- Gold passes $1,600 for first time. Gold prices have hit $1,602 an ounce as the metal continues to hit record highs due to fears about eurozone and U.S. debt. In midday European trading, gold was +0.4% at $1600.80. With this flight to safety, the euro (-0.8%) and European shares dropped, dragged down by banks such as Barclays (NYSE:BCS) and RBS (NYSE:RBS) after stress test results released on Friday exacerbated the debt concerns.
- Philips posts $1.34B loss. Philips (NYSE:PHG) swung to a surprise net loss of €1.34B ($1.9B) in Q2 from a net profit of €259M a year ago after major writedowns at its healthcare and lighting divisions. Adding to the gloom, revenue slipped to €5.21B from €5.35B due to weak consumer sentiment and the "disentanglement" of Philips' TV division. The company doesn't expect any immediate improvement, although it plans to cut €500M in costs by 2014 and to buy back €2B in stock. Premarket, Philips is -1.9%.
- Congress formulates debt plans. Legislators are working on two plans to resolve the debt impasse, although it's doubtful that either could pass both Houses of Congress. On Tuesday, the House is due to vote on a GOP "cut, cap and balance" program that would condition increasing the debt limit on a constitutional amendment requiring a balanced budget. In the Senate, Mitch McConnell and Harry Reid are formulating a proposal to empower President Obama to raise the debt limit by $2.5T in three increments while creating a panel to discuss cutting the deficit.
- Trichet maintains opposition to Greek default. Jean-Claude Trichet has reiterated that the ECB wouldn't accept defaulted Greek bonds as collateral, potentially cutting off funding for Greek banks. Trichet's comments come as Angela Merkel again insisted on private sector involvement in any new bailout, which would probably cause a "selective default." With an EU meeting about Greece set for Thursday, a plan to buy Greek bonds on the secondary market, where they trade at deep discount, is gaining momentum, although legal and technical obstacles may lie in the way.
- Lloyds branch auction attracts three bidders. Richard Branson's Virgin Money was among three concrete bidders by last week's deadline for 632 U.K. branches being sold by Lloyds (NYSE:LYG), with the offers believed to be above £2B ($3.2B). Lloyds is selling the branches as a condition for receiving government bailout money during the financial crisis and is expected to whittle down the proposals by the end of July.
- U.S. halts Swiss talks over tax evasion. The U.S. has reportedly ended talks with Switzerland aimed at making a deal over Swiss banks accused of helping Americans evade taxes. One reason might be Swiss insistence that any agreement would leave the country's bankers free from prosecution in the U.S. The report follows news that Credit Suisse (NYSE:CS) is the target of a U.S. probe, which also includes HSBC (HBC) and other European banks.
- Borders scrambles for saviors. Borders (OTC:BGPIQ) is in talks with Alabama-based retailer Books-A-Million (NASDAQ:BAMM) and other potential buyers as it looks to survive after a bidding deadline passed yesterday without any offers that would save the company. With a bankruptcy auction set for Tuesday, the only bidders were liquidators, as private-equity firm Najafi didn't make an offer despite being in the driving seat until last week. Given that Books-A-Million only has a market cap of $48.16M, it's unclear how much of Borders it could save.
- PPD looking at sale. Pharmaceutical Product Development (NASDAQ:PPDI), a provider of outsourced clinical research services, is exploring a sale, sources say. The company has a market cap of $3.15B and could attract bids from private-equity and larger clinical-research providers. PPD's move comes as private-equity firm Genstar Capital looks to sell PPD competitor PRA International for over $1B.
- Sierra Income files to raise $1.5B. Sierra Income, which invests in private companies, has filed to raise up to $1.5B in an IPO by selling 150M shares at $10 each. However, Sierra won't sell any shares unless it manages to raise a minimum of $2M within a year.
- Obama to name bank critic for consumer watchdog. President Obama is due to today announce Richard Cordray as head of the Consumer Financial Protection Bureau, which was created following the financial crisis. In choosing Cordray, Obama has passed over Elizabeth Warren, who conceived the idea for the agency but is viewed with hostility on Wall Street. Not that Cordray is such a friend of the banks, given that he led state authorities in challenging their foreclosure practices when he was Ohio Attorney-General.
- NRC wants to enforce Nuclear proposals quickly. Gregory Jaczko, the Chairman of the Nuclear Regulatory Commission, wants his agency to decide within three months how to proceed with major safety changes recommended for the industry by a report released last week. The study was commissioned following the Japan disaster and includes a proposal to enforce possibly expensive upgrades without the need for cost-benefit analyses. However, the nuclear industry, which has to compete with low natural gas prices, argues the current procedures protect it from making expensive changes that don't significantly enhance safety.
- Four banks closed. Regulators shut four banks on Friday, bringing the total failures in 2011 to 55 so far. Two banks were closed in Georgia and one each in Florida and Arizona, with the combined cost to the FDIC's insurance fund expected to be $129.1M.
Earnings: Monday Before Open
- Check Point Software (NASDAQ:CHKP): Q2 EPS of $0.68 beats by $0.02. Revenue of $300.6M (+15.1% Y/Y). (PR)
- In Asia, Japan closed. Hong Kong -0.3% to 21805. China -0.1% to 2817. India -0.3% to 18507.
- In Europe, at midday, London -1.1%. Paris -1.6%. Frankfurt -1.2%.
- Futures at 7:00: Dow -0.7%. S&P -0.8%. Nasdaq -0.9%. Crude -0.4% to $96.86. Gold +0.6% to $1,600.20.
Monday's Economic Calendar
- 9:00 International Capital Flow
10:00 NAHB Housing Market Index
11:00 Financial Stability Oversight Council Meeting
- Notable earnings before Monday's open: CHKP, GCI, HAL, HAS
- Notable earnings after Monday's close: IBM, LNCR, MOS, PKG, SWK, STLD, WYNN, ZION
The Market Currents team contributed to this post.
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