Sunday, October 21, 2012

Wall St. Breakfast: Must-Know News

UBS CEO heads for the door. UBS (UBS) CEO Oswald Gruebel has stepped down amid the fallout of the $2.3B rogue trading scandal, and board member Sergio Ermotti has been appointed CEO on an interim basis. The firm must now find both a permanent chief executive and a new strategy for its troubled investment bank, while trying to rebuild its tattered reputation.

Eurozone rescue plan in the works. The Telegraph reports German and French officials are working on a multitrillion-dollar "firebreak." Among the steps is a bank recapitalization going well beyond the laughable €2.5B tagged by the EU stress tests (the IMF puts the figure at €200B, others say €1T). A bump in EFSF firepower to €2T and a "controlled" Greek default giving a 50% haircut to lenders are also in the mix. Germany's Merkel took a hard line on Greece, saying late yesterday that the eurozone needs to be able to protect itself by building a barrier around Greece, though she rejected the idea of having Greece leave the eurozone. Euro -0.9% vs. the dollar (2:30 ET).

McGraw-Hill gets Wells Notice. McGraw-Hill (MHP) disclosed this morning that it had received a Wells Notice from the SEC. Officials are considering a civil injunctive against McGraw's S&P over the rating of a CDO.

Talk, little action, from the IMF. In a communique from its annual meeting, the IMF agreed "to act decisively to tackle the dangers confronting the global economy." Other than promising a renewed push to implement the crumbling July 21 agreement - a 2nd Greek bailout and expansion of the EFSF - the agency offered no specific policies. The U.S. and other major nations used the meeting as an opportunity to push eurozone leaders to increase the size of their rescue fund to as much as trillions of euros (see details above).

CME hikes margins. CME Group hiked margins again late Friday, on gold by 21%, silver by 16% and copper by 18%. The changes will be effective after the close of business today. Futures are deeply in the red this morning: as of 2:30 ET, gold -3.4% to $1,583.60; silver -11.2% to $26.74; copper -4.9% to $3.119.

Rio Tinto considers spin-off. Rio Tinto (RIO) is reportedly considering spinning off part of its Australian aluminum assets in response to a planned carbon emissions tax. Rio would likely spin off the unit's refineries and smelters, but hang on to its two bauxite mines because of their higher margins and the strategic importance of bauxite to Chinese buyers.

Boeing's Dreamliner debuts. After three years of delays and billions of dollars in extra costs, Boeing (BA) delivered yesterday its first 787 Dreamliner to All Nippon Airways. Boeing hopes production will speed up as technology becomes more efficient and lighter.

Groupon hesitates on IPO. Groupon is still committed to going public, sources say, but is unsure on IPO timing after several missteps and in light of market volatility. In a Friday filing, Groupon said it's changing the way it accounts for revenue, now reporting it as net of what it receives after paying its merchant partners, and calling it "gross billings." This will substantially lower the firm's top line, but have no effect on reported profits (or losses).

Today's Markets
Asia: Japan -2.2%. Hong Kong -1.5%. China -1.7%. India -0.8%.
Europe at midday: London -0.1%. Paris +1.9%. Frankfurt +2.2%.
Futures at 7:00: S&P +1.15%. 10-yr -0.08%. Euro -0.05% vs. dollar. Crude +0.15% to $79.97. Gold -0.88% to $1623.35.

Monday's Economic Calendar
8:30 Chicago Fed National Activity Index
9:15 Sarah Raskin: Monetary Policy and Job Creation (.pdf)
9:30 Fed's Bullard: 'Policy after the crisis'
10:00 New Home Sales
10:30 Dallas Fed Manufacturing Outlook

No notable earnings today.

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