Wall Street Breakfast: Must-Know News

• Warner Chilcott to buy P&G drug business. Warner Chilcott (WCRX) reportedly plans to buy Procter & Gamble's (PG) prescription-drug business for around $3.1B in a deal that could be announced as soon as today. Six banks, including JPMorgan Chase (JPM), Bank of America (BAC), Credit Suisse (CS), Citigroup (C), Barclays (BCS) and Morgan Stanley (MS), will provide $4B in financing in a further sign that the market for loans on leveraged deals may be recovering. Warner Chilcott will use around $1B to refinance existing debt. PG +0.8% premarket (7:00 ET).
• Chinalco, Rio in talks. Rio Tinto (RTP) said it's in early-stage talks with Chinalco (ACH) over a possible bauxite and alumina deal, though Chinalco wouldn't confirm the talks and said only that it's open to discussions on the matter. Negotiations between the two companies, which have adjacent bauxite deposits in Australia, would be a significant step in reducing recent tensions between Rio and China. Premarket: RTP +3.3%, ACH +1.6% (7:00 ET).
• Roubini: Double-dip recession risk is rising. In an op-ed in the Financial Times, economist Nouriel Roubini warned there is a growing risk of a double-dip recession. Lawmakers are "damned if they do and damned if they don't," since unwinding stimulus policies too soon could undermine a recovery but running large deficits could push up borrowing rates and cut off economic growth as well. The economy also runs the risk of a contractionary shock if speculation drives oil back over $100, and energy, food and oil prices are rising faster than fundamentals warrant.
• Foreign firms circle failing U.S. banks. As expected, BBVA, Spain's second-largest bank, assumed the deposits of Guaranty Bank (GFG) on Friday, becoming the first foreign company to buy a failed U.S. bank in the current crisis. Other foreign banks, including Toronto-Dominion Bank (TD) and BNP Paribas (BNPQY.PK), have expressed an interest in picking up failed U.S. banks as well. Though the FDIC may be uncomfortable with handing over a failed bank to a firm with no regulatory history in the U.S., its primary consideration at the moment is limiting the cost of bank failures to its dwindling insurance fund (see below). In the case of BBVA and Guaranty, a loss-sharing agreement on $11B in assets will cost the FDIC around $3B.
• Many, many more bank failures ahead. Eighty-one banks have failed so far this year, but analyst Richard Bove warned another 150-200 will fail in the current banking crisis, placing a serious strain on the FDIC's insurance fund. The failures will also put pressure on the banking industry, which could see as much as 25% of its 2010 pretax income go towards FDIC fees.
• Hummer gears up for new owner. General Motors will reportedly sign off on the sale of its Hummer unit this week to Sichuan Tengzhong Heavy Industrial Machinery Co. Executives of the Chinese machinery maker are expected to arrive in Detroit this week to complete negotiations, with final approval of the deal subject to U.S. and Chinese authorities. Separately, GM failed to choose a buyer for its Opel unit on Friday, creating a delay that has angered many German leaders and raising the possibility of an Opel insolvency or a GM push to retain ownership of the unit. Chancellor Angela Merkel said a decision is 'urgently' needed and reiterated her support for Magna International's (MGA) bid.
• Time for a broad stock market review. Sen. Ted Kaufman is expected to call for the SEC to review all forms of the current stock-market structure, arguing regulatory decisions over the last decade have made the stock market too fragmented and have created the possibility for manipulation and conflicts of interest. In a letter to be sent to the SEC's Mary Schapiro today, Kaufman will request the SEC "undertake a comprehensive, independent 'zero-based regulatory review' of a broad range of market-structure issues, analyzing current market structure from the ground up before piecemeal changes built on the current structure increase the potential for execution unfairness."
• AT&T denies role in blocking Google app. AT&T (T) told regulators it played 'no role' in Apple's (AAPL) decision to block the Google Voice (GOOG) application for the iPhone. For its part, Apple said it hasn't blocked the application but rather is studying the application further before approving it, a claim that some sources call a 'total lie' meant to save face before Apple backtracks on its earlier rejection. The Federal Communications Commission is looking into why the Google app hasn't been approved, though it has not yet opened a formal investigation. (Read Apple's response to the FCC and AT&T's response to the FCC)
• Nokia declares smartphone war. Nokia (NOK) has promised to more effectively fight back against Apple (AAPL) following criticism that it has failed to come up with a worthy competitor to the iPhone. After losing market share to Apple and Research in Motion (RIMM), Nokia plans to release a new device this week featuring a Linux operating system as part of its comeback strategy. It also aims to transform itself from a mobile manufacturer into a supplier of handset services, and is expected to unveil plans to sell a netbook. NOK +1.1% premarket (7:00 ET).
• China steps up as commercial property player. China outpaced the U.S. and U.K. combined in H1 commercial property sales with a total of $31.2B in transactions. In contrast, U.S. sales were just $16.2B and the U.K.'s were $13.7B. Though analysts noted this pace of growth may not be sustainable, "there’s no question that China will be a more significant player on the world stage for commercial property transactions versus other Western countries."
• HSBC joins ETF fray. HSBC (HBC) is launching its first European ETF today, which will track London's FTSE 100 index. The move is part of an ambitious plan to become a major player in the $183B European ETF market, especially as demand for passive investment vehicles rises in a backlash against the high costs and poor performances of some active funds. Other banks are planning similar launches.

