Thursday, June 11, 2009

Today's Headlines


- Treasuries gained as the highest yield on a 30-year U.S. bond auction in almost two years attracted investors concerned that record government spending and debt sales will lead to inflation. “At 4.7 percent, 30-year Treasuries are compelling,” said Nils Overdahl, a bond-fund manager at New Century in Bethesda, Maryland, which oversees $500 million. “You are really picking up a lot.” The bonds drew a yield of 4.72 percent at the auction, the highest since August 2007. Benchmark 10-year note yields reached 4 percent earlier for the first time since October on concern the budget deficit and a falling dollar will prompt investors to reduce holdings of U.S. debt. The yield on the 10-year note fell 11 basis points, or 0.11 percentage point, to 3.84 percent, after climbing as high as 4.0038 percent, at 1:19 p.m. in New York, according to BGCantor Market Data.

- Former Federal Reserve Chairman Paul Volcker said the global economic slump is easing “most clearly” in the U.S. and the U.K.

- The cost of protecting corporate bonds in the U.S. from default fell after jobless claims slowed and retail sales climbed for the first time in three months. Credit-default swaps on Gap Inc., the largest U.S. clothing retailer, fell to the lowest since November 2004, according to CMA DataVision. Contracts on Bentonville, Arkansas-based Wal- Mart Stores Inc. declined to the lowest in eight months.

- North Korea demanded South Korean companies quadruple wages at their jointly operated manufacturing plants as the United Nations prepares to curb financial flows to the communist nation. Kim Jong Il’s regime asked South Korea to pay $300 a month for each of 38,000 North Korean workers at the South-funded Gaeseong Industrial Complex, according to a Unification Ministry official who briefed reporters in Seoul. North Korea also demanded $500 million in rent for use of the facility on its territory starting next year, the official said, without specifying if the amount was an annual figure.

- Michael Hasenstab is betting on Iraqi and Malaysian debt to boost returns for his top-ranked Templeton Global Bond Fund, while shunning U.S. Treasuries, U.K. gilts and Japanese bonds.

- Crude oil climbed above $72 a barrel and gasoline jumped to an eight-month high after the International Energy Agency raised its global demand forecast.

- Russia’s economy contracted the most in 15 years in the first quarter after industrial production plunged and the government’s 3 trillion rubles ($97 billion) in stimulus spending failed to boost companies and banks. Gross domestic product tumbled an annual 9.8 percent, compared with growth of 1.2 percent in the previous quarter, the Moscow-based Federal Statistics Service said in a statement on its Web site today. The preliminary estimate on May 15 was a 9.5 percent contraction.

- The vacancy rate in Dubai’s residential property market could double to about a third by the end of 2010 as the population declines and new buildings add to a glut of homes, UBS AG said. The amount of empty houses and apartments may increase from as much as 15 percent at the moment, Saud Masud, a Dubai-based analyst at UBS, said in an interview today. About 30,000 homes will be competed by 2011, Masud estimates.

Wall Street Journal:

- U.S. authorities have resettled four Chinese Uighurs to Bermuda from the prison at Guantanamo Bay, Cuba, the Justice Department said Thursday. The detainees had been in the prison for years despite being cleared for release by U.S. national security officials and the courts. President Barack Obama has ordered the prison closed and government officials are trying to determine what to do with the more than 230 detainees who remain at Guantanamo.

- Some things in politics you can't make up, such as President Obama's re-re-endorsement Tuesday of "pay-as-you-go" budgeting. Coming after $787 billion in nonstimulating stimulus, a $410 billion omnibus to wrap up fiscal 2009, a $3.5 trillion 2010 budget proposal, sundry bailouts and a 13-figure health-care spending expansion still to come, this latest vow of fiscal chastity is like Donald Trump denouncing self-promotion. Check that. Even The Donald would find this one too much to sell. But Mr. Obama must think the press and public are dumb enough to buy it, because there he was Tuesday re-selling the same "paygo" promises that Democrats roll out every election.


- Inflation? Fugheddaboudit. With signs the recession is almost over and no end in sight to the government’s borrowing binge, inflation hawks are circling the market. Well, they better keep looking, say skeptics of the inflation spike scenario. "I think it’s blown entirely out of proportion," says economist David Jones of DMJ Advisors. "Inflation is going to stay lower than expected for awhile," adds Ram Bhagavatula, managing director at the hedge fund, Combinatorics Capital. Unlike in past recovery periods, inflation is unlikely to rear its ugly head anytime soon; in fact, it may be years before it becomes a legitimate threat to the economy.

