Evening Headlines
Bloomberg:
- Trichet 'Held Hostage' as Markets Pressure ECB to Intensify Crisis Fight. The last time Jean-Claude Trichet refused to bow to market pressure, he was forced into a U-turn. This time the stakes may be even higher. With the euro zone’s sovereign debt crisis now threatening to engulf Spain, its fourth-largest economy, investors are again looking for the President of the European Central Bank to do something to stop it, such as delaying the withdrawal of unlimited liquidity support for banks and significantly ramping up its bond purchases. The risk is that the ECB becomes a bail- out tool for politicians -- damaging its independence -- the very scenario Trichet wanted to avoid when he was pressed into the unprecedented step of buying government debt in May.
- Libor Measure Shows Bank Stresses Reach Highest Since June: Credit Markets. Derivatives traders are the most concerned since June that European leaders will fail to address the crisis engulfing the region’s single currency, causing losses for financial companies. Contracts used to bet on the future premium banks will charge each other for dollar loans in London over the federal funds rate almost doubled in November. The so-called FRA/OIS spread soared to 42.75 basis points, before easing back to 39.25 today, UBS AG data show. The measure shows banks are still wary of lending to each other, even as investors hedge their bets after European Central Bank President Jean-Claude Trichet signaled policymakers may step up their response to the region’s debt crisis when they meet tomorrow. The ECB said earlier this year that European banks’ ability to sell bonds may be hampered as governments seek to finance fiscal deficits amassed in part to finance a bailout of the banking industry. “You come back inexorably to the link between sovereigns and financials,” said Matteo Regesta, an interest-rate strategist in London at BNP Paribas SA, the world’s biggest bank by assets. “Financial companies have issues with non-performing loans, fueling the idea they might need government help, which puts pressure on the sovereign, which the banks are also exposed to.” The gains in the FRA/OIS spread in recent weeks signal the market’s expectation that the London interbank offered rate, or Libor, will increase in coming months, Bank of America Merrill Lynch strategists led by Jeffrey Rosenberg in New York wrote in a Nov. 30 note to clients. The premium European banks pay in the currency swaps market to borrow in dollars has almost doubled in the past three weeks, reaching the highest level since May yesterday. The cost to protect against losses on their bonds jumped to a 20-month high before paring the gain today.
- Shipments along the nation's highways continue to rise for U.S. trucking companies, another sign the economic expansion is gaining strength. The Cass Shipments Index, developed by trucker payment-service company Cass Information Systems Inc., jumped 15% in November from a year earlier. Compared with the prior month, the gauge rose 2.8% after a drop in October.
- U.S. Commodities: Wheat Jumps as 'Panic Brewing' on Supplies. Wheat prices jumped the most in seven weeks as excessive rainfall threatened to reduce grain quality and delay the harvest in Australia, the world’s fourth-largest exporter. Wheat futures for March delivery jumped 49.5 cents, or 7.2 percent, to settle at $7.40 a bushel on the Chicago Board of Trade, the biggest gain for a most-active contract since Oct. 8. Egypt, the biggest importer, said today it bought 220,000 metric tons in a tender from the U.S. “There’s a little bit of a panic brewing, and I think the Egyptian tender is a testament that end-users are short high- quality wheat,” said Austin Damiani, a floor broker at the Minneapolis Grain Exchange for Frontier Futures Inc.
- PineBridge Plans $480 Million CLO in First Since AIG Spinoff. PineBridge Investments is in the market with a collateralized loan obligation targeted at about $480 million, according to three people familiar with the discussions. It is the first CLO from the manager since it completed its separation from American International Group Inc. in March. PineBridge will manage the fund that is being created from a group of loans held by a separate investor, said the people, who declined to be identified because the terms are private. The market for CLOs is beginning to open with $2.6 billion of deals backed by widely syndicated loans completed this year. The market had $91.1 billion of issuance at its peak in 2007, according to Morgan Stanley data.
- UN Rules Out Extending Kyoto CO2 Limits This Year, Hurting Carbon Market. The United Nations envoy leading climate talks ruled out extending greenhouse gas limits in the Kyoto Protocol this year, leaving in place doubts about the future of a $2.7 billion a year part of the carbon market.
