Markets party as Germany caves over bond buying. The EU last night agreed to allow countries that comply with its budget policies to access the bloc's rescue funds to support their sovereign bond markets. With Germany caving in, leaders also agreed to recapitalize banks directly from the bailout funds. Global equity markets have been partying on the news, while yields on 10-year Spanish and Italian bonds have plummeted.
A-B InBev to buy control of Grupo Modelo for $20.1B. Anheuser-Busch InBev (NYSE:BUD) has agreed to acquire the half of Grupo Modelo that it doesn't own for $20.1B. In lockstep, Constellation Brands (NYSE:STZ) will purchase the 50% of Crown Imports it doesn't own for $1.85B. Crown is a JV between Modelo and Constellation to import Corona into the U.S. - the transaction is probably an attempt to avoid antitrust concerns about the larger deal.
RBS faces $233M Libor penalty. RBS (NYSE:RBS) is expected to be fined $233M in connection to Libor manipulation, the Times of London reports. Other banks under investigation include HSBC (HBC), Citigroup (NYSE:C) and UBS (NYSE:UBS). With the fallout from the scandal gaining momentum, the British Bankers' Association yesterday asked the U.K. government to intervene in the regulation of the rate's "setting mechanism."
Top Stock News
RIM shares battered as death spiral continues. RIM (RIMM) shares were -16% premarket after FQ1 results yesterday massively missed expectations as the company swung to a net loss per share of $0.37 from a profit of $1.33 and revenue sunk 43% to $2.8B. To make things worse, RIM said its BlackBerry 10 smartphones won't now come until calendar Q1 2013. The company also plans to slash 5,000 jobs by the end of FY13 as part of its restructuring efforts.
Barclays and co. caught up in more scandal. Barclays (NYSE:BCS), HSBC (HBC), Lloyds (NYSE:LYG) and RBS (RBS) will have to “provide appropriate redress” in cases of mis-selling interest rate swaps to customers, the U.K.'s Financial Services Authority has said, adding that the mis-sales had resulted in a "severe impact" on a number of businesses.
Ford issues profit warning due to European woe. Ford (NYSE:F) yesterday said its Q2 operating pretax profit will be "substantially lower," partly due to international losses tripling because of much weaker European sales. The car maker could close an assembly plant in Europe should demand keep falling. Ford had forecast that its Q2 overseas losses would be similar to the $190M it lost in Q1. Shares were -0.9% premarket.
Nike plunges on earnings miss. Like RIM (RIMM), Nike (NYSE:NKE) shares were getting battered premarket following a big EPS miss, and were -12.3%. Earnings came in at $1.17 per share as revenue climbed 12% to an in-line $6.5B, with the company attributing the miss to higher spending and increased material costs. Citigroup clipped its price target for Nike but said it maintained the long-term thesis that the company is a high-quality growth story.
Coty files for $700M IPO. Perfume maker Coty has filed for an IPO in which it plans to raise $700M. The WSJ earlier reported that Coty would seek to raise $1B at a valuation of $7B. The filing comes after the perfume maker abandoned its attempt to acquire larger competitor Avon Products (NYSE:AVP) for $10.7B, and could give a jolt to the somewhat stagnant IPO market.
Court's verdict has mixed impact on healthcare shares. The effect on healthcare stocks following the Supreme Court's ruling validating the Healthcare Act yesterday was mixed, with hospital shares soaring but insurers and medical-device makers falling. Hospitals will benefit by gaining millions of new customers, but insurers face new rules that could restrict profits, while medical-device and pharmaceutical firms will be hit with new taxes.
Sheldon Adelson accused of wrongdoing in Macau. Las Vegas Sands (NYSE:LVS) CEO Sheldon Adelson has been accused of approving a "prostitution strategy" at the casino operator's properties in Macau. The allegations were made in a court filing by Steve Jacobs, a former top China executive who is suing LVS for wrongful dismissal. Jacobs' latest allegation adds to other accusations of wrongdoing.
U.K. group to acquire Elster for $2.3B. British buyout group Melrose has agreed to buy German gas-and-electric meter company Elster Group (ELT) for $2.3B. The offer of $20.50 for each Elster American depositary share represents a 43% premium to the stock's average price over the last six months.
Top Economic & Other News
Stockton files for Chapter 9. Stockton has made it official and filed for Chapter 9 bankruptcy protection, becoming the largest U.S. municipality ever to do so. The city listed assets of over $1B and debt of $500M-$1B. Of 42 municipal bankruptcies since 1981, 10 have been filed in the last 4 years.
The U.S. cuts China slack over Iranian oil. The U.S. has exempted China for 180 days from sanctions levied against countries who trade with Iran, citing significant reductions in crude oil purchases from the country. U.S. officials were careful to say that the Chinese cuts may have come for its own domestic-energy security reasons, but they nevertheless qualify as reductions for the purposes of the U.S.'s sanctions law.
Japan's mixed data dump. Japan's industrial production dropped 3.1% in May, worse than the 2.8% fall expected, although the jobless rate fell to 4.4% from 4.6% in April. Spending by households rose 4% on year, beating expectations, while core CPI dipped 0.1%, in line with forecasts.
In Asia, Japan +1.5%. Hong Kong +2.2%. China +1.4%. India +2.6%.
In Europe, at midday, London +1.4%. Paris +2.9%. Frankfurt +2.5%.
Futures at 7:00: Dow +1.1%. S&P +1.45%. Nasdaq +1.1%. Crude +3.9% to $80.72. Gold +1.8% to $1578.40.
Today's economic calendar:
8:30 Personal Income and Outlays
9:45 Chicago PMI
9:55 Reuters/UofM Consumer Sentiment
Notable earnings before today's open: STZ
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