Global Market and Economic Updates
Following the Fed’s dovish policy statement last week, investors will again tune in to Fed Chair Janet Yellen, as the market struggles to figure out the timing of the next rate hike. After a week of volatile moves in bonds, stocks and currencies, Yellen will discuss her own view on how Fed policy should evolve from here. Friday’s data also includes a final reading of fourth-quarter GDP, which is expected to rise to 2.4% from 2.2%, and consumer sentiment figures.
Lower oil prices and subdued consumer demand have again pushed Japan to the brink of deflation, underscoring the difficulties faced by policy makers to revive the world’s third-largest economy through its ¥80T a year stimulus program. Japanese core consumer price inflation, which includes energy prices but excludes food, fell to zero Y/Y in February, far below the 2% target the central bank had aimed to achieve by this spring. The Nikkei closed down 1% on the news, falling to 19,286.
South Korea hopes its infrastructure companies will benefit from the country joining the China-backed Asian Infrastructure Investment Bank, its finance ministry said on Friday. The countries share close trading ties: China is South Korea’s biggest trading partner and the two nations are set to sign a free trade agreement in the first half of this year. Seoul announced yesterday it would join the AIIB as a founding member, the latest U.S. ally to do so despite Washington’s warnings.
Saudi Arabian-led strikes on Yemen and a potential nuclear deal with Iran would have little near-term impact on oil supplies, Goldman Sachs said in an overnight note to clients. “We expect both events to have negligible near-term supply impacts, with the build in crude inventories set to continue in 2Q15. Longer term, a deal with Iran could lead to greater OPEC supplies although the timing of the sanction relief remains uncertain,” the firm stated. Crude futures -1.7% to $50.57/bbl.
The Senate early Friday passed a Republican budget plan that would cut domestic spending by $5.1T over 10 years. The non-binding budget, debated all week and passed 52-46 during a 15-hour marathon session before the Easter recess, gives Republicans another crack at repealing the Affordable Care Act, increases defense spending and slashes funds in other areas, including education and health care. The House passed a similar spending plan on Wednesday.
Amazon is in talks to buy online luxury retailer Net-a-Porter in what could be the biggest acquisition yet for the e-commerce giant, Women’s Wear Daily reports. Amazon (NASDAQ:AMZN) has long coveted the high-end fashion retail sector and any deal for Net-a-Porter, which is owned by Swiss firm Compagnie Financiere Richemont (OTCPK:CFRUY), could come with an approximate €2B price tag.
Despite its revenues falling 6%, JPMorgan (NYSE:JPM) has retained its crown as the top performing investment bank in 2014, according to industry analytics firm Coalition. JPMorgan reaped $22B from investment banking last year, compared with $23.3B in 2013. Other U.S. banks also continued to dominate top spots, with Goldman Sachs (NYSE:GS) coming second overall across investment banking, and Citigroup (NYSE:C) and BofA (NYSE:BAC) sharing third place with Deutsche Bank (NYSE:DB).
Swiss private bank Union Bancaire Privee has agreed to buy Royal Bank of Scotland’s (NYSE:RBS) international private banking arm Coutts International. While both parties did not disclose a price, the FT suggested on Thursday that the deal would fetch $600M-$800M. “This acquisition confirms our commitment in further developing our wealth management business and represents a significant milestone in our growth strategy,” said UBP’s chief executive.
Airlines rushed to change their rules yesterday to require a second crew member in the cockpit at all times, just hours after French prosecutors suggested Germanwings (OTCQX:DLAKY) co-pilot Andreas Lubitz locked the captain out of the cockpit on flight 4U9525 and crashed the plane on purpose. The U.S. has required two crew members to be in the cockpit at all times since the Sept. 11 attacks, but the procedure is not standard in Europe or Canada.
Two weeks after Twitter confirmed the acquisition of Periscope, the live streaming service has launched an iOS app (and an Android app is soon to come). “While there are many ways to discover events and places, we realized there is no better way to experience a place right now than through live video,” said Periscope. Twitter’s (NYSE:TWTR) new app faces off against Meerkat, which launched in February and just raised $14M from VC firm Greylock Partners and several entertainment-related companies.
An attorney for Salus Capital, RadioShack’s (OTCPK:RSHCQ) largest creditor, blasted the electronics retailer’s sale process yesterday, calling for the auction to be reopened. “It’s a charade, judge,” Jay Goffman, told the court. Salus said in court papers it had bid $271M in cash, compared to Standard General’s $16M in cash (and debt forgiveness). RadioShack has asked Judge Brendan Shannon to sign off on the Standard General takeover, but Shannon said he will take until Monday to decide if it should be approved.
Chevron is looking to raise up to A$4.62B ($3.6B) through the sale of its entire stake in Caltex Australia (OTC:CTXAY). According to a term sheet, Chevron (NYSE:CVX) is offering 135M shares at a floor price of A$34.20 each, a 9.7% discount to Friday’s close.
Petrobras has named Luciano Coutinho, head of the Brazil’s development bank and widely considered as a Rousseff ally, to replace former Finance Minister Guido Mantega as the company’s new Chairman. His appointment will likely disappoint analysts and investors who had been hoping for an outsider to take the helm of Petrobras’ (NYSE:PBR) board, as more details emerge regarding the company’s vast corruption scandal.
Just a day after the SEC disclosed an investigation into the firing of Dov Charney, the former American Apparel (NYSEMKT:APP) CEO is now claiming $40M in damages stemming from the termination. The company’s board ousted Charney in December, six months after suspending him, for allegedly misusing funds and spreading improper photos of a former employee. Charney’s claims include almost $6M in severance, $1.3M in vacation-time pay, $10M for emotional distress and 13M shares of the company.
GameStop -5.8% premarket after reporting a larger-than-expected revenue drop in the holiday quarter and disappointing guidance. GameStop’s (NYSE:GME) biggest source of revenue has been sales of preowned games and hardware, however, with gamers switching to newer consoles and mobile games, those sales have been under pressure. Q1 guidance: EPS of $0.53-$0.60 vs. $0.66 consensus; FY15 guidance: EPS of $3.60-$3.80 vs. $4.04 consensus.