Thursday, July 9, 2009

Wall Street Breakfast: Must-Know News

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Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • PPIP finally launched. The Treasury unveiled its scaled-back Public-Private Investment Program, committing $30B of equity and debt to match $10B from private investors, down from an initial plan of buying up to $1T in toxic assets. As expected, BlackRock (BLK), Angelo Gordon and Invesco were named among the nine fund managers. Pimco, the world's largest bond manager and an early supporter of PPIP, withdrew its application because of 'uncertainties' about the plan's design.
  • EMC wins Data Domain battle. NetApp (NTAP) dropped out of the bidding war for Data Domain (DDUP), terminating its merger agreement with the company following EMC's (EMC) improved bid earlier this week. Data Domain subsequently signed a definitive agreement to be acquired by EMC for $33.50/share, and paid NetApp a $57M break-up fee.
  • AIG talks to MetLife on Alico sale. AIG (AIG) is in talks to sell key business American Life Insurance Company, or Alico, to rival MetLife (MET). A deal could help AIG raise more than $15B to repay the government, but sources say talks are still preliminary and could fall apart, as they did earlier this year, over a disagreement on price.
  • G-8 diverge on future stimulus needs.G-8 leaders said the global economic recovery is still too weak to consider reversing stimulus efforts, but disagreed on when exactly those efforts should end. Obama wants to keep the door open for a second stimulus package, while Germany's Merkel is trying to shift the focus to deficit reduction. G-8 leaders agreed to cut greenhouse gases by 80% by 2050, while China and India led developing nations in pledging to set a 2050 goal by December, after balking at calls to set a 50% target without delay. Draft statements from the summit have not yet made direct reference to the dollar or currency exchange.
  • OPEC cuts investment forecast. Projecting a steep fall in demand, OPEC cut its five-year forecast for oil investment by around a third, and expects members to invest $110-120B in exploration and production from 2009-2013 instead of the $165B it initially predicted. The International Energy Agency has warned that such a steep cut in oil-development spending could lead to a supply crunch by 2013, and 'huge investment is needed' to meet strong future demand in Asia.
  • IMF brightens outlook. The IMF updated its world economic outlook, forecasting a 1.4% contraction this year vs. a previous estimate of -1.3%, and 2.5% growth in 2010 vs. a previous estimate of 1.9%. Though 'vulnerabilities remain,' overall "financial conditions have improved, as unprecedented policy intervention has reduced the risk of systemic collapse and expectations of economic recovery have risen."
  • Alcoa loss narrower than expected. Alcoa (AA) kicked off the earnings season with its third consecutive quarterly loss (see details below), but still managed to beat analysts' expectations thanks to cost cutting. CEO Klaus Kleinfeld said there are 'some pockets of growth' despite a challenging global market and there are signs that weak aluminum demand might be easing. Despite the hopeful outlook, Alcoa still expects a 7% decline in global aluminum demand this year.
  • Best Buy ties up with TiVo. Best Buy (BBY) is teaming up with TiVo (TIVO) on a multi-year advertising partnership. Best Buy will heavily promote TiVo products in its 1,100 U.S. stores, while TiVo will develop a version of its digital video recorder that will let Best Buy advertise its products and services to TiVo customers using the set-top box at home. Financial details of the deal haven't been disclosed.
  • U.K. wants new risk council. As expected, the U.K.'s Darling proposed tighter regulation for the U.K. banking industry, including the creation of a new council including the Treasury, the Bank of England and financial regulator FSA to deal with risks in the market and at specific firms. Darling said the goal is to "inspire trust on the part of businesses and consumers" and "provide effective mechanisms to deal with failures if they occur."
  • Consumer credit declines. Consumer debt fell for the fourth month in a row, declining $3.2B, or an annualized 1.5%. Credit-card debt experienced the biggest drop, falling $2.9B. (Fed's release)

Earnings: Wednesday After Close

  • Alcoa (AA): FQ2 EPS of -$0.26 beats by $0.12. Revenue of $4.2B (-41%) vs. $3.9B. (PR)

Today's Markets

Asian stocks were mixed, while European markets and U.S. futures are firmly in positive territory.

  • In Asia, Nikkei -1.4% to 9,291. Hang Seng +0.4% to 17,791. Shanghai +1.4% to 3,123. BSE -0.1% to 13,757.
  • In Europe at midday, London +0.7%. Paris +0.9%. Frankfurt +1.2%.
  • Futures: Dow +0.6%. S&P +0.8%. Nasdaq +0.6%. Crude +1.8% to $61.20. Gold +0.5% to $914.

Thursday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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