Tuesday's Economic Calendar
FOMC Meeting, Day 1
7:45 ICSC Retail Store Sales
8:55 Redbook
9:00 S&P/Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:00 Richmond Fed's Manufacturing Index
10:00 Bernanke: Achieving Fiscal Sustainability
10:00 Hearing: Wall Street and the Financial Crisis (Lloyd Blankfein, Fabrice Tourre)
12:00 PM Chicago Fed's Manufacturing Index
12:30 PM Geithner: Middle Class Task Force
5:00 PM ABC Consumer Confidence Index
Tuesday, April 27, 2010
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Rachael Granby
Citi falls on Treasury sale plan. Shares of Citigroup (C) closed down 5.1% yesterday following the Treasury's announcement that it plans to sell up to 1.5B of its Citigroup shares "in an orderly fashion under a pre-arranged written trading plan." The Treasury owns 7.7B Citigroup shares, and additional sales are expected to follow. At present, the Treasury's overall stake is valued at around $36B, giving taxpayers an $11B paper profit. Premarket: C -1.1% (7:00 ET).
Goldman hit by shareholder lawsuit. It was a question of when, not if, but Goldman Sachs (GS) has finally been hit with a shareholder lawsuit. A firm named Robbins Geller Rudman & Dowd filed suit against Goldman and three of its top executives for failing to disclose the SEC's investigation prior to the SEC's suit. The lawsuit asks for class-action status on behalf of shareholders. Separately, Goldman CEO Lloyd Blankfein and trader du jour Fabrice Tourre will testify before lawmakers this morning in a hearing that could have repercussions for the broader financial sector. Blankfein plans to say that the firm didn't consistently short the housing market and didn't bet against its own clients, while lawmakers allege the firm misled investors, made billions of dollars at their expense and did so in not one but a series of complex deals. Premarket: GS -0.35% (7:00 ET).
Setback for financial reform. All the Senate's Republicans (and one Democrat) voted against a key procedural motion which would have opened up the debate on financial reform legislation to the full Senate. Democrats will move to bring another procedural vote on the debate as soon as Wednesday, hoping to round up the extra three votes they need to get the motion approved. In the meantime, lawmakers are heading back to the negotiating table to try to reach a bipartisan deal. Those on Wall Street are following the bill's progress apprehensively, concerned it will hurt business, though many agree on the need for reform. Off of Wall Street, non-financial firms from confectioners to online retailers to manufacturers are concerned their businesses will be hurt too because the legislation is overly broad.
Chloride rejects Emerson bid. The U.K.-based Chloride Group rejected a $1.1B offer from Emerson Electric (EMR) as major shareholders urged Chloride to hold out for a higher bid. "It's a strategic asset, a major player in Europe and it's an important piece of the jigsaw in this growth industry," said one shareholder. "Any offer would have to be substantially higher than three pounds to have any chance of success." Emerson's current offer is equivalent to £2.75 per share.
Bias suit against Wal-Mart moves forward. A federal appeals court ruled yesterday that a class-action gender discrimination lawsuit against Wal-Mart (WMT) could go to trial, potentially exposing the company to billions of dollars in legal damages. The lawsuit alleges that Wal-Mart pays women less than men for the same jobs and that female employees receive fewer promotions. Wal-Mart plans to appeal to the Supreme Court.
Supreme Court to rule on videogames. The Supreme Court agreed to decide whether a California law that will ban the sale of violent videogames to minors is constitutional. California has argued that violent videogames are "a new, modern threat to children" that cause psychological harm and can predispose minors to be violent or behave aggressively. A ruling could affect videogame makers such as Activision Blizzard (ATVI) and Take-Two Interactive (TTWO), which produce "Call of Duty" and "Grand Theft Auto" respectively. It could also impact the broader entertainment industry and the production of violent movies and television shows.
Google scuttles Verizon, Nexus One tie. Google (GOOG) has decided not to make its Nexus One smartphone compatible with Verizon Wireless (VZ), telling customers waiting for the device that they should buy another Google-based smartphone instead. The company didn't explain the decision, which deals a major blow to its ambitions to reshape the cellphone market. Sources suggest lackluster sales of the compatible version prompted the reversal.
Greek pressure continues to rise. Market relief over Greece's aid request last Friday has been short-lived. The cost of insuring Greek debt against default jumped to a new record yesterday and rising yields neared double digits. Worries about a eurozone contagion are also growing, with some economists suggesting that Portugal could become the next Greece. The euro has continued to slide, and is -0.7% against the dollar (7:00 ET).
I-banking lifts Deutsche profit. Deutsche Bank (DB) reported a 48% increase in its Q1 profit, as gains at the investment bank outweighed a loss from asset and wealth management. Net income rose to €1.76B ($2.35B), beating estimates of €1.33B and the €1.19B from the year-earlier period. Shares -1.9% premarket (7:00 ET) as analysts suggest the strong result is unsustainable since it's almost entirely due to investment banking, and "the results of the other divisions leave something to be desired."
BP profits on higher oil prices. BP (BP) posted better-than-expected results this morning, with net profit more than doubling in Q1 to $6.08B. Revenue rose 55% to $74.41B. The results were helped by higher average oil prices and a strong operational performance. However, the earnings report was overshadowed by the continuing oil spill from a BP well in the Gulf of Mexico; the oil is expected to reach land by Saturday. Premarket: BP -1.3% (7:00 ET).
