Weekend Headlines
- Goldman Sachs Group Inc.(GS), by selling stock to help it repay $10 billion to the U.S. Treasury, may pressure competitors to follow suit or appear dependent on government support, analysts said. The company, scheduled to report earnings April 14, is considering announcing the share sale as early as next week, the Wall Street Journal reported yesterday, citing unidentified people familiar with the matter. Lucas van Praag, a spokesman for New York-based Goldman Sachs, declined to comment. A 47 percent gain for the company’s stock price this year and a return to profitability in the first quarter may help Chief Executive Officer Lloyd Blankfein raise new money, analysts said. That might let Goldman Sachs, the sixth-biggest bank, return the cash received in October from the Treasury’s Troubled Asset Relief Program and shake off compensation and hiring restrictions imposed on banks that took the U.S. aid. “It’s in Goldman’s best interest to be free from the TARP,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “But just because it’s best for Goldman Sachs, doesn’t mean their repayment is in the best interests of the broader U.S. economy.”
- The International Energy Agency expects global oil demand to decline by 2.4 million barrels a day this year, about the same amount that Iraq produces, as the economic slump reduces consumption to the lowest since 2004. The adviser to 28 nations cut its 2009 forecast for an eighth consecutive month, slashing last month’s estimate by 1 million barrels a day, or 1.2 percent, to 83.4 million barrels a day. “The pace of contraction is close to early 1980s levels, with a growing consensus that economic and oil demand recovery will be deferred to 2010,” the Paris-based adviser said in a monthly report today. The outlook “implicitly discards” the agency’s earlier view that industrial activity, and demand for fuels, would recover in the second half of the year. Consumption during the first three months of this year was revised lower by 700,000 barrels a day. The collapse in demand will be concentrated in the world’s most developed nations, the Organization for Economic Cooperation and Development, where an “unusually severe recession” will curb consumption by 4.9 percent this year. As a result, crude inventories in these nations are at their highest since 1993, the IEA said. Stockpiles were equivalent to 61.6 days of consumption as of February. In December, OPEC ministers had expressed concern that a level of about 57 days was too high. “In response to weaker demand Saudi Aramco cut the May price for its flagship Arab Light to all regions for the first time in five months,” the IEA report said, referring to prices announced by the Saudi state-run oil company on April 5.
- The US dollar advanced against the euro, heading for the biggest weekly gain in three months, on speculation the worst of the financial crisis in the world’s largest economy is over. The Dollar Index completed its largest weekly advance since November after Wells Fargo & Co.’s profit beat estimates yesterday, triggering the steepest gain on record in the Standard & Poor’s 500 Banks Index. The euro headed for its biggest weekly decline versus the yen since January on concern the European Central Bank will keep cutting interest rates to spur growth. “Wells Fargo’s results augur well for U.S. banks’ earnings and point to an easing in the financial crisis,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The dollar is likely to be bought.” ECB council member Nout Wellink said the central bank can make additional cuts to its 1.25 percent rate and is considering other measures to spur lending and boost the economy. Fellow member Ewald Nowotny said cutting the rate below 1 percent was still open for debate and it would be “sensible” for the bank to buy corporate debt as it fights for an economic recovery. “There seems to be a growing consensus for more rate reductions” from the ECB, said Akifumi Uchida, deputy general manager of the marketing unit in Tokyo at Sumitomo Trust & Banking Co., Japan’s fifth-largest bank. “The euro will probably weaken.”
