Market Snapshot* DJIA
17721.25
+164.84
4872.09
+38.69
S&P 500
2061.72
+19.73
10-Year
1.7779%
-16/32
Nasdaq
30-Year Euro
Tuesday, April 12, 2016
Nymex Crude Source: SIX Telekurs, ICAP plc
Stocks U.S. stocks gained Tuesday as surging oil prices sparked a rally in energy shares. The Dow Jones Industrial Average rose about 165 points to close around the highs of the year.
Treasurys Soaring crude oil prices on Tuesday boosted investors' risk appetites and sparked a broad selloff in government bonds from both sides of the Atlantic. Benchmark 10-year government bond yields in the U.S., Germany and the U.K. rose to the highest level in more than a week. Yields rise as bond prices fall.
2.609%
-31/32
$1.13915
-0.0014
$42.17
+1.81
*preliminary values subject to adjustments
Tomorrow’s Headlines
IMF Cuts Global Economic Growth Outlook for 2016 The world economy is increasingly at risk of stalling, the International Monetary Fund warned Tuesday as it once again cut its forecast for global growth prospects. The IMF said it was forced to downgrade its growth forecast for this year to 3.2%, down by 0.2 percentage point from its projection issued in January. China’s slowdown and weak commodity prices are taking a deeper toll on emerging markets than expected and rich countries are still struggling to escape the legacies of the financial crisis, the fund said. The downward revision is the fourth straight cut in a year, putting world economic growth just a hair over last year’s 3.1% and only marginally above the 3% rate the IMF has previously considered a technical recession globally. continued on page 2
Forex The dollar fell against most rivals Monday and was flat against the yen despite renewed verbal warnings from Japanese officials aimed at blunting the yen's recent bout of strength. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, fell 0.5% to 85.79 as the dollar fell against the pound and euro.
Commodities The U.S. oil benchmark settled above $40 a barrel for the first time in nearly three weeks and the global Brent contract touched a four-month high Monday, as the dollar faded and hopes rose for a coming agreement among sovereign producers that would begin to reduce the global crude glut.
Tomorrow’s Calendar 7:00 a.m.
04/08 MBA Weekly Mortgage Applications Survey Composite Idx (previous 472.8), Composite Idx, W/W% (previous +2.7%), Purchase Idx-SA (previous 223.1), W/W% (previous -2.4%), Refinance Idx (previous 1906.0), W/W% (previous +6.8%)
8:30 a.m.
Mar Advance Monthly Sales for Retail & Food Services Overall Sales-SA, M/M% (expected +0.0%), Sales, Ex-Auto, M/M% (expected +0.4%), Sales, Ex-Auto & Gas, M/M% (previous +0.3%)
8:30 a.m.
Mar PPI, M/M% (expected +0.3%), Ex-Food & Energy PPI, M/M% (expected +0.2%), Personal Consumption (previous -0.4%)
9:00 a.m.
IMF Global Financial Stability Report main chapters published
10:00 a.m.
Feb Manufacturing & Trade: Inventories & Sales Total Inventories (expected -0.1%)
10:00 a.m.
Appeals court in New York hears arguments in Argentina debt case
10:30 a.m.
04/08 EIA Weekly Petroleum Status Report Crude Oil Stocks (Bbl) (previous 529.897M), Net Chg (Bbl) (previous -4.937M), Gasoline Stocks (Bbl) (previous 243.998M), Net Chg (Bbl) (previous +1.438M), Distillate Stocks (Bbl) (previous 162.984M), Net Chg (Bbl) (previous +1.799M), Refinery Usage (previous 91.4%), Total Prod Supplied (Bbl/day) (previous 19.868M), Net Chg (Bbl/day) (previous +0.414M)
10:30 a.m.
IMF Fiscal Monitor published
11:00 a.m.
Jim Yong Kim and Michelle Obama attend 'Let Girls Learn' event
12:30 p.m.
IMF Managing Director Christine Lagarde participates in 'Conflicts and the Refugee Crisis: An International Call for Action' event
12:30 p.m.
World Bank Chief Economists Roundtable
2:00 p.m.
U.S. Federal Reserve Beige Book
4:00 p.m.
IMF Managing Director Christine Lagarde speaks at capacity development event
4:00 p.m.
Jim Yong Kim and Margaret Chan participate in mental health event
N/A
G24 Deputies Meeting
Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com
page 1
Tuesday, April 12, 2016 4 p.m. ET
Import Prices Rose 0.2% Amid Signs of Inflation
Tomorrow’s Headlines continued “Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation,” IMF Chief Economist Maurice Obstfeld said as the fund launched its flagship report. The IMF is worried such stagnation could further stifle investment, smother wage growth, curb employment and push government debt to unsustainable levels in some countries. “Does that culminate in some crisis and recession? It’s not clear at all that would be the case,” Mr. Obstfeld said. “But we definitely face the risk of going into doldrums that could be politically perilous,” he said.
