Markets plunge as Bernanke signals the end of QE. Global markets across multiple sectors have sold off after Ben Bernanke yesterday signaled that the Fed may soon start turning down the money printing presses, saying that the bond-buying could end in mid-2014. Asian, European and U.S. equities fell and government bond yields spiked, while gold had plunged 5.95% to $1,292.20 at the time of writing and hit a 2 1/2 year low. Only the dollar seems to have benefited, rising across the board. (See below for details)
Chinese manufacturing PMI shrinks further. HSBC Chinese manufacturing PMI has fallen to a nine-month low of 48.3 in June from 49.2 in May and vs consensus of 49.4. "Manufacturing sectors are weighed down by deteriorating external demand, moderating domestic demand and rising de-stocking," says HSBC. Because of Beijing's preference for reform over stimulus, the bank expects "slightly weaker growth in Q2." The data added to the gloomy market sentiment, with miners in particular suffering.
U.K. banks need to raise £27.1B. The British banking sector needs to formulate plans to raise a combined £13.4B in order to meet Basel III capital requirements, the Bank of England said today. Banks had a total shortfall of £27.1B at the end of 2012 and have already drawn up programs to raise £13.7B, although some of the proposals need regulatory approval. RBS's (NYSE:RBS) shortfall was £13.6B, Lloyds' (NYSE:LYG) was £8.6B and Barclays (NYSE:BCS) was £3B.
Top Stock News
Sony CEO Kirai stays wary of spin-off. Sony (NYSE:SNE) CEO Kazuo Kirai told a shareholders meeting today that the company will take its time in considering Daniel Loeb's proposal to partially spin off its successful entertainment division and use the funds to boost its struggling hardware operations. "The entertainment business plays an important role in Sony’s future growth" and so shouldn't be let go, Hirai said.
U.K. to "urgently investigate" splitting RBS. The British government will consider breaking RBS (RBS) into "good" and "bad" banks, Finance Minister George Osborne said yesterday. The decision will partly depend on whether the move would support the economy and whether it were to speed up RBS's return to private ownership, which is some way off. However, Lloyds (LYG) is in good enough shape for the government to start selling its 39% stake in the bank within months.
Oracle's revenue growth seen stagnant. Oracle's (NYSE:ORCL) FQ4 results are due out after the bell, with analysts expecting that EPS rose to $0.87 from $0.82 a year earlier as revenue inched up 1.6% to $11.12B. "We expect the company to report muted growth as it continues to face significant challenges in its hardware business," says SA author Trefis. "However, its software business could get back on the growth track after a dismal performance last quarter."
Microsoft held talks to buy Nokia's device operations. Microsoft (NASDAQ:MSFT) reportedly carried out advanced discussions this month to acquire Nokia's (NYSE:NOK) phone business and was "close to an oral agreement" at one point. However, negotiations broke down in part due to price and concerns about Nokia's competitive positioning. The talks aren't likely to be revived.
Vaccines halve rate of virus linked to cervical cancer. The rate of HPV, a sexually transmitted virus that is the main cause of cervical cancer, has dropped 56% among 14-19 year-old young women since the first vaccine was introduced by Merck (NYSE:MRK) in 2006. The results have been so good that the director of the Centers for Disease Control & Prevention, Thomas Frieden, wants to "protect a generation from cancer" by increasing vaccination. Merck's drug, Gardasil, earned $1.6B in sales in 2012, while one from GlaxoSmithKline (NYSE:GSK), Cervarix, brought in $428M.
3D printer firm Stratasys to buy MakerBot. Stratasys (NASDAQ:SSYS) has agreed to acquire desktop 3D printing startup MakerBot in an all-stock deal worth an initial $403M, based on Stratasys' close on Wednesday, but which could reach $604M via performance incentives. MakerBot, which will operate as an independent unit, has sold over 22,000 printers since 2009 and had Q1 revenue of $11.5M. The companies estimate that 35,000-40,000 desktop 3D printers were sold in 2012 and see the market doubling this year.
Forest Labs eyes Elan. Forest Laboratories (NYSE:FRX) is reportedly among several mid-sized pharmaceutical companies that are interested in bidding for Irish drugmaker Elan (NYSE:ELN). The speculation comes a day after Royalty Pharma gave up in its hostile attempt to acquire Elan for up to $8B. Jefferies analyst Corey Davis says that a deal could help reduce the buyer's tax payments, as Elan is based in Ireland, where corporate rates are particularly low.
The Swoosh is going digital. Nike (NYSE:NKE) is encouraging software developers to view the company's FuelBand device for monitoring a wearer's activity as a platform for creating apps. "The more uses there are for the FuelBand, the more it becomes something you will never take off," says Nike's Stefan Olander. It's all part of an attempt by Nike, which has had an uneven experience with gadgets, to think more like a technology company.
Top Economic & Other News
Eurozone factory activity hits 16-month high. Perhaps lost in all the frenzy about the end of QE is what seems to be an improving picture - or one that's less worse - in the eurozone, where flash manufacturing PMI edged up to a 16-month high of 48.7 in June from 48.3 in May and topped consensus of 48.6. While business activity contracted, says Markit, "there are reassuring signs that the downturn is continuing to ease." Markit even forecasts a "return to growth" in Q4.
Eurogroup to discuss bank bailouts. Eurozone finance ministers are due to decide today when and how the European Stability Mechanism (ESM) can be used to bail out distressed banks, with the issue one of the vital elements in creating a European banking union. Among other things, the Eurogroup will decide government contributions, who would take haircuts, and whether the ESM would become a shareholder in an institution it rescued.
Alpha-Rich Stock Movers and Great Calls
1) On Tuesday, Josh Burwick published a bullish article on Red Hat's upcoming earnings, pointing to solid checks as reason to expect the company would beat lowered expectations. RHT was +3.85% after-hours yesterday following its earnings report.
2) In November, Thomas Lott called Aircastle Limited "significantly undervalued." It's +37.5% to-date.
Alpha-Rich Stocks To Watch
1) Jos. A. Bank (NASDAQ:JOSB). Sitting on a growing mountain of cash and entering the high-margin tuxedo rental business, JOSB looks good as a value play.
2) Empresas ICA (NYSE:ICA). Recent events have cut ICA's share price in half, but the long-term Mexican infrastructure story still holds. Shares should rebound to previous highs, giving upside of nearly 100%.
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In Asia, Japan -1.7% to 13015. Hong Kong -2.9% to 20383. China -2.8% to 2084. India -2.7% to 18719.
In Europe, at midday, London -2.4%. Paris -2.5%. Frankfurt -2.5%.
Futures at 7:00: Dow -0.65%. S&P -0.8%. Nasdaq -0.9%. Crude -1.8% to $96.47. Gold -5.95% to $1292.20.
Today's economic calendar:
8:30 Initial Jobless Claims
9:00 PMI Manufacturing Index Flash
9:45 Bloomberg Consumer Comfort Index
10:00 Existing Home Sales
10:00 Philly Fed Business Outlook
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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