Market Snapshot
Asia: Japan +0.3% to 20651. Hong Kong +1% to 25415. China +3.5% to 3957. India +0.1% to 28463.
Europe: London -0.1%. Paris +0.1%. Frankfurt -0.3%.
Futures: Dow -0.1%. S&P -0.1%. Nasdaq +0.3%. Crude -0.1% to $51.17. Gold -0.1% to $1142.60.
Ten-year Treasury Yield flat at 2.34%
Economic News
8:30 Housing Starts
8:30 Consumer Price Index
9:55 Consumer Sentiment
Key earnings before the open
ALV, CMA, ERIC, FHN, GE, GWW, HON, JBHT, KSU, PGR, STI, SYF
Markets
German lawmakers are expected to give Berlin the green light today for negotiations on a third multi-billion euro bailout for Greece, despite Finance Minister Wolfgang Schaeuble questioning whether it will succeed. Yesterday, the ECB increased emergency funding to keep the debt-laden country’s banks afloat, while EU finance ministers approved a €7B bridge financing, allowing Athens to avoid defaulting on a bond payment next Monday and clear its arrears with the IMF. Greek banks are also scheduled to open on Monday, but capital controls will remain in place.
Chinese shares extended gains into a second session today, while Hong Kong shares headed for their first positive week in four, suggesting Beijing’s barrage of support measures has put a floor under equities. Bloomberg reported earlier this morning that China Securities Finance has a further 2.5T-3T yuan ($483B) of funding available for its efforts to support the stock market. Meanwhile, trading has resumed for hundreds of suspended firms. While some 643 firms remained frozen, according to FactSet, that’s near the historical average. Shanghai +3.5%; Shenzhen +5.2%; Hang Seng +1%.
Mirroring recent signals from Fed Chair Janet Yellen, Bank of England Governor Mark Carney said on Thursday the decision to raise interest rates from record lows will become much clearer by the end of the year. Carney’s speech puts the British central bank on track to follow the U.S. Federal Reserve by raising interest rates in the near future, after more than six years at rock-bottom levels amid the fallout of the global financial crisis.
According to the most recent MoneyTree report from PwC, venture capital investments rose to their highest level in 15 years during the second quarter, with the majority of funding going to software and media/entertainment companies. Over the period, venture capitalists poured $17.5B into businesses – the highest since the fourth quarter of 2000 when VC investment totaled $21.97B. Notable funding rounds: Airbnb (Pending:AIRB) $1.5B, Snapchat $537.6M, Zenefits Insurance Services, $500M, Pinterest $186M.
Stocks
Samsung’s controlling Lee family scored a major victory Friday over U.S. hedge fund Elliott Associates, as shareholders approved an $8B merger between Cheil Industries and Samsung C&T. Elliott Associates had argued the merger grossly undervalued Samsung C&T shares. The deal will help streamline Samsung’s convoluted ownership structure, which consists of about 70 affiliates tied together by a complex web of cross-shareholdings, and consolidate the Lee family’s power over the conglomerate.
Google jumps after the company reported quarterly profit that easily topped analysts’ expectations, helped by growth in advertising revenue and tighter controls on costs. Net income climbed to $3.93B vs. $3.35B a year earlier, while paid clicks rose 7% Q/Q and cost per click fell 4%. Google’s (GOOG, GOOGL) new Chief Financial Officer Ruth Porat also signaled plans to bring more restraint to spending at the Internet search giant, while supporting growth initiatives.
Ericsson reported second-quarter sales and operating profit that topped analysts’ estimates today as carriers in Asia and Europe spent more on improving their wireless networks. Sales rose 11% to 60.7B kronor ($7.1B), while profit grew to 3.6B Swedish crowns ($422M). However, the company’s closely watched gross margin shrunk to 33.2%, weighed down by one-time restructuring expenses. Ericsson (ERIC) also faces a number of challenges ahead, including defending its leading network-equipment position against Nokia’s (NOK) $16.6B acquisition of Alcatel-Lucent (NYSE:ALU) and its many legal disputes over mobile technology patents.
Hulu is exploring plans to add an advertising-free option to its service, sources told the WSJ, as the streaming video provider tries to become a stronger rival to Netflix (NFLX). The new service could launch as early as this fall and be priced at around $12-$14 a month. Although Hulu – co-owned by NBCUniversal (CMCSA), Disney (DIS) and Fox (FOXA) – remains small compared to Netflix, its paying subscriber base is now around 9M, up from 6M last year. Netflix on Wednesday reported that it had 65M global subscribers.
Trumping a bid from rival GVC (GMVHF), online gambling firm 888 Holdings (EIHDF) will buy Bwin.Party Digital Entertainment (PYGMF) in a cash and stock deal worth £898M ($1.4B). The deal is the latest in a flurry of M&A activity in the industry, which is expected to accelerate as gambling firms look to protect themselves from increasing tax and regulatory pressures. Just six months ago, 888 rejected a takeover bid from William Hill (WIMHY), which valued it at about £750M.
Tesla hasn’t disclosed what it will be announcing at its press conference at 2:00 p.m. ET today, but it sure has sent out a lot of invites. Speculation is centering around the final production version of the Model X, a crossover SUV version of the Model S sedan, although in the past there have been plenty of surprises.
The Federal Housing Finance Agency disclosed it paid two law firms over $373M since 2010 to pursue litigation against 16 banks over MBSs sold to Fannie Mae (FNMA) and Freddie Mac (FMCC) prior to the financial crisis. The figure paid to Quinn Emanuel Urquhart & Sullivan LLP and Kasowitz Benson Torres Friedman LLP amounts to less than 2% of the $18.7B obtained by the U.S. regulator through settlements and judgments.
In a confidential report sent to Deutsche Bank (DB) in early May – less than a month before the lender announced the resignations of its co-CEOs – BaFin blasted bank management for failing to stop or tell regulators about years of attempted market manipulation, WSJ reports. One of the co-CEOs – Anshu Jain – is singled out in the report for his shortcomings. The other – Jurgen Fitschen – didn’t draw any criticism, but four current members of the board and two other senior executives did.
The third-party committee that Toshiba (TOSYY) has commissioned to look into accounting irregularities is scheduled to submit its report to the company at around 7 p.m. (6:00 a.m. ET) on Monday. The Japanese conglomerate will then hold a news conference at 5 p.m. (4:00 a.m. ET) the following day after releasing the entire text of the report. The expanded accounting scandal is expected to result in CEO Hisao Tanaka’s resignation and a ¥300-400B ($2.4-3.2B) charge.
Hertz surged over 18% in after-hours trading after the rental car provider increased its annual cost savings target to $300M and said it expects 2015 fleet growth of between 0.5%-1.5%. Hertz (HTZ) also affirmed its commitment to a $1B buyback program, a spinoff of its HERC equipment rental unit and completed its much-anticipated financial restatement.
The battle to provide a unified North American calling zone continues, after America Movil (AMX) launched a plan to let postpaid Telcel customers call the U.S. without roaming charges. The plan includes voice, text and data in the U.S. for an additional 50 pesos/month (about $3.16), and may soon include Canada as well. The announcement follows AT&T’s (T) move to offer World Connect users unlimited calls from U.S. to Mexico, and T-Mobile’s (TMUS) step to give Simple Choice customers free coverage/calling in Mexico and Canada.
Looking to seal its €12.4B bid for Alstom’s (ALSMY) power unit, General Electric (GE) has offered concessions in an attempt to seek antitrust approval from the EU, but did not provide too many details. GE said the remedies it submitted “address the concerns of the Commission and at the same time preserve the economic and strategic value of the deal.” The EU competition authority now has until Aug. 21 to decide whether to clear the offer.