Merkel secures coalition deal but agreement faces SPD vote. After two months of negotiations following Germany's general election, the right-of-center grouping of Chancellor Angela Merkel has finally forged a deal with the left-leaning Social Democrats (SPD) to form a government. Germany will largely maintain its fiscal conservatism, although the country will introduce a minimum wage and strengthen labor-market rules. The deal now needs the approval of the SPD's 474,000 members, with the results of a vote due on December 14.
U.S. defies China with flight of unarmed B-52 bombers. The U.S. has got involved in the islands dispute between Japan and China in the East China Sea by flying two unarmed B-52 bombers in the area without informing Beijing. China had created an Air Defense Identification Zone around the islands and warned of military action against planes flying in the region if notification wasn't given. Japanese airlines also flew through the area without first telling China. When the dispute initially arose a year ago, trade between China and Japan was badly hit.
H-P's stock jumps following earnings beat. H-P's (NYSE:HPQ) shares spiked 7% premarket after the IT giant swung to a net profit of $1.41B from a loss of $6.85B a year earlier, with adjusted EPS coming in at $1.01 and topping expectations, as did revenue despite a 3% fall to $29.1B. However, sales fell in five of H-P's six business segments, with demand for personal computers collapsing. CEO Meg Whitman said she was moving H-P to "a new style of IT" based on cloud computing and in which a consumer can print from a mobile phone to a kiosk at a FedEx store.
Top Stock News
Top U.S. banks' mortgage payouts could hit $104B. JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) are among eight leading U.S. banks that could have to pay a further $56.5-104B to settle mortgage-related claims, S&P calculates. However, the country's largest banks have estimated capital buffers of $155B combined, which would be enough to absorb the losses. S&P doesn't expect the legal liabilities to hurt the banks' ratings.
SEC looking at Morgan Stanley and Citigroup over foreign hiring. Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C) have reportedly received requests for information about their overseas hiring practices from the SEC, which is looking at whether the banks breached laws relating to foreign bribery by recruiting the family members of the well-connected in order to win business. The firms join JPMorgan (JPM) in being scrutinized over the issue, with the latter under criminal and civil investigations.
RBS faces possible criminal probe over small-business claims. The U.K.'s Serious Fraud Office (SFO) is reportedly thinking of starting a criminal investigation into accusations that RBS (NYSE:RBS) looked to profit by forcing "vibrant" small companies out of business and then seizing their assets. The SFO has been interviewing former executives of affected firms. The agency is deciding whether RBS acted unlawfully or just engaged in bad practices.
Aramark looks to raise $1B in IPO. Stadium food and clothing vendor Aramark reportedly intends to raise up to $1B in its IPO, which could take place in December. Aramark would use the money to repay some of its debt of $5.7B - a legacy of the $6.3B deal that took the company private in 2007. Aramark's IPO comes at the same time as that of Hilton, both of which could ensure that a banner year for public listings ends with a bang.
Bankruptcy judge to issue ruling on AMR-US DOJ deal. AMR (AAMRQ) and US Airways (LCC) are due to find out today whether Bankruptcy Judge Sean Lane approves of their settlement with the Justice Department over their proposed merger. The DOJ had opposed the transaction until the airlines agreed to concessions. The deal also needs the authorization of a federal district judge, who is accepting public comments until February 7.
Amec eyes $2.8B Foster Wheeler. U.K. energy services group Amec (OTC:AMCBF) is looking to take over Foster Wheeler (NASDAQ:FWLT), which has a market cap of $2.83B, the London Times reports. The companies have been in discussions in the past but aren't currently in talks. Reuters adds that Amec is looking at a number of targets but also that it isn't in discussions with any of them. Foster Wheeler's shares rose 7.55% in post-market trading.
Compuware receives buyout approaches. Compuware (NASDAQ:CPWR) has reportedly been exploring selling itself for months and has received approaches from private-equity funds, with potential suitors including Thoma Bravo and Vista Equity Partners. The Detroit-based software group, which has a market cap of $2.34B, could agree to a deal by January. The news comes almost a year after Compuware rejected a $2.3B offer from Elliott Management. The activist investor holds 8.6% in the company.
Top Economic & Other News
Berlusconi faces expulsion from Italian Senate. Silvio Berlusconi is expected to be expelled from Italy's Senate today following his conviction for tax fraud in August. Because of the recent break-up of the former prime minister's right-wing grouping, in which one faction stayed in the government, his removal from the Senate is unlikely to affect the coalition. The episode has every so often caused turmoil in the markets, although the FTSE MIB was +1.1% at the time of writing.
Alpha-Rich Stock Movers and Great Calls
1) On Monday, buysider Logical Thought said Pain Therapeutics (NASDAQ:PTIE) had 120%+ risk-adjusted upside based on approval of its flagship drug, Remoxy. Shares are +16.3% in the two sessions following publication. Read article »
2) On August 23, MBAvalueinvestor called Nuverra Environmental (NYSE:NES) an over-levered "destroyer of capital," with 80% downside toward its fair value. The stock is -43.6% to date. Read article »
Alpha-Rich Stocks To Watch
1) Veterinary supplier Heska (NASDAQ:HSKA) could double in 2014, as a recent acquisition has created a leading competitive position, says BuyTheDipsSellTheRips. Read article »
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In Asia, Japan -0.4% to 15450. Hong Kong +0.5% to 23806. China +0.8% to 2201. India flat at 20420.
In Europe, at midday, London +0.1%. Paris +0.2%. Frankfurt +0.2%.
Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude -0.4% to $93.29. Gold +0.8% to $1251.40.
Ten-year Treasury Yield +1 bps at 2.73%.
Today's economic calendar:
7:00 MBA Mortgage Applications
8:30 Durable Goods
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
9:45 Chicago PMI
9:45 Bloomberg Consumer Comfort Index
9:55 Reuters/UofM Consumer Sentiment
10:00 Leading Indicators
10:30 EIA Petroleum Inventories
12:00 PM EIA Natural Gas Inventory
1:00 PM Results of $29B, 7-Year Note Auction
3:00 PM USDA Ag. Prices
Notable earnings before today's open: FRO
Notable earnings after today's close: RENN
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