- Forget green shoots. We've seen a veritable hothouse of economic, market and political vegetation sprouting in the past several days that clearly shows the worst of the financial crisis is over.


- Cisco Systems' (CSCO) entry into the server market is creating surprisingly sudden headaches for the network gear maker as longtime server partners — now rivals — steer sales to Brocade Communications Systems. According to market tracker Dell'Oro Group, Brocade (BRCD) gained a sizable 14 points of market share from Cisco between January and March in high-end storage area network switches, which connect data storage systems.

- Overlooked signs the US housing market is turning. In the Sacramento Delta suburbs east of San Francisco - where home prices soared and fell as viciously as anywhere in the country - a housing market rebound is feverishly under way.

Washington Post:

- The Obama administration will announce plans today to tighten scrutiny of mountaintop coal mining, in an effort to reduce environmental damage from operations that shear off peaks and fill Appalachian valleys, federal officials said.


- Caught Short. Returns have improved but hedge funds still face a lot of problems.

- In what should not surprise longtime readers of The Deal, J.P.Morgan Chase & Co. (NYSE:JPM) agreed to acquire the rest of hedge fund manager Highbridge Capital Management LLC as of July 1.

- While national foreclosure filings are on the rise, New Jersey filings dropped 41 percent in May from a year ago, RealtyTrac said Wednesday.


- President Barack Obama Thursday made his strongest pitch yet for sweeping health-care reform by year’s end, drawing on campaign-style tactics and rhetoric and taking sharp aim at critics of his proposed “public option” plan. In remarks prepared for a town meeting here at Southwest High School, the president said he believes “strongly” that health care reform should include “a public insurance option.” “If the private insurance companies have to compete with a public option, it will keep them honest and help keep prices down,” Obama said.


- Thursday, Chindex International Inc. (CHDX), a U.S.-based healthcare company with main operations in China, reported a profit in its fourth quarter, compared to prior year's loss, boosted by strong revenues mainly from Medical Products division. Revenue for the fourth quarter increased 72% to $59.66 million from $34.62 million last year. Quarterly revenue from the Medical Products division surged 130% year-over-year to $39.5 million, and revenue from the Healthcare Services division increased 16% to $20.2 million. According to the company, the revenue growth reflected the recognition of revenue for certain government-backed loan programs, as well as higher medical products sales such as daVinci units, and growth in inpatient and outpatient revenues in the hospital division.

- Iraq’s South Oil Co. is seeking to boost crude output by as much as 500,000 barrels a day by 2012, citing the company’s new head Fayad al-Nema.
South Oil, which exports about 1.5 million barrels of oil a day through the southern port of Basra, is in talks with companies such as Halliburton Co., Schlumberger Ltd., Baker Hughes Inc. and Weatherford International Ltd. to boost production.

- Qualcomm Inc (QCOM) raised its current-quarter profit and revenue targets on stronger sales of mobile phone chips, but its warning that shipments would fall next quarter dampened investor enthusiasm.

- Ford Motor Co (F) Chief Executive Alan Mulally said on Thursday that the U.S. economy is on the right track to begin improving in the second half of the year."We think we are right on track to start this recovery in the second half," Mulally told reporters on the sidelines of an an event promoting the Taurus sedan.

- The two primary U.S. financial market regulators are drafting legislation to implement the Obama administration's proposed crackdown on over-the-counter derivatives, said sources familiar with discussions at the agencies late on Wednesday. In another sign that a merger is unlikely between the Securities and Exchange Commission and the Commodity Futures Trading Commission, the sources said the agencies could split oversight of OTC derivatives under the legal language they are working on for eventual submission to Congress. The SEC, the larger and older of the two agencies, may take charge of regulating credit default swaps, a type of OTC derivative, for publicly traded companies, one source said.

- The International Monetary Fund has raised its global growth estimates for 2010 to 2.4 percent from 1.9 percent in April because of stimulus measures taken in recent months, a G8 source who has seen the latest figures said. The recovery will be gradual, however, and the risks to the outlook are on the downside, the source told Reuters on Thursday, speaking on condition of anonymity.

- BHP Billiton(BHP) and Japanese steelmakers including Nippon Steel Corp and JFE Holdings Inc have agreed to about a 33 percent cut in the 2009 iron ore price, a source familiar with the matter said on Thursday.

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