Wall Street Breakfast: Brent Falls To New 5-Year Low

by: Wall Street Breakfast
Wall Street Breakfast
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Brent crude fell to a new five-year low as a number of banks, including Morgan Stanley cut price forecasts, saying oversupply would peak next year after OPEC decided not to cut output. Brent for January settlement declined as much as $1.72 to $67.35 a barrel on the ICE Futures Europe exchange, its lowest intraday price since October 2009. WTI for January delivery also slumped, dropping as much as $1.25 to $64.59 a barrel on the New York Mercantile Exchange.

Japan’s economy shrank more than initially reported in the third quarter, contracting 1.9% as capital spending declined and private consumption remained weak. Last month, the government estimated that GDP contracted 1.6% during the July-September period. The revised data confirms Japan slipping into recession less than a week prior to general elections that Prime Minister Shinzo Abe has framed as a referendum on his economic policies.

China’s Shanghai Composite Index surged above 3,000 for the first time since April 2011 as the country reported a record trade surplus. Though today’s data is seen as a sign of weakness for China’s economy, falling imports left the country with a trade surplus of $54.5B. Over the past month, the Shanghai Composite has soared 21% on cheap valuations and expectations of more policy easing, and closed up 2.8% at 3,020.26 today after falling as much as 2% in early trading.

After transferring a $378M pre-payment to Gazprom (OTCPK:OGZPY) late on Friday, Ukraine is expecting its gas supply to resume today. Gas deliveries have remained suspended since mid-June after Russia cut supplies over a price and debt dispute and negotiations further deteriorated because of the separatist war in Ukraine's east. The country will receive 1B cubic meters of gas for December as freezing temperatures set in.

As it grapples with a new lower oil price, BP is accelerating plans to reduce its headcount, axing many middle manager positions, announced the Sunday Times. The oil price drop is not likely to affect BP's (NYSE:BP) long-term plans, but some projects may be frozen or cancelled. BP -1.6% premarket.

Merck is in talks to buy Cubist Pharmaceuticals in a deal valued at more than $7B, reports Bloomberg Businessweek. Merck (NYSE:MRK) would pay about $100 per share, representing a 34% premium over Cubist’s (CBST) closing price on Dec. 5. An agreement could be announced as early as this week.

United Technologies' new chairman, Edward Kangas, said former UTC (NYSE:UTX) CEO Louis Chenevert stepped down late last month after Kangas spoke to him out of concern about his priorities. "It was just a growing issue and concern which caused me, with counsel from the board, to discuss with Louis his priorities - personal and business," announced Kangas. A reason for the resignation was not given at the time of Chenevert's departure.

Royal Bank of Scotland has officially launched the sale of private bank Coutts International and has invited at least 10 potential suitors, including Credit Suisse (NYSE:CS), Julius Baer (OTCPK:JBAXY) and Malayan Banking Berhad (OTCPK:MLYBY) to participate in the auction. First-round bids are due before Christmas, with a sale expected to fetch about $1B. The sale of Coutts will help RBS (NYSE:RBS), which is owned by the British government, to focus on domestic lending.

Credit Suisse is looking to scale down its balance sheet-intensive prime brokerage business amid investor pressure, FT reports. The move is part of a plan announced in October to cut leverage by about $71.5B. The fresh cutbacks also mark the third restructuring of Credit Suisse’s (CS) investment bank in just over a year, following reductions to its government bond and commodities trading businesses.

"The bottom line is that this was an unparalleled and well planned crime, carried out by an organized group," wrote Kevin Mandia, the top executive at FireEye's (NASDAQ:FEYE) Mandiant forensics unit, in an email to Sony Pictures (NYSE:SNE) CEO Michael Lynton. Restoring Sony's network is taking a considerable amount of time, as each drive needs to be manually replaced or re-imaged. Questions regarding the extent of damage and who was behind the attack still remain, although reports suggest that North Korea is still the prime suspect.

The families of four co-founders of Infosys have sold about 65B rupees ($1B) of stock to capitalize on a gain in their price and to fund various philanthropic activities. Together, the group holds a combined 91.5M shares (nearly 8% of Infosys' (NASDAQ:INFY) outstanding shares), according to the company's annual report. Shares closed down 4.8% at 1,972 rupees in Mumbai.

CBS and Dish Network reached a new carriage fee deal over the weekend, after CBS (NYSE:CBS) pulled CBS, CBS Sports and Showtime from top Dish (NASDAQ:DISH) markets late on Friday. Terms of the deal weren't disclosed, although CBS reportedly won a concession from Dish which disables its ad-skipping DVR feature for a window of 7 days for CBS-owned stations broadcasted on Dish.

BHP Billiton will call the planned spin-off of its aluminum, nickel, silver and coal divisions South32 - based on the thirty-second parallel south line of latitude which links its two regional centers in Australia and South Africa. Documentation of the demerger will likely be released in March 2015, with a shareholder vote taking place in May. BHP's (NYSE:BHP) new $16B entity will have a primary listing on the Australian Securities Exchange, with additional listings in London and Johannesburg.

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Today's Markets:
In Asia, Japan +0.1% to 17936. Hong Kong +0.2% to 24048. China +2.8% to 3020. India -1.2% to 28119.
In Europe, at midday, London -0.7%. Paris -0.6%. Frankfurt -0.4%.
Futures at 6:20: Dow -0.2%. S&P -0.3%. Nasdaq -0.3%. Crude -1.8% to $64.69. Gold +0.4% to $1195.
Ten-year Treasury Yield +2 bps to 2.33%

Today's economic calendar:
12:30 PM TD Ameritrade IMX

Notable earnings before today's open: TPLM, MTN

Notable earnings after today's close: ABM, DMND, HRB, MCC, PBY, PLAB

See full real-time earnings coverage »

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