Trader Talk

A 'No' to Euro Bonds—But Likely Only for the Moment

A "no" to euro bonds—but likely only for the moment. Ahead of the Sarkozy-Merkel meeting Tuesday, the Germans, predictably, are pushing back on the idea of issuing euro bonds (bonds guaranteed by all the euro zone countries)...but don't kid yourself: that's the direction the euro zone is moving.

This time, German Finance Minister Wolfgang Schauble said there would be no euro bonds as long as each country of the euro zone had its own fiscal policy.

The argument, of course, is that European countries do not represent the same credit risk and that the threat of higher rates is a strong incentive for each country to maintain fiscal discipline.

But in Monday's Financial Times, George Soros says that very premise is wrong: "Deficit countries must be allowed to refinance their debton the same terms as surplus countries."

Europe is approaching an "all-in" moment on fiscal union. Without a doubt, the powers of the European Central Bank will be greatly expanded in the coming months, to make it possible to buy more government bonds. Ultimately, they are likely to go beyond that.


1. Motorola Mobility surges 59 percent after agreeing to be acquired by Googlefor $12.5 billion in cash ($40 a share), a 63 percent premium. The deal reflects Google’s commitment to its Android operating system platform amid the fierce competition from Apple’s iPhone products. By acquiring Motorola Mobility, which was spun off by Motorola back in January, Google will control an attractive portfolio of Android-based handsets. Traders also note that Google may be protecting their patent portfolio against lawsuits: Motorola had a few that overlapped.

On the news, handset maker Nokia jumps 11 percent.

2. Lowe’s falls 5 percent after sales disappointed the Street. Although earnings beat estimates (68 cents a share vs. 66 cents a share consensus), the home-improvement retailer saw same-store sales slip 0.3 percent. The firm gave a tepid outlook, too, cutting its full-year earnings forecast for the second time on reduced expectations for a 1 percent decline in same-store sales.

3. Transocean announced it is acquiring Norwegian deepwater driller Aker Drilling for $2.23 billion, which includes $800 million in debt. The offer is a 62 percent premium from Aker’s close on Friday, and the deal is expected to be accretive to earnings immediately.

4. Foodmaker Ralcorp rises 8 percent after it once again rejected a bid from ConAgra and instead stood by its plan to split into two companies. The twice-raised $94 a share bid was ConAgra’s third attempt to acquire Ralcorp, which unveiled its intention to split its Post cereal business from its private label unit.