Wall Street Breakfast: Must-Know News
July 5, 2012
PBOC lowers rates. The People's Bank of China has cut interest rates, lowering the benchmark lending rate 31 basis points and the benchmark deposit rate 25 basis points. U.S. stock futures moved higher on the unexpected decision.
BOE to print more money. The Bank of England has relaunched QE, adding £50B to its £325B asset purchase program. The bank's benchmark lending rate remains at 0.50%. Next up is the ECB, which is widely expected to cut its benchmark rate by 25 bps today to a record-low 0.75%, although it's unclear where the bank goes from there.
What did Diamond know about Libor and when? Bob Diamond yesterday testified to U.K. legislators that he only found out about the Libor accusations only very recently, which is strange given that reports about Barclays (BCS) being part of the global investigation stretch back to at least March 2011. In his testimony, Diamond also said he did not believe that the Bank of England's Paul Tucker was giving permission to lower rates.
VW to finally gain control of Porsche. Volkswagen has agreed to acquire the 50.1% stake in Porsche it doesn't already own for €4.46B ($5.6B), ending a seven-year takeover saga. The deal helps VW in its aim of speeding past Toyota (TM) and General Motors (GM) to become the world's largest automaker by 2018.
Bank investors in the dark about Libor liabilities. Bank shareholders have no idea what kind of liability they're facing from the Libor probe. Barclays (BCS), for example, dropped 16% the day after being blindsided by a $451.4M regulatory fine. More than a dozen banks are being probed, are providing minimal disclosures and are probably failing to put enough funds in reserve for potential fines.
British judge rules against Apple on four patents. HTC phones don't infringe four Apple (AAPL) patents related to touchscreen technology, and three of those Apple patents are invalid, U.K. Judge Christopher Floyd has ruled. The patents include a slide-to-unlock feature and functionality to touch the screen in two spots simultaneously. It's not an insignificant defeat for Apple, although it did enjoy another pretrial victory against Samsung (SSNLF.PK) on Tuesday.
ConEd, union to talk, possibly to discuss talking some more. Consolidated Edison (ED) and its biggest union are due to meet today under the auspices of federal mediators after talks over a new labor contract stalled and the New York power utility locked out 8,500 workers. The meeting doesn't mean the sides will renew negotiations, so it could be that they'll just talk about having talks, or how hot the weather's been, or whatever.
KKR among those bidding for Getty Images. KKR (KKR) and TPG are reportedly among at least five suitors still in the hunt for Getty Images after the first round of bidding, which attracted offers of $4B. An acquisition by KKR would add to its recent investment in New-York based image database firm Fotolia for $150M.
Best Buy turnaround strategy not convincing the skeptics. Best Buy (BBY) is testing a new recovery strategy, turning some of its cavernous stores into sleek, Apple-inspired retail outlets in the hope of boosting sales. Skeptics worry the makeover doesn't do enough to dissuade shoppers from browsing in the stores and then buying products online from cheaper e-tailers.
US Airways not rushing to catch AMR flight. US Airways (LCC) has said that it's in no rush to merge with American Airlines (AAMRQ.PK), and expects the bankrupt airline to defer review of a possible deal now that it's seeking more time to formulate a stand-alone exit plan. US Airways CEO Doug Parker said his company will "respect the bankruptcy process," so tie-up speculation will "continue for at least several more months."
German antitrust officials reviewing GM-Peugeot alliance. Germany's federal cartel office intends to take a closer look at the partnership between GM's (GM) Opel unit and Peugeot (PEUGY.PK) in a Phase II review. The assessment will examine the impact of the tie-up on car parts suppliers. The latest review comes after GM signed an agreement on Monday to transfer a majority of its business in Europe to Peugeot unit Gefco.
China's Beige Book tells an uplifting story. China's Beige Book, a new private survey of around 2,000 executives and bankers, shows that retail sales and manufacturing strengthened last quarter, property sales increased, and 80% of retailers expect higher sales in six months. The picture painted suggests an economic pick-up not fully captured in China's official statistics.
Cities mull seizure of underwater mortgages. California's San Bernardino County and two of its biggest cities, Ontario and Fontana, want to use the concept of eminent domain to forcibly buy underwater mortgages from investors, lower the loan principal to match the value of the property, and then resell the reduced mortgages. Proponents believe they have a strong legal case, but mortgage investors are unsurprisingly opposed. Robert Shiller likes the idea.
Spanish yields belie S&P optimism on eurozone crisis. S&P thinks the eurozone crisis might be finally easing, citing the stabilizing agreements that came out of the June 29 summit. There is significant implementation risk but the measures "can provide a more stable funding framework" while governments work to "implement growth-enhancing structural reforms and reduce their budgetary imbalances." Despite S&P's optimism, Spanish yields again rose in a bond auction today.
Farmers hurting despite high crop prices. Corn and wheat may be trading near ten-month highs, but farmers are hardly profiting. With razor-thin margins and food crops priced well-below the cost of production, many growers are quitting. From the U.S. to Australia, and from beef to vegetables, farmers globally are facing the same crunch.
Mammoth Lakes goes under water. Mammoth Lakes filed for bankruptcy protection on Tuesday, becoming the second Californian city in six days to do so after Stockton entered Chapter 9 last week. Mammoth Lakes, which has assets of over $100M and debt of more than $50M, made the filing after its largest creditor refused to negotiate concessions on a $43M legal judgement.
Today's Markets:
* In Asia, Japan -0.3%. Hong Kong +0.5%. China -1.2%. India flat.
* In Europe, at midday, London +0.5%. Paris +0.1%. Frankfurt +0.9%.
* Futures at 7:00: Dow +0.3%. S&P +0.4%. Nasdaq +0.3%. Crude +0.7% to $88.26. Gold -0.3% to $1617.60.
Today's economic calendar:
Chain Store Sales
7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 Initial Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:00 ISM Non-Manufacturing Index
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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Why Did the Market Fall?
Said an equity trader, "I'll cop to this:
I can't tell why we tanked from the top to this,
But the punters of punts
All concluded at once -
There's no basis for being an optimist."
- David Lefkovits AKA Dr. Goose
@ www.limericksecon.com/
