Forex investigation finds evidence of collusion. The global probe into forex manipulation has reportedly discovered electronic chat-room messages in which traders from different banks swapped information about client orders and agreed to make transactions in a particular sequence so that they could maximize their profits. This is apparently the first time that investigators have found evidence of collusion. Major banks have suspended traders as part of the probe, including UBS (NYSE:UBS), Barclays (NYSE:BCS), JPMorgan (NYSE:JPM) and Citigroup (NYSE:C).
Chinese shares suffer worst run for 19 years as cash tightens. Chinese stocks closed down for the ninth consecutive session, the worst run since 1994, amid increasing fears of another cash crunch in the short-term money markets. The seven-day repurchase rate soared 100 bps to a six-month high of 7.6%, representing a jump of 328 bps this week. The spike today came as borrowing remained difficult despite the People's Bank of China making an emergency cash injection in the financial system yesterday after being inactive for over two weeks. The Shanghai Composite closed -2%.
Nike profit sprints 40% higher. Nike's (NYSE:NKE) FQ2 profit jumped 40% to $537M as adjusted EPS of $0.59 topped expectations by a penny, while revenue climbed 8% to $6.43B but missed consensus. The sportswear company benefited from strong sales in Western Europe, and growth in North America and greater China. The performance in the latter market was particularly important, as sales had been soft there. With future orders rising 12%, Nike gave upbeat guidance.
Top Stock News
Mining equipment makers set to capitalize on Aussie project. Caterpillar (NYSE:CAT), Joy Global (NYSE:JOY) and other U.S. mining equipment manufacturers may reap over $500M in fresh sales after the Export-Import Bank approved nearly $700M in government-backed financing for the A$10B Roy Hill iron ore mining project in Australia. The decision marks a victory for the struggling companies, whose sales have plunged during the past year, and a defeat for miners such as Cliffs Natural Resources (NYSE:CLF), which had argued the loan would hurt their interests.
Liberty, TWC differ over scale of possible merger synergies. Liberty Media (NASDAQ:LMCA) reportedly believes that a merger of Charter Communications (NASDAQ:CHTR) - in which Liberty owns 27% - and Time Warner Cable (TWC) could generate annual synergies of $700M. The latter isn't so convinced and pegs the figure at around $500M. The expected large stock component of any deal would mean that the size of the synergies would play an important part in the attractiveness of a merger to shareholders. Charter had been looking to make a bid for Time Warner this week but is likely to delay it until the New Year.
McDonald's has a problem in Japan. McDonald's Japan expects FY net income of $48M, well below consensus of $91.5M. The restaurant operator, which is 50%-owned by McDonald's (NYSE:MCD), plans to close 74 outlets due to the underwhelming performance, with November marking the fifth straight month of falling sales on an annual basis.
Top Economic & Other News
S&P strips EU of AAA rating. S&P has lowered the EU's long-term credit rating to AA+ from AAA, due to the "overall weaker creditworthiness of the EU's 28 member states" and concerns about budget talks. The downgrade doesn't affect the ratings of individual countries, the agency said, although it does follow cuts for Italy, Spain, Holland and France in recent years. The euro was flat at $1.3657 at the time of writing.
BOJ keeps ultra-loose policy unchanged. As anticipated, the Bank of Japan has left its key interest rate at 0.1% and maintained its program of expanding the monetary base by ¥60-70T a year. The BOJ expects the annual rate of core CPI to rise "for the time being," while the bank also maintained its view that the economy will continue recovering moderately. However, the BOJ believes that demand will increase before a rise in sales tax in April and then fall after the hike is implemented.
Fed holdings sail past $4T. The Federal Reserve's balance sheet has topped $4T for the first time after rising $14.1B this week to $4.01T. The milestone comes as the central bank plans to scale back its bond-buying program to $75B a month from $85B. Prior to this third round of QE in September 2012, the central bank held $2.82T in assets. Its balance sheet has quadrupled since 2008.
Lew warns on debt limit. Having approved a two-year budget deal on Wednesday, Congress now has until late February or early March to raise the $16.7T debt ceiling, Treasury Secretary Jacob Lew has warned. During the last brouhaha over the matter in October, the cap was suspended until February 7. From that date, the Treasury will be able to juggle the money about for a bit to stave off a default before running out of cash.
Senate to vote on Yellen confirmation in January. The Senate is expected to approve a procedural vote today that would close the debate over the nomination of Janet Yellen as the Chairwoman of the Federal Reserve. A simple majority is needed. The chamber will then probably retire for Christmas and the New Year and will vote on Yellen's candidacy when it returns on January 6.
Alpha-Rich Stock Movers and Great Calls
1) On December 9, Abdalla Al-ayrot said the ongoing turnaround at Brazilian homebuilder Gafisa (NYSE:GFA) would lead to strong gains for shareholders. The stock is +18.1% to date. Read article »
2) Buysider Ted Barac noted on October 3 that the market was pricing Sprint (NYSE:S) well below the price paid by Softbank for a controlling stake just more than three months earlier - a price Softbank itself thought was too cheap. Shares have gained steadily since and are +45.3% to date. Read article »
Alpha-Rich Stocks To Watch
1) Southern consumer bank Regions Financial (NYSE:RF) has finally put its crisis-era woes behind it and is poised for substantial upside from rising rates, writes Helix Investment Research. Read article »
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In Asia, Japan +0.1% to 15870. Hong Kong -0.3% to 22812. China -2% to 2085. India +1.8% to 21079.
In Europe, at midday, London +0.1%. Paris -0.1%. Frankfurt +0.4%.
Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude +0.85% to $98.63. Gold +0.2% to $1195.60.
Ten-year Treasury Yield flat at 2.93%.
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