Sweeping changes to EU rules on financial instruments will come into force today representing the biggest global financial reform in a decade. MiFID II, already close to 7,000 pages in length with all its addendums, will shine a spotlight on transactions, offer greater protection to investors and inject more competition into the trading of all asset classes. Some critics, however, are asking if the changes will unnecessarily complicate and fragment the markets.

Economy

While the U.S. pulled out of the deal nearly a year ago, Britain is interested in joining the Trans-Pacific Partnership after it leaves the EU. "With these kind of plurilateral relationships, there doesn't have to be any geographical restriction," Trade Minister Greg Hands told the FT. EU rules still state that Britain cannot agree to any new trade deals before it leaves the bloc in March 2019.

Beijing's crackdown on pollution has put China on track to overtake Japan this year as the world's biggest importer of natural gas. Already the largest importer of oil and coal, China is the world's third biggest user of natural gas behind the U.S. and Russia, but has to import around 40% of its total needs as domestic production can't keep up with demand.

A conflict on the Korean Peninsula could disrupt global businesses, making it "the greatest geopolitical threat to credit quality in Asia," according to Moody's. While an escalation remains a "low-probability event," the agency predicted potential economic outcomes such as a hit to global electronics, energy and financials. The warning comes after President Trump said he had a "much bigger & more powerful Nuclear Button" than Kim Jong-un and that his "Button works!"

Deadly protests in Iran have intensified talks within the Trump administration about imposing fresh penalties against the Islamic Republic, just 10 days before the president must decide whether to continue waiving sanctions that were lifted under the Iran deal. In a pair of tweets on Tuesday, Trump also threatened to cut off foreign aid money to Pakistan and the Palestinian Authority.

Budget Director Mick Mulvaney and Legislative Director Marc Short will meet with congressional leaders of both parties today to discuss a spending plan for fiscal 2018, an issue Congress repeatedly punted last year. A dispute over DACA, ending the visa lottery program and border wall funding will also hang over talks this week to avoid a government shutdown.

After a strong first day of the trading year, investors are set to digest data on auto sales and manufacturing activity, as well as the minutes from the latest Fed meeting. Market participants will be looking at whether the minutes address the prospects of additional rate tightening action in the coming months, and for any economic impacts from the new U.S. tax code.

Stocks

A U.S. government panel's decision to block Ant Financial's (NYSE:BABA) $1.2B buyout of MoneyGram (NYSE:MGI) is another indication that the goodwill built during President Trump's trip to Beijing in November is fading, according to China's state-run Xinhua news agency. CFIUS rejected the deal on national security concerns, the most high-profile Chinese acquisition blocked under the Trump administration. MGI -5% premarket.

Shortly after allowing customers to trade bitcoin futures from CBOE Global Markets, E*Trade (NASDAQ:ETFC) has now opened trading in CME bitcoin futures, according to its website. Futures exchanges CBOE and CME began offering bitcoin futures in mid-December after last year's wild run-up in the price of the cryptocurrency.

Following "numerous attempts" to secure a deal with the premium pay service, Altice USA (NYSE:ATUS) has dropped Starz (NASDAQ:STRZA) from its Optimum and SuddenLink cable systems. The standoff is the first publicized instance of a major cable operator pushing for a price drop, based partly on the argument that the network has diminished the overall value of the cable service.

Vice Media has suspended two top executives, including President Andrew Creighton and Chief Digital Officer Mike Germano, following a NYT report on sexual misconduct at the company. 21st Century Fox (NASDAQ:FOXA) and Walt Disney (NYSE:DIS) own stakes in VICE, while Time Warner (NYSE:TWX) pays the company to produce shows for HBO.

Spotify has been hit with a $1.6B lawsuit that claims the streaming service infringed on thousands of song copyrights, including the Doors' Light My Fire and Tom Petty's Free Fallin'. "Spotify (Private:MUSIC) repeatedly failed to obtain necessary statutory, or 'mechanical,' licenses to reproduce and/or distribute musical compositions on its service," according to the suit from Wixen Music Publishing.

A U.S. court has asked Valeant Pharmaceuticals (NYSE:VRX) and Bill Ackman's Pershing Square (OTCPK:PSHZF) to appear for a hearing, set for Jan. 16, to discuss the proposed settlement in an insider trading case. Last week, Pershing Square and Valeant decided to pay $290M to settle a lawsuit that accused them of insider trading before bidding for Allergan (NYSE:AGN) in 2014.

Under siege from an army of small-batch upstarts, Unilever (UL, UN) is looking to imitate its "ankle biter" competitors. "We have to match them in terms of insight, speed and ability," said CFO Graeme Pitkethly, who is helping spearhead the company’s globe-spanning reorganization. Consumers have gravitated in droves toward smaller, niche or locally made products, and in many cases, they are seeking out healthy alternatives.

McDonald's is testing the use of fresh beef in another burger, the latest move by the company to swap out frozen meat. The Archburger, similar to the Arch Deluxe - a big flop from the late 1990s - will be launched at seven McDonald's (NYSE:MCD) restaurants in Tulsa, Oklahoma. The chain previously held similar tests for fresh beef Quarter Pounders, before scheduling a nationwide rollout in mid-2018.

Petrobras has agreed to pay $2.95B to settle a U.S. class action brought by investors who claim they lost money as a result of a corruption scandal, dubbed Operation Car Wash. The deal is one of the largest securities class action settlements in the U.S. The settlement will be paid in three installments, according to Petrobras (NYSE:PBR), and will affect fourth quarter results.

Today's Markets

In Asia, Japan closed. Hong Kong +0.2%. China +0.6%. India -0.1%.
In Europe, at midday, London flat. Paris +0.3%. Frankfurt +0.4%.
Futures at 6:20, Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +0.4% to $60.63. Gold flat at $1316.20. Bitcoin +0.9% to $14869.
Ten-year Treasury Yield -1 bps to 2.45%

Today's Economic Calendar

Auto Sales
8:55 Redbook Chain Store Sales
10:00 ISM Manufacturing Index
10:00 Construction Spending
2:00 PM FOMC minutes