Delc. 19, 2014

Economy

World markets are ending their last full week of the year on a high, as Wall Street boasted its biggest two-day advance since late 2011 and European shares headed for their strongest week of the year. The gains came amid the Fed's "patient" approach to raising interest rates and as investors began to see the advantages of lower oil and fuel costs that should ultimately help global growth. Brent crude is above the key $60 mark, up 1.3% at $60.04 a barrel. WTI is also up 1.3% at $54.83.

Asian shares also continued their weekly rise earlier following similar sentiment. Concluding its last policy meeting of the year, the BOJ kept monetary settings unchanged, but offered a more upbeat view on the economy. China revised up the estimated size of its economy for 2013 by 3.4% to $9.6T, but said the revision would not affect economic growth this year, which has been close to 7.4% for most of 2014.

Russia's ruble strengthened today after Finance Minister Anton Siluanov confirmed his ministry had sold foreign currency and on expectations that exporters will step up dollar sales. Siluanov said he was also certain that the ruble would firm at the beginning of next year. Russia's central bank has spent over $80B defending the currency in 2014 amid a collapse in oil prices and Western sanctions over Ukraine. The ruble is 2.4% stronger against the dollar at 60.14.

Giving banks additional time to sell stakes in hedge and private-equity funds covered by the Volcker rule, the Fed has announced that it will extend the compliance period from 2015 to 2017. The Fed had previously delayed the measure for collateralized loan obligations, but has now expanded the scope of the extension for other types of funds.

Stocks

Xerox has agreed to sell its IT outsourcing unit to French IT services firm Atos for $1.05B. "By divesting the slower-growing unit...Xerox can now focus on building up the faster-growing units, business process outsourcing and document outsourcing," said president of Xerox (NYSE:XRX) services business Robert Zapfel. Xerox also revised its adjusted earnings forecast to $0.28-$0.30 per share for the current quarter from $0.30-$0.32. Analysts were expecting a profit of $0.31. XRX +4% premarket.

Building upon its current Android Auto software, Google (GOOG, GOOGL) is laying the groundwork for a version of Android that would be built directly into cars. This integration would allow drivers to reap all the benefits of the Internet without plugging in their smartphones as opposed to Google's current Android Auto software. If successful, Android could become the standard system powering a car's entertainment and navigation features, although the move is likely to face heavy competition and various business challenges.

Looking to boost returns to shareholders amid a slump in earnings, Samsung Electronics (OTC:SSNLF, OTC:SSNGY) is considering increasing its full-year dividend by as much as 50%. A final decision will be made by its board at the end of January. The dividend announcement comes less than a month after the electronics maker said it will buy back $2B of stock amid a company-wide restructuring. Samsung paid out 14,300 won ($13) per share in dividends last year.

Despite early reports from U.S. intelligence officials, White House spokesman Josh Earnest said he was not in a position to say that North Korea was responsible for the cyber attack on Sony Pictures (NYSE:SNE), but the hack was "a serious national security matter" and the investigation was "progressing." The Obama administration is now considering a proportional response to the attack. It was reported yesterday that the hacking incident could cost Sony at least $200M.

Should it bid for Oi, Telecom Italia (NYSE:TI) is "leaning toward making an all-stock offer" through 67%-owned TIM Participacoes (NYSE:TSU), Bloomberg reports. The latest wrinkle to Brazil's telecom drama comes a week after a report that Oi (NYSE:OIBR), America Movil (NYSE:AMX)-Claro, and Telefonica (NYSE:TEF)/Vivo (NYSE:VIV) plan to jointly offer $15B for TIM. Such a deal could be easier for regulators to swallow, since it would spread TIM's assets between three carriers. Oi rose 10.7% in trading yesterday on the news.

An eight-month inquiry into the multibillion-dollar corruption scandal at Petrobras (NYSE:PBR) by a Brazilian congressional committee ended yesterday with recommendations that prosecutors indict 52 individuals. Brazilian President Dilma Rousseff vowed to implement the toughest corporate governance standards at the state-run oil company following the announcement. CEO Maria das Gracas Foster has also spoken to Rousseff about potential resignations of senior management, including her own, but said she would stay on for now as long as she has the president’s confidence.

The controversial Keystone XL pipeline has a major hurdle to cross in the Nebraska State Supreme Court, which may rule as soon as today, and one key aspect of the case seems to have been overlooked. A question of legal standing, or who has the right to bring a court challenge, could turn out to be pivotal to the Nebraska case and the overall future of TransCanada's (NYSE:TRP) pipeline.

DuPont plans to name the new public company created by the spinoff of its company’s performance chemicals business The Chemours Company, which will be led by Mark Vergnano, current EVP of the Performance Chemicals segment. DuPont (NYSE:DD) will record a pre-tax charge of about $315M in Q4 related to the spinoff, which is expected to result in at least $1B in savings. The separation remains on track for mid-2015.

American Apparel has been approached by private equity firm Irving Place Capital for a possible takeover, just a day after CEO Dov Charney was terminated by the clothing chain. The news was enough to drive up American Apparel (NYSEMKT:APP) stock 45% yesterday to settle at $1.00. Irving Place is now offering $1.30-$1.40 per share, after initially being rebuffed because the indicative price was too low.

 

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Today's Markets:

In Asia, Japan +2.4% to 17621. Hong Kong +1.3% to 23117. China +1.7% to 3110. India +0.9% to 27372.

In Europe, at midday, London +0.5%. Paris -0.2%. Frankfurt -0.3%.

Futures at 6:20: Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +1.3% to $54.83. Gold +0.2% to $1197.50.

Ten-year Treasury Yield flat at 2.21%

Today's economic calendar:

10:00 Atlanta Fed's Business Inflation Expectations

11:00 Kansas City Fed Mfg Survey

Notable earnings before today's open: BBRY, KMX, CCL, FINL, PAYX

See full real-time earnings coverage »