EU forges debt deal after threatening to go nuclear. Global shares are up today after eurozone leaders last night agreed on the broad outline of a deal that they hope will solve the bloc's chronic debt crisis. Private-sector holders of Greek debt will take a "voluntary" 50% head shave after Angela Merkel, Nicolas Sarkozy and friends told the banks that if they didn't agree, the EU, in the words of Luxembourg Prime Minister Jean-Claude Juncker, "wouldn't resist for one second to move toward a scenario of the total insolvency of Greece." As expected, the EU also agreed to leverage up the eurozone rescue fund to €1T ($1.4T) from €440B, with Sarkozy saying he will go cap-in-hand to China for help. In addition, banks will be forced to raise another €106B to boost their Tier 1 capital, although where the money will come from is anyone's guess.
Sony to buy out Ericsson in phone JV for €1.05B As expected, Sony (SNE) is to buy Ericsson's (ERIC) 50% share of Sony Ericsson for €1.05B ($1.47B) in a deal that also provides Sony with a broad IP cross-licensing agreement and ownership of five essential patent families. "The transaction gives Sony an opportunity to rapidly integrate smartphones into its broad array of network-connected consumer-electronics devices," the companies said. Until now, Sony's tablets, games, TVs and PCs have been kept separate from the Sony Ericsson devices. For Ericsson, the shift in the market to smartphones means there are no longer obvious synergies in having both an infrastructure and a handset business.
Economy expected to have rebounded in Q3. Fears of a double-dip recession may recede when GDP figures for Q3 2011 are released this morning, with economists estimating that the pace of growth rose to an annualized 2.5% from 1.3% in Q2, boosted by increased corporate investment and consumer spending. The latter would have been aided by a rebound in auto production after Japan-related closures earlier in the year and a drop in gasoline prices.
Thailand flooding hits businesses across all sectors. Toyota (TM) and other Japanese car makers have started to reduce domestic production because of a shortage of parts due to the worst flooding in Thailand in five decades, which has wiped out hundreds of factories. The cutbacks are in addition to the closure of three Toyota assembly plants in Thailand. Dell (DELL) and Western Digital (WDC) are among those to be affected as well, as are optical networking companies that rely on Fabrinet (FN), whose key customers read like a who’s who in the sector: JDS Uniphase (JDSU), Oclaro (OCLR), Opnext (OPXT), Finisar (FNSR), and Emcore (EMKR).
Visa profit again beats estimates but revenues lag. As it has done in every quarter since going public in March 2008, Visa's (V) FQ4 EPS exceeded analyst forecasts, rising 14% to $1.27 vs. a consensus of $1.25. However, revenues missed expectations despite growing 12.6% to $2.39B. Earnings were helped by U.S. spending on credit cards growing faster than debit cards for the first time since at least 2005 as well-off consumers increased buying. New caps on debit transaction fees are also leading banks to encourage customers to use credit cards.
North Carolina investigates Encore's debt practices. North Carolina is probing Encore Capital (ECPG), the U.S.'s largest buyer of consumer debts, for the way it collects those debts. The state has issued Encore "an investigative demand…to produce documents and answer interrogatories" concerning this and other issues. The company has already been the subject of a recent lawsuit from Texas that it violated state law by using false and deceptive documents in suits against residents. Encore said yesterday it has agreed to pay an unspecified penalty to settle the Texas case.
FHFA mulls writedowns on mortgage debt. The head of the Federal Housing Finance Agency, which oversees Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), is looking at a proposal that would allow bankruptcy judges to reduce principal amounts on loans for troubled homeowners. Separately, several money managers with large fixed-income funds have shown interest in a White House plan to sell foreclosed homes, Reuters reports. Officials want them to take over as much as $30B in properties that are on the books of government-run organizations.
Akamai President set for Yahoo? Akamai (AKAM) said yesterday that its President, David Kenny, is leaving the company to "pursue more opportunities in the consumer Internet space." This could increase speculation that he might be headed for the top job at Yahoo - where he is already a director - with The Wall Street Journal this week reporting that Kenny has expressed interest in the role. Meanwhile, Akamai said Q3 2011 net profit rose 6.5% to $0.23 a share as revenue increased 11% to $281.9M. The Internet-equipment company also gave guidance that met Street expectations for the first time in four quarters.
Democrats propose slashing deficit by $3T. Democrats yesterday presented a $3T deficit-reduction program to the Congressional "super committee" that is deciding how to reduce U.S. debt by at least $1.2T over 10 years, Reuters reports. Half of the package is made up of spending cuts, including $400B in Medicare savings, and the other half in tax hikes, which almost guarantees that it'll never fly in the current Congress. It was a rare leak from the "super committee," whose secrecy has prompted much speculation about its progress.
In Asia, Japan +2.0% to 8927. Hong Kong +3.3% to 19689. Shanghai +0.3% to 2436. India +0.2% to 17289.
In Europe, at midday, London +2.5%. Paris +4.8%. Frankfurt +4.4%.
Futures at 7:00: Dow +1.75%. S&P +2.1%. Nasdaq +2%. Crude +2.6% to $92.56. Gold -0.5% to $1715.30.
Thursday's economic calendar:
8:30 GDP Q3
8:30 Initial Jobless Claims
8:30 Chicago Midwest Mfg. Index
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 KC Fed Manufacturing
1:00 PM Results of $29B, 7-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 Aetna (AET), Akamai (AKAM), Aflac (AFL), BMC Software (BMC), CA (CA), InterDigital Communications (IDCC), KBR (KBR), Raytheon (RTN), TriQuint Semi (TQNT), Visa (V), W.R. Berkely (WRB), Norfolk Southern (NSC).
Notable earnings before Thursday's open: ABB, ABX, AET, AVP, AVT, AZN, BC, BEN, BG, BLL, BMY, CAH, CCAM, CCE, CELG, CL, CLI, CLP, CMS, CNX, CTXS, CVE, DAN, DLR, DOW, ELN, ENDP, EQT, GR, GTI, HOT, HSY, IMAX, INCY, IP, IRM, JCI, LAZ, LM, MCO, MJN, MO, MSI, MWW, NIHD, O, ORI, OXY, PCG, PEG, PHM, POT, PTEN, RCL, REGN, RTN, SNH, SNV, STD, SWI, TKR, TWC, UAL, UTHR, VLY, WBC, WEC, WM, XEL, XOM, XRAY, YNDX, ZMH
Notable earnings after Thursday's close: AMD, CBG, CERN, CINF, CLD, CLF, CROX, CSTR, DDR, DECK, DPL. EMN, ERTS, EXPE, FII, GILD, HIW, HLS, IM, ITMN, KEG, KLAC, LEG, LVS, MET, MMI, NCR, NETL, NLY, PFG, PMCS, QLGC, QLIK, RGC, RSG, SWN, UHS, VAR, VRSN, VRTX, VSEA
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.