Monday, July 6, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • Rio continues divestment. Rio Tinto (RTP) sold part of its Alcan packaging unit to Bemis (BMS) for $1.2B. The deal significantly boosts Bemis' role in many foods and beverages purchased in U.S. supermarkets, and helps Rio further cut its debt load.
  • GM sale approved. General Motors won approval to sell most of its assets to a new government-run company, with the bankruptcy judge saying the proposed sale was the only option available. A group including bondholders and unions had objected, claiming the 'new GM' is just the 'old GM' without the liabilities. The government will get 60% of new GM in return for $50B in bailout loans. Separately, GM said Beijing Automotive Industry Holding submitted a bid for Opel. The non-binding proposal presents a back-up option for GM if talks with Magna International (MGA) fall apart.
  • Paris Re bought by Partner. Reinsurer PartnerRe (PRE) will buy Paris Re Holdings in a multi-step stock transaction valued at around $2B. The combined company will have about $5.5B of common shareholder equity capital, bumping it to the 'top end of midsized reinsurers,' said PartnerRe CEO Albert Benchimol.
  • China: Time to replace dollar. Chinese officials said this morning that the economic crisis has shown the weaknesses of a dollar-led global economy and that the world should look to displace the dollar, even though that may be a slow process. China may push for the IMF's Special Drawing Right to be used as a dollar alternative.
  • Pouring into Porsche. Three more bidders have expressed interest in acquiring a Porsche stake, including both a Chinese and a Russian sovereign wealth fund. The new interests rival an investment plan presented by Qatar last week.
  • Second stimulus? "We misread how bad the economy was," said Vice President Joe Biden, acknowledging the administration was too optimistic when it forecast unemployment would peak at 8%. Biden didn't rule out a second stimulus, but said the first one is just starting to pick up speed. (Read the transcript of Biden's interview)
  • SocGen sees small profit. Societe Generale (SCGLY.PK) expects to post a small profit in Q2, as improved operating performance at its corporate and investment bank slightly outweighs credit-default losses and debt write-downs. The statement was issued ahead of a meeting today when shareholders will vote on whether CEO Frederic Oudea should assume the chairman position as well.
  • AIG gets plenty of bids. Around 10 firms have submitted bids to buy AIG's (AIG) Taiwanese insurance unit, including private equity firms Kohlberg Kravis Roberts and MBK Partners. The deal could bring in over $2B.
  • UBS to shake up U.S. unit. After deciding not to sell UBS' (UBS) U.S. brokerage business, CEO Oswald Grubel is reportedly looking for a new leader to shake up the unit's top management. It's unclear if the new hire will replace Marten Hoekstra, the head of UBS’ wealth management operations in the Americas, or work with him. The reports come as Bank of America (BAC) knocks UBS out of the top spot for world's largest private-banking group. Shares -3.4% premarket (7:00 ET).
  • Seven more banks shuttered. Going into the holiday weekend, U.S. regulators closed another seven banks, bringing this year's total to 52 failures. The seven closures will cost the FDIC around $314M.

Today's Markets

Asian markets closed broadly lower, and European indices are trading down. Coming off the holiday weekend, U.S. futures get off to an ugly start.

  • In Asia, Nikkei -1.4% to 9,681. Hang Seng -1.2% to 17,979. Shanghai +1.2% to 3,125. BSE -5.8% to 14,043.
  • In Europe at midday, London -1.3%. Paris -1.8%. Frankfurt -1.7%.
  • U.S. futures: Dow -1.1%. S&P -1.2%. Nasdaq -0.9%. Crude -4.3% to $63.86. Gold -1% to $921.40.

Monday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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