- NYSE says savings favor Deutsche Boerse deal. The New York Stock Exchange (NYX) released a report that sees savings of about $583 million in its $9.8 billion merger deal with Deutsche Boerse (OTCPK:DBOEY), up about a third from initial estimates. The deal now promises net savings and synergies of $725 million - closer to the $740 million in savings promised by (rejected) higher-valued offers from Nasdaq OMX (NDAQ) and ICE; the vote on the Deutsche Boerse deal is scheduled for July 7. Meanwhile, Sen. Charles Schumer demands details of potential job losses from Nasdaq/ICE should their bid succeed.
- Coast Guard faults 'poor safety culture' at Transocean. A 288-page Coast Guard investigation of the Deepwater Horizon rig accident (under Marine Casualty Reports) found Transocean (RIG) at fault on numerous accounts including maintenance, training, management and safety code violations. These failures, the report attests, contributed to the likelihood of the event, and negatively impacted the likelihood of limiting collateral damage. The barrage of claims against BP and partners in the Gulf could lay the groundwork for billions in settlements. The Coast Guard report is not an indication of any final agency action.
- Growth data expected to reveal tenuous recovery. Preliminary growth figures of U.S. GDP will be released April 28, and some anticipate a reality check for equity indexes that are operating at full tilt. Lena Komileva, global head of G10 currency strategy at Brown Brothers Harriman in London, said that "the GDP figures will probably zoom in the focus more closely on fundamentals. A disappointment in the UK and U.S. may temper some of the buoyancy behind commodity and equity prices.” Rising fuel prices won’t serve to help the growth picture, as many expect energy spikes to show up in tempered growth numbers. As a result, expect many stocks to focus on emerging-market exposure during earnings this week. If results are good, look for equity indexes to overcome any “domestic” issues, says MF Global analyst Nick Kalivas.
- Southwest jet rupture probe focuses on Boeing plant. A 15-year-old lapse at an assembly line in one Boeing (BA) factory has been revealed as the most likely cause of the fuselage rupture that occurred on a Southwest Airlines (LUV) 737 earlier this month. The incident prompted the immediate grounding of 79 Boeing 737 airplanes, and extensive inspections for 100 more. Five additional planes were found with fuselage cracks that did not pass inspection. A number of these were built around the same time, raising suspicion that the issues are assembly-related. Boeing has been swift to respond to the claims and says “any attempt to draw conclusions… would be premature and speculative." The company says planes underwent a design change leaving current models unaffected by the flaws.
- Big Oil profits set to soar. Oil companies are primed to enjoy soaring profits after a first quarter where crude averaged $100 a barrel, 20% higher than a year ago. Exxon Mobil Corp. (XOM), Chevron (CVX) and ConocoPhillips (COP) all stand to gain from rising prices. Sustained unrest in the Middle East - combined with the seemingly accelerating recovery in some markets - is maintaining upward pricing pressure on crude. Furthermore, news from Saudi Arabia insists that their production capacity will remain at 12.5 million barrels a day, and not the increased 15 million bpd some were anticipating. If prices follow their current trend, many believe Big Oil profits could approach 2008 levels.
- Gold lifts to record on dollar, Euro debt worries. Gold rose past $1,518 Monday morning, extending a rally to the seventh consecutive session. The dollar has responded in weak fashion, stumbling to a three-year low. As many of the developed economies are saddled with debt, inflation has now become an accepted reality (and in the worst cases, a prescribed medication) for the foreseeable future. This has continued to catalyze a flight to safety as investors hope to keep their wealth safe; silver futures hit a 31-year high on related concerns.
- Toyota paces production drops among Japan automakers. The quake in Japan will take years to clean up and many of the long-run implications on production and growth will be difficult to forecast. In the short term, however, some of the first corporate casualties will be the automakers. Toyota (TM) will slip to third in production behind General Motors (GM) and Volkswagen (OTCQX:VLKAY) after missing out on production of 400,000 vehicles through mid-April. Honda (HMC) and Toyota have both made statements saying production will recover by the end of 2011. The impact on earnings has not been discussed directly, but analysts are slashing expectations. Winners in this scenario include South Korean automakers, including Hyundai (OTC:HYMLF) and Kia (OTC:KIMTF).
