Wednesday, July 14, 2010

Today's Headlines

Posted by Gary .....at 3:13 PM

Bloomberg:
  • Intel, ASML Holding Spur Rally in Technology Stocks. Intel Corp.(INTC), the world’s biggest semiconductor maker, and ASML Holding NV, Europe’s largest manufacturer of chip machinery, triggered a rally in technology stocks after forecasting increased sales. A gauge of technology shares was the biggest gainer among the 19 industry groups in the Stoxx Europe 600 Index today, increasing 1.2 percent. ASML rose 3.1 percent in Amsterdam. STMicroelectronics NV and Infineon Technologies AG, Europe’s biggest chipmakers, climbed more than 2 percent. Intel and ASML are benefitting from increased demand as consumers and businesses resume spending after the recession. Companies including Samsung Electronics Co. are expanding factory lines to meet rising demand for personal-computer memory and chips used to store data in portable devices such as Apple Inc.’s iPhone. “Intel’s third-quarter sales guidance provides comfort with regard to end markets,” Amsterdam-based analyst Peter Olofsen at Kepler Capital Markets said today. “After that, Applied Materials Inc. and ASML showed that recovery in the equipment market is continuing as well, and that order intake is continuing to increase.” “When we look at the total picture, 2011 bodes very well for ASML,” Chief Financial Officer Peter Wennink said in a video interview on the company’s website. “Because it’s not a little hump that we’re currently seeing. We are seeing some structural drivers for growth in this industry.” Before Intel’s earnings report, investors were concerned that the industry had built up excess stockpiles of computer chips. Intel Chief Executive Officer Paul Otellini said yesterday that demand is strong enough to ward off a glut. “We are very comfortable with the level of inventory,” he said. Corporate customers are replacing their old desktop and notebook machines, spurring demand for chips, Intel said. At the same time, Internet businesses, such as Google Inc. and Facebook Inc., are ordering more servers for their data centers.
  • Fed Officials Saw No Need for More Stimulus, Trimmed Forecasts. Federal Reserve officials saw no need to boost stimulus to the economy while trimming their forecasts for growth and noting that risks to the recovery had increased, minutes of their June meeting showed.“The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside,” minutes released today in Washington said. “The changes to the outlook were viewed as relatively modest and as not warranting policy accommodation beyond that already in place.”Slowing inflation, constrained household spending and contracting credit prompted Fed policy makers last month to restate a pledge to keep the benchmark lending rate at around zero for “an extended period,” the Fed’s statement showed. The minutes indicated that U.S. central bankers were concerned about lingering high unemployment and risks that inflation could decelerate further. If the outlook worsened, the committee would need to consider whether additional stimulus was appropriate, the minutes said. “Participants expected the pace of hiring to remain low for some time,” the minutes said. “The unemployment rate was generally expected to remain noticeably above its long-run sustainable level for several years, and participants expressed concern about the extended duration of unemployment spells for a large number of workers.”U.S. central bankers lowered their central tendency forecast for 2010 growth to a range of 3 percent to 3.5 percent versus 3.2 percent to 3.7 percent in April, the minutes show. They also trimmed their outlook for inflation this year to a range of 1.0 percent to 1.1 percent, down from 1.2 percent to 1.5 percent in April. Forecasts for unemployment were little changed, with the Fed expecting unemployment between 9.2 to 9.5 percent in 2010 versus 9.1 to 9.5 percent in April.
  • Bond Risk Falls to Two-Month Low as Intel(INTC) Boosts Recovery Bets. The cost of insuring against losses on European corporate bonds fell to the lowest level in two months after record sales and earnings forecasts from Intel Corp. helped fuel bets the economic recovery is on track.The Markit iTraxx Europe Index of credit-default swaps on 125 companies with investment-grade ratings dropped 3.25 basis points to 112, the lowest since May 12, JPMorgan Chase & Co. prices show. “Intel results blew the gasket off, Greece placed its six- month paper successfully and cash remains keen to invest in credit,” said Greg Venizelos, a London-based analyst at BNP Paribas SA. “Credit spreads keep marching tighter.” Credit-default swaps on Greece declined 27 basis points to 784, the lowest level in a month, according to data provider CMA. Contracts on Portugal dropped 6.5 basis points to 272.5 and Spain fell 1 to 207. The cost of protecting European bank bonds from default fell on speculation results of stress tests due next week will reassure investors about their resilience to potential losses. The Markit iTraxx Financial Index of 25 banks and insurers dropped 4 basis points to 128, the lowest since May 18, and the subordinated index was 5 lower at 199. The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 13 basis points to 505, the lowest since June 21, JPMorgan prices show.
