Here is what you need to know.
The yield curve is the flattest its been in eight years. Early selling at the front-end of the US yield curve has run the 2-year yield up to almost 1.07%, its highest in five and a half years. Meanwhile the 10-year yield hovers near 2.24%. The 117 basis point spread is the tightest since early 2008.
Saudi Arabia is cutting fuel subsidies. The drop in oil prices ran the kingdom’s budget deficit to $9 billion this year. Revenue reached 608 billion riyals ($162 billion), down 15% compared to official forecasts. That, combined with spending of 975 billion riyals, 13% more than expected, has caused the finance ministry to cut fuel subsidies, according to the BBC. Petrol prices could rise by as much as 50%, and diesel, electricity and water prices are expected to rise as well.
Spain still hasn’t formed a government. The uncertainty continues in Spain after the country’s Socialist party said it wouldn’t form a government with any party supporting a referendum on Catalonia’s independence. Prime Minister Mariano Rajoy has been unable to form a government after his People’s Party won 123 seats in the election, well short of the 176 that would have held its majority. Spain’s 10-year yield is unchanged at 1.78%.
Deutsche Bank posted its biggest loss ever. The German investment bank reported a net loss of €6 billion ($6.6 billion) with €1.2 billion ($1.32 billion) of that being for litigation charges. Deutsche Bank said revenue slumped 7% year-over-year to €7.3 billion, hurt by its stake in China’s Hua Xia Bank. CEO John Cryan is taking dramatic steps to turn the bank around, saying the firm will lay off thousands of employees while shuttering its businesses in a number of countries. Cryan recently announced Deutsche Bank won’t be paying a dividend in 2015 or 2016.
Carl Icahn upped his bid for Pep Boys. The activist investor has raised his bid for the auto parts retailer to $18.50 per share, or more than $1 billion, Bloomberg reports. The newest offer from Icahn trumps Bridgestone’s latest offer of $17 per share, which Pep Boys had already agreed to. According to Bloomberg, Icahn is willing to raise his bid even further if Pep Boys doesn’t increase the termination fee. Bridgestone will make a decision on its next move within three business days, a spokesman said.
It sounds like Amazon had a great holiday season. The online retailer announced more than 3 million customers signed up for its Prime service during the third week of December. According to Amazon, almost 70% of purchases on the site were done with a mobile device. The company says worldwide, a copy of Adele’s new CD, “25,” was purchased every 3 seconds.
The new Google Glass is coming soon. Google Glass Enterprise Edition, a project now run by Nest founder Tony Fadell, is getting ready to be formally announced. According to Stephen Hall at 9to5Google, the device offers better hardware and wifi, a longer battery life, and an Intel Atom processor. While the new edition is aimed at business professionals, it’s also going to be for consumers.
Samsung Pay is upgrading its US service. Reuters reports, Samsung’s mobile payment service will allow its US users to do online shopping in 2016. In addition, the service will be offered on lower-priced phones. Thomas Ko, global co-general manager of Samsung Pay, told Reuters, Samsung Pay is the most popular mobile payment service in the US, because it can be used with both old and new generation payment terminals and doesn’t require any requirements from the retailer.
Stock markets around the world are trending higher. Overnight, Australia’s ASX (+1.2%) led the way up. In Europe, Germany’s DAX (+1.4%) paces the gains. S&P 500 futures are up 7.75 points at 2056.50.
Economic data is light. The Case-Shiller Index is due out at 9 a.m. ET and consumer confidence will cross the wires at 10 a.m. ET. Treasury will auction $35 billion 5-year notes at 1 p.m. ET.