Windows 8 fails to spark Microsoft back into life. Microsoft (MSFT) experienced a mixed FQ2 as it introduced its new Windows 8, which helped increase revenue at the company's OS unit by 24% to $5.88B. However, Microsoft's net profit slipped 3.7% to $6.38B, EPS of $0.76 just about topped expectations, and revenue edged up 3% to $21.46B but slightly missed consensus. "Business PCs are growing faster than consumer, emerging markets are growing faster than developed," said CFO Peter Klein. Shares were -1.6% premarket.
Positive German Ifo helps boost stocks. Germany's Ifo index of business confidence has risen to its highest level in seven months, increasing to 104.2 in January from 102.4 in December and topping forecasts for 103. The expectations and current conditions indexes have also increased as the country's economic outlook improves amid signs that the eurozone debt crisis is fading, for the moment. The buoyant sentiment helped boost European shares and send the DAX to a five-year high.
Samsung net profit jumps 76% but warns of mobile slowdown. Samsung's (OTC:SSNLF) Q4 net profit surged 76% to 7.04T won ($6.6B), boosted by "solid sales" of its flagship Galaxy S3 and Galaxy Note 2 smartphones. Samsung also enjoyed decent performances at its chip and consumer-electronics divisions, and a turnaround at its LCD business. However, the Korean company expects smartphone demand in developed countries to decelerate in Q1, with the "furious growth spurt" in the global smartphone market in 2012 to be "pacified."
Top Stock News
Starbucks' net profit climbs 13%. Starbucks' shares were +2.55% premarket after the company's FQ1 net profit rose 13% to $432.2M, with EPS of $0.57 matching consensus and revenues climbing 11% to $3.8B, mostly as expected. Despite "a backdrop of weak consumer confidence and an overall weak global economy," Starbucks has been able to maintain its recently garnered momentum, CEO Howard Schultz said.
EU banks to repay €137.2B in cheap loans. European banks can begin paying back their LTRO loans on Wednesday next week, and the ECB expects €137.2B to be returned. It's a fairly significant portion of the more than €1T lent out considering that the loans were for three years; the availability of cheaper sources of funding is probably a major reason for the repayments.
Sony jumps as govt looks to help with unit sale. Sony's (SNE) shares climbed 8.5% in Tokyo following a report that the INCJ Japanese government fund will invest in a Nissan and NEC joint venture if it acquires Sony's lithium-ion battery operations, which the company is looking to sell as part of its restructuring. INCJ is looking for other Japanese buyers also as it seeks to prevent the battery technology from falling into foreign hands.
Gorman joins Dimon in taking paycut. Morgan Stanley (MS) has reportedly cut the salary package of CEO James Gorman for a second year in a row following a mixed performance last year, with his 2012 pay falling to $6M from $8.56M in 2011. Gorman's compensation includes $800,000 in salary, $2.6M in deferred cash and $2.6M in stock options but no cash bonus. Gorman joins JPMorgan's (JPM) Jamie Dimon in receiving a pay cut, although Goldman Sachs' (GS) Lloyd Blankfein is in line for a raise.
Top Economic & Other News
U.K. economy returns to contraction. U.K. preliminary Q4 GDP fell a greater-than-expected 0.3% on quarter vs +0.9% in Q3. The economy is 3.3% smaller than at its peak in Q1 2008 and has only recovered about half the output lost during the financial crisis. "Britain is now half way to a triple dip-recession after this disappointingly weak performance," writes the Guardian's Larry Elliot.
Japan stays stuck firmly in deflation. Japanese core CPI came in as expected at -0.2% on year in December vs -0.1% in November, with the figure falling despite a 2.9% climb in fuel, light and water charges. The drop in prices was the seventh in eight months and indicates the challenge that Japan faces in climbing out of deflation and reaching its new 2% inflation target.
Geithner to leave office today. Treasury Secretary Timothy Geithner is due to leave office today and be replaced on a temporary basis by his deputy, Neal Wolin, until the Senate confirms a permanent replacement, which is likely to be Jack Lew. Geithner entered office in 2009 at the height of the financial crisis, and oversaw TARP and the bailouts of companies such as Citigroup (C) and GM (GM); he leaves with the economy stable but sluggish, and with the debt-GDP ratio the highest since 1950.
Fed balance sheet tops $3T. The Fed's prodigious bond-buying has pushed its balance sheet to above $3T, with total assets rising $48B in the past week to a record $3.01T as of Wednesday. The balance sheet is now more than triple its size on September 10, 2008, the week before Lehman Brothers collapsed. "We're in uncharted territory," says former Fed economist Julia Coronado.
In Asia, Japan +2.9% to 10927. Hong Kong -0.1% to 23580. China -0.5% to 2291. India +0.9% to 20104.
In Europe, at midday, London flat. Paris +0.7%. Frankfurt +1.1%.
Futures at 7:00: Dow +0.3%. S&P +0.25%. Nasdaq +0.4%. Crude +0.3% to $96.28. Gold -0.2% to $1666.10.
Today's economic calendar:
10:00 New Home Sales
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