Global Market and Economic Updates
For the first time since 2010, all four of the eurozone’s largest economies (Germany, France, Italy and Spain) recorded growth. And for the first time since Q1 of 2011, the currency area grew more rapidly than both the U.S. and U.K. The eurozone economy expanded by 0.4% at the start of the year, marking a pickup from the 0.3% growth recorded in the final quarter of 2014.
Although Germany’s economy slowed more than forecast in Q1 (due to sluggish foreign trade and domestic demand), France marched higher. German GDP rose 0.3% at the start of the year, missing forecasts for 0.5% growth, while France expanded at its fastest pace in nearly two years (+0.6%) due to higher consumer spending. Germany is still on track to outperform the euro area over the next two years as other countries lag behind on the reforms needed to sustain the recovery.
Senate Democrats dealt a blow to President Obama’s push for a pan-Pacific trade pact on Tuesday, blocking a bill that would give fast-track authority for the TPP. While the legislation will likely be sought after again, the latest vote will fan the flames of frustration among the U.S.’s negotiating partners. For months they have been waiting for Washington politics to play out so they can conclude what would be the biggest trade pact since NAFTA.
Oil extended gains overnight after posting its strongest daily rise in weeks in the previous session, supported by bets that U.S. crude stockpiles will fall for a second straight week as production slows. Yesterday, the EIA lowered its 2015 crude production growth estimate, while raising its forecast for U.S. oil demand. The report came after OPEC raised its 2015 forecast of global oil demand to 1.18M barrels per day. Crude futures +1% to $61.37/bbl.
Global bond yields will start to stabilize despite a selloff that has sent yields soaring in recent sessions, Pimco chief investment officer Scott Mather told CNBC in a Closing Bellinterview. Yesterday, the benchmark U.S. 10-year Treasury note yield hit a six-month high of 2.36% before reversing, while sovereign yields across Europe broadly moved higher. Despite those moves, the bond selloff’s “worst phase” has likely ended, said Mather, pointing to a higher-than-expected supply of corporate debt and an “unusual” supply month in Europe as possible explanations for rising yields.
China released a flurry of data today that broadly missed estimates, suggesting that more monetary easing may be needed to spur a pick-up in world’s second largest economy. Industrial output rose 5.9% in April from the year-ago period, accelerating from 5.6% in March, although it missed forecasts for 6% growth. Retail sales and fixed asset investment also missed estimates. “Today’s activity data suggest that the momentum of growth during the first month of Q2 could have slowed further to below 7%,” wrote Liu Li-Gang and Zhou Hao, analysts at ANZ. “We expect the PBOC to cut the lending rate by another 25 bps in Q2 in order to lower the cost of funds further for corporates.”
The New York Times will begin publishing articles directly to Facebook’s (NASDAQ:FB) platform today, kicking off one of the high-stakes partnerships that Facebook has been discussing with a variety of media firms. BuzzFeed, NBC News (NASDAQ:CMCSA) and National Geographic are also said to be joining the launch. NYT +2.7% premarket.
Facebook has also hired former FCC Chairman Kevin Martin to manage its mobile and global access policy from Washington amid the social network’s push to extend Web access to 1.1B-2.8B people under an initiative called Internet.org. The well-connected Martin is seen as having pursued a relatively hands-off regulatory approach during his FCC tenure. FB +0.7% premarket.
After reporting earnings last week, AOL (NYSE:AOL) CEO Tim Armstrong pointed out how programmatic ads were key to the company’s growth – and now they’re the key to its $4.4B acquisition by a video-focused Verizon (NYSE:VZ). For Verizon, the timing and focus will be on an upcoming video service that is likely to center around shorter clips rather than long shows (in keeping with their stated target of mobile-viewing millennials) and would combine key assets in the OnCue service it bought from Intel (NASDAQ:INTC) and the ad-insertion tech that AOL provides. AOL’s Platforms unit grew revenues 21% to $279.8M.
The U.S. Justice Department will likely rip up its agreement not to prosecute UBS (NYSE:UBS) for rigging benchmark interest rates, Bloomberg reports, taking a new step to hold banks accountable for repeat offenses. The move by the DOJ would be a first for the industry, making good on a March threat that stated banks which have non-prosecution agreements over failures to police transactions for criminal activity could see those deals withdrawn.
Philippe Selendy, a lawyer for the FHFA, expects Nomura (NYSE:NMR) and Royal Bank of Scotland’s (NYSE:RBS) shoddy MBS conduct before the financial crisis to result in a judgment exceeding $805M. Despite the hefty amount, the two would likely receive the mortgage bonds in exchange, which are estimated to be worth $434M-$479M. A proposed judgment is expected to be filed in court Friday.
In the end, the price was just too high: Reuters reports that Cablevision (NYSE:CVC) will drop its $1 bid for the New York Daily News when second-round bid deadlines arrive next week. A source said that after hundreds of hours of analysis, Cablevision couldn’t justify even the one dollar considering the paper’s poor financial condition. It’s reportedly losing $30M each year with a heavy dependence on newsstand sales.
Responding to shareholder pressure to improve transparency, Wal-Mart (NYSE:WMT) said it will start directly disclosing to investors what it spends on lobbying on a state-by-state basis. The step would make Wal-Mart the first constituent of the Dow Jones to itemize state expenditures at that level of detail, drawing attention to spending that in some states reaches hundreds of thousands of dollars.
Back to the Takata recalls? Toyota (NYSE:TM) and Nissan (OTCPK:NSANY) have now added another 6.56M cars to their global recalls, bringing the total amount of Takata (OTCPK:TKTDY) infected vehicles called back since 2008 to 31M. Toyota will fix about 5M more cars, while Nissan will call back 1.56M.
Ferdinand Piech may have been banished from Volkswagen (OTCQX:VLKAY) last month, but that doesn’t mean he won’t be able to stir up tension at the automaker once again. Shareholders of Porsche (OTCPK:POAHY), the family company that controls a majority in Volkswagen, will conduct their annual meeting today, with Piech remaining as a member of the supervisory board. In the past, Piech has threatened to sell his stake in the holding company, which could open it up to outside investors. The move would make an uproar not only at Porsche but also at Volkswagen.