Wednesday, April 15, 2015

Wall Street Breakfast: Nokia Seals $16.6B Alcatel-Lucent Deal


Economy
China grew at its slowest pace last quarter since the global financial crisis in 2009, official data showed on Wednesday, building the case for further stimulus from policymakers. In line with forecasts, but lower than the 7.3% print the previous quarter, GDP expanded 7% in the three months to March from the year ago period. Retail sales and industrial output data broadly missed expectations, however, with the latter expanding at the slowest pace since 2008.
With some economists already crediting the eurozone's €60B/month stimulus program with spurring growth, Mario Draghi is expected to endorse a continuation of the campaign today at a meeting of the ECB's Governing Council. A survey published on Tuesday by the central bank indicated that lending was increasing in the eurozone after years of tight credit - one of a number of measures signaling growth momentum in the region's economy. The euro is down on the news, 0.5% lower at 1.0608.
Talks on resolving Greece's financial deadlock resumed on Wednesday amid growing creditor concern that Prime Minister Alexis Tsipras' government won't come up with the necessary overhauls to unfreeze aid by an April 24 deadline. Greek finance minister Yanis Varoufakis will also set out to Washington tomorrow, where he will have a private meeting with President Obama. As negotiations drag on, a further "crisis that would unsettle financial markets can't be ruled out," IMF chief economist Olivier Blanchard said on Tuesday.
According to the new annual energy outlook by the Energy Information Administration, U.S. crude oil production will peak at 10.6M barrels per day in 2020, a million barrels more than the high forecast a year earlier. Crude production will then moderate to 9.4M bpd in 2040, 26% more than expected a year ago, the agency added. Despite lower prices, higher production will result mainly from increased onshore oil output, predominantly from shale formations.
Japan is set to overtake China as America's largest overseas creditor when the U.S. Treasury releases its February investment figures at 4 p.m. in Washington. China cut its investment in Treasuries for a fifth month in January, while Japan added $7.7B, narrowing the gap to $1B. While the two Asian nations each own almost 10% of the $12.6T in publicly traded U.S. debt, China has held more than Japan since 2008.
Stocks
Nokia has agreed to acquire telecoms equipment company Alcatel-Lucent (NYSE:ALU) for €15.6B ($16.6B), in a deal that would solidify its ambitions to become a major provider of networking equipment. The merger will take the form of a public exchange offer in France and the U.S., under which Nokia (NYSE:NOK) will give Alcatel-Lucent shareholders 0.55 shares in the combined company for each of their old shares. The deal is expected to close in the first half of 2016. ALU -16% premarket.


Intel met first-quarter profit expectations but fell slightly short of revenue estimates after the bell yesterday, citing sluggishness in its personal computer business but strong growth in the data center segment. "We expect the PC market to remain challenging," CEO Brian Krzanich warned. For all 2015, Intel (NASDAQ:INTC) said it expects revenue to be flat from a year ago, when it reported full-year revenue of $55.9B. INTC +3.3% premarket.
Apple has acquired LinX Computational Imaging, an Israeli developer of multi-sensor mobile camera modules declared (by LinX) to deliver SLR-level image quality and superior low-light shots. According to the WSJ, Apple (NASDAQ:AAPL) reportedly paid about $20M for the purchase. Aside from high image quality, LinX trumpets the ability to use proprietary algorithms and capture multiple images at the same time to gauge depth and create three-dimensional image maps.
Building on last week's guidance, Samsung (OTC:SSNLF) has announced that demand for both its new Galaxy S6 models was "much higher" than initially estimated. "Although there may be some difficulties for the short term, we will do our utmost to secure enough supply for our global consumers," Samsung said in a statement. Analysts say the new devices will generate meaningful earnings momentum in the current quarter as the phones go on sale across the globe.
With the FCC's new net neutrality rules published in the Federal Register, AT&T (NYSE:T) and three industry trade groups representing cablecos and wireless carriers have filed separate lawsuits challenging the rules, which subject firms to heavier "telecom services" regulations. AT&T is the first large individual challenger, joined by the National Cable and Telecommunications Association, wireless group CTIA and the smaller American Cable Association.
European Competition Commissioner Margrethe Vestager has filed formal charges against Google (GOOG, GOOGL) this morning, stating that the company has been abusing its dominance in Internet searches. The move follows five years of intense investigation and comes prior to Vestager's trip to Washington, where she will participate in two antitrust conferences.
Morgan Stanley has been offered more than $1B for its merchant oil trading business by Castleton Commodities International, a U.S.-based trading house. Morgan Stanley (NYSE:MS) previously reached a deal to sell the unit to Rosneft (OTC:RNFTF), but the deal expired as it awaited U.S. regulatory approval in December amid tensions over Moscow's intervention in Ukraine.
GenCorp snapped back at Orbital ATK late on Tuesday after the latter blamed the Oct. 28 Antares rocket explosion on excessive wear in the bearings of its AJ-26 engine. GenCorp (NYSE:GY) spokesman Glenn Mahone said Orbital's statement was "inaccurate and could be misleading," and stated that its own probe found the root cause to be debris in the engine. Orbital's (NYSE:OA) fifth Antares rocket launch ended 15 seconds after liftoff from Wallops Island, Virginia, carrying 5,000 pounds of cargo bound for the International Space Station.
Alibaba is pushing its online pharmacy operations into a Hong Kong-listed affiliate to consolidate its healthcare enterprise and ride a boom in online health-related business. Under the $2.5B deal, Alibaba Health will buy 100% of the online pharmacy operations from a wholly owned subsidiary of Alibaba Group (NYSE:BABA) and another investor. Shares in the affiliate, Alibaba Health Information Technology Limited, rose 81% in Hong Kong after the announcement.
After months of negotiations, Target (NYSE:TGT) is close to a settlement with MasterCard (NYSE:MA) that would reimburse banks with roughly $20M for costs they incurred from its massive data breach two years ago. In 2013, Target said at least 40M credit cards and were compromised by a hack during the holiday shopping season, and the attack might have resulted in the theft of personal information. Target also faces a big payout in its negotiations with Visa (NYSE:V).

Today's Markets:
In Asia, Japan -0.2% to 19870. Hong Kong +0.2% to 27619. China -1.3% to 4083. India -0.8% to 28800.
In Europe, at midday, London +0.4%. Paris +0.7%. Frankfurt +0.5%.
Futures at 6:20: Dow +0.3%. S&P +0.2%. Nasdaq +0.2%. Crude +1.4% to $54.04. Gold -0.1% to $1191.70.
Ten-year Treasury Yield -3 bps to 1.9%
Notable earnings before today's open: ASML, BAC, DAL, MEA, PNC, PGR,TITN, USB, WSO
Notable earnings after today's close: CNS, KMI, NFLX, SNDK, UMPQ,WTFC
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