Wall Street Breakfast: Must-Know News

• Tough day for Europe banks. UBS (UBS) is down 4.65% in pre-market trading to a new 10 year low after it failed to address concerns about further writedowns, despite unveiling major changes to its board. There is also talk UBS may propose another capital raise. Merrill Lynch also removed UBS from its Europe One list. Deutsche Bank (DB) is off 3.4% in the pre-market amid rumors of a profit warning.
• Feds target UBS. To add to UBS's woes, the Justice Department is seeking an unprecedented federal court order to force UBS (UBS) to divulge the names of U.S. clients whom it helped avoid taxes. UBS finds itself between a rock and a hard place, because Swiss law forbids banks to disclose confidential information without client approval.
• Bearish beginnings. At 11,350, the Dow closed out Q2 just inches from bear market territory of 20% below October highs. With futures down 140 points (-0.9%), it appears the bear will ring the Q3 bell. Other benchmarks didn't fare as poorly: S&P 500 -2.9%. Nasdaq +1.1%. Russell 2000 +1.7%. S&P Midcap +5.4%.
• InBev stands firm. InBev said it will forge ahead with its $65/share offer for Anheuser-Busch (BUD) despite strong opposition from the Busch family and various political entities. It says it would rather remain friendly, but plans to pursue "all available avenues that would allow Anheuser-Busch shareholders a direct voice in the process," should friendly talks prove unfruitful.
• No relief in sight for oil shortfall - IEA. The IEA (International Energy Agency) says global oil supplies will shrink more than previously expected through 2013, even as high prices and economic weakness trim demand. "There is no clear sign of a recovery in crude oil capacity over the medium term," it said in its annual medium-term outlook. Crude futures added 1.84% to $142.60 in overnight trading.
• Cuts at Chrysler. Chrysler is laying off 2,400 blue-collar workers and closing a plant amid a demand slump for its minivans and small trucks. Workers say they weren't surprised by the cutbacks. Daimler, which still owns 19.9% of Chrysler, is down 3.4% in the pre-market.
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• Warner signs on to Nokia Music. Nokia (NOK), in its continued effort to challenge Apple's (AAPL) iTunes and iPod, added Warner Music (WMG) to its music service. Warner joins Universal and Sony BMG (SNE). "It's the first global initiative to fundamentally align the interests of music companies with telecommunications companies," Warner CEO Edgar Bronfman Jr. said, calling Nokia's music service "a significant step forward in the evolution of digital music."
• BP staffers to lose Russian visas. Russian authorities refused to renew the work visas of 75 or more TNK-BP (BP) staffers, putting BP at risk of losing control of the joint venture in which it owns a 50% stake; the remainder is owned by four Russian billionaires.
• GE Real Estate (GE) bought $1B of European property loans from Credit Suisse (CS) on the cheap.
• Fortune warns. Fortune Brands (FO) lowered its Q2 and full-year EPS guidance due in part to "weakening consumer sentiment in the U.S., the ongoing correction in the U.S. housing market, and a large and unexpected Australian tax increase on ready-to-drink spirits products." It sees Q2 EPS dropping "at a high-teens-to-mid-20s percentage rate" from last year's $1.51 (vs. a previous drop of "high-single-digit-to-mid-teens"). For the full-year, it sees EPS lower by "high-single-digit-to-high-teens percentage rate" compared to last year's $5.06. Shares fell 3.8% AH.
• CIT exits home lending, makes $1.8B cash. CIT Group (CIT) agreed to sell its Home Lending business, consisting of $9.3B in assets and servicing operations, to Lone Star Funds - for $1.5B in cash and the assumption of $4.4B of outstanding debt. CIT also agreed to sell its $470M manufactured housing portfolio to Vanderbilt Mortgage and Finance for $300M.
• Thinner profits seen at Dollar Thrifty. Car rental company Dollar Thrifty (DTG) warned it will not achieve its previous 2008 EPS guidance of $1.00-1.50. "Our second quarter was below our expectations... In addition, the balance of the year looks less robust than we had forecasted, given overall economic trends," CEO Gray Paxton said.
• Yahoo lobbies shareholders. Yahoo (YHOO) sent a letter to its shareholders in the hopes of rallying them to back its defense against activist shareholder Carl Icahn's dissident slate. Yahoo said it doubts Microsoft (MSFT) "was ever committed to a whole company acquisition"; that its Google (GOOG) tie-up puts it on the fast-track to creating value, more so than Microsoft's proposal; and said Icahn's plan is 'ill-defined' and could put the company in jeopardy.
• Morgan comes to Lehman's rescue. Shares of Lehman (LEH) fell 11% Monday to $19.81 on further speculation it may have to sell itself for as little as $15/share. After the bell, Morgan Stanley analysts initiated coverage of Lehman at Overweight, sending shares up 4.2% to $20.49. "We think near-term risk of incremental write-downs is balanced by solid liquidity and capital footing. The firm's ability to weather near-term market headwinds and return to respectable return on equity generation should help the shares trade closer to book value."
• Chunky share repurchase boosts Campbell. Campbell Soup (CPB) gained 4% Monday after its board approved a $1.2B share buyback, and said it sees 2008 EPS at the high-end of previous forecasts.
• Chip sales climbed a surprising 12.3% from a year ago in May, and gained 2.5% over April - excluding memory chips. Total sales were up 5.3% from last year and 2.8% sequentially. May is an historically strong month for semiconductor sales. Emerging markets are becoming increasingly important to the industry, SIA president George Scalise says. U.S. PC unit sales now account for just 21% of the global total, down from a recent 31%. U.S. cell phone sales are just 13% of global sales, down from 21%.
• Thinning ABS. U.S. asset-backed securities issued during the first half of 2008 were worth just $124B, down from $652B sold a year ago. It's little wonder banks' earnings have plunged.
• Flood fallout less than expected. The USDA said farmers will harvest 9% fewer acres of corn than last year due in part to heavy Midwest flooding. The less-pessimistic-than-expected outlook sent corn futures limit-down.
• The Chicago PMI (Purchasing Managers Index) was 49.6%, just below the 50% expansion/contraction breakeven line - and well ahead of the 48% consensus.
• The Dallas Fed said manufacturing activity weakened in June. General business activity sentiment remains pessimistic; manufacturing expectations remain positive.
• Manufacturer pessimism in Japan. The Bank of Japan's Tankan index of manufacturer sentiment slid to 5 points in June from 11 in March, its third quarterly decline to a four-year low in confidence among Japan's largest manufacturers. Consensus was for an even-worse 3. Profits are expected to drop 7% in the year, vs. a rise of 0.3% predicted 3 months ago.
• UK inflation expectations soar. UK public expectations for inflation over the coming year hit a record high of 4.6% in June, up 50 BP from May's 4.1%. The Bank of England is concerned about the possible effects of the inflationary mindset, and says it is monitoring price expectations closely.

