Tuesday Morning Market Prepper
The dollar is climbing back towards a 14-year high after Janet Yellen flagged strength in the U.S. jobs market, while fallout from attacks in Germany, Turkey and Switzerland are putting pressure on the euro, pushing the currency firmly back below $1.04 (see both below). Many economists have predicted parity with the greenback for years, arguing that the dollar would appreciate as the Fed embarked upon a path of monetary-policy normalization, but those forecasts didn't look likely to pan out until recently.
Terror around the globe: 12 are dead and almost 50 are injured after a suspected Pakistani refugee ploughed a truck into crowds at a busy Christmas market in Berlin. Vladimir Putin said the murder of the Russian ambassador in Ankara was a terrorist plot aimed at destroying the two countries' attempts to reach a solution for Syria and three men were wounded in Zurich after a gunman opened fire on people praying inside a mosque.
The greenback continues to make gains after Janet Yellen told University of Baltimore graduates they are entering the strongest U.S. jobs market in a decade. Although she stayed away from any mention of monetary policy, the Fed Chair said wages are picking up and there are more job openings, but cautioned that the economy still faces weak productivity and low growth.
Donald Trump has secured his official victory in the Presidential election, easily defeating Hillary Clinton in U.S. Electoral College. But the vote, which is normally just a formality, saw the highest number of faithless electors in over a century. At least four Democratic electors voted for someone other than Clinton, while two Republicans turned their backs on Trump.
IMF Managing Director Christine Lagarde won't face punishment and will keep her job, despite being convicted of negligence charges relating to a state payment made during her time as French finance minister in 2008. The court ruled that Lagarde failed to contest a €400M award to billionaire tycoon Bernard Tapie, but decided against sentencing owing to her preoccupation with the 2008-09 financial crisis and strong international reputation.
Smog in northern China including the capital city of Beijing reached hazardous levels for the fourth straight day on Tuesday, highlighting the fallout from resurgent coal production and related demand in the world's second largest economy. A "red alert" - the highest level in China's four-tiered pollution warning system - across 24 cities has canceled flights, closed off highways and shut down schools and factories.
The Bank of Japan has finished a tumultuous year for monetary policy with an upgrade to its economic assessment, while keeping its negative rates, yield-curve and asset-purchase programs unchanged. Stating that the economy continues to recover moderately as a trend, the central bank signaled its conviction that a generally weak yen and a rebound in overseas demand will lift prospects for a solid recovery.
The holiday season is looking very merry for Disney (NYSE:DIS). With the $290.5M worldwide opening of Rogue One over the weekend, the studio on Monday crossed $7B in ticket sales at the 2016 global box office, besting the industry record set last year by Universal (NASDAQ:CMCSA) with $6.9B. DIS +1.1% premarket.
Apple is discussing with the Indian government the possibility of manufacturing its products in the country. In a letter last month, the company outlined its plans and sought financial incentives to move ahead, WSJ reports. Making goods such as iPhones locally would allow Apple (NASDAQ:AAPL) to open its own stores in India, helping build its brand in a country where it has just a tiny slice - less than 5% - of a booming smartphone market.
Mark Zuckerberg has ended 2016 having completed his personal challenge to build a Jarvis-style AI to run his home. "My goal was to learn about the state of artificial intelligence - where we're further along than people realize and where we're still a long ways off," the Facebook (NASDAQ:FB) CEO said in a post. The virtual assistant uses natural language processing, speech and face recognition, and reinforcement learning to execute tasks.
Increasing its share of the U.K. credit card market from about 15% to 26%, Lloyds (NYSE:LYG) has beaten other bidders to buy payment business MBNA from Bank of America (NYSE:BAC) for £1.9B. "The acquisition... advances our strategic aim to deliver sustainable growth as a U.K. focused retail and commercial bank," CEO Antonio Horta-Osorio said in a statement.
