Top Stories
In surprise, South Korea cuts rates. In a surprise move, the South Korean central bank cut interest rates by 25 basis points Thursday, calling economic activity in the eurozone and emerging markets "sluggish" and "weaker than initially expected." The cut took the base rate to 2.5%, its lowest level in two years and when combined with recent fiscal policy designed to bolster growth, should help "accelerate the recovery and increase the upside of Korea's GDP," one economist told the NY Times. South Korean stocks (EWY) rose 1.18% and the won fell 0.34% against the dollar.
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In China, consumer prices rise, producer price deflation persists. Consumer prices rose 2.4% in China during April, up from 2.1% in March and slightly above economists' estimates, although still well below the government's 3.5% target. Producer prices — now in their fourteenth straight month of decline — fell 2.6%, a steeper drop than expected. Stocks in Hong Kong and Shanghai fell 0.14% and 0.6% on the session following the data.
Tesla blows past estimates, reports first quarterly profit. Let the short squeeze begin. Heavily shorted Tesla Motors (TSLA) delivered on its promise to log the first quarterly profit in company history Wednesday, as the electric vehicle maker reported adjusted EPS of $0.12 per share for Q1 (triple analysts' estimates) on revenue of $562M. Moreover, gross margins doubled sequentially as the company beat its early production estimate, producing 5K Model S vehicles. The company also said it will beat its FY13 vehicle delivery estimate of 20K. The stock raced 24% higher AH.
Top Stock News
Green Mountain Coffee beats profit estimates, announces Starbucks deal. Green Mountain Coffee Roasters (GMCR) reported FQ2 earnings of $0.93 per share Wednesday evening, beating expectations as a 14% Y/Y revenue gain was fueled by 21% growth in single-serve pack sales. Lower labor and overhead costs contributed to the bottom line beat. Shares were halted AH before rising 16%, as the company announced a new 5-year deal with Starbucks (SBUX) under which the Seattle coffee giant will triple the number of products it offers for Keurig single cup brewers. That's welcome news for those who feared SBUX might eventually move to put GMCR out of business with the Verismo single-serve machine.
Groupon avoids debacle with quarterly report. Investors were mercifully spared a repeat of last quarter's earnings fiasco as Groupon (GRPN) reported EPS that met the Street's expectations and said revenue rose 8% Y/Y to $601.4M, $12.5M more than analysts predicted. The company also reaffirmed its FY13 GAAP operating income guidance and said Q2 revenue will be between $575M and $625M — analysts expect $616.1M. "It wasn't a debacle," Piper analyst Gene Munster said dryly. The company also noted it isn't in a hurry to find a permanent replacement for ousted CEO and founder Andrew Mason. Shares rose 11% AH.
Sony swings to first full-year profit in five years. Sony (SNE) reported a FQ4 net profit of ¥93.9B on revenue of $1.73T (+8.3% Y/Y), beating estimates on one-time gains related to asset sales. The quarterly results led the company to report its first full-year profit in half a decade as the bottom line showed a gain of ¥43B, versus a horrific ¥457B loss in the previous year. A weaker yen helped results and is expected to drive a ¥50B profit in FY14 (analysts expect ¥66B).
Facebook may spend $1B on start-up. Facebook (FB) is reportedly engaged in advanced talks to buy Israeli start-up Waze for between $800M and $1B. The company, which generates maps and traffic data by tapping into users' smartphones via satellite signals, partnered with FB last year on a version of the product which allows members to share data with their friends on the social network.
Nokia shows off $99 smartphone. Nokia (NOK) unveiled a $99 Asha smartphone in India Thursday. When compared to previous models, the new phone acts more like a fully-featured smartphone with Internet access and a touch-screen with built-in social media apps. The move is part of a push to grab market share in emerging markets, a critical piece of the puzzle in the battle for global smartphone supremacy.
Top Economic & Other News
Bank of England keeps rates, QE unchanged. In keeping with consensus expectations, the Bank of England left rates unchanged at 0.5% Thursday and resolved to maintain the size of its asset purchases (£375B). Some say recent economic data including upbeat industrial output readings, suggest the British economy is on the mend. The BOE's policy committee has been divided of late regarding the need for more QE.
Justice Department recommends reduced sentence for ex-Enron CEO Skilling. Former Enron CEO (and current federal inmate) Jeffrey Skilling has reached a deal with the Justice Department to recommend a reduction of his sentence by a decade, provided he drops a bid to have his conviction overturned. Judge Sim Lake will decide on the new sentence next month. Both the government and Skilling's attorneys said the deal would provide closure for all parties involved.
Junk bond yields hit record lows. For the first time ever, the yield on junk bonds (HYG, JNK) has fallen below 5%. The Barclays U.S. Corporate High Yield index fell to 4.97% earlier this week, capping a more than 100 basis point compression YTD, as investors' insatiable appetite for income in a stingy ZIRP environment has fueled robust demand for relatively riskier assets. Despite the sharp decline in yields, the spread to Treasurys is still well off historic lows at 4.06%. "You can justify it in an environment where you don't expect defaults to pick up," one analyst told WSJ.
Unemployment ticks lower in Australia. Headline numbers obscured rising unemployment in resource-rich Western Australia, where the mining industry (which accounts for 20% of the country's GDP) is suffering from weaker economic growth in China and a stubbornly high aussie (FXA). The jobless rate in Western Australia rose to 5.25% in April from 4.8% in March, hitting its highest level since 2010 and rising more than a full percentage point YTD. Meanwhile, the headline unemployment figure, which of course includes data from Victoria, New South Wales, and Queensland, printed at 5.5% for April, down from 5.6% in March.
Spain's borrowing costs fall at auction. Spain sold €4.57B of debt at auction Thursday, above its target. Three- and five-year bonds yielded 2.247% and 2.789% respectively while a note due in 2026 yielded 4.336% — borrowing costs dropped for all the maturities actioned compared to the last time comparable debt was sold. Bid-to-covers were 2.34 for the three-year, 2.24 for the five-year, and 1.62 for the 2026 bond.
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Today's Markets:
In Asia, Japan -0.66% to 14191. Hong Kong -0.14% to 22548. China -0.6% to 2232. India -0.26% to 19939.
In Europe, at midday, London +0.04%. Paris -0.82%. Frankfurt -0.03%.
Futures at 7:00: Dow +0.01%. S&P -0.05%. Nasdaq -0.05%. Crude -0.38% to $96.26. Gold -0.28% to $1469.00.
Today's economic calendar:
Chain Store Sales
8:30 Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:00 Wholesale Trade
10:30 EIA Natural Gas Inventory
1:00 PM Results of $16B, 30-Year Note Auction
4:30 PM Fed Balance Sheet
4:30 PM Money Supply
Notable earnings before today's open: AES, AGU, ALR, AM, AMRC, APA, BAM, BCE, CBB, CNSL, CTB, CVC, DF, DISH, DNDN, GLP, GTIV, IRC, KEM, KIOR, MEA, NPSP, OWW, PCP, SNE, SNSS, SPH, SRPT, TK, TNK, VICL, VNDA, WAC, WFR, WIN, WWAV, XRAY
Notable earnings after today's close: AGO, AIRM, AL, ALIM, ANAC, ASYS, AUQ, BCEI, BID, BPZ, CALL, CPE, DAR, EGY, ET, FTK, FXEN, GXP, KTOS, LLNW, MBI, MCP, MDRX, MDVN, NGVC, NVDA, OPTR, PANL, PCLN, PDLI, PSA, RNDY, SF, SLXP, SQNM, TNGO, UBNT, ZGNX
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