Today's Markets

Asian markets showed strength this morning and European markets are trading at ten-month highs. U.S. futures are up slightly but have yet to see a major bump from gains in Asia and Europe.

• In Asia, Nikkei +3.35% to 10,581. Hang Seng +1.7% to 20,536. Shanghai +1.1% to 2,993. BSE +2.55% to 15,629.
• In Europe at midday, London +0.65%. Paris +0.6%. Frankfurt +0.65%.
• Futures: Dow +0.3%. S&P +0.2%. Nasdaq +0.3%. Crude -0.1% to $73.80. Gold flat.

Monday's Economic Calendar

• 12:00 PM Chicago Fed's Manufacturing Index
• Notable earnings on Monday: none.

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[markfl:]

"Eighty-one banks have failed so far this year, but analyst Richard Bove warned another 150-200 will fail in the current banking crisis, placing a serious strain on the FDIC's insurance fund." This is the second analyst in the last few days that forecasted this many bank failures. Meredith Whitney said last week on Bloomberg that "[t]here will be over 300 bank closures." www.bloomberg.com/apps...#

This is supposed to push bank FDIC fees to nearly 25% of revenue.

Aug 24 07:37 AM

[fishluvrain:]

I wonder how the Hummer deal will end up. There is a possibility of a disconnect between new management style and expectation and the reality of the American worker and his/her expectation. The cultures are much different.

Aug 24 07:39 AM

[doubleguns:]

"damned if they do and damned if they don't,"

Then dont!!

Aug 24 07:40 AM

[robert.b.fe...:]

Rio Tinto and Chinalco about to reach a deal on Australian bauxite. Could this have anything to do with jailed Rio execs in china and the threat of worse to come. Watch your back when dealing with Chicoms.

Aug 24 08:48 AM

[stocknerd:]

Some ust love the thought of another bottoming of the stock market and an economic crash. Makes their mouths water. Won't happen.
Sorry doom and gloomers.

Aug 24 08:50 AM

[ebworthen:]

The Chinese owners will say "work hard and do good work or no job" and mean it. More than likely they will move it to the south, or the southwest so it's closer to the Pacific ports.

A Chinese company building the Hummer?

A Chinese company bought IBM? (Lenovo).

We've lost the war already...


On Aug 24 07:39 AM fishluvrain wrote:

> I wonder how the Hummer deal will end up. There is a possibility
> of a disconnect between new management style and expectation and
> the reality of the American worker and his/her expectation. The cultures
> are much different.

Aug 24 09:19 AM

[doubleguns:]

USA is broke. Reality is hard to deny.


On Aug 24 08:50 AM stocknerd wrote:

> Some ust love the thought of another bottoming of the stock market
> and an economic crash. Makes their mouths water. Won't happen.<br/>Sorry
> doom and gloomers.

Aug 24 09:50 AM

[TeresaE:]

The American union machine will shock the Chinese, who expect corruption from the government, not the "representative' of the workers.

China will not move the Hummer production to anywhere in America, especially if Cap & Trade and Health Care passes.

They will just move it home where the future Hummer drivers already reside.


On Aug 24 09:19 AM ebworthen wrote:

> The Chinese owners will say "work hard and do good work or no job"
> and mean it. More than likely they will move it to the south, or
> the southwest so it's closer to the Pacific ports.
>
> A Chinese company building the Hummer?
>
> A Chinese company bought IBM? (Lenovo).
>
> We've lost the war already...

Aug 24 10:19 AM

[TeresaE:]

I don't "love the thought"

I fear the reality.

And for over 3 years I listened to people like you telling me that I was full of crap when I said the underlying cause of the Michigan "one state" recession was spreading nationwide. I was nuts, they were making money. Funny how the real world works.

But, what do I know. I just have forgone 2 years of paychecks and amassed tens of thousands in personal debt to save a company (and my workers paychecks) in a system that rewards bad behavior or "new" by slaughtering "old" business that has paid the bulk of the governments paychecks for decades.

So, I know nothing and my nearly closed customers know nothing either. What is new? You know EVERYTHING, even though you didn't see problems last year until they smacked you in the head.

Enjoy them green shoots you think you see growing, hope you can eat them when the inevitable happens.


On Aug 24 08:50 AM stocknerd wrote:

> Some ust love the thought of another bottoming of the stock market
> and an economic crash. Makes their mouths water. Won't happen.<br/>Sorry
> doom and gloomers.

Aug 24 10:24 AM

[notsosmart:]

thats what this country has become.the liars,cheats,crooks & scoundrels get bailed out.folks walk away from their underwater homes that they should not have been in.we used to be called a "paper tiger" by our enemies & now even the paper is phony AAA rated worthless crap.the honest folks who played by the rules got screwed.we are no longer a melting pot but a fruit bowl.as time goes on & the true situation in the usa comes out our immigration problem will be solved as less & less people will come.there wont be jobs.no real good leadership & dumb-dumber citizens.you think im wrong? i hope so.

Aug 24 11:27 AM

[bbowen7:]

I am old enough to remember when US companies bought foreign companies. How quaint.

Aug 24 01:28 PM