Mortgage fraud still alive and kicking. Mortgage fraud has continued to rise, increasing 7% last year according to a new report. Florida had the highest incidence of fraud by far, followed by New York, California, Arizona and Michigan. Though the 7% increase is an improvement from the 26% jump seen the year before, the slower growth rate isn't just because of better reporting and policing of fraud activity; the report warns that more scammers are using technology to access information and remain anonymous, and those in the industry must "ready themselves for more complex schemes in order to continue the fight against mortgage fraud."
Cities angry as investors bet on defaults. Financially struggling U.S. cities now have a new problem to grapple with: investors who are buying derivatives that bet on a municipal default. Credit default swaps on municipal debt became available a few years ago and are still thinly traded, but their proliferation is angering cities which claim the derivatives send a negative message and can potentially raise borrowing costs at a time when municipalities need all the help they can get.
by SA Editor Rachael Granby
Citi falls on Treasury sale plan. Shares of Citigroup (C) closed down 5.1% yesterday following the Treasury's announcement that it plans to sell up to 1.5B of its Citigroup shares "in an orderly fashion under a pre-arranged written trading plan." The Treasury owns 7.7B Citigroup shares, and additional sales are expected to follow. At present, the Treasury's overall stake is valued at around $36B, giving taxpayers an $11B paper profit. Premarket: C -1.1% (7:00 ET).
Goldman hit by shareholder lawsuit. It was a question of when, not if, but Goldman Sachs (GS) has finally been hit with a shareholder lawsuit. A firm named Robbins Geller Rudman & Dowd filed suit against Goldman and three of its top executives for failing to disclose the SEC's investigation prior to the SEC's suit. The lawsuit asks for class-action status on behalf of shareholders. Separately, Goldman CEO Lloyd Blankfein and trader du jour Fabrice Tourre will testify before lawmakers this morning in a hearing that could have repercussions for the broader financial sector. Blankfein plans to say that the firm didn't consistently short the housing market and didn't bet against its own clients, while lawmakers allege the firm misled investors, made billions of dollars at their expense and did so in not one but a series of complex deals. Premarket: GS -0.35% (7:00 ET).
Setback for financial reform. All the Senate's Republicans (and one Democrat) voted against a key procedural motion which would have opened up the debate on financial reform legislation to the full Senate. Democrats will move to bring another procedural vote on the debate as soon as Wednesday, hoping to round up the extra three votes they need to get the motion approved. In the meantime, lawmakers are heading back to the negotiating table to try to reach a bipartisan deal. Those on Wall Street are following the bill's progress apprehensively, concerned it will hurt business, though many agree on the need for reform. Off of Wall Street, non-financial firms from confectioners to online retailers to manufacturers are concerned their businesses will be hurt too because the legislation is overly broad.
Chloride rejects Emerson bid. The U.K.-based Chloride Group rejected a $1.1B offer from Emerson Electric (EMR) as major shareholders urged Chloride to hold out for a higher bid. "It's a strategic asset, a major player in Europe and it's an important piece of the jigsaw in this growth industry," said one shareholder. "Any offer would have to be substantially higher than three pounds to have any chance of success." Emerson's current offer is equivalent to £2.75 per share.
Bias suit against Wal-Mart moves forward. A federal appeals court ruled yesterday that a class-action gender discrimination lawsuit against Wal-Mart (WMT) could go to trial, potentially exposing the company to billions of dollars in legal damages. The lawsuit alleges that Wal-Mart pays women less than men for the same jobs and that female employees receive fewer promotions. Wal-Mart plans to appeal to the Supreme Court.
Supreme Court to rule on videogames. The Supreme Court agreed to decide whether a California law that will ban the sale of violent videogames to minors is constitutional. California has argued that violent videogames are "a new, modern threat to children" that cause psychological harm and can predispose minors to be violent or behave aggressively. A ruling could affect videogame makers such as Activision Blizzard (ATVI) and Take-Two Interactive (TTWO), which produce "Call of Duty" and "Grand Theft Auto" respectively. It could also impact the broader entertainment industry and the production of violent movies and television shows.
Google scuttles Verizon, Nexus One tie. Google (GOOG) has decided not to make its Nexus One smartphone compatible with Verizon Wireless (VZ), telling customers waiting for the device that they should buy another Google-based smartphone instead. The company didn't explain the decision, which deals a major blow to its ambitions to reshape the cellphone market. Sources suggest lackluster sales of the compatible version prompted the reversal.
Greek pressure continues to rise. Market relief over Greece's aid request last Friday has been short-lived. The cost of insuring Greek debt against default jumped to a new record yesterday and rising yields neared double digits. Worries about a eurozone contagion are also growing, with some economists suggesting that Portugal could become the next Greece. The euro has continued to slide, and is -0.7% against the dollar (7:00 ET).
I-banking lifts Deutsche profit. Deutsche Bank (DB) reported a 48% increase in its Q1 profit, as gains at the investment bank outweighed a loss from asset and wealth management. Net income rose to €1.76B ($2.35B), beating estimates of €1.33B and the €1.19B from the year-earlier period. Shares -1.9% premarket (7:00 ET) as analysts suggest the strong result is unsustainable since it's almost entirely due to investment banking, and "the results of the other divisions leave something to be desired."
