Wall Street Breakfast: Tensions Grow Over Greek Debt Relief

by: Wall Street Breakfast
Wall Street Breakfast
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The IMF is pressing the eurozone to let Greece skip paying interest or principal on bailout loans until 2040, WSJ reports, stating they should be fixed at an interest rate of 1.5%, and fall due gradually in the following decades, even as late as 2080. Eurozone governments, led by Germany, are reluctant to make such major concessions on their loans to Athens, which currently total over €200B, but they also want the IMF to rejoin the bailout as a lender to boost the program's credibility.


Along with Goldman Sachs' recent oil forecast, Nigerian supply outages and the Alberta wildfire sent crude to a seven-month high overnight, but prices have now pulled back to under $48 per barrel. Nigeria's oil production has been cut by almost 40%, as the Niger Delta Avengers carry out a growing number of attacks in the region. Canada's oil sands are also under threat following the evacuation of 8,000 workers from facilities near Fort McMurray.

Economic data out of Europe: Inflation in the U.K. edged down in April from a one-year high the previous month, underscoring the fact that price pressures remain weak across the developed world. According to the Office for National Statistics, the rate dropped to 0.3%, due to falls in air fares, clothing and vehicle prices. Meanwhile, French gross domestic product growth for 2015 has come in at 1.3%, with a public deficit of 3.6% of GDP, and the public debt-to-GDP ratio revised up to 96.1% from 95.7%.

The ECB limited its sovereign debt buys of Portuguese and Irish bonds last month due to concerns about hitting purchase caps - a move that could mean those countries stand to benefit less from the scheme. With almost a year left of its QE program, the central bank is already nearing a self-imposed limit of holding a third of the countries' debt. Purchases for most nations have increased by 50%, but only by 16% in Portugal and 33% in Ireland.

An effort to conduct an unconventional audit of the Federal Reserve is gaining traction in Washington and is on its way to a potentially important milestone. The Federal Reserve Transparency Act will undergo the markup process today in the House Oversight and Government Reform Committee. A product of the "Audit the Fed" movement, the bill seeks not a financial exam of the U.S. central bank but rather a peek behind the curtain of how monetary decision-making happens.

Portions of Hong Kong have been shut down as part of a drastic security increase as the city prepares for a rare visit by National People's Congress Chairman Zhang Dejiang. He will be the first senior Chinese official to come to Hong Kong since the 2014 Occupy pro-democracy demonstrations which shut down the territory's financial hub for months. Zhang is scheduled to speak at an economic conference, but will also meet with a small group of pro-democracy legislators tomorrow evening.


Warren Buffett's bite into Apple (NASDAQ:AAPL) yesterday drove the tech giant's best trading day in two months, as his new 9.8M share investment helped U.S. stock markets break a three-day losing streak. But George Soros is keeping the bears happy, doubling his wager against the S&P 500 and making a big bet on gold. The billionaire investor, who has been warning that the 2008 financial crisis could be repeated due to China's economic slowdown, bought 2.1M-share "put" options in SPY during Q1 and added 1.05M shares of GLD.

Vodafone +3.1% premarket after recording its first full year of growth in service revenues and core earnings since 2008 as its £19B "Project Spring" investment in networks began to pay off. Organic earnings before EBIDTA rose 2.7% to £11.6B, while revenues rose 2.3% to £41B when stripping out currency movements. "This has been a year of strong execution," Vodafone (NASDAQ:VOD) CEO Vittorio Colao said in a conference call, while raising the phone operator's dividend.

In another competitive turn towards Google (GOOG, GOOGL), Facebook (NASDAQ:FB) will now sell video ads for other companies for a cut of the revenues. "We think there are an awful lot of publishers looking for help monetizing their video," explained lead product marketer Brett Vogel. In-network, Facebook usually takes about 30% of revenues and gives the rest to publishers, but the split for selling for other companies hasn't been specified.

Jack Dorsey is making it easier for Twitter (NYSE:TWTR) users to stick more stuff in their tweets. Not by dropping the service's famous 140 character limit - an idea the company had previously floated - but by expanding it, in a way: Twitter won't count the characters used to insert photos, links or other media into tweets. Bloomberg says the change "could happen in the next two weeks."

