- House passes bill targeting China's yuan policy. The House easily passed legislation to penalize China's foreign exchange practices, sending a powerful signal to Beijing to boost the value of its currency but risking a backlash that could harm U.S. companies and consumers. The measure allows but does not require the U.S. to levy tariffs on countries that undervalue their currencies. Chinese Premier Wen Jiabao has said China would suffer "major social upheaval" if it acquiesces to demands for a 20%-40% rise in the yuan. Earlier today China warned that the bill could seriously affect bilateral ties.
- U.S. Agrees to AIG Exit Plan. AIG’s (NYSE:AIG) board approved a plan for the Treasury to convert its preferred shares into common stock, paving the way for the federal government to begin to unwind its position in the troubled insurer. Treasury may begin converting its $49B stake in AIG into common stock and sell it off next year. The move is not expected to impact AIG’s credit rating.
- AIG to sell Japan life units to Prudential. In separate AIG (AIG) news, the insurer announced that it was selling two units, AIG Star Life Insurance and AIG Edison Life, to Prudential (NYSE:PRU) for $4.2B in cash and the assumption of $600M in debt. The two Japanese life insurance units will give Prudential revenue in the second largest life insurance market of nearly $18B. The move is an effort on AIG’s part to raise cash to pay back U.S. taxpayers.
- JP Morgan suspends foreclosures as robo-signing controversy spreads. JPMorgan Chase (NYSE:JPM) is delaying foreclosure proceedings to systematically review documents after alerting attorneys that employees may have signed affidavits without personally reviewing the documents. It's the same issue that has plagued GMAC Mortgage, which admitted employees signed foreclosure affidavits in 23 states without knowledge of the documents or a notary present, a process known as "robo-signing." JPMorgan is suspending some 56,000 foreclosures until a review of its filing process in completed.
- Moody’s issues downgrade on Spain. Moody’s (NYSE:MCO) downgraded Spain’s government debt, following downgrades by other credit rating agencies last spring. The move cut the rating by one notch from Aaa to Aa1, and cited a weak economic outlook and doubt that Spain will reach deficit-reduction targets. Bonds actually rose on the news, as some traders had expected a two-grade cut.
- Avis raises offer for Dollar Thrifty Avis Budget Group (NASDAQ:CAR) made a last ditch attempt to come between the planned marriage of car rental outfits Hertz (NYSE:HTZ) and Dollar Thrifty (NYSE:DTG). It said it would up the ante by including a breakup fee in its offer. The move could harm the vote, planned for today, by Dollar Thrifty shareholders on Hertz’s $1.46B offer. Avis’s offer of $1.53B is higher, but thrifty management has backed the Hertz deal. Avis’s breakup fee of $20M is still less than the $44.6M that Hertz is offering. Hertz has said it will end its takeover effort if Dollar Thrifty shareholders vote against it.
- Fed divided over quantitative easing. Three different Federal reserve officials offered three different views on the economy and whether the Fed should buy more Treasury bonds to push down long-term interest rates and stimulate growth: Boston's Eric Rosengren is a strong supporter, Philly's Charles Plosser is clearly opposed, while Minneapolis Fed's Narayana Kocherlakota has been skeptical but his gloomy outlook could sway him. The Fed is a house divided, but if Bernanke really wants to move to quantitative easing, analysts say he's got the votes.
- FedEx shipping rates to rise. FedEx (NYSE:FDX) will increase average FedEx Express shipping rates on U.S. domestic and export services by 3.9%, effective Jan. 3. The full average rate increase of 5.9% will be partially offset by reducing its fuel surcharge. FedEx Freight and less-than-truckload shipment rates will increase by 6.9%, effective Nov. 1. CEO Fred Smith paints an optimistic view, saying the company is "back on track" to reach long-term growth of 10%-15% in EPS and 10%+ in operating margins. But that growth will come mostly from international express shipping, not from the "tepid" U.S. economy.
- RIM may expand use of new operating system. Research in Motion (RIMM) is considering using a new operating system, developed for its tablet device unveiled earlier this week, in some of its smartphones. The operating system was part of a $200M acquisition in April of QNX for use in its new PlayBook tablet. Such a move would likely allow BlackBerry phones to use a wider array of applications. Currently, it lags well behind Apple’s (NASDAQ:AAPL) iPhone and Google’s (NASDAQ:GOOG) Android operating system in the number of apps it can use, and is beginning to slip in market share too.
- Goldman raises $2.3B by reducing ICBC stake. Goldman Sachs (NYSE:GS) raised $2.25 billion from the sale of part of its stake in Industrial & Commercial Bank of China (ICBAF.PK). The bank increased the size of the share placement due to strong demand, cutting its holdings in ICBC by 23%. Goldman continues to own 3% of the Beijing-based bank. Regulatory risks, coupled with ICBC's upcoming rights offering, were considered factors behind Goldman's selldown.
- Nokia finally ships N8 smartphone. After a series of delays, the number one maker of mobile phones, Nokia (NYSE:NOK) finally announced that it was shipping its new flagship N8 phones, that are expected to compete with Apple’s (AAPL) iPhone and phones that run on the Android platform. The phone was originally scheduled to reach customers in June, and then last week, Nokia said there would be another delay. The company said it has a higher number of pre-orders for N8 than any phone in its history.
- McDonald’s may cut health insurance for workers. McDonald’s (NYSE:MCD) is mulling plans to drop its health insurance coverage for nearly 30,000 workers unless regulators waive a requirement of the health care reform law. The battle is over so-called “mini-med” plans that provide limited benefits to low-wage workers. McDonald’s claims that new requirements in the health bill would make it too onerous to continue to offer the plans and is seeking a waiver.
- In Asia, Japan -1.99% to 93369. Hong Kong -0.09% to 22358. China +1.72% to 2656. India +0.57% to 20069.
- In Europe, at midday, London -0.11%. Paris -0.72%. Frankfurt -0.22%.
- Futures: Dow -0.01%. S&P -0.09%. Nasdaq -0.01%. Crude +0.21% to $78.02. Gold +0.27% to $1313.90.
Thursday's Economic Calendar
8:30 GDP Q2
8:30 Initial Jobless Claims
8:30 ISM New York Business Index
8:30 Corporate profits
9:45 Chicago PMI
10:00 Hearing: Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act
10:30 EIA Natural Gas Inventory
11:00 KC Fed Manufacturing
2:30 PM Fed's Bernanke: Town Hall Meeting
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
6:00 PM Fed's Pianalto: 'Vital Economic Issues Confronting the New Congress'
- Notable earnings after Thursday's close: ACN
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