Wall Street Breakfast: Must-Know News

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
Markets unmoved as U.S. government shutdown begins. Global shares were mostly higher at the time of writing despite the U.S. government beginning its first partial shutdown in 17 years. The closure comes after a day of back-and-forth between the House and the Senate yesterday that resulted in Congress failing to pass a budget to fund the federal government. "As long as the hope for just a temporary shutdown exists, it will not be a strong burden for equities," says UniCredit's Christian Stocker.

Japan confirms hike in sales tax to 8%, stimulus package. As widely expected, Japan will go through with a plan to raise sales tax in April to 8% from 5%, a move that is set to raise ¥8T. To offset the economic impact of the hike, Prime Minister Shinzo Abe has unveiled a ¥5T ($51B) stimulus package that will include spending on public works and tax breaks to encourage companies to boost capital expenditures and wages. Still, the VAT rise is Japan's first serious attempt in 15 years to rein in its massive public debt.

Health-insurance exchanges set to open. The government shutdown notwithstanding, health-insurance exchanges are due to open today for people to buy plans in one of the most important provisions of Obamacare. Health insurers that intend to sell coverage on some exchanges include UnitedHealth (NYSE:UNH), Aetna (NYSE:AET), WellPoint (WLP) and Humana (NYSE:HUM). Molina Healthcare (NYSE:MOH) is also set to play a role.

Top Stock News
Wells Fargo to pay Freddie Mac $780M in loan settlement. Wells Fargo (NYSE:WFC) has agreed to an $869M settlement with Freddie Mac (OTCQB:FMCC) over repurchase liabilities related to loans that the bank sold to Freddie Mac before 2009. After adjusting for credits for prior repurchases, Wells' bill will total $780M, which it will pay in one lump sum.

Google close to EU deal over search results. Google (NASDAQ:GOOG) is nearing a settlement with EU regulators over an antitrust investigation into the company's search-engine practices after it made further concessions. Competition Commissioner Joaquin Almunia said he believed that Google's proposals made it easier to see the firm's rivals in search results. Over the past several months, Google has offered to mark out its services from competing products and make it easier for advertisers to move their search ad campaigns to peers.

Google set to escape U.S. antitrust problems over Waze. The U.S. FTC is reportedly unlikely to challenge Google's $1.1B acquisition of Israeli mapping application Waze. In the U.K., meanwhile, Google is sure to raise the ire of many with the revelation that it payed a mere $55M in tax in 2012 on sales of $4.9B.

JPMorgan deal could collapse over "wrongdoing" condition. A dispute over whether JPMorgan (NYSE:JPM) will admit wrongdoing remains a major sticking point in the bank's negotiations with various regulatory authorities over a global deal to settle numerous investigations into the firm's conduct. The disagreement could reportedly lead to the collapse of any deal.

Top Economic & Other News
Chinese official PMI misses estimates. China's official PMI, which focuses on larger state-owned enterprises, edged up to 51.1 in September from 51 in August but missed consensus of 51.5. The tepid growth in the print follows disappointing HSBC PMI data, which concentrates on smaller privately owned firms, and adds to concerns that China's economic recovery might not be all that. Chinese markets are closed for a week's holiday, so any reaction will be fairly delayed.

Eurozone factory activity still growing. Eurozone manufacturing PMI edged down to 51.1 in September from 51.4 in August but remained in growth territory. The eurozone's recovery remains broad-based, with output rising in all nations except France and Greece. Holland enjoyed a 29-month high and Ireland a 14-month peak. However, says Markit, "this is still early days in what looks like a fragile recovery."

Eurozone unemployment remains high at 12%. The eurozone jobless rate held steady at 12% in August and came in slightly below consensus of 12.1%. The lowest rate was in Austria (4.9%) and the highest in Spain (26.2%).

U.S. jobs report at risk following shutdown. The Labor Department reportedly won't release monthly employment data on Friday if the government is still shut down by then. It's not certain what will happen if Washington reaches a deal and federal operations restart before Friday. Other statistics are also at risk, including construction spending, which was due out today. However, the SEC is set to continue handling securities filings and emergency enforcement issues for the time being.

Alpha-Rich Stock Movers and Great Calls
1) On Thursday, Mike Arnold said Brookfield Office Properties (NYSE:BPO) was trading at an unreasonable discount and was a good way to play real estate. After the company's parent company offered to buy it out, the shares closed +12.3% from when Arnold's article came out. Read article »
2) On July 2, Caiman Valores argued short-term issues had created an 80% upside opportunity for Petrominerales' (OTCPK:PMGLF) shares. With Pacific Rubiales Energy (OTC:PEGFF) offering to buy out the company yesterday, Petrominerales shares are +101.3% to date. Read article »

Alpha-Rich Stocks To Watch
1) Royal Bank of Scotland's (NYSE:RBS) sordid history leaves it trading at a sizeable discount to book value. Even under the author's most conservative assumptions, solid upside is possible as the restructuring continues. Read article »
2) Cypress Semiconductor's (NASDAQ:CY) recent pre-announcement left shares pricing in the worst. The company's yield, buyback, aligned management, and likely rebound in sales could mean 35% upside says tech expert Ashraf Eassa. Read article »

Alpha-Rich articles are the best long and short ideas on Seeking Alpha. SA Pro subscribers receive early access to these Alpha-Rich articles, which often move markets. For more information about SA Pro and becoming a subscriber, click here.

Today's Markets:
In Asia, Japan +0.2% to 14485. Hong Kong, China closed. India +0.7% to 19517
In Europe, at midday, London -0.2%. Paris +0.8%. Frankfurt +0.6%.
Futures at 6:20: Dow +0.35%. S&P +0.4%. Nasdaq +0.4%. Crude -0.2% to $102.14. Gold +0.4% to $1332.20.
Ten-year Treasury Yield +4 bps to 2.66%.

Today's economic calendar:
Auto sales
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:00 PMI Manufacturing Index
10:00 ISM Manufacturing Index
10:00 Construction Spending

Notable earnings before today's open: WAG

Notable earnings after today's close: GPN

See full real-time earnings coverage »

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