Wall Street Breakfast: Must-Know News

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by: Wall Street Breakfast
Wall Street Breakfast
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Top Stories
Eurozone unemployment drops for first time in two years. The number of people without a job in the eurozone fell by 24,000 on month in June, the first drop in two years and another sign that the bloc may just be experiencing some green shoots of recovery. However, the decline was too small to affect the unemployment rate, which stayed at a record 12.1% for the fourth month in a row. Meanwhile, annual inflation held steady at 1.6% in July.

Economy expected to have slowed in Q2. U.S. Q2 GDP data is due out this morning, with economists estimating that growth slowed to an annual rate of 1% from 1.8% in Q1, hurt by government austerity and weak global demand. Economists don't expect the reading to influence the FOMC as it makes its latest monetary policy decision today, because the print "tends to be backward looking." Changes to the way GDP is calculated, such as counting R&D as an investment, could boost the numbers.

Apple CEO Tim Cook meets China Mobile Chairman. Apple (NASDAQ:AAPL) CEO Tim Cook met China Mobile (NYSE:CHL) Chairman Xi Guohua in Beijing yesterday to discuss cooperation, the Chinese carrier has said, although it didn't elaborate. China Mobile is the only operator in the country that doesn't have a deal with Apple to sell iPhones and iPads. The issue may have become more urgent for the U.S. company, whose sales in Greater China slumped 43% on quarter in FQ3. Shares were +0.3% pre-market.

Top Stock News
Stocks drift ahead of major day in the U.S. Global equities have been drifting, although tilting towards the positive at the time of writing, ahead of a big day in the U.S. that includes Q2 GDP, the FOMC decision on monetary policy, and the ADP jobs report. Japanese shares dropped 1.4% on persistent yen strength.

Schneider to buy Invensys for £3.4B. France's Schneider Electric (OTCPK:SBGSF) has agreed to acquire U.K.-based Invensys (OTC:IVNSF) for £3.4B in cash and stock. Schneider is offering 502 pence a share, or a 14% premium to Invensys' closing price of 440 pence on July 11, before the negotiations between the firms became public. The deal will provide Schneider with software and control systems used by chemicals makers, oil refineries and mining companies.

AB InBev organic profit, sales top forecasts. Anheuser-Busch InBev's (NYSE:BUD) Q2 organic EBITDA grew 5.8% on a like-for-like basis to $3.895B, topping analyst estimates of $3.78B, while revenues came in at $10.59B vs a reference base of $10.35B last year and consensus of $10.2B. EBITDA grew despite volume falling, with price rises and new product mixes helping to offset the trend. Shares were +7.3% premarket.

Diageo annual pretax profit flat at £3.12B. Diageo's (NYSE:DEO) FY 2013 pretax profit came in flat at £3.12B even as net sales grew 6% to £11.43B. Organic sales increased 5% vs consensus of +4.7% and the group's medium-term target of +6%. The revenue growth reflects strength in Diageo's U.S. spirits business and in emerging markets despite weakness in some geographies. Price increases in each region, a positive mix in the Americas and cost controls "drove significant expansion in operating margin." Shares were +1.05% premarket.

Honda investments hurt profits. Honda's (NYSE:HMC) FQ1 net profit dropped 7% to ¥122.5B ($1.2B) and missed consensus despite a 16% jump in revenue to ¥2.83T, which topped forecasts. Increased investments, such as in expanding output and in further advancing into emerging markets, offset U.S. sales growth amid steady demand for the Accord sedan and the beneficial effect of the weaker yen.

Pfizer to pay $491M to settle marketing charges. Pfizer (NYSE:PFE) has agreed to pay $491M to settle criminal and civil charges over the illegal marketing of kidney-transplant drug Rapamune. Pfizer has pleaded guilty in the case, which centers on the practices of Wyeth Pharmaceuticals, a company that Pfizer bought in 2009 for $68B. While Rapamune was approved for use in kidney transplants, Wyeth promoted the drug for other organ transplants as well.

Blackstone and Deutsche Bank to create rent-backed bond. Blackstone (NYSE:BX) and Deutsche Bank (NYSE:DB) are reportedly in "detailed discussions" to create the first ever bond backed by home-rental payments. The initial product would bundle monthly rent checks on 1,500-1,700 homes owned by Blackstone, with the size of the deal to be $240M-$275M. Needless to say, many are wary about the speed with which Wall Street firms have been snapping up thousands of homes in what has traditionally been a mom-and-pop industry.

