Shutdown hits equities as deadlock in Washington continues. European shares and U.S. stock futures were mostly lower at the time of writing as investors started to get more than a tad concerned that the government shutdown in America might drag on for longer than expected, especially with the first day of the closure ending with no agreement over the federal budget in sight. What the impasse means for raising the debt ceiling is also a worry. Gold was higher, oil lower and 10-year Treasury yields almost unchanged.
Top Microsoft investors want Gates out. Three of Microsoft's (MSFT) 20 biggest shareholders want Bill Gates to resign as Chairman, arguing that he's blocking necessary strategy changes and would prevent the company's next CEO from making them. The investors also think Gates retains power disproportionate to his stake, which is down to 4.5%, and - assuming he continues selling around 80M shares a year through a trading plan - is set to evaporate by 2018.
Italian parliament carrying out vote of confidence. Shares in Italy were bucking a weak trend and were +1.15% at the time of writing as the country's parliament prepared to carry out a vote of confidence in the government. Silvio Berlusconi's People of Freedom (PDL) group said it will vote against Prime Minister Enrico Letta and his Democratic Party, although some PDL politicians, including party secretary Angelino Alfano, said they will back the government. Letta needs 15-20 PDL votes to survive.
Top Stock News
Empire State Realty Trust to raise $929.5M in IPO. The Empire State Realty Trust (ESRT), which includes the iconic namesake skyscraper as part of its portfolio, is due to debut on the NYSE today after raising $929.5M in an IPO. Empire State is selling 71.5M shares at $13 each, giving it a market cap of $3.12B.
Portugal Tel to merge with Brazil affiliate to create $7B+ firm. Portugal Telecom (PT) has agreed to merge with Brazilian affiliate Oi SA in an all-stock deal that will create a company with a combined market cap of over $7B and with 100M subscribers. PT shareholders will hold 38% of the new firm, to be called CorpCo. Oi CEO Zeinal Bava will head the company. PT shares were +15.8% premarket.
BlackBerry reveals even more doom. BlackBerry (BBRY) expects to take at least $400M in charges through the end of the year as part of a restructuring in which it's slashing 40% of its workforce, the company said yesterday in a filing that followed its terrible FQ2 results last week. The figure is up from an initial estimate of $100M. The take-up of BES, a new business-focused offering, is "slower than anticipated," while the company is even beginning to suffer in emerging markets, which had been its one remaining bright spot.
Archer Daniels Midland nears sale of cocoa operations. Archer Daniels Midland (ADM) is reportedly close to selling its cocoa business to Cargill in a deal that could be worth up to $2B. The divestiture would further strengthen ADM's shift towards the grains industry as it completes its $3B acquisition of GrainCorp. The deal would also create a global price-setting giant to rival Zurich-based Barry Callebaut (OTC:BYCBF), the world's biggest producer of industrial chocolate products.
NY AG to sue Wells Fargo over breaching terms of mortgage deal. New York Attorney General Eric Schneiderman reportedly intends to sue Wells Fargo (WFC) today over the firm's alleged failure to fully comply with the conditions of a $26B national mortgage settlement that was agreed with major banks last year. However, Schneiderman has reached a settlement with Bank of America (BAC) over similar problems, while 14 other states and federal authorities are expected to announce deals with BofA and Wells Fargo over the issues involved.
GM CEO tests mettle of potential successors. GM (GM) CEO Dan Akerson has reportedly put in place a four-way contest among the top internal candidates to replace him by assigning them some of the carmaker's most difficult problems to solve. Akerson hasn't said when he plans to depart, but company insiders believe he could leave in 2015. The candidates are North American operations chief Mark Reuss, global product development head Mary Barra, Vice Chairman Stephen Girsky, and CFO Daniel Ammann.
Fed widens review of bank commodity ops to include Goldman, MS. The Federal Reserve has reportedly expanded its inquiry of banks' physical commodities activities to include those of Goldman Sachs (GS) and Morgan Stanely (MS), adding to reviews of Citigroup (C) and JPMorgan (JPM). The Fed is looking at the legal and regulatory exemptions that enable the firms to operate in the commodities markets. However, Boeing (BA), UPS (UPS) and other companies yesterday said that forcing banks out of commodities would cause them difficulties.
Top Economic & Other News
Treasury takes final actions to avoid hitting debt ceiling. The government has started to implement the final extraordinary measures that will enable the U.S. to avoid breaching the country's $16.7T borrowing cap. The government has until October 17 before those measures are exhausted, at which point it will have just $30B left, well below net expenditures on certain days. As indicated above, the prospects of Congress agreeing on a deal to raise the ceiling aren't looking particularly good at the moment.
ADP jobs report seen improving slightly. With the nonfarm payrolls report for September in danger of not being released on Friday because of the government shutdown, ADP's jobs data, which is due out today, is taking on more importance. Economists expect that the private sector added 178,000 jobs last month, up a trifle from 176,000 in August.
Numerous tech problems mar first day of insurance exchanges. Millions of people visited the Web sites of health-insurance exchanges yesterday on their first day of operations, although, as expected, many of the sites were beset by technical glitches. It's unclear how much of the traffic translated into sales - Connecticut's site received 28,000 hits as of 4 pm but only 167 people had applied to buy insurance.
Alpha-Rich Stock Movers and Great Calls
1) On September 24, Vince Martin explained why Adams Resources' (AE) earnings were poised to fall, creating a short opportunity. The stock is -11.1% to date. Read article »
2) On June 3, Marshall Hargrave said that Starz (STRZA) traded at an unreasonable discount given its high-margin, asset-light model. The stock is +25.8% since. Read article »
Alpha-Rich Stocks To Watch
1) Organic giant Hain Celestial's (HAIN) growth is largely inorganic and hence unsustainable, argues buysider William Lucas. With the stock price discounting unrealistic growth expectations, there could be significant downside. Read article »
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In Asia, Japan -2.2% to 14170. Hong Kong +0.6% to 22984. China, India closed.
In Europe, at midday, London -0.8%. Paris -0.8%. Frankfurt -0.5%.
Futures at 6:20: Dow -0.6%. S&P -0.7%. Nasdaq -0.5%. Crude -0.3% to $101.71. Gold +0.6% to $1293.90.
Ten-year Treasury Yield -1 bps at 2.64%.
Notable earnings before today's open: MON
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