Evening Headlines
Bloomberg:
- Euro-Area Bond Stokes Tempers as Flashpoint for Debt Markets: Euro Credit. A proposal to sell joint euro-region debt has emerged as a new flashpoint among European leaders running out of options to stabilize bond markets. With a European Union summit set for next week in Brussels, officials from Italy, Luxembourg, Belgium and Greece said the proposal should be explored, prompting resistance from Germany, France and Austria. Economists and analysts from Goldman Sachs Group Inc., Morgan Stanley and HSBC Holdings Plc said it may end the euro-region debt crisis. The plan would establish a European Debt Agency to sell bonds to finance as much as 50 percent of EU member borrowing, rising to as much as 100 percent for countries unable to lure investors, and take pressure off the European Central Bank to prop up markets. Opponents say such bonds would burden stronger countries with higher borrowing costs.
- China Credit 'Bubble' Set for Bust on Trade Row, Blackhorse's Duncan Says. China’s economy is history’s biggest bubble and may be headed for collapse, according to Richard Duncan, chief economist at Blackhorse Asset Management Pte. who predicted a credit boom would trigger a global recession. A more than 50 percent surge in China’s money supply since 2008 helped fuel economic growth in excess of 9 percent per year, even as trading partners sank into recession. The expansion also saddled the country with factories that produce three times more goods than can be bought by China’s workers, 80 percent of whom make less than $5 a day, said Duncan. “China has the greatest economic bubble in history,” said Duncan, author of “The Dollar Crisis” first published in 2003. “There’s a real risk it’s going to collapse in a Great Depression-style scenario.” “It’s hugely hypocritical for the Chinese to say anything about the U.S. doing quantitative easing because they’re the kings of quantitative easing,” Duncan said in a phone interview this week from Bangkok. Premier Wen Jiabao’s government has been creating about $250 billion worth of yuan each year “out of thin air,” Duncan said. To keep its currency from appreciating, the People’s Bank of China has been printing yuan to offset the dollars flowing in from a trade surplus that expanded to $27.2 billion in October, the most since July.
- Hedge Funds, Institutions to Increase Commodity Investments, Barclays Says. About 76 percent of the respondents surveyed at a Barclays conference yesterday in New York predicted a bigger inflow into direct commodity investments than in 2010. New investments this year were $50 billion, the London-based bank said.
- Fink Builds Wall Street's Brain as BlackRock(BLK) Marks Rise of Asset Managers. As chairman and chief executive officer of BlackRock Inc., Larry Fink controls more money than Germany has gross domestic product. BlackRock is the world’s biggest asset-management firm, a $3.45 trillion powerhouse that is Wall Street’s largest trading partner, set to pay investment banks $1 billion in fees this year. It manages $1.4 trillion for public pension funds in states including New York, New Jersey and California, and invests $240 billion for central banks and sovereign wealth funds such as the Abu Dhabi Investment Authority. The company serves as the U.S. Treasury Department’s go-to source for private-sector financial expertise and managed at least $150 billion in toxic assets on behalf of U.S. taxpayers after the 2008 bailouts of American International Group Inc. and Bear Stearns Cos. While running the company is a team effort, Fink, 58, is BlackRock’s brain, and BlackRock, increasingly, is Wall Street’s, Bloomberg Businessweek reports in its Dec. 13 edition.
- Bernanke Pledges Cooperation on Increasing Transparency, Issa Aide Says. Federal Reserve Chairman Ben S. Bernanke today pledged to “work cooperatively” with the new head of a House panel who’s seeking to increase disclosure of the central bank’s actions, the lawmaker’s spokesman said. Representative Darrell Issa made it “very clear” in a private meeting with Bernanke that the lawmaker will pursue “an overall agenda intent on making government as transparent as possible,” said Kurt Bardella, spokesman for the California Republican who’s set to chair the House Oversight Committee in January. “Chairman Bernanke certainly signaled that he would be a willing partner in that effort.”
- Community Health(CYH) Makes $7.3 Billion Bid for Tenet(THC). made an unsolicited offer to buy Community Health Systems Inc.Tenet Healthcare Corp. for $7.3 billion in a bid to create the largest hospital operator in the U.S., with 176 hospitals in 30 states. Tenet rejected the offer Dec. 6 as not “remotely fair value” and Community Health has renewed the bid with Tenet’s board, Community Health, based in Franklin, Tennessee, said today in a statement.
