Wall Street Breakfast: VW Agrees To Largest Auto Settlement In U.S. History

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Includes: BCS, CMG, EADSY, EBAY, ENDP, ETE, FB, GOOG, GOOGL, HSBC, HZNP, LYFT, LYG, LYV, MAR, PEP, PFE, QQQ, RBS, SCBFF, SCTY, SPY, TKTDY, TSLA, VLKAY, WMB, ZTCOY
by: Wall Street Breakfast
Wall Street Breakfast
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.

Volkswagen's price tag to settle lawsuits in the U.S. over its rigging of diesel emissions tests has jumped to more than $15B - $5B more than previously reported - with a settlement expected to be filed in a San Francisco court today. According to several sources, VW's (OTCPK:VLKAY) deal includes $10B for buybacks of 475K polluting vehicles and nearly $5B for fines and funds to boost clean-emissions technology.

Economy

A recovery is taking shape across the globe after a record $3T in market cap was wiped off the board in just two trading days and sterling fell to its lowest level in over 30 years. Hopes of a more coordinated central bank response to support the financial markets and firmer oil prices are helping stocks claw back some of their losses following the Brexit battering. The mostly sideways year for the Dow and S&P is still negative, down 1.6% and 2.1%, respectively.

Heads of government of the EU's member countries are gathering for a two-day meeting of the European Council in Brussels. No country has ever left the bloc, so they are in uncharted territory as they try to figure out how to make Britain's divorce proceed as smoothly as possible. Pressure is also expected to be applied on the U.K. to trigger Article 50 as soon as possible to curtail the uncertainty surrounding the European economy and political establishment.

The race to replace David Cameron is heating up, but it won't include George Osborne. The U.K. Chancellor has withdrawn himself as a candidate, citing his support for the 'Remain' camp as the key conflict. Sky News reports that Pensions Minister Stephen Crabb could be seeking a joint bid with Business Secretary Sajid Javid (despite both having lobbied for the U.K. to stay in the EU), but Boris Johnson still seems to be the Tory favorite.

Speaking at the ECB's annual forum in Portugal, ECB President Mario Draghi avoided mentioning the U.K.'s vote to leave the EU, but called for greater alignment of global policies to mitigate the spillover risks from ultra-loose monetary measures. "What I mean by alignment is a shared diagnosis of the root causes of the challenges that affect us all." On Monday, Draghi said "sadness" was the best word to describe his sentiment toward the Brexit.

For the first time in at least a decade, the Shanghai Stock Exchange has lost its position at the top of turnover rankings for China's four major trading venues. The new leader is Shenzhen's Small and Medium Enterprise Board, a market for mostly non-state companies that first climbed to No. 1 on May 17. It has since jockeyed for position with the Shanghai, with both bourses handling about 180B yuan ($27.1 billion) of trades on average over the past five days.

Fresh from mending fences with Israel, Turkey is aiming for a quick normalization of ties with Russia by apologizing for the downing of a military jet near the Syrian border last November. The months-old spat saw Moscow restrict tourism, clamp down on agricultural imports and set stringent visa limits on Ankara, leading to the worst deterioration of Turkish-Russian relations in recent history.

The U.S. Senate is set to launch a debate for establishing a federal oversight board that would be in charge of restructuring Puerto Rico's debt where one out of every three dollars it earns in revenue is used to pay creditors. The measure is identical to the plan passed by the House earlier this month, as Congress tries to send it to President Obama to sign into law by July 1.

Stocks

The British government has abandoned plans to sell down its shareholdings in RBS and Lloyds (NYSE:LYG) in light of the Brexit referendum, leaving a multi-billion pound hole in its finances. The Treasury had planned to cut its exposure to the domestic banks, raising £9B through stock sales, but the date has now been pushed back until at least 2017 given market volatility.

Moody's will revise the outlook of "a number of big U.K. lenders" to negative from stable today due to fallout from last week's EU referendum, sources told Sky News. The plan comes just hours after rival Standard & Poor's stripped the U.K. of its coveted triple-A rating and Fitch downgraded the sovereign. Related tickers: HSBC, BCS, RBS, LYG, OTCPK:SCBFF

A large "Four Points by Sheraton" sign has gone up outside the Havana hotel that this week becomes the first in Cuba to operate under an American brand since the 1959 revolution. The military-owned Gaviota 5th Avenue Hotel, close to the Caribbean seafront, is one of two hotels that Starwood Hotels & Resorts (HOT) agreed to manage in a multi-million dollar deal in March.

