Global Market and Economic Updates
European shares are again on the decline after talks between Greece and euro zone finance ministers collapsed. Jeroen Dijsselbloem, who chaired the meeting yesterday, told Greece it had until Friday to request a six-month extension of its international bailout or the program would expire at the end of the month. “We want an honorable settlement,” announced Greek Finance Minister Yanis Varoufakis following the talks. “It’s not a bluff, because it’s the only option we have. It’s Plan A, there is no Plan B.”
Brent crude prices extended their rally beyond $62 per barrel today as the IEA warned of supply risks in the Middle East, while other analysts noted the recent price increases may be overblown. The rise of ISIS presents a major challenge for the investment necessary to prevent an oil shortage in the next decade, announced the IEA’s top economist, Fatih Birol. With Brent prices outperforming U.S. contracts the spread between the two benchmarks has risen to almost $9 per barrel, the highest level since August last year.
Cleveland Fed President Loretta Mester says it’s time to drop the “patient” language from the FOMC statement, joining at least six other top Fed officials in suggesting that short-term interest rates could be raised mid-year. “I want June to be a viable option,” Mester told the WSJ in an interview. “That is why I would like to see the language change.”
U.K. inflation fell more than economists forecast in January, dropping to a record low as food and fuel prices tumbled. Consumer-price growth slowed to 0.3% from 0.5% in December, the lowest since the data series began in 1989. Economists had forecast a 0.4% rate in January. As the Bank of England cut its near-term inflation projections last week to reflect the drop in oil prices, Governor Mark Carney warned the rate could fall into deflationary territory in the coming months.
Top lawmakers in the House and Senate have begun their own probes into a recent wave of fraudulent tax filings made through Intuit’s (NASDAQ:INTU) TurboTax, highlighting a growing problem in the “e-filing” industry. IRS data shows that the issue has grown rapidly, to a record of almost 2M suspected incidents by 2013 from about 440K in 2010. The federal government estimates it blocked about $24B in attempts, but still lost about $5.2B in 2013, due to fraudulent e-filings.
Fairfax Financial said it has struck a deal to acquire U.K. specialty insurer Brit PLC for $1.88B, and has secured irrevocable agreements to acquire about 73% of Brit’s outstanding float. Under the terms of the deal, Fairfax (OTCQB:FRFHF) is offering 305 pence in cash per Brit share — an 11.2% premium over the stock’s Monday closing price.
A CSX train carrying more than 100 tankers of crude oil has derailed and burst into a huge fireball in West Virginia, igniting at least 14 tankers. One tanker car and perhaps more fell into the Kanawha River, prompting concerns about potential contamination of water treatment facilities that serve local communities. Although there were no injuries reported, according to CSX (NYSE:CSX), one person was being treated for potential inhalation issues.
Canadian Pacific Railway and the Teamsters Canada union have agreed to seek mediated arbitration, ending a 3,000 Teamsters member strike at the country’s No. 2 railway. CP (NYSE:CP) and the union representing the company’s locomotive engineers and conductors had been locked in a dispute over contracts, with the union at odds with the company’s scheduling model and the number of rest hours for train crews.
Transocean has announced the departure of CEO Steven Newman, who will be replaced by company chairman Ian Strachan in the interim. Suffering along with other oil services companies, Transocean (NYSE:RIG) has experienced a cutback on investment following a halving in oil prices since June. The company also slashed its annual dividend by 80% to $0.60 per share, as it looks to conserve its capital. RIG +0.9% premarket.
Just a little over a month before Apple (NASDAQ:AAPL) releases its smartwatch, LG (OTC:LGEAF) has unveiled a new smart “luxury timepiece” called the LG Watch Urbane, which features a 1.3 inch touchscreen display and runs on Google’s (GOOG, GOOGL) Android Wear. Companies are vying for leadership in the smartwatch space, a market which is expected to be worth $32.9B by 2020, according to Allied Market Research.
“Dividends and other forms of shareholder returns are responsibilities that the company has for shareholders, so we will make efforts to meet them. But our primary objective is growth,” said Robert Yi, Samsung Electronics’ (OTC:SSNLF) head of investor relations. While investors were cheered this year by Samsung’s 40% dividend boost and its first share buyback since 2007, the tech giant is looking to use its $56B cash pile to fund growth in 2015, including acquisitions.
Following the release of its Q4 results, Orange (NYSE:ORAN) forecast a slight decline in earnings for the coming year amid tough competition in its key home market. Net profit fell 51% Y/Y to €925M during the quarter, weighed down by charges linked to the group’s part-time pension plan and litigation settlements. The company said it expects EBITDA to reach between €11.9B-€12.1B this year, but pledged to hold the line on costs and deliver a stable dividend.
Endo International now joins Valeant Pharmaceuticals (NYSE:VRX) and Shire (NASDAQ:SHPG) as a company rumored to be interested in acquiring Salix Pharmaceuticals (NASDAQ:SLXP). Endo (NASDAQ:ENDP) has apparently sent Salix several letters stating its interest in a transaction, but Salix has yet to respond.
Sanofi is set to announce this week that Olivier Brandicourt, head of Bayer’s (OTCPK:BAYRY) healthcare business, will become its new chief executive, Reuters reports quoting Le Figaro newspaper. Brandicourt’s name has been circulating for months as one of a few people suitable as a replacement for Chris Viehbacher, who was sacked by Sanofi’s (NYSE:SNY) board in October.
General Motors will find itself back in the courtroom today in a fight to preserve its bankruptcy shield against legal claims. Judge Gerber, who presided over GM’s (NYSE:GM) government-backed restructuring, is revisiting details of the case to decide whether plaintiffs can sue for vehicle recalls that have dented the value of their GM models and injuries from a defective ignition switch that occurred before the company’s bailout. The faulty switch has been tied to at least 56 deaths.