Budget Deficit Expands In First Half of Fiscal Year The U.S. budget deficit expanded during the first half of the fiscal year as spending rose faster than receipts, marking a turnaround after six years of an improving fiscal picture. The government ran a $461.04 billion deficit from October to March, the Treasury said Tuesday in its monthly report. That was up almost 5% from the first half of the 2015 fiscal year, which runs from October through September. In March, the deficit was $108.04 billion, up from the $52.92 billion gap during the same month a year earlier, though much of the single-month difference was caused by calendar quirks. The U.S. budget deficit exploded to more than $1.4 trillion, about 9.8% of gross domestic product, in 2009 as the U.S. shuddered through the recession. The figure has fallen steadily since, reaching it is lowest level since 2007 last year. At 2.5% of gross domestic product, the deficit was below the 2.8% average over the prior 50 years.
Prices for imported goods rose for the first time in nine months in March, a sign that a rebound in oil prices is slowly pushing up inflation pressures in the U.S. Import prices increased 0.2% in March from the prior month after falling a revised 0.4% in February, the Labor Department said Tuesday. The increase marked the first time prices posted a monthly gain since last June, however the pace of growth fell short of expectations. Economists surveyed by The Wall Street Journal had expected import prices to increase 0.9% from February to March. The monthly increase largely reflected a rebound in oil prices. Petroleum import prices rose 6.5% from February. The price of crude tanked in February, but rebounded last month on hopes that declines in oil drilling around the world and an output deal among major producers would shrink the global glut of crude.
GAO Criticizes Fed, FDIC on Living Wills The Government Accountability Office on Tuesday encouraged the Federal Reserve and the Federal Deposit Insurance Corp. to be more transparent about the so-called living wills that big banks are required to file. In its report, the congressional watchdog said that the two regulatory agencies should publicly disclose more information about how they decide whether to accept a bank’s living will, a mandate of the 2010 Dodd-Frank regulatory overhaul that requires banks to spell out how they would unwind in an orderly fashion, without requiring taxpayer assistance.
Now, it is set to start expanding again. The Congressional Budget Office is projecting a $534 billion deficit for the current fiscal year, a roughly 22% increase from a year earlier.
The regulators have said that they need to keep certain information private, but the GAO said that “limits the potential for companies to better achieve the Dodd-Frank Act’s objective.”
CBS, Turner Strike $8.8B Deal to Keep March Madness Til 2032
Lack of transparency has been a key complaint among the banks, which last year filed more-detailed living wills. They are still waiting on whether the Fed and FDIC will accept them as “credible.”
CBS Corp. and Turner have extended their media partnership for the NCAA men’s college basketball tournament known as “March Madness” through 2032. The current 14-year, $10.8 billion contract that CBS and Time Warner Inc.’s Turner cable unit have with the National Collegiate Athletic Association doesn’t expire until after the 2024 tournament. But the three parties agreed to go ahead and continue the deal for eight more years at a cost of $8.8 billion—showing the media companies’ willingness to pay more on average per year to lock in the rights. CBS and Turner said they expect the NCAA to remain a profitable property through the length of the deal. Before CBS’s agreement to bring in Turner to share the rights, the broadcaster was losing about $100 million annually on the tournament, according to a person familiar with the matter.
The GAO said that the lack of transparency around certain parts of the living wills “may weaken public and market confidence” in the plans “and limit the extent to which the regulators can be held accountable for their decisions.”
Prosper Talks With Goldman, Others on Loan Arrangement Online lender Prosper Marketplace Inc. has decided to end a loan-sale arrangement it had with Citigroup Inc. and is talking to other firms, including Goldman Sachs Group Inc., to replace the New York bank, according to people familiar with the matter.
Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com
continued on page 3
page 2
Tuesday, April 12, 2016 4 p.m. ET
Deutsche Bank Freezes North Carolina Expansion
Tomorrow’s Headlines continued Since last summer, Citigroup has been one of the biggest buyers of Prosper’s unsecured consumer loans, often selling them to investors in securitization deals. The financialtechnology company, which matches consumer borrowers with investors willing to lend them money, is considering several other banks, including Goldman, to replace Citigroup, some of the people said. It is also talking to sovereign-wealth funds about buying some of the loans. The move follows remarks at a conference by Prosper President Ron Suber indicating the company was unhappy about aspects of recent deals sold by Citigroup. “When we don’t have alignment with our investors, when groups sell our loans into the market no matter what, if the market’s not ready, it’s not good,” Mr. Suber said in his speech. “We learned that at Prosper this year.”
