Stock Market - Thursday, December, 29 2011 Wall Street Breakfast Editors submit:

by Rachael Granby and the Market Currents team

Italian yields down slightly. Italy sold €2.5B of 10-year bonds at an average yield of 6.979%, down from recent highs but still an unsustainable level. The 10-year auction was slightly oversubscribed, with a bid-to-cover ratio of 1.357%. All told, Italy raised ~€7B today from bonds of varying maturities; the plan was to sell €5B-8.5B. Separately, the use of the ECB's overnight deposit facility declined marginally from Tuesday's record high, dipping to €437B from €452B.

Banks face new tax rules. Banks are bracing for new U.S. regulations aimed at reducing tax evasion, which could affect hundreds of billions of dollars worth of deposits in accounts across the globe. In response, some banks overseas are alerting customers their accounts will be closed, while U.S. banks are lobbying for changes to some of the proposals.

BP employees may face charges. U.S. prosecutors are reportedly preparing the first criminal charges against BP (BP) employees in connection to the Deepwater Horizon oil spill. Sources said the focus is on several engineers and at least one of their supervisors for possibly providing regulators with false information about drilling risks.

China updates FDI guidelines. China wants foreign investors to focus on hospitals, financial-leasing companies and sectors that bring new technology to the country, and to minimize investment in such traditional draws as automobile factories or petrochemicals. The 29-page list of investment guidelines was released today, and kicks in on Jan. 30.

Alibaba pushes for Yahoo deal. Alibaba.com (ALBIY.PK) has reportedly hired Washington lobbying firm Duberstein Group in its effort to strike a deal with Yahoo (YHOO). The move suggests Alibaba might be willing to make a bid for all of Yahoo if it doesn't succeed in its efforts to buy back Yahoo's Asian assets.

Oil to stay elevated. Analysts see oil prices staying above $100 a barrel in 2012, with the potential for an Iran disruption embedding a $10-$20 premium in prices. Also seen as contributing to the forecast for $100+ prices is the concerted effort of OPEC nations to keep prices elevated to help fund social assistance programs promised by governments in the Middle East and North Africa in response to the Arab Spring uprisings. WTI crude +0.2% to $99.55 (7:00 ET).

Alexion to buy Enobia. Alexion Pharmaceuticals (ALXN) agreed to buy privately-held biotech firm Enobia for $1.08B in cash, with $610M paid up front and the rest after various regulatory and sales milestones are hit. Enobia is focused on therapies treating patients with ultra-rare, life-threatening genetic disorders.

Japan, India create swap line. Japan and India agreed to a $15B currency swap line, after a previous $3B deal expired over the summer. The countries have good diplomatic relations, but share only a fraction of the trade that goes on between Japan and China.

Mosaic cuts production. Mosaic (MOS) will cut its quarterly finished phosphate production by up to 250,0000 tons, or ~10%, until the end of March as excess supply weighs on market prices. "The current spot prices in this market do not reflect our outlook for the business, nor do we think they are sustainable," CEO Jim Prokopanko said. In after-hours trading, MOS -1.9%.

Global M&A takes a hit. Global M&A fell to its lowest level in more than a year this quarter, down 16% from the previous quarter to $457.1B. A 2012 M&A recovery isn't looking good, as volatile stock markets, the eurozone's debt crisis and tightening credit markets are scaring cash-rich companies away from major purchases.

Easing repo market risk. At the request of the Fed, a bank industry task force is working on a plan to ease systemic risk in the repo funding market where traders have near-complete dependence on JPMorgan (JPM) and BNY Mellon (BK) as clearing banks. One solution is to add more banks, while another, favored by some at the Fed, is to let a government agency take over.

Chesapeake Midstream buys Appalachia Midstream. Chesapeake Midstream Partners (CHKM) agreed to acquire Appalachia Midstream Services, the wholly owned subsidiary of Chesapeake Midstream Development that holds its Marcellus Shale midstream assets, for $865M.

Today's Markets:
In Asia, Japan -0.3% to 8399. Hong Kong -0.7% to 18398. China +0.2% to 2174. India -1.2% to 15544.
In Europe, at midday, London +0.2%. Paris +0.2%. Frankfurt +0.4%.
Futures at 7:00: Dow +0.2%. S&P +0.3%. Nasdaq +0.2%. Crude +0.2% to $99.55. Gold -2.1% to $1531.40.

Thursday's economic calendar:
8:30 Initial Jobless Claims
9:45 Chicago PMI
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 KC Fed Manufacturing
11:00 EIA Petroleum Inventories
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

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