Dollar rises above ¥100, Nikkei Soars. For the first time since April of 2009, the yen (FXY) fell through the 100-level against the dollar, helping the Nikkei rally nearly 3% on the session and almost 7% on the week. Japanese equities (EWJ) are now trading at levels last seen in January of 2008. Japanese capital flows data finally showed what many had been waiting for since BOJ Governor Kuroda's shot across the bow at deflation: an outflow, as Japanese investors became net buyers of foreign bonds.
Icahn, Southeastern to bid for Dell. Carl Icahn is partnering with Southeastern Asset to make an alternative bid to acquire Dell (DELL). Icahn and Southeastern will offer shareholders $12/share that can be taken in cash or stock, to go with the option to maintain additional shares in a recapitalized Dell. In a letter to Dell's board, Icahn/Southeastern effectively threaten to go to the courts if investors don't get a chance to vote on their offer. "Either give shareholders the real choice they are entitled to or face the legal liability for your failures."
Top Stock News
ArcelorMittal posts loss, but results improve from Q4. ArcelorMittal (MT) posted a net loss of $345M or -$0.21 per share for Q1 on revenue of $19.752B, and while both figures were worse than Q1 2012, the results were an improvement over the previous quarter. CEO Lakshmi Mittal said the economic environment "remains challenging," but sounded upbeat about the company's performance in the face of a soft market. The world's largest steel maker said EBITDA (which, like the profit and revenue picture, improved slightly from Q4), should continue to improve sequentially and will likely come in above $7.1B for the full year.
Priceline slips as guidance disappoints. Priceline (PCLN) reported earnings that beat analysts' expectations Thursday evening as management said anticipated operating margin pressure "did not materialize to the degree forecast" during the quarter. Non-GAAP net income jumped 34.6% Y/Y, revenues rose 26%, and gross bookings increased 36.4% fueled by 42.8% growth internationally. Nevertheless, the company's outlook disappointed, as Q2 EPS guidance of $8.87-9.45 on revenue growth of between 15-22% came in below expectations, causing the shares to fall 2.8% AH.
Nissan benefits from weaker yen, but U.S. results lag. A weak yen helped Nissan (NSANY.OB) report a FY13 net profit of ¥342.45B, ahead of estimates and in line with guidance. FQ4 net profit was ¥110.06 on revenue of ¥2.874T. Results lagged those of competitors Toyota (TM) and Honda (HMC). The company called its results in the United States a "big disappointment" as FY13 North American operating profit fell 15.6% Y/Y to ¥177.3B. Going forward, the automaker forecast FY14 net profit, operating profit, and revenue of ¥420B, ¥610B, and ¥10.37T respectively.
Molycorp beats expectations. Molycorp (MCP) reported a Q1 non-GAAP loss that was far narrower than anticipated Thursday on higher than expected revenue. Adjusted EPS came in at -$0.15 per share, less than half of the $0.31 per share loss analysts surveyed by FactSet called for. Sales rose 9% sequentially and the company said the "ongoing production ramp-up at Mountain Pass remains on course [with] full-scale" commercial production (an annual run rate of 20,000 metric tons) expected by mid year. The shares rose 8.77% AH.
Panasonic posts loss, sees FY14 profit. Panasonic (PCRFY.OB) reported a net loss of ¥754.3B for the year ended March, narrower than 2012's loss, but slightly wider than analysts expected. Operating profit tripled however, to ¥160.94B, beating estimates. The company said it will swing to a ¥50B profit in FY14 as President Kazuhiro Tsuga attempts to make good on a promise to shutter unprofitable business lines and restore growth. The plunging yen won't hurt.
Nvidia tops estimates. Nvidia (NVDA) earned $0.13 per share on revenue of $954.7M for FQ1, beating consensus estimates as the company's gross margin expanded 140 basis points from last quarter and 420 basis points Y/Y to 54.3% (analysts expected 53%). The results showed high-end computer buyers "are still willing to spend more for NVDA's newest processors," a Wedbush analyst told Bloomberg. The company said FQ2 revenue should come in at $975M give or take, against expectations of $1.01B. Shares traded higher by 1% after the report.
Top Economic & Other News
California AG files suit against JPMorgan. According to California AG Kamala Harris, JPMorgan (JPM) effectively hijacked the state's judicial system, filing thousands of lawsuits (which allegedly had "only the thinnest veneer of legitimacy") per month for more than three years in order to procure default judgements and extract payments from borrowers. Harris says that on one particularly busy day, JPM filed 469 suits. The bank had no comment.
Margin debt hits pre-crisis levels. NYSE margin debt hit $379.5B in March, a 28% Y/Y increase as investors borrow money to buy into what has become a famously resilient rally. The concern is that a steep sell-off could snowball if leveraged investors are forced to unwind positions to meet margin calls. Borrowing to buy shares is of course one sign of unbridled optimism, although some believe levering up makes sense in the current environment. The last time margin debt hit $380B: July 2007, the same month S&P and Moody's marked the beginning of the crisis by downgrading hundreds of RMBS.
Eisman says Canada's housing market in trouble. Steve Eisman thinks the Canadian housing market may be heading for trouble and warned listeners at the Ira Sohn conference Wednesday that Toronto-listed, non-prime mortgage originator Home Capital Group will "have serious problems" in the event the Canadian housing market rolls over. Home prices, which have doubled in Canada over the past decade, are beginning to falter and Canadians, undeterred by cautious rhetoric, are continuing to lever up, with debt to disposable income ratios on the rise. David Rosenberg — no stranger to gloomy predictions — says talk of a collapse is "completely overhyped."
Moody's doesn't see corporate bond bubble. Don't panic, Moody's said in a report Friday, there's "no strong evidence that recent [corporate debt] issuance levels presage a damaging correction." The notion that a bubble is building in the corporate bond market isn't reflected in credit spreads which, for both investment grade (LQD) and high yield (HYG, JNK), are closer to long-run averages than they are to alarmingly tight. Furthermore, the ratings agency said a surge in issuance reflects the "disintermediation of the banking sector" and noted that the proportion of total corporate liabilities comprised of debt securities "hasn't significantly increased over the past two years." We can all rest easy now.