  • Commodity-Shipping Rates Extend Decline, Led by Larger Vessels. The Baltic Dry Index, a measure of commodity-shipping costs, fell for the 34th consecutive day, the longest decline in almost nine years, as rates plunged to hire larger iron ore carriers. Rents for capesize ships that haul iron ore to make steel fell 17 percent, the most since October 2008. Steel prices in China, the biggest iron-ore consumer, are likely to drop 10 percent for the rest of the year, JPMorgan Chase & Co. said in a note on July 12. Baoshan Iron & Steel Co., the biggest publicly traded steelmaker in China, cut steel prices for a second month. “Iron ore buying has really fallen off,” Peter Norfolk, research director at Freight Investor Services Ltd. in London, said by phone today. A “rapid increase in steel production has led to oversupply. It’s not taken long for increased steel output to overrun demand.” The Baltic Dry Index of rates on international trade routes fell 81 points, or 4.5 percent, to 1,709 points, according to the London-based Baltic Exchange. Rates have dropped everyday starting May 27, the longest retreat since Aug. 15, 2001. Chinese prices for 25 millimeter (1 inch) rebar, a steel product used to reinforce concrete, have fallen 2.6 percent this month while iron-ore stockpiles rose 4.8 percent, according to data from Antaike Information Development Co.
  • Microsoft(MSFT) Says 12th Alleged Russian Spy Was Employee. Microsoft Corp. said the 12th alleged member of a Russian spy ring operating in the U.S. was an employee at the company’s Redmond, Washington, headquarters. The man, a Russian citizen in his early 20s named Alexey Karetnikov, worked for Microsoft as a software tester for about nine months, a spokeswoman for Microsoft in Moscow, who declined to be identified in line with company rules, said by e-mail today.
  • U.S. Import Prices Declined in June by Most Since January 2009. Prices of goods imported into the U.S. fell in June by the most since January 2009, led by declines in costs of oil, business equipment and consumer goods. The 1.3 percent decline in the import price index was more than projected and followed a revised 0.5 percent drop in May, Labor Department figures showed today in Washington. “Deflation is still the dominant risk over the intermediate term,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Pricing power remains virtually non-existent. The global recovery has lost some momentum.”
  • Baghdad Is Back on Map for Lufthansa, Business Jets. Iraq is transforming from a battleground into a focus for civil aviation as the collapse of its national airline and a decline in violent attacks attract international carriers and business-jet operators. Deutsche Lufthansa AG will begin flights to Baghdad on Sept. 30, helping to fill a void left by Iraqi Airways, which the government is dissolving to prevent Kuwait from seizing planes as compensation for 10 jetliners plundered by Saddam Hussein’s invading forces in 1990. Middle Eastern carriers have also begun services and charter company Royal Jet is flying twice a week from Abu Dhabi as attacks in Iraq fall to their lowest level since the 2003 U.S.-led liberation. “The constantly improving security situation combined with ongoing reconstruction and investment has created ideal conditions for private aviation into and out of the country,” John Morgan, Royal Jet’s vice president for commercial operations, said in an interview.
  • BP(BP) Would Be Barred From New U.S. Leases in House Bill. BP Plc would be barred from new U.S. offshore leases to drill for oil or natural gas because of past safety violations under an amendment approved by a House panel. The House Natural Resources Committee adopted the amendment by voice vote today while considering legislation to toughen safety standards for offshore drilling after the BP spill in the Gulf of Mexico.
