Wall Street Breakfast: Shanghai Soars, Markets Await ECB

by: Wall Street Breakfast
Wall Street Breakfast
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"Employment gains were widespread across districts," according to the Fed's Beige Book survey, though wage gains remained muted except for a few fields facing worker shortages. The optimistic tone of the report seemingly sets the stage for the FOMC to remove the "considerable time" language from the policy statement when it meets on December 16-17. Next up is tomorrow's Nonfarm Payroll report, and the expectation is for 230K in job gains and a steady unemployment rate of 5.8%.

European stocks are up marginally ahead of the ECB's policy decision due at 7:45 ET. No changes in interest rates are expected, but ECB President Draghi last month pledged to raise euro area inflation "as fast as possible." Markets will be looking to his press conference at 8:30 ET to see if Draghi has been able to move forward with convincing the reluctant Germans about the need for outright QE.

Western nations would have imposed sanctions on Russia even without the Ukraine conflicts, said President Putin in his annual speech in front of both houses of parliament. The policy of the West, he said, is to hold Russia back. He called for tax breaks for small businesses, a doubling of road construction, and amnesty for capital brought back to Russia. As for the ruble, its weakening means more inflation in the short term, he says, but also makes Russian companies more competitive internationally. The currency fell further as he spoke, with one dollar now buying 53.453 rubles.

Gasoline prices fell to a four-year low and sub-$2 per gallon was seen for the first time since July 2010. The $1.99 price was spotted at an Oncue Express station in Oklahoma City, and yesterday's national average of $2.74 per gallon was a whopping $0.51 lower than a year ago, saving consumers about $200M per day. According to AAA, gas stations have yet to catch up to the recent plunge in crude oil prices and drivers can expect another $0.15-$0.20 in price declines in coming weeks.

China's Shanghai Composite soared another 4.3% overnight, the largest gain in two years. The move brings the index's advance to 19% over the past month, the most among 93 global markets tracked by Bloomberg. The rally coincides with not just a rate cut by the PBOC, but the opening up of trading of mainland stocks to the rest of the globe, and volumes are nearly double what they were in the previous month.

The data breach at Sony Pictures (NYSE:SNE) has set off upheaval at the company. Morale has plummeted as employees have to find workarounds to do their jobs as systems come back online piecemeal, salary information of some 6K workers was apparently leaked, and the studio warns even more personal information could have been stolen. Some investigators believe the attack is the work of North Korea, and the WSJ notes it could be retaliation for the upcoming Sony film "The Interview," which mocks the country's dictator.

Unilever will split its spreads business into a standalone unit, as it maybe moves towards exiting the struggling operation. The division - including brands like Flora and I Can't Believe It's Not Butter - will be fully operational by mid-2015, said Unilever (NYSE:UL) CFO Jean-Marc Huet at an investor conference today, and will only operate in developed markets. The ADRs are higher by 2% in premarket action.

Honda plans to expand its recall of Takata driver-side airbags to all 50 states, and has told a House panel it's in discussions with other air bag suppliers about adding production of replacement parts. Honda (NYSE:HMC) agreed to act after Takata (TKTDY) rejected a regulator demand to broaden its repair campaign beyond a few states, but the promise has no immediate effect as there aren't enough replacements to fix all vehicles at once. Honda plans to continue to focus on fixes in high-humidity locations where the problem seems worst.

In its post-merger financial outlook for 2015, Kinder Morgan (NYSE:KMI) expects to declare dividends of $2 per share, a roughly 16% increase from 2014's budgeted $1.72. The company says growth is strong even as the price of oil continues to slide and it has a backlog of about $18B in expansion projects and JV investments with a high likelihood of completion. Kinder's pre-merger forecast had called for dividend payout growth of about 10% per year for 2015-2020, but this longer-term outlook isn't included in the new forecast.

Walt Disney boosted its dividend by 33.7%, with the new annual payout of $1.15 vs. $0.86 previously. The boost brings the forward yield on Disney's (NYSE:DIS) stock to 1.24%. Shares rose 0.5% after-hours following the announcement.

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Today's Markets:
In Asia, Japan +0.9% to 17887. Hong Kong +1.7% to 23833. China +4.3% to 2899. India +0.4% to 28563.
In Europe, at midday, London +0.1%. Paris +0.4%. Frankfurt +0.5%.
Futures at 6:20: Dow +0.2%. S&P +0.1%. Nasdaq +0.2%. Crude +0.1% to $67.50. Gold -0.5% to $1202.80.
Ten-year Treasury Yield flat at 2.28%

Today's economic calendar:
Chain Store Sales
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Gallup US Payroll to Population
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Notable earnings before today’s open: BKS, DG, EXPR, GIL, KR, SHLD, TTC, TD, UNFI

Notable earnings after today’s close: AMBA, AEO, CBK, COO, FNSR, FIVE, RALY, SD, SWHC, ULTA, ZUMZ

See full real-time earnings coverage »

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