Evening Headlines
Bloomberg:
- BP(BP) Cementing Well Caps Confidence Crisis for Energy Bonds: Credit Markets. The bond market’s crisis of confidence in companies tied to the biggest accidental offshore oil spill on record is ending as BP Plc moves closer to permanently plugging its well in the Gulf of Mexico. One-year credit-default swaps on bonds from BP and its partner in the well, Anadarko Petroleum Corp., cost less than five-year protection, reversing an inversion that began in June amid a rush to hedge against the risk of the companies’ sudden failure. London-based BP’s $3 billion of 5.25 percent bonds due in 2013 have regained 69 percent of the value they lost after the spill began. Mounting expectations that the costs to clean up the spill and compensate victims are being contained are sparking energy companies such as Hess Corp. and Pride International Inc. to sell debt.
- Fannie Mae Seeks $1.5 Billion From U.S. Treasury After 12th Straight Loss. Fannie Mae, the mortgage-finance company operating under federal conservatorship, is seeking $1.5 billion in aid from the U.S. Treasury Department after a 12th straight quarterly loss. Fannie Mae had a loss of $1.2 billion in the second quarter, compared with a loss of $14.8 billion in the same period a year earlier, it said today in a filing to the Securities and Exchange Commission. The Washington-based company posted more than $147 billion in losses in the preceding 11 quarters, according to data compiled by Bloomberg. The Treasury Department seized Fannie Mae and McLean, Virginia-based Freddie Mac, the biggest sources of U.S. mortgage funding, in September of 2008 and has spent $145 billion already to keep them solvent.
- Mortgage Refinancing Rises Among Lower-Rate Loans, Fannie Mae Data Shows. Mortgage refinancing likely rose last month only among borrowers with lower rates, showing reduced home prices and tighter credit standards are keeping some property owners from taking advantage of record-low interest rates, bond prepayment data show. The constant prepayment rate for Fannie Mae 30-year fixed- rate notes with 5 percent coupons, backed by loans with average rates of about 5.5 percent, rose to 20, from 16.5, JPMorgan Chase & Co. said in a note to clients, based on data released today. The CPR, or the share of debt that would be retired in a year at the current pace, for bonds with 6.5 percent coupons, with loan rates of about 7 percent, fell to 21.7, from 23.4.
- Wheat Futures May Surge to $10 a Bushel, CWA Says. Wheat futures may surge to $10 a bushel on concern that Ukraine and Kazakhstan, the second- and third-largest exporters in the former Soviet Union, will follow Russia in banning exports, according to CWA Global Markets Pty. “It’s got $10 written all over it,” said Peter McGuire, CWA’s managing director, who correctly predicted on Aug. 3 that prices would surge to $8.50 a bushel. The new forecast implies a 23 percent jump from yesterday’s close. Russia yesterday banned exports of wheat, barley, rye, corn and flour from Aug. 15 to Dec. 31.
- Wheat Importers to Turn to U.S., Australia, Rabobank Forecasts. Wheat buyers will turn to the U.S., Australia and Argentina for supplies as Black Sea region output slumps, raising the risk of price gains if there are Southern Hemisphere crop problems, Rabobank said in a report. “The outlook for new-crop Russian winter wheat plantings is less than desirable, while production in Australia and Argentina is less than assured,” London-based analysts Luke Chandler and Doug Whitehead wrote yesterday. “Additional supply-side shocks would leave the wheat market extremely vulnerable to a considerable upside price move.”
- China Unlikely to Relax Existing Property Policy 'Anytime Soon,' BNP Says. China is unlikely to relax measures aimed at slowing the real-estate industry “anytime soon,” damping a recent recovery in sales and disappointing investors, according to BNP Paribas. “The sector will be under downward pressure in the short term,” BNP analysts led by Frank Chen said in a report. “Existing policies are unlikely to be relaxed anytime soon.”
- U.S. Warns Terrorists May Enter the Country From Mexico as Drug War Rages. Mexico’s drug-related violence is straining local law enforcement in the northern part of the country, making it easier for terrorists to enter the U.S. through the border, the U.S. State Department said. Mexican drug cartels are stepping up attacks on police and the army in the northern swath of the country, as well as marijuana-growing regions, the State Department said today in a report on its website. That’s overwhelming security forces and creating potential vulnerabilities that international terrorists may exploit, the report said.
- Obama Grants $1 Billion in Stimulus Funds for Illinois Carbon-Capture Plan. The Obama administration said it will give $1 billion in stimulus funds to Ameren Corp., Babcock & Wilcox Co. and a group of energy companies for an Illinois project to lower carbon emissions from coal-fired power plants. The FutureGen 2.0 project will revamp a 200-megwatt unit at Ameren’s power plant in Meredosia, Illinois, Energy Secretary Steven Chu and Senator Dick Durbin, an Illinois Democrat, said in an e-mailed statement today.
- Obama No-Shows Come to Life on Veteran Death Benefits. A half-dozen members of President Barack Obama’s Cabinet sit on an advisory council overseeing life insurance for U.S. military forces, a program facing investigations of whether insurers are unfairly profiting from policies of dead soldiers and veterans.
