Wall Street Breakfast: Must-Know News

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 |  Includes: AAPL, AZN, BA, BAC, BCS, DTEGY, GLD, GOOG, HSBC, KKR, LMT, QQQ, RBS, RHT, S, SHCAY, SPY, T, USO
by: Rachael Granby
Rachael Granby
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.

AT&T abandons T-Mobile bid. AT&T (NYSE:T) ended its bid to acquire T-Mobile (OTCQX:DTEGY), taking a $4B Q4 charge for "break-up considerations." The two plan to enter a "mutually beneficial roaming agreement." AT&T's shares fell a slight 0.35% in AH trading. Sprint (NYSE:S), which would have been relegated to a junior league carrier if the deal went through, gained 6% in AH trading, and called AT&T's move "the right decision for consumers, competition and innovation in the wireless industry." Collateral impact includes the loss of $150M banks would have received for working on the deal.

EU misses fundraising target. The EU announced it had raised €150B (less than €200B hoped) from member states to lend to the IMF to lend back to needy member states. Notably absent from any contribution is the U.K. Also, Sweden, Poland, Denmark, and the Czech Republic indicated a willingness to take part but have to run it by their parliaments first. Yes, Spain and Italy are chipping in, to the tune of €38.3B. In further eurozone news, the ECB said yesterday in its twice-yearly Financial Stability Report that risks to the eurozone's financial system have risen "substantially" in H2, and contagion from the region's debt crisis could have a global impact.

Payroll tax cut still up in the air. House Republicans scuppered plans for a direct vote today on the payroll tax cut, and instead will hold a vote this morning on whether to call for a conference committee with Senate negotiators to work out a compromise on the legislation. The tax break will expire Dec. 31 if no action is taken.

Apple wins ruling against HTC. Apple (NASDAQ:AAPL) has prevailed in an infringement case against HTC. The U.S. International Trade Commission ruled HTC is violating Apple's patents, and has ordered a U.S. import ban on certain products to go into effect in April. HTC will likely try to negotiate a settlement ahead of time, though Apple's uncompromising legal stance could make things difficult.

Red Hat disappoints. Red Hat (NYSE:RHT) reported Q3 earnings yesterday, narrowly beating on EPS and reporting revenue in-line, but shares fell sharply in after hours trading. The company's deferred revenue balance reached $819.6M, up 20% Y/Y but less than 1% Q/Q. Red Hat guided for FQ4 revenue of $289M-$292M and EPS of $0.26-$0.27; the latter meshes well with a consensus of $0.26, but the former is below a consensus of $292.5M. Shares, which were down over 10% in the AH session, have recovered slightly and are currently -7.7% premarket (6:00 ET).

Lockheed nabs Japan deal. As expected, Lockheed Martin (NYSE:LMT) won a contract to supply 42 stealth F-35 jets to Japan for an initial $5.33B, beating Boeing (NYSE:BA) and the Eurofighter Typhoon. The F-35 has been beset by problems, but the deal could now be followed by a South Korean order for 60 jets.

Google, KKR get sunny on solar. Google (NASDAQ:GOOG) and KKR (NYSE:KKR) announced today a joint investment in a California solar-power project, becoming majority owners of four solar farms and underscoring investor interest in the field even as some government incentives are phased out. Recurrent Energy, a subsidiary of Sharp (OTCPK:SHCAY) and the project's developer, will remain a minority owner and operate the facilities.

Apple invests in flash storage. Apple (AAPL) is buying Israel's Anobit, a maker of flash storage technology, for $500M, and plans to open an R&D center in Israel, its first outside the U.S.

AstraZeneca takes charge on drug studies. AstraZeneca (NYSE:AZN) will take a Q4 pretax charge of $381.5M after two disappointing drug studies. The company confirmed its prior guidance that full-year core EPS will be in the range of $7.20-7.40, but said it's now likely to be in the lower half of this range. Shares -1.4% premarket (6:20 ET).

Japan eyes yen, diversification. Japan is stepping up its efforts against the appreciating yen, with plans to raise the issuance limit for bills to fund currency intervention to ¥195T ($2.5T). Finmin Jun Azumi says the increase will allow him to take "decisive" actions when needed. Azumi also said Japan should consider holding Chinese government bonds as a way to strengthen ties between the two countries, marking the first clear indication that Japan intends to shift part of its foreign reserves into yuan-denominated Chinese debt. At the moment, Japan's $1.3T reserves are mainly denominated in dollars, with a small portion in euros.

U.K. banks face ring-fencing rule. As expected, U.K. finmin George Osborne approved a panel's recommendations that banks should ring-fence their retail operations from investment banking. Osborne estimated the cost to banks of the reforms at £3.5B-8B ($5.4B-12.4B). The loss-absorbing capacity of big banks will be at least 17% of equity capital, which will apply to their U.K. and non-U.K. ops, "except where they can demonstrate that they do not pose a threat to the U.K. taxpayer." The question is where that leaves HSBC (HBC), given its vast overseas balance sheet. Osborne also backed the overhaul of RBS's (NYSE:RBS) investment banking arm. In yesterday's trading, RBS -5.25%, BCS -3.6%, HBC -1.2%, LYG -8%.

BAC drops below $5. Bank of America (NYSE:BAC) shares dropped to a $4 handle for the first time since the week of March 6, 2009 when American stocks overall put in their epic bear market bottom. If the stock remains below $5, some money managers will be forced to sell it. Shares closed -4.1% to $4.99, and are currently +2.3% premarket to $5.10 (6:30 ET).

RBA minutes reveal eurozone fears. Minutes from the RBA's most recent meeting show the bank lowered its benchmark rate because of the “non-trivial possibility of a very sharp contraction” in Europe and had seen no “strong need” to reduce rates based on the domestic outlook.

Sweden cuts rates. Sweden’s Riksbank cut its repo rate 25 bps to 1.75% this morning. Eurozone troubles are having a "dampening effect" on the Swedish economy, and a deterioration may force Sweden to further lower its benchmark rate.



Today's Markets:
In Asia, Japan +0.5% to 8336. Hong Kong +0.1% to 18080. China -0.1% to 2216. India -1.3% to 15175.
In Europe, at midday, London -0.2%. Paris +0.9%. Frankfurt +0.9%.
Futures at 7:00: Dow +0.6%. S&P +0.8%. Nasdaq +0.8%. Crude +1.3% to $95.13. Gold +0.7% to $1607.90.

Tuesday's economic calendar:
7:45 ICSC Retail Store Sales
8:30 Housing Starts
8:55 Redbook Chain Store Sales
1:00 PM Results of $35B, 5-Year Bond Auction

Notable earnings before Tuesday's open: CAG, CCL, GIS, JEF, NAV

Notable earnings after Tuesday's close: CTAS, JBL, NKE, ORCL, PAYX

For full real-time earnings coverage, please click here.



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