BP profits on higher oil prices. BP (BP) posted better-than-expected results this morning, with net profit more than doubling in Q1 to $6.08B. Revenue rose 55% to $74.41B. The results were helped by higher average oil prices and a strong operational performance. However, the earnings report was overshadowed by the continuing oil spill from a BP well in the Gulf of Mexico; the oil is expected to reach land by Saturday. Premarket: BP -1.3% (7:00 ET).
Mortgage fraud still alive and kicking. Mortgage fraud has continued to rise, increasing 7% last year according to a new report. Florida had the highest incidence of fraud by far, followed by New York, California, Arizona and Michigan. Though the 7% increase is an improvement from the 26% jump seen the year before, the slower growth rate isn't just because of better reporting and policing of fraud activity; the report warns that more scammers are using technology to access information and remain anonymous, and those in the industry must "ready themselves for more complex schemes in order to continue the fight against mortgage fraud."
Cities angry as investors bet on defaults. Financially struggling U.S. cities now have a new problem to grapple with: investors who are buying derivatives that bet on a municipal default. Credit default swaps on municipal debt became available a few years ago and are still thinly traded, but their proliferation is angering cities which claim the derivatives send a negative message and can potentially raise borrowing costs at a time when municipalities need all the help they can get.
Thursday, April 22, 2010
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Rachael Granby
Qwest, CenturyTel agree to merger. Qwest Communications (Q) and CenturyTel (CTL) agreed to a merger that will bring together two of the country's largest landline phone companies. Qwest shareholders will receive 0.1664 CenturyTel shares for each share of Qwest common stock; based on CenturyTel's recent closing price, this is roughly a 15% premium to Qwest shareholders. The merger will likely face significant regulatory hurdles, but the move is a long-awaited one for Qwest, which has struggled to stay competitive against wireless operators like AT&T (T) and Verizon (VZ). Premarket: Q +10.7%, CTL -1.9% (7:00 ET).
Greek up a creek over new numbers. The EU's statistics office dealt Greece a blow today, saying the country's budget deficit last year was 13.6% of GDP, higher than the initial estimate of 12.9%. Eurostat also expressed reservations about the quality of the data reported by Greece, warning that "off-market swaps" and other uncertainties could potentially lead to a revised budget deficit of more than 14%. The yield on 10-year Greek bonds rose to 8.13% today, the highest in twelve years and more than twice the comparable German rate. The euro is -0.4% against the dollar (7:00 ET).
Obama heads to Wall Street. Obama is heading to Wall Street today to deliver a speech stressing the importance of financial reform, hoping to pressure Republicans in the process into supporting a financial reform bill. According to pre-released excerpts of his speech, Obama will say the financial crisis "was born of a failure of responsibility from Wall Street to Washington," and will urge big banks to line up behind the Democratic package of reforms that will likely face a Senate vote next week.
U.S., China take anti-dumping measures. The U.S. and China have taken new anti-dumping steps against one another, threatening to reignite trade tensions that had recently eased. The U.S. Commerce Department is launching an investigation into whether certain Chinese aluminum products are being sold at unfairly low prices because of government subsidies. China's Commerce Ministry said this morning that it's imposing anti-dumping duties of up to 96.5% on imports of polycaprolactam, or nylon 6, from the U.S., Europe, Russia and Taiwan.
Lions Gate gives Icahn a roaring rejection. Lions Gate Entertainment (LGF) rejected another bid from Carl Icahn, calling his sweetened offer "opportunistic and coercive" and still too low. The board urged shareholders not to tender their shares. Icahn, who is trying to buy the 81% of the studio he doesn't already own, had raised his offer last Thursday to $7 per share from $6 per share.
Simon presents revised offer to GGP. Simon Property Group (SPG) gave General Growth Properties (GGP) a revised recapitalization offer late yesterday, ahead of a presentation before GGP's board later today. The revised offer features a group of new investors contributing $1.1B in capital in addition to Simon's planned $2.5B investment (which includes an existing $1B commitment from hedge fund Paulson & Co.).
CyberSource soars on Visa deal. CyberSource (CYBS) closed up more than 32% yesterday after it agreed to be bought by Visa (V) for around $2B in cash. The deal will also allow Visa to improve its offering of online transaction services and help fight fraud. Visa closed down 1%.
Fed pushes banks to cut risk incentive. Federal Reserve officials are reportedly telling around two dozen of the largest U.S. banks that they need to do more to end compensation practices that encourage excessive risk and are instructing boards to increase their scrutiny of incentives. Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM), Bank of America (BAC) and Morgan Stanley (MS) are said to be among the firms under Fed review. In addition, officials want the banks to run pay-risk tests using hypothetical economic scenarios.
Toyota feeling moody over ratings cut. Moody's lowered Toyota's (TM) credit rating this morning to AA2 from AA1, saying it expects Toyota's low profitability to continue and recall-related litigation costs could be significant. Toyota has estimated in February that its recalls would cost the company $2B in the fiscal year ending in March, but Toyota has recalled additional vehicles since then and most analysts believe the final cost will be much higher. Premarket: TM -0.8% (7:00 ET).
GM repays all its gov't loans. General Motors (GMGMQ.PK) announced yesterday that it had fully repaid $6.7B in loans from the U.S. government and $1.4B in loans from Canada, ahead of its already-accelerated June timetable. The Treasury still holds $2.1B in preferred stock and owns 61% of GM's common equity. The White House pointed to GM's early repayment, and to progress in the auto industry in general, as a positive reflection on the country's continuing economic recovery.