- Commodity markets brace for Fed. Commodity markets married to the Fed are bracing for the impact of Ben Bernanke’s first press conference on Wednesday. A withdrawal of QE could spell trouble for many commodities riding recent Fed-sponsored waves of easy money. Some analysts anticipate the Fed will be late in raising interest rates to avoid stifling the sputtering recovery, creating more room for commodities to run. Others are concerned with the actions of big markets like China and India, who have recently become more cognizant of inflationary concerns. Inflation in China will fall in the second half of 2011. This comes on the heels of the central bank raising required reserves four times, and interest rates twice, since the beginning of 2011.
- Huawei’s $30 billion China credit opens doors. Huawei is taking advantage of favorable credit terms with the China Development Bank to expand into Brazil and Mexico. “Our support for Huawei, ZTE and other high-technology companies has opened up the overseas market,” said Bank Chairman Chen Yuan. Huawei and ZTE have been the subject of scorn and jealousy from EU companies that claim they cannot compete with the Chinese tech giants due to these basically interest-free loans. The European Chamber of Commerce recently released a report that said European firms are losing out on billions worth of projects inside China due to protectionism and corruption.
- St. Louis tornado forces flight stoppages. An EF4 tornado tore through Lambert-St. Louis International Airport on Friday, causing devastation to buildings, houses and aircraft. American Airlines (AMR) and Southwest (LUV) both plan on operating on Monday after halting flights this weekend, and the airport should be back to full capacity by the middle of the week. Luckily, no lives were lost in the devastating storm.
- Misrata, Libya under rebel control. The battle for Libya continues to shake the Middle East as Gaddafi forces bombarded rebel troops along a ferociously contested strip of Misrata Sunday. Even as the government shelled the city from its outskirts Sunday, rebels claim to have won the city during the day. NATO forces have also flattened a building inside the Gaddafi Bab al-Aziziyah compound in what some from the Gaddafi camp consider an attempt on the leader’s life.
- Nintendo net profits drop 66%. Nintendo (OTCPK:NTDOY) profits dropped 66% year-on-year from ¥226.6 billion to ¥77.6 billion ($946 million). A strong yen and drop in sales contributed to the decline. The earthquake did not directly impact revenues, but Nintendo indicated that consumer spending would most likely be softer as a result. In hopefully more positive news, Nintendo announced the release of the second Wii system in 2012. A playable version will be demoed at the gamer convention E3 this summer.
- Apple, Android location logging sparks privacy debate. In separate incidents, privacy issues have risen at two of the premier mobile players in the world. Two British researchers, Alasdair Allan and Pete Warden, discovered a location logging mechanism introduced by Apple (AAPL) products in early to mid-2010. Elsewhere, Swiss researcher Magnus Eriksson found a similar feature on Android (GOOG) phones. Senators have written letters to Apple CEO Steve Jobs to ask about the purpose of the logging feature, and countries like South Korea are launching investigations into whether these features violate privacy laws. Google has responded to these claims, but Apple has stayed quiet on the subject.
Earnings: Monday Before Open
- In Asia, Japan -0.1% to 9672. Hong Kong closed. China -1.5% to 2965.
- In Europe, London, Paris, Frankfurt closed.
- Futures at 7:00: Dow +0.3%. S&P +0.3%. Nasdaq +0.3%. Crude +0.3% to $112.65. Gold +0.9% to $1517.20.
Monday's Economic Calendar
- 10:00 New Home Sales
- Notable earnings before Monday's open: BEAV, BPOP, CBE, JCI, KMB, SOHU
- Notable earnings after Monday's close: ACL, AGNC, AMP, ESRX, HLX, HMA, JEC, MAS, NFLX, PCL, RSH, UIS, VECO
The SA Currents team contributed to this post.
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