- China’s government is “highly concerned” about the U.S. steel industry’s petition to the State Department and the International Trade Commission to investigate whether Chinese products were dumped in that country. The application will have a “significant impact” on exports of Chinese steel products to the U.S., Yao Jian, a spokesman for China’s Ministry of Commerce, said in a statement posted on its Web site. “Blindly accusing importers of dumping or giving countervailing duties without proof and seeking trade protectionism won’t solve the real problems confronting the U.S. industry,” Yao said in the statement, dated yesterday. The U.S.’s application follows the European Union’s decision to levy anti-dumping tariffs on Chinese steel products, after anti-protectionism pledges were made at the G20 meeting earlier this year. Mills in China, the world’s biggest producer of steel, benefit from subsidies for so-called oil-country tubular goods which are sold in the U.S. The EU announced tariffs as high as 24.2 percent on steel pipes and tubes from China on April 8 to help producers including ArcelorMittal fend off cheaper imports. “Global demand for steel is very poor because of the economic downturn, so there will be more protectionism,” Luo, a Shanghai-based analyst at China International Capital Corp., said by phone today. “China is a big steel exporter, but its shipments have already fallen a lot.” Chinese steel exports dropped 52 percent to 1.56 million tons in the first two months of the year, the Customs General Administration said in March. The global recession may lead China to export 80 percent less steel products this year, the country’s Iron and Steel Association said March 18.
- Gold holdings in the SPDR Gold Trust, the biggest exchange-trades fund backed by bullion, rose to a record, according to figures on the company’s Web site. The fund held 1,127.68 metric tons of bullion as of April 9, up from 1,127.37 tons a day earlier. The trust is the world’s sixth-largest stockpile of the precious metal, behind Italy
- Chinese stockpiles of nickel ore have climbed to a near record at a major port in the world’s biggest consumer as falling prices erased the cost advantage of nickel pig iron, made from the raw material, a port manager said. Shandong province-based Rizhao Port , which handles one third of China That is near a record for the port set at the end of last year, Xie said. “It’s been very difficult for us as the LME prices stay at around $10,000,” said Zhong Yongqi, general manager of producer Shaanzi Energy Metals & Minerals Resources. “If nickel falls to $8,000, I don’t think a single Chinese nickel pig iron producer can survive,” said Zhong. “Nickel prices may fall further this year because of a global overcapacity of stainless steel,” he said.
- The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.
- President Barack Obama is seeking an additional $83.4 billion for military operations in Iraq and Afghanistan and other initiatives, a request that would bring the total cost of the conflicts to more than $900 billion. The administration submitted a request to Congress yesterday for $75.8 billion more in war funding for the remainder of the 2009 fiscal year. The request includes $11.6 billion to replace military equipment, including $600 million to buy the last four Lockheed Martin Corp. F-22 fighters the Pentagon wants and $400 million for 12 Boeing Co. AH-64 Apache helicopters. The so-called supplemental spending proposal also seeks $3.6 billion to beef up the Afghanistan Security Force, part of the revised strategy to fight Islamic militants Obama announced last month. Other spending requests include $1 billion in aid to Pakistan, $30 million to begin shutting down the prison at Guantanamo Bay, Cuba, and $350 million to fight narcotics trafficking along the U.S.-Mexico border.
- Japan’s record 15.4 trillion ($153 billion) stimulus package may give a short-term boost to the nation’s economy, while leaving it saddled with a debt burden that will smother future growth, economists said. The plan unveiled yesterday by Prime Minister Taro Aso, who faces elections this year, is aimed at creating jobs in an economy heading for the worst recession since 1945. Equal to 3 percent of gross domestic product, the measures will add to debt that the OECD already forecasts will rise to 197 percent of gross domestic product next year.
- China, the world’s second-biggest energy consumer, may agree next week on lending $10 billion to Kazakhstan in return for the right to take a stake in an oil producer in the Central Asian country. China National Petroleum Corp. plans to buy a minority holding in AO Mangistaumunaigas from state-run KazMunaiGaz National Co., a China National official said yesterday. The two nations may sign an accord on April 15 when Kazakh President Nursultan Nazarbayev visits Beijing, the official said, declining to be identified because of internal rules. China should tap its $1.95 trillion in currency reserves to help domestic companies buy overseas exploration rights, Zheng Xinli, a deputy director at the policy research office of the ruling Communist Party, said in March. Kazakhstan received an estimated $21.1 billion in exploration and production investment last year, a 19 percent increase on 2007, Mynbayev said in January. It holds 3.2 percent of the world’s proven oil reserves, according to BP Plc. Russia, which agreed in February to supply China with oil for 20 years in return for $25 billion in credit, is in discussions with the country for additional loans for natural gas supplies, the official said, without giving details.
