Late-Night Headlines
Bloomberg:
- The euro’s rally against the U.S. dollar may be entering its “last stage,” and investors would likely benefit from selling the 16-nation currency against the greenback, UBS AG said in a note to clients yesterday. The euro is likely to drop toward $1.30, UBS analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist, wrote in a research note.
- Investors should take off bets that Treasury prices will fall further because elevated yields will attract buyers, Deutsche Bank AG says. Deutsche shifted to a ‘neutral duration’ from a ‘duration underweight’ recommendation on U.S. debt on the expectation that the pressures that drove investors to sell Treasuries have nearly abated, New York-based analysts Mustafa Chowdhury and Marcus Huie wrote in a note to clients. Investors with cash will likely resume buying government debt if borrowing costs rise much further, while the Federal Reserve could shift from its “negligible” response to the borrowing cost increase by boosting the amount of money allocated for Treasury purchases, the analysts wrote.
- The cost of protecting Asia-Pacific corporate and government bonds from default fell, according to traders of credit-default swaps. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 10 basis points to 165 as of 8:46 am in Singapore The Markit iTraxx Japan fell 15 basis points to 155 at 9:20 am in Tokyo Australia index was quoted 11 basis points lower at 173.5 as of 10:46 am in Sydney
- Microsoft Corp.(MSFT) will enable gamers to control Xbox 360 machines with body motions instead of hand-held controllers, a bid to gain an edge on Nintendo Co.’s market leading Wii. Xbox 360 consoles, including those already sold, will be able to track gestures and recognize voice commands and facial movements, Shane Kim, an Xbox vice president, said today in an interview. The features rely on a box with motion and voice sensors.
- EMC Corp.(EMC) made an unsolicited offer to acquire Data Domain Inc. for $1.8 billion in cash, topping a bid by NetApp Inc.(NTAP), which agreed to buy the company for $1.5 billion two weeks ago. DataDomain(DDUP) rose 16 percent in late trading after EMC offered $30 a share in cash. NetApp’s offer is valued at $25.56 a share, based on today’s closing price, making EMC’s bid 17 percent higher
- Israeli Prime Minister Benjamin Netanyahu rejected U.S. President Barack Obama’s demand for a halt to all construction in West Bank settlements. Netanyahu, who spoke at a meeting of the parliament’s Foreign Affairs and Defense Committee, said a call by the U.S. to stop all so-called natural growth in existing settlements was unreasonable, according to someone who was present at the meeting and spoke on condition of anonymity because the session was held behind closed doors. Netanyahu’s remarks come just three days before Obama is to make a speech to the Muslim world in Cairo, and two weeks after the president told the Israeli leader in Washington that all settlement building must stop. Most of the parties in Netanyahu’s ruling coalition, including his Likud party, oppose halting settlement expansion. The statement by Netanyahu may elevate tensions with the U.S. administration, said Yossi Alpher, who advised former Prime Minister Ehud Barak, now the defense minister, and today co- edit’s the bitterlemons.org Web site. “It’s a conscious decision by the Netanyahu government to defy a request by the Obama administration,” Alpher said. “The ball is now in Obama’s court.”
- JPMorgan Chase & Co.(JPM) and American Express Co.(AXP) will sell at least $5.5 billion of stock to satisfy a new Federal Reserve rule forcing firms that took bank rescue funds to tap equity markets before they can repay the money. JPMorgan, the second-largest U.S. bank by deposits, will sell $5 billion of stock, and American Express, the biggest U.S. credit-card company by purchases, plans to raise $500 million, the companies said today in separate statements. The Fed issued its rule today.
- General Motors Corp., the world’s largest carmaker until its 77-year reign ended last year, will be removed from the Standard & Poor’s 500 Index after filing for bankruptcy protection, S&P said. GM will be replaced by DeVry Inc.(DV), the second-largest publicly traded U.S. school owner by market value, after the close of trading tomorrow, S&P said in a statement.
- The four-week flood of money into developing-nation stock funds that drove the MSCI Emerging Markets Index to an eight-month high is sending the strongest sell signal since equities peaked in October 2007. Inflows totaled $12 billion, or 3.5% of developing-nation fund assets, the most since the 22-country benchmark hit its record high 19 months ago, said EPFR Global, which tracks $410 trillion in investments worldwide. The only other time since 2001 that funds attracted as much cash, in February 2006, the MSCI gauge lost 8.4% in four months. A slower-than-estimated economic recovery in China
- Goldman Sachs Group Inc., which wants to return $10 billion this month to the U.S. government, is raising as much as HK$14.86 billion ($1.92 billion) by selling shares of Industrial & Commercial Bank of China Ltd. after the stock jumped 29 percent in two months. Goldman Sachs, based in New York, is offering 3.03 billion Hong Kong-traded shares, or a 0.9 percent stake in the Chinese bank, at HK$4.80 to HK$4.90 each, according to a sale document e-mailed to fund managers today. That’s as much as 6 percent below the stock’s HK$5.11 closing price yesterday.
