Opening Bell: 07.29.11 - Dealbreaker

Opening Bell: 07.29.11

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House Puts Off Debt Vote as Press by Boehner Fails (NYT)
Just minutes from a roll call vote on the plan pushed by Speaker John A. Boehner, Republicans stunned the House by interrupting the debate and turning to routine matters while Mr. Boehner and his lieutenants tried to pressure reluctant conservatives into backing their plan. The House then went into a recess and shortly before 11 p.m., the leadership announced that no vote would be held Thursday…Failure to pass the measure would represent a significant defeat for Mr. Boehner, the first-year speaker who has invested significant political capital in trying to get his fractious majority behind the legislation, which had the strong support of the entire leadership team. It could also bolster Senate Democrats in their push to raise the debt ceiling by enough to take the Treasury Department through 2012.

Debt Ceiling Impasse Rattles Short-Term Credit Markets (DealBook)
Over the last week, big banks and companies have withdrawn $37.5 billion from money market funds that invest in Treasury debt and other ultra-safe securities, the biggest weekly drop this year. Meanwhile, in the vast market for repurchase agreements, in which many financial firms make short-term loans to one another, borrowers are beginning to demand higher yields…Interest rates on longer-term Treasuries have held steady, but the yield on notes coming due next week, after the deadline, has moved sharply higher in recent days. The yield on Treasury bills coming due Aug. 4 jumped five basis points to 15 basis points, a significant move for a security that carried a yield close to zero earlier this month, said Jim Caron, head of interest rate strategy at Morgan Stanley.

U.S. balance now less than Apple cash (Financial Post)
As Republicans and Democrats continue to work towards a compromise to the country’s debt ceiling crisis, the U.S. Treasury Department said on Thursday that Washington now has a total operating balance of only US$73.768-billion. Meanwhile, Apple currently boasts a cash reserve of US$75.876-billion, as of its most recent quarterly earnings report at the end of June.

Moody’s puts Spain on review for downgrade (FT)
Moody’s, the US rating agency, in part blamed the increased cost of funding for its move to put Spain’s Aa2 rating on review for downgrade. It also argued that the second Greek bail-out agreed this month sets a precedent by imposing losses on bondholders, thus exacerbating the funding pressure… Moody’s also cited the challenges posed by weak economic growth and continued problems at regional governments, downgrading seven Spanish regions by one notch due to the “deterioration” in their fiscal and debt positions.

Goldman Sachs rates desk hemorrhages traders (Reuters)
More than a dozen traders have quit Goldman Sachs's North American government bonds and derivatives trading desk in New York in recent months as the bank takes fewer risks and big bonuses for ambitious traders dry up. Goldman has been handing out promotions and better pay to its salespeople, rather than the traders who manage the bank's inventory of securities and derivatives, people familiar with the bank's operations said.

California man uses butter knife, cigarette in home hernia surgery (Reuters via National Post)
"He told his wife he was frustrated with this hernia, and he didn't want to wait any longer for the medical procedure." Police watched as the man, after pulling the knife out of his abdomen, put a lit cigarette into the wound. Sgt. Lorenz said the unidentified man had committed no crime and was not under the influence of drugs or alcohol.

As Business Takes Aim at Dodd-Frank, Battle Shifts to Courts (WSJ)
First Congress was lobbied, then the regulators. Now the battle over the Dodd-Frank law is shifting to the courts. Some business groups are considering filing lawsuits aimed at blocking parts of the financial overhaul passed by Congress last July. While legal challenges likely won't happen unless efforts to win changes from regulators or lawmakers fail, Dodd-Frank opponents are emboldened by last week's appeals-court ruling that toppled a Securities and Exchange Commission rule designed to help investors oust corporate directors.

Deal-Making Lifts Lazard and Evercore (DealBook)
The results of both banks highlighted the improved market in deal-making, as companies seek growth through transactions such as mergers and asset sales…Lazard reported net income of $65.8 million on a fully exchanged basis and core operating revenue of $486.9 million. Still, the 48-cents-a-share profit fell 1 cent below the average estimate of analysts surveyed by Thomson Reuters…Using adjusted pro forma numbers, Evercore had a quarterly profit of $17.8 million, or 43 cents a share, on revenue of $141 million. The adjusted earnings were slightly below analysts’ expectations.

Nomura Earnings Jump on Trust Sales (WSJ)
Japan's largest securities firm by revenue posted a net profit of 17.77 billion yen ($229 million) in the quarter ended in June, compared with a net profit of 2.32 billion yen in the same period a year earlier. The results were better than the consensus estimates of a 13.65 billion yen profit compiled by Thomson Reuters from three analysts' expectations.

Ackermann Job Move Skirts Governance Rules (Bloomberg)
Ackermann, 63, is set to replace Clemens Boersig as chairman of Deutsche Bank’s supervisory board next year, when Anshu Jain, the head of investment banking, and Juergen Fitschen, who steers the Frankfurt-based lender’s domestic business, move up to share the CEO role. That will make Deutsche Bank the first DAX Index (DAX) member to seek an exemption to German corporate governance rules introduced in 2009 that call for a two-year grace period before a CEO can accept the role of supervisory board chairman.

Ex-Highbridge Huttenlocher plans Sept soft launch for Myriad (Reuters)
Carl Huttenlocher, the former Asia head of JPMorgan Chase & Co's Highbridge Capital, will soft launch his own hedge fund Myriad in September, four sources familiar with the matter said. The fund will start trading with about $300 million initially, two of the sources said. It is expected to raise well above $1 billion early next year when Huttenlocher plans to open the fund to external investors, the sources added.
Debt-Cap Failure ‘Collective Insanity’: Citigroup (Bloomberg)
A U.S. debt default triggered by the failure of politicians to agree to raising the country’s debt ceiling would be an “act of collective insanity” with severe impact on assets prices and the global economy, according Citigroup economists. The prospect of a default by the U.S. government, while still remote, is no longer negligibly small, wrote Citigroup Global Markets economists led by Willem Buiter. A default would “severely” damage the country’s role as an international financial power and as provider of the world’s reserve currency, they said. The political division is so wide that there is little chance of a meaningful agreement on addressing the long- term debt problem any time soon, making a downgrade of the country’s AAA credit rating “likely.”

Nintendo product flop crushes shares, outlook crumbles (Reuters)
Nintendo's shares fell as much 20 percent on Friday to 11,100 yen, its lowest intraday level since May 2004…Nintendo sold only 710,000 units of the 3DS in April-June, compared with 3.6 million in the month following its launch, and a tiny fraction of the 16 million unit target for the year to March 2012…Nintendo cut its annual operating profit forecast after market hours on Thursday to 35 billion yen from an initial forecast of 175 billion yen. The new estimate is far short of the previous consensus of 154.9 billion yen based on 24 analysts' forecasts ahead of the results.

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