Calpers Pushes Exxon On Climate-Change Initiatives Investors holding more than $5 billion in Exxon Mobil Corp. shares are urging the company to disclose how its business would be affected by the global push to slow warming atmospheric temperatures. The California Public Employees’ Retirement System is planning an effort to put its muscle behind climate-related shareholder proposals for the first time. The outreach campaign is expected to test the strength of climate activism among shareholders of the world’s largest publicly traded oil company, whose stock-market value was $345.55 billion as of Monday, according to FactSet. Environmentally minded Exxon investors have sought for decades to use the company’s annual meeting, set for next month, as a bully pulpit, usually with limited success. This year, a change in investor attitude following the December climate talks in Paris and an active proxy campaign could garner far more votes than in previous contests, analysts say.
Judge Dismisses Lawsuit Against SeaWorld A judge in southern California has dismissed a securitiesfraud lawsuit brought by investors in SeaWorld Entertainment, Inc. who claimed company officials misled them about the impact of the documentary “Blackfish” on the company’s financial performance and attendance at its parks. U.S. District Judge Michael Anello said the investors failed to show that SeaWorld officials had deliberately made false statements, that “Blackfish” alone caused attendance declines and that SeaWorld officials knew “Blackfish” had caused attendance declines. The lawsuit was brought by pension retirement programs for Arkansas state workers and Danish workers on behalf of all investors who had purchased shares in the company after its initial public offering in April 2013 until August 2014.
In the latest sign of fallout over a controversial North Carolina law that eliminates antidiscrimination protections for lesbian, gay and transgender people, Deutsche Bank AG said Tuesday it is halting plans to add 250 new jobs outside Raleigh. The German bank already employs about 900 people at a software-application development center in Cary, N.C., and announced plans in September to add 250 new positions to its operations in the Raleigh suburb. A week ago, online-payment firm PayPal Holdings Inc. said it wouldn’t open a new 400-employee global operations center in Charlotte because of the new state law. “We take our commitment to building inclusive work environments seriously,” said John Cryan, co-chief executive of Deutsche Bank, in a news release. “We’re proud of our operations and employees in Cary and regret that as a result of this legislation we are unwilling to include North Carolina in our U.S. expansion plans for now.”
AB InBev to Buy Devils Backbone Brewing Anheuser-Busch InBev NV on Tuesday said it agreed to acquire Devils Backbone Brewing Co., the latest addition to the beer company’s craft and import brands business. Financial terms of the deal, expected to close in the second quarter, weren’t disclosed. Virginia-based Devils Backbone, whose portfolio includes flagship Vienna Lager, Eight Point IPA and Schwartz Bier, joins AB InBev’s High End unit, which includes Four Peaks Brewing Co., Goose Island Beer Co., Blue Point Brewing Co., 10 Barrel Brewing, Elysian Brewing Co. and Golden Road Brewing. “While we are joining a creative group of craft breweries in the division, Devils Backbone will retain a high level of autonomy,” said Devils Backbone co-founder and chief executive Steve Crandall in prepared remarks.
Horizon Pharma Shares Tumble on Projected Earnings Details Horizon Pharma PLC shares plunged Tuesday after the company said it expects as much as two-thirds of its 2016 adjusted earnings to come in the second half of the year, raising questions about the pharmaceutical company’s ability to meet its financial growth targets amid drug-pricing and reimbursement pressures. In a filing with the Securities and Exchange Commission, Horizon confirmed its prior 2016 guidance of $1.025 billion to $1.050 billion in sales and $505 million to $520 million in adjusted earnings before interest, tax, depreciation and amortization. But it was the company’s new, more detailed projections of when the sales and profits would occur that had investors concerned.
Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com
page 3
Tuesday, April 12, 2016 4 p.m. ET Copyright Dow Jones & Co., Inc.
Talking Points
Tomorrow's News Today is made available as a complimentary service to Dow Jones News Service paying subscribers. No further redistribution is permitted without written permission from Dow Jones. Tomorrow’s News Today is intended to provide factual information, but its accuracy cannot be guaranteed. Dow Jones is not a registered investment adviser, and under no circumstances shall any of the information provided be construed as a buy or sell recommendation or investment advice of any kind.
IMF: “Brexit” Could Kill Recovery
Want to send a co-branded daily version to your valued clients? Dow Jones offers subscribing firms the opportunity to co-brand Tomorrow's News Today for redistribution to their clients. If your firm is interested in co-branding, please contact us at
[email protected] or 1.800.223.2274.
