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.