- Oil falls as Libyan rebels retake oil ports. The price of benchmark crude oil has fallen below $105 a barrel after Libyan rebels recaptured the oil ports of Ras Lanouf and Brega, helped by air strikes from the international coalition. The allies have also attacked Muammar Gaddafi's hometown of Sirte, which the rebels have to overcome if they are to march on Tripoli. The opposition has pledged to quickly restart Libya’s 1.6M barrels per day of crude output, although they will be hampered by a lack of foreign workers, who left the country at the outbreak of the uprising. Later today, President Obama is due to give a televised address about his policy on Libya and the other unrest in the Middle East. Crude futures -0.5% to $104.84 (7:00 ET).
- Alcatel-Lucent, Nokia climb on upgrade. Shares of Alcatel-Lucent (ALU) and Nokia (NOK) are both posting solid gains this morning after getting upgraded by Goldman Sachs. Alcatel-Lucent was raised to Buy from Neutral, with analysts saying "we now believe that profits from the company's structurally attractive growing businesses are poised to overtake declining legacy profits," creating "46% upside potential." Analysts expect Alcatel to sustain high-single-digit earnings margin (before interest and taxation) from 2012. Goldman said Nokia, also raised to Buy from Neutral, provides long-term opportunity for value investors after falling around 30% since February. Nokia's new strategy "is appropriate and creates the potential for €1B or more in cost reduction." Premarket: ALU +6.7%, NOK +3.35% (7:00 ET).
- Tax settlement to lift AstraZeneca's earnings. AstraZeneca (AZN) raised its profit target this morning after announcing a tax agreement with U.S. and U.K. authorities. The company expects to pay $1.1B to resolve all U.S. transfer pricing issues, which will allow AstraZeneca to free up a portion of the provisions set aside to cover the settlement. The result will be a Q1 boost to earnings of approximately $500M. In addition, the company's effective tax rate for the year will drop to around 21% from 27%, and AstraZeneca therefore expects 2011 core EPS to rise to $6.90-$7.20 from $6.45-$6.75. Premarket: AZN +0.5% (7:00 ET).
- Fed's Bullard calls for QE2 review. The Fed should consider curtailing its $600B QE2 program as the U.S. economy may not need as much stimulus as previously thought, St. Louis Fed President James Bullard said over the weekend. With the "economy looking pretty good," Bullard warned of creating inflation if the Fed is "as accommodative as we are today for too long." Bullard, who was the first policy maker to call for the buying of Treasurys, is not alone in calling for a review of the program, with the Fed's Charles Plosser and Jeffrey Lacker having done so also. However, Ben Bernanke has not indicated that the central bank will halt the policy.
- Ireland wants bank bondholders to share the pain. Ireland's government wants to impose losses on the senior unsecured bonds of Irish banks that are not covered by a state guarantee. Agriculture Minister Simon Coveney says investors are already pricing in the possibility of such a move given that the debt is trading at a discount in the secondary market. Under last year's EU-IMF bailout, Ireland can impose losses on banks' junior debt but the ECB is opposed to doing the same on senior debt due to fears of contagion. With Ireland's new government saying it can't afford the bailout terms, the EU will decide on the concessions it can offer the country after results of fresh stress tests on Irish banks later this week. These tests are expected to show a capital hole of around €25B ($35B).
- Merkel loses key state German election. Germany's contribution to the eurozone bailout fund could come under further pressure after Chancellor Angela Merkel's center-right coalition lost the important regional election of Baden-Wurttemberg to the Green Party. While the outcome was mainly due to anti-nuclear sentiment following the crisis in Japan, it is likely to weaken Merkel's authority among her conservative colleagues, who are expected to fight to limit German payments to the fund.
- Advantest to buy Verigy for $1.1B. Advantest (ATE), the world's second-largest manufacturer of chip-testing equipment, signed a definitive agreement to buy Verigy (VRGY) for around $15/share in cash, or $1.1B total. The agreement was largely expected, as Verigy earlier this month had called it a 'superior offer,' rebuffing a previous merger agreement with LTX-Credence (LTXC). The deal will aid Advantest in its battle with Teradyne (TER), until now the global leader in the overall sector; the acquisition of Verigy could give Advantest as much as 48% of the market, taking it past Teradyne's 40%.
- Porsche to raise almost €5B ahead of VW merger. Porsche (OTC:POAHF) is raising around €5B ($7B) that it will use to cut its debt to €1.5B ahead of a merger with Volkswagen (OTC:VLKAY). Porsche will issue a combined 131M ordinary and preferred shares to current owners at €38 each, with the price a 32% discount to the preferred stock’s close on Friday. The subscription will begin on Wednesday and end on April 12. Porsche and Volkswagen, which already owns 49.9% of Porsche’s carmaking operations, had hoped to complete the merger later this year, but believe that it won't close until 2012 because of German legal obstacles and an investigation into alleged share-price manipulation.
- Riversdale slipping from Rio's reach. With its deal deadline looming, Rio Tinto (RIO) is still short of the 50% of Riversdale shares it needs, having secured interest and acceptances equal to a 39.66% stake. The revised deal expires at the end of the day, at which point the sweetened offer reverts to A$16/share from A$16.50 until the bid closes on April 6. Premarket: RIO -1.1% (7:00 ET).
- TV unit drags on Philips. Royal Philips Electronics (PHG) expects to miss its target of breaking even on its television business this year, pointing to 'severe' pricing pressure in the market and 'some headwind' from its efforts to reduce inventory. The unit is now expected to generate a Q1 loss of €100M-120M ($141M-169M), vs. a Q4 2010 loss of €67M. Philips stressed its television business "remains a major issue and resolving this is an absolute priority for the company." In European trading, Philips -1.8% (7:00 ET).
- Walter buys Green Tree. Walter Investment (WAC) will pay $1.07B to buy privately-held Green Tree Credit Solutions, a hefty offer from a mortgage servicer with a market cap of just under $500M. The company will issue 1.8M shares of common stock, assume around $20M of existing Green Tree debt, and issue $765M of new debt to finance the deal. Walter Investment said the deal will provide "opportunities to achieve both revenue and expense synergies."
- Democrats may offer GOP $20B in further cuts. Democrats are formulating a proposal to offer the Republicans another $20B in spending cuts in this year's budget, sources say. This would come on top of $10B in reductions that Congress has already enacted and would represent a deeper cut than the White House and Senate Democrats had previously offered. However, acceptance of the plan is uncertain, as the GOP-controlled House has passed a bill that would slash $61B from 2010 levels, and the Republicans face pressure from tea-party activists not to compromise. Talks between the Democrats and GOP broke down last week and it's not certain when they will resume. Since the start of the year, the government has been operating under a series of interim appropriations bills, the latest of which will expire on April 8.
- In Asia, Japan -0.6% to 9479. Hong Kong -0.4% to 23068. China +0.2% to 2984. India +0.7% to 18943.
- In Europe, at midday, London +0.1%. Paris +0.2%. Frankfurt -0.2%.
- Futures at 7:00: Dow +0.1%. S&P +0.2%. Nasdaq +0.3%. Crude -0.5% to $104.84. Gold -0.8% to $1415.30.
Monday's Economic Calendar
- 8:30 Personal Income and Outlays
10:00 Pending Home Sales
10:30 Texas Manufacturing Outlook Survey
12:40 PM Fed's Lockhart: Economic Outlook
4:00 PM Fed's Evans: 'A Perspective on the Current Economy'
6:00 PM Fed's Rosengren: 'Recession and Recovery'
- Notable earnings after Monday's close: PVH
The SA Currents team contributed to this post.
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