Glencore to take $5-7B hit on Xstrata assets. Glencore Xstrata (OTCPK:GLCNF) will reportedly write down $5-7B in assets that were part of Xstrata prior to its merger with Glencore. Nickel assets are expected to be the hardest hit, with prices for the metal sitting near four-year lows. The impairment would be the latest in a series of major writedowns in the mining industry as the leading players suffer from falling prices. Glencore Xstrata is set to detail the impairment in its half-yearly earnings tomorrow.
Almost $20B flees bond funds in August so far. Outflows from U.S. bond mutual funds and ETFs have risen to $19.7B in August from $14.8B in July, TrimTabs says, making this month's figure the fourth-highest on record. Since the beginning of June, $103.5B has left bond funds, representing 2.7% of total assets. The sell-off, which has been prompted by fears of Fed tapering, has sent Treasury yields upwards, with the 10-year hitting 2.871% today, the highest for just over two years.
SEC probes JPMorgan over China hiring. The list of probes into JPMorgan (NYSE:JPM) keeps on growing, with the SEC reportedly investigating the bank for possibly recruiting the children of influential Chinese officials in order to win business. In one instance, JPMorgan hired the son of the chairman of state-controlled China Everbright Group, after which, the U.S. bank won multiple deals from the Chinese financial conglomerate. The investigation adds to several probes of JPMorgan, including into the London Whale trading blunder and mortgage bonds.
Top Stock News
Eli Lilly readies case for blockbuster drug. Eli Lilly (NYSE:LLY) is due in court today as it seeks to protect a patent on its blockbuster lung cancer treatment Alimta, which generated 11% of the company's revenue in 2012. At issue is a patent covering the administration of Alimta in conjunction with folic acid and vitamin B12, a combination the company says may have saved the medicine after a "string of drug-related deaths." However, Teva (NASDAQ:TEVA) and others argue that the addition of the vitamins was no innovation at all.
U.S. auto factories may be maxing out. "There has never been a time in the U.S. industry that we've had this high a level of capacity utilization," says Oliver Wyman's Ron Harbour, with 40% of North American car factories producing vehicles for over 80 hours per week. Sales are less than 2M shy of the 2005 record of 17.5M, while the industry employs 647,600 workers vs 925,700 eight years ago. Some reckon the sector is hitting the upper limits of production and will need to expand plants or build new ones.
Statoil to sell $2.65B of assets to Austria's OMV. Statoil (NYSE:STO) has agreed to sell stakes in key offshore Norwegian fields to Austrian company OMV (OTC:OMVJF) for $2.65B. Under the deal, Statoil's holding in the Gullfaks field will drop to 51% from 70%, and in the Gudrun field to 51% from 75%. The Scandinavian company is also exiting two other fields near Scotland. Statoil expects to recognize a gain of $1.3-1.5B from the deal, which will allow it to reallocate $7B of capital expenditure.
Workers at Chinese Cooper JV threaten $2.5B buyout. Chinese workers at a joint venture involving Cooper Tire (NYSE:CTB) and Chengshan Group are trying to scupper the $2.5B acquisition of Cooper by India's Apollo Tyres. The workers went on strike soon after the deal was announced in June, while Chengshan has asked a local court to dissolve the JV. Their complaint is that they weren't properly consulted over the deal, while they're also concerned about a clash of corporate cultures.
Atlas Copco to buy Edwards for up to $1.6B. Atlas Copco (OTCPK:ATLKY) has agreed to acquire British vacuum pumps firm Edwards Group (NASDAQ:EVAC) for up to $1.6B, including $400M of debt. Atlas Copco will pay an initial $9.25 a share and as much as $1.25 extra, depending on Edwards' 2013 earnings. In comparison, the latter's stock closed at $8.45 on Friday. Edwards shareholders representing around 84% of stock have agreed to vote in favor of the deal.
How Ackman will be allowed to sell JCP holding. Pershing Square, which owns around 39M shares, or 17.7%, of J.C. Penney (NYSE:JCP), will be allowed to sell its stake in four large blocks of at least 5M shares. While it appears the sales will be orderly and over time, when combined with Vornado's (NYSE:VNO) apparent intention to sell what's left of its stake (6.1%), the stock could have a bit of an overhang.
Top Economic & Other News
Japanese trade surges on weak yen. Japan's exports climbed 12.2% in July, the fastest since December 2010, while imports jumped 19.6% and the trade deficit hit ¥1.02T, the third-largest ever. The weak yen was a major factor, helping to make sales abroad cheaper but imports more expensive. "The details are encouraging because you can see that exports to Japan's main markets are bouncing back," says economist Hiroaki Muto. Sales to the U.S. increased 18.4%, to China 9.5% and to the EU 16.6%.
Berlusconi threatens Italy's government. Silvio Berlusconi has threatened to bring down Italy's government, of which his PDL party is a member, if he is expelled from the country's Senate following his conviction for fraud. The PDL has also said that the coalition's survival depends on the repeal of an unpopular property tax. However, Prime Minister Enrico Letta has said he won't support any measure that would increase Italy's massive debt. Shares were -1.2% at the time of writing.
U.S. energy exports are fastest growing. The value of U.S. petroleum and coal exports has more than doubled to $110.2B in the year to June 2013 from $51.5B three years earlier, the FT calculates, making the category the fastest growing for sales abroad. Oil and gas exports showed the second-fastest expansion with an increase of 68.3%, with both categories further demonstrating how the country's energy boom is boosting the economy. Critics reckon energy exports could be even higher if restrictions were reduced.
Deadline nears for opponents of Detroit's Chapter 9 filing. Opponents of Detroit's bankruptcy have until 11:59 p.m. ET tonight to file their objections. The city's retirement systems for municipal, police and fire workers have already said they will submit their arguments about why Detroit is not eligible for Chapter 9 protection, while other creditors who could do so include bondholders, bond insurers and vendors. Until now, just a handful of former city employees have submitted their dissent. A hearing on Detroit's eligibility is scheduled for October 23.
Alpha-Rich Stock Movers and Great Calls
1) Last Wednesday, Harry Long explained why Food Technology (NASDAQ:VIFL) was a strong investment on both a stand-alone basis and as an acquisition target. The shares are +18.7% since. Read article »
2) On July 17, Caiman Valores pointed out several tailwinds that could drive Canacol Energy's (CAAEF.PK) stock price up to 60% higher. The stock is +25.2% in the month since. Read article »
Alpha-Rich Stocks To Watch
1) Proto Labs (NYSE:PRLB) is priced for perfection despite several warning signs regarding its growth story. Fund manager Keubiko sees significant downside. Read article »
2) Bankers Petroleum (OTCPK:BNKJF) owns the largest onshore oilfield in Europe, but is undervalued in several key metrics. A new CEO could help lead the company and its stock higher. Read article »
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In Asia, Japan +0.8% to 13758. Hong Kong -0.2% to 22464. China +0.8% to 2086. India -1.8% to 18266.
In Europe, at midday, London -0.2%. Paris -0.5%. Frankfurt -0.2%.
Futures at 6:20: Dow flat. S&P +0.05%. Nasdaq +0.15%. Crude -0.1% to $107.34. Gold +0.4% to $1376.70.
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