- Taxpayer Risk 'Impossible' to Know for Some Fed Programs. The Federal Reserve exposed U.S. taxpayers to risks that can’t be quantified based on information it made public today about the collateral posted by recipients of about $885 billion in emergency loans.
- Goldman's(GS) Emergency Fed Loans Topped $24 Billion in Crisis. Goldman Sachs Group Inc., which rebounded from the financial crisis to post record profit last year, was a regular borrower from two emergency Federal Reserve programs in 2008 and early 2009, new data show. The firm borrowed from the Fed’s Term Securities Lending Facility most weeks from March 2008 through April 2009, data released by the Fed today show. Two units of the New York-based firm borrowed as much as $24.2 billion from the Fed’s Primary Dealer Credit Facility in the weeks after Lehman Brothers Holdings Inc.’s bankruptcy in September 2008, the data show. Chief Executive Officer Lloyd Blankfein, 56, was quoted by Vanity Fair last year as saying the company might have survived the credit crisis without government help. The firm’s president,Gary Cohn, was more definitive, according to the magazine: “I think we would not have failed,” he was quoted as saying. “We had cash.”
- Galaxy, Melco Lead Casino Operators Higher After Macau Revenue Surges 42%.
- Signs Point to Extending All Tax Cuts Temporarily. Republicans and Democrats Wednesday sat down to negotiate a compromise on extending Bush-era income tax cuts—an effort that could be the first step toward a deal this month that many strategists in both parties believe will temporarily extend current tax rates for all income levels.
- Hedge Funds Tapped Rescue Program. Hedge funds and investors whose bearish trades on housing helped them profit amid the credit crisis were among those that benefited from a U.S. government emergency rescue program to kick-start lending, according to Federal Reserve data released Wednesday. That program, known as the Term Asset-Backed Securities Loan Facility, or TALF, and established during the financial crisis, provided low-cost loans from the Federal Reserve to investors buying bonds backed by student, auto and commercial-property loans and other assets. The program, which lasted from March 2009 until June 2010, was aimed at helping banks move loans off their books by repackaging them into bonds and selling them. Funds managed or backed by Magnetar Capital, Tricadia Capital and FrontPoint Partners, which made large profits from the downturn in the U.S. housing market, were among those who obtained low-cost loans from the Fed to buy securities during the ensuing credit crisis, according to the Fed data.
- Amazon(AMZN) Poised to Make a Major Strategic Investment in LivingSocial to Counter Groupoogle Threat. With the red-hot acquisition dance between Google and Groupon sucking up all the attention, it’s easy once again to ignore the No. 2 player in the fast-growing social buying space–LivingSocial.
- Citadel, Getco Joust Over Flash Trading in Options Markets. An ongoing debate over the future of so-called flash orders is pitting two of the most powerful U.S. financial firms on opposite sides, with Citadel LLC and Getco LLC continuing a rich history of clashes among Chicago's trading elite. The dispute revolves around regulators' proposed ban on flash trades in U.S. stock and options markets. The practice gives some market participants the chance to act on unfilled orders for stocks or options before they are routed on to another exchange to be filled.
- SEC Goes After Fraud by Local Hedge Funds. The San Francisco office of the Securities and Exchange Commission is seeking to crack down on illegal conduct by hedge funds and corporate bribery, activity that got pushed aside as regulators grappled with Ponzi schemes and subprime mortgage-related probes during the recent financial crisis. The shift in focus is reverberating among Bay Area technology companies and financial-services firms.
- Merck(MRK) to Buy Biotech Company Developing Diabetes Drug. Merck & Co. is expected to announce Thursday a deal to buy a closely held biotechnology company in the early stages of developing a new diabetes treatment, according to a person familiar with the matter.
- Spain, Italy Seek Action. Nations Seen at Risk of Contagion Press for a Central Bank Move, Officials Say. Spain and Italy, the countries that with Portugal appear most at risk from being enveloped by the euro zone's deepening debt turmoil, are leading an effort to spur more decisive action from the European Central Bank in order to prevent the crisis from spreading further.