- North Korean leader Kim Jong Il has named third son Kim Jong Un as his successor to lead the Stalinist state, the Dong-A Ilbo newspaper said, citing unidentified people familiar with the situation. North Korea notified its international diplomatic offices of the choice and is teaching its people a song in praise of the anointed leader, the South Korean daily said.
- Treasuries rose, snapping yesterday’s decline, as Federal Reserve purchases scheduled for the next two days and yields near a six-month high attracted investors.
- Treasury Secretary Timothy Geithner said Chinese officials are confident in the U.S. economy and the Obama administration’s actions to fight the recession and restore financial stability. “I’ve actually found a lot of confidence here in China, justifiable confidence, in the strength and resilience and dynamism of the American economy,” Geithner said in an interview in Beijing for CCTV, Chinese state-run television.
Wall Street Journal:
- Citigroup Inc. and Bank of America Merrill Lynch are expanding their teams that provide services to hedge funds, looking to become bigger players in that sector even as it has shrunk dramatically.
- In a rare case of a jetliner disappearing midflight, an Air France Airbus A330 plane with 228 people onboard was feared lost over the Atlantic Ocean on Monday after suffering an apparent electrical failure while flying through storms and turbulence en route from Rio de Janeiro to Paris.
- While we were poking fun at Silicon Valley’s incessant need to stick a hyped-up catchphrase on each and every development, the use of such jargon was actually important, because we think that the digital sector is now moving full bore into an entirely new cycle of profound change. ”So what’s the seminal development that’s ushering in the era of Web 3.0? It’s the real arrival, after years of false predictions, of the thin client, running clean, simple software, against cloud-based data and services.” The Apple iPhone and iPod Touch are the tip of this spear. It’s more than just those two products, of course, but it’s what they represent: the complete integration of computing into every part of our lives in a way that is seamless, ubiquitous and, ideally, dead simple.
- Target(TGT) has its bull's-eye on a new venture: online media. On Tuesday, the retailer plans to formally announce a partnership with DailyCandy.com, the email newsletter and Web site owned by cable operator Comcast that covers fashion and culture for a mostly female audience. The venture, called Red Hot Shop, will be a special section of Target.com that will feature products from up-and-coming designers selected by DailyCandy editors, along with articles and artwork by the DailyCandy team.
CNBC.com: Traders are eagerly watching a relatively obscure technical indicator. Every time it turns higher, it almost always signals the start of a bull market! We’re talking about something known as the Coppock guide. According to Bloomberg the technical indicator has successfully signaled the start of a bull market all but once since World War II. Although it’s a rather complicated thing – essentially the Coppock guide signals a buy when it moves from a negative number to zero. And it's making that move right now!
NY Times:
- For decades, the United Automobile Workers had a simple strategy for getting what it wanted from the carmakers — it would go on strike. The tactic proved so successful that the mere threat of a walkout often won better wages, benefits and job security. Now, with General Motors and Chrysler in bankruptcy and the union a major shareholder in both through its retiree health fund, life has become a lot more complicated for the U.A.W.
CNNMoney:
- Whether a new iPhone will be unveiled at Apple’s (AAPL) World Wide Developers Conference — which begins a week from today — is still an open question, but all the signs of an impending announcement are now in place. Two weeks ago, we got specs and spot shortages (see here). Last week the leaked photos started showing up. The provenance of none of them is certain, but neither has any been shown to be a forgery. And at least one veteran Apple watcher says the latest batch “look very real” to him.
Politico:
- RNC Chairman Michael Steele takes a sharp line against the the White House auto industry plan; this is one whose politics will depend very much on how it works out.
LA Times:
- The State Lands Commission lashed out today at Gov. Arnold Schwarzenegger's attempt to reverse its rejection of the first new oil drilling in California waters since 1969. Lt. Gov. John Garamendi, the three-member panel's chair, called the governor's proposal "a naked power-grab." At a contentious hearing in Santa Monica, the commission passed a resolution urging legislators not to go along with Schwarzenegger's plan, which would revive a drilling project off the Santa Barbara County coast that the commission killed in January.
Pensions&Investments:
- CME Group Inc. and Citadel Investment Group have signed five prominent money managers to their fledgling credit-swap default joint venture. But the launch of the business — targeting a $29-trillion market — is being thwarted by an “oligopoly” of banks that want to keep business at a rival clearinghouse in which they have an economic interest, according to a letter from one of the founding hedge funds, New York-based BlueMountain Capital Management LLC. CME’s joint venture, CMDX, has been in the works for more than a year, but its ambitions to be a clearing destination for the insurance-like derivatives known as credit-default swaps have so far gone unfulfilled. CMDX’s main rival, IntercontinentalExchange Inc.’s ICE Trust clearinghouse, opened for business in March and has so far guaranteed $710 billion in credit-default swaps. ICE Trust is backed by a dozen or so Wall Street firms, including Morgan Stanley and Goldman Sachs Group Inc.
