Wall Street Breakfast: Must-Know News

by: Jason Kelly
Jason Kelly
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

  • BHP withdraws bid for Canada's Potash. After a three-month pursuit and a resounding rejection by Canadian regulators, mining giant BHP Billiton (NYSE:BHP) shuttered its $39B bid to buy Potash (NYSE:POT), a deal that would have been the world's biggest this year. It was the third failed major acquisition attempt in a row for BHP, and the company plans to give in to investor demand and return cash to shareholders with a $4.2B share buyback. Chief executive Marius Kloppers said in a statement that BHP believes "its offer would have resulted in a significant net benefit to Canada." Premarket: BHP +0.8%, POT -3.6% (7:00 ET).
  • MUFG buys RBS' project finance unit. As rumored, Mitsubishi UFJ Financial Group (NYSE:MTU) announced it will buy RBS' (NYSE:RBS) project finance portfolio for £3.8B ($6.1B). The deal accelerates MUFG's already-aggressive overseas expansion strategy, and will allow RBS to repay some of its taxpayer bailout. MUFG also raised its full-year profit outlook by 25% to ¥500B ($6.1B) after Q2 net profit nearly tripled. Premarket: RBS -0.45% (7:00 ET).
  • EMC to buy Isilon. Data storage leader EMC (NYSE:EMC) is expected to announce as soon as today that it will buy Isilon (ISLN), which stores video and digital images, in a bid to lock up the clustered storage segment of online cloud computing. Data storage is hot, with volume growing at rates of 50% Y/Y even as PC sales flatline. While Isilon is barely profitable, its Q3 revenue of $54M was up 70% from a year earlier. Premarket: ISLN +8.4% (7:00 ET).
  • Warner to bid $750M for EMI's recorded music division. Warner Music (NYSE:WMG) may lodge a $750M bid for EMI's recorded music division within weeks. Guy Hands, the head of EMI's owner Terra Firma, is not interested in a sale. However, Citigroup (NYSE:C), which lent Terra Firma money to buy EMI three years ago, supports a sale to Warner as a way for it to recoup its losses and untangle itself from Hands, who has repeatedly breached banking covenants, and lost a lawsuit against Citi in which he claimed the bank tricked him into overpaying for EMI in 2007.
  • Germany urges Ireland to accept EU bailout. Eager to stop a bond sell-off at the edges of the eurozone, Germany pushed Ireland into talks with the EU's Finance Ministry regarding a likely request for aid worth €80B ($110B) between 2011 and 2013. Irish officials, however, deny that there is a crisis, stress the country is "fully funded till well into 2011," promise a credible austerity budget next month, and say their country won't give up its "hard-won" sovereignty by being forced to tap the European Financial Stability Facility. A European diplomat took little comfort in Ireland's position, saying, "Even a denial is seen as some sort of affirmation that there is something to deny." Ireland did mention that its banks could use a little help. Euro -0.6% vs. the dollar (7:00 ET).
  • Goldman delayed in paying back Buffett. Goldman Sachs (NYSE:GS) formally requested permission from the Fed in late October to pay back a $5B investment from Warren Buffett's Berkshire Hathaway (NYSE:BRK.A) during the financial crisis, but the effort has been delayed while the Fed devises guidelines for bank dividend increases. Goldman's $76B in shareholder equity and healthy cash base have put it in a position to repay Berkshire, even under the new Basel III capital guidelines. However, the Fed must approve the transaction because it's Goldman's banking supervisor.
  • Stimulus helps Japan beat GDP forecasts. Japan's July-September quarter saw GDP grow 0.9%, up from 0.4% in the preceding three months and better than expectations of 0.6%. On an annualized basis, GDP rose 3.9%. It was Japan's fourth straight quarter of expansion, driven largely by consumers eager to take advantage of government subsidies for car buyers ahead of their expiration in September, and cigarette buyers stocking up ahead of a new tobacco tax. Analysts think Q4 will 'stink' without such 'stimulus steroids.' Yen -0.6% vs. the dollar (7:00 ET).
  • AMP and AXA bid $13.1B for AXA Asia Pacific. Australian wealth manager AMP and French insurer AXA (OTCQX:AXAHY) tendered a complex $13.1B-plus bid for AXA Asia Pacific in what looks to be the final stage of one of Asia's largest takeovers that has dragged on for a year. The deal would better position AMP to compete against the four banks that dominate Australia's $1.2T wealth management market, and enable AXA Asia Pacific's parent, AXA, to exit Australia entirely and focus on its goal of growing in Asia. The AMP/AXA bid is A$539M higher than their offer in December 2009, and on par with a bid by the National Australia Bank that was blocked by regulators in September.
  • APEC seeks free trade, currency stability. The 21-member Asia-Pacific Economic Cooperation forum issued a statement yesterday calling for progress toward a free-trade area made more robust with 'market-determined' currency exchange rate systems. The members agreed to "refrain from competitive devaluation of currencies" and said that advanced economies, "including those with reserve currencies, will be vigilant against excess volatility and disorderly movements in exchange rates." While it contained no concrete policies, the statement presented unity that contrasted with 'discord over currencies' seen at last week's G-20 summit.
  • IEA sees oil market 'well supplied' until end of 2011. International Energy Agency Executive Director Nobuo Tanaka said this morning in Tokyo that "if OPEC continues production at the current level, the oil market will be very well supplied toward the end of next year." On Friday, the IEA raised its 2010 global oil demand growth forecast to an average of 87.3M barrels per day, following data from the U.S. Department of Energy on Wednesday that showed crude stockpiles in America down 3.3M barrels in the week ending November 5 - analysts expected them to rise 1.4M barrels. The price of oil dipped to $85 per barrel on Friday when traders worried about a possible interest-rate increase in China crimping demand, but rebounded above $85 in Asian trade this morning as bargain hunters think "90 dollars is possible" by year-end. Oil futures +0.7% to $85.45 (7:00 ET).
  • Qantas may replace 14 Rolls-Royce engines on A380s. Qantas Airways announced it might need to replace 14 of the Rolls-Royce (OTCPK:RYCEY) engines on its A380 (OTCPK:EADSY) superjumbos, after investigations into why one of the engines failed on a flight two weeks ago, causing damage to the plane and forcing an emergency landing in Singapore. Rolls-Royce warned on Friday that the incident would cause it to miss profit forecasts, with analysts estimating the total cost could run from £40M ($24.8M) to £50M. Separately, Qantas said today that a plane heading for Buenos Aires was forced to return to Sydney because of electrical faults, becoming at least the fourth flight turned around by Qantas in less than two weeks.
  • Bank failures climb to 146. Two busted banks in Georgia were bought by Ameris (NASDAQ:ABCB) and regulators closed a third in Arizona on Friday to bring this year's tally of bank failures to 146, higher than last year's 140 and the most seen in a year since the Savings & Loan Crisis of the early 1990s. The failures will cost the FDIC's deposit insurance fund around $204M. The FDIC's list of "problem" banks weighed in at 829 with $403B in assets at the end of the second quarter, a 7% jump from the 775 banks on the list in the first quarter.

Today's Markets

  • In Asia, Japan +1.1% to 9828. Hong Kong -0.8% to 24027. China +1.0% to 3014. India +0.8% to 20310.
  • In Europe, at midday, London +0.1%. Paris -0.8%. Frankfurt +0.2%.
  • Futures at 7:00: Dow +0.2%. S&P +0.3%. Nasdaq +0.55%. Crude +0.7% to $85.45. Gold +0.1% to $1366.30.

Monday's Economic Calendar

Seeking Alpha's Market Currents team contributed to this post.

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