Stocks in the US Started the Trading Session on a Positive Note
Stocks in the US started the trading session on a positive note after Apple and China Mobile announced a deal that would bring iPhones to China in January. Apple (NASDAQ:AAPL) was higher by nearly 4% in the pre-market on the back of the news of the deal. The Bank of Japan announced a new budget while Chinese rates put pressure on US short term rates.
Apple finally struck a deal for iPhone’s with China Mobile. Apple entered into a multi-year agreement with China Mobile (NYSE:CHL) to sell the iPhones 5S and 5C to the 760 China Mobile subscribers. Importantly, the devices will work on China Mobile’s new 4G TD-LTE network and its existing 3G TD-SCDMA infrastructure. Analysts estimate that Apple will sell an extra 10-24M handsets, although headwinds include the popularity of cheap and large Android phones in China.
US short term rates were under some pressure early on Monday, pushed higher by liquidity issues in China. The in China, the 7-day repo rate jumped nearly 2.5% last week to 6.62%, a level not seen in six months. At the same time, Chinese officials may be more concerned about the persistent increase in long-term rates. This change is more of a liquidity squeeze than traders pushing up rates due to stronger than expected data.
Economic data is fairly light Monday. The US reported that the Fed’s favored inflation gauge the PCE climbed 1.1% year over year lower than the 2% target. Spending and income also rose modestly. The increase in spending was the impetus for the higher GDP data reported last week. Consumer confidence was also strong. The Thomson Reuters/University of Michigan final index of consumer sentiment climbed to 82.5 from 75.1 in November. Economists expected a reading of 83, according to the median projection. A pickup in employment, higher property values and stock-market gains are bolstering household wealth and underpinning sentiment.
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