Flavin Nooney & Person Market Flash 7.21.14
courtesy of @seekingalpha
Gold and other precious metals continued to trade close to their lowest level in five years today amid rising expectations for a U.S. interest rate increase that has boosted the dollar. The strong currency makes raw materials less affordable to overseas investors, while higher interest rates tend to draw money into yield-bearing assets and away from commodities. Bullion for immediate delivery is now down 0.1% at $1105.40, but dipped below the psychological mark of $1,100 an ounce in early Asia hours.
U.S. oil prices dropped below $50/bbl on Monday for the first time since April, as data showed Saudi Arabian exports falling to their lowest in five months despite record output, while a resurgence in U.S. drilling activity seen earlier this month seemed to fade. Although oil consumption has risen this year, many analysts say demand is insufficient to eat away at the commodity’s global glut. WTI crude fell more than 3% this past week and more than 14% in July, while Brent fell nearly 3% last week and more than 10% for the month.
The Greek government handed in legislation to parliament today required by lenders to restart talks on a multi-billion euro rescue package. The bailout bill puts into law new EU rules on propping up failed banks and includes the adoption of new regulations for the country’s civil justice system. Prime Minister Alexis Tsipras, who will likely again need opposition votes for the proposal, has until Wednesday night to get the measures adopted in the assembly.
North Korea is not interested in an Iran-like dialogue with the U.S. to give up its nuclear capabilities, the country’s foreign ministry said on Tuesday. “It is not logical to compare our situation…we are always subjected to provocative U.S. military hostilities, including massive joint military exercises and a grave nuclear threat,” the North Korean statement said. The U.S. and five world powers struck a historic accord with Iran last week aimed at limiting Tehran’s nuclear capabilities in exchange for sanctions relief.
In one of Japan’s largest ever accounting scandals, investigators found that top executives at Toshiba (OTCPK:TOSYY) fudged the firm’s accounting for more than seven years, embellishing earnings by $1.2B. President Hisao Tanaka and his predecessor Norio Sasaki sought to delay booking losses and employees were unable to go against management orders. Tanaka and Sasaki handed in their resignations following the news; Chairman Masashi Muromachi has been named Chief Executive.
Qualcomm is expected to conduct a strategic review that may result in the breakup of the company, among other options, sources told WSJ. The news comes after earlier reports stated the company was preparing to lay off several thousand employees. Fueling the pressure: Activist Jana Partners called on Qualcomm (NASDAQ:QCOM) in April to consider spinning off its chip division from its IP licensing unit. QCOM +0.9% premarket.
First Data, the target of one of the last big leveraged buyouts struck before the financial crisis, looks like it is finally coming back to the stock markets. The payments processor has filed for an IPO, paving the way for majority owner KKR to eventually sell off its holdings after buying the company for $29B. Should First Data (Pending:FDATA) succeed in going public, its stock sale would likely be one of the biggest of 2015.
Citing acquisition-related charges, restructuring expenses and higher stock-based compensation outlays, SAP (NYSE:SAP) posted a 15% decline in Q2 net profit of €471M vs. €557M in the same period a year earlier. SAP has struggled with shrinking profits in recent quarters, as CEO Bill McDermott looks to shift the company’s focus toward cloud based offerings. The company also reiterated its guidance for 2015, saying it expects a non-IFRS operating profit of between €5.6B-€5.9B and full year non-IFRS revenue for cloud subscriptions of €1.95B-€2.05B.
Nokia is nearing an agreement to sell its maps business HERE to a group of German luxury-car makers, including BMW (OTCPK:BAMXY), Daimler (OTCPK:DDAIY) and Audi (OTCPK:AUDVF). An agreement could be reached as early as next week, with an announcement targeted for around July 31, Bloomberg reports. Sources say Nokia (NYSE:NOK) has sought as much as $4B for the unit. NOK +1.3% premarket.
Novartis’ second-quarter profit fell 32% from the same period last year, as the drug giant got hit by a strong dollar and weak results from its eye-care treatment business. Net income fell to $1.86B, or $0.77 per share in the quarter ended in June vs. $2.72B a year earlier. Core net income fell 8%. Novartis (NYSE:NVS) also confirmed its full year outlook, with net sales expected to grow in the mid-single digits and core operating income to grow at a faster, high-single-digit rate.
