BOE warns U.K. banks over potential losses. The Bank of England's Financial Policy Committee has accused British banks of possibly misleading investors about the health of their finances. In its semi-annual report, the panel said banks may be overstating capital levels by not recognizing potential losses on loans and by playing down risks. Banks may also not have made enough provisions to cover the costs of compensating customers for the mis-selling of certain financial products.
Rio Tinto to cut costs by $7B. Rio Tinto (RIO) intends to slash $7B of costs, including $5B of operating expenses over the next two years and a further $2B in spending cuts mostly at its struggling aluminum and Australian coal operations. Commodity prices are weak, yes, but in just five years, Australia has gone from being among the cheaper places to operate to the most expensive.
Dell in talks to invest in Sharp. Dell (DELL) is the latest American corporation to be linked with a possible investment in Sharp (SHCAF.PK), adding to speculation of talks between the struggling Japanese firm and Intel (INTC) and Qualcomm (QCOM). Sharp is looking for up to ¥20B ($240M) from both Dell and Intel, and a smaller amount from Qualcomm. The negotiations with the U.S. companies come as talks about an investment from Taiwan's Hon Hai drag on.
Top Stock News
India to hold vote on foreign supermarket stake. The Indian government has buckled to intense pressure and agreed to votes in both chambers of parliament over its controversial proposal to allow foreign retailers to own up to 51% of domestic supermarkets. While the votes will be symbolic, a loss for the government will be a setback in its attempts to reform the economy and spark growth, while the likes of Wal-Mart (WMT) also have a lot riding on the outcome.
Wells Fargo escapes charges as SEC ends mortgage-bond probe. The SEC has dropped a long-running investigation into whether Wells Fargo (WFC) misled investors in the sale of mortgage bonds. The probe is the second one related to such securities that the SEC has closed without making charges, with the agency dropping an inquiry into Goldman Sachs (GS) earlier this year. Still, the SEC did recently win settlements totaling over $400M from JPMorgan (JPM) and Credit Suisse (CS).
GM Chinese JV to build $1B plant. One of GM's (GM) Chinese joint ventures, SAIC-GM-Wuling, intends to invest $1B to build a third commercial-vehicle plant in the southwest of the country. Construction is due to begin next year, with the first phase set to open in 2015. Meanwhile, GM is opening the second phase of a global R&D center in Shanghai as it looks to exploit the vast quantity of engineers in China.
Gold Fields to wash hands of strike-hit mines. South Africa's Gold Fields (GFI) plans to spin off two mines that were beset by violent strikes in recent months. The KDC and Beatrix mines will be placed under the control of a new company called Sibanye Gold, which will be listed in February. While the mines produced 1.4M oz last year, the strikes cost Gold Fields 2B rand ($226.8M) in revenue and 145,000 oz in lost production.
Timken fights call for break-up. Activist fund Relational Investors and the Calpers pension fund yesterday disclosed a combined 6.4% stake in Timken (TKR) and called on the company to spin off its steel business. Timken, which also makes mechanical components, said a split would not be in the best interests of shareholders.
F-35 costs soar into the stratosphere. Beset with problems, Lockheed Martin's (LMT) F-35 fighter program is years behind schedule, while expenses have run out of control. The price to build each plane is $137M vs $69M in 2001, and the program will cost $396B if the Pentagon keeps to a plan to build 2,443 jets by the late 2030s. That's not to mention the $1.1T in operating expenses.
Top Economic & Other News
Italian 10-year yields fall to two-year low in auction. Italy has sold €2.98B of 10 year bonds at a yield of 4.45%, down from 4.92% in a previous auction and the lowest in two years, indicating how the market tumult over the eurozone debt crisis has somewhat subsided - for now. The government also issued €3B of five-year paper at 3.23%, down from 3.8%. The total sale of €5.98B was at the top end of the government's target of €4-6B. In the secondary market, 10-year yields were -7 bps at 4.53% midday in Europe.
S&P affirms China's rating at "AA-." S&P has reiterated China's sovereign long-term rating at "AA-" and its outlook at stable, citing "strong economic growth potential, (a) robust external position, and the government's relatively healthy fiscal position." Despite the conservative nature of China's new Politburo Standing Committee, S&P reckons that "efforts toward deepening structural and fiscal reforms are likely to continue."
Fed set for additional QE in 2013. Frustrated with the lack of substantial job gains, many Fed officials want the bank to continue buying long-term Treasurys even after Operation Twist expires. The purchases would be in addition to the $40B a month of mortgage-backed securities that the Fed's been scooping up. Under Twist, the bank's been paying for the long-term Treasurys with short-term paper, but as the latter is running out, the Fed will have to print money to keep the program going.
Court allows Argentina to delay debt payment. An appeals court yesterday allowed Argentina to delay the payment of $1.3B of defaulted debt to bondholders who refused to accept haircuts on the paper, pending a further ruling. A district judge had ordered the country to place the money into an escrow account by Dec 15 if it pays out $3B of restructured debt, as scheduled. The lower court ruling had sparked fears that Argentina could default.
In Asia, Japan +1% to 9401. Hong Kong +1% to 21923. China -0.5% to 1963. India +1.8% to 19171.
In Europe, at midday, London +0.8%. Paris +1%. Frankfurt +0.7%.
Futures at 7:00: Dow +0.6%. S&P +0.6%. Nasdaq +0.7%. Crude +1.3% to $87.60. Gold +0.4% to $1725.80.
Today's economic calendar:
Chain Store Sales
6:00 Fed's Fisher: 'Monetary and Fiscal Challenges in the United States and the Euro Area'
8:30 Initial Jobless Claims
8:30 GDP Q3
8:30 Corporate Profits
9:00 Fed's Williams: Economic Outlook
9:45 Bloomberg Consumer Comfort Index
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $29B, 7-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
See full real-time earnings coverage »
Wall Street Breakfast is sent out by email for free -- Get it now »