PBOC moves to soothe markets over liquidity. Chinese shares (NYSEARCA:FXI) staged a major recovery from an earlier pounding to close a mere -0.2% following speculation that the People's Bank of China would raise the white flag to China's "feral hogs" over its tough liquidity stance, which had caused short-term lending rates to go haywire. While the rumors proved to be a little enthusiastic, PBOC official Ling Tao did say the bank will guide rates to a "reasonable range" and be flexible in managing liquidity.
Markets recover some poise after global rout. It's not only Chinese shares that have been soothed by a central bank today, U.S. stock futures and European shares have also risen, while bond markets have been fairly tame. The comments from the PBOC's Ling Tao added to dovish remarks from Fed officials yesterday, while the ECB's Benoit Coeure joined the chorus by saying that the bank's exit from its accommodative policy is still far off.
Microsoft, Oracle announce software partnership. Oracle (NYSE:ORCL) and Microsoft (NASDAQ:MSFT) have made their partnership official, with Oracle's database software to not only "receive full support" from the company when running on Microsoft's Windows Azure cloud app/infrastructure platform, but also when used with the latter's Hyper-V virtualization platform. The deal could intensify the competitive pressure on VMware (NYSE:VMW) and IBM (NYSE:IBM) offerings.
Top Stock News
EP Energy eyes IPO just 15 months after buyout. EP Energy, the oil and gas company bought last year by a private-equity consortium led by Apollo (NYSE:APO) for $7.15B, has reportedly asked several investment banks to draw up plans for a possible IPO as soon as this year. EP Energy, originally El Paso Corp.'s exploration and production arm, could be valued at over $8B in the listing.
Generic drugs industry wins major victory in Supreme Court. The Supreme Court yesterday ruled that patients can't sue firms over copycat drugs that are allegedly unsafe in a verdict that represents a major victory for generic pharmaceutical companies. The court quashed a New Hampshire jury's decision to award $21M to a woman who developed a debilitating skin disease after she took a generic version of the pain treatment sulindac made by a unit of India's Sun Pharmaceutical.
Tapes show how bank execs brought Ireland to its knees. Tape recordings show how executives at doomed Anglo Irish Bank (AIB) misled Ireland's government about how much was needed to save the firm during the financial crisis in 2008. AIB asked for €7B even though the bank knew it needed much more, with the idea being that once the government had "got skin in the game" it would have to keep providing more cash. It was bank rescues such as this one that brought Ireland to its knees.
CFTC to sue Jon Corzine over MF collapse. The Commodity Futures Trading Commission is set to sue Jon Corzine over the collapse of MF Global, but while the CFTC is unlikely to offer a settlement, it probably won't bring criminal charges. The agency won't directly link Corzine with the disappearance of over $1B in customer money and will instead try to blame him for breaches that took place lower down in the firm.
Jefferies confirms to help fund Icahn's Dell bid. Jefferies (JEF) has confirmed speculation it will provide financing for Carl Icahn's $14-a-share offer for Dell (NASDAQ:DELL), with the bank launching a $5.2B covenant-lite loan package for the purpose. Icahn will also use $7.5B of cash on Dell's balance sheet and $2.9B from the sale of receivables to finance his proposed takeover.
Ousted Men's Wearhouse CEO plots return. Former Men's Wearhouse (MW) Chairman George Zimmer is reportedly considering a comeback. Zimmer, who was forced out earlier in the month and resigned from the board yesterday, might entertain ideas about attempting a buyout or teaming up with activist shareholders to launch a board challenge.
Top Economic & Other News
Obama to lay out climate strategy. President Obama is due to provide details of his ideas for dealing with climate change in a speech today, which may include measures to limit greenhouse gas emissions from existing power plants. It is unclear if Obama will make any reference to TransCanada's (NYSE:TRP) proposed Keystone pipeline.
Retail investors lead stampede out of bonds. The headlong rush out of bonds over the past week has been particularly visible among retail investors, who have offloaded a record $48B worth of shares in bond mutual funds so far this month, although institutional investors have also been stepping bank. Greylock Capital CEO Hans Humes reckons the volatility is caused more by fear than rational analysis, although Nomura strategist George Goncalves says it's a reflection of leverage.
G20 to study Libor reform. The G20's Financial Stability Board (FSB) will set up a task force to look at reforming Libor, incoming Bank of England Governor Mark Carney said today after an FSB meeting. The committee will report back next year over whether the benchmark should be changed and in what timeframe. The creation of the task force comes after banks were fined for Libor manipulation.
China's Beige Book highlights lending disparity. The proportion of Chinese banks that increased lending to businesses has risen to 45% in Q2 from 35% in Q1, China's Beige Book shows, but at the same time, the number of companies applying for loans has fallen to 38% from 51%. The disparity helps explain last week's spike in short-term borrowing costs and indicates that "credit appears to be concentrated on a few borrowers."
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In Asia, Japan -0.7% to 12969. Hong Kong +0.2% to 19856. China -0.2% to 1960. India +0.3% to 18603.
In Europe, at midday, London +1%. Paris +1.2%. Frankfurt +1.6%.
Futures at 6:10: Dow +0.5%. S&P +0.6%. Nasdaq +0.6%. Crude +0.7% to $95.85. Gold +0.5% to $1283.20.
Today's economic calendar:
7:45 ICSC Retail Store Sales
8:30 Durable Goods
8:55 Redbook Chain Store Sales
9:00 FHFA House Price Index
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:00 Richmond Fed Mfg.
10:00 New Home Sales
1:00 PM Results of $35B, 2-Year Note Auction
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