Banks protest IMF's 'punishment tax.' Banks hit back against the IMF's proposal to levy taxes on banks' balance sheets, profits and compensation, calling it a "punishment tax" and warning it would significantly hurt profits while failing to reduce the risk of future failures. The tax would harm the industry without improving it, with some analysts suggesting pre-tax profit could be cut by as much as 20% if the measure moves forward.
by SA Editor Rachael Granby
Qwest, CenturyTel agree to merger. Qwest Communications (Q) and CenturyTel (CTL) agreed to a merger that will bring together two of the country's largest landline phone companies. Qwest shareholders will receive 0.1664 CenturyTel shares for each share of Qwest common stock; based on CenturyTel's recent closing price, this is roughly a 15% premium to Qwest shareholders. The merger will likely face significant regulatory hurdles, but the move is a long-awaited one for Qwest, which has struggled to stay competitive against wireless operators like AT&T (T) and Verizon (VZ). Premarket: Q +10.7%, CTL -1.9% (7:00 ET).
Greek up a creek over new numbers. The EU's statistics office dealt Greece a blow today, saying the country's budget deficit last year was 13.6% of GDP, higher than the initial estimate of 12.9%. Eurostat also expressed reservations about the quality of the data reported by Greece, warning that "off-market swaps" and other uncertainties could potentially lead to a revised budget deficit of more than 14%. The yield on 10-year Greek bonds rose to 8.13% today, the highest in twelve years and more than twice the comparable German rate. The euro is -0.4% against the dollar (7:00 ET).
Obama heads to Wall Street. Obama is heading to Wall Street today to deliver a speech stressing the importance of financial reform, hoping to pressure Republicans in the process into supporting a financial reform bill. According to pre-released excerpts of his speech, Obama will say the financial crisis "was born of a failure of responsibility from Wall Street to Washington," and will urge big banks to line up behind the Democratic package of reforms that will likely face a Senate vote next week.
U.S., China take anti-dumping measures. The U.S. and China have taken new anti-dumping steps against one another, threatening to reignite trade tensions that had recently eased. The U.S. Commerce Department is launching an investigation into whether certain Chinese aluminum products are being sold at unfairly low prices because of government subsidies. China's Commerce Ministry said this morning that it's imposing anti-dumping duties of up to 96.5% on imports of polycaprolactam, or nylon 6, from the U.S., Europe, Russia and Taiwan.
Lions Gate gives Icahn a roaring rejection. Lions Gate Entertainment (LGF) rejected another bid from Carl Icahn, calling his sweetened offer "opportunistic and coercive" and still too low. The board urged shareholders not to tender their shares. Icahn, who is trying to buy the 81% of the studio he doesn't already own, had raised his offer last Thursday to $7 per share from $6 per share.
Simon presents revised offer to GGP. Simon Property Group (SPG) gave General Growth Properties (GGP) a revised recapitalization offer late yesterday, ahead of a presentation before GGP's board later today. The revised offer features a group of new investors contributing $1.1B in capital in addition to Simon's planned $2.5B investment (which includes an existing $1B commitment from hedge fund Paulson & Co.).
CyberSource soars on Visa deal. CyberSource (CYBS) closed up more than 32% yesterday after it agreed to be bought by Visa (V) for around $2B in cash. The deal will also allow Visa to improve its offering of online transaction services and help fight fraud. Visa closed down 1%.
Fed pushes banks to cut risk incentive. Federal Reserve officials are reportedly telling around two dozen of the largest U.S. banks that they need to do more to end compensation practices that encourage excessive risk and are instructing boards to increase their scrutiny of incentives. Citigroup (C), Goldman Sachs (GS), JPMorgan (JPM), Bank of America (BAC) and Morgan Stanley (MS) are said to be among the firms under Fed review. In addition, officials want the banks to run pay-risk tests using hypothetical economic scenarios.
Toyota feeling moody over ratings cut. Moody's lowered Toyota's (TM) credit rating this morning to AA2 from AA1, saying it expects Toyota's low profitability to continue and recall-related litigation costs could be significant. Toyota has estimated in February that its recalls would cost the company $2B in the fiscal year ending in March, but Toyota has recalled additional vehicles since then and most analysts believe the final cost will be much higher. Premarket: TM -0.8% (7:00 ET).
GM repays all its gov't loans. General Motors (GMGMQ.PK) announced yesterday that it had fully repaid $6.7B in loans from the U.S. government and $1.4B in loans from Canada, ahead of its already-accelerated June timetable. The Treasury still holds $2.1B in preferred stock and owns 61% of GM's common equity. The White House pointed to GM's early repayment, and to progress in the auto industry in general, as a positive reflection on the country's continuing economic recovery.
Banks protest IMF's 'punishment tax.' Banks hit back against the IMF's proposal to levy taxes on banks' balance sheets, profits and compensation, calling it a "punishment tax" and warning it would significantly hurt profits while failing to reduce the risk of future failures. The tax would harm the industry without improving it, with some analysts suggesting pre-tax profit could be cut by as much as 20% if the measure moves forward.