- Nobel No-Shows for Award to Dissident Liu Reveal Rising Chinese Influence. Nineteen countries will be absent from today’s ceremony bestowing the Nobel Peace Prize on Chinese dissident Liu Xiaobo in the wake of his government’s campaign to portray the award as a western effort to undermine its authority. Those absent will include countries with unelected rulers such as Cuba and Saudi Arabia, Chinese neighbors Kazakhstan and Vietnam, and U.S. allies Colombia and Egypt. Their decision to skip the ceremony in Oslo comes as Chinese Foreign Ministry spokeswoman Jiang Yu derided the award as a “farce” bestowed by “clowns” in comments to reporters in Beijing on Dec. 7.
- China's November Inflation May Be 5.1%, Two Newspapers Say. China’s inflation may have accelerated to 5.1 percent in November, the fastest pace since July 2008, according to two Chinese newspaper reports today ahead of the release of the data tomorrow. The reported pace would top the median 4.7 percent forecast in a Bloomberg News survey of economists and bolster the case for the central bank to raise interest rates.
- Markets Defy Fed's Bond-Buying Push. The Federal Reserve's decision to spur the economy with a $600 billion round of bond buying was among the most controversial in its history. Fed officials quarreled over whether to proceed. At worst, some members argued, such a move risked whipping inflation to dangerous levels. Six weeks later, the bond program looks more like a water pistol than a cannon. The purchases of government bonds are meant to drive down long-term interest rates, which did happen in the lead-up to the Nov. 3 move. But since then, long-term rates are up sharply.
- CFTC Hammers Out Corporate Exemption for Derivatives Rule. Federal regulators on Thursday proposed rules for spelling out how companies like Shell Energy North America and Caterpillar Inc. can avoid potentially costly new derivatives rules. The proposal by the Commodity Futures Trading Commission was approved in a 3-2 vote and will now be issued for public comment. A second vote is needed to implement it.
- Companies Cling to Cash. Corporate America's cash pile has hit its highest level in half a century. Rather than pouring their money into building plants or hiring workers, nonfinancial companies in the U.S. were sitting on $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of June, the Federal Reserve said Thursday. Cash accounted for 7.4% of the companies' total assets—the largest share since 1959.
- The Puzzling Assault on For-Profit Colleges. President Obama's commitment to serve nontraditional students—low income, working, mid-career—is clear. He demonstrated that again this week by visiting a community college in North Carolina. The reason, in his words: "Folks who have never gone to college have an unemployment rate nearly double of those who have gone to college." That's why it's so disappointing that the Department of Education is pursuing regulations that threaten to cripple or close down for-profit colleges and career schools that provide advancement opportunities for millions of poor and minority students.
- Once-Cautious Carlyle Gets in Game. Four years and a private-equity-boom ago, Carlyle Group LP co-founder William Conway sounded a cautionary note about buyout-market froth, as competitors pursued what proved to be market-top deals. Not so now. As other private-equity players fret about high takeover prices and a weak economy, Carlyle is in the midst of one of the biggest deal splurges in its 23-year history, a spree driven in part by an unusually bullish outlook for the U.S. and parts of the global economy. "We think the economy is stronger than most [people do], so we're putting more money to work," said Mr. Conway.
- Why I Support the Ryan Roadmap by Sarah Palin. Let's not settle for the big-government status quo, which is what the president's deficit commission offers.
- Video Game Sales Surge Once More in November. "Black Ops" brought some black ink for the video game industry in November. Retail software sales posted impressive growth over 2009 numbers, marking the first time the industry has posted back-to-back gains this year.
- Friday's Front Page Story: "What to Do When the Shells Hit Seoul". The US press mainly focuses on the fragile Korean situation after escalation, but don't presume things have calmed down, just because you may not have read about anything for a couple of days. The Korean papers are filled Friday with talk of war, including this column in the Chosun Ilbo suggesting that war is a real possibility, and this full page feature in the Joong Ang Daily titled What To Do When The Shells Hit Seoul. Note the use of the word "when" not "if." What does one do? Well, it seems that Seoul is pretty prepared:
- Sarah Palin-Friendly Sites Attacked. Websites supportive of former Alaska GOP Gov. Sarah Palin came under cyberattack Thursday, a day after Palin’s own site was briefly taken down by hackers, POLITICO has learned.
- Obama 'Confident' Amid Dem Tax Revolt. The House Democratic Caucus voted Thursday to oppose President Barack Obama’s tax plan, throwing into flux weeks of negotiations on an issue that has turned many congressional Democrats against the White House. But in an interview with NPR Thursday, Obama said he still expected a final agreement that would continue the Bush tax cuts beyond their scheduled Dec. 31 expiration date, despite the protests in the House.
- 'Don't Ask' Repeal Fails in Senate. A key legislative opportunity to repeal the military’s ban on gays in uniform, which President Barack Obama vowed would be dismantled “on my watch,” fell victim to partisan wrangling and the time pressures of the lame-duck session Thursday afternoon.
