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Wall Street Breakfast: ECJ Adviser Backs ECB Bond Plan

Seeking Alpha

Jan. 13, 2015

Economy

The ECB’s earlier pledge to save the region from economic ruin by buying government bonds is compatible with EU law, announced ECJ advocate-general Cruz Villalon today. The opinion issued comes in response to a lawsuit brought by German opponents who claimed that the ECB’s Outright Monetary Transactions program, announced in August 2012, violates the EU treaty. While the opinion isn’t binding on the court, the judges usually follow the advocate general’s reasoning.

World shares are in the red today, as commodity prices dropped and falling oil prices continued to weigh on global equity markets. The World Bank yesterday cut its forecast for global growth this year amid worsening prospects in Europe and China. Oil is now down for a fourth day, with WTI 0.3% lower at $45.75/bbl.

Speaking at an annual economic conference this morning, Russia's finance minister Anton Siluanov said that his ministry plans to cut budget costs by 10% across all sectors except for military spending. The World Bank expects Russia's economy to contract by 2.9% in 2015 due to poor economic prospects in the euro zone and lower oil prices.

Seeking to support growth, Japanese Prime Minister Shinzo Abe's cabinet approved a record ¥96.3T ($814B) budget while cutting new borrowing for a third year in a row. Rising revenues following the sales tax increase last April enabled Abe to raise spending without increasing the proportion financed by new government bonds, though the total national debt is still well over twice the country's GDP.

President Obama will push the Federal Communications Commission today to overturn state laws that prevent cities from building their own broadband networks, building on his previous call for the agency to regulate broadband service as a utility. The centerpiece of the initiative is a call for the FCC to pre-empt laws in 19 states that can prevent cities and localities from building their own high-speed broadband networks. FCC Chairman Tom Wheeler has already indicated that he is strongly considering the move.

Stocks

Samsung Electronics has launched the first smartphone that runs its homegrown Tizen operating system, a major step in advancing an alternative to Google's (GOOG, GOOGL) dominant Android platform. The newly released Z1 went on sale in India today for 5,700 rupees ($92) each. Up until now, Samsung's (OTC:SSNLF) Tizen-powered smartphones faced a series of delays, including the postponed release of the Z, which was scheduled to go on sale in Russia in 2014.

Calling it "the most powerful and secure system ever built," IBM (NYSE:IBM) unveiled the z13 yesterday, a mainframe that can carry out 2.5B transactions a day. Sales of mainframes have been far outdistanced in the past two decades by the popularity of servers that use chip technology known as x86, but they remain an important part of IBM's search for revenue growth. The new z13 has a price tag starting at $200K.

Royal Bank of Scotland has been granted a waiver by the U.S. Federal Reserve from new overseas bank laws that go into effect next year. The rules will require all overseas banks with over $50B of U.S. assets to set up a separate American holding company with strict capital and reporting requirements. The Fed did not give a reason for the RBS (NYSE:RBS) decision.

A vote on whether to join the International Association of Machinists and Aerospace Workers is expected within four to six weeks, after about 60% of Delta Air Lines (NYSE:DAL) flight attendants demanded a vote on whether they should unionize. Except for pilots and dispatchers, Delta workers lack union representation, bucking the norm in one of the most unionized U.S. industries. "Delta flight attendants have already rejected union representation three times since 2002," Delta said in a statement. "Our flight attendants deserve better than the IAM."

Looking to expand its advertising business, Alibaba (NYSE:BABA) has bought a controlling stake in online marketing company AdChina. The move is geared towards improving the company’s online marketing technology platform, Alimama, which sells marketing to merchants using Alibaba's e-commerce sites like Taobao and Tmall.com.

Whether it needs the authorization or not, Royal Dutch Shell (RDS.A, RDS.B) has obtained U.S. government approval to export lightly processed crude oil condensate that has undergone minimal processing. Shell says the approval will enable it to move ahead with exports of condensate that qualify it as a refined product as defined by U.S. Commerce Department guidance issued on Dec. 30.

Tesla's auto sales in China were "unexpectedly weak" during the fourth quarter, said Elon Musk at the Detroit Auto Show yesterday, blaming the fall in the nation on consumer misperceptions of the charging process. Musk also related that Tesla (NASDAQ:TSLA) will not be profitable until 2020, but is expecting to boost production of electric cars to "at least a few million a year" by 2025 from fewer than 40K in 2014. TSLA -6.7% premarket.

Although Ford's sales in the U.S. have lagged peers over the last few months as it prepped for the huge F-150 roll-out, the launch of the 2015 model is on schedule, said top execs, also at the Detroit Auto Show. Ford (NYSE:F) says the aluminum-bodied truck is selling in an average of five days after hitting dealership floors and lots.

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Today's Markets:

In Asia, Japan -1.7% to 16796. Hong Kong -0.4% to 24113. China -0.4% to 3223. India -0.3% to 27347.

In Europe, at midday, London -1.5%. Paris -0.4%. Frankfurt -0.3%.

Futures at 6:20: Dow -0.3%. S&P -0.3%. Nasdaq -0.3%. Crude -0.3% to $45.75. Gold -0.4% to $1229.90.

Ten-year Treasury Yield -2 bps to 1.89%

Today's economic calendar: