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Wall Street Breakfast: Must-Know News

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AT&T reportedly thwarted in Telefonica bid. AT&T (T) has reportedly been thwarted in a €70B bid to acquire Telefonica (TEF) by Spain’s government, which has the power to stop the sale of any company that is deemed strategic. The U.S. carrier told state representatives that it would take on the Spanish operator’s €52B of debt as part of any transaction. Telefonica said it hasn’t “received any approach or…indication of interest,” from AT&T. The Spanish company’s shares were +3.1% at midday in Madrid.

Kabel Deutschland sees Vodafone deal at €11B. Kabel Deutschland (KBDHY.OB) reportedly wants Vodafone (VOD) to pay over €8B in cash to acquire the German cable operator and assume nearly €3B in debt. The cash component would represent a premium of around 10% on Kabel’s Friday close in Frankfurt and and an 11%+ premium on the €7.2B that Vodafone has already reportedly offered.

Boeing,


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GE Threatened By Seminal Event This Week

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mkaminisBy Markos Kaminis (Wall St. Greek):

A seminal event this week could change the market’s perspective about the economy, which in turn should affect the fund flows that have recently sought cyclical names like General Electric (GE). If events unfold as I suggest they could, I expect recently hot ideas like GE and Boeing (BA) would give way.

In a recent report, I suggested that there was a good chance the Federal Reserve would revise its GDP forecast lower this Wednesday when it publishes its quarterly update. I showed that the trend for the Fed over the last two quarters has been one of adjustment lower, but that it appeared its revisions were understated. The reasoning for this was due to comparison with the forecasts of the Conference Board and the World Bank, which were a half point or more lower than the Fed’s current forecast range. Also, the Fed does not seem to have factored


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Wall Street Breakfast: Must-Know News

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Detroit restructuring plan set to be unveiled. Detroit emergency manager Kevyn Orr is due to unveil his restructuring plan for the debt-laden city today to unions, bondholders and bond insurers, including MBIA (MBI) and Assured Guaranty (AGO). Orr will reportedly try to persuade creditors to accept as little as 10 cents on the dollar for the city’s debt. He has indicated that creditors would be far better off compromising now than taking their chances with a bankruptcy filing.

Hilsenrath: Tapering doesn’t mean end of QE. The WSJ’s Jon Hilsenrath, who seems to have the inside track at the Fed, yesterday quoted officials as saying that a tapering of asset purchases doesn’t mean an end to asset purchases, and a hike in short-term interest rates isn’t anywhere close to being on the radar at this point. The report helped Wall Street to close higher, although stock


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Wall Street Breakfast: Must-Know News

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Vodafone confirms Kabel Deutschland interest. Vodafone’s (VOD) shares were -3.95% premarket after its stock went ex-dividend and following the company’s confirmation that it is interested in acquiring Kabel Deutschland (KBDHY.OB). Vodafone has reportedly offered €10B for the German cable TV, Internet and telecom operator, whose shares were +9.5% at lunchtime in Frankfurt. That gives it a market cap of €7.17B. Any deal would mark a major departure by Vodafone from its focus on the cellular market.

U.K. regulator mulls probe into possible forex manipulation. The U.K.’s market supervisor, the Financial Conduct Authority, is reportedly considering opening an investigation into the alleged manipulation of WM/Reuters benchmark foreign-exchange rates, which are used to fix the value of trillions of dollars of investments. The practice has apparently been going on every day for at least a decade at major banks.

Amgen’s Enbrel blockbuster drug no better than


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Wall Street Breakfast: Must-Know News

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Sunbelt apartment firms to merge in $8.6B deal. Colonial Properties Trust (CLP) and Mid America Apartment Communities (MAA) have agreed to merge in a deal that will create a Sunbelt-focused apartment REIT with a combined market cap of about $8.6B. Under the terms of the agreement, each CPT share will be converted into 0.36 of a newly issued MAA share.

Eurozone PMI improves markedly but recession still on. Eurozone manufacturing PMI rose to a 15-month high of 48.3 in May from 46.7 in April, with the downturn easing across the bloc, although price deflationary pressures remained. Of particular note was Spain, whose PMI jumped to its best level in two years with an increase to 48.1 from 44.7. However, the overall eurozone data “still suggest that GDP is likely to have fallen 0.2%” in Q2, says Markit, extending the eurozone’s recession into a seventh quarter.

Drug


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Wall Street Breakfast: Must-Know News

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Eurozone unemployment hits record – again. As expected, eurozone unemployment edged up to a new high of 12.2% in April from 12.1% March, with an eye-watering 19.4M people without a job. Meanwhile, inflation rose in line with consensus to an annual 1.4% in May from 1.2% in April, while core CPI increased to a greater-than-expected 1.2% from 1%. Inflation is well below the ECB’s target of just under 2%, so could give the bank further room to loosen monetary policy.

Japanese stocks break nine-month winning streak. The Nikkei 225 (EWJ) closed +1.4% today after several volatile sessions, but that wasn’t enough to prevent the index from ending May 0.6% lower, its first monthly loss in ten. Stocks rallied following a report yesterday that Japan’s $1T Pension Investment Fund could increase its equity allocation.

Clearwire delays vote on buyout offers. Clearwire (CLWR) will adjourn


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Wall Street Breakfast: Must-Know News

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Smithfield Foods soars on buyout report. Smithfield Foods (SFD) is reportedly close to selling itself to China’s Shineway in a deal worth $4.5-5B. The acquisition would represent a 25-30% premium over Smithfield’s close yesterday of $25.97. The speculation comes amid calls from large shareholders for the company to split up. Smithfield’s shares were +23.2% premarket at $31.99.

U.S. Treasurys stabilize following blood-letting. U.S. bond prices were higher premarket following the carnage yesterday, when the 10-year yield rose 15 bps to a 13-month high of 2.16%. Maybe more troubling for those borrowing short and lending long was a 12 bp jump in the 5-year yield to 1.01% (it’s up from 0.65% in a month), and a 4 bp pop in the 2-year yield to 0.28%. It was shoot first, ask questions later for many income plays such as mREITs, utilities and leveraged income funds.

U.S. prosecutors


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Valeant soars on $8.7B deal to buy Bausch & Lomb. Valeant (VRX) shares surged 7.7% premarket following news the company will acquire Bausch & Lomb for $8.7B in cash, including $4.2B in debt. The purchase – Valeant’s 15th since 2010 – will boost its offerings in the ophthalmology sector, which, said CEO Mike Pearson, the company has been looking at for three years. “It’s a lot like dermatology – a growing market, a growing specialty.”

China steals designs from top defense firms. Chinese hackers have stolen the designs for some of the U.S.’s most advanced weapons’ systems, a study for the Pentagon has reportedly alleged. The programs to have been breached include missile systems from Raytheon (RTN) and Lockheed Martin (LMT), and aircraft made by Boeing (BA), Textron’s (TXT) Bell Helicopter and United Technology’s (UTX) Sikorsky. Pentagon officials are not surprisingly frustrated by the degree


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