- ARS deals ignore some. Recent pacts between NY AG Andrew Cuomo and Wall Street brokerages (C, UBS, MS, JPM, WB) fall short of helping individual investors who didn't buy their auction-rate securities [ARS] directly, but rather through smaller wealth-management houses. "This is a glaring oversight," one investor - who bought Goldman Sachs- (NYSE:GS) issued ARS through a different broker - says. JPMorgan confirms its settlement doesn't extend to clients of other firms, as does Wachovia. Cuomo said recently he's working his way down the list, and would eventually bring action against smaller brokers. Firms like Oppenheimer counter they had no advanced notice of the likely failure of the ARS market.
- BHP Billiton posts record profit. BHP Billiton (NYSE:BHP), the world's largest miner, posted a record profit on historically high prices for petroleum, iron ore, copper, and coal. Net profit for the year was $15.3B (+14.7%), short of consensus estimates of $15.86B. Revenue rose to $59.5B (+25.3%). The company acknowledged the record profit by raising its dividend to $0.41/share (vs. market expectations of $0.36/share). Despite the good report, BHP's $131B bid for rival Rio Tinto (RTP) may be in trouble. Rio is expected to release strong earnings later in the month, and some investors see no reason to combine companies doing so well individually.
- MUFG-UB $3.5B deal likely be approved. In now-friendly talks with UnionBanCal (UB), Mitsubishi UFJ (NYSE:MTU) offered to acquire the 35% of UB it doesn't already own for $3.5B. After the initial offer was rejected as being too low, Mitsubishi UFJ raised its bid to $73.50/share (vs. a previous $63), - a 25% premium on where UB's shares were trading before the initial bid. UB will recommend shareholders accept the offer. A deal may be a sign of encouragement for a U.S. financial sector eager to see that healthy assets still command attractive premiums.
- OPEC threatens production cuts. OPEC may cut crude oil production in early September, Iran's OPEC governor Mohammad Ali Khatibi says. Prices are being pressured by higher supplies and lower demand. Khatibi says the market is oversupplied by at least 1M b/d.
- Economists ready to cheer commodity bull slaughter. Earlier this year, global inflation seemed to be spiraling out of control. But recent ruptures in the energy/commodity complex now have most economists thinking unabated inflation fears are no longer a serious risk, especially in Asia. Commodity-linked economies like Malaysia and Latin America are vulnerable, but economists note many producers have set aside large portions of their windfall profits for harder times. While almost all agree moderate inflation is an "unambiguous positive," caveats include how sticky high prices will be, and continued pressure from financial and credit market woes.
- Debt markets sweat; equity markets stride along. Measures of credit turmoil have moved higher in recent weeks, and are now at levels not seen since the Bear Stearns debacle. The stock market, meanwhile, is uncharacteristically sanguine. One possible explanation for the divergence is that the market has already priced everything in. It's also possible that debt spreads are being widened not by default fears, but because banks are dumping assets in the process of strengthening their balance sheets. Even so, bank deleveraging could lead to household deleveraging - which could ultimately impact the equity market.
- Housing slide stretches on. The latest housing numbers from real-estate research firm Zillow show little signs of a housing-market bounce. Including foreclosures, 24% of all homes sold during the last year were sold at a loss. Among buyers over the past five years, 29% now have negative equity. Mean home value fell 10% Y/Y in Q2, the worst on record.
- Qwest sidesteps strike. Qwest Communications (NYSE:Q) and unions representing over 20,000 employees agreed to extend negotiations, holding off a planned strike. Contract talks have focused largely on health-care benefits.
- Euro-zone posts unexpected trade deficit. The Euro-zone's June trade balance was weaker than expected, posting a €0.1B deficit instead of the expected €1.1B surplus. The shortfall indicates a strengthening euro and weakening global demand are hitting exporters hard. Analysts think a depreciation in the euro will make euro-zone exports more competitive.
- U.K. house prices fall the most since 2002. U.K. house prices fell 4.8% Y/Y, the largest yearly decline since at least 2002. BoE's Mervyn King says the housing market faces "a significant adjustment."
Earnings: Monday Before Open
- Focus Media (NASDAQ:FMCN): Q2 EPS of $0.44 beats by $0.04. Revenue of $212M (+106.8%) vs. $192M. Sees Q3 EPS of $0.53-0.54 vs. $0.49. [PR]
- Lowe's (NYSE:LOW): Q2 EPS of $0.64 beats by $0.08. Revenue of $14.5B vs. $14.12B. [PR]
- Trina Solar (NYSE:TSL): Q2 EPS of $0.76 misses by $0.05. Revenue of $204M (+171.2%) vs. $198M. Sees 2008 revenue of $850-900M vs. $796M. [PR]
- Asia markets closed lower, with the exception of Tokyo. Nikkei +1.12% to 13,165. Hang Seng -1.09% to 20,931. Shanghai -5.34% to 2,320. BSE -0.53% to 14,646.
- European markets are higher at midday. London +0.3%. Paris +0.8%. Frankfurt +0.2%.
- U.S. futures are up at 7:10 AM. Dow +0.27%. S&P +0.27%. Nasdaq +0.32%. Crude +0.2% to $114. Gold +1.04% to $800.20.
Monday's Economic Calendar:
Seeking Alpha editor Rachael Granby contributed to this post.
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