Wednesday, April 21, 2010
Today's Economic Calendar
Wednesday's Economic Calendar
7:00 MBA Mortgage Applications
10:30 EIA Petroleum Status
7:00 MBA Mortgage Applications
10:30 EIA Petroleum Status
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Rachael Granby
BHP subject of corruption probe. BHP Billiton (BHP) said today that following an information request from the SEC the company has found "possible violations of applicable anti-corruption laws involving interactions with government officials." The company didn't disclose the location of the projects in question, but said it wasn't related to business in China and that the firm is cooperating fully with authorities. The SEC couldn’t “confirm or deny the existence or non-existence of any investigation,” but sources said an investigation began in August 2009. BHP -1.6% premarket (7:00 ET).
TARP watchdog probes Goldman role in AIG losses. Neil Barofsky, the special inspector general for TARP, plans to investigate whether securities sold by Goldman Sachs (GS) led to losses at AIG (AIG) and, by extension, if U.S. taxpayers were the victims of fraud. Barofsky is in touch with the SEC and may coordinate with the Justice Department as well. Separately, Barofsky said he may also launch a broader audit of BlackRock's (BLK) role in TARP. Premarket: GS -0.3%, AIG +0.2% (7:00 ET).
Regulators may rethink repo accounting. The Financial Accounting Standards Board, which is in charge of setting U.S. accounting rules, may change repo accounting methods after the SEC finishes its examination of the accounting practices at the 19 largest U.S. banks. In a letter to the House Financial Services Committee, FASB Chairman Robert Herz said the board will "work closely" with the SEC on determining whether any changes are necessary. Repo accounting has recently been in the spotlight after a bankruptcy examiner said the accounting trick led to the collapse of Lehman Brothers (LEHMQ.PK).
SEC could bring Lehman charges. Former SEC chairman Christopher Cox said the SEC could potentially file charges against Lehman Brothers (LEHMQ.PK) after a bankruptcy examiner's report showed the firm "filed misleading financial reports and failed to disclose material accounting information." Cox, who was chairman of the SEC when Lehman filed for bankruptcy in September 2008, also said that neither the SEC nor the Federal Reserve were aware of Lehman's use of Repo 105 transactions.
SEC may create new debt rules for banks. Testifying before lawmakers yesterday, the SEC's Mary Schapiro said the agency is considering new rules that would prevent financial firms from temporarily lowering their debt levels immediately before quarterly reporting deadlines as a way to mask their true risk exposure. If done intentionally, the practice violates existing guidelines, but the SEC may require stricter disclosures, and could extend the rules to all companies instead of just to banks. Recent media reports have shown that 18 large banks lowered a specific kind of debt at the end of each of the past five quarters by an average of 42% from quarterly peaks.
Banks boost lobbying ahead of reform legislation. Banks are spending more money on donations and lobbying as lawmakers prepare to vote on financial reform legislation as soon as this week. Six of the top ten U.S. banks, including Goldman Sachs (GS), JPMorgan (JPM) and Morgan Stanley (MS), increased their donations to lawmakers in the last month. Goldman, Bank of America (BAC) and U.S. Bancorp (USB) were among seven banks that increased their lobbying in the first three months of the year, and the U.S. Chamber of Commerce doubled its lobbying spending in the first quarter.
IMF calls for taxes on banks. The IMF advised G-20 nations to tax the balance sheets, profits and compensation of financial firms in order to reduce the likelihood of another financial crisis and to cover the costs should a crisis occur. The IMF recommended that the tax, called a "Financial Stability Contribution," seek to raise between 2-4% of GDP over time, or roughly $1T-2T if all G-20 nations adopt the tax. Additionally, the IMF revised its forecast for global bank losses from the financial crisis. It now expects losses to total $2.28T, a drop of $533B from the estimate it made in October.
Live Nation faces breach-of-contract claim. In an 8-K filing, Live Nation Entertainment (LYV) disclosed that it faces a breach-of-contract claim by German ticketing firm CTS Eventim. Live Nation said the claims are "without merit and inconsistent with the terms of the CTS agreement," but warned that if the matter is resolved in CTS' favor, it could prevent the recently merged company from realizing "the full operational efficiencies that the combined company might otherwise obtain." LYV shares closed -3.15% in after hours trading.
EADS takes on Boeing in tanker bid. Airbus parent EADS (EADSF.PK) plans to compete directly against Boeing (BA) for a $50B U.S. military refueling plane contract. Ralph Crosby, chairman of EADS North America, called it "a hell of an opportunity," but analysts warn it will likely be an uphill fight for EADS, as "Boeing has put significant political capital into securing this win."
Google may buy travel software firm. Google (GOOG) is said to be in talks to acquire airline IT and services provider ITA Software Inc. in a deal that could cost as much as $1B. Negotiations may still fall apart, but a successful purchase would allow Google to use ITA Software's tools to help users find online flight information, helping Google compete with travel-search features offered by Microsoft (MSFT).
Hedge fund assets back on top. Assets managed by the global hedge fund industry are just 2% below their previous all-time high reached in October 2007. Hedge funds collectively manage around $1.67T of assets, and the average hedge fund saw compounded gains of 24.55% last year, making 2009 the industry's best year in a decade.
Volcano flight ban draws to an end. London's Heathrow airport became the last major European terminal to re-open after a six-day flight ban following the eruption of a volcano in Iceland. The ash cloud that shut down air travel has cost airlines an estimated $1.7B in lost revenue, and more than 100,000 flights were canceled.
