- BHP, Xstrata & Co. bid for Aussie rail assets. BHP Billiton (NYSE:BHP), Rio Tinto (RTP), Xstrata (OTC:XSRAF) and ten other coal miners with Australian operations have bid A$4.85B ($4B) for the country's largest coal railroad network to prevent an IPO of the assets. The mining companies are concerned that an independent operator would raise fees on the monopoly asset. The Queensland government, which is planning the offering, last year valued the tracks at A$7B, but the offer by the coal miners exceeds what an IPO would likely pull in. Premarket: BHP +1.4%, RTP +1.8% (7:00 ET).
- Qatar fund eyes Treasury's Citi stake. Qatar's sovereign wealth fund has reportedly expressed interest in buying part of the Treasury's 27% stake in Citigroup (NYSE:C). Unlike other sovereign wealth funds, the Qatar Investment Authority is still interested in banks and has done well on investments in Credit Suisse (NYSE:CS) and Barclays (NYSE:BCS) during the crisis. Premarket: C +2.9% (7:00 ET).
- Apple at core of antitrust inquiry. The Justice Department is said to be in the early stages of an antitrust inquiry into Apple (NASDAQ:AAPL) and its role in the digital music market. Officials have reportedly spoken to major record labels and online music companies about the dynamics of selling music online. In particular, investigators have discussed allegations that Apple used its market dominance to persuade music labels to block Amazon (NASDAQ:AMZN) from exclusive access to soon-to-be released music. Apple is also the subject of at least two other government probes, one on Apple's rules for app developers and one on Apple's hiring practices. Premarket: AAPL +1.3% (7:00 ET).
- OECD raises growth forecasts. The OECD raised its growth forecast for its 30 members to 2.7% in 2010, up from the 1.9% growth predicted in November. Including non-members like China, the forecast is for 4.6% growth in 2010 and 4.5% in 2011, highlighting the divergence between developed economies and emerging nations in the post-crisis world. The report also noted some downside risks, including potential sovereign debt problems and the possibility of "a boom-bust scenario" in countries like China and India.
- Pru investors warned on AIA deal. RiskMetrics, the international proxy advisory service, has warned Prudential (NYSE:PUK) investors to vote against the insurer's planned purchase of AIG's (NYSE:AIG) Asian unit. The deal has "a sensible strategic rationale," said RiskMetrics, but "a full price, integration risk and ambitious targets that barely meet the cost of capital do not make a compelling combination." The warning is further bad news for Prudential, which has been struggling to hold the shaky deal together. Shareholders will vote on June 7.
- Foster's splits beer and wine. Australia's Foster's Group (OTC:FBRWY) said it plans to demerge its beer and wine operations, sending its shares up strongly in Australian trading on investor expectations of a takeover approach. The split, to be completed in the first half of 2011, will create around A$100M in annual savings and give the company some much-needed flexibility, as the wine business has weighed Foster's down. Shares +7.4% in Australia.
- Telefonica may make hostile bid to get Vivo. Telefonica (NYSE:TEF) said it may consider a hostile bid for Portugal Telecom if it doesn't succeed in its €5.7B ($7.3B) bid for PT's stake in Brasilcel, their joint venture. Brasilcel controls 60% of Brazilian mobile company Vivo (NYSE:VIV), and Telefonica is seeking control of Vivo in order to consolidate its position in the strategically important Brazilian market. PT's board rejected the unsolicited bid earlier in the month, and tensions between the two firms have been growing, with Telefonica threatening to block dividends to PT from Vivo.
- Roadblock in Blockbuster debt talks. Blockbuster's (BBI) efforts to cut its debt load by more than $900M have reportedly hit a roadblock, after the company and bondholders disagreed over how much money investors would inject into the struggling movie-rental chain. Bondholders had suggested a $30M investment but Blockbuster wants $100M. Meanwhile, one group of bondholders said it's willing to wipe out $300M in debt if it gets the "lion's share" of new equity in a restructured company, while a separate group owed $630M is discussing temporarily canceling amortization payments in exchange for a large equity stake.
- Transocean defends dividends, faces DoJ scrutiny... Transocean (NYSE:RIG) defended its February decision to pay dividends, saying the payment won't impact its ability to meet legal obligations related to the oil leak in the Gulf of Mexico. Eighteen senators had asked the Department of Justice to investigate Transocean over its announced $1B payout to shareholders, and its likely $270M profit on the insurance policy for the sunken Deepwater Horizon rig. Associate Attorney General Thomas J. Perrelli said the rig owner's legal action to limit its liability to $27M is "inappropriate." Premarket: RIG +1.8% (7:00 ET).
- ...while political pressure weighs on BP. The White House will announce new safety measures for offshore drilling tomorrow, as it's time to "revisit how these oil companies are operating." Government officials are under pressure to exert more control over BP's (NYSE:BP) containment and cleanup efforts, and BP, by extension, is under increased pressure to show its efforts are succeeding. Meanwhile, according to a memo released by lawmakers yesterday, BP said it may have been a "fundamental mistake" to continue drilling in the Gulf well after a test warned something may be wrong. Premarket: BP -1.5% (7:00 ET).
- Bernanke: Fed independence crucial. Speaking at a conference in Tokyo, Bernanke once again argued the importance of keeping the Federal Reserve free from political interference. Political meddling "in monetary policy can generate undesirable boom-bust cycles that ultimately lead to both a less stable economy and higher inflation," he said. Bernanke added that while the Fed doesn't issue an official inflation target, central banks around the world are aiming for inflation at or around 2%.
- Derivatives spin-off may get spun-off. Rep. Barney Frank, chairman of the House Financial Services Committee, said the provision in the Senate's financial reform bill which requires banks to spin off their derivatives operations "goes too far." As a central figure in the creation of a joint House-Senate bill, Frank's comments are significant, and suggest the derivatives proposal may be removed from the final legislation altogether.
- Geithner in Europe for debt crisis talks. Geithner arrived in Europe to discuss the region's debt crisis, and said there must be a coordinated global approach to financial reform. His comments follow Germany's unilateral decision to temporarily ban naked short selling of eurozone sovereign bonds and credit default swaps, and as Berlin stands poised to extend the ban to naked short selling of all German stocks listed on the country’s exchanges.
Earnings: Wednesday Before Open
- Toll Brothers (NYSE:TOL): FQ2 EPS of -$0.24 misses by $0.01. Revenue of $311M (-21.9%) vs. $322M. (PR)
Earnings: Tuesday After Close
- TiVo (NASDAQ:TIVO): Q1 EPS of -$0.13 beats by $0.03. Revenue of $43.2M (-10.9%) vs. $42.8M. Shares -2.4% AH. (PR, earnings call transcript)
- In Asia, Japan +0.7% to 9523. Hong Kong +1.1% to 19196. China +0.1% to 2626. India +2.3% to 16388.
- In Europe, at midday, London +1.7%. Paris +2.5%. Frankfurt +1.6%.
- Futures: Dow +0.6%. S&P +0.6%. Nasdaq +0.7%. Crude +2.7% to $70.58. Gold +1.2% to $1212.50.
Wednesday's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Durable Goods
10:00 New Home Sales
10:00 Hearing: TARP Aid for AIG
10:30 EIA Petroleum Inventories
1:00 PM 5-Yr Note Auction
2:00 PM Hearing: State of the Housing Government Sponsored Entities
4:15 PM Fed's Lacker: 'The Regulatory Response to the Financial Crisis'
- Notable earnings before Wednesday's open: AEO, DSX, TOL
- Notable earnings after Wednesday's close: DBRN, NTAP, PAY
Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.
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