Draghi rush wears off as stocks lose steam. U.S. stock futures were higher at the time of writing and European shares mixed after soaring yesterday following Mario Draghi's pledge that the ECB would maintain its easy money policies for a while to come. Blithely casting aside the central bank's previous stance of never pre-committing to future decisions, Draghi said key interest rates will stay low "for an extended period of time." Pre-market U.S. time, the focus was on the nonfarm payroll report today.
Samsung shares slide following disappointing guidance. Samsung's (OTC:SSNLF) shares slid 3.8% in Seoul after the company projected Q2 earnings that were below consensus. Still, Samsung expects record quarterly operating profit of 9.3-9.7T won ($8.2-8.5B) vs 6.46T won last year on sales of 56-58T won vs 47.60T. In addition to the earnings miss, analysts are concerned about slowing handset sales and falling margins due to intense competition at the lower end of the market.
Jobs growth expected to have slowed in June. Economists estimate that nonfarm payrolls, which are due out this morning, rose 165,000 in June vs 175,000 in May and that the unemployment rate edged down to 7.5% from 7.6%. Given the impact of the data on whether the Fed will taper or not, it's difficult to predict what the market reaction will be, other than, in the words of Denis Gartman, "egregiously erratic."
Top Stock News
Diageo consolidates position in India with $521M deal. Diageo (NYSE:DEO) has gained control of United Spirits by acquiring a 14.98% stake in the Indian company from businessman Vijay Mallya for 31.3B rupees ($521M). While the purchase takes Diageo's stake to just 25.02%, voting and other governance arrangements with Mallya enable the U.K. firm to have control. The deal gives Diageo the leading position in the largest whiskey market in the world.
China probes drug firms over pricing. China's National Development & Reform Commission is investigating the costs and prices of 60 pharmaceutical companies, including those of major foreign firms Merck (NYSE:MRK), Novartis (NYSE:NVS), Baxter (NYSE:BAX) and GlaxoSmithKline (NYSE:GSK). The probe is the latest in a series of audits by the commission - which fixes an upper "ceiling" price for patented and generic drugs that the government pays for - and could herald price cuts.
New bank stress test results due today. The results of the first-ever "mid-cycle" stress tests of the major banks are due today. Unlike the Fed exams completed in March, these analyses are self-administered and based on scenarios of the banks' own choosing. Will any fail themselves? Worth watching are BB&T (NYSE:BBT) and Ally Financial - both of which failed the Fed's test.
Silver Lake wavers over Dell buyout - report. Silver Lake, Michael Dell's partner in his $24.4B bid to take Dell (NASDAQ:DELL) private, is reportedly wavering in its commitment amid the firm's deteriorating performance and the worsening debt markets. Meanwhile, several of Dell's largest investors have told the board to up the $13.65-a-share offer or risk shareholder rejection, or come up with a Plan B in case the proposal fails.
Murdoch may have known about cop payments. A recording of a speech that Rupert Murdoch gave to journalists at the U.K. Sun newspaper indicates that he knew about payments to police for news tips. "That's been going on a hundred years, absolutely," the News Corp. (NASDAQ:NWS) chairman told the reporters, many of whom had apparently been arrested for bribing members of the authorities. Last year, Murdoch told a parliamentary hearing that "paying police officers for information is wrong."
Prosecutors running out of time to charge SAC boss. SAC Capital chief Steven Cohen is set to escape criminal insider-trading charges relating to transactions in July 2008, as prosecutors don't believe they have enough evidence to convict him. Authorities had hoped to gather the evidence before the statute of limitations on any possible crime runs out later this month. Prosecutors could now focus on more recent trades to snag Cohen.
Unilever ups holding in Indian unit for €2.45B. Unilever (NYSE:UL) has increased its stake in Indian unit Hindustan Unilever to 67.28% from 52.48% for €2.45B after the latter's shareholders tendered 319.7M shares in response to Unilever's offer of 600 rupees ($9.90) a share. However, the Anglo-Dutch company missed its target of raising its holding to 75%. Upping its stake in Hindustan is part of Unilever's strategy of strengthening its position in emerging markets.
Top Economic & Other News
Portuguese PM hangs on in there. Portuguese Prime Minister Pedro Passos Coelho has kept his government intact for now, with Paulo Portas providing assurances that his Democratic & Social Center Party will stay in the coalition as the junior partner despite his resignation as foreign minister on Tuesday in protest against austerity. Portugal's 10-year bond yields were -31 bps at 6.99% at the time of writing after shooting through 8% earlier this week, although the PSI 20 stock index was -0.1%.
China to tackle over-capacity with plant closures. China's State Council plans to work with banks to bring about an orderly closing of factories in sectors that suffer from over-capacity. However, the government will continue to make sure that companies with competitive products will have access to credit. As HSBC economist Li Huiyong indicates, the move demonstrates China's resolve to focus on restructuring "rather than (on) providing more liquidity to support growth."
China to set up zone to test financial reform. China is establishing an experimental free-trade zone in Shanghai to test some of the government's financial reforms, including increasing the convertibility of the yuan and interest-rate liberalization. The proposal is a further step in China's plan to loosen its capital controls and facilitate the internationalization of the renminbi. HSBC economist Qu Hongbin says the government's intention is to roll the pilot out on a national scale.
Alpha-Rich Stock Movers and Great Calls
1) On Monday, Intangible Valuation pointed out that AmeriServ Financial (NASDAQ:ASRV) traded at a deep discount despite a bright future. The stock is +9.1% on the week. Read article »
2) Lakeland Industries (NASDAQ:LAKE) has continued to rally, and is now +41% since Whopper Investments said the company was poised to emerge from a difficult period on May 30. Read article »
Alpha-Rich Stocks To Watch
1) Eagle Bancorp (NASDAQ:EGBN) can fly higher even after the financial sector rally. In the early innings of an efficient growth story, the stock has up to a 30% upside. Read article »
2) Mallinckrodt Pharmaceuticals (NYSE:MNK), Covidien's (COV) pharmaceutical spin-off, is undervalued out of the gate. An aging population should boost its generics business to the tune of a 50% upside. Read article »
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In Asia, Japan +2.1% to 14310. Hong Kong +1.9% to 20855. China +0.1% to 2007. India +0.4%.
In Europe, at midday, London +0.6%. Paris -0.2%. Frankfurt -0.2%.
Futures at 7:00: Dow +0.9%. S&P +0.9%. Nasdaq +1%. Crude -0.15% to $101.09. Gold -1.5%% to $1233.05.
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