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Daily Agenda: Oil Hits Earnings Season

Australia’s central bank cuts rates; Federal Reserve leak subject of Department of Justice probe; Indonesia posts slow growth.

The long-lasting oil price slump is reverberating through macroeconomic data points and this earnings season. Suburban Houston-headquartered oil and gas exploration company Anadarko Petroleum’s announcement yesterday of a $3.27 billion loss for the initial three months of the year was emblematic of this pain. The impact of lower investment and employment in the energy sector was also reflected in disappointing first-quarter U.S. GDP data.

Australian central bank lowers rates. Policymakers at the Reserve Bank of Australia lowered the benchmark cash rate by 25 basis points to an all-time low of two percent today during the regular monthly rate announcement. The move had been anticipated by analysts after an easing bias signaled in the prior two announcements. In the accompanying statement, bank governor Glenn Stevens indicated that the inflation outlook, after last year’s sharp correction in commodity prices, provided the opportunity for easing with many economists projecting further rate cuts for the coming months.

Federal Reserve leak probed. The U.S. Department of Justice has announced it is investigating how Medley Global Advisors, a private research firm, disseminated confidential information ahead of the September 2012 Federal Open Market Committee announcement. Federal Reserve Chair Janet Yellen has indicated that the bank will comply fully with the investigation into communications between bank executives and Medley Global Advisors. Medley discussed the details of the September 2012 FOMC meeting.

UBS earnings nearly double. Zurich–based UBS Group announced first-quarter results that beat analyst expectations. The financial institution reported net income of 1.98 billion Swiss francs ($2.12 billion) versus 1.05 billion Swiss francs during the same period last year. The bank’s performance reflected the focus on its wealth management franchise and smaller, more focused investment banking operations adopted in 2012. UBS’s wealth management division reported an 14.4 billion Swiss franc increase in assets from first-quarter 2014.

Euro zone growth forecasts increased. The European Commission today increased growth projections for the common currency region. GDP for the 19-nation group is expected to rise at an annualized pace of 1.5 percent in 2015, an increase from a prior 1.3 percent target. Separately, the Commission reduced its forecasts for Greece sharply to just 0.5 percent as the beleaguered country teeters on the brink of exit from the euro.

Indonesia growth slumps. GDP data for the first quarter issued today by Badan Pusat Statistik indicated the slowest pace of growth in five years. The largest economy in Southeast Asia registered an annualized 4.71 percent pace of growth versus a prior 5 percent, as Chinese demand for base metals and coal weighs on the nation’s exporters. While household consumption expanded marginally during the first three months of the year, exports fell by nearly 6 percent versus the final quarter of 2014 and government spending plunged. A slowing economy is challenging the administration of President Joko Widodo which had pledged economic reforms that have proven hard to implement due to partisan politics.

Spanish unemployment falls at a rapid pace. Spain’s jobless headcount contracted by nearly 120,000 in April, almost twice as large a drop as consensus economist forecasts. Despite this decrease in job seekers, the headline unemployment rate in the country remains above 20 percent, with youth unemployment particularly high.

European cement merger wins U.S. approval. The Federal Trade Commission yesterday approved a plan to divest assets which would allow two major European cement producers, Swiss firm Holcim and French company Lafarge, to merge without running afoul of U.S. antitrust regulations. The combined market value of the merged companies will exceed $25 billion.

U.S. earnings season continues. Chicago–headquartered global food commodity giant Archer Daniels Midland recorded a 15 percent decline in sales for the first quarter versus the first three months of 2014 as a strong U.S. dollar weighed on multiple business segments, particularly the corn processing division, which has also been hard hit by weak ethanol demand on the back of low oil prices. Despite the setbacks the company achieved earnings of $0.77 per share, beating consensus analysts’ estimates for $0.71. Hedge fund firm Och-Ziff Capital Management Group announced a 17 percent increase in revenues for first-quarter versus the same period last year, with flat earnings per share. Herbalife, the multilevel marketing dietary supplement company that has been the subject of an activist shareholder tug-of-war, will announce today after equity markets close in New York.

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