Breaking News This Morning ...
Employment Report: Just moments after the November payroll numbers came out Friday, observers noted the Federal Reserve should now have enough ammunition to raise interest rates. The U.S. added 211,000 jobs in November, and October's already stellar payroll figure was revised upward to 298,000 from 271,000, the Wall Street Journal reports. September also received an upward revision to 145,000 from 137,000. The unemployment rate stayed at 5% in November, which the New York Times said means the U.S. economy has not yet reached a state of "full employment." Also important: average hourly earnings grew by 4 cents, or 2.3% year-over-year; a sign that wage growth may be solidifying. Still the wage growth may be too tepid< for the Fed to consider a more rapid rate hike plan, the Times notes.
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ECB Slams Markets: Despite its decision to extend quantitative easing until at least 2017, the European Central Bank delivered a major blow to markets across the board. The plan to cut one key interest rate to a historic low of -0.3% and to begin a municipal bond-buying program in addition to typical government debt underwhelmed investors who expected further rate cuts and monthly bond purchases, according to the Financial Times. Consequently, stocks in both Europe and the U.S. took a tumble. The Eurofirst 300 index had its worst day since the big sell-off in August and the S&P dropped into the negative realm for the year again. Similarly, bond markets in many European countries suffered losses, and the euro had a rare gain on the dollar, all moves the ECB was looking to avoid by adding stimulus, according to the Wall Street Journal. Of course, the ECB isn't alone to blame — the Journal notes investors had become a bit overeager. Many took short positions on the euro, which they then had to scramble to reverse. And in general, the day served as indication investors have placed too much faith in central banks and the central banks need to improve their communication to prevent such off-base decision-making in the markets.
BTG Pactual's Struggles Continue: The major Brazilian bank finds itself still searching for ways to rectify the mess made when the company's former chief and key investor André Esteves landed in prison as part of a probe into national oil company Petrobras. BTG is on the hunt for a buyer for its private banking division, BSI, despite receiving final regulatory approval to acquire the Swiss bank just three months ago, the Financial Times reports. No price has been named, but the sale nonetheless would help ease liquidity problems that have recently plagued BTG. The bank's experience has become a testament though to the dangers of issuing multiple classes of stock, according to the New York Times. Esteves owned nearly a quarter of BTG's equity, and his stock class was such that it gave him veto power over major decisions. While swaps have resolved this issue, the supervoting stock left BTG in a bind when Esteves himself became the problem at hand. American companies though may want to proactively follow BTG's lead and figure out how to get rid of this stock class system.
Wall Street Journal
Goldman Sachs' recent activity tied to commodities demonstrates how Wall Street continues to keep its tabs on those markets despite curbs implemented by Dodd-Frank and tougher capital rules. Rather than subject itself to market risk, Goldman is instead taking on credit risk by loaning to industries tied to commodities through inventory financing. For instance, Goldman lent operating cash and credit guarantees to Hawaii Independent Energy, a supplier of jet and ship fuel and marketer of gasoline and diesel. Other banks have made similar deals: Citigroup provided financing for a Canadian refinery, while Bank of America did so for a U.S. one. But while revenue is growing steadily for inventory financing — Goldman said its doubled in the past two years — it still lags behind the big bucks coming in through trading.
In what may become the biggest year for mergers and acquisitions ever, some banks made out better than others. Goldman Sachs was the year's top M&A adviser, weighing in on approximately $1.6 trillion of deals. J.P. Morgan Chase & Co. came in second, with $1.5 trillion of deals. And Morgan Stanley was a close third, with $1.4 trillion worth. Overall, investment banks brought in nearly $21 billion from M&A advising. Technically, that figures rests below the 2007 peak and even last year's haul — but many advising banks are waiting for the big payoffs from deals yet to close.
Smaller banks have already begun to see the benefits of the recent downgrade of major banks by S&P. The big banks were downgraded as a result of the growing sentiment that a federal government bailout has become less of a given as regulators push more rigorous capital requirements. Consequently, smaller banks like US Bancorp can now borrow at levels similar or even lower than their mega competitors. But as the paper notes, while the downgrades rest on the assumption the government is less keen on a bailout, one could still come if the alternative is the collapse of the financial system as we know it.
New York Times
Allegations have come in that JPMorgan concocted false grievances against a former broker after he publicly aired concerns he had with his old employer. Johnny Burris in 2013 raised issues with JPMorgan's alleged practice of pressuring brokers to sell its own mutual funds even in cases where competitors had better options for clients. After his statements to the Times came out though, public complaints from former clients showed up on his disciplinary record, making it hard for him to find new work and shooting down his chances at a wrongful termination suit. Now, some of those clients have come clean. Many of them say their supposed comments were actually written by JPMorgan, and they signed them without full knowledge of their contents. Burris now has a whistle-blower case before OSHA, and Finra is looking into the allegations of the false comments — creating a major headache within one of JPMorgan's most profitable divisions.
Regulators are calling foul on prepaid card company UniRush, saying it has not cooperated fully with investigations into a major malfunction with the company's RushCard product that left thousands without access to their much-needed funds. The Consumer Financial Protection Bureau asked UniRush to provide information dating back to Jan. 1, including details regarding the processor conversion that led to the malfunction. UniRush balked at the request however, calling it burdensome, and attempted to delay its reply until January. The CFPB in turn denied the request, according to an order posted to its website Thursday. UniRush is also drawing political scrutiny, with two senators demanding details regarding the company's problems.
CNBC: Apple is moving beyond credit cards. In Russia, Apple users can make purchases by typing in a phone number and charging the items to their monthly mobile bill as part of a partnership with mobile company Beeline. A similar deal was also made last month between Apple and Telefonica's O2 in Germany. Apple has come to the carrier billing game somewhat late — Google, Microsoft and Facebook have all previously scored mobile billing deals. Nonetheless, mobile billing represents a workaround wherein you don't need credit cards to make payments. That appeals to Europeans, who are more inclined to use cash than Americans. But analysts say Apple isn't too happy about having to follow the trend into carrier billing, given that the company likes to have a tight leash on customer behavior.