France AAA rating confirmed as further austerity promised. Amid swirling rumors of a downgrade and fears about Societe Generale's (SCGLY.PK) liquidity, all of which sent global stocks plunging yesterday, S&P, Fitch and Moody's confirmed France's AAA rating with a stable outlook. Nicolas Sarkozy also pledged to reduce France's budget deficit from 7.1% last year to 3% by 2013 "whatever the evolution of the economic situation." His ministers have a week to formulate new measures as concern rises over France's growth prospects and its ability to meet that deficit target.
SocGen shares turn sharply red. Shares in Societe Generale (SCGLY.PK) have made a sharp about turn, plummeting 5.9% after being firmly in the green earlier. That initial rise followed a 15% decline yesterday and came after CEO Frederic Oudea described a variety of rumors, including about SocGen's liquidity, as "absolutely rubbish." SocGen has officially requested that France’s market watchdog open a probe into the origins of the speculation. European stocks also fell into the red after rising earlier, although U.S. futures were up.
BofA in talks to sell China Construction Bank shares. The wild ride that is Bank of America (BAC) looks set to continue, with shares +1.9% premarket after earlier being up over 4% and oscillating all week. The company is in exploratory talks with Kuwait's and Qatar's sovereign-wealth funds about selling up to half its 10% stake in China Construction Bank (CICHY.PK). The shares are worth about $16B and any sale would be part of the bank's strategy, as laid out by CEO Brian Moynihan on an investor call, of selling non-core assets to raise capital and meet regulatory requirements. Analysts, though, believe BofA needs about $50B in total.
Cisco surges as Q4 beats forecasts. Shares in Cisco (CSCO) surged 11.8% premarket after the company's FQ4 earnings beat analyst expectations, with EPS coming in at $0.40 and revenues rising 3% to $11.2B. Cisco said it is ahead of its plan to cut annual expenses by $1B and it predicted its FQ1 revenue would rise by up to 4%. This would beat Street estimates but would be well below growth of 27% a year earlier, while the company also faces reduced government spending as budgets are cut around the world.
SNB ruminates on more options to stop the franc. The Swiss National Bank could ease monetary policy further to curb the franc's inexorable rise without resorting to selling the currency in the market, Deputy President Thomas Jordan has reportedly said. In addition, temporarily linking the franc to the euro would be legal under the bank's mandate. His comments sparked speculation that the SNB could impose negative interest rates and so force banks to charge clients to hold their money. The franc was -1.6% vs. the dollar and -2.2% vs. the euro in midday European trading.
CME increases gold margins. The CME last night hiked margin requirements for gold futures by 22% from $6,075 to $7,425. The news knocked a few dollars off the price of the metal, and futures were lower in midday European trading. Earlier, gold touched an all-time high $1,817.60 on the Comex in New York.
Murdoch eyes Carey as heir. Rupert Murdoch has virtually anointed News Corp. (NWS) COO Chase Carey as his successor and not son James. "If anything happened to me I'm sure he'll get it immediately - if I went under a bus," Murdoch senior said yesterday. His comments came after News Corp. reported that FQ4 EPS fell to $0.26 from $0.33 a year earlier, due to a $254M loss on the sale of Myspace. However, revenue climbed 11% to $8.96B, helped by advertising sales and fees at Fox TV and the company's cable networks.
U.S. bank regulations to be in line with Basel III. The Fed is reportedly formulating regulations for the U.S.'s largest U.S. banks that won’t be more stringent than global capital standards agreed to under Basel III. This would be in line with Governor Daniel Tarullo's "goal of congruence" between Basel and the Dodd-Frank Act. "There will be a sigh of relief" that the Fed is staying within the Basel framework, said a former Fed official.
SEC probes Deere for bribery. Deere (DE) has reportedly become the latest company to be investigated by the SEC for bribing foreign officials, with the farming-equipment firm receiving a request last month about payments made in Russia and nearby countries. The investigation comes as the company is trying to exploit the growth of cities in the developing world and the need for more food production globally. And with Russia accounting for 9% of the world's arable land, Deere sees it as a long-term source of growth.
Foreclosures drop to four-year low. The number of homes receiving foreclosure filings dropped to 212,764 in July, RealtyTrac said, down 4% on month and 35% on year. As in previous months, the decline was not due to a housing recovery but to the measures taken following the "robo-signings" scandal and government programs to help homeowners stave off repossession.
Plans for foreclosed properties get mixed reaction. White House proposals to help spark a housing rebound by selling tens of thousands of properties owned by state-backed entities to investors in bulk and at discounts, and for conversion to rentals, have received mixed reviews. Some industry participants approved, as demand for rentals is rising even as prices decline, while others pointed out that buyers pay close to list prices for repossessed homes.
Focus of Google antitrust probe sharpens. Regulators are reportedly focusing their antitrust probe into Google (GOOG) on Android and search. They want to know whether Google prevents phone makers that use Android from using rivals' services and if the company grants preferential placement on its website to its own products. The existence of the probe seems to have made Google alter its behavior, with the company tweaking its search engine to assuage its competitors and to avoid a clash with antitrust authorities.
Apple world's most valuable company. For the first time ever at the close of trading, Apple (AAPL) was the world's most valuable public company, knocking Exxon Mobil (XOM) off its perch. Apple was worth $337.17B vs. $330.77B for Exxon.
In Asia, Japan -0.6% to 8982. Hong Kong -0.9% to 19595. China +1.3% to 2582. India -0.4% to 17059.
In Europe, at midday, London -1.0%. Paris -1.8%. Frankfurt -2.3%.
Futures at 7:00: Dow +0.9%. S&P +1.1%. Nasdaq +1.25%. Crude -0.2% to $82.75. Gold -0.1% to $1782.00.
Thursday's economic calendar:
8:30 Trade Balance
8:30 Initial Jobless Claims
10:30 EIA Natural Gas Inventory
1:00 PM Results of $16B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Earnings Results: Companies that beat EPS expectations last night and today include Kinross Gold (Shares +3.3%), Advance Auto Parts (+3.8%), Cisco Systems (+11.7%), Kohl's (-4.9%). Those that missed forecasts include EnerSys (-6.5%), Jack in the Box (-7.4%). Click here for details.