Germany preparing for defaults by large eurozone nations. Germany is preparing for bankruptcy by eurozone countries that are too big to be bailed out, a leaked document from the country's foreign ministry reveals. Officials are also planning for a European Monetary Fund that would take ailing countries into receivership and run their economies, and for closer political integration.
Spanish right expected to win election. Spain goes to the polls on Sunday, when voters are expected to sweep the Socialists from power in favor of the right-of-center People's Party led by Mariano Rajoy. He is promising more of the austerity that has brought mass protest but is believed to be needed to calm markets and bring down debt costs. Spanish yields were lower at lunchtime in Europe, as were those of Italy, where Mario Monti yesterday outlined his restructuring plan. An 8.3% slump in industrial orders in September highlights the task that Monti faces.
California subpoenas Fannie and Freddie. California AG Kamala Harris has subpoenaed Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) as part of a probe into lending and repossession practices. While a main aim is to understand the mortgage giants' contribution to the state's foreclosure crisis, the move could be a tactic to force their regulator to allow more principal reduction for troubled borrowers.
Alcatel-Lucent under pressure to replace CEO. Alcatel-Lucent (ALU) has informally approached potential outside successors to CEO Ben Verwaaye as shareholder pressure grows to replace him, sources say. Verwaaye is struggling to turn around the ailing firm, with the company issuing a profit warning earlier this month and shares losing two-thirds of their value since July.
GAP profit falls again. GAP's (NYSE:GPS) difficult year continued in FQ3 as EPS slumped 36% to $0.38, but beat forecasts, while revenue slipped 2% to $3.58B. The retailer intends to attract consumers in the shopping season with "aggressive" discounts, although this won't do much for its margins, which the company expects to stay pressured. Long term, GAP is pinning its hopes on international expansion as it closes stores in the U.S.
Deutsche Boerse, NYSE offer concessions to get M&A OK. Looking to gain EU antitrust approval for their $9B merger, Deutsche Boerse (OTCPK:DBOEY) and NYSE Euronext (NYSE:NYX) have submitted proposals to sell European equity-option operations, and to provide competitors with access to a major derivatives clearinghouse. A ruling is due at the year-end.
MF Global customer cash may have been wiped out. It's looking like outright theft at MF Global (OTC:MFGLQ), where investigators believe that customer accounts were raided to pay off losing bets, meaning that the $600M officials are looking for may not just be missing, it may be gone. Like other brokers, MF was allowed to borrow customer cash if it put up collateral, but it appears the firm did not provide the necessary backing.
Congress passes spending bill. With a rare absence of rancor, Congress yesterday passed a bill that enables various government departments to keep running when funding expires tomorrow. Notable elements include raising the size of mortgages that the FHA can insure despite its dwindling reserves, and denying a White House request for a boost to the CFTC budget. Just to keep things normal, the "supercommittee" is still deadlocked.
Silver Lake interested in Yahoo. Private-equity firm Silver Lake has held talks with Microsoft (NASDAQ:MSFT), Canada Pension Plan Investment Board and other potential partners about buying Yahoo (NASDAQ:YHOO), sources say. Silver Lake is one of a few Yahoo suitors to sign an NDA, a requirement that has slowed the sale process.
Activist investor joins H-P board. H-P's (NYSE:HPQ) board, which doesn't have the best of press, has added Ralph Whitworth as a director after he accumulated a stake of around 1%. Whitworth, whose Relational Investors firm oversees $6.5B, has used his holdings in other companies such as ITT (NYSE:ITT) and L-3 Communications (NYSE:LLL) to agitate for change.
In Asia, Japan -1.2% to 8375. Hong Kong -1.7% to 18491. China -1.9% to 2417. India -0.6% to 16372.
In Europe, at midday, London -0.7%. Paris -0.3%. Frankfurt -0.2%.
Futures at 7:00: Dow +0.6%. S&P +0.7%. Nasdaq +0.5%. Crude +0.3% to $99.09. Gold +0.5% to $1728.20.
Friday's economic calendar:
10:00 Leading Indicators
Those in line include Aruba Networks (NASDAQ:ARUN).