- AIG execs avoid criminal charges. The Justice Department has closed its two-year criminal investigation into AIG (NYSE:AIG) and will not press charges against the insurer or its senior executives. DoJ didn't issue any comments over the weekend, but AIG put out a statement welcoming the decision, while attorneys for Joseph Cassano, former head of the Financial Products unit, said that "although a two-year, intense investigation is tough for anyone, the results are wholly appropriate in light of our client’s factual innocence." Sources said prosecutors had found evidence supporting Cassano's account, prompting questions about why federal officials aren't going after auditor PricewaterhouseCoopers. An SEC investigation into the insurer and its executives is ongoing. Premarket: AIG -1.4% (7:00 ET).
- Treasury considers AIA flotation. Treasury officials are reportedly considering a flotation of AIA, AIG's (AIG) Asian unit, in case the planned sale to Prudential (NYSE:PUK) falls through. Officials have been working on the back-up plan for two weeks, since signs of regulatory trouble with the Pru deal first emerged. Several of Asia’s biggest financial-services firms have been approached, as have Chinese banks including ICBC and Bank of China. In acknowledgement of the deal's shaky status, and to gain investor support for the $35.5B purchase, Pru CEO Tidjane Thiam is forgoing a 'get-out' clause in the firm's rights issue prospectus and has pledged to put £1.5B ($2.2B) of his own money into the rights issue that will fund the AIA deal.
- NABE raises growth forecast. The National Association for Business Economics expects the U.S. economy to grow at an "above trend" rate in 2010 and 2011, with real GDP growth of 3.2% in both years. NABE's February forecast had been for 3.1% growth. In its May report, NABE also noted that "job growth is on a steady footing," and the unemployment rate will likely drop to 9.4% at the end of this year and 8.5% by the end of 2011.
- Banks' ratings at risk. Banks have moved one step closer to potential credit-ratings downgrades with last week's Senate passage of the financial reform bill. Part of that legislation weakens the implied government safety net for banks, and if that feature is maintained in the joint House-Senate version of the bill, then rating companies have already warned major downgrades are likely in store. This could create billions of dollars in additional financing costs for some of the biggest banks, including Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and Goldman Sachs (NYSE:GS). Premarket: C -0.5%, WFC -2% (7:00 ET).
- Banks promise dark pool disclosure. Six banks operating a 'dark pool' trading platform in Europe have agreed to start disclosing daily volumes amid increased regulatory scrutiny and a push for greater transparency. Market data company Markit will collect and verify the data, and then break out volume on a country-by-country basis. The six banks are Credit Suisse (NYSE:CS), Deutsche Bank (NYSE:DB), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS) and UBS (UBS).
- Geithner pushes noncommittal China. U.S. and Chinese officials met for their second Strategic and Economic Dialogue, where Geithner urged China to reduce trade barriers and said a yuan appreciation is in China's own interests. Chinese President Hu Jintao struck a conciliatory note, saying the two countries must work together to promote "full economic recovery," but avoided any specific commitments. "China will continue to steadily advance reform of the renminbi exchange rate formation mechanism following the principles of being independent, controllable and gradual," Hu said.
- Pressure grows on BP. Government officials lashed out at BP (NYSE:BP) over the weekend, saying the company had missed "deadline after deadline" in its efforts to plug the Gulf of Mexico oil leak. In response to those failures, the White House created an independent national commission to study the spill and suggest ways to prevent future accidents. BP maintains it's cooperating with government officials and has already spent $760M on its spill response. However, its containment efforts have had mixed success; a siphon tube inserted into the leak has collected an average of 2,010 barrels per day, far less than the amount of oil estimated to be leaking into the sea, and company executives said there's no certainty of success for a top-kill attempt that will begin late tomorrow. Premarket: BP -3.4% (7:00 ET).
- Euro pressures help U.S. home buyers. Market fears about the European debt crisis are providing an unexpected boon to U.S. home buyers. Just when the housing industry was braced for mortgage rates to rise, safe haven flows into the U.S. are pushing mortgage rates to the lowest levels of the year, back to nearly fifty-year lows. At 4.86% now, analysts suggest the rate could drop as low as 4.5% this summer, in contrast to the 6% economists has previously forecast.
- RBS nears P-E sale. Royal Bank of Scotland (NYSE:RBS) is nearing a deal to sell its European private equity fund portfolio to Alpinvest, the Dutch pension fund, for around €400M ($497M). A deal could be announced in the next few weeks. RBS is also in talks to sell its U.S. private equity fund portfolio for around $200M as it tries to shed non-core assets. Premarket: RBS -1.7% (7:00 ET).
- China reviews Morgan Stanley's CICC stake sale. Securities regulators in China have reportedly begun their review of Morgan Stanley's (MS) application to sell its roughly $1B stake in China International Capital Corp. [CICC]. If the review goes smoothly, Morgan could be allowed to sell its 34.3% stake within three months, paving the way for other joint ventures, including a possible investment with China Fortune Securities Co.
- Equity One buys Capital Shopping unit. Equity One (NYSE:EQY) agreed to buy the U.S. unit of London-based Capital Shopping Centers Group in a $258.3M deal, helping Equity One expand into California. Excluding transaction expenses, Equity One also reaffirmed its 2010 guidance and expects funds from operations of $1.00-$1.08 per share.
- British Airways goes on strike. British Airways' (OTC:BAIRY) cabin crew began a five-day strike today after negotiations fell apart over the weekend. The airline will operate a reduced schedule during the week, but the strike could impact other members of the Oneworld alliance, including American Airlines (AMR). Two more five-day strikes are planned to start on May 30 and June 5.
- Friday's failure. Just one bank was closed on Friday, bringing this year's failures to 73 so far. The closure of Pinehurst Bank of St. Paul, Minn. is expected to cost the FDIC's insurance fund $6M.
Earnings: Monday Before Open
- Campbell Soup (NYSE:CPB): FQ3 EPS of $0.54 beats by $0.03. Revenue of $1.8B (+6.9%) in-line. (PR)
- Yingli Green Energy (NYSE:YGE): Q1 EPS of $0.18 misses by $0.04. Revenue of $359M (+145.3%) vs. $354M. (PR)
- In Asia, Japan -0.3% to 9758.4. Hong Kong +0.6% to 19668. China +3.5% to 2673. India +0.1% to 16470.
- In Europe, at midday, London -0.7%. Paris -0.6%. Frankfurt -1.5%.
- Futures: Dow -1%. S&P -1.2%. Nasdaq -1.2%. Crude -0.3% to $69.86. Gold +0.8% to $1185.20.
Monday's Economic Calendar
- 8:30 Chicago Fed National Activity Index
10:00 Existing Home Sales
- Notable earnings before Monday's open: CPB, YGE
- Notable earnings after Monday's close: PVH
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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