- BHP/Rio back out of huge iron-ore JV. Fearing strong objections from regulators, BHP Billiton (BHP) and Rio Tinto (RTP) said Monday they would forsake their $116B Australian iron-ore JV. The mutual abandonment sidesteps the hefty $275M breakup fee either would have had to pay. The pair said it was disappointed regulators didn't agree with its pro-competitive view of the proposed join-up. Focus will now move to Plan B: to share infrastructure, blend products and freely move iron ore through each other's ports.
- Northeast Utilities and NSTAR agree to $17.5B merger of equals. Northeast Utilities (NU) and NSTAR (NST) agreed Monday to a merger of equals worth $17.5B - creating New England's largest utility company. Northeast shareholders will own 56% of the combined company, which will be called Northeast Utilities. Together, it will operate six electric and gas utilities in three states; have nearly 3.5M customers; 4,500 miles of electric transmission lines; 72,000 miles of electric distribution lines; and 6,000 miles of gas distribution lines.
- St. Jude to acquire AGA Medical for $1.3B. St. Jude Medical (STJ) will acquire AGA Medical Holdings (AGAM) for cash and shares worth $1.3B, or $20.80/share, vs. Friday's close of $14.71. AGA Medical, with sales of $200M, develops and manufactures devices used to treat structural heart defects and vascular abnormalities using transcatheter treatments. St. Jude says their combined product lines, "will create a clear leader in the structural heart market, making St. Jude Medical the only company with programs across all major categories that include structural heart defects, left atrial appendage occlusion, transcatheter aortic valve implantation and percutaneous mitral valve repair."
- Robo-signing damages should be modest. FDIC chief Sheila Bair said Sunday regulators haven't yet gauged the scope of foreclosure improprieties, but that the processing of foreclosure documents without proper review appears to be endemic. Bair added that if foreclosure documentation is largely intact, and the issue is procedural rather than fundamental, she doesn't expect banks' exposure to be significant. So far, the Street has taken a similar view, saying the temporary halts in foreclosure sales aren't likely to impact on banks in the long run. "Sorry, no free houses," Nomura's Glenn Schorr wrote in a research note Friday.
- RBC buys BlueBay for $1.5B. Royal Bank of Canada (RY) said Monday it will buy U.K. fixed-income fund manager BlueBay Asset Management PLC for £963M ($1.54B), expanding the top-10 global-wealth manager's asset management solutions. The deal underscores ongoing consolidation in the global asset-management industry, as boutique firms look to tap larger players' sales channels, while banks either unload or double down on their asset management units, depending on how much capital they have. BlueBay has about $40B under management, up from just $8B when it went public in 2006.
- Investors flee stocks, leaving hedge funds in driver's seat. Pension fund managers say they continue to shave their exposure to equities, fleeing stocks for bonds as they try to achieve stable returns that more-or-less keep pace with their obligations. Earlier this decade, corporate pension plans had almost 70% of their money in stocks; by July, they had cut their exposure to just 45%. Their caution, coupled with that of self-directed investors, is shifting market influence to hedge funds that often trade rapidly, contributing to volatility, and could be one reason markets have become so choppy.
- Ad recovery picks up speed. Research firm Zenith Optimedia raised its forecast for 2010 global ad spending - a much-watched barometer of economic confidence - to a stronger than expected +4.8% (from +3.5%), or $450B. "We are seeing growth across the board and the recovery is steeper than we originally forecast," Zenith said; key growth areas include political ad spending, automobile, financial services and retail. U.S. ad spending is seen up 2.2%, to $151.5B, double Zenith's earlier forecast of +1.1%.
- No austerity measures here... Luxury spending has rebounded to pre-crisis levels, thanks largely to wealthy Americans replenishing their wardrobes after a year of self-denial, and nouveau-riche Chinese indulging in a worldwide spending spree. According to Bain & Co.'s annual survey, global sales of designer clothes, fine leather goods, jewelry, watches and other indulgences will surge 10% to $235B in 2010, recovering from a disastrous 8% drop in 2009. U.S. sales will climb 12%, compared with 6% growth in Europe and 22% growth in Asia.
- BP offloads $1.8B stake in Venezuela, Vietnam. BP (BP) will sell $1.8B worth of assets in Venezuela and Vietnam to Russian oil venture TNK-BP as it raises money to help pay for the Gulf of Mexico oil spill. Analysts reacted positively to the move, noting it bolsters BP's balance sheet while retaining 50% access to the potentially valuable assets through its stake in TNK-BP. BP is looking to raise about $30B through asset sales; today's deal brings its total thus far to $11B.
Earnings: Monday Before Open
- Asia: Japan flat. Hong Kong -1.2%. China -0.5%. India +0.1%.
- Europe at midday: London +0.1%. Paris flat. Frankfurt +0.3%
- Futures at 7:00: S&P -0.36%. 10-yr +0.1%. Euro -0.49% vs. dollar. Crude -0.17% to $81.79. Gold -0.8% to $1361.00.
Monday's Economic Calendar
- 9:00 International Capital Flow
- 9:15 Industrial Production
- 10:00 NAHB Housing Market Index
- 4:00 PM Geithner: 'The State of the Economy'
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