French food group Bonduelle is looking to team up with Centerview Partners in a bid to acquire General Mills’ (NYSE:GIS) Green Giant vegetable business, sources told Reuters. General Mills reportedly hired investment bank Rothschild to explore a sale of Green Giant in March. The unit has approximately $700M in annual revenue.
The Federal Reserve has finalized the capital surcharge amounts for the nation’s largest financial firms, or systemically important financial institutions (SIFIs). Surcharges: JPMorgan (NYSE:JPM) 4.5%; Citigroup (NYSE:C) 3.5%; BofA (NYSE:BAC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) 3%; Wells Fargo (NYSE:WFC) 2%; State Street (NYSE:STT) 1.5%; BNY Mellon (NYSE:BK) 1%. Taken together, the group’s capital cushion will be more than $200B larger than if the surcharge was not implemented. Note: The Fed offered a reprieve to GE Capital from more-intensive regulation, after the company promised to cut its assets by more than half.
Online gambling firm GVC is still considering its options regarding peer Bwin.Party Digital Entertainment (OTCPK:PYGMF), which accepted a bid from 888 Holdings (OTCPK:EIHDF) last week. 888’s offer of £898M ($1.4B) was lower than GVC (OTC:GMVHF) and Amaya’s (NASDAQ:AYA) £908M bid, making the latter debate its alternatives. GVC also noted there was no certainty it would make another offer.
In other gambling news, Caesars Entertainment (NASDAQ:CZR) reached an agreement with its lenders that will reduce its operating company’s debt by about $10B, paving the way for new debt worth $8.6B. The deal will see Caesars Entertainment contribute an additional $200M of convertible notes to the second lien noteholders, and about 5% equity in company property to investors. CZR +1.5% premarket.
Following its split from eBay (NASDAQ:EBAY) yesterday, PayPal (NASDAQ:PYPL) shares soared 5.4% to close at $40.47, giving the payments giant a market value of nearly $50B. PayPal is now free to pursue its own corporate strategy, unencumbered by potential conflicts with its onetime parent. A whole host of firms also launched coverage on PayPal with bullish ratings, giving the stock an extra boost. PYPL +2.8% premarket.
Monday’s key earnings
Halliburton (NYSE:HAL) +1.9% after beating expectations and capex cuts. (link)
IBM (NYSE:IBM) -5% AH as revenue fell for the 13th straight quarter. (link)
Infosys (NYSE:INFY) +11.6% AH after raising full year sales forecast. (link)
Lockheed Martin (NYSE:LMT) +2% topping estimates and its Sikorsky acquisition. (link)
Morgan Stanley (MS) -0.4% despite an earnings beat. (link)
In Asia, Japan +0.9% to 20842. Hong Kong +0.5% to 25536. China +0.7% to 4018. India -0.8% to 28182.
In Europe, at midday, London +0.1%. Paris +0.1%. Frankfurt +0.1%.
Futures at 6:20: Dow -0.1%. S&P flat. Nasdaq +0.1%. Crude -0.2% to $50.36. Gold -0.1% to $1105.40.
Ten-year Treasury Yield flat at 2.37%
Today’s economic calendar:
8:55 Redbook Chain Store Sales
Notable earnings before today’s open: ABG, AMTD, ATI, BHI, BK, CFG, CP, DOV, EDU, FITB, HOG, INFY, LXK, MAN, MDSO, NEOG, NVR, NVS, OMC, PLD, PNR, RF, SAP, SBNY, SNV, TRV, TTS, UTX, VZ, WSO, WWW
Notable earnings after today’s close: AAPL, ACE, CMG, CMRE, CNMD, FTI, FULT, GPRO, HAWK, HTS, HUBG, IBKR, ILMN, IRBT, ISRG, KALU, LLTC, MANH, MSFT, NAVI, PKG, VASC, VMW, YHOO, ZIXIooney & Person Market Flash 7.21.14