- Visitors should be careful in parts of Mexico wracked by drug-related violence, Mexico’s ambassador to the United States said in a television interview. “If you go to Juarez, I would certainly advise precaution,” Ambassador Arturo Sarukhan said on the CBS News program “Face the Nation.” Almost 70 percent of Mexico’s drug-related violence over the past two years has taken place in three areas: Ciudad Juarez, Tijuana and Culiacan, he said.
- President Barack Obama said the U.S. is determined to suppress piracy off Somalia and to hold pirates accountable for their acts. “We remain resolved to halt the rise of piracy in this region,” Obama said a statement e-mailed by the White House today, following the rescue of American cargo ship captain Richard Phillips. Obama said he admired Phillips’s “bravery” and “selfless concern” for his crew.
- Sharpshooters firing from the fantail of a U.S. Navy destroyer killed three pirates holding an American cargo-ship captain in a lifeboat, ending a five-day ordeal that unfolded amid a surge in piracy off Somalia’s coast. Richard Phillips, 53, captain of the Maersk Alabama, was untied, pulled from the lifeboat and brought unharmed aboard the USS Bainbridge, said Vice Admiral Bill Gortney, the commander of U.S. Naval Forces Central Command. The Navy acted because Phillips’s life was threatened by pirates who were aiming weapons at him, Gourtney said. The on- scene commander “had seconds” to make a decision, he said.
- Brazil’s Oil Euphoria. Petrobras’s offshore bonanza may transform the country -- if oil prices hold and the company can extract the crude from beneath kilometers of salt and rock.
Wall Street Journal:
- Since Henry Ford began mass production of the Model T nearly a century ago, car-loving Americans have gulped ever-increasing volumes of gasoline. A growing number of industry players believe that era is over. Among those who say U.S. consumption of gasoline has peaked are executives at the world's biggest publicly traded oil company, Exxon Mobil Corp., as well as many private analysts and government energy forecasters. The reasons include changes in the way Americans live and the transportation they choose, along with a growing emphasis on alternative fuels. Drivers filled their cars with 371.2 million gallons of petroleum-based gasoline every day in 2007, according to the U.S. Energy Information Administration. It expects that to fall 6.9% to 345.7 million gallons in 2009, as demand at the pump declines and the use of plant-based ethanol increases. Even if usage climbs after the recession ends, it won't exceed 2007 levels, according to EIA forecasts. Demand for all petroleum-based transportation fuels -- gasoline, diesel and jet fuel -- fell 7.1% last year, according to the EIA. This is the steepest one-year decline since at least 1950, as far back as the federal government has reliable data. Exxon believes U.S. fuel demand to keep cars, SUVs and pickups moving will shrink 22% between now and 2030. "We are probably at or very near a peak in terms of light-duty gasoline demand," says Scott Nauman, Exxon's head of energy forecasting. Diverse trends are adding up to a steady drain on gasoline demand. Gasoline engines are being designed to burn fuel more efficiently. Hybrid and other advanced-technology vehicles that minimize gasoline usage are joining the nation's fleet. Tanks of gasoline and diesel fuel are being leavened with increasing amounts of biofuel, now made mostly from corn but in the future also from perennial grasses and municipal waste. President Barack Obama's pledge to end the "tyranny of oil," and a push for energy efficiency and biofuels in recent legislation, could accelerate these trends. This time, the forces suppressing gasoline usage are formidable. The 2007 Energy Independence and Security Act toughened requirements for both efficiency and biofuels use. By 2020, vehicles sold in the U.S. must average 35 miles a gallon, versus 27.5 for cars now and 23.5 for light trucks. The Obama administration is working on proposals to further increase the standard. Makers of U.S. transportation fuel must blend in 36 billion gallons of biofuels a year by 2022, compared with about 11 billion this year.
