Wall Street Breakfast: Global Shares Jump After BOJ Eases Policy
Economy
World shares rose and the yen tumbled against the dollar this morning, as the Bank of Japan unexpectedly eased monetary policy due to concerns that a decline in oil prices would weigh on consumer prices and delay a shift in sentiment away from deflation. The BOJ decided to raise its monetary base target to an annual increase of ¥80T yen ($724.5B), from ¥60T-70T. The Nikkei surged 4.8% to 16,414, its highest since November 2007, while the dollar is up 2.2% to ¥111.62, its highest since January 2008.
Russia and Ukraine have signed an agreement that will guarantee the flow of Russian gas exports into Ukraine through the winter, following a long and bitter dispute over payments. European Union energy chief Guenther Oettinger, who brokered the deal, says "we can guarantee a security of supply over the winter," not only for Ukraine but also for the EU nations closest to the region.
San Francisco Fed President John Williams outlined this morning that while inflation targeting helped central banks keep prices low and stable during the financial crisis, the policy still faces "critical challenges" with interest rates near zero. Central banks that have already cut rates near zero can’t lower them any further if they still face too-low inflation, says Williams, "this has been an ongoing problem." The comments come just two days after the U.S. central bank ended its controversial QE and upgraded its assessment of the labor market.
Stocks
Sony's losses ballooned to ¥136B yen ($1.2B) in its fiscal Q2 as the electronics and entertainment giant's troubled mobile phone division reported huge red ink. Losses were still narrower than analysts estimated, as blockbuster sales of its PlayStation 4 games console reduced the impact of its sluggish smartphone division. Sony (NYSE:SNE) lowered its smartphone sales outlook to 41M handsets from 43M, but is still sticking to its full-year net loss forecast of ¥230B.
GoPro shares +17.7% premarket after the company reported better-than-expected quarterly earnings and revenue, while issuing strong guidance. GoPro posted Q3 EPS of $0.12 on revenue of $280M, with a major camera refresh boosting sales. The company expects Q4 revenue of $550M-$580M and EPS of $0.65-$0.69, soundly above a consensus of $499.9M and $0.53.
As the holiday shopping season heats up, Wal-Mart (NYSE:WMT) is weighing the benefits of a program which would match prices from online rivals. The move would expand upon Wal-Mart's current price-matching program for local bricks-and-mortar rivals, giving the retailer a competitive edge but risking a cut to earnings. The company is also planning to hire 60K additional workers for the holidays, up 10% from last year.
In response to Senator Patrick Leahy's letter last week urging top ISPs to not enter "paid prioritization" deals, Comcast (NASDAQ:CMCSA) and AT&T (NYSE:T) say they have no plans to create the Internet "fast lanes" which would hurt consumers' freedom to roam the Web. Verizon (NYSE:VZ) published its response to Leahy on Wednesday, also asserting that it has no plans for "fast lanes". The pledges come after the FCC proposed its "net neutrality" rules that prohibit ISPs from blocking content, but suggests allowing some "commercially reasonable" paid prioritization deals.
Twitter product chief Daniel Graf, hired away from Google (GOOG, GOOGL) only half a year ago, has been demoted from Twitter's (NYSE:TWTR) consumer product team. Yesterday, CNBC reported engineering VP Jeremy Gordon and analytics chief Adam Kinney are leaving the company, while adding "some in the engineering organization are not clear about where [CEO Dick Costolo] and engineering executive Alex Roetter are leading." TWTR +1.7% premarket.
After beating Q3 earnings estimates, Groupon (NASDAQ:GRPN) discloses that it has hired advisers to explore strategic options for its Asian ops, including Korean deals site/marketplace Ticket Monster (acquired last year for $260M). "There are certain countries where we’d benefit from a partner," says CEO Eric Lefkofsky. The company specifies that it is not looking to sell all of Ticket Monster. GRPN +4.5% premarket.
BNP Paribas reported an 11% jump in third-quarter net profit, as gains in its investment-banking business helped it recover from the previous quarter when it was hit with a record $8.9B fine for sanctions violations. The bank posted net profit for the period from July through September of €1.5B ($1.9B), compared with €1.36B a year earlier, on revenue of €9.5B. Last week, BNP Paribas (OTC:BNPZY) completed the ECB’s stress tests unscathed.
Salus Capital Partners, a major RadioShack lender, is attempting to buy a bigger piece of the electronic retailer’s debt in exchange for agreeing to back the company’s store-closing plan. RadioShack (NYSE:RSH) was forced to scale back its plans to close 1,100 underperforming stores this year to just 200, as creditors and vendors disagreed over its restructuring plans. Salus is looking to buy as much as $465M of the $585M of loans arranged for affiliates of Standard General, RadioShack's largest shareholder.
Bombardier has put plans for a new assembly line in Russia on hold, amid economic and political tensions between the West and Moscow over military actions in Ukraine. "We are setting the project aside for the time being and we will see what happens over the next few months and then decide if we go ahead," says CEO Pierre Beaudoin. Bombardier (OTCQX:BDRBF, OTC:BOMBF), Rostec and Ilyushin Finance signed a series of letters of intent for the venture in August 2013, contingent on the establishment of a final assembly line in Russia.
Following in the footsteps of Barclays (NYSE:BCS), Citigroup (NYSE:C) and others, Royal Bank of Scotland (NYSE:RBS) says it has set aside £400M ($639M) to cover potential fines for manipulating currency markets. Another £100M will be allocated to compensate customers who were mis-sold loan insurance. Regarding Q3 earnings, the bank announced that it had made a pretax profit of £1.27B vs. a loss of £634M the year before. RBS also confirmed that it plans to keep its Ulster Bank business, following an upturn in the Irish economy.
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Today's Markets:
In Asia, Japan +4.8% to 16414. Hong Kong +1.3% to 23998. China +1.2% to 2420. India +1.9% to 27866.
In Europe, at midday, London +1.2%. Paris +2%. Frankfurt +1.8%.
Futures at 6:20: Dow +1.1%. S&P +1.1%. Nasdaq +1.5%. Crude -0.7% to $80.59. Gold -2.2% to $1172.20.
Ten-year Treasury Yield +1 bps to 2.32%
Today's economic calendar:
8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:45 Chicago PMI
9:55 Reuters/UofM Consumer Sentiment
3:00 PM USDA Ag. Prices
Notable earnings before today's open: AON, AXL, BUD, CBOE, CLX, COL, COMM, CVX, D, GWR, HLT, HPY, ITT, IXYS, LM, MGI, MMP, MOG.A, MSG, NS, NTLS, NWL, OSK, PNM, PNW, SNE, SPR, TDS, TE, USM, VTG, WETF, WY, XLS, XOM
Notable earnings after today's close: CMRE
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