Shell tables Alaska plans. Royal Dutch Shell (RDS.A, RDS.B) says it will delay its hunt for oil off the Alaskan Arctic until next year after a dome which could be used to contain oil in the event of a spill was damaged in a test. Shell says it will continue to work off the coast of Alaska but will only drill the top part of wells without drilling deeper into the ground, before temporarily closing the holes and returning to them next year. There is a short drilling season in the Chuckhi Sea in the Arctic, which is only navigable for a few months a year, and Shell is still waiting to receive the final permits to allow it to proceed.
China protests rattle Japan. Japan-related stocks fall sharply in both Shanghai and Hong Kong, as anti-Japanese protests erupted in China over the weekend amid a territorial dispute that threatens to hurt trade ties between Asia's two largest economies. Toyota (TM) and Honda (HMC) said arsonists had badly damaged their stores in the eastern port city of Qingdao, and Canon (CAJ) and Panasonic (PC) plan to halt some of their China-based production due to safety concerns. The two countries have long disputed over a group of uninhabited islands in the East China Sea which contains potentially large natural gas reserves.
Gloomy start for Europe. European stocks are off to a weak start this week after Swedish retailer H&M (HNNMY.PK) reported subpar sales and steelmaker SSAB warned of lower Q3 earnings on weak demand. SSAB will speed up planned cost savings to wrap up by Q1 2013, including reducing white-collar EMEA employees by 10%. Reports over the weekend suggested Spain's Prime Minister Rajoy is reluctant to ask for a sovereign bailout, while the country's finance minister wants to ask for assistance as soon as possible.
Top Stock News
Government balks at GM plan. The U.S. Treasury Department reportedly is unwilling to sell the government's stake in General Motors (GM) because a sale now would mean huge investment losses. Earlier this year, GM is said to have floated a plan with Treasury officials to repurchase 200M of the ~500M shares the U.S. government holds in the automaker, with the Treasury selling the remaining shares through a public offering, but the government is not interested in GM's offer at the current price. At GM's Friday share price of $24.14, the U.S. would lose ~$15B on the GM bailout if it sold its entire stake.
JPMorgan Chase faces money-laundering probe. U.S. regulators reportedly are investigating whether JP Morgan Chase (JPM) failed to monitor transactions properly, allowing criminals to launder money. The Office of the Comptroller of the Currency, the federal agency that oversees the biggest banks, is said to be leading the money-laundering investigation. JPM's share price had just regained the levels it held prior to the May 10 announcement of the London Whale trading loss.
iPhone 5 sets sales record. AT&T (T) says it set a sales record with iPhone 5 (AAPL) over the weekend, making the new device the fastest-selling iPhone the company has ever offered. Customers ordered more iPhones from AT&T than any previous model both on its first day of preorders and over the weekend. A new analysis from Barclays predicts massive year-over-year Chinese export gains in September and October, thanks in large part to the iPhone 5.
EADS-BAE merger could be at risk. Senior members of the U.K. government say the proposed merger of EADS and BAE Systems could be challenged in Parliament. The deal is already controversial because it might create a new monopoly in parts of the defense and aerospace industries, which also could spark opposition with the U.S. government. Boeing (BA), Northrop Grumman (NOC) and other major U.S. aerospace and defense contractors are weighing their responses to the proposed tie-up.
Top Economic & Other News
Slow mortgage processing could hit QE3. Bankers say QE3 could be limited by delays in processing mortgage applications, with banks reluctant to cut mortgage rates without the staff to process any increase in business. “In the very near term [QE3] has virtually no transfer mechanism whatsoever to the customer,” said one executive at a top lender. “Originators are massively backlogged in terms of origination volumes.” Yields on mortgage-backed securities fell more than 30 basis points after the Fed's QE announcement, but “very little of that is likely to make it through immediately to consumers."
Obama to announce China trade action. President Obama is set to launch a new trade enforcement case at the World Trade Organization against China, targeting Chinese subsidies for exports of automobiles and automobile parts. The announcement, planned today during a campaign trip to Ohio, highlights the political motivations behind the move: Obama can be seen as taking a stand on China and advance the interests of a major job-providing industry in a state that could tip the balance in a close election against challenger Mitt Romney, who has attacked Obama for what he says is an overly cautious approach in handling China.
Inflation-fighting India. India's central bank holds its benchmark lending rate unchanged and lowers cash reserve requirements for banks, keeping a focus on fighting inflation even as the country's economy turns down. The RBI thinks liquidity coming from global easing could press oil prices higher - India imports three-quarters of its crude needs - and now falls into step with other South Asian central banks in holding rates even.
In Asia, Japan closed. Hong Kong +0.1%. China -2.1%. India +0.5%.
In Europe, at midday, London -0.3%. Paris -0.6%. Frankfurt -0.2%.
Futures at 7:00: Dow -0.2%. S&P -0.2%. Nasdaq -0.2%. Crude -0.2% to $98.76. Gold -0.2% to $1767.10.
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