- Strauss-Kahn steps down as head of IMF. Dominique Strauss-Kahn has resigned as managing director of the IMF following his arrest on sex-assault charges in the U.S. John Lipsky, the organization's first deputy managing director, remains as the acting head. French Finance Minister Christine Lagarde appears to be the favorite to become Strauss-Kahn's permanent successor, with sources saying she would receive Angela Merkel's crucial support, although some developing nations have called for a candidate from an emerging market country. Commentators welcomed Strauss-Kahn's departure, with one saying it "clears the path for the IMF Board to shift from crisis mode to credibility mode." However, former Bank of Canada governor David Dodge said, “It’s certainly, in these negotiations with Europe, very hard to replace him.”
- LinkedIn set to debut at $4.25B valuation. LinkedIn (NYSE:LNKD) shares are expected to begin trading on the NYSE this morning after the business social network last night priced its IPO at $45 a share, the higher end of an increased range. The company sold 7.84M shares and raised $352.8M, with the price giving LinkedIn a market cap of $4.25B, or around 275 times its 2010 net profit of $15.4M. The strong investor demand bodes well for other prominent social networking companies expected to list in the future, including Facebook, Groupon, Twitter and Zynga. As a CEO of a boutique investment bank said, "there is a feeding frenzy going on."
- Glencore raises $10B in IPO. Shares in Glencore began conditional trading in London this morning after the world's largest commodities trader sold 1.14B shares to institutional investors at £5.30 ($8.60) each, raising around $10B before the exercise of an over-allotment option (.pdf). The pricing was at the midpoint of the latest range given, provides Glencore with a valuation of $59.2B, and ensures that the IPO will be the largest ever on the premium listing segment of the LSE. After unconditional dealings start next week on Tuesday in London, the company is expected to enter the FTSE 100. Unconditional trading will start in Hong Kong the next day.
- Takeda to buy Nycomed for €9.6B. Takeda Pharmaceutical (OTCPK:TKPHF), Japan's largest drugmaker, has agreed to acquire Switzerland's Nycomed for €9.6B ($13.6B), including €3.6B of net debt. Nycomed, which is controlled by Nordic Capital and Credit Suisse's (NYSE:CS) private-equity unit, generates over a third of revenue from emerging markets, so the purchase will reduce Takeda’s reliance on sales in Japan and the U.S. It may also help the company offset a drop in revenue once generic versions of its best-selling diabetes pill Actos are released in 2012. However, a Barclays analyst described the deal as expensive, saying "it may not be enough to make up for revenue that will be lost from Actos.”
- Toshiba to buy Landis+Gyr for $2.3B. Toshiba (OTCPK:TOSBF) has agreed to buy smart metering company Landis+Gyr from Bayard Capital and other investors for $2.3B. Toshiba said the smart grid market is expected to grow to ¥5.8T ($71B), six times its current size, over the next decade.
- Sears swings back to net loss in Q1. Sears' (NASDAQ:SHLD) Q1 2011 earnings missed forecasts as the department store made a net loss of $170M after earning a $16M profit a year earlier. The results were hurt by "unfavorable weather, economic pressures facing customers, and comparisons to the previous year's government-sponsored stimulus program relating to the purchase of appliances." With sales declining 3% to $9.7B, Sears also acknowledged that it "fell short on executing with excellence."
- Earthquake sends Japan into recession. Japan's GDP fell 0.9% in Q1 2011 from the previous quarter as the earthquake, tsunami and nuclear crisis in March hurt business and consumer spending as well as supply chains. The fall was greater than a forecast drop of 0.5% and represented a 3.7% annualized decline. With GDP contracting 0.8% in Q4 2010 from the previous period, Japan officially entered recession in Q1. Analysts forecast the economy will shrink again in the second quarter as supply bottlenecks continue to weigh, although the Bank of Japan and many economists believe growth will resume in the second half as supplies are gradually restored and reconstruction spending kicks in.
- GE plans to repurchase $12B in shares. GE (NYSE:GE) intends to buy back $12B of its stock over the next few years in order to reduce its share count to the level it held before a $15.3B offering at the height of the financial crisis in October 2008. Shareholders welcomed the move, announced by GE CEO Jeff Immelt at a conference. "Historically, buybacks that are over 5% are significant and really help the stock," said one. Immelt also said GE had no plans for acquisitions in the near future, having spent $11B on energy companies over the past few months, and indicated that dividends would continue to increase.
