Flavin Nooney & Person Market Flash 7.15.14
courtesy of @seekingalpha
Eurozone finance ministers have begun discussions on whether to give Athens a short-term financing package – expected to be worth about €7B – after Greek lawmakers passed a bailout agreement late last night. Many are also watching whether the ECB will extend emergency liquidity assistance to the country’s banks. Although 229 members of the 300-seat parliament approved the new austerity measures, 32 members of PM Alexis Tsipras’ Syriza party voted “No”, a sign the premier may have lost his majority. Up next: the German Bundestag will vote on Friday whether or not to approve the new rescue, however, talks over securing a new €86B bailout are likely to last for another four weeks.
Although China’s economic expansion beat analysts’ forecasts in the second quarter, the country’s debt levels have increased at an even faster pace. Outstanding loans for companies and households stood at a record 207% of GDP at the end of June, up from 125% in 2008, data compiled by Bloomberg showed. “If you look at the Chinese financial system, shadow banking, amount of leverage…how desperately they worked to keep the stock market up. It looks worse to me than 2007 in the U.S,” Pershing Square’s Bill Ackman said, dubbing China a far bigger global threat than Greece. Hedge fund managers Paul Singer and Jeffrey Gundlach have also weighed in on the crash, calling it “way bigger than subprime” and “far too volatile to invest in.”
U.S. senators have introduced a bill to allow Puerto Rico’s public entities to file for bankruptcy under federal laws as the commonwealth starts negotiations with creditors to restructure its $72B in debt. “What we are proposing is that those public corporations and municipalities in Puerto Rico be given the same access to Chapter 9 as any similar entities in the U.S.,” Senator Richard Blumenthal declared.
Market participants are awaiting day two of Fed Chair Janet Yellen’s testimony in Washington, where she will report to the Senate Banking Committee. On Wednesday, Yellen reiterated that interest rates are likely to rise this year and resisted calls for more congressional oversight, as members of the House of Representatives pressed the central bank to be more accountable.
Netflix +12.3% premarket after announcing a Q2 report which beat earnings, but sacrificed some profits as the company continued to expand its original programming. Investors heavily cheered subscriber growth, which rose 3.27M in the June quarter, bringing the company’s total global streaming membership to 65.55M. Netflix (NASDAQ:NFLX) also smashed its guidance for 600K new subscribers in the U.S., announcing 900K net additions.
eBay is nearing a deal to sell its enterprise business to a consortium led by private equity firm Permira for about $900M, WSJ reports. The deal, which was being finalized late Wednesday, could be announced as soon as today, when the company releases its second-quarter results. Investors are also carefully watching eBay’s PayPal (Pending:PYPL) unit, which is scheduled to complete its spin off tomorrow. EBAY +3.3% premarket.
More worries over a potential Chinese bid for Micron Technologies (NASDAQ:MU) (the last major American memory chip manufacturer) are surfacing. U.S. Senator John McCain, head of the Senate Armed Services Committee, has raised concerns about the potential national security implications of a proposed bid and called for a thorough U.S. review. Other lawmakers have also expressed their fears, given modern weapons’ enormous dependence on computer chips and U.S. cyber attacks tied to Chinese hackers.
European Union regulators have launched twin investigations against Qualcomm (NASDAQ:QCOM), the latest crackdown by the EU on a U.S. tech giant. The first investigation will examine whether the company offered discounts to customers on condition they bought chipsets exclusively from Qualcomm. The second will look at whether the firm engaged in predatory pricing tactics by setting prices below their costs to squeeze out competitors.
BlackRock is a “very dangerous company,” Carl Icahn said at the Delivering Alpha Conference yesterday, turning up the heat on a debate over shareholder activism. Icahn’s beef: BlackRock’s (NYSE:BLK) prevalence of ETFs (which make up a major segment of the firm’s revenue) are dangerous to the market, particularly high-yielding bond ETFs which he thinks stifle liquidity. BLK -0.2% premarket.
Stericycle has agreed to acquire privately-held paper shredding provider Shred-It International for $2.3B in cash. Stericycle (NASDAQ:SRCL) expects the deal to be accretive to cash EPS by at least 10% in 2016 and in the mid-to-high teens in 2018.
Toshiba expects to record ¥300-400B ($2.4-3.2B) in charges related to an accounting scandal that is set to force Chief Executive Hisao Tanaka to resign, according to Reuters. The Japanese conglomerate has hired a third-party committee to investigate past book-keeping practices which sources say led to profits being overstated by more than ¥170B. Toshiba’s (OTCPK:TOSYY) charges include six years of inflated profits as well as various writedowns.
Corning rose 1.9% in after-hours trading following its announcement of a new $2B stock repurchase program. The glass giant also set a quarterly dividend of $0.12 per share. Corning (NYSE:GLW) had $5.07B in cash/short-term investments to pay for buybacks at the end of Q1, and $3.3B in debt.
In a first for the U.S. airline industry, United Continental (NYSE:UAL) has awarded millions of frequent flier miles to hackers who have uncovered gaps in the carrier’s web security. United unveiled the approach in May just weeks before technological glitches grounded its entire fleet twice. Through the “bug bounty” program, researchers flag problems before hackers can exploit them. The cost can be less than hiring outside consultancy.
Paul Elliott Singer is at it again. After going to battle with Argentina a year ago, the activist investor has taken up a fight with the Samsung Group over the proposed merger of two units – Cheil Industries and Samsung C&T. After a six-week public brawl, the Samsung-Elliott will finally be put to a vote at a shareholders meeting tomorrow. Should Singer prevail, it would be the largest victory shareholder activists have ever seen in Korea. If Samsung wins, the group’s founding family will tighten its grip over the conglomerate.
Wednesday’s key earnings
Bank of America (NYSE:BAC) +3.3% after beating estimates. (link)
BlackRock (BLK) +1.1% with money flowing into higher-fee products. (link)
Delta (NYSE:DAL) +0.8% on a boost in domestic business. (link)
Intel (NASDAQ:INTC) +2.6% AH on strong guidance (link)
Kinder Morgan (NYSE:KMI) +0.5% AH despite a Q2 miss. (link)
Netflix (NFLX) +9.7% AH on heavy subsriber growth. (link)
U.S. Bancorp (NYSE:USB) +3.8% after an inline quarter. (link)
In Asia, Japan +0.7% to 20600. Hong Kong +0.3% to 25136. China +0.5% to 3823. India +0.9% to 28446.
In Europe, at midday, London +0.5%. Paris +1.5%. Frankfurt +1.5%.
Futures at 6:20: Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +0.9% to $51.89. Gold -0.3% to $1143.50.
Ten-year Treasury Yield +3 bps to 2.38%
Today’s economic calendar:
8:30 Initial Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:00 Philly Fed Business Outlook
10:00 NAHB Housing Market Index
10:00 Yellen delivers semi-annual monetary policy
10:30 EIA Natural Gas Inventory
4:00 PM Treasury International Capital
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Notable earnings before today’s open: ANFI, BBT, BX, C, DPZ, EBAY, FCFS, FCS, FRC, GS, HOMB, KEY, MTB, MTG, PM, PPG, PVTB, SHW, SON, TSM, TZOO, UNH, WBS, WNS
Notable earnings after today’s close: AMD, ANGO, ASB, CE, CTAS, CYT, EGP, GOOG, MAT, PBCT, SLB, SWI