- Gas Prices on Track for Unseasonable Spike. Motorists, brace yourselves for a lump of coal this holiday season: higher-priced gasoline. Nationwide, a gallon of regular unleaded gas averaged $2.975 on Thursday and more than $3 a gallon in 20 states. That's up nearly 10 cents the past week and 34 cents higher than December 2009, AAA spokesman Troy Green says. Benchmark crude oil opens today at $88.37 a barrel. If crude crosses $90 for the first time since 2008 and continues to rise, as many industry experts forecast, the average price of regular unleaded could hit $3.15 or higher by year's end. $3 a gallon gas will pinch some consumers. "If they have to pay more for gas, they'll have less to spend on other things," Green says.
- Stock Forecasters Predict Market Gains in 2011. An early peek at Wall Street stock market forecasts for 2011 points to more upside for U.S. stocks, with strategists at major firms predicting gains ranging from 5% to 15%.
Reuters:
- PIMCO Ups US Economic Growth Forecast On Tax Deal. Pacific Investment Management Co, which runs the world's biggest bond fund, is revising its growth forecast for the United States next year after President Barack Obama's tax-cut compromise, Chief Executive Mohamed El-Erian told Reuters late Thursday. PIMCO sees the economy growing 3 percent to 3.5 percent in the fourth quarter of 2011 from the same period of this year. That compares with its previous estimate for 2 percent to 2.5 percent growth. "We revised this week our outlook for U.S. growth in 2011 taking into account Monday's announcement on additional fiscal stimulus measures," El-Erian said in an interview.
- Beckman Coulter(BEC) Puts Itself Up For Sale. Beckman Coulter Inc, maker of diagnostic instruments used in clinical testing, has put itself up for sale and could fetch more than $5 billion, the Wall Street Journal reported, citing people familiar with the matter.
- National Semi(NSM) Guides Low But Sees End of Correction.
- Netflix(NFLX), Three Others to Join the S&P 500.
- U.S. Fed's Balance Sheet Grows to Record Size. The U.S. Federal Reserve's balance sheet expanded for a sixth straight week, bolstered to a record by purchases of Treasuries, Fed data released on Thursday showed. The balance sheet, a broad gauge of Fed lending to the financial system, rose to $2.364 trillion in the week ended Dec. 8 from $2.329 trillion the previous week. Last month, the U.S. central bank began a second bout of quantitative easing, known as QE2. The Fed expects to buy about $600 billion in U.S. government debt purchases over an eight-month period in an effort to stimulate the economy.
- Coffee Costs Hit Green Mountain's(GMCR) Outlook, Shares Sink. Green Mountain Coffee Roasters Inc gave a weak first-quarter profit outlook due to higher marketing costs and an expected volatility in coffee costs -- becoming the latest coffee company to take a hit due to soaring prices. Shares of the company fell 18 percent after the bell.
- NYSE Short Interest Slips in Late November, Nasdaq Dips.
- Issa Says Reform Bill 'Soft' on Hedge Funds. The incoming Republican chairman of the House oversight committee said Wall Street owed it to Americans to be more transparent.
- Goldman(GS) CDS Trading Activities Under Fire. Goldman Sachs ’ trading activities in the credit insurance market in 2007 have come under attack from a US senator after e-mails revealed a senior trader urged colleagues to “kill” some investors’ positions. Mr Levin said that in May 2007, Goldman adopted a “short squeeze strategy” to drive down the price of credit default swaps on troubled mortgage-backed securities. Mr Levin alleged the move, which Goldman denies, would have enabled the bank “to purchase the CDSs for itself at artificially low prices”.
Citigroup:
- Reiterated Buy on (CIEN), target $24.
- Rated (PLX), (GILD) and (VRTX) Outperform.
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.50 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 104.75 -1.25 basis points.
- S&P 500 futures +.24%
- NASDAQ 100 futures +.14%.
Earnings of Note
Company/Estimate
- None of note
8:30 am EST
- The Trade Deficit for October is estimated at -$43.8B versus -$44.0B in September.
- The Import Price Index for November is estimated to rise +.8% versus a +.9% gain in October.
- Preliminary Univ. of Mich. Consumer Confidence for December is estimated to rise to 72.5 versus 71.6 in November.
- The Monthly Budget Deficit for November is estimated at -$138.0B versus -$120.3B in October.
- (ROL) 3-for-2
- (RES) 3-for-2
- The (HSC) analyst meeting, (CVVT) analyst day, JPMorgan Ag Conference and the Goldman Sachs Auto Conference could also impact trading today.
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