- Deficit Plan Wins Backers. Bipartisan Support Adds Momentum Despite Sharp Criticism From Left and Right.
- IMF Expects to Double Its Lending Capacity. The International Monetary Fund expects to double its lending capacity to $450 billion over the next few months, giving it additional firepower to deal with the sovereign-debt crisis engulfing Europe, according to IMF officials and documents.
- Power Consumption Declines in China. Western China reports declines, Eastern China has almost no growth.
- The SAC Capital Man Said To Be "Colluding" Against The Euro Just Joined George Soros' Fund.
- Apple(AAPL) Makes Another Play For The Enterprise: Old Navy Testing iPod-Based Point-Of-Sale System. Apple is making a huge play at the enterprise market via iOS: Not just the typical corporate market you think of, like getting big companies to buy Macs instead of Dells, but actually getting companies to use iOS devices as part of their business infrastructure. The latest example: Old Navy, the clothing retailer, is testing out iPod-based point-of-sale systems in its stores, 9to5Mac reports.
- It's About To Get More Expensive For Foreigners To Do Business In China. China is set to increase taxes on foreign companies Dec. 1 by doing away with an exemption to maintenance/construction and education taxes that has been in place since the nation’s sweeping 1994 tax reform.
- Meet The 35 Foreign Banks That Got Bailed Out By The Fed. One may be forgiven to believe that via its FX liquidity swap lines the Fed only bailed out foreign Central Banks, which in turn took the money and funded their own banks. It turns out that is only half the story: we now know the Fed also acted in a secondary bail out capacity, providing over $350 billion in short term funding exclusively to 35 foreign banks, of which the biggest beneficiaries were UBS, Dexia and BNP.
- 30 Weeks of Consecutive Equity Fund Outflows. (graph)
- Why China's Leading Indicators Are A Big Flashing Warning Light To Albert Edwards. As usual, Soc Gen's Albert Edwards does not pull any punches: "Once again, investors see China plays as the only investment game in town. Dylan and I remain convinced we are witnessing a bubble of epic proportions which will burst – catching investors as unawares as the bursting of the Asian bubbles of the mid-1990s."
- Terror-Linked Arrests in Spain and Thailand. The police in and arrested 10 people suspected of operating a counterfeiting network that provided fake European passports to terrorist groups linked to in order to smooth their entry into Western countries, the Spanish Interior Ministry said Wednesday. Seven people — six Pakistanis and one Nigerian — were arrested in Barcelona in raids late on Tuesday and early on Wednesday, and three more — two Pakistanis and one Thai — were arrested in Bangkok in the same period, the ministry said in a statement. One of the Pakistanis arrested in Bangkok, a 42-year-old named Muhammad Athar Butt, known as Tony, directed the forging operation from Thailand, according to a Spanish security official. Mr. Butt was also in charge of cells in Brussels and London, the security official said, speaking on condition of anonymity because the official was talking about a current investigation.
- Obesity Surgery May Become Option for Many More. An advisory committee to the will consider on Friday a request by , the pharmaceutical company, to significantly lower how obese someone must be to qualify for surgery using the company’s Lap-Band device, which restricts intake to the stomach.
- Bank of America's(BAC) Finucane: WikiLeaks Risks Limited. Even if Bank of America is the next target of WikiLeaks, the nonprofit group that recently published online thousands of sensitive US diplomatic cables, it will cause only limited damage, one of the bank's top executives said in Boston today.
- Harvard Law Students Sue Over Airport Body Scans. Two Harvard Law School students are suing the Transportation Security Administration, claiming that the agency's full-body scanners and enhanced pat-downs are unconstitutional. The scans, which show images of airline passengers' naked bodies, and the pat-downs, which include touching genital areas, violate Fourth Amendment rights against unreasonable searches and seizures, according to the complaint, which was filed in federal court on Monday.
