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US Market Update: Europe Reports Q-4 GDP In The Red, US Merger Deals Offset The Gloom

EUR/USD, HNZ, BRK-A, LCC, STZ, ,GMBCF

Economic Data

Russia Gold & Forex Reserve w/e Feb 8th: $532.5-B v $533.5-B prior

Poland Jan M3 Money Supply M/M: -0.8% Vs -1.0%e; M3 Money Supply Level: 912.6B-B Vs 912.8-Be

Initial Jobless Claims: 341-K Vs 360-Ke v 366-K prior; Continuing Claims: 3.114-M Vs3.205 Me

Weekly EIA Nat Gas Inventories

US futures were dragged down in the premarket as Q-4 European GDP reports came in negative across the board. The negative readings were not unexpected, but the declines were lower than estimates. Eurozone Q-4 GDP fell by 0.6% and Italian GDP was notably poor, down 0.9%. All 3 leading US indices declined about 0.4% in the premarket, although they are back to unchanged as of writing.

EUR/USD is heading sideways around 1.3330 this morning post-Euro GDP disappointments. USD/JPY is at the lower end of the range seen over the last two sessions, around 93. The G-20 is meeting in Moscow, and the initial drafts from the meeting indicate members will pledge to avoid competitive currency devaluations. Note that the IMF commented that talk about the currency wars was overblown, and said it is not seeing very significant deviations from fair value in major currencies.

Warren Buffett’s Berkshire Hathaway NYSE:BRK-A and 3G Capital announced a deal to acquire processed food giant H.J. Heinz Co NYSE:HNZ for $23.2-B in cash. Including debt, Heinz valued the transaction at $28-B a bit rich as I see it. All in all, Berkshire and 3G will pay 72.50 per share, a 19% premium to the stock’s all-time high. Mr. Buffett told CNBC he is putting $12-13-B into the deal and still has “ample” amounts of cash left over for another big acquisition.

AMR and US Airways NYSE:LCC announced their long-anticipated merger. The $11-B all-stock deal gives US Air’s team operational control over the bankrupt airline, while AMR’s creditors will wind up owning 72% of the combined carrier, which will retain the American Airlines name. The combined entity becomes the largest US airline in terms of miles flown and annual revenue.

Constellation Brands NYSE:STZ is up 37% this morning after InBev reached a deal to divest Grupo Modelo’s PINK:GMBCF US business in order to satisfy DOJ objections to its plans to acquire Modelo. The DOJ was not convinced that its prior plan to sell its 50% share of US beer importer Crown Imports to Constellation would have satisfied its complaint. Now InBev is selling Constellation Modelo’s Piedras Negras brewery and grant it perpetual rights for Corona and other Modelo brands in the US.

Looking Ahead
12:50 (US) Fed member Bullard speaks on economy in Mississippi

13:00 (US) Treasury to sell $16B in 30-Year Bonds

6:00 (CL) Chile Central Bank Interest Rate Decision: Expected to leave the Nominal Overnight Rate Target unchanged at 5.00%

16:00 (CO) Colombia Dec Exports FOB: No est v $4.7-B prior

16:45 (NZ) New Zealand Q-4 Retail Sales Ex Inflation Q/Q: No est Vs -0.4% prior