  • Bailouts Failed to Aid Small U.S. Banks, Warren Says. Elizabeth Warren, who leads the congressional panel overseeing the Troubled Asset Relief Program, said U.S. taxpayer bailouts helped Wall Street and not small banks. TARP “worked really well for the Wall Street banks, but it didn’t work well for the rest of the banks in the system,” Warren said today on Bloomberg Television’s “In the Loop with Betty Liu.”
  • U.S. Stock Bears Outnumber Bulls for First Time Since April '09. The level of bullish sentiment about the U.S. stock market fell below the level of bearishness for the first time since April 2009, according to a survey of newsletter writers. The proportion of bullish publications tracked by Investors Intelligence trailed bearish ones by 2.2 percentage points, declining to 32.6 percent, the lowest level since March 2009. Individuals’ optimism about equities also fell to its lowest level since March 2009, 21 percent, according to a survey last week by the American Association of Individual Investors.

Wall Street Journal:
  • U.S. Business Groups Air Policy Concerns. Washington's major business groups plan a united front Wednesday in their confrontation with the Obama administration over economic policy, calling on the White House to cut taxes and curb its regulatory agenda. Business groups including the U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Businesses will air a list of concerns about government policy at a "Jobs for America Summit" at the Chamber's offices Wednesday. The Chamber will issue an open letter to President Barack Obama asking that the administration cut taxes, act on pledges to expand export markets, and streamline government rules, according to a copy of the letter obtained by The Wall Street Journal. Summit participants include legislators with leadership roles on business-related congressional committees, including Sen. Judd Gregg (R-N.H.); Sen. Mary Landrieu (D-La.); Rep. Melissa Bean (D-Ill.); and Rep. Paul Ryan (R-Wis.). Also attending from the administration side are Erskine Bowles, President Bill Clinton's chief of staff and former Wyoming Sen. Alan Simpson (R)—the two men co-chair Mr. Obama's National Commission on Fiscal Responsibility and Reform. "There's a lot more unanimity than you may have seen over the past year" among business leaders, particularly in their opposition to tax and regulatory policy, said Stan Anderson, executive director of the chamber's Campaign for Free Enterprise, which promotes its job-creation policies. In the letter, which was sent to the White House Tuesday, the chamber says this Congress has passed $700 billion in tax increases, and demands that all tax cuts passed in the previous decade be extended, including those to individual, estate, capital gains and alternative minimum taxes. "In one bold, swift move, this would substantially boost investor, business, and consumer confidence," the letter reads. To reduce the deficit, the chamber urges the government to trim entitlement spending, expand logging in national forests, and revive inactive leases on oil, gas, and shale reserves. It urges passage of free-trade agreements with South Korea, Colombia and Panama, estimating that 380,000 existing U.S. jobs will be lost to Canada and the European Union should they conclude agreements with the three nations before the U.S. does. On the regulatory front, "What we're looking at here is a tsunami of regulations coming online slowly because of legislation that has either been enacted or legislation that people expect in some form will be enacted," said Bruce Josten, the chamber's chief lobbyist. The letter points out that the Environmental Protection Agency is moving forward with 29 major economic rules (a major rule would have an impact on the economy of at least $100 million) and 173 major policy rules. Legislation overhauling financial-markets regulation now nearing passage in Congress would create more than 350 rule makings, 47 studies and 74 reports. "You can find in these numbers a principal reason why businesses are so reluctant to make investments," the letter reads.
CNBC:
  • Home Sellers Slashing Prices, While Banks Mow the Lawn. That heady buzz from the home buyer tax credit is now turning into a grinding headache, as home sellers realize their very temporary, government-induced catbird seat has now fallen back to earth. As of July 1st, 24 percent of sellers on the market had cut their asking prices at least once, according to Trulia.com. That's up 9 percent from the previous month and represents about $27 billion worth of vanished national home equity (or home equity hopes).
