Wall Street Breakfast: Must-Know News

by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

  • Airline profit expected to nosedive. The International Air Transport Association has slashed its 2011 net profit outlook for airlines to $4B from an estimate of $8.6B three months ago, due to the Middle East unrest, oil price volatility and the disasters in Japan. IATA disclosed its forecast, which is way below the $18B booked in 2010, at its annual conference in Singapore, where it also warned of a trade war if Europe makes airlines join a planned Emissions Trading Scheme. This would force them to buy permits for each ton of carbon dioxide they emit above a certain cap, with carriers saying the program will increase costs.
  • Greece seethes as the troika squeezes. The Greek cabinet was due to meet today to discuss making further cuts worth billions of euros and carrying out accelerated privatizations as part of efforts to secure a new bailout and avoid a default. The meeting follows a demonstration of 80,000 people in Athens last night to protest the austerity. The EU, IMF and ECB troika are still discussing the details of a second bailout for Greece, with support growing - although not at the ECB - to ask private creditors holding soon-to-mature Greek bonds to exchange them for new debt with a longer maturity. The largest holders of such debt last year were German banks with $22.7B, while the French were second with $15B.
  • Opposition wins Portugal election. Portugal's right-of-center Social Democrats have the dubious privilege of imposing massive budget cuts and risk further exacerbating the country's economic woes after winning yesterday's election with around 40% of the vote. The Social Democrats will probably form a coalition with the conservative Popular Party and so gain a majority in parliament. This will make it easier to implement austerity measures, such as welfare and pay cuts, and tax rises, as the government looks to comply with the terms of a €78B ($114B) bailout. The coalition takes office with unemployment at a record 12.6% and with the economy forecast to contract 4% over the next two years.
  • Positive results for cancer drugs. Bayer's (OTCPK:BAYRY) prostate cancer treatment Alpharadin showed such good results in a late-stage trial that the study was stopped early to allow patients receiving a placebo to be offered the new medicine, the company said today. The disclosure follows several announcements of successful testing from the annual meeting of the American Society of Clinical Oncology over the weekend, with among the most eyecatching being studies for melanoma treatments developed by Roche (OTCQX:RHHBY) and Plexxikon together, and by Bristol-Myers Squibb (NYSE:BMY). Other companies to present positive results included Pfizer (NYSE:PFE) with Aromasin, Novartis (NYSE:NVS) with Gleevec and Eli Lilly (NYSE:LLY) with Alimta.
  • Goldman to fight back against Senate report. Battered by a scathing Senate report that has sparked a number of investigations into its role in the financial crisis, Goldman Sachs (NYSE:GS) may release documents that show the report contains sloppy math and incomplete analysis, sources said. In April, the Senate Permanent Subcommittee on Investigations accused Goldman of trying to profit from a 'big short' against the housing market and betraying clients, but the bank says the subcommittee drastically overstated its positions. For example, the report said Goldman had net short positions of $10.6B on February 26, 2007, but a bank document shows that the subcommittee failed to include billions of dollars of bullish plays.
  • Dollar Thrifty urges rejection of Hertz offer. Dollar Thrifty's (NYSE:DTG) board has unanimously recommended that shareholders not tender their stock in Hertz's (NYSE:HTZ) $72 a share offer, citing "uncertainty surrounding the length and outcome of the regulatory process." Dollar Thrifty is cooperating with Hertz and Avis Budget Group (NASDAQ:CAR) as the two rental-car companies seek regulatory approval for rival buyout deals. But Dollar Thrifty also adopted a shareholder-rights plan, or 'poison pill,' last month, designed to avert an undesired takeover proceeding too quickly. When it was made in May, Hertz's cash and stock offer was worth $2.36B.
  • Peter Diamond withdraws as Fed nominee. Nobel Prize winner Peter Diamond is planning to withdraw as a candidate for Federal Reserve governor, announcing his decision yesterday in an opinion piece in The New York Times entitled "When a Nobel Prize isn't enough." The withdrawal by the President Obama nominee follows repeated Republican criticism of his candidacy, with Richard Shelby, the top Republican on the Senate Banking Committee, saying Diamond lacks monetary policy experience. In his article, Diamond hit back. "We should all worry about...how little understanding of monetary policy there is among some of those responsible for its Congressional oversight," he wrote.
  • Moody's decries constant changing of Japan PM. The increasing likelihood that Japan will again change prime minister is negative for its rating, Moody's said today. Under pressure to resign for his handling of the March earthquake and its aftermath, Naoto Kan will reportedly quit no later than August after he has pushed through a reconstruction bill, a second supplementary budget, and legislation to issue deficit-covering government bonds. However, with Japan's past four prime ministers lasting an average of less than a year, Moody's said more change could delay the fiscal programs needed to recover from the earthquake. In May, Moody's placed Japan's Aa2 ratings on review for a possible downgrade.
  • Jobs set to unveil iCloud storage service. In the midst of another medical leave that started in January, Steve Jobs is poised to cheer investors just by his mere presence at Apple's (NASDAQ:AAPL) annual developer conference in San Francisco today. Jobs is due to deliver a keynote speech and preview the company's new iCloud online storage service, which is expected to enable consumers to store their song libraries on the Internet and then access the music using different devices. Apple is reported to have agreements with major record labels for the service as it looks to compete with similar offerings from Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG).
  • Statoil to sell gas pipeline stake for $3.25B. Statoil (NYSE:STO) has agreed to sell a 24.1% stake in a European natural gas transport venture called Gassled for 17.35B kroner ($3.25B). The Norwegian company is selling Gassled to Solveig Gas Norway, a consortium comprising German insurer Allianz (OTCQX:ALIZF), the Abu Dhabi Investment Authority and Canada Pension Plan Investment Board. Statoil said the sale will allow it to use its "competence elsewhere with a higher return on our investment," although it will still retain a 5% stake in Gassled.
  • AvalonBay quickly appoints successor to CEO. Apartment-building operator AvalonBay Communities (NYSE:AVB) has named company president, Timothy Naughton, as CEO to replace Bryce Blair, who will step down at the end of the year. Naughton doesn't plan dramatic changes, saying he'll continue focusing on building apartments and diversifying what had been a largely upscale portfolio. Blair, who will remain as chairman until the end of next year, led AvalonBay's recovery from the housing and financial crashes, which pulled the company's share price to below $50. On Friday, the stock closed +1.9% at $131.24.

Today's Markets

  • In Asia, Japan -1.2% to 9380. Hong Kong closed. China closed. India +0.2% to 18420.
  • In Europe, at midday, London -0.1%. Paris -0.7%. Frankfurt -0.2%.
  • Futures at 7:00: Dow -0.2%. S&P -0.15%. Nasdaq -0.3%. Crude -0.8% to $99.38. Gold +0.2% to $1545.10.

Monday's Economic Calendar

The SA Currents team contributed to this post.

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