- SEC investigates e-platform failures; proposes ratings overhaul. The SEC is investigating computer failures at electronic marketplaces, including Nasdaq (NASDAQ:NDAQ), to determine whether internal controls are sufficient, sources said. The probe is part of a broader regulatory review of stock exchanges following last year’s 'flash crash', recent hacking attempts, and trading glitches. Separately, the SEC early yesterday proposed new rules to overhaul the debt-rating business. The SEC wants to force Moody's (NYSE:MCO), S&P (MHP), Fitch and seven smaller firms to provide more detail on ratings, bar participation by their salespeople in the ratings process, and consider revising any ratings that involved an employee who was later hired by a firm he or she rated. Meanwhile, President Obama has nominated Republican Daniel Gallagher and Democrat Luis Aguilar as SEC commissioners.
- Thermo Fisher in strong contention for Phadia. Lab-equipment company Thermo Fisher Scientific (NYSE:TMO) is a leading contender to buy privately owned Swedish allergy testing firm Phadia in a deal that could be worth up to $3B, sources said. A purchase of Phadia could weaken Thermo's interest in Gen-Probe (NASDAQ:GPRO), for which it made a bid after the producer of tests for AIDS and other sexually transmitted diseases put itself up for sale. Novartis (NYSE:NVS) and Life Technologies (NASDAQ:LIFE) have also made offers for Gen-Probe, which has a market cap of $4.15B.
- Fed nears agreement on how to exit stimulus but not when. Minutes from the FOMC's meeting in late April show that Fed policy makers are beginning to coalesce on how to end the central bank's easy money policy, although there is division as to the timing. The majority of attendees said the Fed should first end its policy of reinvesting proceeds from maturing securities and later raise interest rates and sell assets. However, while some officials said an exit should come sooner than expected, others were concerned that early rate hikes would stifle any recovery. Separately, the St Louis Fed's James Bullard said the central bank should stop relying on core inflation and focus instead on overall price increases. Excluding food and energy prices "is hardly helpful for Fed credibility," Bullard said.
Earnings: Thursday Before Open
- Sears (SHLD): FQ1 EPS of -$1.58 misses by $0.17; adjusted loss of $1.39/share. Revenue of $9.7B (-3.4%) misses by $0.1B. (PR)
- Williams-Sonoma (NYSE:WSM): Q1 EPS of $0.30 beats by $0.02. Revenue of $771M (+7.4% Y/Y) beats by $5.6M. (PR)
Earnings: Wednesday After Close
- Advance Auto Parts (NYSE:AAP): Q1 EPS of $1.35 misses by $0.03. Revenue of $1.9B (+4% Y/Y) in-line. Shares -7.3% AH. (PR)
- Limited Brands (LTD): Q1 EPS of $0.40 beats by $0.01. Revenue of $2.2B (+15% Y/Y) in-line. Shares -3.6% AH. (PR)
- In Asia, Japan -0.4% to 9621. Hong Kong +0.7% to 23163. China -0.5% to 2860. India +0.3% to 18141.
- In Europe, at midday, London +1.0%. Paris +1.3%. Frankfurt +1.4%.
- Futures at 7:00: Dow +0.3%. S&P +0.35%. Nasdaq +0.2%. Crude +0.5% to $100.56. Gold -0.4% to $1490.30.
Thursday's Economic Calendar
8:30 Initial Jobless Claims
8:30 Fed's Dudley: Economic Outlook
10:00 Existing Home Sales
10:00 Leading Indicators
10:00 Philly Fed Business Outlook
10:30 EIA Natural Gas Inventory
12:00 PM Fed's Dudley: Economic Outlook
1:30 PM Fed's Fisher: 'Federal Reserve Functions and Economic Update'
1:40 PM Fed's Evans: 'Economic conditions and monetary policy'
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
- Notable earnings before Thursday's open: GME, MF, MPEL, ROST, SHLD, WSM
- Notable earnings after Thursday's close: ADSK, ARO, ARUN, BRCD, CRM, FL, GPS, INTU
The SA Currents team contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.