Political uncertainty in Spain and Italy spooks markets. Spanish PM Mariano Rajoy is having to fight off allegations that he and other leaders in his party took bribes, while in Italy, Silvio Berlusconi's party is surging in the polls ahead of upcoming elections as he promises to tear up "German-imposed" austerity policies and cancel a despised property tax. The uncertainty has been causing ructions in markets, and at midday in Europe, Madrid shares were -1.6% and Milan was -2.1%, while Spanish 10-year bonds were +15 bps at 5.21% and those of Italy were +7 bps at 4.4%. (See below for more)
U.K. to "electrify" bank ring-fence. The U.K. government intends to give regulators the power to break up banks that breach upcoming rules over separating their retail operations from their investment-banking activities. "In the jargon, we will 'electrify the ring fence,'" Finance Minster George Osborne said today. He also plans rules that will limit banks' leverage.
Barclays CFO, General Counsel to retire amid image clean-up. Barclays (NYSE:BCS) CFO Christopher Lucas and General Counsel Mark Harding are retiring, but they will stay in their positions until successors are found. The departures come amid attempts by new CEO Antony Jenkins to restore the bank's battered reputation, although while Lucas is under investigation over the firm's fundraising from Qatar in 2008, Jenkins said, "Their decision to retire was theirs alone." Shares were -0.4% at midday in London.
Top Stock News
RBS nears £500-600M deal on rate-rigging. RBS (NYSE:RBS) is reportedly closing in on an agreement with U.K. and U.S. regulators to pay £500-600M to settle allegations that it manipulated inter-bank interest rates, with an announcement possible on Tuesday. The sides are still negotiating key details, including whether RBS will admit a criminal charge. U.K. Finance Minister George Osborne wants the bank to pay any penalties out of its bonus pool. Shares were -0.8% at midday in London.
KKR, Permira mull sale of ProSiebenSat stake. KKR (NYSE:KKR) and Permira Advisers are reportedly considering their options for their 53% stake in ProSiebenSat.1 Media (OTCPK:PBSFF) - which has a market cap of €5.43B - including selling their shares to another firm or on the market. Although the German broadcaster is having to cope with falling ad revenues, potential suitors could include Time Warner (NYSE:TWX), Comcast (NASDAQ:CMCSA) and News Corp (NASDAQ:NWS).
Japan Airlines still has faith in 787. Boeing's (NYSE:BA) 787 aircraft should stay at the center of Japan Airlines' strategy despite the jets being grounded, the carrier has said, although it will try to seek compensation from the plane-maker for the suspension of flights, as will All Nippon Airways. Meanwhile, Boeing plans to soon start producing stretched 787 aircraft even though investigators still have no clue as to why two lithium-ion batteries burned on Japan Airlines Dreamliners.
AB InBev to fight its corner over Modelo. AB InBev (NYSE:BUD) intends to "vigorously contest" the Department of Justice's lawsuit that seeks to block the company's $20B deal to take control of Mexico's Modelo (OTC:GPMCY), arguing that the DOJ's analysis that the transaction will lead to too much consolidation in the U.S. beer sector and cause price increases is flawed. Experts reckon the sides will try to thrash out an agreement in private.
Investors eye impact of chicken scandal on Yum's results. Yum Brands' (NYSE:YUM) Q4 earnings are due out after the bell today, with analysts expecting that the restaurant operator's EPS rose to $0.82 from $0.75 and that revenue inched up 0.1% to $4.12B. Investors will be particularly interested in the impact on Yum's earnings of a scandal in China over the use of chickens that were allegedly given dangerous hormones. The affair could have hurt same-store sales by 6% after they increased 9% in the first nine months of 2012.
Pratt & Whitney finalizes $1B+ deal for F35 engines. After over a year of talks, United Technologies (NYSE:UTX) unit Pratt & Whitney has reportedly finalized a contract to supply 32 engines for the fifth batch of F-35 Joint Strike Fighters. A preliminary deal in December 2011 was worth $1.12B and was for 30 engines, with the final value of the agreement appearing to be just over $1B. Pratt hopes to secure an initial contract for the sixth set of jets in the coming weeks.
Entergy escapes blame for Super Bowl outage. Electricity utility Entergy (NYSE:ETR) has been able to wash its hands of responsibility for last night's power failure during the Super Bowl, with the outage due to an "abnormality in the system" at the Super Dome stadium. CBS (NYSE:CBS) resisted the temptation to run extra ads during the blackout, virtuously declaring that its commitments to advertisers were "being honored." Nevertheless, the problems disrupted Coca-Cola's (NYSE:KO) two-part desert race commercials. (NYT critique of the ads)
Top Economic & Other News
Oil firms, environmentalists jockey for position over California shale. Oil companies such as Occidental Petroleum (NYSE:OXY), Venoco (NYSE:VQ) and Hess (NYSE:HES) are looking to exploit California's Monterey Shale, whose untapped deposits are estimated at 15.4B barrels, or over four times the reserves in the Bakken Shale. However, the industry is facing stiff opposition from the state's environmental lobby, which is concerned about the substances used in fracking and the potential for setting off earthquakes.
Deal averts strike at East Coast, Gulf ports. A weekend deal between longshoremen and the U.S. Maritime Alliance - representing shipping companies and port associations in the East and Gulf coasts - averted a strike that could have cost the economy $1B a day and brought shortages of consumer goods. The largest port involved was the Port of New York & New Jersey; the dispute centered on container royalties shared between shippers and union members.
China's services PMI hits highest since August. China's non-manufacturing PMI has edged up to its highest since August, increasing to 56.2 in January from 56.1 in December. The rise compares with divergent trends in the country's manufacturing sector. Retailing experienced an "obvious" improvement, while new orders in civil engineering and infrastructure construction climbed to their highest since March last year. However, the indexes for activity and new orders for commercial real estate dropped below 50.
In Asia, Japan +0.6% to 11260. Hong Kong -0.2% to 23685. China +0.4% to 2428. India -0.1% to 19751.
In Europe, at midday, London -0.7%. Paris -0.8%. Frankfurt -0.4%.
Futures at 7:00: Dow -0.1%. S&P -0.2%. Nasdaq -0.1%. Crude -1% to $96.82. Gold -0.4% to $1663.50.
Today's economic calendar:
10:00 Factory Orders
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