- Monsanto(MON)-backed Mahyco Plans India's First Gene-Modified Wheat in 5 Years. Maharashtra Hybrid Seeds Co., an Indian seed breeder partly owned by Monsanto Co., plans to develop the country’s first genetically modified wheat and rice in the next three to five years, a company official said. The company is working on various traits of genetically altered grains that can withstand drought and salinity, Usha Barwale Zehr, the chief technology officer at Mahyco, said in a telephone interview yesterday.
- Dealers Preparing Tradeable 'Bond of Bonds' to Hedge Risk. Wall Street dealers are preparing to introduce a tradeable bond certificate in the U.S. that will give investors exposure to a basket of 75 liquid, investment-grade corporate bonds through a single instrument, according to people familiar with the plan. The note will function like a bond of bonds, they said, giving investors pro-rata exposure to an underlying basket of securities. A spokesman for Markit, which is partly owned by dealers and will administer the certificate, confirmed the plan.
- BofA(BAC) Seeks Sanction's End. Bank of America Corp. wants out of a secret U.S. sanction imposed during the financial crisis, but regulators are keeping the 15-month-old penalty in place as they evaluate whether the giant lender has satisfied all of their requirements, said people familiar with the situation.
- Lockerbie Release Flawed. Scotland Lacked Medical Consensus in Returning Convicted Bomber to Libya. Scotland released the convicted Lockerbie bomber from prison in August 2009 on the grounds he likely had three months to live, even though there was no consensus among specialists treating his prostate cancer that his prognosis was so dire, according to publicly available documents and people familiar with the case.
- Wall Street Firms Still Trying to Figure Out Volcker Rule.
- An Argentinaville Stimulus? Wall Street comes to life with rumors of a back-door stimulus. A wire service put out the story that Wall Street was abuzz that the Administration might lower Fannie Mae's and Freddie Mac's mortgage refinancing standards or trim mortgage balances for homeowners, thereby putting billions of dollars overnight into the pockets of benefiting consumers, thereby producing a "free stimulus," estimated by one Morgan Stanley analyst at $46 billion. And this stimulus "spending" would be achieved without a moment spent passing it through the Congressional appropriations process.
- U.S. Ends Private Talks on Web Rules. U.S. officials called off closed-door talks with lobbyists aimed at reaching a compromise on ways to regulate Internet traffic, saying they couldn't reach a solution. The meetings, which involved Internet and telecommunications giants, sought to give the Federal Communications Commission authority to act as an Internet traffic cop without the need to adopt controversial wholesale changes to the law.
- Big Democratic Fund Raiser Indicted. A major Democratic lobbyist and fund-raiser was arrested Thursday and indicted on charges of making hundreds of thousands of dollars of illegal campaign contributions to members of Congress. The 11-count indictment by the Department of Justice against Paul Magliocchetti, the founder of the now-defunct lobbying outfit PMA Group, brings for Democrats new and unwelcome attention to continuing ethics controversies ensnaring some of the party's lawmakers.
- Hedge Fund Trade of the Week: Crown Castle(CCI).
- Cramer: Russian Wheat-Export Ban Means Ag Bull Market.
Forbes:
Pensions & Investments:
Politico:
- Kagan Win Warns of Battles Yet to Come. Chosen by President Barack Obama for her ability to build consensus on a deeply divided Supreme Court, Elena Kagan didn’t have much of a unifying effect on the Senate. Though it confirmed her Thursday as the newest justice by a 63-37 vote, Kagan has the dubious distinction of receiving one of the lowest total of “yes” votes for a nominee during the past three presidencies — and the lowest number of confirmation votes ever for a justice picked by a Democrat.
- Dems Accused of Tea Party Tampering. Nationally, Democrats say they intend to campaign against the tea party movement. But locally, Democratic officials and activists in at least four states now stand accused of collaborating with tea party candidates in an attempt to sabotage Republican challengers in some of the closest House races in the nation. The charges of dirty tricks are being leveled in Pennsylvania, Michigan, New Jersey and Florida — and they involve more than a half-dozen contests that could tip the balance of power in the House. The accusations range from helping tea party activists circulate candidate petition sheets to underwriting the creation of official tea parties, which then put forth slates of candidates that local conservatives accuse of being rife with Democratic plants.
- Romer to Leave White House Post. Council of Economic Advisers Chairwoman Christina Romer will leave the White House Sept. 3 to resume teaching economics at the University of California at Berkeley, the White House said Thursday. Romer's departure follows that of another key adviser: Office of Management and Budget Director Peter Orszag left last month.
- US Warns Citizens in Saudi of Threat. The U.S. Embassy in Saudi Arabia has warned American citizens that extremists may be planning to attack Westerners in the country.