- The federal government is taking an increasingly hard line with the creditors of General Motors Corp. and Chrysler LLC, trying to squeeze billions of dollars in concessions out of banks, bondholders and others. In both cases, the U.S. is directly and not-so-directly managing negotiations for the car companies as they prepare for what could be Chapter 11 bankruptcy filings.
- Bristol-Myers Squibb Co.(BMY) is looking to do six or seven additional partnerships or acquisitions with the $9 billion in cash it has on hand to bolster its drug pipeline, Chief Executive James Cornelius said.
- Amazon.com Inc.(AMZN) is developing a new version of its Kindle electronic-book reader featuring a larger screen, according to people who said they have seen a version of the device. The new Kindle could debut before the 2009 holiday shopping season, they said.
- More than three months into a medical leave from Apple Inc., Chief Executive Steve Jobs remains closely involved in key aspects of running the company, say people familiar with the matter. Chief Operating Officer Tim Cook runs the day-to-day operations at Apple, these people say. But Mr. Jobs has continued to work on the company's most important strategies and products from home, they say. He regularly reviews products and product plans, and was particularly involved in the user interface of the new iPhone operating system that Apple unveiled last month, these people say.
- Two IPOs with different spins on the education market are set to make their debut in the U.S. this week, with deals from Rosetta Stone Inc. and Bridgepoint Education Inc. creating the busiest period for new stocks since August.
- The fight over a stalled bill that would make it easier for unions to organize workers is entering a new round, with the nation's largest business association and big labor unions gearing up competing efforts to sway a small group of senators.
MarketWatch.com:
- New Crop of Electric Cars. (video)
CNBC:
- Chevron(CVX) warned after markets closed Thursday that its first-quarter earnings would be sharply lower than the previous quarter as lower oil and gas prices took a toll and refined-product margins shrank significantly. Shares of Chevron fell about 2 percent in after-hours trade.
NY Times:
- Chinese exports fell for a fifth consecutive month in March and imports continued to decline despite government efforts to stimulate the nation’s economy, according to trade figures released Friday. Exports, which make up about one-third of China’s economy, were 17.1 percent lower in March than a year earlier, the government said. That made a fifth consecutive month of declines as the world economy slowed to a crawl last year, sending demand for goods from China and other exporting countries sharply lower. Imports to China fell 25.1 percent from a year ago, a slide that was steeper than February’s drop and more than economists had expected.
- The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend.
- The European duo who created Skype and sold it to eBay(EBAY) for billions may have another trick up their sleeve: buying it back.
- As the Obama administration completes its examinations of the nation’s largest banks, industry executives are bracing for fights with the government over repayment of bailout money and forced sales of bad mortgages.
- A bias in favor of male offspring has left China with 32 million more boys under the age of 20 than girls, creating “an imminent generation of excess men,” a study released Friday said. For the next 20 years, China will have increasingly more men than women of reproductive age, according to the paper, which was published online by the British Medical Journal. “Nothing can be done now to prevent this,” the researchers said. They attributed the imbalance almost entirely to couples’ decisions to abort female fetuses. The trend toward more male than female children intensified steadily after 1986, they said, as ultrasound tests and abortion became more available. “Sex-selective abortion accounts for almost all the excess males,” the paper said.
- University of Texas plant physiologist Jerry Brand has spent the past decade lovingly tending the world's largest collection of pond scum. Now the quest for renewable energy has made Mr. Brand and his algae hot commodities.
- Employees of US-based banks including Goldman Sachs(GS), Morgan Stanley(MS) and Citigroup(C) are quitting to join smaller investment firms and foreign banks not subject to tightened regulations. Several hundred bankers at more than a dozen new firms including Broadpoint Securities Group Inc., Pinetum Capital and BTIG LLC have been fired since the summer of 2007, citing a survey.
