- FDIC to tap banks for $36B. Sources say the FDIC will propose U.S. banks prepay three years of regular assessments to top off its shrunken deposit insurance fund at a meeting this morning to discuss proposals (see calendar below). The move would give the FDIC another $36B (3 times $12B), while banks would not be required to report the expense until the fee was actually due. Bankers have complained upfront fees could weaken banks just as their balance sheets are starting to recover. After the failure of 95 lenders, the fund now stands at about $10.4B. Some worry the FDIC's newfound creativity in fundraising raises red flags about the agency's viability.
- World Bank pres. trash talks dollar. The dollar's days as the unchallenged reserve currency are numbered as the euro and the Chinese renminbi assume bigger roles, World Bank president Robert Zoellick said Monday. Zoellick's speech was unusually provocative, arguing the U.S. and its cronies could no longer dominate the world economy. He also criticized President Obama’s plan to put the Fed in charge of monitoring and reducing systemic risk, arguing the Treasury, which reports to Congress, should be leading the charge: "It will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority." (read Zoellick's full speech)
- CNOOC eyes large Nigeria stake. Sources say Chinese state-owned oil company CNOOC (CEO) is in talks with Nigeria to buy a large stake in some of Africa's richest oil blocks, at a possible value of $30B. A successful buy would put CNOOC in competition with western oil majors with a strong presence in the area (TOT, RDS.A, CVX, XOM). Industry sources say it's no secret China has an eye on Nigeria, but that the size reported is surprising.
- BofA sued for billions over Merrill. Five pension funds are leading a class-action suit seeking billions of dollars in damages from Bank of America (BAC) over the Merrill Lynch takeover, Ohio AG Richard Cordray said after filing a complaint in Manhattan federal court. The suit also goes personally after BofA CEO Kenneth Lewis, former Merrill chief John Thain, other executives and the board.
- iPhone trio. Vodafone (VOD) announced it will sell Apple's (AAPL) iPhone in the U.K. and Ireland starting early 2010. The announcement comes one day after France Télécom's (FTE) Orange got the go-ahead to sell the iPhone in the U.K., ending O2's (TEF) two-year exclusive contract.
- Flu fever. Amid rising concern about the threat of flu pandemics, three big drugmakers announced deals that give them rights to new flu vaccines, increasing their exposure to one of pharma's brightest, but riskiest, segments. The largest deal was Abbott Laboratories' (ABT) €4.5B acquisition of Belgian conglomerate Solvay's (OTC:SVYSY) drug unit, which includes a vaccine-making business. Johnson & Johnson (JNJ) paid $441M for an 18% stake in Crucell NV (CRXL) in order to jointly develop vaccines, while Merck (MRK) said it obtained marketing rights to CSL's seasonal flu vaccine for an undisclosed sum. Investors responded warmly to Abbott's move, with shares up 2.6% Monday.
- Heads roll at Sequenom. Shares of Sequenom (SQNM) plunged 45% in after-hours trading after the company fired its CEO, Harry Stylli, and senior VP of R&D, Elizabeth Dragon, and also said it secured the resignation of CFO Paul Hawran, following its internal investigation into the mishandling of test data of its prenatal Down syndrome treatment. The company "failed to put in place adequate protocols and controls for the conduct of studies" Chairman Harry Hixson said. "This is a significant setback and the company will face challenges." Besides throwing the company into disarray, the abrupt upheaval is likely to push testing back to 2011.
- Warner Music, YouTube coming to terms. Sources say Warner Music Group (WMG) and YouTube (GOOG) are close to settling their licensing dispute, a deal that would return Warner's music videos to YouTube after a nine-month hiatus. The proposal would give Warner the right to sell ads that run next to its videos and receive the bulk of the revenue, a formula Google has used to resolve a number of recent disputes with content owners looking for greater monetization.
- UBS wants out of gov't scheme. UBS's (UBS) U.S. wealth management unit, Paine Webber, isn't a core part of the bank's operations, but UBS won't sell it at fire-sale prices, CEO Oswald Gruebel says. "We've had a lot of inquiries from potential buyers but it wouldn't make sense to sell at current valuations." UBS bought Paine Webber in 2000 for about $10B. Gruebel also told the FT he's looking to sever ties with the Swiss government by buying its way out of a 'bad bank' scheme, an about-face from a statement on Aug. 27, and that he hopes to return to health within a year. Separately, UBS said Fiat CEO Sergio Marchionne and Shell CEO Peter Voser will be leaving its board.
- Opel deal nowhere near done. GM's planned sale of Opel to a group led by Magna International (MGA) faces fresh uncertainty after Spain urged European regulators to investigate the agreement, and Germany's Free Democrats, consistent critics of the deal, are poised to clinch a powerful position in Germany's new government. The deal has run into steady fire from Magna customers and European governments alike. "Overall, this deal is not as near to completion as many people are trying to present," one auto analyst says.
- Midwest activity declines. The Chicago Fed's National Activity Index fell to -0.90 in August, from -0.56 in July. Three of the four categories of indicators made negative contributions, but production and income were positive for the second straight month. Meanwhile the Dallas Fed's factory outlook showed the first signs of bottoming, with a near zero reading. Shipments and new orders turned positive, while other components improved but remained negative.
Hong Kong led Asia higher Tuesday, but Europe stocks are under some pressure and stock futures are showing modest losses.
- Asia: Nikkei +0.91% to 10,100. Hang Seng +20.6% to 21,013. Shanghai -0.33% to 2,755. BSE +0.96% to 16,853.
- Europe at midday: London -0.4%. Paris -0.5%. Frankfurt -0.6%.
- Futures: Dow -0.1% to 9716. S&P -0.2% to 1057. Nasdaq -0.4%. Crude -0.7% to $66.36. Gold -0.3% to $990.90. Treasurys are flat. Euro -0.3% vs. dollar. Yen +0.6%. Pound +0.6%.
Tuesday's Economic Calendar
- Tuesday's economic calendar:
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
9:30 SEC panel on short selling, Day 1
9:35 Business Roundtable's Q3 CEO Survey
10:00 FDIC Board meeting to discuss restoration plan for Deposit Insurance Fund
10:00 Dallas Fed's Fisher reports on the economy
10:00 Consumer Confidence
10:00 State Street Investor Confidence
5:00 PM ABC Consumer Confidence Index
7:00 PM Philly Fed's Plosser speaks on the Fed's role in the economy
- Notable earnings before Tuesday's open: WAG
- Notable earnings after Tuesday's close: DRI, JBL, MDRX, MU, NKE, WOR, ZZ
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