to fend off deflation. According to flash estimates released by Eurostat this morning, the annual rate of inflation climbed to -0.1% from -0.3% in February. Other data also showed the region’s unemployment rate falling to 11.3% last month, down slightly from 11.4% in January.
Meanwhile, the euro fell for a second day, heading toward a fourth straight quarter of declines, amid concerns Greece will fail to reach an agreement with its European partners to unlock a fresh lifeline of €7.2B. The currency is now down 0.9% at $1.0737 after sliding 0.5% on Monday – weakening 11% this year against the dollar. Greece’s creditors said yesterday that the reform plan the country submitted over the weekend fell short of the needed requirements.
Asian equities are off to a winning start this year, with China and Japan stealing the show in the first quarter. “Abundant global liquidity, provided by the BOJ and ECB, combined with…interest rate cuts by several central banks in the region and lower oil prices have bolstered sentiment towards Asian equities,” said Tai Hui, chief Asia market strategist at JPMorgan. China’s Shanghai Composite has rallied 17% so far this year and expectations of further stimulus will likely buoy the market going forward. Japan’s Nikkei Index was the second top performer in the region, up 13% YTD, benefiting from the central bank’s QE policies and the shift by the country’s pension funds out of bonds and into equities.
Will it be a yes or a no? Oil is heading lower again as Iran and six world powers try to break an impasse in negotiations aimed at stopping Iran from having the capacity to develop a nuclear bomb, in exchange for an easing of international sanctions. Iran could increase oil production by some 500K bpd in three to six months if sanctions are removed, and by an additional 700K bpd within another year, according to estimates by Facts Global Energy. The deadline to find a preliminary agreement is set to expire tonight. Crude futures-2.2% to $47.61/bbl.
Japan remains cautious about signing up to the China-led Asian Infrastructure Investment Bank, indicating that Tokyo will miss the March 31 deadline for application, but both Taiwan and Norway said they would seek to join the institution. Despite warnings from Washington, over 40 nations have joined or said they intend to become members of the AIIB, adding clout to an institution seen as enhancing Beijing’s regional and global influence.
Giving his second speech on the topic since Friday, Fed Vice Chairman Stanley Fischer declared that regulators must better monitor and consider new rules for the growing proportion of lending being done within the shadow banking sector. “Non-bank firms and activities can pose the same key vulnerabilities as banks, including high leverage, excessive maturity transformation, and complexity, all of which can lead to financial instability,” said Fischer. The Financial Stability Board stated in a November report that U.S. financial assets held by non-banks reached $25.2T in 2013, exceeding pre-crisis levels.
IBM is investing $3B over the next four years in a new ‘Internet of Things’ division, aiming to sell its expertise in gathering and making sense of the surge in real-time data. For its first major partnership, IBM (NYSE:IBM) said a unit of the Weather Company will move its weather data services onto its cloud, so that customers can use the data with IBM’s analytics tools. Focusing on the cloud has been part of Big Blue’s gradual shift away from its traditional hardware and consulting business.
Looking to lift off its drone program, Amazon (NASDAQ:AMZN) has hired the former number-two executive at the Air Line Pilots Association. Sean Cassidy, an Alaska Air pilot and former member of a TSA aviation-security advisory committee, will oversee “partner relationships” at Amazon’s Prime Air program, which intends to use drones to make unmanned deliveries within about 10 miles of a warehouse.
McDonald’s says it will begin table service in Germany as part of its transition to a modern burger company under new CEO Steve Easterbrook. The company has also been active in the U.S. over the last month with an antibiotic policy change and by testing new initiatives – including a simplified menu and all-day breakfast. Shares of McDonald’s (NYSE:MCD) cracked the $100 level in early March, but have sauntered along in a tight $95-$98 range since then.
Swiss luxury group Richemont says it will merge its Net-a-Porter unit with Italian fashion site Yoox (OTCPK:YXOXY) in an all-share deal aimed at gaining a larger share of the fast-growing online luxury market. A report last week suggested that Amazon (AMZN) was in talks to buy the online luxury retailer. Richemont (OTCPK:CFRUY) said it will receive 50% of the combined entity, but its voting rights will be limited to 25% to preserve the unit’s independence.
After five years in the role, AIG (NYSE:AIG) Chairman Steve Miller intends to step down in July, but will remain on the global insurance giant’s board. Company guidelines say a non-executive chairman should serve no more than five years, and – with the company no longer in crisis mode – there’s no compelling reason to extend the restructuring specialist’s term, WSJ reports. No replacement has yet been settled on.
Enterprise Products Partners says Chief Executive Michael Creel will retire at year’s end after leading the company for five years, to be replaced by Chief Operating Officer James Teague. Teague joined Enterprise Products (NYSE:EPD) in connection with its purchase of certain energy assets from affiliates of Shell (RDS.A, RDS.B) in 1999, and has served as COO since 2010.
Shutting Herbalife is “one of the most important things” I can do, declared Bill Ackman yesterday at the Council of Institutional Investors in Washington. Ackman noted that when he first bet against Herbalife (NYSE:HLF), he had not anticipated that Carl Icahn would come in and take a long view on the company. Had Icahn not shown up, Ackman said, the whole thing would be over in a few months and Herbalife’s alleged pyramid scheme would have collapsed. HLF shares are up over 13% for the year.
Betting that group travel will grow more rapidly in the years ahead, Blackstone (NYSE:BX) has agreed to pay more than $1.2B to a consortium of Paulson, Winthrop Realty Trust (NYSE:FUR) and Capital Trust (now the Blackstone Mortgage Trust, BXMT) for three large hotels. The sale includes the Ritz Carlton and J.W. Marriott in Orlando, Florida and the J.W. Marriott in Scottsdale, Arizona.
Tesla’s Chinese sales rose 130%-150% M/M in March, Bloomberg reports, citing an article that originally appeared in Xinhua. China was a weak spot for Tesla in Q4, but Elon Musk has continued to stress his optimism about the automaker’s long-term future in the country, despite prior mistakes. Earlier yesterday, Musk tweeted that Tesla (NASDAQ:TSLA) would unveil a new product that isn’t a car at its Hawthorne Design Studio on April 30. TSLA +0.8% premarket.
Philips has agreed to sell an 80.1% stake in its lighting components division to Go Scale Capital, a fund sponsored by GSR Ventures and Oak Investment Partners, as chief executive Frans van Houten focuses the Dutch company on the consumer health-care market. Philips (NYSE:PHG) will receive $2.8B for the sale and will retain the remaining shares in the unit. The deal is also a prelude to an even bigger strategic move: spinning off its main lighting division, the world’s largest lighting maker, in a multibillion-euro IPO next year. PHG -1.3% premarket.