Wall Street Breakfast: Must-Know News
- Eurozone inflation posts record drop. Euro area inflation probably plunged to 2.1% in November from October's 3.2% Eurostat says (.pdf) - the biggest-ever drop - fueling expectations the ECB will cut its key rate of 3.25% by at least another 50 BPs at its Dec. 4 meeting. Economists expected inflation to drop to 2.4%. As recently as July, Eurostat's flash inflation estimate was 4.1%.
- Chesapeake seeks cash. In a series of filings with the SEC late Wednesday (I, II,III), Chesapeake (CHK) revealed plans to issue almost $2B in common shares to raise cash for day-to-day operations and to subsidize drilling leases it is in the process of renegotiating. Such a move would hurt already-battered shareholders, who have seen shares plunge 70% since July. The financial crisis, falling gas prices and concerns over oversupply have pushed the natural gas producer to renegotiate some of its drilling lease-purchase agreements at a cheaper price. The $1B slated for "general corporate purposes" will not be used immeditately, it said.
- Nokia gives up on Japan. Nokia (NOK) will no longer sell phones in Japan, except for its luxury brand Vertu, after struggling to expand its presence. Nokia said previously it will cut costs 'decisively' in the face of declining global mobile phone sales. "In the current global economic climate, we have concluded that the continuation of our investment in Japan-specific localized products is no longer sustainable," executive VP Timo Ihamuotila said. Shares are -1.5% premarket. More here.
- Stateside squeeze. Municipal-debt issuance has dropped sharply over the past few months, as the credit crunch has elevated interest rates and scared away investors, and some brokers dealing in the debt have disappeared. Municipalities have issued 9.1% fewer bonds YTD, but since September, muni issuance has plunged by 41% compared with the same period in 2007. 10-year munis now yield about 4% - one full percentage more than Treasurys - despite the former's huge advantage of being tax-exempt. Governers have begun warning constituents of cutbacks due to a lack of funds; the government has yet to bailout states and localities, but Obama has vaguely described some kind of help.
- RBS, meet daddy. The British government will take a 57.9% stake in Royal Bank of Scotland (RBS) after investors bought just 0.24% of the shares offered in its state-backed capital raise. Share prices had dropped below the £0.655 RBS was asking, which made it cheaper to buy shares on the open market, assuming one wanted any. The government's stake will cost it almost £15B.
- Honda lowers expectations, traders applaud. Reaching its already-lowered annual profit forecast "is going to be a Herculean task," Honda (HMC) executive VP Koichi Kondo said. "The environment is becoming tougher by the day," and notes Honda will likely again revise its profit forecast of $5.8B for the year ending in March 2009 - a number any of the Big Three would gladly accept the task of 'revising.' Shares ended up 3.2% in Tokyo.
- Arcelor cuts workforce. The world's largest steelmaker ArcelorMittal (MT) unveiled plans on Thursday to slash up to 9,000 more jobs, saving about $1B. The cuts are in response to a deepening global economic downturn, and the effects of a huge drop in raw materials prices. Analysts don't expect steel demand to pick up until at least mid-2009 as customers work through their own inventory and scale back production of cars and appliances.
- Pension insurer questions automakers' strategy. The U.S. Pension Benefit Guaranty, the agency that protects pension plans, sent letters to G.M. (GM), Ford (F) and Chrysler saying it's concerned about their plans to use pension plan funds to cover early retirements or other buyout deals and asking for facts and figures. In what's turning out to be a high-stakes game of hot potato, no one (government, unions, pensioners) seems very anxious to be the one to tow snowbanked automakers out of the ditch.
- Drugmakers under antitrust microscope. Preliminary results of a year-long probe show pharmaceutical industry competition is flawed, the European Commission says. Competition Commissioner Neelie Kroes accuses Big Pharma of using multiple patent filings, litigation and settlement deals to delay or block the introduction of cheaper generics (say it isn't so!), and says she won't hesitate to prosecute companies found in breach of antitrust law.
Earnings: Friday Before Open
- Frontline (FRO): Q3 EPS of $1.76 misses by $0.20. Revenue of $577M (+10.89%) vs. $399M. Shares (PR)
- STMicroelectronics (STM): Sees Q4 revenue of $2.2-2.35B vs. $2.62B consensus due to recent and substantial changes in customers' demand and order push-outs. Shares -5.5% in Paris. (PR)
Today's Markets
- Most Asia markets closed higher Friday. Nikkei +1.66% to 8,512. Hang Seng +2.48% to 13,888. Shanghai -2.44% to 1,871. BSE +0.73% to 9,093.
- In Europe, markets are mostly lower at midday. London +0.05%. Paris -1.2%. Frankfurt -0.9%.
- U.S. stock futures are pointing down. Dow -0.5% to 8650. S&P -0.8% to 879. Nasdaq -1.1%.
- Crude -1.3% to $53.80. Gold +0.1% to $812.
Friday's Economic Calendar
- 9:45 NAPM Chicago Business Barometer
3:00 PM Farm Prices
4:30 PM Money Supply
Seeking Alpha editor Rachael Granby contributed to this post.
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This article has 8 comments:
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woodsey
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146 Comments
Nov 28 10:17 AM-
axelrod608
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287 Comments
Nov 28 10:56 AMIf government regulators continue to allow US corporations to use their pension plans as piggy banks to steal from and toilets to dispose of depleted assets, the Penson Guarantee Fund will eventually be the universal payer of retirement benefits. Bend over taxpayers, corporate America has another gift for you.
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Right in San Francisco
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192 Comments
My Website
Nov 28 12:55 PM-
Homer II
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52 Comments
Nov 28 11:27 PM-
Kinabalu
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148 Comments
Nov 29 12:27 PMIf these negotiations are not succcessful the most likely alternative is Chapter 11, which will absolutely result in adjustments to the Union contract and to executive deferred compensation arrangements. Congress will dilly-dally because of the political pressure but will ultimately do the right thing and not provide any bail-out funds unless Union and Management meet halfway.
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Roy M.
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355 Comments
Nov 29 03:46 PMDon't expect the UAW to agree on anything. That's their nature.
Even if they (both) meet half way, it's still a giant burden to the gov
and taxpayers. Still a giant Black Hole. The best solution will be Chp.11. That way will leave them no option but to negotiate. Right now, UAW still
think they are the king as they used to for half a century.
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Kinabalu
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148 Comments
Nov 29 06:49 PMOn Nov 29 03:46 PM LobsterM wrote:
> Kinabalu,
> Don't expect the UAW to agree on anything. That's their nature.
>
> Even if they (both) meet half way, it's still a giant burden to the
> gov
> and taxpayers. Still a giant Black Hole. The best solution will be
> Chp.11. That way will leave them no option but to negotiate. Right
> now, UAW still
> think they are the king as they used to for half a century.
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Mike123A
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4 Comments
Dec 01 08:50 AMMichael A. Grand, Futurist / Visionary