Japanese PM unveils "third arrow" of reform... Japanese Prime Minister Shinzo Abe has announced a sweeping package of reforms, or the "third arrow" of his grand plan to pull his country out of deflation. The arrow itself comprises three "pillars:" improving productivity in the private sector, labor reform, and developing new markets. The program includes allowing Japan's massive public pension funds to buy more stocks, the creation of special economic zones, free-trade agreements, privatization, and power-market reform. The hope is to raise average income by 3%, which is greater than the two-year inflation target of 2%.
...but Nikkei plunges in disappointment. The Nikkei (NYSEARCA:EWJ) dropped sharply once again and took other Asian bourses with it, with the fall this time because of disappointment with Shinzo Abe's grand reform plan. The measures "aren't enough for Japan to achieve sustained economic growth and overcome deflation," says economist Hisashi Yamada, especially as the labor-market proposals don't go far enough. There's also disappointment at the lack of a nationwide corporate-tax cut.
Top Stock News
Argentina court releases Chevron assets. Argentina's Supreme Court has overturned a judge's order to freeze Chevron (NYSE:CVX) owned assets in the country, opening the way for the company to proceed with a $1.5B venture with YPF (NYSE:YPF) to develop shale oil and gas. Chevron's assets were initially frozen at the request of Ecuadorean plaintiffs who are trying to enforce a $19B award against the oil major over toxic waste in the Amazon.
Monsanto sued over GMO wheat. A Kansas farmer has sued Monsanto (NYSE:MON) over the recent discovery of genetically modified wheat in Oregon, claiming that the company's gross negligence hurt U.S. growers by driving down wheat prices and causing some international markets to suspend certain imports. The lawsuit is believed to be the first stemming from the discovery, but more are surely in the works.
India looks to reach settlement with Vodafone over $2.2B bill. India's cabinet has authorized a proposal to start a non-binding conciliation process with Vodafone (NASDAQ:VOD) over a $2.2B tax bill related to the company's acquisition of a unit of Hutchison Whampoa (OTCPK:HUWHY) in 2007. While Vodafone disputes the bill, it has in the past expressed willingness to reach a settlement that doesn't include interest. The outcome of the row could affect at least four other cases, including one involving AT&T (NYSE:T).
Samsung wins ban on older iPhones, iPads. In a slight reversal of fortune, the ITC has issued a limited U.S. ban on AT&T's (T) versions of Apple's (NASDAQ:AAPL) iPhone 3GS and iPhone 4 devices, and the 3G versions of the iPad 1 and 2, after ruling that the products violate a standards-essential Samsung (OTC:SSNLF) patent. U.S. iPhone 4 sales are still meaningful - for a few more months, anyway - but 3G iPad 2 shipments are probably minuscule, while the 3GS and original iPad have been discontinued.
MF Global moves into liquidation. MF Global Holdings' (OTC:MFGLQ) trustee, Louis Freeh, yesterday stepped down and gave the job of liquidating the firm to a three-member board. While the move was approved in April, it could only go into effect when certain conditions were met, with one being that the estate would have enough money to pay its liabilities. Customers at MF Global's brokerage are expected to receive a full pay out.
Top Economic & Other News
JPM to take $842M haircut in Jefferson bankruptcy deal. Jefferson County in Alabama has reached a settlement with its creditors that paves the way for it to exit bankruptcy in what has been the largest municipal failure in U.S. history. Under the agreement, debt-holders will forgive $1.2B out of $3.1B they are owed, with JPMorgan (NYSE:JPM), the largest creditor, to take a haircut of $842M. With a number of other local governments in distress, the case is being closely watched.
Australian growth stagnates in Q1. Australia's Q1 GDP was flat at 0.6% on quarter and came in below consensus of +0.8%. With exports helping to drive growth, one economist says the figures highlight the weakness of domestic demand. Another says the reading shows that Australia's transition to growth led by non-resource industries as the mining boom peaks is still "fairly hesitant and slow." The Aussie (NYSEARCA:FXA) was -0.9% vs. the U.S. dollar at the time of writing.
FHA's worst-case losses projected at $115B over three decades. The Federal Housing Administration's projected losses over 30 years in a worst-case economic scenario could jump to as much as $115B, according a Fed.-style stress test that was carried out last year but not disclosed. That's well above an estimate of $65.4B for a "protracted" economic "slump," a scenario the FHA cited in its annual report. Under current conditions, the FHA said its losses would exceed its reserves by $13.5B over three decades.
Chinese services activity adds to concerns. China's HSBC services PMI edged up to 52.1 in May from 51.1 in April, although the composite index dropped to 50.9 from 51.1. Along with the mixed manufacturing data for May, the services reading has added to concerns about the softening in China's economy. Export, industrial output and retail sales data later this week are forecast to confirm the trend.
Alpha-Rich Stock Movers and Great Calls
1) Alaska Communications Systems Group (NASDAQ:ALSK) is +7.3% since hedge fund trader Harry Long published an article on Monday which identified the telecom as an excellent takeover target.
2) Amira Nature Foods (NYSE:ANFI) is -6.4% since Howie Man's bearish article was published last Friday. Man sees 80% potential downside for Amira, citing structural concerns, negative cash flow, and other risk factors.
Alpha-Rich Stocks To Watch
1) TiVo (NASDAQ:TIVO). Samuel Biller lays out TiVo's path to profitability in 2014. 60% upside before factoring in positive litigation optionality.
2) Fiesta Restaurant Group (NASDAQ:FRGI). With two attractive restaurant chains, FRGI is poised for great things. RIA Tim Travis says an equity infusion could fuel festive levels of growth.
3) Move, Inc. (NASDAQ:MOVE). A cheap stock in an expensive neighborhood: lower-valued MOVE has higher sales and earnings than online real estate peers. An essential operational adjustment could put it on investors' maps.
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In Asia, Japan -3.8% to 13015. Hong Kong -1% to 22069. China -0.1% to 2271. India +0.1% to 19568.
In Europe, at midday, London -1.6%. Paris -1.2%. Frankfurt -1.3%.
Futures at 7:00: Dow -0.4%. S&P -0.5%. Nasdaq -0.4%. Crude +0.3% to $93.58. Gold flat at $1396.60.
Today's economic calendar:
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 Productivity and Costs
10:00 Factory Orders
10:00 ISM Non-Manufacturing Index
10:30 EIA Petroleum Inventories
2:00 PM Fed's Beige Book
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