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
S&P downgrades France to "AA." S&P has reduced France's debt rating by one notch to "AA" from "AA+," citing the country's low economic growth and the "inability to significantly reduce total government spending." The ratings agency believes that tax, labor and other reforms won't raise France's growth prospects, while high unemployment is damaging support for further structural and fiscal measures. The CAC 40 (NYSEARCA:EWQ) was -0.7% at the time of writing, but French 10-year bond yields were just +3 bps to 2.27%.

China's leadership to discuss economic overhaul. China's leadership is due to start a major four-day meeting tomorrow, when they are set to discuss "comprehensive reforms" of the economy. These are expected to include liberalizing interest and exchange rates, promoting competition, cutting red tape, strengthening the fiscal system, pushing innovation, and developing the service sector. Ultimately, the government wants to rebalance the economy away from state-owned heavy industry and exports, and towards private consumption.

U.S. jobs growth seen slowing. Employment data for October is due out this morning, with economists estimating that nonfarm payrolls increased by 120,000, which would mark a fall from 148,000 in September. The jobless rate is seen nudging up to 7.3% from 7.2%. Strategists reckon that payroll growth of over 150,000 could cause fireworks, as it would suggest that the economy withstood the government shutdown. Add that to yesterday's better-than-expected GDP data, and the Fed could decide to taper sooner rather than later.

Top Stock News
Disney's earnings top forecasts. Disney's (NYSE:DIS) shares slipped 1.7% in after-hours trading despite FQ4 net income rising 8% to $6.1B, with adjusted EPS of $0.77 beating expectations. Revenue climbed 7.7% to $11.57B and also surpassed forecasts. Good performances at three of Disney's major divisions — theme parks, consumer products and movies — outweighed television-related declines, although ESPN remained a juggernaut.

Telefonica's earnings hit by currency swings, asset sales. Telefonica's (NYSE:TEF) Q3 net profit dropped 21% to €1.09B ($1.46B) and slightly topped expectations, while revenue declined 10% to €14.1B. Earnings were hurt by forex fluctuations, with sales in Latin America climbing 11% in local currencies but tumbling 6.8% in euros. The divestiture of assets also hit Telefonica's numbers. Debt fell to €46.1B from €48.6B in Q2, with Telefonica's loan-cutting program ahead of plan. Shares were +3.9% premarket.

Over 150M Adobe accounts compromised in security breach. A data breach at Adobe (NASDAQ:ADBE) seems to be much larger than the company has disclosed, with password-security firm LastPass saying that it has found data belonging to 152M Adobe users on an underground Web site that cyber criminals visit. That makes the theft of the information, which includes email addresses, encrypted passwords and password hints, one of the biggest ever. Until the latest revelations, Adobe had acknowledged that 41M accounts had been compromised.

UBS to acquire Stabfund from SNB for $3.76B. UBS (NYSE:UBS) has agreed to pay $3.76B to the Swiss National Bank to repurchase a stabilization fund of toxic assets that was created in 2008 to bail the bank out during the financial crisis. UBS's rescue included the SNB taking on $39B in assets, which have since become profitable.

Top Economic & Other News
Iran, world powers near deal over nuclear program, sanctions. Iran and the P5+1 world powers are close to an agreement in which the Persian nation would halt the most advanced elements of its nuclear program, including the production of weapons-grade fuel, in return for a limited easing of the sanctions that have badly hurt its economy. The deal, which could be announced today, won't at this stage include a lowering of banking and oil sanctions. Crude prices were mixed at the time of writing.

China's trade surplus more than doubles. China's trade figures came in above consensus as exports grew 5.6% on year and imports 7.6%, while the trade surplus more than doubled on month to $31.1B. "Combined with...better export data in Korea and Taiwan, China's export numbers suggests some — although not yet decisive — improvement in global demand momentum," says RBS economist Louis Kuijs. The import growth reflects the "healthy expansion of demand" in China.

German trade surplus jumps 19% to record high. Germany's trade surplus increased 19% on month to a record high €18.8B in September and exceeded consensus of €15.5B. Export growth accelerated to 1.7% and also topped forecasts, although imports unexpectedly fell 1.9%. The figures will do nothing to assuage those who have criticized Germany for relying too much on exports, especially at the expense of Southern Europe.

Alpha-Rich Stock Movers and Great Calls
1) On October 23, BuyTheDipsSellTheRips said Issuer Direct's (NYSEMKT:ISDR) recent acquisition hadn't registered with the market yet, leaving 70% upside on the table. The stock is +18.1% since. Read article »
2) On July 24, Mike Williams laid out the turnaround case for FreightCar America (NASDAQ:RAIL), saying a strong cash position and potential to return to historical profitability could lead to a double. Shares are +39.2% to date. Read article »

Alpha-Rich Stocks To Watch
1) Fears over Argentina have knocked Americas Petrogas' (OTCPK:APEOF) shares, but the value is still there. LatAm expert Caiman Valores forecasts significant upside as fears subside. Read article »
2) A pending carve-out of Power Assets Holdings' (OTCPK:HGKGY) low-growth Hong Kong segment should allow the high-growth international segment to gain a higher valuation. The stock could have 25% upside as the picture becomes clearer. Read article »

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Today's Markets:
In Asia, Japan -1% to 14086.8. Hong Kong -0.6% to 22744. China -1.1% to 2106. India -0.75% to 20666.
In Europe, at midday, London -0.4%. Paris -0.9%. Frankfurt -0.6%.
Futures at 6:20: Dow +0.1%. S&P +0.2%. Nasdaq +0.35%. Crude -0.1% to $94.12. Gold +0.05% to $1309.20.
Ten-year Treasury Yield +1 bps to 2.61%.

Today's economic calendar:
8:30 Nonfarm Payrolls
8:30 Personal Income and Outlays
9:55 Reuters/UofM Consumer Sentiment

Notable earnings before today's open: AINV, COV, CVC, DRH, EBIX, EGO, HALO, HMSY, LGF, NTWK

See full real-time earnings coverage »

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