- Google, Verizon propose net neutrality rules. Google (GOOG) and Verizon (VZ) issued a joint legislative proposal on an open internet, laying out seven principles that include a net neutrality enforceable on wireline networks but not on wireless. The agreement does ask for transparency in network management on both wireline and wireless networks. Despite the buzz around the joint announcement, the practical impact is limited; the agreement basically sticks to the status quo on net neutrality, has no teeth unless the FCC makes it part of its official rules, and allows Verizon to block content or services on its wireless network as long as it informs consumers.
- S.Korea raids Google office. South Korean police raided Google's (GOOG) office in Seoul this morning on suspicions the company had illegally collected data on users. Google has been preparing since late last year to launch its 'Street View' in South Korea, a service now notorious for various privacy breaches.
- GDF Suez, International Power form energy powerhouse. As expected, GDF Suez (OTC:GDFZY) and International Power (OTC:IPRPY) agreed to a tie-up that will see GDF take control of 70% of the combined company, while International Power shareholders will own the remaining 30%. As part of the deal, GDF will transfer some of its power plants to International Power and pay shareholders a special dividend of 92 pence a share ($1.45). Both companies also released their H1 results this morning: International Power's net profit fell 49% to £199M ($316M), revenue -16% to £1.6B. GDF net profit rose 9.3% to €3.6B ($4.7B), revenue +0.3% to €42.3B.
- Elan postpones spinoff. Elan (ELN) announced it would delay the planned spinoff of EDT, its drug delivery business, as "market conditions at this time are not conducive to an appropriate valuation." The company reaffirmed its 2010 financial outlook of adjusted earnings of more than $150M, and expects to retire up to approximately $500M in outstanding debt due to mature in November 2011 and November 2013.
- KKR shelves common offering. KKR (KKR) canceled its plans for a $500M common stock offering, a setback for the firm that was listed on the NYSE less than a month ago. The company, which had planned to use the proceeds to expand its business and for general corporate purposes, didn't provide an explanation for the cancellation. KKR also reported economic net income of $433.1M in Q2, down from a pro forma figure of $613.5M a year ago.
- SanFran Fed: Economy to deteriorate. The economy “is likely to deteriorate progressively starting sometime next summer," according to researchers at the San Francisco Fed. Over the next 18-24 months, the odds of another recession are higher than that of expansion, as measures of consumer spending and confidence have dropped and private hiring has fallen short of expectations.
- Lehman, HSBC face minibond suit. A New York judge ruled yesterday that investors may sue Lehman Brothers (OTC:LEHMQ) and HSBC (HBC) over $1.6B in now-worthless securities sold to retail investors in Hong Kong. The plaintiffs, who bought structured financial notes called minibonds, are seeking class action status; Hong Kong doesn't have a mechanism for filing class action suits. Premarket: HBC -0.9% (7:00 ET).
- Dozens of funds nearly broke the buck. Sixty-two money market funds in the U.S. and Europe nearly broke the buck during the financial crisis, coming dangerously close to falling beneath a constant $1 per share price, according to Moody's. At least 20 firms that manage "prime" money funds injected at least $12.1B into their funds to preserve principal and prevent investors from credit losses. Moody's didn't identify the funds.
- Skype calls for IPO. Luxembourg-based internet telephony provider Skype filed for an IPO of American depository shares. Net income for the first half was only $13M, and much of it was from interest income, but its gross margins are 51% and have been expanding steadily. As of the end of June, Skype averaged 124M users per month, with 8.1M paying users; the company plans to continue expanding its overall user base while working to convert more users into paying customers. The company, which is looking to trade on Nasdaq, didn't specify the number of shares in its IPO or the price range.
- BP, U.S. near deal on escrow fund. BP (BP) made an initial $3B deposit into the $20B escrow account established to pay for Gulf spill claims, and is said to be close to an agreement with government officials as to how to guarantee the remaining $17B obligation. BP is likely to use future revenues to guarantee its fund, a move that gives both sides an incentive for production to continue in the Gulf. There had also been discussion of securing the fund with BP's oil fields in the Gulf, but sources said the government didn't want to end up owning wells. These options provide the government with collateral in case BP's efforts to generate the funds through ongoing operations and asset sales fall short. Premarket: BP -1.6% (7:00 ET).
- Faulty ignition prompts Honda recalls. Honda (HMC) recalled 384K vehicles due to a faulty ignition system that could allow the car to be switched off without being placed in park, increasing the chance the vehicle could roll. The recall affects Accord and Civic 2003 models and Element 2003-2004 models. The company received several complaints, reports of a small number of accidents and one injury from the problem.
