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Five Things You Need to Know to Start Your Day

Five Things You Need to Know to Start Your Day

(Bloomberg) --

Good morning. The Federal Reserve cut rates, a new auto giant may be created in Europe and some of the biggest of Big Tech reported results. Here’s what’s moving markets.

Fed Cuts

The Federal Reserve cut interest rates by a quarter-point and signaled that policy is just about where officials want it to be, so there may not be any further reductions on the way. That's prompted traders to trim their bets on any imminent further easing, all of which is unlikely to offer any salve to Fed critic President Donald Trump, who on Tuesday said the Fed “doesn’t have a clue!” The decision  complicates the outlook for many Asian central banks and eyes will turn once again to the European Central Bank and its new leader, Christine Lagarde, as skepticism grows about negative rates.

Auto Giant

It’s looking like a done deal: The boards of Peugeot owner PSA Group and Fiat Chrysler Automobiles NV have signed off on a merger that would create a new behemoth in the European auto industry, according to people familiar with the matter. The plan calls for paying a special dividend of 5.5 billion euros to Fiat investors and for PSA to spin off to its shareholders a 3-billion-euro stake in parts maker Faurecia SE. Importantly, the French government is backing the deal. As much as anything, the talks demonstrate the pressures on an auto industry dealing with a slowdown in sales, trade wars and an expensive switch to more environmentally friendly, electric and autonomous vehicles.

Big Tech

Apple Inc.’s prediction of holiday sales that were ahead of expectations was taken well by the market. The company continues to find ways to juice iPhone sales even in a saturated smartphone market, though there remains at least a degree of skepticism about any return to its glory days. Arch-rival Samsung Electronics Co.’s profit also beat expectations and it forecast a gradual recovery in the memory chip market to boot. Elsewhere in giant tech news, social network Facebook Inc. also topped expectations, demonstrating how its business can navigate through relentless criticism, including a thinly-veiled swipe from a rival, over its reach and influence.

Trading Barbs

The U.K. election campaign starter gun has unquestionably been fired and the first significant speech from Labour Party leader Jeremy Corbyn will arrive on Thursday. He’ll reiterate many of the pledges already made by his party, including re-nationalizing swathes of British industry, and will attack a “corrupt system” filled with “tax dodgers” and “bad bosses.” Traders, however, are more worried about the threat posed by Brexit champion Nigel Farage than by the socialist agenda of Corbyn while companies face a difficult choice too. Consumer confidence, by the way, has hit a six-year low with Britons fretting about their finances.

Coming Up…

Asian stocks were mixed after the Federal Reserve decision and as corporate earnings continue to pour in, while gains in U.S. Treasuries petered out over the session. We’ll have euro-area GDP data to digest later and another huge earnings day, topped by the likes of oil major Royal Dutch Shell Plc, U.K. lender Lloyds Banking Group Plc and French drugmaker Sanofi. Note too that China’s factory outlook dimmed once more amid lingering uncertainty over the trade picture and that the Bank of Japan strengthened its forward guidance on interest rates but left current policy unchanged.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours. 

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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