Bank officials, trade groups and lawmakers are quietly pressing the Federal Reserve for a delay of up to seven years regarding the rule that limits their investments in private-equity and venture-capital funds. The "Volcker rule," part of the Dodd-Frank legislation, restricts banks' ownership stake in hedge funds and private equity funds, and prohibits banks from making speculative bets with their own money. Regulators finalized the rule in December but agreed not to enforce it until 2015.
The SEC has launched an investigation into examining alternative mutual funds, following their recent surge in popularity. The funds in question typically employ investment strategies that imitate those of hedge funds, such as investing in private debt or shorting assets, and command higher fees. Investigations will be conducted at large investment firms such as BlackRock (NYSE:BLK) and AQR Capital Management, as well as smaller firms that previously didn't offer mutual funds.
The Treasury Department posted a U.S. budget deficit of $95B at the end of July, down 3% from $98B in the same period last year. Fiscal year-to-date, the deficit of $460B is off 24% from the same period a year ago, and the lowest for the first ten months of the fiscal year since 2008. Receipts last month totaled $211B, up 5% from the year-ago period, and spending totaled $305B, up 3% from July 2013.
Japan's economy contracted sharply in the second quarter after a national sales tax in April rose 3% and triggered a sharp decline in consumer spending. Real GDP shrank 6.8% in the three months through June on an annualized basis from the prior quarter. Prime Minister Shinzo Abe will have to address the tax issue again soon. A sales tax increase (which will raise the rate to 10%) has been approved by the Japanese government and will take effect in October 2015.
Jumping further into the mobile payments market, Amazon (NASDAQ:AMZN) has unveiled a credit card reader to take on devices made by Square, PayPal (NASDAQ:EBAY), and a range of other companies. The new gadget expands the online retailer's presence in the brick-and-mortar world, and will give the company data on how U.S. consumers shop offline. Amazon will compete with rivals by charging lower fees per swipe.
Target is planning to fix its disastrous Canadian expansion through a three-pronged turnaround plan which will focus on supply chain management, pricing, and merchandise selection. After opening 124 stores and three distribution centers in Canada last year, Target's (NYSE:TGT) expansion over such a short time frame led to a nearly $1B loss. The supply chain "reset" comes as new CEO Brian Cornell takes the reins at the company.
AOL has announced its new offering of convertible notes, as an effort to raise $300M to be used toward potential acquisitions. The company also plans on using $50M of the raised money to repurchase shares. Until recently, the company only depended on cash generated from internal operations and asset sales to fund its growth. The offering marks the first time AOL (NYSE:AOL) has issued bonds since it was spun off from Time Warner in 2009.
Sony has announced at the Gamescom 2014 conference that cumulative PS4 sales have now topped 10M. The new figure indicates that sales have nearly doubled from the 5.3M Sony (NYSE:SNE) had seen as of Feb. 8. All signs suggest the PS4 has handily outsold the Xbox One since both consoles launched last November. However, Xbox One sales have picked up a bit since Microsoft (NASDAQ:MSFT) launched a $399 Kinect-free package in June.
Berkshire Hathaway has hired two senior executives from AIG's (NYSE:AIG) Asia operations to boost its insurance business in the region. The company has recently put a large effort into expanding its businesses by moving beyond its core reinsurance operations. In July, Berkshire Hathaway (BRK.B), (BRK.A) entered the fiduciary insurance business and hired AIG's VP of fiduciary liability. The company's Specialty Insurance unit is also applying for licenses from regulators in Sydney, Hong Kong, Singapore and Europe.
WellPoint is planning to change its name to Anthem, which is the brand that it now uses for most of its health-insurance products. "There's been a major pivot" to a more consumer-focused approach, says CEO Joseph Swedish. The Anthem brand is better-recognized among consumers. The new change reverses a decision made during the merger of Anthem Inc. and WellPoint Health Networks in 2004. The combined company took the name WellPoint (WLP).
FleetCor has agreed to buy payment solutions provider Comdata for $3.45B. The company plans to use $2.4B of new debt and the issuance of 7.3M shares to Comdata-owner Ceridian in order to finance the acquisition. The addition of Comdata will add $0.50-$0.60 to EPS in 2015, according to an early forecast from FleetCor (NYSE:FLT).
Telecom Italia's CEO Marco Patuano is scheduled to meet with Vivendi (OTCPK:VIVHY) chairman Vincent Bollore on Wednesday or Thursday to discuss an offer for the latter's Brazilian wireline carrier GVT. Telecom Italia's (NYSE:TI) proposal may include an equity swap, by offering Vivendi shares in exchange for GVT. Tensions are high, due to a $9B bid from Spanish rival Telefonica (NYSE:TEF) just days before. Telefonica plans on merging GVT with its Brazilian mobile and wireline subsidiary Vivo.
The DOJ's Antitrust Division has requested additional information from Tyson Foods (NYSE:TSN) and Hillshire Brands (NYSE:HSH) regarding their $7.7B deal announced in June. Tyson's tender offer, which was scheduled to expire on July 16, has been extended until Aug. 19. The companies estimate the deal to be completed by Sept. 27. Antitrust experts are expecting the deal to win approval, since the companies tend to sell different products.
American Apparel has disclosed that it will not meet the filing deadline for Q2 financial statements, but the filing contains preliminary figures including an estimated net loss of $15M, or ~$0.09/share, vs. a $38M net loss, or ~$0.34/share, in the prior-year period. American Apparel (APP) says it is delaying its official quarterly report because of the recent overhaul of its board.
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In Asia, Japan +0.4% to 15214. Hong Kong +0.8% to 24890. China 0.1% to 2223. India +0.2% to 25919.
In Europe, at midday, London +0.2%. Paris +0.6%. Frankfurt +0.9%.
Futures at 6:20: Dow +0.3%. S&P +0.4%. Nasdaq +0.4%. Crude -0.1% to $97.27. Gold flat at $1310.80.
Ten-year Treasury Yield +1 bps to 2.47%
Today's economic calendar:
7:00 MBA Mortgage Applications
8:30 Retail Sales
10:00 Atlanta Fed's Business Inflation Expectations
10:00 Business Inventories
10:30 EIA Petroleum Inventories
1:00 PM Results of $21B, 10-Year Bond Auction
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