Biotech news roundup: Endo International (NASDAQ:ENDP) has held discussions with P-E firms about potential asset sales to reduce its more than $8B debt pile. Pfizer (NYSE:PFE) is investing $350M to build its first biotech center in China. Horizon Pharma (NASDAQ:HZNP) has hired Bank of America to help it explore selling a significant equity stake that would bolster its balance sheet.

Looking to revive falling cola sales, PepsiCo (NYSE:PEP) is bringing back aspartame, an artificial sweetener it removed from Diet Pepsi in the U.S. last year. Diet Pepsi's sales volume fell 5.8% last year and dropped roughly 11% at retail during Q1 2016.

Chipotle is introducing a three-month loyalty program intended to get customers back into its stores following a string of food safety lapses last year. "Chiptopia" will reward customers for making multiple paid visits within a month rather than on the total amount spent, or by accumulating points. It comes after Chipotle (NYSE:CMG) doled out freebies over the past months to regain traffic.

An airbag made by Takata has been linked to a crash that killed a woman in Malaysia over the weekend, potentially raising the number of deaths caused by the faulty devices to 15 worldwide. Has the news finally pushed senior management over the edge? At the company's annual meeting today, CEO Shigehisa Takada offered to resign once a "new regime" is found for Takata (OTCPK:TKTDY).

The flight data recorder of EgyptAir flight MS804 has been successfully repaired, paving the way for investigators to analyze data that could help explain what caused the plane to crash. The Airbus A320 (OTCPK:EADSY) vanished over the Mediterranean Sea while en route from Paris to Cairo on May 19, killing all 66 people on board.

Could Lyft be looking for a buyer? That's the conclusion one might glean based on a report that said the San Francisco-based unicorn hired Qatalyst Partners, a boutique investment bank that specializes in finding suitors for tech companies. LYFT, valued at $5.5B last year, may be one of several highly valued start-ups that look to M&A as venture funding dries up in tech.

Line Corp., the Japanese rival to WhatsApp (NASDAQ:FB), is largely sticking to its earlier IPO target despite market turmoil following the Brexit vote. The messaging service has set a price range for its offerings in Tokyo and New York next month at ¥2,700-¥3,200 ($26.50-$31.50) a share. This sets the stage for an IPO that could raise up to ¥112B ($1.09B) and puts it on track to become the biggest tech listing of 2016.

Addressing potential conflicts of interest, SolarCity (NASDAQ:SCTY) is forming a special committee to help it evaluate an acquisition bid from Tesla (NASDAQ:TSLA). The committee consists of Donald Kendall, a founder of investment manager Kenmont Capital Partners, and Nancy Pfund, a founder of venture-capital firm DBL Investors. The two are SolarCity's directors without any special connections to Tesla.

Williams Cos. is continuing its legal fight to close the merger with Energy Transfer Equity (NYSE:ETE) after shareholders voted to approve the deal at yesterday's shareholder meeting. Williams (NYSE:WMB) is appealing Friday's ruling that said Energy Transfer had not breached their merger agreement by raising tax issues that would prevent the deal from closing by the agreed upon termination date.

The U.S. Commerce Department has extended the temporary lifting of sanctions on ZTE Corp. (OTCPK:ZTCOY) through Aug. 30, as the Chinese maker of telecom equipment tries to rebuild its reputation after allegedly breaking sanctions against Iran. The extension of temporary relief is good news for ZTE, which has been scrambling to cope with the potential damage on its global operations and brand image.

Replacing Live Nation's Ticketmaster (NYSE:LYV), eBay's (NASDAQ:EBAY) StubHub has won a 6.5 year revenue-sharing deal to resell tickets for the New York Yankees. The move ends a long standoff between the two companies, which had previously been at odds over a price floor for tickets. Reports suggested the deal was worth around $100M, but a StubHub spokesman said the value of the agreement was "definitely not that high."

The EU is taking steps that could lead to a third antitrust complaint against Google (GOOG, GOOGL), this time over its dominance in advertising. Margrethe Vestager, the bloc's antitrust chief, has already filed formal antitrust charges against the tech giant for allegedly skewing its search results to favor its own shopping service, and more recently in April, over Google's conduct with its Android mobile-operating system.

Today's Markets

In Asia, Japan +0.1% to 15323. Hong Kong -0.3% to 20172. China +0.6% to 2913. India +0.5% to 26525.
In Europe, at midday, London +2.5%. Paris +2.5%. Frankfurt +2.1%.
Futures at 6:20, Dow +1.1%. S&P +1%. Nasdaq +1%. Crude +2.6% to $47.54. Gold -1% to $1311.
Ten-year Treasury Yield +2 bps to 1.48%

Today's Economic Calendar

8:30 GDP Q1
8:30 Corporate Profits
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
10:00 Richmond Fed Mfg.

Companies reporting earnings today »