Wall Street Breakfast: Ukraine Tensions, Bank Settlements, Siemens Bid

by: Wall Street Breakfast
Wall Street Breakfast
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NATO has announced that Russia has begun increasing troops again on its border with Ukraine. Vladimir Putin has blamed Ukraine for the escalation, stating that the military operation on the eastern border has been raging for days. Threats of new Western sanctions have been voiced, but while the U.S. can institute them at any time, the EU will have to wait until a meeting of EU leaders in Brussels on June 26-27.

As EU policymakers continue talks regarding budget consolidation, former German Chancellor Gerhard Schroeder stressed the need for southern European indebted countries to be given more time to fix their budgets, lest voters turn to extremes on the political right and left. EU rules allow for slower budget consolidation if a country makes investments or undertakes structural reforms, although officials want to see proof that real reform efforts are taking place.

With the growing demand for chocolate across Asia, and new processing facilities in India and China, cocoa prices have shot through the roof. In the last five years, demand for the beans rose in Asia by 29%, although European demand fell by 1% for the same period. ICE September cocoa rose 3.2% to $3,128 a tonne yesterday, its highest level since 2011. The price of cocoa beans has soared by over 40% over the past year, with cocoa butter rising more than 70%.

Following Apple's release of a "kill switch" last September, Google (GOOG, GOOGL) and Microsoft (NASDAQ:MSFT) are now adding the feature to their next smartphone operating systems. Apple's (NASDAQ:AAPL) kill switch function prompts users to enter their Apple ID and password before erasing data, turning off "Find my iPhone", or reactivating the device. Since the feature has been added, iPhone thefts have plummeted.

AbbVie has announced that Shire rejected its proposed merger, which valued the latter at $78.87 a share. This was the third merger attempt made by AbbVie (NYSE:ABBV) in recent months. Discussions regarding the acquisition are said to be not continuing further. Shire's (NASDAQ:SHPG) Q1 net profit soared to $230M from $65M a year ago, and sales rose 16% to $1.35B. AbbVie's profit climbed 1.2% to $980M in Q1, and sales grew 5.4% to $4.56B.

Bank of America representatives have requested U.S. Attorney General Eric Holder to meet with CEO Brian Moynihan to discuss a settlement over its lawsuit with the Justice Department. The DOJ has accused BofA (NYSE:BAC) of defrauding mortgage bond investors before the financial crisis. The request comes after JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon negotiated a $13B deal with Holder, regarding his bank's involvement with shoddy mortgage selling.

The mortgage lawsuits continue as Royal Bank of Scotland (NYSE:RBS) pays $99.5M to settle a case accusing it of selling sour mortgages to Freddie Mac (OTCQB:FMCC). The case is one of two lawsuits filed by the Federal Housing Finance Agency against RBS. This also marks the 15th mortgage security settlement since 2011 won by the FHFA, on behalf of Fannie Mae (OTCQB:FNMA) and Freddie Mac.

The Consumer Financial Protection Bureau has ordered GE Capital Bank (NYSE:GE) to pay $225M to consumers "harmed by illegal and discriminatory credit card practices." The payments will be split into two. $56M will be paid to 638k consumers for false advertising, and $169M will go to 108k borrowers that could not secure debt relief because of their national origin. The fine is the biggest federal settlement on record for deceptive marketing and discriminatory practices.

Euronext Shares started trading at €19.40 this morning, which was 3% below its IPO price. Concerns about the exchange's potential growth caused stock trading volume to remain down. Parent company Intercontinental Exchange (NYSE:ICE) priced the shares at €20 yesterday, and had sold all 42M shares in the spinoff company. ICE acquired NYSE Euronext for $11B last year, and planned to spin off Euronext at the time.

Improving their offer for Alstom, Siemens (OTCPK:SIEGY) and Mitsubishi (OTCPK:MHVYF) will now pay €8.2B ($11.2B) in cash, in place of their last bid of €7B. This will value Alstom (OTCPK:ALSMY) at €14.6B, which is well above GE's (GE) offer of €12.4B. Siemens has also expressed it is willing from the start to enter a mobility management joint venture with Alstom. Mitsubishi is also willing to purchase a 40% stake in the energy business, raising its cash payment €3.9B from €3.1B.

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Today's Markets:
In Asia, Japan -0.1% to 15349. Hong Kong +0.1% to 23194. China +0.2% to 2027. India -0.4% to 25106.
In Europe, at midday, London +0.3%. Paris +0.1%. Frankfurt +0.3%.
Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude +0.1% to $106.54. Gold -0.2% to $1311.
Ten-year Treasury Yield +1 bps to 2.63%

Today's economic calendar:
10:00 Atlanta Fed's Business Inflation Expectations

Notable earnings before today's open: DRI, KMX

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