Monday, June 22, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

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  • Xstrata proposes Anglo American merger. Xstrata (XSRAF.PK) proposed a 'merger of equals' with Anglo American (AAUK), noting the pair's 'complimentary assets.' Analysts say a tie up would be very compelling, and could save the combined firm $750M a year while creating a world leader in base metals, platinum, ferrochrome and coal. Anglo American has thus far been resistant to the idea, and characterized merger talks as 'preliminary.' AAUK +5.6% premarket (7:00 ET).
  • Jobs' liver transplant leak. The Wall Street Journal reported over the weekend, without citing any sources, that Apple (AAPL) CEO Steve Jobs received a liver transplant two months ago. Jobs didn't comment on the story and an Apple spokeswoman would only say that Jobs is expected to return to work by the end of June. However, the report raises questions about who leaked the story, whether it was planned by Apple executives to lower expectations and to what degree Jobs should have to disclose his past and present medical problems once he returns to work. Shares -1% premarket (7:00 ET).
  • U.S. calls for China talks over internet filter. The U.S. has called for talks with China over Chinese plans to require web-filtering software on personal computers, voicing concerns about the possible effect on trade and freedom of expression. Direct U.S. intervention over internet freedom is rare, but the issue has become an increasingly important one between the two countries over the years and U.S. technology companies see it as a back-door way of keeping them out of the Chinese market. Chinese officials have also taken aim at Google (GOOG), and asked the company to stop showing some results from foreign websites through its Chinese website.
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  • Swiss pressure for a UBS deal. After the U.S. and Switzerland agreed to a double taxation treaty last week, Swiss officials said the U.S. might be willing to cut a deal with UBS (UBS) over allegations of tax fraud and evasion. Officials reiterated that without some sort of deal, the Swiss government could have trouble getting the new tax agreements ratified in a possible referendum.
  • Fed weighs repo market changes. The Federal Reserve is considering major changes to the repurchase markets where banks raise overnight dollar loans, including plans to create a utility to replace the clearing banks that handle transactions. Fed officials plan to meet with market participants next month to discuss the changes. JPMorgan Chase (JPM) and Bank of New York Mellon (BK) are the largest intermediaries.
  • Looser rules urged for Fannie/Freddie. Two lawmakers want Fannie Mae (FNM) and Freddie Mac (FRE) to relax recently tightened standards for new condominium mortgages, saying the tighter rules could threaten the viability of some projects and 'may be too onerous' for a weak housing market. In March, Fannie said it won't guarantee mortgages on condos where less than 70% of the units have been sold, up from 51%. It also won't buy mortgages in buildings where 15% of owners are delinquent on condo dues or where one owner has more than 10% of the units. Freddie plans to implement similar rules.
  • World Bank cuts outlook. The World Bank lowered its outlook for global growth, forecasting a 2.9% contraction this year vs. a previous forecast of -1.7%. Growth in 2010 will reach 2%, down from 2.3%. Impoverished economies will lag rich ones in an eventual recovery, while a flight of capital from developing economies will contribute to a spike in the number of poor and unemployed.
  • Bye, bye banks. Regulators closed three more banks on Friday, bringing this year's total number of failures to 40. Georgia-based Southern Community Bank's closure will cost the FDIC $114M. North Carolina-based Cooperative Bank's closure will cost the FDIC $217M. Kansas-based First National Bank of Anthony's closure will cost the FDIC $32.2M.

Today's Markets

Asian markets closed mostly up, but Europe is deep in the red and U.S. futures are heading down as well.

  • In Asia, Nikkei +0.4% to 9,826. Hang Seng +0.8% to 18,060. Shanghai +0.55% to 2,896. BSE -1.35% to 14,326.
  • In Europe at midday, London -1.2%. Paris -1.7%. Frankfurt -1.3%.
  • U.S. futures: Dow -0.7%. S&P -0.8%. Nasdaq -0.6%. Crude -1.7% to $68.36. Gold -1.2% to $925.20.

Monday's Economic Calendar

  • No events scheduled.
  • Notable earnings before Monday's open: WAG
  • Notable earnings after Monday's close: SWHC

Seeking Alpha editor Eli Hoffmann contributed to this post.

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