Tuesday (12/20/11) Pre-Market News: RBS Shrinking iBanking Division

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Every morning the Street of Walls team puts out an update on market levels, today’s top stories, and active M&A deals.

Today’s Top Stories:

  • 13D, Owl Creek Challenges Icahn: Owl Creek Asset Management has disclosed a 8.48% ownership of the common stock of Navistar International (NYSE:NAV) and noted recent conversations the hedge fund has had with Navistar’s management http://bit.ly/uDbNJN
  • GS on What Worries Markets: “As we head into 2012, markets are preoccupied with the same three global themes that have dominated macro sentiment since late 2008/early 2009: China growth, Europe sovereign debt, and US policy” (Goldman Research)
  • Another Strong Spanish Action: Demand for the 3- and 6-month Treasury bills was high, with more than 18 billion euros ($23.43 billion) offered for 5.6 billion euros sold, above the targeted amount of 3.5 billion to 4.5 billion euros
  • Why Bank Stocks are 5x P/E: Bank stock have been lagging today, Citi and Bank of America now both trade at ~5x 2012 earnings.   We’ve noticed the last few quarters that hedge funds have been puking financials from their portfolios http://bit.ly/vcxucU
  • Bill Gross on Ultra Cheap Money: “Zero-bound money – credit quality aside – creates no incentive to expand it…when the return on money becomes close to zero in nominal terms and substantially negative in real terms, then normal functionality may breakdown”  (FT)
  • Tech & Healthcare Most Attractive: Technology and Healthcare are discounting depressed profitability and growth vs. historical valuation ranges http://bit.ly/sdxqez
  • Best Stock Picks for 2012: Barclays is out with their best stock picks for 2012, top picks including Brasil, Kraft, PDG, Abercrombie, CVS, Macy’s and more http://bit.ly/rY5sLE
  • RBS Shrinking Their Investment Bank: another article talking about how RBS will be shrinking its investment bank.  ”RBS should significantly reduce its IB…scaling back risky activities that are heavy users of capital and funding” (FT)
  • AT&T Takes $4bn Hit on T-Mobile Deal: T and T-Mobile deal officially off. T will recognize $4B pretax accounting charge for Q4
  • Citi on AT&T/T-Mobile Fallout: “AT&T and DT announced yest that the co’s have ended their discussions on T’s proposed acq of T-Mobile USA and T will pay a cash break-up fee of $3bn and recognize an additional charge of $1bn for the transfer of spectrum assets during 4Q/11. We are surprised T didn’t negotiate longer for an alternative deal or a reduced break-up fee but  expect them to get back to focusing on using its recently built cash position to consider alternative sources for spectrum, possibly repo further stk.  S is a potential beneficiary and may revisit merger with T-Mobile USA in due course” (Citi Research)
  • Barclays Holiday Highlights: “1) online sales are tracking about 15% of total.  2) last weekend promotions averaged 40% of in stores. 3) trends have decelerated.  4) Three of the busiest holiday sales days are yet to come including 12/22, 12/23 and 12/26—expect promotions to intensify as we get closer to the Christmas weekend” (Barclays Research)

Economic Calendar:

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  • Tuesday: Housing Starts, Building Permits
  • Wednesday: Existing Home Sales
  • Thursday: Chicago Fed Survey, GDP, Personal Consumption, Initial Jobless Claims, U. of Mich Confidence, Leading Indicators, House Price Index
  • Friday: Durable Goods Orders, Personal Income, New Home Sales

M&A Watch:

  • Weekly M&A Trends: M&A volumes declined by 13% to $25.7bn, so far 4Q 2011 M&A volumes are averaging 14% below 3Q 2011 volumeshttp://bit.ly/t5PKot
  • Bi-Lo buys Winn-Dixie: BI-LO and Winn-Dixie Stores (Nasdaq:WINN) announced today that the companies will merge to created a company of approximately 690 grocery stores in eight southeastern stateshttp://bit.ly/ujtK6s