- Allergan’s(AGN) Botox Gaining in Its Use as Medicine.
Politico:
- Sen. Evan Bayh (D-Ind.) touted his fiscally conservative record as senator and as former governor of Indiana to explain his opposition to President Barack Obama’s budget on “Fox News Sunday.” Bayh, a leading contender to be Obama’s running mate last year, was one of only two Democrats to vote against the president’s budget. He also has formed a 15-member group of centrist Senate Democrats called the Moderate Dems Working Group. “I’ve been a fiscal conservative throughout my career. It’s nothing personal to the president, “ Bayh said. "In the short run, I agree with the president. We do need to stimulate the economy. The government needs to step in… In the long run, I think the deficits and the debt are too high. We need to get those under control. So that was the reason for my vote there."
USA Today:
- More companies meet virtually as conventions canceled.
AP:
- Iranian President Mahmoud Ahmadinejad said his country is capable of all the steps in the cycle of producing nuclear fuel, citing his speech on state tv today.
Financial Times:
- A rapid deterioration in the ability of Chinese companies to honour payments to their suppliers as a result of the economic crisis is significantly increasing the risk of doing business in China, according to Coface, one of the world’s biggest credit insurers. Xavier Farcot, who heads the French insurer’s underwriting and claims business in China, said the cost of insuring against customers defaulting on payments in domestic trade had risen by 30 per cent since the financial crisis, even for the best customers who have not made any claims previously. Even though Chinese banks, unlike their western counterparts, have ample liquidity, “they are accustomed to lending to large state-owned enterprises rather than small companies who often do not have large resources or equity”, he said. This cash crunch forced many Chinese companies to turn to their suppliers for credit, thus forcing the pain up the supply chain. Nearly 90 per cent of Chinese suppliers are extending credit to their domestic customers on more than half of their sales, compared to just 70 per cent a year ago, according to Coface’s annual survey of the country’s corporate credit management practices. This was bad credit management, said Mr Farcot. “Now is not the time to extend credit, it is time to restrict it,” he said. Most Chinese suppliers, however, have never experienced such a downturn. “A lot of these companies never had to deal with the problem of not getting paid, because sales had always been increasing,” he said, “There’s not enough financial resource, not enough management.”
- Goldman Sachs(GS) has raised $5.5bn for a fund to buy discounted private equity holdings – the largest amount ever raised for a fund of this type – as investors anticipate a flood of forced sellers trying to offload private equity stakes. Goldman’s Vintage V fund last week closed to new investors after 10 months of fundraising, having surpassed its goal of $5bn. The fund is a so-called secondary fund, which buys investors’ holdings in private equity and buy-out funds. The successful fundraising reinforces the view that the private equity secondary market is where most deals are expected to happen in the next year, as investors try to raise cash. JPMorgan Chase (JPM) is also raising a secondary fund and is believed to have attracted $500m over the past few months.
- President Barack Obama’s administration is preparing to ratchet up pressure on Congress to pass climate change legislation this year by declaring its authority to regulate greenhouse gas emissions through the Environmental Protection Agency. The EPA has been considering its approach to global warming since a Supreme Court ruling in 2007 found it was entitled to regulate carbon dioxide emissions under existing air pollution laws. George W. Bush’s administration declined to take up the authority but Mr Obama has given the EPA the green light to declare CO2 emissions a danger to public health and welfare. An announcement could be made this week, according to several environmental groups briefed about the plans. Regulations would not come into force at once but the declaration would intensify pressure on Congress to pre-empt EPA action by passing its own legislation to curb industrial emissions. The Obama administration is pressing Congress to set up a cap-and-trade system to regulate emissions and wants progress before United Nations climate change talks in Copenhagen in December to signal US commitment and encourage other countries, particularly China and India, to make concessions. Draft legislation was unveiled in the House of Representatives this month but the proposals face intensifying resistance from Republicans and some Democrats, amid concern about the economic cost of fighting climate change when the US is haemorrhaging jobs. Critics have described the plan as a “light-switch tax” that would undermine economic recovery by increasing energy costs for businesses and consumers. Some recent opinion polls show public sentiment shifting against “green” policies as economic fears mount. For the first time in 25 years of asking the question, a Gallup survey last week found a majority of Americans believe economic growth should be given priority over the environment.
