World equities throw off pre-Fed caution. Helped by positive economic news (see below), global stock markets were mostly higher at the time of writing ahead of an announcement by the FOMC today over whether it will start the taper, with investors seeming to throw off their usual caution and nervousness about these things. Derek Halpenny of Bank of Tokyo-Mitsubishi UFJ reckons that a taper announcement would not only not hurt stocks but could even encourage a year-end rally, as it would help clear up uncertainty.
Apple still in talks with China Mobile over iPhone deal. Apple (NASDAQ:AAPL) hasn't yet sealed a deal with China Mobile (NYSE:CHL) for the latter to sell iPhones, with its chairman, Xi Guohua, saying that the companies are still in talks. Earlier this month, the WSJ reported that the deal could be unveiled today, but Xi's comments suggest otherwise.
Top Stock News
BP in major oil find but also writes off $1.1B. BP (NYSE:BP) has made a significant oil discovery at its Gila prospect in the Gulf of Mexico, which the U.K. company co-owns with ConocoPhillips (NYSE:COP). BP will now need to carry out further work to determine the size of the reserve. However, BP is booking a $1.1B write-off related to an off-shore Brazilian well that came up short. Still, 2013 has been BP's best year for new field exploration for nearly a decade.
DOJ to file civil fraud charges vs Citi, Merrill. The Department of Justice is preparing to file civil fraud charges against Citigroup (NYSE:C) and Merrill Lynch (NYSE:BAC) over the sale of mortgage bonds prior to the financial crisis, Reuters reports. The DOJ is also progressing in probes of RBS (NYSE:RBS) and Credit Suisse (NYSE:CS). The report comes a month after JPMorgan (NYSE:JPM) reached a $13B settlement with the DOJ and other agencies over the issue.
JPMorgan sues FDIC for portion of Washington Mutual cash. JPMorgan (JPM) has sued the Federal Deposit Insurance Corp. for a portion of the $2.7B remaining in the FDIC receivership that liquidated Washington Mutual following the sale of its branches and deposits to JPMorgan for $1.88B during the financial crisis in 2008. The lawsuit is the latest development in the dispute between JPMorgan and the FDIC over who should assume Washington Mutual's legal liabilities, such as those related to the sale of problematic mortgage bonds.
SABMiller Chairman dies of cancer. SABMiller (OTCPK:SBMRY) Chairman Graham Mackay has passed away at the age of 64 following a battle with cancer and will be replaced by acting chairman John Manser with immediate effect. Manser will delay his retirement by a year to July 2015 while the world's second-largest brewer looks for a candidate for the long term.
EU Council approves tobacco directives. The EU council has authorized measures that would ban the selling of flavored tobacco in member states, including fruit, menthol, and vanilla. The EU also wants combined picture and text health warnings to cover 65% of the front and back of packages of smoking products
Top Economic & Other News
Budget passes key Senate procedural vote. The Senate has voted 67-33 to restrict the debate on the bipartisan budget bill that has already passed in the House, thereby ensuring that opponents can't use a filibuster to stop it. The Democrat-led chamber is now expected to approve the budget legislation in a vote that could take place today. The bill sets spending at just above $1T over two years and eases some of the sequestration cuts in return for future savings elsewhere.
German businesses continue to gain confidence. The German Ifo institute's business climate index has increased to its highest in 20 months, edging up to 109.5 in December from 109.3 in November and meeting consensus. The expectations print climbed to 107.4 from 106.4 and beat estimates, although the current-situation reading slipped a bit. Still, says Ifo CEO Hans-Werner Sinn, "the German economy is in a festive mood."
U.K. unemployment falls to lowest in over 4 1/2 years. U.K. unemployment dropped to its lowest level since April 2009 in the three months to October, falling to 7.4% from 7.6% in July-September. The number of people who were employed was 30.09M, surpassing 30M for the first time ever. However, the growth in average weekly earnings excluding bonuses was just 0.8% on year, well below inflation of 2.1%.
BOE again united in keeping policy on hold. As expected, the Bank of England's Monetary Policy Committee voted unanimously to keep interest rates at 0.5% and against more quantitative easing at a meeting earlier this month. However, the BOE has made an about-turn on sterling, notes Reuters' Jamie McGeever. Only three months ago, the minutes showed that the rising pound would cool inflation. Now, further gains could hit the U.K.'s recovery. As if to drive home the point, the pound was +0.6% at $1.6367 at the time of writing.
Japan's exports rise more than expected. Japanese exports climbed 18.4% on year in November vs +17.9% expected and +18.6% in October, while imports jumped 21.1% but eased from growth of 26.1%. Interestingly, the volume of merchandise exports rose 6.1% on year - the sharpest increase in a year and a half - indicating that the weak yen isn't just boosting the value figure.
BOJ officials see room to loosen policy even further. Bank of Japan policy makers reportedly believe that the BOJ has significant scope to increase the rate of its bond purchases if it needs to in order to meet its 2% inflation target. The officials aren't too worried about the perception that the bank is underwriting fiscal deficits, but they want more time to assess price trends. The BOJ is due to start a two-day policy meeting tomorrow.
India surprisingly leaves interest rates unchanged. The Reserve Bank of India has held its benchmark repurchase interest rate at 7.75%. With inflation rising last month, economists had expected the RBI to hike the rate by a quarter of a percentage point. However, the bank cited projections that food costs, a main component of inflation, could soften. The RBI could act in the future but it wants more data first, while it also wants to support stuttering growth. Indian shares jumped following the lack of action from the RBI.
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In Asia, Japan +2% to 15587.8. Hong Kong +0.3% to 23144. China -0.1% to 2148. India +1.2% 20860.
In Europe, at midday, London +0.3%. Paris +0.6%. Frankfurt +0.9%.
Futures at 6:20: Dow +0.3%. S&P +0.3%. Nasdaq +0.3%. Crude +0.1% to $97.34. Gold +0.1% to $1231.80.
Ten-year Treasury Yield -1 bps to 2.85%
Today's economic calendar:
7:00 MBA Mortgage Applications
8:30 Housing Starts
10:30 EIA Petroleum Inventories
1:00 PM Results of $35B, 5-Year Note Auction
2:00 PM FOMC Announcement
2:00 PM FOMC Forecast
2:30 PM Bernanke Press Conference
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