The International Monetary Fund said Tuesday that a British exit from the European Union risks severely damaging the global economy, adding its voice to an intense debate ahead of the country’s June referendum on the question. The Washington-based fund listed the possibility of Britain leaving the EU as one of seven major risks to the global economy in the year ahead, alongside worries over the health of the Chinese economy and turbulence in financial markets. Such a vote “could do severe regional and global damage by disrupting established trading relationships” in the world economy, the IMF said, in its quarterly world economic outlook. It said uncertainty about the outcome of the June 23 referendum is already weighing on the U.K. economy, prompting it to cut its U.K. growth forecast for this year to 1.9% from 2.2%. “A British exit from the European Union could pose major challenges for both the United Kingdom and the rest of Europe,” the IMF said. The fund said that negotiations on post-exit arrangements would likely be protracted, “resulting in an extended period of heightened uncertainty that could weigh heavily on confidence and investment, all the while increasing financial market volatility.” For Europe, so-called “Brexit” would likely disrupt trade and financial activity, reducing the benefits that flow from the continent’s economic cooperation and integration, according to the fund. “It’s obvious that there’s a lot of uncertainty at the moment about what will happen in June that it is weighing on confidence and investment in the U.K.,” IMF chief economist Maurice Obstfeld said at a news conference in Washington. Prime Minister David Cameron, who is using economic security as a key part of his campaign to persuade Britons to vote to remain in the EU, seized on the IMF’s intervention. Most polls suggest a narrow lead for staying in the bloc. “The IMF is right—leaving the EU would pose major risks for the UK economy. We are stronger, safer and better off in the European Union,” Mr. Cameron said on his Twitter account. Treasury chief George Osborne, a close ally of Mr. Cameron who also champions EU membership, said the IMF’s warning underscores the high stakes. “The IMF has given us the clearest independent warning of the taste of bad things to come if Britain leaves the EU,” he said. The Treasury is due to publish its own assessment of the costs and benefits of EU membership soon. The fund’s conclusions on the potential perils of “Brexit” echo those of the Bank of England and many private-sector economists. But proponents of Britain leaving the EU, including London Mayor Boris Johnson and several ministers in Mr. Cameron’s government, challenge the pro-EU camp’s economic claims. They argue that quitting the EU would unshackle the U.K. from burdensome regulation and costs and leave it free to sign its own trade deals with faster-growing parts of the world. They also say leaving the bloc would give Britain greater control over immigration and restore the sovereignty of Parliament in U.K. affairs. Matthew Elliott, chief executive of Vote Leave, which campaigns in favor of exit, said the IMF’s forecasts show the U.K. economy is “robust,” despite the downgrade. He said “the biggest risk to the U.K.’s economy and security is remaining in an unreformed EU,” which he said is incapable of dealing with challenges such as the continuing eurozone debt crisis and surging migration. Nigel Farage, who leads the anti-EU UK Independence Party, said the IMF’s predictions can’t be trusted. “The IMF was wrong when it supported the continued on page 5 Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com
page 4
Tuesday, April 12, 2016 4 p.m. ET
Talking Points
“Not even middle-income African countries have such a strong exposure.”
continued euro, wrong when it failed to predict the global recession and is wrong now it is trying to scare the British people,” he said.
Latin America Faces Recession After Commodities Crash The economies of Latin America and the Caribbean will likely contract for a second consecutive year, dragged down by South American countries that rely heavily on commodities and are more exposed to the slowdown in China, the World Bank said Tuesday. In its semiannual report on the region, the World Bank said it expects output to shrink 0.9% from 2015 as the region enters its fifth year of economic slowdown. While Mexico, Central America and the Caribbean will likely see a 2.5% expansion, thanks in part to their closer ties to the U.S. economy, South America will probably contract 2%, with Brazil down 3.5% and Venezuela down 8.3%, the bank said. “South America’s exposure to commodities prices is unique in the world,” said Augusto de la Torre, World Bank Chief Economist for Latin America and the Caribbean.
The International Monetary Fund on Tuesday lowered its 2016 global economic-growth estimate to 3.2% from 3.4%, and expects Latin America and the Caribbean to contract 0.5%. The end of a decade-long commodity boom has put policy makers in South America in a quandary. Although they would like to lower interest rates and spend more to spur growth and employment, they are compelled to tighten conditions and adjust domestic demand as a result of lower export revenue. “They’re adapting to external conditions that appear to be lasting,” Mr. De la Torre added. The boom years led to greater increases in demand than it did in domestic output, helping to reduce poverty, but complicating the transition in lean years. The demand effect was greater in countries with lower levels of savings. “For the poor it doesn’t matter if the windfall lasts for a short or a long time. The sensible thing for them is to consume,” Mr. De la Torre said. The official singled out Peru as a country that handled its windfall well by not increasing spending too much and maintaining a relatively open economy, which puts less overheating pressure on the domestic economy. Peru’s economy grew 3.3% last year and is expected to accelerate in 2016.
Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com
page 5