Confidence dips down. ABC's Consumer Comfort Index dropped 3 points to -50, matching a 2010 low and not far above its all-time low of -54. Positive ratings of the national economy held steady at 8%, but those who think it's a good time to buy things slipped to 24% and positive ratings of personal finances slipped to 43% from 47%.
by SA Editor Rachael Granby
BHP subject of corruption probe. BHP Billiton (BHP) said today that following an information request from the SEC the company has found "possible violations of applicable anti-corruption laws involving interactions with government officials." The company didn't disclose the location of the projects in question, but said it wasn't related to business in China and that the firm is cooperating fully with authorities. The SEC couldn’t “confirm or deny the existence or non-existence of any investigation,” but sources said an investigation began in August 2009. BHP -1.6% premarket (7:00 ET).
TARP watchdog probes Goldman role in AIG losses. Neil Barofsky, the special inspector general for TARP, plans to investigate whether securities sold by Goldman Sachs (GS) led to losses at AIG (AIG) and, by extension, if U.S. taxpayers were the victims of fraud. Barofsky is in touch with the SEC and may coordinate with the Justice Department as well. Separately, Barofsky said he may also launch a broader audit of BlackRock's (BLK) role in TARP. Premarket: GS -0.3%, AIG +0.2% (7:00 ET).
Regulators may rethink repo accounting. The Financial Accounting Standards Board, which is in charge of setting U.S. accounting rules, may change repo accounting methods after the SEC finishes its examination of the accounting practices at the 19 largest U.S. banks. In a letter to the House Financial Services Committee, FASB Chairman Robert Herz said the board will "work closely" with the SEC on determining whether any changes are necessary. Repo accounting has recently been in the spotlight after a bankruptcy examiner said the accounting trick led to the collapse of Lehman Brothers (LEHMQ.PK).
SEC could bring Lehman charges. Former SEC chairman Christopher Cox said the SEC could potentially file charges against Lehman Brothers (LEHMQ.PK) after a bankruptcy examiner's report showed the firm "filed misleading financial reports and failed to disclose material accounting information." Cox, who was chairman of the SEC when Lehman filed for bankruptcy in September 2008, also said that neither the SEC nor the Federal Reserve were aware of Lehman's use of Repo 105 transactions.
SEC may create new debt rules for banks. Testifying before lawmakers yesterday, the SEC's Mary Schapiro said the agency is considering new rules that would prevent financial firms from temporarily lowering their debt levels immediately before quarterly reporting deadlines as a way to mask their true risk exposure. If done intentionally, the practice violates existing guidelines, but the SEC may require stricter disclosures, and could extend the rules to all companies instead of just to banks. Recent media reports have shown that 18 large banks lowered a specific kind of debt at the end of each of the past five quarters by an average of 42% from quarterly peaks.
Banks boost lobbying ahead of reform legislation. Banks are spending more money on donations and lobbying as lawmakers prepare to vote on financial reform legislation as soon as this week. Six of the top ten U.S. banks, including Goldman Sachs (GS), JPMorgan (JPM) and Morgan Stanley (MS), increased their donations to lawmakers in the last month. Goldman, Bank of America (BAC) and U.S. Bancorp (USB) were among seven banks that increased their lobbying in the first three months of the year, and the U.S. Chamber of Commerce doubled its lobbying spending in the first quarter.
IMF calls for taxes on banks. The IMF advised G-20 nations to tax the balance sheets, profits and compensation of financial firms in order to reduce the likelihood of another financial crisis and to cover the costs should a crisis occur. The IMF recommended that the tax, called a "Financial Stability Contribution," seek to raise between 2-4% of GDP over time, or roughly $1T-2T if all G-20 nations adopt the tax. Additionally, the IMF revised its forecast for global bank losses from the financial crisis. It now expects losses to total $2.28T, a drop of $533B from the estimate it made in October.
Live Nation faces breach-of-contract claim. In an 8-K filing, Live Nation Entertainment (LYV) disclosed that it faces a breach-of-contract claim by German ticketing firm CTS Eventim. Live Nation said the claims are "without merit and inconsistent with the terms of the CTS agreement," but warned that if the matter is resolved in CTS' favor, it could prevent the recently merged company from realizing "the full operational efficiencies that the combined company might otherwise obtain." LYV shares closed -3.15% in after hours trading.
EADS takes on Boeing in tanker bid. Airbus parent EADS (EADSF.PK) plans to compete directly against Boeing (BA) for a $50B U.S. military refueling plane contract. Ralph Crosby, chairman of EADS North America, called it "a hell of an opportunity," but analysts warn it will likely be an uphill fight for EADS, as "Boeing has put significant political capital into securing this win."
Google may buy travel software firm. Google (GOOG) is said to be in talks to acquire airline IT and services provider ITA Software Inc. in a deal that could cost as much as $1B. Negotiations may still fall apart, but a successful purchase would allow Google to use ITA Software's tools to help users find online flight information, helping Google compete with travel-search features offered by Microsoft (MSFT).
Hedge fund assets back on top. Assets managed by the global hedge fund industry are just 2% below their previous all-time high reached in October 2007. Hedge funds collectively manage around $1.67T of assets, and the average hedge fund saw compounded gains of 24.55% last year, making 2009 the industry's best year in a decade.
Volcano flight ban draws to an end. London's Heathrow airport became the last major European terminal to re-open after a six-day flight ban following the eruption of a volcano in Iceland. The ash cloud that shut down air travel has cost airlines an estimated $1.7B in lost revenue, and more than 100,000 flights were canceled.
