- G-7 intervention puts brakes on the yen. The yen has fallen today after the G-7 agreed to concerted intervention in the currency markets for the first time since 2000. The yen, which was at 81.46 to the dollar midday in Europe, had surged to a record 76.25 yesterday in response to the earthquake, tsunami and nuclear crisis in Japan. This sparked fears about the country's ability to use exports to help its economy recover from the triple blow. The Bank of Japan started proceedings with a reported purchase of $25B and was followed by its counterparts in the U.K., France and Germany. The BOJ also pumped another ¥3T ($37B) into money markets, adding to the tens of trillions it has injected this week. The Nikkei 225 ended +2.7% at 9,206.75 on the announcement of the G-7 intervention, although it was -10.2% for the week, while the broader Topix index was -9.3%. The increase in shares came as progress was made on work to cool overheating fuel rods at the stricken Fukushima Daiichi nuclear power station.
- U.N. approves Libya action; oil volatility to continue. The U.N. Security Council, by a vote of 10-0 with 5 abstentions, authorized yesterday evening a no-fly zone in Libya and approved 'all necessary measures' to protect Libyan civilians. The French government indicated that bombing of Libyan targets could begin within hours of the authorization, which means military action is likely imminent, if not already underway. Crude futures are +0.5% to $101.93 (though they were as high as +1.5% earlier in the morning), as investors worry that military strikes could cut oil supply from Libya. Also lifting crude: Saudi troops have been deployed in Bahrain to help contain protests, and analysts fear the Saudi intervention may strain the relationship between the world's biggest oil producer and the U.S. Traders will be watching carefully for crude price catalysts as Saudi Arabia's King Abdullah addresses his nation this morning.
- General Mills moves in on Yoplait. General Mills (NYSE:GIS) said this morning it has entered exclusive negotiations with PAI Partners and Sodiaal to buy interests in Yoplait, confirming earlier reports that it beat out bidders including Nestle (OTCPK:NSRGY) for the 50% stake. Negotiations are 'in progress' and General Mills provided few specifics, though PAI and Sodiaal said the deal values the Yoplait stake at €800M ($1.13B).
- Higher costs dent Nike earnings. Nike (NYSE:NKE) shares fell 5.3% in after-hours trading yesterday, after the company reported Q3 earnings results slightly below consensus estimates (see details below). The company said higher costs for cotton, labor and transportation were responsible for its first earnings miss in 19 consecutive quarters, and that profit margins may be reduced this year as a result. To help offset its higher costs, Nike plans to raise prices on a broad variety of its products 'across the board,' a shift from the company's recent strategy of 'surgical' price increases that target specific products and markets.
- Fed to greenlight bank dividends. The Federal Reserve is expected to sign off today on the health of some of the nation's largest banks, removing restrictions created during the financial crisis that barred banks from raising dividends and buying back shares. Banks that are cleared by the Fed today are expected to make announcements immediately; sources say JPMorgan (NYSE:JPM) plans to announce dividend boost and share buybacks. U.S. Bancorp (NYSE:USB), American Express (NYSE:AXP) and Wells Fargo (NYSE:WFC) are also expected to get Fed clearance. Some banks, like Bank of America (NYSE:BAC), will likely be left hanging for at least a little longer.
- EMC's anti-hacking division hacked. EMC's (EMC) security division RSA was hacked into after intruders compromised a widely used technology for preventing computer break-ins and made off with confidential data on RSA's SecurID products. The breach could threaten highly sensitive computer systems, although the scope of the attack wasn't immediately known. RSA's customers include the military, governments, banks, medical facilities and health insurance outfits.
- FDIC sues ex-WaMu execs. The FDIC is suing three former Washington Mutual Bank executives and two of their wives, accusing CEO Kerry Killinger, COO Stephen Rotella and David Schneider, president of the home loans division, of pushing risky loans while ignoring warnings about the housing bubble. When the bubble began to burst, Killinger and Rotella allegedly transferred their wealth to their wives to put it beyond the reach of creditors. The FDIC has been seeking $900M in damages in private negotiations with the executives but didn't specify an amount in its suit.
