Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
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.
  • InBev makes bid for Bud. Belgium's InBev made a $65/share, $46.3B unsolicited offer for Anheuser-Busch (NYSE:BUD) -- a 14% premium to Tuesday's close. BUD says it will evaluate the proposal. A deal would be the biggest all-cash acquisition ever. In April, CEO August A. Busch IV said a takeover won't happen "on my watch," although the family only owns 4% of the company. Banks -- including JPMorgan (NYSE:JPM), Banco Santander (STD), Barclays (NYSE:BCS), Deutsche Bank (NYSE:DB), Fortis (FORSY), ING Group (NYSE:ING) and Royal Bank of Scotland (NYSE:RBS) -- have pledged to lend InBev at least $40B.
  • Crude crunch. Crude inventories posted another larger-than-expected drawdown of 4.56M barrels (vs. 1.5M consensus). Crude oil stockpiles are declining rapidly, at a time when they should be peaking. The four-week decline of 23.6M is the third largest four-week decline since the government began tracking the data in 1984. Gasoline inventories were up 1M (vs. 1.45M), and distillates were up 2.27M (vs. 2M). Oil gained 4.03% Wednesday to $136.58, but is down 2.28% to $133.15 in overnight trading.
  • Thornburg loses $21/share. Thornburg Mortgage (TMA) lost $3.31B in Q1 ($20.64/share), including a $1.54B writedown on mortgage-backed securities and securitized loans. CEO Larry Goldstone says he expects a modest increase in delinquencies through year-end, but called the credit quality of Thornburg's portfolio "exceptional."
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  • Citi shutters CEO's hedge fund. Citigroup (NYSE:C) is closing its Old Lane Partners hedge fund, co-founded by CEO Vikram Pandit. Last month, it secured substantial fresh capital to infuse the fund, but later decided the move would strain its already-distressed balance sheet.
  • Sony could soon be playing solo. Bertelsmann wants $1.2-1.5B for its 50% stake in Sony BMG (NYSE:SNE). Sources say Sony could be in full control of the world's number-two music company within weeks, which could result in a deeper integration with Sony Ericsson SNE/ERIC mobile phones.
  • Starbucks gains Europe partner. U.K. food company SSP is licensing Starbucks' (NASDAQ:SBUX) brand and will open 150+ Starbucks outlets in European travel hot spots. "In the past, we had not been as aggressive because the resources of the company and the focus [have] primarily been on the U.S. business," CEO Howard Schultz said in an interview.
  • Big bank balance sheets not forthcoming. Nervous bank investors may ask "where's the beef" when they realize eagerly-awaited balance sheets of GS, MS, LEH and others are regularly filed several weeks after quarterly earnings.
  • Gloria, meet Rachel. Jones Apparel (NYSE:JNY) is expected to announce a 50% stake in emerging luxury fashion label Rachel Roy. "We needed a designer with a story to tell as well as an image and an ability to relate to people," CEO Wesley Card says. Very little money changed hands, and no bankers were involved, Card said. Wednesday shares fell 6% after JNY halved its credit facility to $500M.
  • GM hurting in Europe. GM's (NYSE:GM) Europe chief of sales says high raw material costs and a strong euro could drive regional sales to lows not seen in decades. What more, "the rise in oil is having a profound and permanent impact on the fundamentals of our business - and not just in North America," Carl-Peter Forster says.
  • AIG activists toughen stance. Activist AIG (NYSE:AIG) shareholders, including Eli Broad and Legg Mason's (NYSE:LM) Bill Miller, now want "significant and immediate" changes to management, the board and its CEO -- including a new leader "with strong business experience" and "new enough to the board to bear little or no responsibility for the mess created during the last three years."
  • Banks' disappearing dividends. Fifteen U.S. banks, including Citigroup (C) and Wachovia (NASDAQ:WB), slashed dividends this year, more than the previous five years combined. Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) may be next.
  • Nearing eye of the financial storm. Bank of America (BAC) CEO Ken Lewis says U.S. banks loan losses and writeoffs are still gaining momentum. Losses will peak in Q3.
  • Lampert bets on housing. Eddie Lampert's $11.6B hedge fund has begun snapping up shares of U.S. homebuilders Centex (CTX) and KB Home (NYSE:KBH) and mortgage firms CIT Group (NYSE:CIT) and PHH Corp. (NYSE:PHH) to add to its $950M Home Depot (NYSE:HD) stake.
  • Beige Book offers mixed picture. Only 7 of 12 districts call the economy sluggish, down from 9, according to the Fed's Beige Book. The other five call conditions stable, but conceded economic growth in April was 'generally weak.' Rising raw material costs are hurting U.S. firms: "Business contacts in most districts reported increases in input prices ... especially prices for energy, petroleum derivatives, metals, plastics, chemicals, and food," it said. "There is not quite the degree of softness that we saw in the previous Beige Book," Fed watcher David M. Jones said.
  • Chip sales seen weak. The SIA dropped its 2008 global chip sales growth forecast to 4.3% from 7.7%, amid ongoing soft pricing. DRAM revenue fell 34%, despite +30% unit shipments.
  • Nortel soars. Shares of Nortel (NT) jumped 13% after the company confirmed its 2008 guidance, and unveiled a Verizon (NYSE:VZ) order for metro ethernet equipment. The move signals Nortel is reducing its investment in ultrafast wireless internet standard WiMAX to focus on the rival LTE technology, favored by AT&T (NYSE:T), Verizon and Vodafone (NASDAQ:VOD).
  • Lehman down big, again. Shares of Lehman (LEH) fell 14% after Merrill analyst Guy Moszkowski cut the broker-dealer to Neutral just a week after calling it a Buy. The "scale of the second-quarter loss and capital-raise indicate lower return on equity potential and lower confidence, especially given Lehman's remaining exposure," he said.
  • British consumers see more inflation. The Bank of England says consumer 12-month inflation expectations hit a new high of 4.3%, up from 3.3% in February. (Perceptions matter.) Meanwhile Euro-zone industrial production rose an unexpectedly strong 0.9% (vs. 0.1% consensus).
  • Inflation moderates in China. Chinese inflation fell to 7.7% from 8.5% in April, a sign the government's efforts to control food prices are taking hold. But Standard Chartered Bank's Stephen Green doesn't think the downturn will last: "There is a lot more bottled up inflation in this economy than meets the eye."

Today's Markets

  • Asia markets closed in the red. Nikkei -2.08% to 13,889. Hang Seng -1.3% to 23,024. Shanghai -2.21% to 2,958. BSE -0.89% to 15,050.
  • Europe at midday: London +0.82%. Paris +0.37%. Frankfurt +0.6%.
  • U.S. futures at 7:15 AM: Dow +0.57%. S&P +0.64%. Nasdaq +0.57%. Crude -2% to $133.60. Gold -1.23% to $8.72.

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