It is my absolute delight to inform you that former Wall Street Breakfast writer Rachael Granby has given birth to a baby girl.
French economy flatlines. French Q2 GDP unexpectedly showed zero growth vs. a +0.3% forecast and +0.9% in Q1 as household consumption dropped 0.7%. The figure won't do anything to calm fears about the government's ability to cut the deficit and the country's AAA rating. Economist Philippe Waechter said France would need to expand 0.5% in Q3 and Q4 to reach the government's 2% target for the year but that may not happen.
SEC looks into S&P downgrade. The SEC has reportedly started a preliminary inquiry into potential insider trading in connection with S&P's (MHP) U.S. downgrade, asking the firm who knew about the ratings cut before it was announced. However, proving a leak could be difficult, as many in the market anticipated the downgrade and trades can occur across numerous securities or currencies. Earlier this week, Naked Capitalism reported "compelling evidence" S&P leaked the decision to banks and hedge funds prior to the announcement.
European shares rally after opening down. European shares are yo-yoing again today and were higher in midday trading after opening lower despite a ban on short-selling in four countries. The latest rally came after the ECB said the use of its overnight loan facility by banks plummeted to €227M from €4B the previous night. This eased fears that banks were facing liquidity problems. France, Italy, Spain and Belgium are temporarily banning short-selling on select stocks to try to calm the volatility, although major doubts exist about the effectiveness of the measure.
Stocks rebound once more as volatility continues. U.S. shares bounced back again with sharp gains yesterday following steep falls on Wednesday, ensuring the week will go down as one of the most volatile on record. The DJIA ended +3.9%, the S&P +4.6% and the Nasdaq +4.7%, with the Dow completing four straight days of 400-point movements for the first time. The volatility has been magnified in the last hour of trading by orders from ETFs, accounts that hedge against the market's ups and downs, and high-frequency traders. As for today, premarket futures were mostly flat at the time of writing after dropping over 2% earlier. (see below for details).
Postal services looks to cut 120K jobs. Facing a second year of losses of $8B or more, the U.S. Postal Service has proposed slashing 120,000 jobs, and to withdraw its employees from federal health and retirement plans and set up its own systems. The service has also said it will be unable to make a $5.5B payment due on September 30 to cover future employee health care costs. The job cutting requires the approval of Congress, and if passed could have major ramifications for government workers and the national labor movement.
BofA sale of CBC stake hits hurdles. Bank of America (NYSE:BAC) has reportedly encountered problems in selling its 10% holding in China Construction Bank (OTCPK:CICHY), partly because Chinese banks are expected to embark on a wave of rights issues, share sales and new listings. One prospective suitor, Kuwait's sovereign wealth fund, already holds large stakes in two other banks and believes it has "enough exposure" to the sector.
Nvidia swings to profit as shares surge on guidance. Nvidia (NASDAQ:NVDA) matched Street expectations in Q2 as it swung to a net profit of $0.25 a share from a loss of $0.25 a year earlier and revenue climbed 26% to $1.01B. The graphics processor company forecast Q3 revenue of $1.05B-$1.07B vs. analyst estimates of $1.05B, a prediction that helped send shares soaring 11.9% in after-hours trading. Nvidia is gaining customers from AMD (NYSE:AMD) and it has started winning more orders for its Tegra processors for mobile phones, with Samsung (OTC:SSNLF) agreeing to install the chip in its new Galaxy R smartphone.
China to keep yuan stable. China's central bank said in its quarterly report it will aim to keep the yuan at a "reasonable and balanced level" but reiterated it will use "multiple policy tools," including interest rates, exchange rates and bank reserve requirements, to try to bring down inflation. The yuan has risen steeply this week and reached a record against the dollar for the third straight day today. In addition, speculation is rife in the Chinese press that the PBOC will let the yuan strengthen further to help fight high prices.
Validus sues Transatlantic. Reinsurer Validus (NYSE:VR) has sued Transatlantic (NYSE:TRH) to force the latter to consider Validus' takeover offer over a deal with Allied World (NYSE:AWH). Validus argued that Transatlantic is "arbitrarily" refusing to enter into talks even though its offer was worth more than Allied's when Validus made the proposal in July. However, due to market fluctuations, the two bids, which contain stock elements, are now worth about $2.8B. This is below Berkshire Hathaway's (NYSE:BRK.A) $3.25B offer.
States sue Bank of New York Mellon over forex. The Virginia and Florida Attorneys-General yesterday filed civil suits against Bank of New York Mellon (NYSE:BK), accusing it of cheating pension funds in the states with improper prices for currency trades the bank processed for them. The Virginia suit cites a 2008 email from a senior banker warning that if the company provided "full transparency" to clients, they would be able to "carefully monitor each and every trade at the time of execution," which would cut "margins dramatically."
AT&T hires bank to advise on divestitures. AT&T (NYSE:T) has hired Bank of America (BAC) to advise it on possible asset sales to help smooth the way for antitrust regulators to approve the carrier's $39B acquisition of T-Mobile (OTCQX:DTEGY). Most of the divestitures would come from T-Mobile and would include customers and wireless spectrum. The scale of any sale would depend on what regulators ask for and could amount to $8B or more.
Italy cabinet to meet on further austerity. Italy's cabinet is due to meet later today to approve measures to balance the budget by 2013, a year early, as the government attempts to convince investors it can retain control of the country's debt. The proposals include easing labor-market laws, selling local services, and possibly hiking capital-gains tax to 20% from 12.5%.
In Asia, Japan -0.2% to 8964. Hong Kong +0.1% to 19620. Shanghai +0.5% to 2593. India -1.3% to 16840.
In Europe, at midday, London -1.0%. Paris -1.8%. Frankfurt -2.3%.
Futures at 7:00: Dow flat. S&P flat. Nasdaq -0.1%. Crude -0.3% to $85.47. Gold +0.2% to $1754.60.
Friday's economic calendar:
8:30 Retail Sales
9:55 Reuters/UofM Consumer Sentiment
10:00 Business Inventories
10:00 Fed's Dudley: 'Job Creation in the Region'
Earnings Results: Companies that beat EPS expectations last night include Nordstrom (shares +4%), Emulex (-6.9%), DeVry (-8.8%). Those in line include Nvidia (+11.9%) and Renren (-11.6%). Click here for details.