IMF: EU countries to miss budget targets. Spain's budget deficit will hit 7% of GDP in 2012 and 5.7% in 2013, thereby missing EU-agreed targets of 6.3% and 4.5% respectively as the country recapitalizes its banking sector, the IMF has forecast. The fund added that debt will hit 90.7% this year and 96.9% next year, well above Spanish estimates. The fund also predicted that France and Italy will miss their goals, and warned that the U.K. should slow austerity if the economy continues to founder.
IMF lowers global economic outlook. In no real surprise, the IMF has cut its global growth estimates again, predicting a rise of 3.3% this year (down from 3.5%) and 3.6% in 2013 (down from 3.9%). The fund has raised its estimates for U.S. growth slightly to 2.2% in 2012 and 2.1% in 2013, but forecast that China will weaken to 7.8% this year and grow 8.2% next year. Key factors include the U.S. "fiscal cliff" and the fate of the euro.
Russians look to sell TNK-BP stake. In the latest twist in the dispute between BP (BP) and its Russian billionaire partners in TNK-BP, AAR, which represents the partners, intends to sell its 50% stake in the joint venture to a third party or sell some of the shares in an IPO. AAR said the move would give it more flexibility if BP sells its 50% holding to Rosneft.
Top Stock News
Cisco halts ZTE partnership over sales to Iran. Cisco (CSCO) has ended a seven-year partnership with ZTE following allegations that the Chinese company illegally sold equipment to Iran, including Cisco switches and a telecom surveillance system. ZTE was "reasonably successful" in reselling Cisco products in China, although other aspects of the relationship didn't go so well. ZTE, along with Huawei, was yesterday accused of posing a security threat to the U.S.
Alcoa earnings seen plunging as earnings season kicks off. Alcoa (AA) is set to get earnings season underway later today, with analysts predicting that Q3 EPS sank to $0.01 from $0.15 a year ago and that revenue slumped 13.2% to $5.57B. While Alcoa is seen as a barometer for global manufacturing, FactSet says it's not a good indicator of how S&P 500 results will turn out. Since 2009, whenever Alcoa missed consensus, an average of 72% of component companies beat profit estimates.
Anschutz wants $10B for AEG. Anschutz wants to sell AEG in one piece and keep the management in place, and expects to receive bids of around $10B for the sports and entertainment company, Reuters reports. That's higher than the $6B-$8B that was mooted last month, and, along with the desire to avoid a break-up, complicates the sale. Prospective suitors include Liberty Media (LMCA).
Japanese car makers confirm dive in China sales. September sales for major Japanese automakers in China have confirmed just how bad the East China Sea islands dispute is for business. Toyota's (TM) sales in the country plunged 48.9% year on year, Honda's (HMC) skidded 40.5% and Nissan's (OTC:NSANF) dropped 35.3%, while Suzuki's (OTC:SZKMF) shipments to dealers plummeted 42.5%.
Barclays snaps up ING's U.K. online ops. Barclays (BCS) has agreed to acquire ING Direct U.K., with the British bank taking on deposits of £10.9B and mortgages of £5.6B, as well as 1.5M customers and 750 employees. The mortgage book had a loan-to-value ratio of 50% as of August 31, with Barclays paying a 3% discount but buying the deposit book at par. ING (ING) is taking a €320M after-tax loss on the sale of the British Internet operations.
Sears to earn $346.5M from spin-off. Sears (SHLD) expects to earn $346.5M from the separation of Sears Hometown and Outlet Stores into a new company after a rights offering was fully subscribed. Sears will receive another $100M in the form of a special cash dividend prior to the separation. The spin-off, to trade on Nasdaq under the symbol SHOS, is set to operate 944 Sears Hometown Stores, 96 Sears Hardware Stores, and 76 Sears Home Appliance Showrooms.
Edwards Lifesciences sinks on revenue warning. Edwards Lifesciences' (EW) shares plunged 15.8% in post-market trading after the company warned that it expects Q3 revenue of $448M, below a $476.6M consensus. The company blamed soft transcatheter heart valve (THV) sales due to European austerity, a lack of U.S. reimbursement for certain inoperable patients, and a "more pronounced effect" from summer vacations.
Principal Financial expands in Chile with $1.5B deal. Principal Financial (PFG) has agreed to acquire Chilean pension manager AFP Cuprum for around $1.5B as it expands its presence in fast-growing Latin American markets. Cuprum has approximately $32B of assets under management.
Big Tobacco hopes not to suffer from domino effect over packaging. Tobacco products with more graphic warnings and sold in only plain packaging are now on display in Australia after the country's new tobacco laws came into effect this month. Industry analysts warn that tobacco control measures have historically passed quickly from nation to nation, a trend that BAT (BTI) and Philip Morris (PM) hope will be slow in developing.
Firms lock in low interest rates for decades. Companies are not only exploiting rock-bottom interest rates to issue more debt, but are also taking advantage by offering long-term paper. Companies have sold $91.9B of 30-year bonds in 166 deals this year, up from $73.2B in 145 offerings in 2011 and the most in any full year since 1995. Those feasting include GE (GE), Comcast (CMCSA) and UPS (UPS).
Top Economic & Other News
IMF warns eurozone to take haircut on Greek debt. The IMF is threatening to cut its financing to Greece unless eurozone countries take haircuts worth tens of billions of euros on the country's debt, the WSJ reports. The eurozone is resisting the IMF's suggestions, which include having the ESM take on Greek debt of $50B, a move that could slash the country's burden by 15%-20% of GDP.
PBOC pumps more liquidity into markets. The People's Bank of China has provided the money market with another liquidity rush, injecting 265B yuan ($42.14B) by offering reverse repurchase agreements. It's the PBOC's second-largest ever daily fund injection after the 290B yuan of reverse repos the bank offered on September 25. Traders say the move could reduce China's money market rate and so lower corporate financing costs. Chinese shares climbed 2% on the news.
Japan's current-account surplus grows. Japan's current-account surplus widened to ¥454.7B ($5.8B) in August from ¥436.3B a year earlier, the first such increase for 18 months as lower energy prices helped offset the strengthening yen and falling exports. The latest figure beat consensus but fell from July. Bank of Tokyo-Mitsubishi strategist Takahiro Sekido says the year-on-year move was "a temporary blip in a negative trend."
In Asia, Japan -1.1%. Hong Kong +0.5%. China +2%. India +0.5%.
In Europe, at midday, London -0.3%. Paris +0.1%. Frankfurt -0.5%.
Futures at 7:00: Dow -0.1%. S&P -0.1%. Nasdaq -0.3%. Crude +0.4% to $86.69. Gold -0.1% to $1773.70.
Today's economic calendar:
7:30 NFIB Small Business Optimism Index
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
10:00 Employment Trends Index
10:00 IBD/TIPP Economic Optimism
1:00 PM Results of $32B, 3-Year Note Auction
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