MarketWatch:
Business Insider:
Chicago Tribune:
  • Socially Responsible Mutual Fund Cuts Out 'Too-Big-To-Fail' Banks. Are "too-big-to- fail" banks just as bad as tobacco growers and alcohol producers? A Chicago-based socially conscious mutual fund thinks so. Last week Appleseed Fund began tarring "too-big-to-fail" banks with the same brush as pornographers, weapons-makers and others when it changed its screening criteria to also exclude Citigroup(C), Goldman Sachs(GS), Morgan Stanley(MS), Bank of America(BA) and JPMorgan Chase(JPM) from its portfolio. "Given the failure of regulators to prevent the credit crisis and the subsequent failure of legislators to break up the massive and interconnected banks that helped create the crisis, it's incumbent on depositors and investors to vote with their wallets," co-portfolio manager Adam Strauss said. "Until the financial system is truly restructured," Appleseed won't invest in too-big-to-fail banks, choosing instead to invest in regional banks, community banks and credit unions, he said.
The Daily Beast:
FINalternatives:
  • New York Governor Resurrects Hedge Fund Tax Plan. He was for it before he was against, and now New York Gov. David Paterson has again proposed a major tax hike on out-of-state hedge fund managers. Luckily for the hedge fund industry, the New York State Senate rejected Paterson’s “compromise” revenue bill—which would complete the state’s 105-day-late budget—out of hand.
Market Folly:
  • Latest Hedge Fund Positioning: Exposure Monitor Report. Bank of America Merrill Lynch is out with the latest rendition of their hedge fund monitor report. Last week we took note that hedge funds had increased short exposure yet were still suffering poor performance. Long/short equity hedge funds continue to have low net long equity exposure at around 27% net long. This continues to be well below the historical average of 35-40%. L/S funds still slightly favor growth stocks over value at the moment. Market neutral funds, while as of late they've taken opposite positions of L/S funds, are now flat in terms of equity exposure. Global macro hedge funds on the other hand have reduced emerging markets exposure and covered their short position on US indices. Based on CFTC data, however, other hedge funds (large speculators) have added to their short positions in both the S&P and Russell 2000. Bank of America Merrill Lynch highlights two recent hedge fund portfolio moves of note. Firstly, they point out that hedgies are now in a crowded long in the Japanese Yen. Secondly, they highlight the net short position in Nasdaq futures that many speculators have put on. To see the latest hedge fund exposure levels, view the full monitor report from BofA embedded below:
ABC News:
  • EU Fails to Reach Deal on Financial Supervision. Efforts to clinch a deal on the way banks, insurers and markets in the European Union are supervised failed on Wednesday and talks will resume in late August or early September, EU sources said. "Talks have not led to an agreement this morning. Negotiations have now been postponed until the end of August, early September," a European Parliament source said.
Huffington Post:
  • Jack Lew: Obama's OMB Pick Oversaw Citigroup(C) Unit That Shorted Housing Market. President Barack Obama's choice to lead the White House budget office oversaw a Citigroup unit that profited off the housing collapse and financial crisis by investing in a hedge fund king who correctly predicted the eventual subprime meltdown and now finds himself involved in the center of the U.S. government's fraud case against Goldman Sachs. Jacob Lew, named Tuesday as Obama's nominee to lead the Office of Management and Budget to replace departing OMB chief Peter Orszag, served as chief operating officer of Citigroup Alternative Investments in 2008. He has served as a top aide to Secretary of State Hillary Clinton since the administration came into office. Though Lew is a longtime public servant who's spent nearly 30 years in various positions throughout government, it is his few years at Citi -- in particular the one year he spent at its then-$54 billion proprietary trading, hedge fund and private equity unit -- that's likely to raise the most eyebrows in the coming weeks as Lew faces a Senate confirmation hearing. Especially his unit's investments in a hedge fund that bet on the housing market to collapse -- a reality suffered by millions of American homeowners.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).
Politico:
  • Black Tea Partiers Rebut NAACP. Some African-American tea party candidates are displeased by a resolution that the NAACP approved on Tuesday calling the grass-roots conservative movement “racist.” “I have not experienced the charges of racism that the NAACP is touting,” Vernon Parker, an African-American tea party congressional candidate in Arizona, told POLITICO. Parker, former mayor of Paradise Valley, said that he has never felt out of place at a tea party rally because of the color of his skin. “When I go to tea party events, people don’t look at me any differently,” he said. “They didn’t judge me on the color of my skin, quite frankly, they judged me on my principles." "The NAACP should be concerned about bringing jobs to people in depressed areas,” he added, “not the tea party.”
