Eurozone recession deepens, Germany contracts. The eurozone recession deepened in Q4 as GDP shrank a greater-than-expected 0.6% on quarter vs -0.4% in Q3. The picture is ugly all across the bloc, with Germany slipping into a contraction of 0.6%. France also shrank after hanging on at or just above zero for a long while. EU shares had started fairly brightly, but were all sharply lower at midday in Europe, while the euro was -1% vs the dollar. U.S. stock futures weren’t looking too clever either. (See below for details)
AMR, US Airways confirm merger. American Airlines (AAMRQ.PK) and US Airways (LCC) have confirmed that they are to merge and will provide details at a press conference this morning. According to reports, the all-stock deal will create the world’s largest airline by passenger traffic with a market cap of $11B, and it will take AMR out of bankruptcy. The combined company will operate under the American Airlines brand.
Cisco’s net profit jumps 44% to $3.14B. Cisco’s (CSCO) shares fell 2.1% premarket despite the company’s FQ2 earnings beating analyst expectations, with EPS coming in at $0.51 and revenue edging up 5% to $12.1B, while net profit grew 44% to $3.14B. JMP Securities analyst Erik Suppiger said that Cisco "did a good job managing costs and keeping their margins up, but there’s a lot of concern about what they can do to build revenue." The problem is that Cisco’s strategy of "building a cloud and wireless business eats into your traditional product lines."
Top Stock News
AB InBev moves to allay Modelo antitrust fears. AB InBev (BUD) has amended the terms of its $20.1B proposal to acquire the 50% of Modelo it doesn’t own as it looks to offset U.S. antitrust concerns. The main change is that AB InBev will sell the Mexican company’s Piedras Negras brewery to Constellation Brands (STZ) and give the latter perpetual rights to sell Corona and other Modelo brands in the U.S. in a deal worth $2.9B. Constellation’s shares soared 17.7% premarket and those of AB InBev were +4.1%.
Schulze considers scrapping Best Buy bid. Best Buy (BBY) founder Richard Schulze is mulling whether to scrap plans for a buyout of the struggling electronics chain and instead, along with other investors, strengthen his minority stake, the WSJ reports. Schulze, who owns around 20% of Best Buy, hasn’t yet secured enough financing for a buyout, which is leading him to explore his options, but no decision has been made yet. Shares were -3.4% premarket.
Time Warner looking to divest magazine business. Time Warner (TWX) is in discussions to sell the vast majority of Time Inc.’s 21 magazine titles to Meredith (MDP), including People and Entertainment Weekly, although the deal would exclude Time, Sports Illustrated, and Fortune. Alternatively, because Meredith couldn’t afford a speculated price of $2.4-2.9B for Time Inc., the publications of both would be placed in a new company in which Time Warner shareholders would own 2/3 and Meredith investors the rest.
Rio Tinto swings to full-year net loss of $3B. Rio Tinto (RIO) swung to its first loss in at least 21 years in 2012, with the loss coming in at $3B vs a profit of $5.8B a year earlier, although the miner did beat consensus. Revenue dropped to $50.97B from $60.54B. The main reason for the poor result was an impairment charge of $14.4B, mainly related to Rio’s aluminum operations and coal assets in Mozambique.
Brazil denies Apple request to register iPhone. Brazil’s National Institute of Industrial Property yesterday denied Apple’s (AAPL) request to register the iPhone trademark in the country, as electronics maker IGB Eletronica already owns the rights to the name. Apple won’t have to immediately suspend iPhone sales, but it faces a potentially lengthy and costly legal battle in what has become a fast-growing market.
Toyota seen as most dependable car maker. Toyota (TM) has swept J.D. Power’s 2013 vehicle dependability study, with its Lexus brand snagging top spot, followed by GM (GM), Honda (HMC), Mazda (MZDAY.PK, MZDAF.PK) and Ford (F). Volkswagen (VLKAY.PK, VLKAF.PK) did not fare well, with 174 reported problems per 100 vehicles.
Union accuses Boeing of intimidating workers. Boeing (BA) has denied misconduct after the Speea engineers and technical workers union filed a complaint with the National Labor Relations Board accusing the company’s managers of intimidating staff over voting for Boeing’s latest contract offer, which Speea has said employees should reject.
Top Economic & Other News
Bank of Japan keeps policy unchanged as recession continues. As expected, the Bank of Japan has maintained the size of its asset purchase program at ¥101T ($1T) and its benchmark interest rate at 0%-0.1%. The BOJ’s decision followed news that Japan’s economy had contracted for a third quarter in Q4 as GDP shrank 0.1% Q/Q vs consensus of +0.1%, with declining exports and a drop in business investment offsetting improved consumption.
Foreclosure filings sink to six-year low. Foreclosure filings fell to the lowest level in almost six years in January, dropping 28% on year and 7% on month to 150,864. The main reason for the decline was because of a new law in California that slowed repossessions – default notices in the state plunged 62% on year, and for the first time since January 2007, it didn’t have the most properties with foreclosure filings.
In Asia, Japan +0.5% to 11307. Hong Kong +0.8% to 23413. China closed. India -0.6% to 19497.
In Europe, at midday, London -0.8%. Paris -0.8%. Frankfurt -1.1%.
Futures at 7:00: Dow -0.4%. S&P -0.4%. Nasdaq -0.4%. Crude -0.2% to $96.85. Gold +0.1% to $1647.30.
Today’s economic calendar:
8:30 Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:30 EIA Natural Gas Inventory
10:30 Daniel Tarullo testifies on Wall Street Reform
1:00 PM Results of $16B, 30-Year Note Auction
12:50 PM Fed’s Bullard: U.S. Economic and Monetary Policy
4:30 PM Fed Balance Sheet
4:30 PM Money Supply
Notable earnings before today’s open: ABB, ABX, ALXN, ANR, APA, BGCP, BWA, CAB, CRIS, CVE, DISCA, DTV, DVA, DWRE, ECA, GELG, GM, GNC, GNRC, INCY, JAH, LNT, LUFK, MFA, NGLS, NRF, O, OAK, PDS, PEP, PPL, REGN, SHPG, STRA, TAP, UTHR, VMC, WM, ZIP
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