Banks shrug off Moody's "mea culpa". Shares in banks that Moody's downgraded yesterday rose following the rating agency's long-awaited announcement of the cuts, indicating that either the decisions were already baked in or that no-one cares that much anymore about what the ratings agencies think, or both. The downgrades are "a mea culpa from 2007 and 2008," says Morningstar analyst James Leonard. "The banks have improved but the ratings have got worse. What does that tell you?"
J&J's Xarelto could miss out on $1B market after FDA decision. The FDA has blocked Johnson & Johnson's (JNJ) application to widen the use of its Xarelto blood thinner to prevent heart attacks and strokes in people with acute coronary syndrome, a market estimated at $1B. J&J said it will work with the FDA to address its questions, indicating that the company hasn't given up hope of eventually getting the authorization.
EU big four set to meet in Rome. Leaders from Germany, France, Italy and Spain are due to meet today in Rome, where Spain may formally request a bailout for its banks after independent audits yesterday said they needed €62B. The agenda at the meeting may include a proposal that the EFSF and ESM rescue funds should be able directly fund banks as opposed to having the sponsoring country apply for a rescue, a suggestion that has found support even at the ECB.
Top Stock News
BlackRock managers leaving amid black clouds. Daniel Rice, star co-manager of $4.4B in energy assets at BlackRock (BLK), will leave the firm after reports of potential conflicts of interest between his family's private energy investments and the portfolios he managed for clients. Meanwhile, Reuters reports that the retiring Bob Doll may have based his fund models on the work of others rather than the company's proprietary models, as claimed in the past.
Decision on AMR union contracts delayed. A court ruling that was expected today on union contracts at American Airlines (OTCQB:AAMRQ) has been pushed back to June 29, providing a bit more time for the company to persuade labor representatives to accept voluntary cost cuts. An eventual decision could pave the way for imposed layoffs and other steps.
Tycoon set to challenge Murdoch in Aussie bidding war. It looks like a nice little bidding war could play out Down Under between Rupert Murdoch and fellow tycoon Kerry Stokes for TV holding company CMH, with Stokes' Seven Group indicating it may make a proposal for the 76% it doesn't own. News Corp. (NWS) has already offered $2B for CMH, which 50.1%-owner James Packer is minded to accept unless something better comes along.
Amazon Web Services' stunning growth. "If you're a start-up, you'd be crazy to build your own infrastructure," said an executive at cloud storage leader Dropbox, which uses Amazon Web Services (AMZN) to host billions of members' files. Many other startups also rely on AWS, whose aggressive pricing and rapid deployment times have fueled its stunning growth.
JOBS Act not yet doing the job. While the JOBS Act was designed to make it easier for small companies to IPO, it's not clear that the measure will have much of an effect. In a survey of 6,000 small firms, just 1% said the bill increased the chances that they'll go public. Instead, the businesses will seek bank loans and other sources of financing.
Sara Lee's place on S&P 500 to be gobbled up by Monster. Monster Beverage (MNST) will be added to the S&P 500 and Sara Lee (SLE) deleted on June 28. Sara Lee is spinning off its international Coffee & Tea business to shareholders in a transaction expected to be effective after the close of trading on that date.
Top Economic & Other News
Pentagon cuts could cost 1M jobs - NAM The National Association of Manufacturers has warned that the looming cuts in Pentagon spending that would begin in January will lead to the loss of more than a million jobs, including 130,000 manufacturing jobs by 2014. It's the latest warning by industry groups and think tanks about the impact of the automatic spending cuts put into law last year by the Budget Control Act.
California agrees to $92B budget deal. Once plagued by budget delays, California is set to pass its new FY program on time for the second year in a row after a deal yesterday between Governor Jerry Brown and legislators. The $92B agreement, a mix of spending cuts and a tax hike that will go before voters in November, plugs a $16B deficit and should improve California's reputation amongst muni-bond investors.
German approval of bailout fund in doubt. Germany's ratification of the ESM rescue fund by the July 1 launch date is in doubt after an opposition party yesterday said it would ask the country's top court to delay authorization on constitutional grounds. If the court's previous actions are anything to go by, it will reject an injunction to delay the ESM while it considers the issue.
Firms post vacancies but aren't in a hurry to fill them. While job openings have risen since the end of the recession, firms aren't necessarily filling them, and hiring is still way below levels prior to the financial crisis. A study of "recruiting intensity" indicates that companies aren't in a hurry to hire, especially with the recovery so bumpy.
China, Brazil agree to $30B currency-swap. China and Brazil have reportedly agreed to a $30B currency-swap deal, allowing each country to tap the other's central bank to help bolster reserves in the event of a crisis or a major liquidity event. The agreement is seen as the first step in a wider pact that could eventually include Russia, India and South Africa.
M&A market stagnates. U.S.-targeted M&As plunged 44% on year in H1 to $299B as the economic uncertainty caused companies to stay cautious about expanding despite the piles of cash they've accumulated. Global activity slumped 25% to $1T and bankers don't expect things to get any better in H2.
In Asia, Japan -0.3%. Hong Kong -1.4%. China -1.4%. India -0.3%.
In Europe, at midday, London -0.8%. Paris -0.6%. Frankfurt -0.6%.
Futures at 7:00: Dow +0.45%. S&P +0.5%. Nasdaq +0.4%. Crude +0.5% to $78.59. Gold +0.2% to $1568.90.
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