Global Market and Economic Update

Economy
Fed Chair Janet Yellen’s Senate testimony today could revive market expectations for a mid-year interest rate hike after dovish-sounding minutes from the Fed’s January meeting suggested the move is likely to be deferred amid low inflation. Yellen is scheduled to testify before the Senate banking committee in her semi-annual report on monetary policy today, and will appear before the House Financial Services Committee on Wednesday.

Republicans are increasing pressure on the FCC to delay Thursday’s net neutrality vote, saying the public needs time to see and review the plan. The proposal has been subject to heated battle since Chairman Tom Wheeler proposed reclassifying broadband from a lightly regulated information service to a more strictly overseen telecommunications service. Supporters of the approach say that without such rules, broadband companies could charge tolls to websites for their fastest speeds, while critics say the plan would give the agency the authority to regulate pricing.

Homeland Security spending authority will expire at midnight on Friday, leading to a partial shutdown of the department unless Congress approves new funding. “It will have a direct impact on your economy, and it will have a direct impact on America’s national security because their hard work helps to keep us safe,” warned President Obama. The $39.7B budget is stalled in Congress over Obama’s recent executive orders that lift the threat of deportation from millions of undocumented immigrants.

Greece sent a list of economic reform plans to the Eurogroup of euro zone finance ministers around midnight, just making a deadline set by its international creditors, Reuters reports. “In the Commission’s view, this list is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review,” said a source. If the reforms are approved, Greece will secure a four-month extension to euro zone funding, keeping its financial system afloat. Athens’ ATG stock index +6.7%.

Stocks
JPMorgan is preparing to charge an array of financial firms, including hedge funds, private-equity firms and foreign banks, for some deposits, citing new rules that make holding money for the clients too costly. Certain deposits are less profitable to handle than they used to be due to new federal rules that can penalize banks for holding deposits viewed as prone to fleeing during a crisis or a stressed environment, sources told WSJ. JPM -0.2% premarket.

BHP Billiton reported a 47% Y/Y drop in net profit as its two most important commodities, iron ore and oil, collapsed in value last year, but the results beat market forecasts. Profit fell to $4.27B for the six months through December, down from $8.11B a year earlier, beating analyst estimates of $3.59B. The company added that it would cut its spending targets to withstand the tough conditions. BHP +3.5% premarket.

Canada’s largest railway reached a last-minute tentative agreement with one of its unions representing 4,800 railroad employees late yesterday, averting a lockout that threatened to delay imports and compound a U.S. West Coast port logjam. “Canadian National Railway (NYSE:CNI) will be running at full capacity tonight and tomorrow,” announced Canadian Labor Minister Kellie Leitch. The move follows last week’s deal between Canadian Pacific Railway (NYSE:CP) and the Teamsters Canada union, which ended a 3,000 member strike at Canada’s No. 2 railway.

As the fight for mobile payment market share heats up, Google (GOOG, GOOGL) has struck a deal with start-up Softcard and several U.S. telecoms to tackle Apple (NASDAQ:AAPL) and Samsung (OTC:SSNLF) in the area of mobile payments. Under the deal, Google will buy mobile wallet technologies and patents from Softcard, and its wallet app will be pre-installed on Android phones sold by AT&T (NYSE:T), T-Mobile (NYSE:TMUS) and Verizon Wireless (NYSE:VZ) later this year.

Hitting a record market cap of nearly $775B yesterday, Apple’s (AAPL) stock closed up 2.7% at $133, after Barron’s predicted over the weekend that the stock could return 25% in a year. At $160, the tech giant would trade at 17x forward EPS, on par with the S&P 500’s current valuation. Apple is also now worth more than twice as much as any other U.S. publicly traded company, with a market value of $774.69B.

Deutsche Bank will outsource large parts of its wholesale banking IT infrastructure to Hewlett-Packard (NYSE:HPQ) in a multibillion-dollar deal that is expected to significantly cut costs. Under the 10-year agreement, HP will provide computing capacity and data storage to host Deutsche’s (NYSE:DB) operations, while the bank will retain activities such as IT architecture and information security.

HSBC has set aside another $550M to cover potential fines for alleged manipulation of foreign exchange markets and warned it could face a $500M bill to compensate U.S. customers for debt protection products it offered before May 2012. HSBC (NYSE:HSBC) paid $611M to global regulators in November when it was one of six institutions fined over allegations of price fixing and manipulating benchmarks in the $5T-a-day forex market.

U.S. officials are probing at least 10 major banks for the possible rigging of precious-metals markets, even though European regulators shelved a similar investigation after finding no evidence of wrongdoing, WSJ reports. The DOJ is scrutinizing the price-setting process for gold, silver, platinum and palladium in London, while the Commodity Futures Trading Commission has opened a civil investigation.

BP has appealed U.S. District Judge Carl Barbier’s finding of the size of the 2010 Gulf of Mexico oil spill, which leaves the company potentially liable to pay $13.7B in fines. In January, Barbier ruled that 3.19M barrels of oil had poured into the Gulf as a result of BP’s (NYSE:BP) disaster, but a new decision that less oil was spilled would likely translate into a lower fine for the company.

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