Activist fund Corvex Management disclosed a stake in Pandora (NYSE:P) late Monday, sending shares up 3.5% AH, after expressing concern about its stock price and calling for the business to consider a sale. "Despite its many strengths, the company has been unable to date to translate its great product into a great business with an attractive public market valuation," the firm said in a regulatory filing. Corvex owns 8.3% of Pandora, making it the company's largest shareholder.

Still reeling from revelations that forced the resignation of its founder and chief executive, Lending Club (NYSE:LC) has received a subpoena from the DOJ, and "intends to cooperate" with the department. Once considered the pioneer in its field, Lending Club is now fighting to defend the soundness of its business model. Shares fell 10.7% AH, and are down 49% since the morning of May 9, when the P2P lender posted Q1 results and announced the departure of CEO Renaud Laplance.

Sumner Redstone has the power to remove Viacom (VIA, VIAB) CEO Philippe Dauman, but not his daughter Shari, from the trust that will control his $40B media empire after his incapacitation or death, sources told Reuters. There is no evidence that 92-year old is considering replacing Dauman, but the fact that Shari Redstone has a more secure position on the seven-person trust, could embolden her in efforts to wield more influence at Viacom as it struggles with falling ratings.

The Department of Agriculture has agreed to join the U.S. government panel that is reviewing ChemChina's planned $43B acquisition of Syngenta (NYSE:SYT), sources told Reuters. The move comes after lawmakers wrote to Treasury Secretary Jacob Lew in March to ask that the USDA be involved in the review to better assess the potential impacts of the transaction on domestic food security. Syngenta extended the offer period for ChemChina's takeover bid following the news.

After ending its proposed merger with Staples (NASDAQ:SPLS), Office Depot (NASDAQ:ODP) is considering selling some of its European operations, making additional acquisitions and increasing markets like break room and cleaning supplies. "We fully understand the future success of Office Depot will require bold new action," CEO Roland Smith said during an investor conference. The company will also receive $250M in cash this week as a breakup fee from Staples.

Phone book publisher Dex Media has filed for bankruptcy protection after reaching a restructuring deal with creditors. The Chapter 11 announcement marks the fifth time in seven years the firm or its predecessors have found themselves in a bankruptcy court as yellow-pages companies struggle with the move of advertisers to the Internet. Dex Media (NASDAQ:DXM) reported $1.27B in assets and $2.65B in debts as of Dec. 31.

Alphabet has unveiled a pilot program that will enable several thousand San Francisco-area workers to hitch rides to or from work with its Waze navigation app. Riders will pay drivers $0.54 a mile, and the company won't take a cut during the pilot. Alphabet (GOOG, GOOGL) said it began testing its carpooling app, called Waze Rider, in Tel Aviv in July 2015. Thousands of people now use the app across Israel, where the tech giant takes a 15% commission for each trip.

Separately, a team of former Alphabet (GOOG, GOOGL) executives is launching a start-up focused on self-driving trucks, in an attempt to improve driverless technologies in the long-haul trucking industry. Otto plans to sell kits to retrofit existing trucks with autonomous platforms, but has not disclosed when they will go on sale. The technology will only work on highways for now, with human drivers required off-highway, potentially allowing the vehicles to travel much greater distances.

The U.S. Supreme Court has backed out of a divisive clash involving religious groups that object to mandatory contraceptive coverage under Obamacare, issuing a compromise that said the two sides might be able to work out their differences. With four conservative justices and four liberals, the judges sent the case back to the lower courts, but suggested the government arrange coverage directly with health insurers rather than requiring employers to sign off on it. Related tickers: PFE, MRK, JNJ, TEVA, CHD, OTCPK:BAYRY

Today's Markets

In Asia, Japan +1.1% to 16653. Hong Kong +1.2% to 20119. China -0.3% to 2844. India +0.4% to 25774.
In Europe, at midday, London +0.6%. Paris +0.4%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.2%. Crude +0.2% to $47.79. Gold -0.1% to $1272.60.
Ten-year Treasury Yield flat at 1.76%

Today's Economic Calendar

8:30 Consumer Price Index
8:30 Housing Starts
8:55 Redbook Chain Store Sales
9:15 Industrial Production
10:00 E-Commerce Retail Sales
12:00 PM Fed's Lockhart speech

Companies reporting earnings today