Thursday, March 12, 2015

Wall Street Breakfast: South Korea Next To Jump On Easing Bandwagon

  |  110 comments  |  Includes: ACAD, BABA, BAC, BNDSY, BP, C, CMG, DB, ENDP, GE
Economy
Asian shares rose today after South Korea joined twenty four countries across the globe by easing monetary policy in 2015. Taking advantage of low inflation, the BOK cut its base rate by 25 bps to a record low of 1.75%. South Korea also previously slashed its forecast for this year's economic growth to 3.4% in January from 3.9%, but is widely expected to lower it again next month as China's growth continues to slow and much of Europe flounders.
The IMF has approved a bigger bailout for Ukraine, giving Kiev immediate access to $5B of the $17.5B in emergency funding to keep the country afloat. "This new four-year extended arrangement will support immediate economic stabilization in Ukraine," said IMF Managing Director Christine Lagarde. Kiev's conflict with pro-Russian separatists has put the country's economy into a tailspin with a plunging currency, the highest interest rates in 15 years and central bank reserves of just $6.4B.
The euro eased after falling to fresh 12-year lows against the dollar this morning, as the ECB's stimulus program continued to weigh, while investors looked ahead to U.S. economic reports later in the session. Hitting its weakest since March 2003, the euro fell to $1.0495 before pulling back to trade at $1.06, 0.5% higher on the day. The U.S. will release data on retail sales and jobless claims this morning, which will be closely watched for further indications on the direction of monetary policy.
Stocks
Tweaking their planned payouts to achieve passing grades, Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and JPMorgan (NYSE:JPM) just scraped by the Fed's annual CCAR test, while BofA (NYSE:BAC) will resubmit its capital plan before winning approval for boosted shareholder returns. Citigroup (NYSE:C) CEO Michael Corbat also breathed a sigh of relief, staying at the helm of the bank by repairing last year's foul-up. The only rejections: The U.S. units of Deutsche Bank (NYSE:DB) and Santander (NYSE:SAN).
GE is considering making deeper cuts in its banking business, deciding that returns from lending are no longer worth the opposition it provokes among investors. While the company has long committed to shrinking GE (NYSE:GE) Capital, it has viewed a smaller, safer banking business as an integral part of a conglomerate. GE is now believed to see the bulk of the lending operation as severable, similar to how it viewed its appliances business which it sold last year.
TSB has received a takeover approach from Banco Sabadell (OTCPK:BNDSY), valuing the business at about £1.7B ($2.6B) and said it would be willing to recommend the offer to shareholders, Sky News reports. Lloyds (NYSE:LYG), which is TSB's (OTCPK:TSBBY) largest shareholder with a 50% stake, would still need to approve the deal for it to go ahead. TSB shares are flying high on the news, up 26% in London.


