Wall Street Breakfast: Must-Know News

by SA Editor Eli Hoffmann

• Hints of a recovery as small business loans jump. Small businesses stepped up borrowing in September while delinquencies declined to a new post-recession low, suggesting the recovery is gaining steam ahead of any planned monetary easing. Thomson Reuters/PayNet's Small Business Lending Index jumped 16% in September, following a 15% rise in August, and is now at the highest level in almost two years. Closely-watched small businesses account for about 80% of new hiring, and are seen as more agile and more in tune with changing economic trends.



• China PMI jumps, signalling strong domestic consumption. Growth in China surged ahead in October, providing welcome support for the global economy in the face of sluggishness in the U.S., most of Europe, and Japan. PMI rose to a six-month high of 54.7 from 53.8 in September, easily beating forecasts of 52.9 - despite a seasonal downside bias. Manufacturers continue to deplete inventories to meet rising domestic orders, reflecting strong consumption. The strong reading helped boost Asia shares ex-Japan Monday by 1.7%.



• IBM has Fortinet in its sites. IBM (IBM) is in advanced takeover talks with Fortinet (FTNT), sources say. Analysts say Fortinet's all-in-one security appliances, and its strong foothold among enterprises and governments, would offer a potential suitor "an immediate leadership position in the increasingly business-critical threat-management market."



• Goldman's fixed-income edge slips away. Goldman Sachs (GS) is losing its edge in fixed-income trading, its most successful business. Goldman's share of fixed-income trading revenue at eight of the largest U.S. and European banks slipped to 19% in Q3, down sharply from a peak of 29% in Q4 2009. The shift comes as Goldman has slashed its value-at-risk to $121M, the lowest since 2006, even as rivals ramp up their efforts. On last month's earnings call, CFO David Viniar explained the cautious stance, saying, "The world is still not a very safe place," and adding that the firm isn't seeing many worthwhile opportunities.



• Apple counter-sues Motorola: Not surprisingly, Apple (AAPL) reacted to Motorola's (MOT) claims of patent infringement with its own lawsuit, claiming Motorola's smartphone suite borrows liberally from Apple's touchscreen software and other display technologies. Less than a month ago, Motorola sued Apple saying the iPhone, iPad, iTouch and some Macs infringe on its early-stage patents. Elsewhere in recent smartphone news, Microsoft (MSFT) sued Motorola over Android last week; before that, Oracle (ORCL) sued Google (GOOG) over Android, and Google fired back; HTC and Apple are battling over patents; Eastman Kodak (EK) says Research In Motion (RIMM) and Apple are violating its patents; Motorola (MOT) says the same about RIM; and the ITC is investigating a complaint by Apple against Nokia (NOK).



• ICBC snaps up U.S. broker dealer. Beijing's largest lender, ICBC, will pay a token $1 to acquire Fortis' Prime Dealer Services from BNP Paribas (BNPQY.PK), making it the first Chinese bank to buy a U.S. broker-dealer. The new unit, ICBC Financial Services, will at first focus on bond clearing, and will later explore other opportunities including underwriting bonds for all kinds of companies - which would pit it against incumbents like Goldman Sachs (GS) and JPMorgan (JPM).



• Avanir gets go-ahead; Biodel doesn't. Avanir Pharmaceuticals (AVNR) won FDA approval for Nuedexta, which treats MS and Lou Gehrig patients for bouts of uncontrolled laughter or crying, sending shares up more than 100% premarket. Avanir will begin marketing Nuedexta in Q1, and analysts say the drug could hit $275M in annual sales within three years. But Biodel (BIOD) said regulators did not approve its experimental diabetes drug, requesting instead two new late-stage trials, and sending shares down by almost 50% premarket.



• Exxon, Shell, Occidental on short-list for $10B project. Sources say Abu Dhabi has shortlisted ExxonMobil (XOM), Shell (RDS.A) Occidental Petroleum (OXY) as potential partners to develop the $10B Shah natural-gas project after ConocoPhillips (COP) withdrew in April.



• Fox, Cablevision resolve dispute. Cablevision (CVC) and Fox Networks (NWS) ended their two-week spat just as game three of the World Series began without disclosing terms. Industry insiders say Fox's two-week stance may have been a ploy to test the FCC's mettle. If true, the stunt proved there was little the FCC could do to protect couch potatoes.