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.

Macarthur backs increased $5.11B offer. Peabody Energy (NYSE:BTU) and ArcelorMittal (NYSE:MT) have finally received the backing of Macarthur Coal (OTC:MACDF) for a takeover of the world's biggest producer of pulverized coking coal after increasing their combined bid from A$15.50 a share to A$16.00, or A$4.8B ($5.11B). The proposal needs the support of Macarthur investors holding 50.1% of shares to succeed, although Arcelor already owns 16%. However, a rival offer may still emerge, with sources saying that Anglo American (OTCPK:AAUKY) is exploring a bid.

Dollar General profit rises 25%, ups guidance. Dollar General's (NYSE:DG) FQ2 earnings beat expectations as EPS increased 25% to $0.52 and revenue rose 11.2% to $3.58B. Same-store sales climbed 5.9%, representing an acceleration from Q1 and demonstrating the company's "ability to balance the challenges of pricing and rising input costs." Given its H1 results, Dollar General increased the low-end of its FY earnings guidance range to reflect same-store sales growth of 4%-6%. The company now expects total sales to rise 12%-14% and adjusted EPS of $2.22-$2.30.

Shell set to benefit in Iraq gas project. Shell (NYSE:RDS.A) looks poised to be the big winner in a deal to develop Iraq's huge southern gas and oil fields, with Reuters reporting that BP (NYSE:BP), Exxon (NYSE:XOM), China's CNPC and Italy's Eni (NYSE:E) may have to surrender most of the gas from the fields to a Shell-led processing and export project.

CCB, BofA to sign strategic development deal. China Construction Bank (OTCPK:CICHY) will sign a five-year strategic cooperation agreement with Bank of America (NYSE:BAC) within the next few days despite BofA yesterday saying it is selling half its 10% stake in the company for over $8B. The divestment follows news of Warren Buffett's cash injection on Thursday, since when BofA has gained $14B in value. However, although shares soared 8.1% on Monday, they were -2.15% premarket. As The Wall Street Journal pointed out, neither the Buffett nor CCB deals are bargains, while one analyst questioned what the bank's asset sales would do for earnings.

FDIC objects to BofA's $8.5B mortgage deal. Despite the doubts, the importance of the capital Bank of America (BAC) is raising was characterized yesterday by the FDIC filing an objection to BofA's proposed $8.5B mortgage settlement with major investors. The FDIC, which owns securities covered by the deal, said it doesn’t have enough information to evaluate the accord. The FDIC joins states and investors in challenging the agreement, adding to doubts about whether it will be approved and the uncertainty about BofA's total mortgage liabilities.

Universal Display shares jump on Panasonic-Idemitsu deal. Universal Display (NASDAQ:PANL), which rocketed 85% last week following news of a partnership with Samsung (OTC:SSNLF), jumped 9.1% in post-market trading after announcing a licensing deal and material supply agreement with a joint venture owned by Panasonic (PC) and Idemitsu Kosan (OTCPK:IDKOY). Unlike the Samsung deal, the Panasonic Idemitsu agreement includes royalty payments on OLED product sales.

Accounting body criticizes Greek debt writedowns. Some EU financial institutions should have marked down their Greek debt by larger amounts, the International Accounting Standards Board reportedly wrote in a letter to the EU market regulator. The IASB criticized the inconsistency in the methods employed, and without naming names, indicated concerns over the approach taken by BNP Paribas (OTCQX:BNPQY) and insurer CNP Assurances (OTCPK:CNPAF), which used their own models rather than market prices. EU banks took a total hit of €3B ($4.2B), although the writedowns varied from 21%-50%.

Yields fall in Italy debt auction. The ECB's purchase of Spanish and Italian bonds continued to work its magic today as Italy sold €7.7B ($11.1B) of debt, with the yield on its benchmark 10-year note falling to 5.22% from 5.77% at an auction a month ago. The Treasury had planned to sell up to €8B of bonds, and bids totalled €10.4B.

Japan unemployment rises. Japanese economic data has underscored the task facing Yoshihiko Noda, who was today confirmed as Prime Minister by the country's parliament. In July, unemployment rose to 4.7% from 4.6% in June while retail sales fell a monthly 0.3%. Noda would like to raise taxes next fiscal year to help pay for Japan's earthquake reconstruction, but economist Yoshimasa Maruyama reckons the increases may have to wait, as the "economy won’t be strong enough."

CoreLogic explores options, shares surge. Data aggregator CoreLogic (NYSE:CLGX) is forming an independent committee to explore its strategic options, including a possible spinoff, merger or sale. The panel will also look at cutting costs, and repurchasing debt and common stock. Following the news, shares jumped 17.2% postmarket.

Judge due to decide on Lehman creditor plan. Lehman (OTC:LEHMQ) will today ask a bankruptcy judge to allow creditors to vote on its $65B payout plan, which would provide an average of $0.20 on the dollar and up to nearly $0.28 for some groups. If the judge says yes, a vote on the program would take place in November and final court approval could come in December. The plan has the backing of most of Lehman's key creditors, including two groups that hold a combined $100B in claims, although it also faces opposition.

Today's Markets:
In Asia, Japan +1.2% to 8953.9. Hong Kong +1.7% to 20204. China -0.4% to 2567. India +1.6% to 16677.
In Europe, at midday, London +2.4%. Paris -0.1%. Frankfurt -0.6%.
Futures at 7:00: Dow -0.5%. S&P -0.6%. Nasdaq -0.4%. Crude -0.5% to $86.80. Gold +0.2% to $1795.30.

Tuesday's economic calendar:
7:45 ICSC Retail Store Sales
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
11:15 Fed's Kocherlakota: Economic Outlook
2:00 PM FOMC minutes

Earnings Results: Companies that beat EPS expectations last night and today include Dollar General (DG). Full real-time earnings coverage here.

Notable earnings before Tuesday's open: DG, DSW

Notable earnings after Tuesday's close: DRYS, PVH

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