The other funds that have signed on to Chicago-based CMDX include bond-fund manager Pacific Investment Management Co. and hedge funds BlackRock Inc., D. E. Shaw & Co. and AllianceBernstein Holding LP.
USA Today.com:
- Americans are overwhelmingly opposed to closing the detention center for suspected terrorists at Guantanamo Bay and moving some of the detainees to prisons on U.S. soil, a USA TODAY/Gallup Poll finds. By more than 2-1, those surveyed say Guantanamo shouldn't be closed. By more than 3-1, they oppose moving some of the accused terrorists housed there to prisons in their own states. The findings underscore the difficult task President Obama faces in convincing those at home that he should follow through on his campaign promise to close the prison in Cuba, especially in the absence of a plan of where the prisoners would go.
- Prefab homes sprout green designs, improve affordability.
Reuters:
- SunTrust Banks Inc (STI), a U.S. Southeast regional bank ordered by federal regulators to raise $2.2 billion of equity capital, on Monday speeded up a previously announced capital-raising plan, hoping to benefit from recent investor demand for banks' securities. The Atlanta-based bank said it plans to sell $1.4 billion of common stock, raise $300 million of common equity from selling securities, and raise $250 million of common equity from buying back up to $1 billion of preferred and hybrid securities for cash. After the markets closed, the bank priced the offering of 108 million stocks at $13.00 per share, below Monday's closing price of $13.80. SunTrust said the underwriters will have up to 30 days to buy an additional 16.2 million shares.
Financial Times:
- After months of financial gloom, summer has brought some relief. However, there is now a danger that policymakers and market participants are lulled into a false sense of security, which would be likely to lead to another negative feedback loop. To prevent such an outcome, quick and resolute action is needed. In particular, Europe must complete the job of putting the financial system on firmer ground. If one looks at earlier episodes of large-scale macro-financial distress, a number of key lessons emerge. Japan’s experience in the past two decades, in particular, make clear that a banking system populated by zombie banks is a major threat to recovery; banking systems remain dysfunctional until losses are fully recognized and disclosed; and procrastination increases the ultimate cost to the taxpayer. Sweden’s experience shows the benefits of expediting the clean-up. A dysfunctional banking system would represent a particular challenge for Europe, whose economies are much more dependent on banks than is that of the US. Big worries about the state of Europe’s banks remain, as current information is unsatisfactory and published accounts are not trusted. Recent International Monetary Fund estimates of potential future writedowns and recapitalization needs have added to these concerns, as they suggest that the European Union trails the US in the recapitalization process. Europe’s approach to stress testing has been half-hearted at best. We cannot wait another four months to discover that we do not yet know the true state of Europe’s banking system. Instead, a systematic European approach is needed.
- A leading Chinese financial official on Monday rejected suggestions the US dollar could be replaced quickly as the global reserve currency, as US Treasury secretary Tim Geithner arrived in China on his first official visit. “In the short term I don’t think we can find another currency to replace the US dollar,” said Guo Shuqing, chairman of China Construction Bank and former head of the country’s foreign exchange administrator. “The US dollar is the main currency because their economy is number one in terms of competitiveness, in terms of innovation.” Speaking in an interview with the Financial Times, Mr Guo also raised doubts about a proposal from China’s central bank governor, Zhou Xiaochuan, to replace the dollar with a “super-sovereign reserve currency” based on special drawing rights issued by the International Monetary Fund. “We’ve had SDRs for many years but everybody knows they don’t work so well,” said Mr Guo. “People worry about US dollars very much because of the imbalances in the current account but that has been the case for many years – they have had a deficit in the current account since the very beginning of the 1970s.” The bulk of China’s total international investment position is held in US dollar assets and only 6 per cent is in the form of direct investment.
China Daily:
- China's largest Internet search engine, Baidu.com Inc(BIDU), stands accused of abusing its dominant market position in the Internet industry's first test of the nation's Anti-Monopoly Law. Tangshan Renren Information Service Company (TRISC), claimed that the Web giant had monopolized China's search engine market and blacklisted its subsidiary website after TRISC cut back spending on advertising on Baidu.
Chosun Ilbo:
- North Korea The assessment by South Korean and the US
Yonhap:
- South Korea won approval from the US to buy laser-guided bombs capable of destroying North Korea
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (BDN), raised target to $9.
- Reiterated Buy on (ALTR), target $21.
CSFB:
- Reiterated Buy on (BRCM), boosted estimates, raised target to $29.
Morgan Keegan:
- Rated (GD) and (LMT) Outperform.
Night Trading
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- (BCSI)/.21
- (BOBE)/.39
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Economic Releases
10:00 am EST
- Pending Home Sales for April are estimated to rise .5% versus a 3.2% gain in March.
Afternoon
- Total Vehicle Sales for March are estimated to rise to 9.4M versus 9.3M in April.
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BOTTOM LINE: Asian indices are higher, boosted by automaker and commodity stocks in the region. I expect US
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