- Government poised for profit in AIG stock sale. The Treasury is set to make a small profit on some of its 92% stake in AIG (AIG) today with the offering of $8.7B worth of shares, sources said. The government and AIG intend to sell a combined 300M shares at $29-$29.30 each, above the Treasury's breakeven price of $28.73 but below yesterday's close of $29.98. However, AIG's poor stock performance recently has prevented the Treasury from making a bigger return, with the paper profit on its entire stake falling to $2B today from $23.5B in January. The offering has an over-allotment option of 45M shares, which will leave the Treasury with 75% of AIG if exercised.
- Greek default could hit ratings across Europe. Moody's believes a Greek default could hurt the credit ratings of other distressed countries as well as that of Greece and its banks, which would require a recapitalization. The ratings agency also said a 'reprofiling' of Greece's debt would constitute a default. Moody's assessment comes a day after Greece unveiled €6B worth of new emergency fiscal measures to bring down its deficit and said it would accelerate the pace of privatization to raise money, including with the sale of its stake in Hellenic Telecom (HLTOY.PK).
- Moody's considering downgrades for U.K. banks. Moody's is placing 14 U.K. banks on review for downgrades, including Lloyds (LYG) and Royal Bank of Scotland (RBS), due to the authorities indicating that they will be less likely to bail out the banks in the future. The rating agency also changed Barclays' (BCS) outlook to negative and maintained the same prognosis for HSBC (HBC). Analysts have said that RBS and Lloyds would lose the most in any downgrade, as their ratings rely on state support and higher ratings help lower their costs of funding.
- Pressure on banks from probes intensifies. Despite their protestations of innocence, the scrutiny on banks by the authorities continues to increase. The SEC is examining whether Bank of New York Mellon (BK) and State Street (STT) fairly charged pension-fund clients for currency trading, a source said. The probe follows investigations by the Justice Department and three state attorney generals. Meanwhile, other sources said New York AG Eric Schneiderman has extended his probe into mortgage practices at leading banks to include Royal Bank of Scotland (RBS), UBS (UBS), JPMorgan Chase (JPM) and Deutsche Bank (DB), bringing to seven the number of firms under scrutiny. On the opposite coast, California AG Kamala Harris is creating a mortgage-fraud task force of 25 people to look at corporate fraud, scams and lending practices.
- Internet craze continues as Yandex raises $1.3B in IPO. Russian search engine Yandex (YNDX) is set to debut on Nasdaq today after it raised $1.3B in its IPO by selling 52.2M shares at $25 each. The price was at the top of a range that was revised upwards and gives the company a market cap of $8B, or almost 60 times 2010 net profit of $134M. While exuberant, the valuation is nowhere near that of LinkedIn (LNKD), which carried out its IPO last week at a value around 275 times last year's earnings. However, after more than doubling on their first day of trading, shares in the business social network have fallen for two straight sessions.
- Volcanic ash hits flights. The ash cloud from the eruption on Saturday of Iceland's Grimsvotn volcano has hit air travel to and from Scotland and closed a part of Danish airspace. Around 250 flights have been cancelled so far, including those of British Airways (ICAGY.PK), KLM (KLMR.PK), easyJet (EJETF.PK) and Ryanair (RYAAY). The latter has flown a plane through an area over Scotland that regulators say has a 'high ash concentration' to show there is no danger from the cloud. Concerns about the effect of the cloud pushed forward President Obama's planned departure from Ireland to the U.K., where he arrived last night.
- Insurers face record losses from weather and other disasters. The deadly tornadoes in the Missouri city of Joplin and other Midwestern communities, as well as floods and earthquakes around the world, are expected to bring record losses for insurance companies this year. EQECAT, which provides disaster and risk models to the industry, forecasts that insurers could suffer losses of up to $55B from disasters, including from the major earthquakes in Japan and New Zealand. Concerns about the mass payouts have caused stocks in the sector to lag, with the S&P Insurance Index flat since the start of the year compared with a 4.7% rise for the S&P 500.
- Bank of America to pay $410M overdraft charge. Bank of America (BAC) has won tentative court approval for a $410M settlement with 1M customers over claims they were overcharged for overdrafts. A final approval hearing is set for November. Other banks may also find themselves paying out over the issue, with Citigroup (C), JPMorgan (JPM) and Wells Fargo (WFC) involved in related lawsuits.
- Panel urges Toyota to revamp. Toyota (TM) should include foreigners on its board and appoint a CEO for its North American operations to better prevent and respond to safety and quality problems, an independent panel has recommended. The panel also advised the Japanese automaker to hire more powerful regional managers, blaming many of the problems that have led to massive recalls on an overly strong and centralized authority. Toyota is set to come under further pressure in the U.S. from today, when Volkswagen (VLKAY.PK) officially opens a $1B factory in Tennessee. An industry expert said the plant enables VW to "localize a significant amount of their volume" which will significantly reduce costs and improve competitiveness.
- Office Depot appoints Austrian as CEO for the long term. Office Depot (ODP) has appointed interim Chairman and CEO Neil Austrian to the positions on a permanent basis, seven months after the abrupt departure of predecessor Steve Odland. Despite being 71, Austrian's achievements since taking charge in November "led the board to re-think the decision to introduce a new leader at this time."
Earnings: Tuesday Before Open
- AutoZone (AZO): FQ3 EPS of $5.29 beats by $0.31. Revenue of $1.98B (+8.6% Y/Y) beats by $0.07B. (PR)
Earnings: Monday After Close
- GT Solar International (SOLR): FQ4 EPS of $0.41 beats by $0.07. Revenue of $271M (+39% Y/Y) beats by $47M. Shares +13.6% AH. (PR)
- In Asia, Japan +0.2% to 9477. Hong Kong +0.1% to 22731. China -0.3% to 2768. India +0.1% to 18012.
- In Europe, at midday, London +0.5%. Paris +0.1%. Frankfurt +0.9%.
- Futures at 7:00: Dow +0.3%. S&P +0.2%. Nasdaq +0.2%. Crude +1.3% to $98.99. Gold +0.5% to $1522.90.
Tuesday's Economic Calendar
- 2:00 Fed's Rosengren: 'Financial Stability and Regulatory Priorities'
7:45 ICSC Retail Store Sales
8:20 Consumer Finance Conference
8:55 Redbook Chain Store Sales
9:00 OECD Forum 2011
9:50 Fed's Hoenig: 'Is Housing Ready for a Rebound?'
10:00 FDIC Quarterly Banking Profile
10:00 Richmond Fed Mfg.
10:00 New Home Sales
11:30 Hearing: Oversight of the Consumer Financial Protection Bureau
- Notable earnings before Tuesday's open: AZO, MDT
- Notable earnings after Tuesday's close: : AMAT, AVGO, CPWR, PSS, TIVO, TTWO
The SA Currents team contributed to this post.
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