Wall Street Breakfast: Must-Know News
- Strong start for holiday sales, sort of. The holiday shopping season got off to a surprisingly solid start, with Black Friday sales up 7.2% (or 3% or 11%) from a year ago. There were, however, clear signs that strong sales were largely driven by 'door buster' deals: First, Friday's momentum ebbed on Saturday. Second, as many as 70% of shoppers were purchasing only 'deeply discounted' merchandise. Another sign of weakness to come: By weekend's-end, 39.3% of shoppers said they had completed a greater portion of their holiday shopping, up from 36.4% last year. Online sales were up just 1%.
- Citi drives a hard bargain. Citigroup's (C) infrastructure fund, Citi Infrastructure Partners, agreed to buy troubled Spanish highway operator Itinere Infraestructuras from Sacyr Vallehermoso for €7.9B - €2.9B in cash and assumed debt of €5B. Sacyr, Spain's fifth-largest construction company, fell into uncertainty after taking on €16.5B in debt - more than seven times its market cap - in an effort to expand in energy and counter a slump in domestic construction, forcing the sale. Analysts say Sacyr sold out of desperation, and got the short end of the stick. Citigroup is up 12% in premarket trading.
- Redstone finds Midway buyer. Sumner Redstone's holding company, National Amusements, will announce today it is selling its 87% stake in Midway Games (MWY) to investor Mark Thomas for $100,000 and the assumption of $70M in debt. National Amusements is in negotiations with banks to restructure its $1.6B debt burded after recently breaching one of its debt covenants; the proceeds of the Midway sale is expected to ease pressure on the family. The holding company will take an $800M+ loss on the sale, which will reduce its 2008 taxable income and entitle it to a refund of amounts paid in previous years. Redstone has already sold $233M of his holdings in Viacom (VIA) and CBS Corp. (CBS) to help resolve debt issues, and has vowed not to sell any more of his stake in the pair.
- Microsoft pursuing Yahoo's search business? Shares of Yahoo (YHOO) are up 18% premarket on a report Microsoft (MSFT) is in talks to acquire its online search business for $20B. In an interview published this weekend by Barron's magazine, Yahoo board member and major stakeholder Carl Icahn said Microsoft "has said publicly that they are not interested in buying the whole company, and I believe them. But they are interested in doing a deal on search, and we should pursue that."
- Slippery slope? Analysts say that despite OPEC's publicly-stated support of oil at around $75/barrel, the cartel is not cutting production fast enough to address the current drop in demand - hence oil's 67% plunge from July's highs. On Saturday, OPEC concluded its Cairo conference without cutting output, but did note cartel members are adhering to their quotas. OPEC accounts for 40% of the world's total oil output. While member nations appreciate the value of higher-priced oil, OPEC has in the past struggled to hold them to quotas and forego additional sales. Merrill Lynch forecasts crude at $43/barrel in Q1 2009. Last time OPEC failed to eliminate a supply glut, in 1998, crude bottomed at $10.35. Crude fell 4.7% to $51.90 in overnight trading.
- Pound slides on weak manufacturing, housing data. U.K. manufacturing shrank at the fastest pace in at least 16 years in November, increasing pressure on the BoE to slash interest rates again this week. The Chartered Institute of Purchasing and Supply's factory index dropped to 34.4, the weakest since the data began in 1992. Meanwhile the average cost of a home in England fell 8.1% during the past year to £161,400. The pound was pounded, falling 2.25% in overnight trading on expectations of a full-point cut to the BoE's five-decade low 3% target rate.
Today's Markets
- Asia markets were mixed Monday. Japan's Nikkei fell 1.35% to 8,397. Hang Seng +1.59% to 14,109. Shanghai +1.25% to 1,895. BSE Sensex -2.78% to 8,840.
- In Europe, markets are near their lows at midday. London -2.5%. Paris -2.5%. Frankfurt -3.2%.
- U.S. futures inidcate a weak open to the week. Dow -1.8% to 8664. S&P -2.3% to 875. Nasdaq -2.1%. Crude -4.2% to $52.15. Gold -3.15% to $790.50.
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