Flavin Nooney & Person Market Flash 7.27.14

Posted in Newsroom by flavin_cpa on July 27th, 2015

Flavin Nooney & Person Market Flash 7.27.14

courtesy of @seekingalpha

Economy
Chinese stocks fell sharply today, leading the Shanghai Composite to record its largest one-day drop since June 2007, while bringing down European shares and U.S. futures. Weak manufacturing data revealed that profit at the country’s industrial firms dropped 0.3% in June from a year earlier, the National Bureau of Statistics said. Chinese investors seem to have also gotten back on the bear train after classifying the government’s unprecedented intervention as unsustainable. Shanghai -8.5%.

Following five long years of negotiations, the Trans-Pacific Partnership will go down to the wire this week, as Pacific Rim officials meet in Hawaii for talks that could make or break the deal. The toughest issues have been left until last, including monopoly periods, preferential treatment for state-owned companies and opening protected markets to competition. TPP would cover 40% of the world’s economy, including the U.S., Japan and ten other Pacific nations.

In a rare weekend session, the U.S. Senate voted on Sunday to advance legislation that would resurrect the Export-Import Bank, whose charter expired on June 30 and was not renewed by Congress. The bipartisan vote allowed supporters to attach a measure reauthorizing the federal credit agency to an unrelated three-year highway and infrastructure bill, which is expected to pass in the Senate early this week.

Is it a debt or deficit problem? Puerto Rico’s bondholders and three former IMF economists have presented a rival recovery plan for the U.S. commonwealth, stating it could move to a surplus by fiscal 2017. The new study argues that the island could avoid a restructuring by eliminating its deficit, but acknowledges that it’s cash strapped in the short term and would need some kind of financing to bridge the gap.

The Athens Stock Exchange will remain closed today, but might reopen on Tuesday after a one-month shutdown. Officials say more time is needed to finalize the details which would allow the market to reopen based on the ECB’s opinion. Meanwhile, Greek PM Alexis Tsipras seems to be under pressure due to chaos in the Syriza party. New reports suggest that some members had planned to raid central bank reserves and hack taxpayer accounts during crisis talks to prepare a return to the drachma.

Stocks
Teva Pharmaceuticals has agreed to buy the generic-drug business of Allergan (NYSE:AGN) for about $40.5B in cash and stock, ending its effort to acquire rival Mylan (NASDAQ:MYL). Allergan will receive $33.75B in cash and shares in Teva (NYSE:TEVA) valued at $6.75B, giving it a 10% stake in the enlarged company. The acquisition further extends a wave of mergers that has swept over the healthcare industry. Pharmaceutical deals so far this year have topped $180B, on pace to beat the $200B announced in 2014. TEVA +12.1% premarket.

Besides the new tie-up, Allergan (AGN) said on Sunday it would purchase biotech company Naurex, which is developing a fast-acting antidepressant. “Depression remains one of the largest unmet areas of medical need. When you think about existing therapies, they have modest effects with lots of side effects,” announced Brent Saunders, Allergan’s chief executive. The $560M all-cash transaction is expected to close by year-end.

Meanwhile, Sanofi has agreed to acquire cancer drug Caprelsa from AstraZeneca (NYSE:AZN) for as much as $300M, including an upfront payment of $165M and sales milestone payments of up to $135M. Caprelsa is currently sold in 28 countries for treating medullary thyroid carcinoma and had sales last year of $48M. The deal will boost Sanofi’s (NYSE:SNY) rare disease medicine offerings.

As oil prices slump for a second time this year, the world’s biggest energy groups have shelved $200B of spending on new projects in an urgent round of cost-cutting aimed at protecting investors’ dividends, FT reports. Among companies postponing big production plans while they wait for costs to come down are BP (NYSE:BP), Royal Dutch Shell (RDS.A, RDS.B), Chevron (NYSE:CVX), Statoil (NYSE:STO) and Woodside Petroleum (OTCPK:WOPEY). Crude prices have now fallen 20% since hitting five-month highs in early May.

General Electric wants to be a “sizable” player in the market for energy storage systems, a sector the company expects to quadruple to $6B by 2020. “We believe in the space and its ability to grow,” Jeff Wyatt, GE’s (NYSE:GE) general manager for energy storage, told Reuters. Demand for industrial battery systems has attracted a wide range of companies, including Tesla Motors (NASDAQ:TSLA), which said in April it plans to package batteries for utilities as well as homes and businesses.

