Eurozone debt fears run rampant. European stocks and U.S. futures are sharply lower, led by bank stocks, on fears the eurozone debt crisis has taken a turn for the worse. Greece committed to €2B in new budget cuts Sunday, but that did little to calm concerns Greece will default on its debt - especially after German FM Philipp Roesler said Europe could no longer rule out an "orderly default."
French banks see sea of red. French banks are sharply lower on fears of an imminent Moody's downgrade. In Europe, SocGen (OTCPK:SCGLY) was recently -9.6%, BNP Paribas (OTCQX:BNPQF) was -11%, and Credit Agricole (OTCPK:CRARF) was -9.7% - leading a 4% drop in Paris's CAC. The pressure on SocGen - which has dropped 50% since Aug. 1 - comes despite today's attempts to calm investor worries (see below).
SocGen's own austerity plan. SocGen (OTCPK:SCGLY) surprised markets by saying it will cut jobs and costs and sell toxic assets worth €4B to bolster its balance sheet. The move was apparently intended to mitigate damage from a potential Moody's downgrade, but jitters over European banks' exposure to a Greece default continue to roil investors.
Stark departure a vote of non-confidence. Also contributing to today's gloom is Friday's shock resignation of top German ECB official Juergen Stark over the ECB's purchase of government bonds - a move that could hardly have come at a worse time. "It's the ECB that is holding the show together, so anything that weakens the ECB is bad news," one EU official said.
Member states blast EC budget. The European Commission suffered a setback this morning after eight of its largest constituents rejected its 2014-2020 budget proposal. "European public spending cannot be exempt" from austerity efforts, they said, urging the EC "to spend better, not to spend more."
U.K. banks need to build fences. The ICB's much-anticipated Vickers report recommended this morning that U.K. banks "ring-fence" their basic services (deposits, overdraft), and move riskier "casino" operations to a non-ring-fenced bank that would not enjoy government support. Ring-fenced ops would need to maintain a debt/equity ratio of at least 10%. U.K. banks were among the least impacted by this morning's downturn after the somewhat mild verdict, with BCS recently -3.2%, LYG -2.5%, RBS -1.8% and HBC -1.2%.
Dimon to U.S.: Time to exit Basel III. In an interview this morning, Jamie Dimon (NYSE:JPM) called on the U.S. to exit Basel III, saying new rules - that require mega-banks like JPM to maintain Tier 1 capital of 9.5% - are "blatantly anti-American." While Basel III's top-tier banks include 5 non-U.S. outfits, Dimon's worried the rules will lead to Asian banks grabbing market share from muzzled U.S. I-banks.
McGraw-Hill to split into two. McGraw-Hill (MHP) will unleash shareholder value by splitting into two companies - McGraw-Hill Markets and McGraw-Hill Education. MHP says the move - which was floated in August - will allow the "pure plays" to leverage their businesses, cut costs, and shrink share floats.
Colfax wins Charter in bidding war. U.S. pump and valve manufacturer Colfax (NYSE:CFX) will buy U.K. toolmaker Charter International (OTC:CHITF) for £1.53B ($2.4B) in cash and shares, beating off rival bidder Melrose (OTC:MLSPF). Despite the sweeter bid, Colfax still needs to convince Charter's shareholders that it can do a better job of a turnaround.
Wynn Macau gets first nod. Wynn Macau (NASDAQ:WYNN) beat rivals MGM China (NYSE:MGM) and SJM Holdings (OTCPK:SJMHF) in signing a $193M deal to develop its Cotai property, and compete with incumbents Sands China (NYSE:LVS), Melco (NASDAQ:MPEL), and Galaxy (OTCPK:GXYEF).
Ireland not done with public-sector pay cuts. Ireland should cut public-sector pay again to bring its deficit under control, outgoing ECB chief economist Juergen Stark says. "Without the support of the public and without strong political leadership, there is a risk that the program gets off track." The ECB, together with the IMF and EC, form the "troika" overseeing the Irish bailout.
No recession in China. China imports surged 30.2% in August from a year ago, following a 22.9% rise in July, shrinking its trade surplus to $17.8B from $31.5B even as exports rose 24.5%. Economists say the data allays concerns of a sharp slowdown in Chinese demand, even as the rest of the global economy sags.
Fed wants better peek into COF/ING deal. The Fed is pressing Capital One Financial (NYSE:COF) for details about its planned $9B purchase of ING's (NYSE:ING) U.S. online-banking in order to determine whether the combo would pose a systemic risk to the financial system. The Fed's request is unusual, and its ruling could have broad impact on what Dodd-Frank means for the biggest U.S. banks. So far, the Fed has said little about how it will apply the rules.
Asia: Japan -2.3%. Hong Kong -4.2%. China closed. India -2.2%.
Europe at midday: London -1.7%. Paris -4.0%. Frankfurt -2.6%.
U.S. futures at 7:00: S&P -2.05%. 10-yr +0.08%. Euro -0.38% vs. dollar. Crude -1.88% to $85.6. Gold -1.12% to $1836.35.
Monday's economic calendar:
9:00 NABE conference
1:00 PM Results of $32B, 3-Year Note Auction
7:00 PM Fed's Bullard: 'Lessons Learned from the Financial Crisis'
No notable earnings.
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