Confidence dips down. ABC's Consumer Comfort Index dropped 3 points to -50, matching a 2010 low and not far above its all-time low of -54. Positive ratings of the national economy held steady at 8%, but those who think it's a good time to buy things slipped to 24% and positive ratings of personal finances slipped to 43% from 47%.
Tuesday, April 20, 2010
Today's Economic Calendar
Tuesday's Economic Calendar
7:45 ICSC Retail Store Sales
8:55 Redbook
9:00 Bank of Canada Announcement
11:00 Hearing: Lehman Bankruptcy (Bernanke, Geithner, Fuld)
5:00 PM ABC Consumer Confidence Index
7:45 ICSC Retail Store Sales
8:55 Redbook
9:00 Bank of Canada Announcement
11:00 Hearing: Lehman Bankruptcy (Bernanke, Geithner, Fuld)
5:00 PM ABC Consumer Confidence Index
Wall Street Morning News
Wall Street Breakfast: Must-Know News
by SA Editor Rachael Granby
AIG may go after Goldman on CDO losses. AIG (AIG) may go after Goldman Sachs (GS) over losses it suffered on $6B of insurance deals tied to mortgage-backed securities. AIG lost around $2B on the deals, and any action on the part of the insurer could signal the SEC's decision to file civil fraud charges against Goldman is about to set off a wave of investor lawsuits. Financial firms should brace themselves, as the fallout may not be limited to Goldman alone and litigation risk post-crisis has the potential to get very costly very quickly. According to a Credit Suisse report, Bank of America/Merrill Lynch (BAC) leads the "CDO litigation risk" list after offering $16.85B of CDOs similar to the ones Goldman is being charged for. Premarket: GS +2.6%, BAC +0.6% (7:00 ET).
SEC was split on Goldman charges. The SEC's decision to bring civil fraud charges against Goldman Sachs (GS) was hardly unanimous; the five-member commission voted 3-2 along political lines in favor of the charges, with the unusual split threatening to politicize one of the agency's biggest cases in years. Both Republican commissioners objected to the charges, and Rep. Darrell Issa (R., Calif.) plans to send the SEC a letter today questioning why the agency chose to press charges at the same time lawmakers are fighting over a financial reform bill.
U.K. opens formal Goldman probe. The U.K.'s Financial Services Authority announced today that it will launch a formal investigation into Goldman Sachs' (GS) London units in connection to the SEC's recent allegations. German and French securities regulators are considering whether to launch investigations of their own.
Fuld defends Lehman. Former Lehman Brothers (LEHMQ.PK) CEO Dick Fuld will testify before lawmakers today on Lehman's failure. According to his prepared testimony, Fuld will argue that Lehman has been "unfairly vilified," that he wasn't aware of the bank's controversial Repo 105 transactions until a year after Lehman filed for bankruptcy and that, in any case, "Lehman should not be criticized for complying with the applicable accounting standards." Notably, Fuld will also say that the SEC and Federal Reserve were aware of everything happening at Lehman as it moved towards bankruptcy, a claim that contradicts with regulators' version of events. Bernanke, Geithner and the SEC's Schapiro will also testify at the hearing.
More Toyota recalls. Toyota (TM) is recalling its Lexus GX 460 SUV after Consumer Reports called it a "safety risk" and company technicians were able to replicate the problem. Toyota, which had halted sales of the SUV last week, said a software fix for the stability control system will be at dealers by the end of April. The recall affects around 13,000 vehicles, including 9,400 in the U.S.
California takes Moody's to court. California is suing Moody's (MCO) to force it to explain the ratings it assigned during the crisis. California's Attorney General Jerry Brown said the state is seeking a court order to make Moody's comply with a subpoena issued in September, which seeks "information regarding Moody's decision to give its highest credit ratings to securities backed by risky and toxic mortgage-backed securities." Brown said Moody's has been stonewalling and had called the subpoena "a waste of time."
Greece may need far more than €30B in aid. Bundesbank President Axel Weber told German lawmakers that Greece may need more than the €45B ($61B) in aid that the EU and IMF have committed, said sources present at the briefing. Greece may ultimately need as much as €80B to avoid default. Weber also expressed concern that Greek citizens demonstrating against austerity measures don't realize what a serious situation Greece faces, and that Greece's situation is worsening.
CKE dumps THL for superior bid. CKE Restaurants (CKR) said this morning that it has received a superior bid from Western Acquisition Holdings and will terminate its merger agreement with private-equity firm Thomas H. Lee Partners. Western Acquisition offered $12.55 per share in cash, compared to THL's offer of $11.05 per share in cash.
GM to repay loans early. General Motors (GMGMQ.PK) plans to announce today that it's repaying its remaining $4.7B in government loans ahead of schedule. GM CEO Edward Whitacre believes the repayment is a critical step in winning back U.S. customers.
Unilever to sell frozen-foods unit. Unilever (UN) is reportedly ready to put its Italian frozen-foods division up for sale in an auction that could bring in more than €600M ($839M). The move reflects the continued consolidation of Europe's frozen food industry as consumers opt for fresh and chilled products.
