- Strong demand for massive Petrobras share sale. Petrobras' (PBR) record $70B share offering was oversubscribed, with buyers including sovereign wealth funds from the Middle East and Asia. The offer's 2% discount was much smaller than investors expected, and suggests strong demand. PBR -1.1% premarket.
- Japan relents, frees Chinese skipper. Japan announced it will release a Chinese sea captain who has been in custody since a collision in contested waters triggered a flare up in the countries' already-strained relationship. "We decided it was inappropriate to continue the investigation while keeping the suspect in custody any further, considering the future of the Japan-China relationship," an official said at a hastily called news conference. The decision came amid signs that the dispute has been spreading to bilateral business relations. Experts say Japan and other U.S. allies are taking a harder line on territorial issues as a part of a broader strategy, backed by the U.S., to stand up to an increasingly powerful China.
- Not-so musical chairs at HSBC. Sources say HSBC (HBC) CEO Michael Geoghegan will be replaced by Stuart Gulliver, head of the investment bank, while finance director Douglas Flint will take over as Chairman from Stephen Green who is leaving to become Britain's Trade Minister. On Wednesday, it was widely reported that Geoghegan was very unhappy with the board's decision to name a separate Chairman. The turmoil is yet another sign of the unstable nature of HSBC's top management. +1% premarket.
- Blockbuster goes bust. Blockbuster (BLOKA.PK) filed for Chapter 11 bankruptcy protection Thursday, reeling from mounting losses, rising debt and competitors that have better catered to Americans' media habits. Blockbuster will continue to operate its 3,300 U.S. stores, although hundreds will likely close over time under new owners led by billionaire investor Carl Icahn. In 2005, Icahn pushed Blockbuster to build up its DVD-by-mail service after acquiring a 10% stake in the company, only to see the chain get into deeper trouble.
- Volcker launches into bankers, politicians, regulators. Former Fed Chairman Paul Volcker scrapped a prepared speech Thursday and delivered a blistering critique of nearly every corner of the financial system. While praising the financial overhaul, Volcker told attendees at the Chicago Fed the system is still at the risk of regulators being swayed by the relentless lobbying of banks and politicians. Volcker said central banks may have become, "a little too infatuated with their own skills and authority because they found secrets to price stability... I think it's fair to say there was a certain neglect of supervisory responsibilities."
- SEC stripped of privacy cloak. The House voted Thursday to repeal part of the recently enacted financial overhaul that allows the SEC to keep information gathered during examinations secret, a blow to SEC Chairman Mary Schapiro. The provision was "a recipe for more coverups at the agency that failed to catch Bernie Madoff," one policy advocate said. The SEC has faced ongoing criticism over its response to Freedom of Information Act requests.
- BHP clears first hurdle, much more to come. BHP Billiton (BHP) received FTC approval for its attempted $40B hostile takeover of Potash (POT), but the contested deal is likely to face greater scrutiny in Canada, and analysts say Potash's shareholders remain the biggest obstacle. Potash has said the offer is "grossly inadequate," and has filed suit against BHP. On Thursday, POT shares closed at $145.40, a 12% premium to BHP's offer.
- Limit system could replace circuit breakers. Sources say the SEC is looking to replace the circuit-breaker system that briefly halts trading in a stock if its price rapidly rises or falls by a certain percentage with a "limit up/down" system that would allow trading to continue within the allowed range. The proposal would help in situations where a circuit breaker is triggered by an aberrant trade rather than a fundamental breakdown in a stock's value.
- GM's shrinking IPO. GM's IPO will be smaller than expected, sources say, with the government selling just a small part of its 61% stake. GM's initial offering is now seen at $8-10B; it was previously thought GM's IPO could rival Visa's (V) $19B launch for the biggest in U.S. history.
- Jobless claims jump. Initial jobless claims rose for the first time in five weeks, up 12K to 465K, vs. expectations of a flat reading or small drop. The rise suggests jobs remain scarce, and that some companies may still be cutting workers. Claims have been stuck above 450K for most of the year. Miller Tabak's Dan Greenhaus: "What's becoming increasingly clear is that this isn't a normal recovery. There's little we can do to create jobs until demand returns, and demand isn't returning."
- Home sales higher; prices fall. Existing home sales rose 7.6% in August to 4.13M/year, still the second-worst month in more than a decade. Prices fell by 2% month-on-month, and the trend looks likely to continue given the onslaught of foreclosures the housing market is expecting to absorb in the coming months.
Earnings: Thursday After Close
- Nike (NKE): FQ1 EPS of $1.14 beats by $0.13. Revenue of $5.2B (+7.8%) in-line. Shares +5.1% AH. (PR, earnings call transcript)
- TIBCO Software (TIBX): FQ3 EPS of $0.17 beats by $0.02. Revenue of $184.5M (+22.8%) vs. $175.8M. Shares +9.1% AH. (PR, earnings call transcript)
- Asia: Japan -1%. Hong Kong +0.3%. China +0.1%. India +0.9%.
- Europe at midday: London -0.4%. Paris -0.2%. Frankfurt -0.5%.
- Futures at 7:00: S&P +0.27%. 10-yr +0.09%. Euro +0.73% vs. dollar. Crude +0.04% to $75.21. Gold +0.22% to $1299.10.
Friday's Economic Calendar
- 8:30 Durable Goods
9:00 Hearing: Home Mortgage Disclosure Act
10:00 New Home Sales
- 10:30 ECRI Leading Index
1:00 PM Fed's Lacker: 'Reflections on economics, policy and financial crisis'
4:30 PM Fed's Bernanke: 'Implications of the Financial Crisis for Economics'
- Notable earnings before Friday's open: KBH
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