- Berkshire in bid for Citi unit. Berkshire Hathaway (NYSE:BRK.A) is reportedly part of a consortium in exclusive negotiations to buy Citigroup's (NYSE:C) consumer-lending unit OneMain Financial in a deal that could exceed $8B. The other members of the group include Leucadia (NYSE:LUK) and private-equity firm Centerbridge. Berkshire's presence could boost the group's chances of sealing a deal.
- Obama invites legislators to debt summit. President Obama invited senior legislators for talks Thursday on cutting the deficit and raising the $14.2T debt ceiling by August 2, although Democrats and Republicans are as far apart as ever on raising taxes. If no agreement is reached, the Fed could buy some of the Treasury's gold reserves, giving it the money to pay its bills. The White House could also try to invoke the 14th Amendment, which some Democrats believe allows (or even requires) the Treasury to borrow so that bondholders wouldn't question the validity of U.S. debt.
- Moody's cuts Portugal to junk. Moody's yesterday became the first rating agency to cut Portugal's rating to junk status, downgrading it 4 notches to Ba2. Moody's cited "heightened concerns" that Portugal won't be able to achieve its debt targets, saying it's increasingly likely Portugal will require a second bailout before it can return to the private markets. Portugal's new government countered by saying Moody's didn't take into account strong political backing for austerity and an extraordinary tax announced last week.
- China hikes interest rates. China boosted its key deposit and lending rates by 25 bps, effective tomorrow. The one-year deposit rate is now 3.5% and the one-year lending at 6.56%. The rise comes as China attempts to cool inflation, which hit 5.5% in May and is expected to peak at 6%.
- Banks' sales of Greek debt could stymie rollover. Leading financial institutions are due to meet in Paris today to discuss increased private-sector participation in Greece's bailout, although hopes for a significant contribution from bondholders are fading. European banks may have already sold much of the short-term debt that would be included in a rollover, and other investors are less likely to agree to the proposed rollovers.
- Munis defy Meredith. Despite fears to the contrary, the number of municipal issues defaulting has fallen sharply, to 26 in the first half from 60 in H1 2010, while the value of those defaults plunged to $818.2M from $2.8B. In fact, municipal bonds have just had their best quarter since 1999, putting another nail in the coffin on Meredith Whitney's forecast of 50-100 'sizable defaults' amounting to hundreds of billions of dollars.
- Bondholder group challenges BofA settlement. A group of 11 unidentified mortgage-bond investors calling themselves Walnut Place has filed a court request to be excluded from Bank of America's (NYSE:BAC) proposed settlement to pay $8.5B to investors who lost money on mortgage bonds. Walnut Place said the 22 investors who agreed to the deal were self-appointed and didn't represent all bondholders. If the court grants the request, it could open the way for other investors to seek their own settlements, renewing uncertainty over BofA's mortgage-bond liabilities.
- Regulators to visit China over auditor inspections. Regulators from the SEC and U.S. audit watchdog PCAOB will travel to China as early as next week to discuss allowing them to inspect Chinese audit firms that handle U.S. listings. The visit comes on the heels of a series of accounting scandals involving Chinese companies traded in the U.S. and Canada. These began with small firms that went public via reverse mergers with shell companies, but now include larger firms such as Longtop (NYSE:LFT) and Sino-Forest (OTC:SNOFF).
- AirAsia to boost Airbus deal to 300 planes. Malaysia's AirAsia will buy an extra 100 Airbus (OTCPK:EADSF) A320neo jets, a source says, in addition to the $18.2B 200-plane deal it struck with Airbus at the Paris Air Show last month. The extra booking for the more fuel-efficient jet highlights the A320neo's growing lead over Boeing's (NYSE:BA) 737 at a time of high oil prices, and increases the pressure on the U.S. planemaker to respond. Separately, Boeing said it expects the global passenger airplane market to be worth $4T over the next 20 years, driven by growth in India and elsewhere in Asia.
- Bidders offer $3B in Insight auction. Insight Communications, the country's ninth-largest cable operator, attracted final bids of just over $3B in an auction, including from peers Mediacom Communications and WideOpenWest, sources say. Time Warner Cable (NYSE:TWC) remains interested but is unlikely to bid for Insight unless the price falls below $3B, while Cablevision (NYSE:CVC) has dropped out. Insight's auction comes as Carlyle Group, which owns 42% of the company, is reportedly looking to raise $1B in an IPO.
- FDIC set to adopt compensation clawback. The FDIC is expected today to adopt a rule that would allow regulators to recoup pay from managers considered substantially responsible for a company's failure. Bank groups argue the rule could cause senior executives and directors "to head for the exits at the first sign of trouble."
- In Asia, Japan +1.1% to 10082. Hong Kong -1.0% to 22518. China -0.2% to 2810. India -0.1% to 18727.
- In Europe, at midday, London -0.6%. Paris -0.5%. Frankfurt -0.1%.
- Futures at 7:00: Dow -0.2%. S&P -0.45%. Nasdaq -0.2%. Crude -0.6% to $96.30. Gold flat at $1513.
Wednesday's Economic Calendar
7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
7:45 ICSC Retail Store Sales
8:15 ADP Jobs Report
8:55 Redbook Chain Store Sales
10:00 ISM Non-Manufacturing Index
SA editors contributed to this post.
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