Wall Street Breakfast: Must-Know News

January 15, 2013  | 13 comments  |  includes: AAUKF.PK, APCVZ, BA, BCS, BRCD, JPM, MYL, NVS, PFE, RBS, RIO, SPY,UBS, UPS, WMT

Top Stories
Eurozone crisis hits Germany as GDP contracts in Q4. The eurozone's woes finally hit Germany's economy in Q4, when GDP contracted a preliminary 0.5%, which was greater than expected and marked a deterioration from +0.2% in Q3. In 2012 as a whole, German growth fell to 0.7% from 3% a year earlier, with the Federal Statistical Office saying that exports were "once again the main driving force" for the country's expansion. The data, along with fears about the U.S. debt ceiling, helped depress sentiment in global markets, and U.S. stock futures fell pre-market.

Japanese Economy Minister: Yen weakening has gone far enough.Japanese shares returned from a three-day weekend to hit a 32-month high of 10,952.31, but then pared gains to close +0.7% at 10879.08 after Economy Minister Akira Amari suggested that the weakening of the yen has gone far enough. Amari said that the value of the currency was in line with economic fundamentals but that further declines could pose risks. The comments helped send the yen 1% higher vs the dollar premarket.

Amplat to slash 14,000 jobs, suspend mines. Looking to return to profitability, Anglo American Platinum (AAUKF.PK) intends to suspend output at several mines in South Africa, sell its Union mines, cut 14,000 jobs and slash annual output by 400,000 ounces to 2.1-2.3M ounces. Most of the layoffs will come at Amplat's assets in Rustenburg, a region where labor unrest left several dead last year. With Amplat producing 40% of global platinum, spot prices were +2.1% at $1,690 an ounce premarket.

Top Stock News
Rio to boost iron ore production as prices surge. Rio Tinto (RIO) intends to expand its iron ore mine in the remote Australian region of Pilbara to 360M metric tons a year by mid-2015 from 290M by the end of 2013. In 2012, Rio's overall production rose 4% to 253M tons, slightly above its guidance of 250M tons. The company is benefiting from an 80% recovery in iron-ore prices since September as Chinese steel mills re-enter the market on an improving economic picture.

Pfizer, Novartis, others eye $2B Indian acquisition. Looking to offset a patent cliff that could cut sales by up to $2.75B this year, Pfizer (PFE) is among the companies reportedly interested in acquiring Agila Specialties, the injectable-medicines unit of India's Strides Arcolab. Novartis (NVS), Mylan (MYL) and Fresenius (APCVZ) have also been eyeing Agila, which produces cancer treatments and antibiotics, and could be valued at $2B.

RBS to pay up to £500M over rate rigging. RBS (RBS) will reportedly have to pay as much as £500M to settle charges that it tried to manipulate inter-bank interest rates such as Libor. As part of an "accountability probe," the bank may also fire two senior executives, and it intends to claw back payments to those involved in the alleged rigging and slash its bonus pool. The fine will add to the $1.5B and £290M that UBS (UBS) and Barclays (BCS) respectively have agreed to pay.

UPS starts formulating plan B after TNT deal blows up. UPS (UPS) will reportedly look to grow its existing business and at acquiring smaller European companies following the collapse of its €5.16B ($6.9B) acquisition of TNT Express due to EU opposition. However, UPS has no specific plans at this point; the company has already made purchases in Belgium, Italy and Turkey in recent years.

Wal-Mart to hire over 100K veterans. Wal-Mart (WMT) intends to recruit more than 100,000 ex-soldiers in the U.S. over the next five years, CEO Bill Simon is due to announce in a speech to the National Retail Federation conference today. "Hiring a veteran can be one of the best business decisions you make...veterans have a record of performance under pressure," Simon will say. Wal-Mart believes that it is already the largest private employer of former soldiers.

JPMorgan ordered to clean house. As expected, federal regulators have ordered JPMorgan (JPM) - which has already overhauled its organization chart - to take steps to correct the poor risk management that led to its London Whaling loss. There's no fine involved, just a lot of tough after-the-fact talk.

Brocade hires new CEO. Brocade (BRCD) has named networking industry veteran Lloyd Carney, who was most recently the CEO of Oracle-acquired Xsigo Systems, as its new CEO. Carney replaces Michael Klayko, who announced his intention to resign in August. Carney's hiring might strengthen Brocade's networking virtualization efforts, given that Xsigo is a player in the realm. Look for Carney to also reinforce Brocade's commitment to software-defined networking.

Top Economic & Other News
Fitch reiterates warning over U.S. debt. Fitch has again warned it will formally review the U.S.'s AAA rating if the debt ceiling isn't raised, although the agency believes that the risk of a default "remains extremely low." Even if the U.S. averts a default, however, Fitch could still downgrade the country later in the year if Washington fails to formulate a medium-term plan to cut the deficit and restore confidence.

BOJ gets even more pessimistic about regions. The Bank of Japan has downgraded its economic assessment for eight of the country's nine regions for the second consecutive quarter. "Many regions said their economies were moving on a weak note or weakening due to the continued slowdown in overseas growth," the BOJ noted.

Pakistan shares plunge after court orders arrest of PM. Pakistan's KSE 100 has plummeted 3.2% after the supreme court ordered the arrest of Prime Minister Raja Pervez Ashraf for allegedly accepting bribes. The order comes amid increasing speculation that Pakistan's generals are maneuvering to delay Spring elections and impose a military backed caretaker government.