Wall Street Breakfast: Must-Know News

March 13, 2012  | 10 comments  |  includes: AIG, ARMH, BA, BX, CME, CS, EADSY.PK, FB, HBC, INTC, JNJ, MFGLQ.PK, PFE,QQQ, SPY, YHOO 

 

Yahoo sues Facebook. Yahoo (YHOO) is suing Facebook (FB) in federal court, alleging a number of FB's products infringe on its patents and trespass on technologies that are "the foundation of our business." Among the charges is that Facebook's News Feed is an infringement of Yahoo's Customization Patents. In addition, privacy is addressed by using Yahoo's Privacy patents.

HSBC denies Asia exit. HSBC (HBC) says it has no plans to exit any markets in Asia, denying earlier reports that it might pull out of seven countries in the region as it focuses on higher growth. According to theFinancial Times, HSBC is considering the sale or closure of seven Asia-Pacific retail businesses in order to focus on six key Asian growth markets outside of Hong Kong (Australia, China, India, Indonesia, Malaysia and Singapore) and two long-term strategic markets (Taiwan and Vietnam).

Fed fights Bernanke subpoena. The Federal Reserve is fighting a civil lawsuit subpoena that would put Bernanke on the witness stand, requiring the Fed chief to testify on conversations he had with Bank of America executives before the lender completed its Merrill Lynch purchase. It's rare for an acting top regulator to be deposed in a private case, and the Fed believes Bernanke's conversations aren't central to the lawsuit.

Fed's doomsday stress test scenario. The Fed unveiled its doomsday scenario for the upcoming bank stress tests. Under the scenario, the 19 biggest U.S. banks would have to survive a world with 13% unemployment, a 50% drop in stocks, and a 21% tumble in housing prices. The Fed plans to release full results Thursday at 4:30 p.m. ET.

U.S. to file rare earths complaint. The U.S. will file a complaint today with the WTO over China's quota for rare earth exports, with President Obama expected to personally announce the action.

BOJ holds steady. The Bank of Japan held off further easing (following last month's ¥10T boost), leaving its overnight call rate unchanged and sticking with its inflation target. As expected, though, it will extend a cheap loan line for growth industries.

Intel turns to TV. In a major departure from its historical focus, Intel (INTC) is developing an Internet-based TV service to sell to consumers, and has been talking with media companies about creating a "virtual cable operator" that would offer channels in a bundle. The TV service would rely on Intel-built set-top boxes that feature the company's own processors. However, building a new TV service would be a costly gambit for Intel, and shows how desperate the chip giant is to establish a strong presence in the TV processor market, after abandoning it last year to ARM (ARMH) and MIPS-based solutions.

United Biscuits may be split and sold. Blackstone (BX) and France's PAI Partners, co-owners of U.K.-based United Biscuits, have reportedly tapped Credit Suisse (CS) to split the food company's salty snack business from its other operations, and will try to sell the company in parts. Blackstone and PAI had tried to sell the whole business in 2010 for £2B, but couldn't land a deal.

J&J under settlement pressure. Johnson & Johnson (JNJ) faces pressure from the U.S. government to up its offer to settle a long-standing civil investigation probe into the marketing practices of the company over its antipsychotic treatment Risperdal, according to sources. The latest figure of $1.8B offered by the DOJ is considerably higher than the rejected $1B offer previously negotiated by the U.S. Attorney's office in Philadelphia.

WTO rules against Boeing. The WTO ruled that Boeing (BA) received $3B-$4B in illegal subsidies in the form of federal research grants and local tax breaks, but U.S. Trade Rep Ron Kirk called the decision "a tremendous victory" for the U.S. because European subsidies to Airbus (EADSY.PK) "are far larger... and far more distortive than anything" the U.S. does for Boeing.

Pfizer likely to spin off animal-health unit. Pfizer (PFE) said that it's more likely it will spin off its animal-health unit than sell it to one of the many companies rumored to be in the hunt to buy it. CEO Ian Read noted that it's the largest animal health business and would benefit PFE investors as a stand alone company.

Tax breaks to AIG should end. Four former members of the TARP watchdog panel are urging the Treasury Department to end tax breaks for bailed-out insurer AIG (AIG), writing that the tax exemptions have allowed AIG to escape billions of dollars in tax payments since receiving $182B government aid in a taxpayer-financed bailout.

U.S. budget deficit rises. The U.S. government ran a $231.7B budget deficit in February, the Treasury Department reported, up substantially from the $222.5B deficit in the same month last year. Receipts were $103.4B, and outlays were $335.1B. Fiscal YTD, the deficit is $580.8B, $60.4B less than at the same period last year.

Spain tightens deficit target. Spain's self-declared deficit target of 5.8% of GDP "is dead," said Eurogroup chief Jean-Claude Juncker, as European finance ministers reach an accord with Spain to cut an additional 0.5% of GDP out of the 2012 budget. Spain still says it will hit the eurozone's 3% limit in 2013.

Greek aid package approved. Eurozone finmins signed off on Greece's second bailout, clearing the way for the first payment from the €130B package to be made later this month.

Hungary faces aid freeze. EU ministers may freeze €495M ($651M) in development aid to Hungary after the country failed to narrow its budget deficit in a "sustainable" manner. The move, up for vote today, would affect 29% of Hungary’s share of so-called EU cohesion funds.

CME chief quits. Unexpectedly, Craig Donohue will step down from the CEO post of CME Group (CME) at year-end, to be replaced by President Phupinder Gill - and while Donohue says it isn't about MF Global (MFGLQ.PK), the brokerage's collapse leaves a cloud over CME and has invited scrutiny from Congress and raters.

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