Wall Street Breakfast: Brent Soars, GE Seals Deal, Oracle Acquisition

by: Wall Street Breakfast
Wall Street Breakfast
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With increasing Iraqi violence, Brent crude rose 62 cents to $115.43 by 6:35 a.m. GMT, and may break its Thursday record of $115.71 - the highest price since September 9. Militants yesterday took control of three towns, two crossings on the Iraq-Syrian border, and stopped traffic on the main highway from Jordan to Baghdad. U.S. crude for August delivery also gained, soaring 50 cents to $107.33. The July contract expired on Friday.

PwC forecasts global spending on capital projects and infrastructure to increase by more than $9T a year after 2025, and estimates $78T in total global spending between now and then. Spending for 2012 was $4T. The new calculation also projects much faster growth in China and other Asian countries which have not faced the brunt of the financial crisis. China surpassed the U.S. in capital and infrastructure spending in 2009.

Japanese shares rose to a five-month high, after a positive survey on Chinese manufacturing added to gains caused by the Fed's dovish monetary policy. The Nikkei climbed 0.1% to 15,369.28, its highest close since January 29. The benchmark has risen almost 10% since the end of May. The Topix increased 0.1% to 1,267.48 at the close of trading in Tokyo, with 1.96B shares changing hands. The JPX-Nikkei Index 400 fell 0.1% to 11,537.06.

BNP Paribas will most likely settle the U.S. investigation over its sanction violations for $8-9B, CNBC reports. The bank is said to have been involved with evading American sanctions by engaging in more than $100B of transactions with Sudan, Iran and Cuba. Some BNP Paribas (OTCQX:BNPQF) officials have also already resigned, after U.S. authorities demanded more than a dozen chosen bank employees leave as part of any settlement.

Oracle is expected to announce a $5B acquisition of MICROS Systems (NASDAQ:MCRS) this morning. The deal values MICROS at more than $67 a share, a slight premium to its $65.77 Friday close. If confirmed, the acquisition would be Oracle's (NYSE:ORCL) largest deal since it bought Sun Microsystems for $5.6B in 2009.

The last remaining element for the GE-Alstom deal has now been completed, after the French government secured its 20% stake in Alstom (OTCPK:ALSMY) from Bouygues (OTCPK:BOUYF). In order to become an immediate shareholder, Bouygues will lend out the shares to the French state. Siemens (OTCPK:SIEGY) CEO Joe Kaeser says he's still ready to negotiate with Alstom should the agreement between General Electric (NYSE:GE) and the power equipment company fall apart.

The American Apparel board has rejected a plea to meet with ex-CEO Dov Charney, and has again refused to reinstate his position. Charney's lawyer says the company did not give the ex-CEO 21 days’ notice of his severance package as required by law, and demanded the meeting with the board. American Apparel (APP) is also reportedly working with investment bank Peter J. Solomon, and may look for a buyout by the end of the year.

Honda and Mazda have announced the expected recall on their vehicles containing the Takata (OTC:TKTDF) airbag defect. The recall expands upon last year's 1.1M vehicle take back, which was issued after discovering the exploding airbag malfunction. Another 2M cars have now been recalled by Honda (NYSE:HMC), and approximately 200k by Mazda (OTCPK:MZDAF).

Santander has agreed to purchase GE (GE) Money Bank for €700M ($950M). GE Money Bank serves as GE Capital's consumer finance business in Scandinavia. The deal is expected to close in the next six months, and will have an 8 basis point impact on Santander's (NYSE:SAN) core capital.

After Shire rejected AbbVie's $46.5B takeover bid last week, the latter is now considering the possibility of raising its offer for the company a fourth time, Bloomberg reports. AbbVie (NYSE:ABBV) is also debating if this potential bid should be taken directly to Shire (NASDAQ:SHPG) shareholders. The deadline to make another offer is July 18.

Nestle is looking to double its direct commodity purchases to secure the quality of its goods and supply chain. Currently 670k farmers are under company contract. As it faces heavy competition across the globe, Nestle (OTCPK:NSRGF) is looking to expand its international market share. It will soon do more than half of its business with Asia, as China becomes its second most important market after the U.S.

PepsiCo and Saudi dairy farm Almarai will invest $345M over the next five years in an Egyptian joint venture. The two will initiate the investment through their subsidiary International Dairy & Juice, owned 52% by Almarai and 48% by PepsiCo (NYSE:PEP). The venture looks to rival Coca-Cola (NYSE:KO) which announced a $500M investment plan for the region in March. Egypt is looking to attract $10B in foreign direct investment for the coming fiscal year beginning next month.

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Today's Markets:
In Asia, Japan +0.1% to 15369. Hong Kong -1.7% to 22805. China -0.1% to 2024. India -0.3% to 25031.
In Europe, at midday, London -0.2%. Paris -0.2%. Frankfurt -0.3%.
Futures at 6:20: Dow +0.1%. S&P +0.1%. Nasdaq flat. Crude +0.2% to $107.55. Gold -0.2% to $1314.40.
Ten-year Treasury Yield flat at 2.62%

Today's economic calendar:
8:30 Chicago Fed National Activity Index
9:45 PMI Manufacturing Index Flash
10:00 Existing Home Sales

Notable earnings after today's close: MU, SONC

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