Wall Street Breakfast: Must-Know News

by: SA Editor Yigal Grayeff
SA Editor Yigal Grayeff
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

  • China denies Gmail hacking claims. China's foreign ministry has described as 'completely unfounded' Google's (NASDAQ:GOOG) assertions that hackers from Jinan in China ran a campaign to steal hundreds of Gmail passwords, including those of senior U.S. government officials, Chinese political activists, officials in several Asian countries, military personnel and journalists. Jinan is home to a technical reconnaissance bureau of the People's Liberation Army and a technical college that U.S. investigators last year linked to a previous attack on Google. The latest breach follows an unrelated attempt to break into Lockheed Martin's (NYSE:LMT) computer systems and a successful attack on Sony (NYSE:SNE).
  • Japan PM survives no-confidence vote after offering to quit. Japan's government has survived a no-confidence vote after Prime Minister Naoto Kan offered to resign once he has dealt with the worst of the country's tsunami and nuclear crises. However, Kan didn't provide a timeframe for leaving, and given his weak position, he may find it difficult to make progress on the tax and social security reforms needed to contain Japan's bulging debt. The uncertainty has been rattling markets, adding to concerns over the nation’s debt burden and sending bond yields up. Japanese shares fell today despite the no-confidence motion failing, with investors also concerned by the state of the U.S. economy and Greece's debt problems.
  • Greek CDSs soar following Moody's downgrade. The cost of insuring Greek debt against default rose today after Moody's cut Greece's debt rating yesterday to Caa1 from B1 with a negative outlook, and noted that about 50% of Caa1-rated governments default within 5 years. With five-year credit default swaps increasing 40 basis points to 1,470 points, it now costs €1.47M to protect €10M of debt. The downgrade, which put Greece on a par with Cuba, followed a report that the ECB may support a plan in which the eurozone nation will roll over its debt, as the bank believes that this would not technically constitute a default.
  • Europe to hold off on bank stress tests. The European Banking Authority plans to delay releasing the latest stress test results for banks until July, sources said, on concerns that the data provided was overly optimistic. The EBA wants banks to resubmit data about how they would fare in an economic downturn. The results were supposed to be released this month.
  • Expedia and Groupon partner. Expedia (NASDAQ:EXPE) and Groupon are launching a travel deals service called Groupon Getaways that will allow people to book hotel rooms and airfares from Expedia at a steep discount. The partnership was disclosed at the D9: All Things Digital conference by Groupon CEO Andrew Mason, who also said that while the company has talked to bankers about an IPO, it still has 'nothing to announce.'
  • Orbitz soars after American Airlines ruling. Shares in Orbitz Worldwide (NYSE:OWW) sky-rocketed 51% in post-market trading after an Illinois court ordered American Airlines (NASDAQ:AMR) to post and sell flights on Orbitz again. American pulled its content from Orbitz in December following the latter's refusal to adopt American's new technology that would let consumers price their trips based on factors other than just fares.
  • MBIA fraud claim against Credit Suisse dismissed. A New York court has dismissed part of a lawsuit in which bond insurer MBIA (NYSE:MBI) accused Credit Suisse (NYSE:CS) of misrepresenting the quality of mortgage-backed securities. The judge also blocked MBIA's attempts to secure punitive damages. In a 2009 lawsuit, MBIA said that since a transaction with Credit Suisse and two other defendants to insure residential mortgages closed in April 2007, loans accounting for more than half of the original total loan balance had defaulted, requiring it to make about $296M in claim payments. The ruling is a promising precedent for several other firms facing similar suits from MBIA.
  • Arcadia allegedly rigged Yemen oil exports. Arcadia Petroleum, charged last week by the CFTC for manipulating oil prices, allegedly used hardball tactics to monopolize the purchase of oil from Yemen and obtain below-market prices. A State Department cable said authorities broke the trading house's 'long-standing monopoly,' by revamping their sales process. Citing a highly-ranked government official, the cable also said Arcadia and its agent in Yemen "scared away potentially more competitive bidders by threatening to kidnap their representatives." Arcadia, which is among the world's largest private oil trading firms, has denied the allegations, describing the kidnapping claim as 'ludicrous.'
  • Fed officials sing from same easy money hymn sheet. Top Federal Reserve officials Sandra Pianalto and Janet Yellen have maintained that the bank's easy money policies remain appropriate given the high unemployment rate. "We've got a long way to go before labor markets can be described as healthy again," said Pianalto. John Williams, president of the San Francisco Fed, said the Fed's two rounds of asset purchases will have boosted GDP by about 3% and added about 3M jobs by the second half of 2012. Data from payrolls processing company ADP Employer Services yesterday showed that employment growth slowed sharply in May (.pdf), leading economists to cut their forecasts for government non-farm payroll figures, which are due out tomorrow.
  • Auto bailout to cost $14B-$16B. The U.S. is likely to make a loss of $14B-$16B on the bailouts of the auto industry, a government report (.pdf) said yesterday. Of the $80B provided, less than 20% may be lost, an estimate that's far better than a projection of 60% two years ago. The report also said the rescue saved the government tens of billions of dollars in direct and indirect costs, including in unemployment insurance and lost tax receipts. Since GM (NYSE:GM) and Chrysler (FIATY.PK) emerged from bankruptcy, the industry has created 115,000 jobs. The report came as data showed that U.S. auto sales declined an annualized 3.7% in May as short supplies, higher prices and economic worries weighed on demand.
  • Microsoft lifts curtain on Windows for tablets. Microsoft (NASDAQ:MSFT) has demonstrated its new operating system, a touch-screen version of Windows that will operate on tablets and personal computers. With the company looking to respond to Apple's (NASDAQ:AAPL) iPad, Windows 8 is the first full edition of the OS capable of running on chips based on technology from ARM Holdings (NASDAQ:ARMH), the leading player in the tablet space. Microsoft didn't give a release date for Windows 8 but said it wouldn't be in the autumn.
  • Alibaba's Ma expects deal with Yahoo over Alipay. Jack Ma, CEO of China's Alibaba (OTC:ALBCF), is 'optimistic' about reaching an agreement with major shareholders Yahoo! (YHOO) and Softbank (OTCPK:SFTBF) over the transfer of Alibaba's online payments business Alipay to one of his companies. However, in comments possibly designed to rile Yahoo, Ma said the search company should be broken up. Yahoo's shares have slumped about 15% since it disclosed the Alipay spin-off last month, and it is seeking compensation on concern its investment in China would lose value.

Earnings: Thursday Before Open

  • Joy Global (JOYG): FQ2 EPS of $1.52 beats by $0.27. Revenue of $1.1B (+19% Y/Y) beats by $0.07B. (PR)

Today's Markets

  • In Asia, Japan -1.7% to 9555. Hong Kong -1.6% to 23254. China -1.4% to 2705. India -0.6% to 18494.
  • In Europe, at midday, London -0.8%. Paris -1.1%. Frankfurt -1.1%.
  • Futures at 7:00: Dow +0.2%. S&P +0.3%. Nasdaq +0.4%. Crude +0.2% to $100.47. Gold +0.1% to $1543.90.

Thursday's Economic Calendar

  • Notable earnings before Thursday's open: JOYG, UTIW
  • Notable earnings after Thursday's close: PAY, SAI

The SA Currents team contributed to this post.

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