- Greeks protest; EU fails to agree to a deal. Thousands of Greeks have again been protesting and workers have launched a nationwide strike against government efforts to approve new austerity measures that would enable the country to receive further bailout money. Those efforts may be in danger as opposition in the legislature within the governing party grows as well. The protests come after EU leaders yesterday failed to agree on how holders of Greek debt should share the cost of a new €120B rescue package. Holders in France, BNP Paribas (OTCQX:BNPQY), Credit Agricole (OTCPK:CRARY) and Societe Generale (OTCPK:SCGLY), fell in European trading after Moody's threatened them with downgrades because of their exposure to Greece's debt, and warned that action on other banks could soon follow.
- U.K. banks fall on reports about retail ring-fencing. Shares in Lloyds (NYSE:LYG), Barclays (NYSE:BCS), HSBC (HBC) and Royal Bank of Scotland (NYSE:RBS) have fallen in London on reports that Finance Minister George Osborne will tonight back a plan to force lenders to ring fence their retail operations. The rationale behind the proposal is to 'bullet-proof' the financial system against a future crisis. Stocks are down despite HSBC already operating a variant of the subsidiarised model and Barclays having formulated advanced plans to implement ring-fencing. Lloyds is unlikely to be greatly affected, as it has a relatively small investment banking arm.
- Pandora valued at $2.6B in IPO. Pandora (NYSE:P) is due to debut on the NYSE today after raising $235M at $16 a share in an IPO that valued the unprofitable online music service at $2.6B. Seeking Alpha author John Gilliam says that while some of the concerns surrounding Pandora are legitimate, such as its rising content costs, he believes a $2B+ market cap is justified. This is because the company provides one of the few ways to invest in music streaming and is leading a revolution in the space, giving it "the potential to make Pandora the Netflix (NASDAQ:NFLX) of music." Gilliam also says the firm will be able to grow revenues through vastly improved ad targeting and increased subscriptions.
- Fractious Wisconsin union law upheld. Wisconsin's Supreme Court yesterday voted 4-3 in favor of a controversial bill that eliminates most collective bargaining rights for public employees, and requires them to pay more for pensions and health coverage. Republican Governor Scott Walker said the measure is needed to help reduce the state's budget deficit, although Democrats characterized the law as an attack on unions. The bill sparked massive protests and pushed Wisconsin to the forefront of a national debate as Republicans who took control of many statehouses in the midterm elections have moved aggressively to shrink government and limit the power of public unions.
- Fed mulls adopting inflation goal. Fed officials are in talks about setting an explicit inflation target, beyond the theoretical debates the FOMC has held on the issue for over a decade, sources said. Ben Bernanke has long supported such a strategy, and it is practiced by central banks around the world, including in the U.K. and Canada. News of the discussions coincide with the release today of May CPI, which is forecast to have increased 0.1% after a 0.4% rise in April. The expected slowdown is due to waning fuel costs, with the figures coming after data yesterday showed that May PPI fell to +0.2% from +0.8%.
- SEC investigates Merrill CDO sale. The SEC is scrutinizing Merrill Lynch’s (NYSE:BAC) sale of a $1.5B collateralized debt obligation it created for Illinois hedge fund Magnetar, sources said. The agency is investigating whether Merrill told buyers that Magnetar helped select the assets included in the CDO and bet against those same assets. Magnetar has denied it helped choose the portfolio. The SEC is also looking at whether Merrill mispriced assets in the instrument. The regulator is additionally investigating the role of NIR Capital Management, the collateral manager that helped select the assets included in the CDO.
- Swiss probe trading before news of Synthes purchase. Swiss stock exchange SIX is looking at a spike in the shares of Synthes before news emerged of its $21.3B sale to Johnson & Johnson (NYSE:JNJ), sources said. If the investigation finds evidence of insider trading, SIX could refer the case to Zurich's prosecutor. The probe comes as European authorities join their U.S counterparts in stepping up their efforts against insider trading. Europe hasn't historically been as aggressive as the U.S. in its actions against the activity, with Switzerland being particularly lax.
- Drug from Pfizer and Boehringer may raise risk of death. Any Pfizer (NYSE:PFE) hopes of getting Spiriva, a mist inhaler for chronic lung disease, accepted in the U.S. may have suffered a blow after a review of five trials found it could increase the risk of early death. The studies involved over 6,500 patients and showed that Spiriva was associated with a 52% rise in the risk of mortality compared with a placebo. Available in 55 countries, Spiriva is a long-acting treatment for a breathing difficulty that affects as many as 24M Americans. The device is marketed by Germany's Boehringer Ingelheim as well as Pfizer.
- Government attempts to end Air Canada strike. Canadian Labor Minister Lisa Raitt has introduced a motion to end a strike by 3,800 Air Canada (AIDIF.PK) airport customer service agents if a settlement isn't agreed. Raitt said a prolonged walkout at the carrier, which holds about 56% of the domestic market, would damage the economy. Air Canada drafted around 1,700 managers to replace the agents, but warned that while it would continue to offer all scheduled flights, it would not be travel as usual. Negotiations between Air Canada and the agents' union collapsed late Monday night over pension issues.
- In Asia, Japan +0.3% to 9574. Hong Kong -0.7% to 22344. China -0.9% to 2705. India -1.0% to 18132.
- In Europe, at midday, London -0.2%. Paris -0.4%. Frankfurt -0.4%.
- Futures at 7:00: Dow -0.5%. S&P -0.5%. Nasdaq -0.5%. Crude -0.6% to $98.78. Gold -0.3% to $1520.10
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
8:30 Consumer Price Index
8:30 Empire State Mfg Survey
8:30 Real Earnings
8:30 FDIC Conference: Minority Depository Institutions
9:00 International Capital Flow
9:15 Industrial Production
9:30 Senate Hearing: Dodd-Frank Implementation
10:00 NAHB Housing Market Index
10:00 Senate Hearing: Banking Supervision
10:30 EIA Petroleum Inventories
- Notable earnings after Wednesday's close: FNSR
The SA Currents team contributed to this post.
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