Today's Markets

• Asia markets slipped Tuesday: Nikkei -0.13% to 13,463. Shanghai -3.09% to 2,652. BSE Sensex -3.71% to 12,962.
• In Europe, markets are down sharply at midday. London -2.54%. Paris -2.73%. Frankfurt -2.17%.
• U.S. futures are all down more than 1% in overnight trading. Dow -1.02%. S&P -1.11%. Nasdaq -1.56%.
• Oil is up 1.49% to $142.08. Gold is up 0.41% to $932.10.

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Comments

[francis schutte]

I liked the note about the BP staff not seeing their visa renewed. Such a situation is typical Russian...we have a lot more after WWII when the Iron Curtain was closed. I would not even think of investing a dime in this country.

[long_on_oil]

I would sooner put all my money on a single number at a roulette table than invest in Russia. I don't feel one bit sorry for BP and I own 1000 shares...lol This just shows why BP is lagging all the other oil companies. Poor judgement. And no I can't sell the shares because the dividend is yielding me over 10% based on my cost.

[pickaroonwyo]

Any suggestions for good information on escalating Israel-US/Iran conflicts?

[notsosmart]

unless you have money to lose i hink investing in russia or china is very risky. china is a dictatorship(SEE THE CHANGES AFTER THE OLYMPICS) & RUSSIA is a phony democracy.

[rightinsanfrancisco]

There is good news and bad in the Russia-BP mess. For the Europeans who are becoming increasingly dependent upon Russian energy sources, there should be no illusions about how important brute power is in the relationship. And for global investors, it serves as a reminder that the US, with its tradition of laws, is a haven for capital.

[User 218405]

What happened to my comment?

[SA Editor Eli Hoffmann]

User 218405: Maybe you mean your comment on this post:

seekingalpha.com/artic...

[Iowa515]

It appears that there are many great investment opportunities in today's collapsing world. Unfortunately, the best shots are all on the short side, and short is difficult to handle. When the earthquake shakes the casino, and the ceiling is falling, it's hard to pick the winning numbers on the roulette table, as the whole table may soon be gone.