Wall Street Breakfast: Must-Know News

by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

Authorities probe Oracle for bribery. The FBI, Justice Department and SEC are reportedly investigating Oracle (NASDAQ:ORCL) for possible bribery in its foreign dealings, including in software sales to governments in Western and Central Africa. The probe, which has been going on for a year, characterizes how the tech sector, with its focus on speed, use of third parties and heavy interaction with foreign governments, is a target for scrutiny. H-P (NYSE:HP) and IBM (NYSE:IBM) are two other major IT firms to have been investigated, with IBM paying a $10M fine this year.

Sony, Toshiba, Hitachi to merge LCD ops. Sony (NYSE:SNE), Toshiba (OTCPK:TOSBF) and Hitachi (HIT) intend to merge their small- and medium-sized display operations and then hand over control to state-owned Japanese company Innovation Network. The latter will invest ¥200B ($2.6B) in the new entity and receive a 70% stake, leaving the three firms with 10% each. The deal comes amid falling panel prices, volatile demand and the spectre of oversupply. The merged entity will replace Sharp (OTCPK:SHCAY), which is due to receive a $1B investment from Apple (NASDAQ:AAPL), as the largest maker of the panels used in smartphones and tablet PCs.

Exxon replaces BP in Rosneft arctic deal. Exxon Mobil (NYSE:XOM) has gained access to major oil and gas reserves with the signing of an Arctic exploration deal with Rosneft. While the financial terms need to be finalized, the agreement almost certainly ends any hopes BP (NYSE:BP) had of resurrecting its partnership with Rosneft, which collapsed in May. Exxon and the Russian company will invest $3.2B to develop blocks in the Kara Sea that contain an estimated 110B barrels of oil equivalent, and an area in the Black Sea with 9B barrels of oil.

BP Russian offices raided. To add salt to BP's (BP) wounds, bailiffs today raided its Moscow offices in relation to a lawsuit filed by minority shareholders of TNK-BP - the U.K. company's JV in Russia - over BP's aborted pact with Rosneft.

BofA knew about potential AIG lawsuit in January. Bank of America (NYSE:BAC) was reportedly warned by AIG (NYSE:AIG) in January about a potential lawsuit over problematic mortgages and knew by March that the latter would probably seek over $10B, but BofA made no mention of the threat until AIG filed suit this month. While lawyers are divided over whether BofA should have disclosed the prospective litigation, that the bank didn't may further undermine its credibility and increase fears about further lawsuits. The AIG revelations come amid increasing opposition to BofA's $8.5B settlement with major investors and a fresh $1.75B lawsuit from US Bancorp (NYSE:USB).

BofA mortgage retreat continues. As it looks to streamline its operations and strengthen its finances in the face of its massive legal liabilities, Bank of America (BAC) reportedly plans to sell its correspondent mortgage business. Correspondents finance loans and sell them to larger lenders such as BofA, which has used the channel to build volume and generate revenues by re-selling the debt. Such loans accounted for $27.4B of BofA's mortgage originations in Q1, so as one observer said, exiting the business is "a huge retreat" that "will reduce their volume significantly."

QE3 expectations rise after FOMC minutes. Expectations for more bond buying have increased after the minutes from the FOMC's August 9 meeting showed that some policy makers were in favor of the move in order to help spur the economy, for which the Fed painted a gloomy picture. Officials also considered other actions, including setting inflation and unemployment targets, rejigging the Fed's Treasury holdings, and lowering interest rates even closer to zero. However, the FOMC hawks don't believe that any of the available tools would do much to promote growth, and argued that more stimulus would risk increasing inflation.

Icahn steps up battle with Clorox. Carl Icahn yesterday fired another shot in his battle with Clorox (NYSE:CLX), saying his board nominees would try to sell the company if elected. Icahn, who owns 9.5% in Clorox, also pledged to "back stop" the process with a $10.26B offer that he would pay for in cash and bonds. The company has turned down two previous bids and again spurned Icahn's advances, which have yet to fulfill his aim of sparking a bid from a strategic player. Icahn's not always successful in his boardroom battles - yesterday he agreed to walk away from a two-year attempt to take over Lions Gate (NYSE:LGF).

EU bank regulator weighs funding help. The European Banking Authority is reportedly considering ways to assist EU banks that are having problems with accessing credit markets for medium- and long-term funding. One option is a program to guarantee bank bonds, although this would mean giving even more new powers to the eurozone's €440B ($635B) rescue fund. And member states are not keen on revisiting the recent deal that gave the fund further authority in other areas.

Eurozone inflation, unemployment steady. Eurozone inflation remained unchanged at an annualized 2.5% in August, in line with forecasts but above the ECB's target of just below 2%, Eurostat said. Unemployment in July stayed at 10%, above predictions of a small drop to 9.9%, with marked variations across the bloc. Austria enjoyed the lowest rate (3.7%) and Spain had the highest (21.2%). In August, German unemployment remained at 7%, but while the labor market remains strong in the country, ING economist Carsten Brzeski told MarketWatch that it "is a lagging, not leading indicator."

Battle over commodities disclosures intensifies. Amid a simmering debate about the role of speculators, campaigners will today attempt to increase the pressure on authorities to make commodities investors regularly disclose their trading positions. Tyson Slocum, a member of an advisory committee to the Commodities Futures Trading Commission, intends to release a letter about the issue to Congress and CFTC commissioners, arguing that such disclosure would ensure transparency and provide "critical information to decision makers and the public." However, industry groups say it would unfairly expose their trading strategies and could prompt some to cut their activity.

Some companies paid more to CEOs than they did in taxes. A quarter of the 100 top-paid U.S. CEOs made more in salaries than their firms paid in federal income tax, a study from the left-leaning Institute for Policy Studies shows. The report also said many companies spent more on lobbying than they did on taxes. However, the survey left out any foreign, state and local levies paid, as well as deferred charges. Still, the study sparked criticism from the GOP and Democrats, and a call for congressional hearings on executive pay.

Today's Markets:
In Asia, Japan +0.0% to 8955.2. Hong Kong +1.6% to 20535. China flat at 2567. India closed.
In Europe, at midday, London +0.9%. Paris +1.6%. Frankfurt +1.2%.
Futures at 7:00: Dow +0.7%. S&P +0.85%. Nasdaq +0.8%. Crude -1.2% to $87.83. Gold +0.2% to $1834.00.

Wednesday's economic calendar:
7:00 MBA Mortgage Applications
7:30 Challenger Job-Cut Report
8:15 ADP Jobs Report
8:30 ISM New York Business Index
9:45 Chicago PMI
10:00 Factory Orders
10:30 EIA Petroleum Inventories
11:30 Fed's Lockhart: Economic Outlook
3:00 PM USDA Ag. Prices

Earnings Results: Companies that beat EPS expectations last night and today include Vera Bradley (NASDAQ:VRA), Phillips-Van Heusen (NYSE:PVH). Those that missed forecasts include DryShips (NASDAQ:DRYS). Full real-time earnings coverage here.

Notable earnings before Wednesday's open: JOYG

Notable earnings after Wednesday's close: SAI

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