Stocks fall as Boehner ties budget, debt cap to cutting deficit. Global equities and oil were lower at the time of writing after John Boehner yesterday said he won't introduce legislation to finance the government or raise the debt ceiling until the Democrats agree to "a serious conversation" about cutting the deficit. Boehner also said the U.S. is on "the path" to a debt default, a stance that is in contrast to reports last week saying he wouldn't let such an event occur.
Japan Airlines orders $9.5B worth of A350s in blow to Boeing. Japan Airlines (JAL) has announced its first ever booking for Airbus (OTCPK:EADSF) planes, saying it will buy 31 A350 jets in a deal worth $9.5B at list prices. It's a blow to Boeing's (NYSE:BA) dominance in Japan, which had been the biggest market for the 787, a rival to the A350. JAL has suffered more than most from the constant technical problems to have afflicted the Dreamliner.
Strategic buyers interested in BlackBerry. Blackberry (NASDAQ:BBRY) is in talks with Cisco Systems (NASDAQ:CSCO), Google (NASDAQ:GOOG) and SAP (NYSE:SAP) about selling itself whole or piecemeal, Reuters reports. The negotiations could provide an alternative to Fairfax's (OTCPK:FRFHF) $4.7B bid, which some speculate has little chance of securing financing. The potential strategic suitors are particularly interested in BlackBerry's secure server network and patent portfolio, although doubts about the value of the assets remain. BlackBerry's shares were +3.4% premarket.
Top Stock News
Sikorsky drops furlough plan after DOD orders staff to return. United Technologies (NYSE:UTX) unit Sikorsky Aircraft has canceled plans to furlough almost 2,000 workers today after Defense Secretary Chuck Hagel ordered most of the Pentagon's 400,000 civilian employees to return to work despite the continued government shutdown. However, at the time of writing, it appeared as if Lockheed Martin (NYSE:LMT) was going ahead with plans to furlough 3,000 staff.
Buffett's profits from crisis investments: $10B and counting. Warren Buffett's Berkshire Hathaway (BRK.A, BRK.B) has so far made $10B from the $26B of funding it provided to six companies during the financial crisis, the WSJ calculates. The firms included Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Dow Chemical (NYSE:DOW) and General Electric (NYSE:GE). "An average investor could have done just as well investing in the stock market if they bought during the panic period," Buffett says.
P-E firm Apollo eyes raising $15B fund limit. Apollo Global (NYSE:APO) is reportedly considering seeking permission from investors to increase the limit on its latest flagship fund from $15B. The private-equity firm had originally targeted raising $12B for Apollo Investment Fund VIII, but investors are interested in providing up to $20B in total. At $15B, the new vehicle would top the $14.7B that Apollo attracted for a 2008 fund, which was generating a 28% net internal rate of return as of June 30.
India's Apollo Tires wants to pay less for Cooper. Apollo Tires wants to lower the price of its $2.5B purchase of Cooper Tire & Rubber (NYSE:CTB), due to "significant and unanticipated costs" that are "well beyond" those it thought it would have to pay. Apollo said yesterday that Cooper has agreed to a price cut, although the latter said it hasn't agreed to any such thing. The deal has been hit by labor issues in the U.S. and China.
Sanofi sees growth returning following end of huge patent cliff. Sanofi (NYSE:SNY) CEO Chris Viehbacher expects the company to return to growth in Q4 after having "come through the deepest and most concentrated patent cliff in the industry." Sanofi lost IP protection on nine drugs in three years, which badly hit earnings, but it now doesn't face the expiry of patents on brand-name drugs and it's introducing new treatments. Shares were -1.4% premarket.
Top Economic & Other News
Greece sees light at the end of the long dark tunnel. Greece's government has forecast that the economy will rebound to grow by 0.6% in 2014 vs a contraction of 4% in 2013, boosted by a recovery in investment, exports and tourism. Athens also expects a small primary budget surplus this year and one of 1.6% of GDP next year. Greece even hopes it can return to bond markets in H2 2014. If the growth prediction is correct, Greece would emerge from six years of deep recession, if not depression. We'll believe it when we see it.
Supreme Court set to hear at least 28 cases affecting business. Despite the government shutdown, the Supreme Court is due to open today for a nine-month term following the summer hiatus. Justices have agreed to hear 47 cases so far, of which 28 affect business interests. The most high-profile include whether President Barack Obama has the power to make "recess appointments" when the Senate is not in session. A ruling against the White House could void hundreds of decisions by the National Labor Relations Board.
Government shutdown could send agricultural markets into turmoil. The government shutdown and the resulting lack of official statistics are prompting traders to shun agricultural commodities due to concerns about the vacuum of information and fears of a data dump once the closure ends. Likely to fall victim is the USDA's monthly World Agricultural Supply & Demand Estimates, set for Friday, which affect the global prices of grains and other agricultural commodities.
Job churn stays low as workers play it safe. While the headline unemployment figure has been slowly improving, job churn remains well below pre-crisis levels. In July, 2.3M people quit their jobs vs almost 3M in 2007. Churn is seen as a lubricant for the economy, because it often means that workers are improving their income and/or moving away from poor companies to better ones, while it also opens up positions for the unemployed. But with the jobless rate still high, employees are staying put.
Growth of U.S. shadow banking concerns regulators. While the rise of "shadow banking" in China has caused much concern, the NY Fed is worried about the growth of such lending in the U.S. Debt-laden companies who can't access traditional financing are on course to borrow a record $1T in shadow loans this year, mostly from "inherently fragile" unregulated financial firms. Consumers looking for higher returns have been entering the sector via mutual funds that invest in leveraged loans. In August, these funds held $145.7B in assets, double that of two years ago.
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In Asia, Japan -1.2% to 13853. Hong Kong -0.7% to 22974. China closed. India -0.1% to 19895.
In Europe, at midday, London -0.6%. Paris -0.9%. Frankfurt -0.9%.
Futures at 6:20: Dow -0.8%. S&P -0.9%. Nasdaq -0.8%. Crude -1.1% to $102.71. Gold +0.1% to $1311.20.
Ten-year Treasury Yield -2 bps to 2.63%.
Today's economic calendar:
3:00 PM Consumer Credit.
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