Eurozone PMI points to recession. Eurozone manufacturing PMI improved to an initial 45.3 in August from 44 in July, although it's still contracting, as is factory activity in Germany and France. The data "reinforces the prevailing view" that the economy will drop back into recession in Q3, said Markit. "The July and August readings would historically be consistent with GDP falling by around 0.5%-0.6% quarter-on-quarter."
Chinese factory activity contracts at faster pace. The August preliminary HSBC PMI for China fell to a nine-month low of 47.8 from 49.3 in July. New orders and new export orders contracted at a faster rate than in July, while inventories rose at a speedier pace. "Beijing must step up policy easing to lift infrastructure investment in the coming months," HSBC said.
ECB may keep quiet about bond-yield target. The ECB could set a yield target for buying sovereign debt but might not say what it would be, Reuters reports. By keeping the level private, the bank hopes to avoid a debate with governments about what it should be, says former ECB economist Christian Schulz. However, it's also "an invitation to markets to...sell, sell, sell to see where you would intervene."
Top Stock News
H-P shares dive after earnings slip. Hewlett-Packard (NYSE:HPQ) yesterday followed Dell (NASDAQ:DELL) in reporting a lackluster earnings report, sending shares 5.4% lower premarket. H-P's FQ3 adjusted EPS fell to $1 from $1.10 a year earlier but beat consensus, while revenue slipped 5% to $29.67B and missed expectations. Sales at H-P's traditional businesses of PCs and printers fell, with CEO Meg Whitman, who's trying to enact a turnaround, forecasting dim near-term prospects for both.
Qantas drops multi-billion dollar Boeing 787 order. Qantas (OTCQX:QUBSF) has canceled a booking for 35 longer-distance Boeing (NYSE:BA) 787-9 aircraft with a list price of $8.5B after making an FY net loss of A$245M ($257.4M), the airline's first since 1995. However, Qantas is keeping an order for the 787-8, 15 of which are due to be delivered in H2 next year. Boeing is also paying Qantas $433M, with over $300M because of late deliveries.
KAR owners in sale talks. KAR Auction's (NYSE:KAR) owners are in discussions with private equity firms over a possible sale of the vehicle auction company, Reuters reports. Kelso, Goldman Sachs (NYSE:GS), ValueAct Capital and Parthenon Capital, which collectively own about 78% of KAR, have reached out to other buyout firms to discuss a sale that could fetch north of $4B.
NY Fed set to wrap up sales of AIG assets. The NY Fed is today planning to auction the last batch of CDOs from Maiden Lane III - a vehicle set up as part of the rescue of AIG (NYSE:AIG) - with a sale of $3.4B worth of mortgage debt. AIG has so far received over $6B in proceeds from previous auctions and could get another $1.9B, which will help it buy back more shares from the Treasury.
Ancestry wants suitors to raise their offers. Ancestry.com (NASDAQ:ACOM) has asked suitors, including P-E firms Permira and TPG, to increase their bids for the genealogy Web site, Bloomberg reports, with the firm already turning down a proposal of $35 a share. KKR (NYSE:KKR) and Providence have shown interest but haven't yet made any offers as they think the price is too high. Ancestry.com closed yesterday at $30.24, giving it a market cap of $1.29B. Shares were +6.4% premarket.
Top Economic & Other News
Markets rally as FOMC signals that more easing is on the way. Global markets started to rally yesterday after the FOMC minutes yesterday showed that support is growing for additional action "fairly soon" unless there is clear strengthening of the recovery, with QE3 among the options. Add the weak Chinese PMI print, and it looks like there could soon be a lot more fiat paper chasing the same level of goods. Equities, precious metals and oil are all up.
The middle class' lost decade. The middle class suffered its "worst decade in modern history" in the 10 years ending in 2010, falling backward in income for the first time since World War II, a Pew Research study shows. In 1970, the share of U.S. income going to the middle class was 62%, while the wealthy received 29%; by 2010, the middle class took 45% of total income vs. 46% for upper-income Americans.
Aussies divided over resources boom. "The resources boom is over," says Australian Resources & Energy Minister Martin Ferguson. Oh no it isn't, argues Nev Power, the CEO of miner Fortescue (OTCQX:FSUMF), which reported better-than-expected H2 profits. "There is a boom and it's continuing and those volumes will continue in the future," says the always confident Power. The debate comes as BHP (NYSE:BHP) and other miners put the brakes on capital spending amid slowing Chinese demand.
Chinese acquisitions of corporate America hit record high. Chinese purchases of U.S. companies and assets hit a record $7.8B in the first eight months of the year, and look poised to top the FY record of $8.9B, which was set in 2007. The biggest deal this year is Dalian Wanda's $2.6B acquisition of AMC Entertainment. The trend comes despite 2012 global M&A volumes being on track for their weakest year since 2003.
In Asia, Japan +0.5%. Hong Kong +1.2%. China +0.3%. India flat.
In Europe, at midday, London +0.4%. Paris +0.3%. Frankfurt +0.2%.
Futures at 7:00: Dow +0.2%. S&P +0.2%. Nasdaq +0.2%. Crude +0.6% to $97.82. Gold +1.5% to $1664.90.
Today's economic calendar:
8:30 Initial Jobless Claims
9:00 PMI Manufacturing Index
9:45 Bloomberg Consumer Comfort Index
10:00 New Home Sales
10:00 FHFA House Price Index
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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