UBS saw its profits soar 53% in Q2, after the bank reported earnings a day early due to a newspaper leak of its figures. Citing positive contributions from all divisions and regions, the bank reported net profit of 1.2B Swiss francs ($1.25B) in the three months to March this year, heavily beating expectations. UBS (NYSE:UBS) also bolstered its capital cushion, a measure of a bank’s ability to withstand a crisis, to 14.4%.

Verizon workers on the U.S. East Coast have voted to go on strike, if necessary, over a dispute about a new contract. “Our members…reject management’s harsh concessionary demands, including the elimination of job security, sharp increases in workers’ health care costs, and slashing retirement security,” Union Communications Workers of America said in a statement. The contract covers 39,000 employees who work for Verizon’s (NYSE:VZ) wireline business, which provides FiOS Internet, telephone and TV services. VZ -0.3% premarket.

AT&T closed its deal for DirecTV on Friday, making it the country’s largest pay TV provider with more than 26M total subscribers. That fact created some concern for regulators, but following an extended review, the FCC approved the deal with conditions. AT&T (NYSE:T) said its operations would be merged with DirecTV’s (NASDAQ:DTV) “over the coming months.”

The Apple Watch will be available at more than 100 Best Buy (NYSE:BBY) stores in the U.S. starting in August, and more than 300 locations before the holiday season, marking the first time the watch will be sold outside of the Apple (NASDAQ:AAPL) retail store. During its earnings announcement last week, CEO Tim Cook said the Watch was selling better than expected, but didn’t say how many the company had sold or what its projections were.

More M&A is expected in the financial-related media industry. Pearson (NYSE:PSO) has moved closer to an exit from business publishing after it announced plans to dispose of its stake in The Economist, just days after the sale of The Financial Times. The sale to a “diversified western media company” is expected to draw about £500M (about $775.5M), Politico Europe reports.

McGraw Hill is also nearing a deal to pay more than $2B for SNL Financial, a financial news and data services provider owned by private equity firm New Mountain Capital. The deal, which would boost McGraw Hill’s (NYSE:MHFI) data offerings for its main base of clients, could be announced as soon as Monday.

The NHTSA is close to hitting Fiat Chrysler Automobiles (NYSE:FCAU) with a record $105M fine for recalls affecting more than 11M vehicles, adding to the mounting scrutiny of the automaker’s safety practices. The penalties are tied to legal violations in an array of areas, including misleading regulators, inadequate repairs, and failing to alert car owners in a timely manner. Fiat Chrysler is expected to sign a consent order agreeing to the fines, which could be unveiled as soon as Monday.

Separately, Mitsubishi Motors has confirmed it will stop making cars in the U.S. due to dwindling output in recent years. Production at its sole North American plant, in Normal, Illinois, will move to Japan and Thailand. Although it has seen solid growth rates in the U.S. this year, Mitsubishi (OTCPK:MMTOF) faces higher costs due to the strong U.S. dollar.
Today’s Markets:
In Asia, Japan -1% to 20350. Hong Kong -3.1% to 24352. China -8.5% to 3726. India -2% to 27561.
In Europe, at midday, London -0.1%. Paris -1.4%. Frankfurt -1.3%.
Futures at 6:20: Dow -0.3%. S&P -0.3%. Nasdaq -0.5%. Crude -0.7% to $47.80. Gold +1.3% to $1099.20.
Ten-year Treasury Yield -2 bps to 2.24%

Today’s economic calendar:
8:30 Durable Goods
10:30 Dallas Fed Manufacturing Outlook

Notable earnings before today’s open: ACW, AVX, BOH, CYOU, HAE, LECO, MGLN, NSC, ONB, PHG, POL, QSR, ROP, RPM, SOHU, WAL, XCO

Notable earnings after today’s close: ACC, AGNC, AHL, ALSN, AMKR, ARE, AVB, BIDU, BRX, CDNS, CKEC, CMP, CNL, CR, EMN, GIG, HIG, HLIT, IPHS, JJSF, KN, MSTR, OMI, PCL, PLT, PRE, RCII, RE, SIMO, SWFT, SWN, TMK, UDR, WCN, WRB

 

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