Paulson buys ACAS stake. Hedge fund billionaire John Paulson is buying around a 13% stake in business developer American Capital (ACAS), picking up 43.7M shares of a 58.3M share common offering. The move is a boon for American Capital, which has been trying to restructure $2.4B in debt. ACAS rose 5.1% in regular trading yesterday, and climbed another 2.1% after hours.
Supreme Court to hear Costco case. The Supreme Court agreed to rule on whether Costco (COST) can be held liable for copyright infringement for reselling luxury Swiss watches it obtained through third-party sources. The case will be closely watched by retailers such as eBay (EBAY), Target (TGT) and Amazon (AMZN), firms that routinely facilitate the resale of goods, often at reduced prices.
by SA Editor Rachael Granby
AIG may go after Goldman on CDO losses. AIG (AIG) may go after Goldman Sachs (GS) over losses it suffered on $6B of insurance deals tied to mortgage-backed securities. AIG lost around $2B on the deals, and any action on the part of the insurer could signal the SEC's decision to file civil fraud charges against Goldman is about to set off a wave of investor lawsuits. Financial firms should brace themselves, as the fallout may not be limited to Goldman alone and litigation risk post-crisis has the potential to get very costly very quickly. According to a Credit Suisse report, Bank of America/Merrill Lynch (BAC) leads the "CDO litigation risk" list after offering $16.85B of CDOs similar to the ones Goldman is being charged for. Premarket: GS +2.6%, BAC +0.6% (7:00 ET).
SEC was split on Goldman charges. The SEC's decision to bring civil fraud charges against Goldman Sachs (GS) was hardly unanimous; the five-member commission voted 3-2 along political lines in favor of the charges, with the unusual split threatening to politicize one of the agency's biggest cases in years. Both Republican commissioners objected to the charges, and Rep. Darrell Issa (R., Calif.) plans to send the SEC a letter today questioning why the agency chose to press charges at the same time lawmakers are fighting over a financial reform bill.
U.K. opens formal Goldman probe. The U.K.'s Financial Services Authority announced today that it will launch a formal investigation into Goldman Sachs' (GS) London units in connection to the SEC's recent allegations. German and French securities regulators are considering whether to launch investigations of their own.
Fuld defends Lehman. Former Lehman Brothers (LEHMQ.PK) CEO Dick Fuld will testify before lawmakers today on Lehman's failure. According to his prepared testimony, Fuld will argue that Lehman has been "unfairly vilified," that he wasn't aware of the bank's controversial Repo 105 transactions until a year after Lehman filed for bankruptcy and that, in any case, "Lehman should not be criticized for complying with the applicable accounting standards." Notably, Fuld will also say that the SEC and Federal Reserve were aware of everything happening at Lehman as it moved towards bankruptcy, a claim that contradicts with regulators' version of events. Bernanke, Geithner and the SEC's Schapiro will also testify at the hearing.
More Toyota recalls. Toyota (TM) is recalling its Lexus GX 460 SUV after Consumer Reports called it a "safety risk" and company technicians were able to replicate the problem. Toyota, which had halted sales of the SUV last week, said a software fix for the stability control system will be at dealers by the end of April. The recall affects around 13,000 vehicles, including 9,400 in the U.S.
California takes Moody's to court. California is suing Moody's (MCO) to force it to explain the ratings it assigned during the crisis. California's Attorney General Jerry Brown said the state is seeking a court order to make Moody's comply with a subpoena issued in September, which seeks "information regarding Moody's decision to give its highest credit ratings to securities backed by risky and toxic mortgage-backed securities." Brown said Moody's has been stonewalling and had called the subpoena "a waste of time."
Greece may need far more than €30B in aid. Bundesbank President Axel Weber told German lawmakers that Greece may need more than the €45B ($61B) in aid that the EU and IMF have committed, said sources present at the briefing. Greece may ultimately need as much as €80B to avoid default. Weber also expressed concern that Greek citizens demonstrating against austerity measures don't realize what a serious situation Greece faces, and that Greece's situation is worsening.
CKE dumps THL for superior bid. CKE Restaurants (CKR) said this morning that it has received a superior bid from Western Acquisition Holdings and will terminate its merger agreement with private-equity firm Thomas H. Lee Partners. Western Acquisition offered $12.55 per share in cash, compared to THL's offer of $11.05 per share in cash.
GM to repay loans early. General Motors (GMGMQ.PK) plans to announce today that it's repaying its remaining $4.7B in government loans ahead of schedule. GM CEO Edward Whitacre believes the repayment is a critical step in winning back U.S. customers.
Unilever to sell frozen-foods unit. Unilever (UN) is reportedly ready to put its Italian frozen-foods division up for sale in an auction that could bring in more than €600M ($839M). The move reflects the continued consolidation of Europe's frozen food industry as consumers opt for fresh and chilled products.
Paulson buys ACAS stake. Hedge fund billionaire John Paulson is buying around a 13% stake in business developer American Capital (ACAS), picking up 43.7M shares of a 58.3M share common offering. The move is a boon for American Capital, which has been trying to restructure $2.4B in debt. ACAS rose 5.1% in regular trading yesterday, and climbed another 2.1% after hours.
Supreme Court to hear Costco case. The Supreme Court agreed to rule on whether Costco (COST) can be held liable for copyright infringement for reselling luxury Swiss watches it obtained through third-party sources. The case will be closely watched by retailers such as eBay (EBAY), Target (TGT) and Amazon (AMZN), firms that routinely facilitate the resale of goods, often at reduced prices.
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