In another milestone toward the restoration of U.S. and Cuba relations, IDT (NYSE:IDT) has reached an agreement with Cuba's Empresa de Telecomunicaciones de Cuba to provide direct telephone connections between the two countries. The move marks the first commercial accord realized since the joint Dec. 17 announcement. Although the U.S. imposed an economic embargo on Cuba in the 1960s, phone communication between the two countries was still possible if calls passed through third countries.
Acadia Pharmaceuticals -29% premarket after postponing its Nuplazid New Drug Application from Q1 to the second half of the year and announcing the retirement of Chief Executive Uli Hacksell. Acadia's (NASDAQ:ACAD) Chief Financial Officer Steve Davis will take over as interim CEO. Nuplazid, if approved, is indicated for the treatment of Parkinson's disease-associated psychosis.
Valeant, which is currently marketing a $9.6B high-yield bond to finance its planned acquisition of Salix Pharmaceuticals (NASDAQ:SLXP), is not pulling the deal despite reports that Endo International (NASDAQ:ENDP) is making a rival bid. A road show for the deal - which would be the second largest junk bond on record - started on Tuesday. Endo's bid values Salix at $175/share ($11.2B) in cash and stock, while Valeant's (NYSE:VRX) $10.1B offer consists of $158 per share in cash.
The U.K. Parliament has voted to ban branding on cigarette packs as of 2016, under which cigarettes would be sold in uniform packs stripped of distinctive logos and colors, and adorned with graphic health warnings. The move draws promises of legal challenge from the tobacco industry and raises the prospect of similar legislation in countries across Europe.
KFC and others may face pressure from consumer and environmental groups to change how its poultry are raised after McDonald's (NYSE:MCD) announced it would switch to chicken raised without human antibiotics. Both McDonald's and KFC (NYSE:YUM) are stepping up efforts to win back diners lured away by chains such as such as Chipotle (NYSE:CMG) and Panera Bread (NASDAQ:PNRA), which boast antibiotic-free meats. Chicken stocks also took a hit yesterday on concerns that the push to remove antibiotics from hatcheries could raise costs or that inaction could crimp demand.
A month after reporting Snapchat is seeking a valuation as high as $19B in a new funding round, Bloomberg reports Alibaba (NYSE:BABA) plans to pour $200M into the ephemeral messaging platform at a $15B valuation. Snapchat, whose user base skews heavily towards millennials, was valued at just ~$10B in a $485.6M funding round that took place a couple months ago. Its monthly active user count is believed to be around 200M.
United Technologies may split off its Sikorsky Aircraft helicopter unit, and might "discuss steps toward a possible spinoff" at its 2015 investor meeting today, WSJ reports. Excluding restructuring costs and non-recurring items, Sikorsky had 2014 revenue of $6.62B (+6% Y/Y), and an operating profit of $699M. The business is best known for its Black Hawk helicopters. UTX +0.8%premarket.
General Motors' approval this week of a new $5B buyback plan will likely delay one of its important goals: achieving a top-tier credit rating that would benefit its growing auto finance division. GM (NYSE:GM) Chief Executive Mary Barra on Monday declared that maintaining an investment-grade balance sheet was key, although Standard & Poor's and Moody's analysts say the carmaker's next upgrade could be delayed due to its new capital allocation plan.
A federal appeals court has upheld a district judge's decision to drop manslaughter charges against two former BP (NYSE:BP) well site managers over their roles in the 2010 Macondo well disaster that killed 11 people. The panel affirmed a district court's 2013 ruling, saying Robert Kaluza and Donald Vidrine's responsibilities on the rig did not constitute the "marine operations, maintenance, and navigation" of a ship, so the federal law did not apply to them.
Lumber Liquidators founder and chairman, Tom Sullivan, hopes today's conference call will give his company a chance to "show our side of the story," and declared that the "real story" about the retailer is only starting to come out. Yesterday, activist investor Robert Chapman revealed he had taken a long position in Lumber Liquidators (NYSE:LL) despite Sunday's damaging 60 Minutes formaldehyde report that sent the stock into a nosedive. LL +6.1%premarket.

Today's Markets:
In Asia, Japan +1.4% to 18991. Hong Kong +0.3% to 23798. China +1.8%to 3349. India +1% to 28930.
In Europe, at midday, London +0.8%. Paris -0.1%. Frankfurt -0.1%.
Futures at 6:20: Dow +0.2%. S&P +0.3%. Nasdaq +0.3%. Crude +0.9% to $48.59. Gold +0.8% to $1159.60.
Ten-year Treasury Yield -2 bps to 2.11%
Notable earnings before today's open: BONT, CMN, CRME, CSTM, CVGW,DG, GCO, GLP, HOV, JASO, KIRK, LEAF, MTN, PGEM, PLCE, PWE, QIWI, RICE,SMRT, SNSS, TLP
Notable earnings after today's close: ANAC, ARO, ATHX, EGY, FF, FTD,FXCM, GST, HIL, IRET, IRG, JMBA, KRO, KTOS, LOCO, MED, OMED, PPHM,RMAX, TEAR, ULTA, ZUMZ
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