- The unit that all but destroyed AIG has failed to sign up for the overhaul of the global derivatives market which was given added impetus by the troubles at the US insurance group. AIG confirmed that its financial products unit, whose soured bets on credit default swaps forced the company into government hands last year, did not adopt the “Big Bang” protocol that has been signed by more than 2,000 market participants. “We fully intend to adhere to the protocol but for technical reasons have decided to do so through bilateral agreements with our counterparties,” AIG said. Company officials added that for simpler transactions, such as CDSs written on individual corporate bonds, AIG FP would adopt a contract similar to the protocol. AIG FP’s move raised eyebrows, with worries that because AIG is not a signatory to the new credit derivatives regime, it could choose not to abide by a credit event ruling.
The Scotsman:
- Hedge funds to shrink by 60% as scandals and downturn batter sector
Le Soir:
- Baudouin Prot, chief executive officer of BNP Paribas SA, France “We have been in the financial crisis for almost two years and I think the worst is behind us,” Prot said. “The issue now, more than the losses of value on such-and-such structured credits, is the economic recession, which is hitting very hard.”
Commercial Times:
Apple will release three new models of iPhones including its first so-called 2.75 generation model, a third-generation handset and a phone targeted specifically at the China Shipments from suppliers will begin at the end of April, with the products arriving at Apple during May or April. Apple sold 4.36 million iPhones in the three months to Dec. 27, and may have shipped 3.1 million during the most recent quarter, Peter Misek, an analyst with Canaccord Adams, wrote in a note to clients this month.
Xinhua:
- More Chinese listed companies forecast profit plunges or losses for the first quarter at weekend following downbeat predictions published previously last week, showing the persistent impact of the global financial crisis. At least five listed companies will see net profits slump more than 50 percent year on year in the first three months of this year, while another six firms expect losses, according to company reports released on Saturday and Sunday.
China Business News:
- Guangdong Growth was 10.1% in the fourth quarter. The province’s exports fell 22.9% in the three-month period. Guangdong ’s exports accounted for 30% of China
Edaily:
- EBay Inc.(EBAY) agreed to buy a stake in South Korea EBay will buy 34.21% of the Seoul-based online retailer for $413 million.
Al-Sabah:
- Iraq Oil exports last year averaged 1.85 million barrels a day, Hussain al-Shahristani said. The country plans to increase output to 6 million barrels a day in five years, Shahristani said.
Weekend Recommendations
Barron's:
- Made positive comments on (CSCO), (WFC) and (AXP).
- Made negative comments on (RIMM).
Night Trading
Asian indices are unch. to +2.25% on avg.
Morning Preview
US AM Market Call NASDAQ 100 Pre-Market Indicator/Heat Map Pre-market Commentary Pre-market Stock Quote/Chart Global Commentary WSJ Intl Markets Performance Commodity Futures Top 25 Stories Top 20 Business Stories Today in IBD In Play Bond Ticker Economic Preview/Calendar Earnings Calendar
Conference Calendar
Who’s Speaking?
Upgrades/Downgrades Rasmussen Business/Economy Polling
Earnings of Note
Company/Estimate
- (JBHT)/.22
- (TLB)/-.65
Upcoming Splits
- None of note
Economic Releases
- None of note
Other Potential Market Movers
- The (ARA) shareholders meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology shares in the region. I expect US The Portfolio is 100% net long heading into the week.
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