- China Needs Slower, Better Growth by Yu Yongding. Although China’s huge stimulus package was a great success, it also stored up serious problems for the future. Rushed investment in roads and buildings leads to waste, which will have dire long-term consequences for China’s improved, but still fragile, banking system. Investment in infrastructure avoids overcapacity, but bring returns only if it goes hand-in-hand with stronger manufacturing and other growth. Where will tolls come from if there is no traffic on an eight-lane highway? How then will the bank loans be repaid? Such issues have been under-examined as Chinese policymakers grapple with how to halt a housing boom. Low interest rates and excess liquidity created by 2009’s huge credit expansion have driven house prices to dizzying heights. From January 2009 to May 2010, in 36 big cities, residential house prices increased by 40 per cent. In Beijing, Shanghai, and Shenzhen rises were even greater. Justifiable or not, high house prices have caused immense public resentment, and as a result China’s leaders have of late been attempting to undo some of their own work. For the first time, both a property tax and a capital gains tax are under discussion. Now the real economic debate in China focuses on whether the government should move again, this time to reverse the new slowdown it itself initiated. Some western economists, in particular, worry that China’s property market is beginning a collapse that will hit the nation’s banking system. But, in my view, wobbling because of the current dip in growth would be a mistake. Yes, at the moment there is a tug of war between house buyers and property developers. Whether prices fall will depend on who blinks first. But this, in turn, depends on whether both believe in the credibility of government policy. If the government stands firm, house prices will fall. Of course, if controls are implemented haphazardly the government risks such a collapse. But currently a 30 per cent drop is the worst-case scenario. Chinese households have low debt levels and even a dramatic fall could be borne by well-capitalised banks. Overall, therefore, China’s short-term fiscal position remains much better than almost all other big economies. It is in the long-run that all is not well. A viable economy cannot be built on steel and concrete alone, and China’s problem is more its poor allocation of resources than the bursting of a property bubble. At present real estate, at around a quarter of total investment, simply takes up too much economic room. The economy’s list of structural problems is also long, including over-dependence on investment and external demand, an unacceptably wide gap in incomes, too few social goods and an underdevelopment of the service sector. Slow progress in anti-corruption campaigns and institutional reforms are also worrying. In the long-run, however, it is the pattern of growth that needs most urgent attention. Investment and exports have been the twin engines of China’s growth. But investment growth will soon hit a ceiling imposed by social, environmental and natural resources. The danger is that deflation will set in and the growth process will break down. Increasing exports can postpone, but not prevent, this reverse. Following the increase in the size of the Chinese economy and the general slowdown of the global economy, China’s export drive is also crashing into a stone wall of trade friction and protectionism. To sustain growth it must lower investment and rebalance its current account. Improving the quality, rather than the quantity, of growth should be the priority. China has concentrated obsessively on GDP growth for far too long. But growth is not a good excuse for postponing much-needed structural adjustment. This readjustment, when it comes, will inevitably lead to a slowdown. But it is the only way to lay a solid foundation for sustainable growth in the long-run. And the longer the delay, the more painful the adjustment will be.
- U.S. to Send Aircraft Carrier to Yellow Sea Despite China's Opposition. The aircraft carrier USS George Washington will take part in joint naval exercises in the Yellow Sea, the Pentagon said Thursday, amid China's opposition to such maneuvers off its coast.
- The world economy will "almost certainly" see a prolonged period of slow growth, resulting in an end to the era of high profitability for banks, Bank of China Ltd. Chairman Xiao Gang wrote.
- China's Sales of cars will rise about 10% this year, slowing in the second half from the 48% increase in the first six months, citing figures provided by Dong Yang, secretary general of the China Assoc. of Automobile Manufacturers.
- US-Vietnam Nuke Deal 'Destabilizing'. The "advanced negotiations" between the United States and Vietnam to share nuclear fuel and technology disrupt international stability, Chinese analysts have said. "The US is used to employing double standards when dealing with different countries ... as a global power that has promoted denuclearization, it has challenged its own reputation and disturbed the preset international order," said Teng Jianqun, deputy-director of the China Arms Control and Disarmament Association, on Thursday. The US and Vietnam - two former Cold War foes - are in advanced talks to share nuclear fuel and technology, which could "unsettle" China, The Wall Street Journal reported on Wednesday. Under the agreement, Hanoi will reportedly be allowed to enrich uranium on its own soil, a move that is also expected to hamper global nuclear nonproliferation efforts.
Citigroup:
- Reiterated Buy on (REG), target $47.50.
- Reiterated Buy on (CCOI), target $16.
- Reiterated Buy on (NILE), target $53.
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 118.0 +4.0 basis points.
- Asia Pacific Sovereign CDS Index 114.50 +2.0 basis points.
- S&P 500 futures +.16%.
- NASDAQ 100 futures +.21%.
Earnings of Note
Company/Estimate
- (AIG)/.99
- (AES)/.21
- (MIR)/.29
- (DYN)/-.41
8:30 am EST
- The Change in Non-farm Payrolls for July is estimated at -65K versus -125K in June.
- The Change in Private Payrolls for July is estimated at +90K versus +83K in June.
- The Unemployment Rate for July is estimated to rise to 9.6% versus 9.5% in June
- Average Hourly Earnings for July are estimated to rise +.1% versus a -.1% decline in June.
- Consumer Credit for June is estimated at -$5.3 Billion versus -$9.1 Billion in May.
- None of note
- None of note
No comments:
Post a Comment