  • Time for Obama to Make Sacrifices by Tim Pawlenty.
AspenDailyNewsOnline:
  • Hedge Fund Manager John Paulson Paid $24.5 Million for Aspen Home. Hedge fund manager John A. Paulson, president and founder of Paulson & Co., Inc. paid $24.5 million on June 22 for a luxurious home on eight acres off of McLain Flats Road just outside of Aspen, according to sources. The sources, who asked that their identity not be disclosed, said the 12,500-square-foot home at 460 Sunnyside Lane was purchased by Paulson, a billionaire who made a fortune in 2007 betting against the subprime mortgage sector. “Paulson’s winning’s were so enormous they seemed unreal, even cartoonish,” wrote Wall Street Journal reporter Greg Zuckerman in his 2009 book about Paulson, “The Greatest Trade Ever.” “His firm, Paulson and & Co., made $15 billion in 2007 … Paulson’s cut was nearly $4 billion, or more than $10 million a day.” Paulson, 54, was recently at the center of a lawsuit filed by the U.S. Securities and Exchange Commission against Goldman Sachs(GS).
Reuters:
  • Clampdown Rumored as China "Twitter" Sites Down. Chinese social networking websites that provide Twitter-like services have suddenly reverted to testing mode and access has been spotty amid reports of a government clampdown. Although Twitter has been banned for more than a year in China, Chinese Internet companies have been quick to fill the void, providing microblogging services that allow users to post frequent updates and follow other posters. On Wednesday, NetEase.com Inc's microblog (t.163.com) was inaccessible. A notice said the site had been down since 7 p.m. on Tuesday and was under maintenance. Sohu.com Inc's microblog (t.sohu.com) was also shut down for more than a day earlier in the week and all Chinese "twitters" now display the notice "in testing mode." Company sources told Reuters that the developments were the result of tightened government controls over the new services. "Nobody will publicly announce the reason, but it is as obvious as a fly on a bald head," one source said, declining to be named because of the sensitivity of the matter. The Shanghai-based Oriental Morning Post cited unnamed "industry sources" as saying that the websites were under pressure from Chinese censors. News content on Chinese Internet websites is under intense government censorship, and online news editors with major Internet portals often receive dictats from the government on what can and cannot be published.
  • Yum(YUM) Sees 'Very High Labor Inflation' in China.
  • Iraqis, On Cusp of Building Boom, Repair Homes.
  • Spain's Zapatero Pushes Austerity, Has Few Allies. Prime Minister Jose Luis Rodriguez Zapatero, facing opposition to tough spending cuts, urged lawmakers on Wednesday to back pension reforms and other austerity measures to lift Spain out of its economic crisis.

Financial Times:
  • Richmond Fed Chief Opposes Bail-Outs. US regulators must let a large institution collapse without bailing out its creditors to convince markets that no bank is too big to fail, the president of the Federal Reserve Bank of Richmond said. Jeffrey Lacker told the Financial Times that markets must have clear expectations about how short-term creditors would be treated in a bank failure. “Ambiguity about that was just deadly over the past few years coming into this crisis,” he said.
Folha de S. Paulo:
  • Petroleo Brasileiro SA(PBR) may buy oil reserves from Brazil's government for $7 to $9 a barrel, citing directors at the company. The administration of President Luiz Inacio Lula da Silva is concerned that Petrobras may have to further delay its planned share sale because of presidential elections in October.
Hurriyet:
  • The United States is working to make it easier for Turkey to take military action against the Kurdistan Workers' Party, or PKK, in northern Iraq, citing James Jeffrey, ambassador to Ankara. U.S. authorities are working on ways to allow Turkey to strike at PKK bases in Iraq more rapidly and more often, Jeffrey said.

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