UBS to pay $1.5B to settle rate-rigging charges. Largely as expected, UBS (NYSE:UBS) has agreed to pay $1.5B to U.S., U.K. and Swiss authorities to settle charges that it rigged inter-bank interest rates, including Libor. The large size of the penalty - it's more than triple that of Barclays (NYSE:BCS) - reflects the centrality of UBS to the scandal. The bank's Japanese unit, which was responsible for much of the attempted manipulation, has pleaded guilty to one count of fraud.
Fitch threatens downgrade if U.S. falls off cliff. Fitch has warned that a failure to avert the fiscal cliff will increase the likelihood that it will strip the U.S. of its AAA rating. Falling over the edge "would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the U.S. into an avoidable and unnecessary recession," Fitch said in its 2013 global outlook.
Oracle rises after earnings top forecasts. Oracle's (NYSE:ORCL) shares were +2.1% premarket after the company's FQ2 results beat expectations as net profit jumped 18% to $2.58B, EPS came in at $0.64 - boosted by a $3B share buyback - and revenue rose 3% to $9.09B. New software license/cloud subscription sales climbed 17%, up from growth of 6% in FQ1, although hardware product sales were still ugly at -23%. Oracle provided FQ3 guidance that was in line with consensus and predicted that hardware revenues would "improve" to flat to -10%.
Top Stock News
Tobacco firms to pay $1.5B less in settlement. Altria (NYSE:MO), Reynolds American (NYSE:RAI) and Lorillard (NYSE:LO) have reached a deal with 19 states that will allow the cigarette manufacturers to receive over $1.5B in credits that are connected to a 1998 settlement in which tobacco firms agreed to pay more than $200B to cover smoking-related health costs. Under the latest deal, the companies will be able to cut their payments based on market-share losses to rivals that didn't sign the original settlement.
Getco wins race for Knight Capital Group. Getco has reportedly beaten rival Virtu in the race to buy Knight Capital Group (NYSE:KCG) after the high-speed trading company raised its offer to over $3.70-3.75 a share in cash and stock from $3.50 initially. Under the deal, Getco will acquire 60% of Knight, whose shares were +2.7% premarket.
Sirius hires interim chief. Sirius XM Radio (NASDAQ:SIRI) has named James Meyer, its President of Sales & Operations, as its new interim CEO, effective immediately. The search goes on at the company for a full-time replacement for Mel Karmazin.
Greenbrier rejects American Railcar offer. Greenbrier (NYSE:GBX) has turned down American Railcar Industries' (NASDAQ:ARII) $543M takeover bid, saying the offer "grossly undervalues the company." However, Greenbrier is willing to continue talks with Carl Icahn, who controls American Railcar, declaring that a merger "could be beneficial to both companies" and could achieve "substantial synergies."
Top Economic & Other News
Michigan appoints review team for Detroit. Michigan Governor Rick Snyder has appointed a financial review team for Detroit after a preliminary study found that the city had "a serious financial problem." The team will carry out a new review that could lead to the appointment of an emergency manager who would have the authority to allow Detroit to file for what would be the largest ever U.S. municipal bankruptcy.
Japan's export decline slows. Japan's exports fell 4.1% on year in November after dropping 6.5% in October, with overseas sales continuing to be pressured by the strong yen and weak global growth. Exports to China declined 14.5% while shipments to Europe slumped 19.9%. With imports edging up 0.8%, the trade deficit widened to ¥953.4B ($11.3B) from ¥549.0B.
Congress agrees on $640.7B defense budget. House and Senate negotiators yesterday reached a deal over a $640.7B defense budget for the current fiscal year, including $88.5B for operations in Afghanistan. However, the spending doesn't account for the automatic cuts that are due to take place if the fiscal cliff is not averted. The measures now need to be approved by the House and Senate before going to President Obama for his signature.
German business confidence increases. Germany's Ifo Business Climate index has improved for the second consecutive month, rising to a greater-than-expected 102.4 in December from 101.4 in November. "There is a certain calming down at the end of the year," Ifo economist Klaus Wohlrabe says. "Export expectations have risen. Companies are growing confident again."
China may be at risk of severe credit crunch. China could face a severe credit crunch because of Wealth Management Products, which are mostly short-term securities that promise high yields and have become massively popular. The underlying assets are often undisclosed but can include speculative real-estate developments. The fear is that a recent default of a WMP could cause a run on the products and hence the credit crunch, or expose banks to massive liabilities.
In Asia, Japan +2.4% to 10160.4. Hong Kong +0.6% to 22623. China flat at 2162. India +0.6% to 19476.
In Europe, at midday, London +0.4%. Paris +0.4%. Frankfurt +0.2%.
Futures at 7:00: Dow +0.2%. S&P +0.2%. Nasdaq +0.3%. Crude +0.5% to $88.30. Gold -0.1% to $1668.70.
Today's economic calendar:
7:00 MBA Mortgage Applications
8:30 Housing Starts
10:30 EIA Petroleum Inventories
1:00 PM Results of $29B, 7-Year Note Auction
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