WALL ST BREAKFAST: China Devalues Yuan To Lift Flagging Economy

Economy

The surprise devaluation of the yuan is roiling markets across the globe as investors weigh the implications of the unforeseen move. Exporters are dragging stocks lower, while commodities are down amid speculation the weaker currency will make imports more expensive and slow demand. Although the move shook forex markets in Asia earlier, the decision is expected to add further momentum to the strong dollar, which has already been boosted this year on prospects for higher U.S. interest rates.

Greece and its international lenders have clinched a bailout agreement after night-long talks in Athens, although a couple of minor issues still have to be resolved. The pact is expected to be worth up to €86B. Greek officials anticipate the accord to be ratified by parliament on Wednesday or Thursday and vetted by eurozone finance ministers on Friday, clearing the way to aid disbursements by Aug. 20 - the day a €3.2B debt payment falls due to the ECB.

Despite the failure of the latest Trans-Pacific Partnership talks in Hawaii, a conclusion of the trade pact remains in the cards over the next 12 months, former U.S. chief trade negotiator Ron Kirk declared. "I've been in these negotiations and I know the worst thing to do is to put an artificial timeline on it," Kirk said in an interview with CNBC. Other countries, however, are expressing concern. Japan is alarmed that participants didn't agree to meet again this month to settle remaining differences on dairy, medicine and automotive trade.

OPEC pumped the most crude last month in more than three years as Iran returned output to the highest level since international sanctions were strengthened in 2012. The 12-member group, responsible for 40% of world oil supplies, raised output in July by 100,700 barrels a day to 31.5M. The increase came even as Saudi Arabia, which often curbs output toward the end of the summer, told OPEC it cut production by the most in almost a year. Crude futures -1.6% to $44.26/bbl.

Stocks

Google belted out some eye-popping news just before the closing bell yesterday. The tech giant announced a new holding company called Alphabet which will separate its core web advertising business from newer ventures. Larry Page will be the CEO of Alphabet, and fellow co-founder Sergey Brin its president. Sundar Pichai, who was put in charge of Google's (GOOG,GOOGL) core products last fall, will be the CEO of Google proper. GOOG +5.6%; GOOGL +6%premarket.

Twitter interim Chief Executive Jack Dorsey has joined other insiders in buying more stock in the company, following a week in which shares slumped to new post-IPO lows. Monness Crespi also upgraded the stock to Buy, stating the "worst will soon be behind," lifting Twitter (TWTR) shares 9% during yesterday's session.

Terex and Finnish competitor Konecranes have agreed to an all-share merger, creating a crane and materials-handling supplier with a combined $10B in sales. The planned tie-up, which will be located in Finland and called Konecranes Terex, will be owned 60% by the shareholders of Terex (TEX) and 40% by Konecranes (KNCRF) investors. TEX +24.1% premarket.

Symantec plans to sell its data storage business Veritas to Carlyle Group (CG) under a deal set to be announced this afternoon, when Symantec (SYMC) reports its quarterly results. Carlyle would pay on the high side of a range between $7B-$8B. At that price, the deal would be this year's largest private equity takeover of a tech company.

Global mergers and acquisitions are on pace this year to hit the highest level on record, thanks to record buying sprees from companies on the hunt for growth. According to data provider Dealogic, takeover-deals would reach $4.58T this year if the current pace of activity continues, comfortably above the $4.29T notched in 2007. The latest big deal to add to the tally is Berkshire Hathaway's (BRK.A, BRK.B) $37.2B acquisition of Precision Castparts (PCP).

Investors reacted in an unusual way to Freeport McMoRan's (FCX) plan to potentially sell $1B worth of stock, just weeks after declaring their preference to not issue new shares: They pushed the stock 10.8% higher in the best performance in more than six years. While new shares will dilute value for existing holders, investors seem to see it as a better option than selling more assets or taking its oil business public.

Shire Chief Executive Flemming Ornskov is stepping up his campaign to get Baxalta (BXLT) to the negotiating table as he pushes the benefits of a $30B takeover bid to the biotech company's shareholders. In response, Baxalta has intensified its opposition to the approach. Speaking on a call with investors yesterday, CEO Ludwig Hantson said there was no reason to negotiate with Shire (SHPG) based on its current offer, since the company faces strong growth prospects as a standalone group.

Activist investors, who take equity positions and push for financial or strategic changes, are increasingly showing up in the same stocks, often with different agendas. Last year, 39 companies faced multiple activist campaigns. According to FactSet, that figure has increased every year since 2011, when there were 20. Notable companies that have faced multiple activists over the past year include Mondelez (MDLZ), Sotheby's (BID) and Hertz (HTZ).

Crunch time for Tesla? According to a Reuters analysis, the EV automaker is losing more than $4,000 on every Model S electric sedan it sells, and burned $359M in cash last quarter during a bull market for luxury vehicles. Tesla (TSLA) shares fell almost 9% on Thursday and slipped another 2% on Friday as investors digested the company's wider quarterly loss, downgraded sales forecast, and possibility it may need to raise more cash to offset heavy spending. Tesla had just $1.15B on hand as of June 30, down from $2.67B a year earlier.

ExOne (XONE) -5.6% AH as Q2 results missed estimates.
Kraft Heinz (KHC) -1.7% on a drop in organic revenue.
Rackspace (RAX) +5.5% AH after upping its buyback to $1B.
Shake Shack (SHAK) +8% AH on higher comp sales, beating expectations.