- Nasdaq's counterbid for NYSE stalls. Nasdaq OMX (NASDAQ:NDAQ) is urgently trying to counter Deutsche Boerse's (OTCPK:DBOEY) $9B bid for NYSE Euronext (NYSE:NYX), but is facing several difficulties that are delaying a possible counterbid. Renewed volatility in global markets is making it harder for Nasdaq to secure financing, and there are still several pivotal details that need to be ironed out between Nasdaq and potential bid partner IntercontinentalExchange (NYSE:ICE), including the timeline of an offer. Sources previously said a counterbid was expected this week, but now suggest it isn't clear when a bid will be made, if at all.
- Multinationals warn of disruptions over Japanese supplies. Multinational corporations across several sectors are facing supply-chain and manufacturing disruptions because of the events in Japan. Analyst firm iSuppli said Apple (NASDAQ:AAPL) might have trouble in securing certain components made in the country, including those used in the iPad 2. Toyota (NYSE:TM), Honda (NYSE:HMC) and other Japanese car makers have already shut plants in Japan, and General Motors (NYSE:GM) will halt output at a factory in Louisiana on Monday due to a shortage of parts. Volkswagen (OTCPK:VLKAY) and Sony Ericsson (SNE, ERIC) said they may experience difficulties and Nokia (NYSE:NOK) was reported to be affected. However, Intel (NASDAQ:INTC), Qualcomm (NASDAQ:QCOM), Motorola Mobility (NYSE:MMI) and Research in Motion (RIMM) said they're seeing little or no impact.
- Senate passes three-week budget bill. The Senate has followed the House in passing a sixth stop-gap bill that will fund the U.S. government for three more weeks while legislators attempt to forge an overall budget agreement. The government would have run out of money today had the Senate not approved the bill, which slashes $6B from government spending in that period. However, a gap of $50B exists in the negotiating positions of Republicans and Democrats for the annual budget.
- Executive bonuses bounce back. CEO bonuses at 50 major corporations jumped to a total of $126.1M in 2010 from $83M a year earlier, a study from consulting firm Hay Group shows. A big beneficiary was Walt Disney (NYSE:DIS) chief Robert Iger, who enjoyed a 45% increase to $13.5M. GE's (NYSE:GE) Jeffrey Immelt collected $4M after skipping payments the previous two years, when profit dropped. Starbucks (NASDAQ:SBUX) CEO Howard Schultz pocketed $3.5M compared with $1M a year earlier after profit more than doubled to record levels. However, the bonus for Whirlpool (NYSE:WHR) CEO Jeff Fettig fell by half while Monsanto's (NYSE:MON) Hugh Grant didn't receive anything, with the latter paying for underperformance.
- State AGs prep for robo-signing negotiations. State attorneys general will begin negotiations 'relatively soon' with mortgage servicers accused of flawed paperwork and processing, but at this point are still discussing with banks when and how the negotiations will take place. Iowa AG Tom Miller said a settlement is "more likely than not" but "definitely not certain." To recap, then, state AGs are negotiating the details of their upcoming negotiation, and a settlement may or may not happen. The banks in question include Bank of America (BAC) and Wells Fargo (WFC).
- Borders shuts more stores. Bankrupt Borders (OTC:BGPIQ) will close another 28 stores on top of the 200 locations it already plans to shut down, leaving Borders with only half of its original 'superstores.' The bookseller aims to exit bankruptcy in September, and will have to contend not just with competition from rivals but from a changing market as well; January's e-book sales of $70M exceeded sales of hardcovers ($49.1M) and mass market paperbacks ($39M).
Earnings: Thursday After Close
- LDK Solar (NYSE:LDK): Q4 EPS of $1.09 beats by $0.17. Revenue of $921M (+36% Y/Y) beats by $34M. Shares -2.6% AH. (PR, earnings call transcript)
- Nike (NKE): FQ3 EPS of $1.08 misses by $0.04. Revenue of $5.1B (+7.3% Y/Y) beats by $0.1B. Shares -5.3% AH. (PR, earnings call transcript)
- In Asia, Japan +2.7% to 9207. Hong Kong +0.1% to 22300. China +0.4% to 2909. India -1.5% to 17879.
- In Europe, at midday, London +0.3%. Paris +0.8%. Frankfurt +0.5%.
- Futures at 7:00: Dow +0.6%. S&P +0.7%. Nasdaq +0.55%. Crude +0.5% to $101.93. Gold +0.8% to $1415.20.
Friday's Economic Calendar
- 10:30 ECRI Leading Index
- No notable earnings today.
The SA Currents team contributed to this post.
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