Accenture in talks to buy consultant Booz & Co. Consulting firm Accenture (NYSE:ACN) is reportedly in negotiations to acquire smaller peer Booz & Co., which generated estimated revenues of $1.4B in 2012. The deal would add to a number of other acquisitions that Accenture has made this year. Booz Allen Hamilton's (NYSE:BAH) shares spiked on the report yesterday until traders realized that it's not connected with Booz & Co. anymore, at which point the stock returned back to earth.

Alcatel-Lucent/Qualcomm deal reportedly worth €100M. Qualcomm's (NASDAQ:QCOM) investment in Alcatel-Lucent (ALU) is reportedly worth €100M plus, and is part of a partnership in which the companies will develop products for the burgeoning small-cell base-station market, where Alcatel has already struck deals with major carriers. Any resulting hardware will almost certainly use Qualcomm's small-cell baseband processors, with Lazard estimating that the firm's EPS could be boosted by $0.08-$0.29 by FY14 from the royalties.

Top Economic & Other News
German retail sales unexpectedly drop. German retail sales fell 1.5% on month in June vs a rise of 0.7% in May and consensus for an increase of 0.2%, with the unexpected decline weighing on market sentiment. Meanwhile, the unemployment rate held steady at 6.8% in July as the number of people out of work dropped by 7,000 to around 2.93M. Q2 "is dominated by catch-up effects after a weak start into the year," says economist Christian Lips, but adds that the economy will expand in 2013.

Obama rehashes corporate tax proposals. President Barack Obama yesterday revived a plan to cut corporate taxes to 28% from 35% and to overhaul the tax code, which would generate one-time funds that would be used to finance infrastructure, education, and promoting manufacturing. To limit tax evasion and the use of havens, Obama proposed a minimum tax on foreign earnings. With Republicans unimpressed, Obama's plans are unlikely to make too much headway in the House.

Alpha-Rich Stock Movers and Great Calls
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Alpha-Rich Stocks To Watch
1) Town Sports International Holdings (NASDAQ:CLUB). Town Sports has built up a strong moat and trades cheaply compared to free cash flow. As the market recognizes its true earning muscle, the shares could bulk up 45%. Read article »
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Today's Markets:
In Asia, Japan -1.4% to 13668. Hong Kong -0.3% to 21884. China +0.2% to 1994. India +0.1% to 19,361.
In Europe, at midday, London +0.6%. Paris flat. Frankfurt flat.
Futures at 6:15: Dow flat. S&P +0.5%. Nasdaq flat. Crude +0.2% to $103.33. Gold +0.5% to $1332.

Today's economic calendar:
7:00 MBA Mortgage Applications
8:15 ADP Jobs Report
8:30 GDP Q2
8:30 Employment Cost Index
9:00 Treasury Refunding Quarterly Announcement
9:45 Chicago PMI
10:30 EIA Petroleum Inventories
2:15 PM FOMC Announcement
3:00 PM USDA Ag. Prices

Notable earnings before today's open: AB, ACCO, ADT, AGCO, AGN, ALR, AMED, AMT, AUO, BAH, BKW, CEVA, CMCSA, CNH, CYNO, DLPH, EGN, ENR, EXC, GAS, GIB, GOV , GRMN, H, HCBK, HERO, HES, HPY, HSP, HUM, HUN, INGR, IVZ, JNY, LPLA, LVLT, MA, MTOR, NGD, NI, PCG, PSX, SO, SODA, SPW, TASR, TFX, TLM, TSRA, VG, VNDA, WEC

Notable earnings after today's close: AFFX, AHT, ALL, ARI, ATML, ATW, AUY, AXLL, AXTI, BALT, BGC, BJRI, BLMN, BRKR, CAVM, CBL, CBS, CBT, CJES, CNQR, CNW, CRAY, CRL, CTRP, CWT, DDR, DOX, DRE, DWA, DX, ENTR, ERII, ESS, FOE, FORM, GHDX, GNK, INT, IPI, ITRI, KEYW, KGC, LNC, LNDC, LOCK, LPSN, LRCX, MANT, MAR, MBLX, MCHP, MDU, MET, MMLP, MUR, NEWP, NOW, NXPI, OHI, OTEX, PCYC, PHH, PL, PSE, QEP, QUIK, REG, RGR, RKUS, ROVI, SAM, SFLY, SGEN, SLCA, SPWR, STMP, STR, SU, THOR, TRLA, TRN, UNTD, VNR, VVC, WEC, WFM, WMB, WPZ, WRI, YELP

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