- Boehner Excoriates Democrats. Incoming House Speaker John Boehner threw away the niceties that appeared in the wake of his meeting with President Barack Obama, and lambasted Democrats for bringing a bill to the floor that would extend just the lower- and middle-bracket tax rates. “I don’t know what my colleagues across the aisle didn’t hear during the election,” Boehner said Wednesday evening in the Ohio Clock Corridor outside the Senate door. “The American people spoke pretty loudly. They said stop all the looming tax hikes and to cut spending". And while we had a good meeting at the White House yesterday about how to resolve the issue of stopping all of the tax hikes, the House leader is going to go down this path of gerrymandering the process so members only have one option, and that’s to vote on only providing some tax relief for the American people.” Boehner also accused House Democrats of playing “political games.”
Reuters:
- Finisar(FNSR) Q2 Tops Market, Sees Strong Q3. Network equipment maker Finisar Corp reported second-quarter results above market expectations on strong demand for closed networking products, and forecast its third fiscal quarter above estimates, sending its shares up 6 percent.
- Investors in sovereign debt involved in bailouts should incur some losses, Otmar Issing, a former member of the ECB, wrote. "If a permanent rescue mechanism is established, we should also have a restructuring regime that involves losses for private investors," Otmar said. "Default must be a credible threat - otherwise investors will have a strong incentive to buy bonds offering higher interest rates without taking into account the associated risks," he said.
- A 25 billion-euro ($33 billion) contingency fund for Ireland's banks, agreed as part of the bailout for the country, makes its lenders better equipped for stressed conditions than previously required by the Irish regulator and other bodies. While the Irish regulator had estimated the banks would need 15 billion euros at most, the extra 10 billion euros were set aside as a "backpocket" safety net, citing government officials.
- Spain and Ireland Turn to Privatization. Spain and Ireland are set to launch large-scale privatisation programmes as they fight to preserve market faith in their turnaround plans. The Spanish government is looking at auctioning stakes in its national lottery operator and airports, while Ireland will look at privatisations in its electricity and gas sectors as part of a joint European Union and IMF bail-out package agreed on Sunday. News of the privatisation plans came as it emerged that the eurozone bail-out fund will next month begin issuing debt on behalf of embattled member states. Any bonds sold would be the first issued in the name of all currency pact members.
- North Korea, which shelled a South Korean island last month, may be planning an attack on the mainland within the year. North Korea may attack Gyeonggi province, surrounding Seoul, citing a person who quoted an official from the communist nation's espionage agency.
- Japanese Finance Minister Yoshihiko Noda will seek a 10% reduction in public works spending for the next fiscal year. The government allocated 5.7 trillion yen for public works spending this fiscal year, down 20% from last year.
- China should moderately tighten monetary policy by utilizing interest rates and reserve requirements, Guo Tianyong, head of the China Banking Research Center at the Central Univ. of Finance and Economics, wrote in a commentary.
- Li & Fund Ltd.'s Victor Fung expects the price of Chinese exports to rise by a range of 10% to 15% next year because of an average wage increase of about 30%, citing the company's chairman.
- China will shift focus to "stabilizing growth" next year, from "ensuring growth" as it has said this year, at the government's central economic work conference to be held next week, citing government advisers. The Asian nation will lower next year's M2 target to 15% from this year's 17% and cut its new loan target to 7 trillion yuan or lower, the report said.
- None of note
- Asian equity indices are +.75% to +2.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.0 -13.0 basis points.
- Asia Pacific Sovereign CDS Index 110.0 -8.0 basis points.
- S&P 500 futures -.02%
- NASDAQ 100 futures +.01%.
Earnings of Note
Company/Estimate
- (TOL)/-.07
- (DLM)/.34
- (KR)/.31
- (NOVL)/.07
- (PVH)/1.43
- (PAY)/.36
- (ULTA)/.21
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 424K versus 407K the prior week.
- Continuing Claims are estimated to rise to 4200K versus 4182K prior.
- Pending Home Sales for October are estimated to fall -1.0% versus a -1.8% decline in September.
- None of note
- The Fed's Bullard speaking, Fed's Plosser speaking, Fed's Duke speaking, ICSC November chain store sales, weekly EIA natural gas inventory report, (FMC) analyst meeting, (DTV) analyst meeting, CSFB Aerospace/Defense Conference and the CSFB Tech Conference could also impact trading today.
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