The DOJ has asked Credit Suisse (NYSE:CS) to pay between $5B-$7B to settle a probe over its sale of toxic mortgage securities in the run-up to the financial crisis, Reuters reports, but the lender has resisted settling for that amount. In a sign of how far along things have moved, the Attorney General herself last week talked with top management at the bank. A deal could be reached this week.
Euronext has confirmed it's in exclusive talks with London Stock Exchange (OTCPK:LNSTY) to buy the French clearing arm of LCH, a deal which could help regulators bless LSE's merger with Deutsche Boerse (OTCPK:DBOEY). Euronext (OTCPK:EUXTF) is expected to pay between €400M-€600M for the asset, FT reports. That would make it the exchange operator's largest deal since it was spun off and became an independent company again in 2014.
Italian bank shares are seeing some relief today after the government decided to seek parliamentary approval to borrow €20B for underwriting the stability of its wobbly banking sector. A likely bailout would start with No. 3 lender, Monte dei Paschi (OTCPK:BMDPY), as early as this week. The institution is facing a serious capital crunch and risks being wound down by the ECB.
In a further escalation of hostilities between two European TV giants, Vivendi (OTCPK:VIVHY) is planning to raise its stake in Mediaset (OTCPK:MDIUY) to 30% - the upper limit above which it would be legally obliged to launch a takeover bid. Vivendi raised its participation in Mediaset first to 3% and then 20% last week, in a move that riled the Italian government and stoked an ongoing row between the companies over a pay-TV deal.
President Obama is ready to use a 1953 law to block the sale of new offshore drilling rights in much of the U.S. Arctic and parts of the Atlantic, sources told Bloomberg, but the decision likely wouldn't affect existing leases, including 42 parcels owned by Royal Dutch Shell (RDS.A, RDS.B), Eni (NYSE:E) and others. Until now the law has been used sparingly to permanently preserve coral reefs, walrus feeding grounds and marine sanctuaries.
"The program is not out of control," Air Force Lieutenant General Chris Bogdan said in a media briefing, a week after President-elect Trump took aim at the F-35's (NYSE:LMT) costs. Bogdan, who runs the fighter jet program for the Pentagon, acknowledged the first F-35s cost twice as much as expected, but those problems largely ended in 2011. The general also noted that his team had not yet met Trump transition officials.
Volvo Cars is setting itself on the road back to the stock market as the Swedish carmaker raised fresh equity - 5B Swedish crowns ($533M) - for the first time under Chinese ownership. Volvo has flourished under Geely (OTCPK:GELYY), boosting sales and profits as well as building factories in the U.S. and China, as part of its ambition to challenge German premium manufacturers.
Honda's fuel-cell cars have come to Southern California. The 2017 Clarity Fuel Cell has the highest EPA driving range rating of any zero-emission vehicle in America, with a 366 mile range and fuel economy rating of 68 combined MPGe (miles per gallon equivalent). A lease for the Honda (NYSE:HMC) vehicle is currently priced at $369 a month for 36 months with $2,868 due at signing.
Volkswagen may be closer to settling its diesel problems in the U.S., but it also has to deal with its northern neighbor. VW (OTCPK:VLKAY) has agreed to spend up to $2.1B to either buy back or repair about 105,000 polluting diesels in Canada, according to Reuters. That would be one of the largest consumer settlements in Canadian history.
Is an IPO still in sight? Uber (Private:UBER) lost more than $800M in the third quarter, before interest, taxes and stock-based compensation, The Information reports. On the bright side, Uber's revenue is skyrocketing, and its rate of losses slowed from the prior period. Net revenue grew to around $1.7B vs. $1.1B in the second quarter, despite its departure from China.
In Asia, Japan +0.5%. Hong Kong -0.5%. China -0.5%. India -0.3%.
In Europe, at midday, London +0.1%. Paris +0.4%. Frankfurt +0.1%.
Futures at 6:20, Dow +0.1%. S&P +0.2%. Nasdaq +0.1%. Crude +0.6% to $53.40. Gold -0.7% to $1135.10.
Ten-year Treasury Yield +2 bps to 2.56%