Wall Street Breakfast: Global Stocks Rise Following Strong U.S. Growth

by: Wall Street Breakfast
Wall Street Breakfast
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U.S. benchmark indices closed at record highs yesterday, with the Dow soaring above 18,000 for the first time. The gains came as revised Commerce Department data reported U.S. GDP surging 5% in Q3, its strongest growth in more than a decade. Shares in Europe and Asia today pushed higher on the news, although Shanghai bucked the trend. As stocks continued their strong run, the dollar held near its highest point in almost nine years against a basket of currencies.

Giving up some of the previous session's gains, crude prices are on the decline after trading near their highest prices in almost two weeks, also on yesterday's strong U.S. growth data. Brent crude is down $0.97 at $60.72 after settling up $1.58 in the previous session. WTI is down 1.8% at $56.12, paring a 3.4% gain yesterday.

Shinzo Abe has been re-elected prime minister by Japan’s parliament today following his decisive victory at the polls earlier this month. Abe's most immediate challenge will be getting Japan's economy back on a growth track after two straight quarters of contraction. His cabinet is expected to compile a stimulus package later this week, in yet another part of Abe’s policy mix of monetary easing, fiscal stimulus and long-term changes to accelerate growth.

Russia may lose its investment-grade credit rating for the first time in a decade after Standard & Poor’s placed the country on CreditWatch Negative. The move "stems from what we view as a rapid deterioration of Russia’s monetary flexibility and the impact of the weakening economy on its financial system," the agency said in a statement. S&P will resolve the CreditWatch upon the conclusion of its review, which is expected by mid-January.

More leaked emails from Sony show that the company is exploring the sale of its Sony/ATV Music Publishing unit, which owns the rights to most of the Beatles' songs. The unit, which is estimated to be worth $1.5B-$2B, is jointly owned by Sony (NYSE:SNE) and deceased pop star Michael Jackson's estate. Meanwhile, despite the threats of violence, Sony will let The Interview play at 200 select theaters, a move the White House has applauded.

UPS and FedEx have started limiting their air express deliveries after a last-minute increase in shipped packages caused some retailers to exceed agreed-upon limits. The move is aimed at avoiding a repeat of last year’s disaster, when an estimated 2M express packages didn’t arrive in time before Christmas due to a combination of a limited air fleet, bad weather and a surge in last-minute deliveries. Both UPS (NYSE:UPS) and FedEx (NYSE:FDX) previously announced that if unplanned package volumes threatened to overload their systems, they could refuse to take them.

Thanks to profits that have strengthened as oil prices have collapsed, American Airlines (NASDAQ:AAL) CEO Doug Parker says the airline will announce "very strong" results for 2014. American Airlines plans to pay flight attendants an additional four percentage points on top of raises already averaging 10% due to the strong profit. Other work groups would also see improvements in their raises - once their respective contracts are ratified.

Minimum wage increases across the U.S. will prompt Wal-Mart (NYSE:WMT) to adjust base salaries at 1,434 stores, impacting about a third of its U.S. locations, as minimum wage hikes hit 21 states on or around Jan. 1. Wal-Mart and other employers, such as Target (NYSE:TGT) and McDonald's (NYSE:MCD), make these adjustments each year, but growing attention to the issue has expanded the scope of the change. Thirteen U.S. states lifted the minimum wage in 2014, up from 10 in 2013 and 8 in 2012.

Smith & Nephew -4.6% premarket, after jumping 9.4% yesterday in response to anonymous reports that Stryker (NYSE:SYK) is preparing a bid. Sources close to the matter say Stryker is willing to pay as much as a 30% premium to Smith & Nephew's (NYSE:SNN) current price. Stryker is not planning a tax inversion because of the limited tax benefits and the recent U.S. clampdown on those types of deals.

Signing a widely-anticipated multi-platform deal, DirecTV (NYSE:DTV) and Disney (NYSE:DIS) have reached a multiyear distribution agreement that will give DirecTV subscribers wide access to Disney, ESPN, and ABC shows on linear TV and through the company's Watch service. Disney content will also be available for VOD purchase.

Sumitomo Mitsui will buy Citigroup's Japanese retail banking operations in October for about ¥40B ($332M), Reuters reports, outlining a date for the long-awaited sale. Sumitomo Mitsui (NYSE:SMFG) will announce the deal tomorrow. Citi (NYSE:C) is looking to exit 11 consumer-banking markets with poor returns, including Japan, as it looks to focus on corporate and investment banking, markets and transaction services.

Following the worldwide recall of 24M cars due to its defective air bags, Takata (TKTDY) says its president Stefan Stocker will step down. Stocker will be replaced by chairman Shigehisa Takada to unify the company's response to the crisis. Takata also announced that Stocker, Takada and three other executives will take a pay cut.

Uber Technologies CEO Travis Kalanick has been indicted in South Korea, along with Uber’s Korean unit and car-rental partner MK Korea, for flouting a local transportation law prohibiting rental cars from operating as cabs. Uber became the most highly valued U.S. technology start-up after a fundraising round this month valued it at $40B, although it is coming under increased scrutiny worldwide as governments step up regulation of its car-sharing service.

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Today's Markets:
In Asia, Japan +1.2% to 17854. Hong Kong +0.1% to 23349. China -1.9% to 2974. India -1.1% to 27209.
In Europe, at midday, London +0.1%. Paris -0.3%. Frankfurt closed.
Futures at 6:20: Dow +0.1%. S&P flat. Nasdaq +0.1%. Crude -1.8% to $56.12. Gold -0.1% to $1176.70.
Ten-year Treasury Yield flat at 2.26%

Today's economic calendar:
7:00 MBA Mortgage Applications
8:30 Initial Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Petroleum Inventories
11:30 Results of $29B, 7-Year Note Auction
12:00 PM EIA Natural Gas Inventory
NYSE closes at 1:00 PM SIFMA closes 2:00 PM

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