- News Corp. cuts Chinese TV stake. News Corp. (NWS) will sell control of its three Chinese TV channels to a fund backed by China Media Capital, China's second largest media company. It marks a defeat for the company, which had struggled in the Chinese market for years, and a shift in strategy as profitable growth in China now seems less likely in the face of various restrictions on trade. Financial terms of the deal weren't disclosed.
- U.S., U.K. probe Goldman disclosure timing. Regulators in the U.S. and Britain are investigating the timing of Goldman Sachs' (GS) disclosure that it was the subject of a federal civil probe. The timing of the disclosure is part of larger, ongoing investigations into the bank's marketing of CDOs tied to subprime mortgages.
- BofA could get capital boost from China bank stake. Bank of America (BAC) may add $13B to its book value because of its 11% stake in China Construction Bank. The stake had been valued at the original cost of $9.2B because it couldn't be sold until August 2011, but with the lockup period expiring in less than a year, accounting rules require the stake to be carried at its current market value of $22.9B. The $13B boost, which is expected to be included in October's Q3 report, will help lessen the blow from the bank's potential $10B charge tied to new regulations. Premarket: BAC -0.8% (7:00 ET).
- BoJ holds steady. The Bank of Japan held its key policy rate steady at 0.1%, as expected, and maintained its credit programs for lenders by a unanimous vote. In their statement, policymakers made no direct mention of the yen, which is approaching a 15-year high and threatening a weakening economic recovery, but the language indicated concern about how overseas events are affecting the currency.
Earnings: Tuesday Before Open
- JA Solar Holdings (JASO): Q2 EPS of $0.27 may not be comparable with consensus of $0.24. Revenue of $351M (+296%) vs. $304M. Shares +0.5% premarket. (PR)
Earnings: Monday After Close
- Clean Energy Fuels (CLNE): Q2 EPS of $0.14 beats by $0.21. Revenue of $44M (+2100%) vs. $41M. (PR, earnings call transcript)
- Ctrip.com (CTRP): Q2 EPS of $0.23 beats by $0.02. Revenue of $103M (+46%) vs. $98.9M. Shares -0.9% AH. (PR)
- Golden Star Resources (GSS): Q2 EPS of $0.03 misses by $0.02. Revenue of $120M (+31%) in-line. (PR)
- MBIA (MBI): Q2 EPS of $6.32 beats by $6.94. Shares +11% AH. (PR)
- McDermott International (MDR): Q2 EPS of $0.32 misses by $0.11. Revenue of $1.3B (-14.8%) vs. $1.4B. Shares -1.7% AH. (PR)
- Nuance Communications (NUAN): FQ3 EPS of $0.30 beats by $0.01. Revenue of $293M (+16.8%) vs. $300M. Shares -7.5% AH. (PR, earnings call transcript)
- Qiagen (QGEN): Q2 EPS of $0.16 misses by $0.05. Revenue of $262M (+9.4%) vs. $275M. Shares +0.1% AH. (PR)
- Rackspace Hosting (RAX): Q2 EPS of $0.08 in-line. Revenue of $187.3M (+23%) vs. $186.8M. Shares -3.8% AH. (PR)
- Time Warner Telecom (TWTC): Q2 EPS of $0.10 beats by $0.01. Revenue of $317M (+5.2%) vs. $315M. (PR)
- In Asia, Japan -0.2% to 9551. Hong Kong -1.5% to 21474. China -2.9% to 2595. India -0.4% to 18220.
- In Europe, at midday, London -0.5%. Paris +1.0%. Frankfurt +0.6%.
- Futures: Dow -0.5%. S&P -0.6%. Nasdaq -0.4%. Crude -1.3% to $80.44. Gold -0.4% to $1197.40.
Tuesday's Economic Calendar
- 7:45 ICSC Retail Store Sales
8:30 Productivity and Costs
8:55 Redbook Chain Store Sales
10:00 IBD/TIPP Economic Optimism
10:00 Wholesale Trade
12:00 PM Treasury's Barr: 'The Path Forward for Financial Reform'
1:00 PM Results of $34B, 3-Year Note Auction
2:15 PM FOMC Announcement
5:00 PM ABC Consumer Confidence Index
- Notable earnings before Tuesday's open: JASO
- Notable earnings after Tuesday's close: AONE, CFN, CREE, DIS, MYGN, SPWRA
Seeking Alpha's Market Currents team contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.