Tuesday, January 13, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Bush, Obama ask for TARP's part II. Pres. Bush has requested the second half of TARP funds from Congress, after being asked to do so by Obama. Worried about a 'still fragile' economy, Obama felt "it would be irresponsible for me... to enter into the administration without any potential ammunition should there be some sort of emergency or weakening of the financial system." Obama's team is already working to satisfy the concerns of lawmakers on the use of TARP funds, as many Republicans and some Democrats are expected to oppose releasing the money. A vote could come as early as Friday.
  • Satyam shakedown continues. After gaining nearly 45% in India yesterday on hopes of a government rescue, Satyam (SAY) shares are falling again as reality sinks in (-9.2% as of 5:30 ET). The new government-appointed board acknowledged it would take time to get the company back on track, and said one of its top priorities is appointing an independent accountant. In the meantime, non-Indian computer-service providers like IBM (IBM) and Accenture (ACN) are in a stronger position to pick up new contracts as investors worry about India's corporate governance.
  • Elan considers merger, sale. Drugmaker Elan (ELN) has hired Citigroup Global Markets (C) to review the company's strategic options, including a possible merger or sale. Elan's shares lost 72% last year on concerns about its ability to pay back $1.15B in debt and the safety of its Tysabri multiple sclerosis drug, and then gained over 25% last week on rumors, later proved to be untrue, that the company was in talks with Pfizer (PFE). Shares +10.6% in Ireland (5:30 ET).
  • Spain opens Madoff probe. Spanish prosecutors are investigating how Banco Santander (STD), Europe's second-largest bank, managed to lose €2.3B ($3.1B) of its clients' money by investing with Madoff. Two-thirds of the losses came from the Latin America, a market where Santander does almost a third of its business and wants to expand. Santander itself lost just €17M. Officials are trying to find out what exactly was the nature of Santander's relationship with Madoff's firm, and when the bank first realized there were any problems with the investments. Until this scandal, Santander had provided a rare beacon of stability in otherwise tumultuous financial markets.
  • RBS cashing out of China? Royal Bank of Scotland (RBS) is said to be selling a stake in Bank of China Ltd. With an 8.25% holding, RBS is Bank of China's second largest shareholder. The move would follow the leads of UBS (UBS), which cashed out its 1.6% stake in Bank of China at the end of December, and Bank of America (BAC), which last week sold $2.8B of shares in China Construction Bank (previously I, II). Details of the sale could be announced as early as today.
  • AIG asset sales. Sources say AIG (AIG) is in talks to sell its Canadian life insurance unit to Bank of Montreal (BMO). An agreement could be reached as soon as today.
  • Infosys sees record profits. Infosys (INFY), India’s second-largest computer-services provider, posted record Q3 profits as more companies turned to outsourcing to cut their costs. The company stands to win additional orders as clients defect from rivals Satyam (SAY) and Wipro (WIT). Net income rose 33%, the fastest rate in six quarters, reaching 16.4B rupees ($336M) vs. 15.4B consensus. (more details below)
  • U.K. reaches for bailout #2. The U.K. government is getting ready to roll out another giant bailout plan totaling billions of pounds, aimed at saving companies and jobs. Sources say the plan could be announced in the next ten days, or possibly as soon as tomorrow. The U.K. economic outlook has continued to deteriorate rapidly, despite a £500B ($758B) bailout package already in place.
  • German stimulus grows. In its second attempt to address Germany's worst recession since World War II, Angela Merkel's coalition agreed last night to spend an extra €50B ($66B) over two years to help the economy. The plan includes measures such as lowering health insurance payments, investing in schools and roads, reducing the lowest income-tax rate and €100 checks for each child. "If we’d failed to do what we did last night, we’d have risked the collapse of parts of our industrial base...," said one lawmaker. "We’re in an exceptional situation."

Earnings: Tuesday Before Open

  • Infosys Technologies (INFY): Q3 EPS of $0.56 beats by $0.01. Revenue of $1.17B (+8.0%) vs. $1.18B. (PR)

Earnings: Monday After Close

  • Alcoa (AA): Q4 EPS of -$0.28 misses by $0.18. Revenue of $5.69B (-19.1%) vs. $5.26B. (PR)

Today's Markets

  • Asia markets closed down on a bleak earnings outlook. Nikkei -4.8% to 8,414. Hang Seng -2.2% to 13,668. Shanghai -1.95% to 1,863. BSE -0.4% to 9,071.
  • In Europe at midday, London -2.2%. Paris -2.5%. Frankfurt -2.2%.
  • U.S. futures: Dow -0.8%. S&P -0.9%. Nasdaq -1.0%. Crude -2.0% to $36.83. Gold -0.2% to $819.30.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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