Tuesday, January 04, 2011

Today's Headlines


Bloomberg:

  • Corporate Bond Risk Falls in Europe on Economic Growth Optimism. The cost of insuring against default on European corporate bonds fell on speculation economic growth is accelerating. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings was trading at 415 basis points, the lowest level since April 21, according to JPMorgan Chase & Co. at 11:30 a.m. in London. That’s down from 436 basis points on Dec. 31. “We are opening the new year with risk appetite on a strong footing,” said Greg Venizelos, a credit strategist at BNP Paribas SA in London. “The bullishness is coming from both Asia and the U.S. on better growth expectations.” The Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 3.75 basis points to 100.75, JPMorgan prices show. The Markit iTraxx Financial Index of swaps on the senior debt of 25 banks and insurers declined 9 basis points to 169, and the subordinated index fell 21 to 323. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments fell 9 basis points to 200, CMA prices show.
  • Some Fed Officials Had Fairly High Threshold to Alter QE2 Size. Federal Reserve policy makers said that improvements in the economy didn’t meet the threshold for scaling back their plans to purchase $600 billion in bonds. “While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program, and some noted that more time was needed to accumulate information on the economy before considering any adjustment,” the Fed said in minutes of its Dec. 14 policy meeting, released today in Washington. The Fed’s Open Market Committee “emphasized that the pace and overall size of the purchase program would be contingent on economic and financial developments,” according to the minutes. “However, some indicated that they had a fairly high threshold for making changes to the program,” the minutes added. The minutes show that with growth picking up since the easing program began, Fed officials remain focused on an unemployment rate forecast to be high for some time and an inflation rate that is lower than the Fed prefers. During the meeting, Fed officials affirmed their pledge to purchase $600 billion in Treasury securities through June.
  • Orders to U.S. Factories Unexpectedly Increased in November. American factories unexpectedly received more orders in November, signaling that gains in consumer spending, business investment and exports will sustain the manufacturing recovery. The 0.7 percent increase in bookings topped the median forecast of economists surveyed by Bloomberg News which called for a 0.1 percent drop, figures from the Commerce Department showed today in Washington. Orders for capital goods like computers rebounded after falling in October. Orders for durable goods, which make up over half of total factory demand, fell 0.3 percent, less than the 1.3 percent drop estimated by the government Dec. 23, today’s report showed. Bookings for capital goods excluding aircraft and military equipment, a measure of future business investment, rose 2.6 percent after a 3.2 percent drop in October that was smaller than previously estimated. Demand for computers and electronics climbed 6.3 percent, the most since February 2009. Shipments of such equipment, which are used in calculating gross domestic product, increased 1.1 percent, better than the 1 percent gain estimated in last month’s durable goods report.
  • GM(GM), Ford(F), Chrysler U.S. December Sales Top Analyst Estimates. GM’s deliveries in the month rose 7.5 percent to 224,185, the Detroit-based automaker said today in a statement. The largest U.S. automaker was expected to post a 4.3 percent sales increase, the average of four analysts’ estimates compiled by Bloomberg. Ford’s sales gained 3.5 percent, topping the 3.3 percent average estimate of five analysts. “This is a market that’s coming back significantly,” said Rebecca Lindland, an analyst with IHS Automotive, a researcher in Lexington, Massachusetts. “And with really strong products coming from GM, Ford and Chrysler, there’s a lot of opportunity for change in the marketplace.”
  • Too-Big-to-Fail Banks Face New Limits Under EU Plan. The European Union may give regulators power to block new products and limit trading risks at banks deemed too big to fail, as part of plans to protect public finances from future financial crises. National regulators of cross-border banks may be able to require “changes to legal or operational structures” if the lender would need “extraordinary public financial support” during a crisis, according to draft proposals obtained by Bloomberg News.
  • BP(BP) Gains on Report Shell Considered Bid; Spill Costs Played Down. BP Plc jumped the most in six months after a report that Royal Dutch Shell Plc considered a takeover bid during the oil spill and the lawyer in charge of the $20 billion compensation fund said only half the cash may be needed. Shell is still interested in a merger, the Daily Mail newspaper reported today, citing unidentified people close to the company. Kenneth Feinberg, who is administering the fund, said in a Dec. 31 Bloomberg Television interview that $10 billion may be “more than enough to pay all the claims.” BP advanced 5.9 percent, the most since July 12, to 492.90 pence as of the 4:30 p.m. close in London.
  • Gold Futures Decline Most in Seven Weeks as Equities Rally; Silver Plunges. Gold fell the most in six months on speculation that a global recovery will curb demand for the metal as a haven asset. Silver plunged. Equities gained worldwide. The dollar strengthened against the Japanese yen on speculation that the U.S. recovery will gather momentum. Gold posted a 10th straight annual gain in 2010, rising 30 percent and outperforming stocks and bonds. The metal reached a record $1,432.50 an ounce on Dec. 7. “Some of the flight-to-quality bid is coming out of gold,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “Some of the fast money is selling gold to begin the year. People are expecting equities to rally.” Gold futures for February delivery fell $40.10, or 2.8 percent, to $1,382.80 at 10:43 a.m. on the Comex in New York. A close at that price would mark the biggest decline for a most- active contract since July 1.
  • Crude Oil Futures Tumble in N.Y. After Yesterday's Surge to 27-Month High. Crude oil fell from the highest level in 27 months in New York as commodities including precious metals tumbled. Futures dropped the most in seven weeks amid speculation that a global economic recovery will boost investments in currencies and equities. A stronger dollar reduces demand for commodities. Crude for February delivery fell $3.12, or 3.4 percent, to $88.43 a barrel at 12:52 p.m. on the Part of what the commodities rally was all about was they were the currency of last resort in terms of storing value,” said John Kilduff, a partner at Again Capital LLC in New York. “Economic prospects are helping the dollar.”New York Mercantile Exchange, the biggest decline since Nov. 12.
  • Sales at U.S. Retailers Increased 3.6% Last Week. Sales at U.S. retailers rose 3.6 percent last week from a year earlier, as some shoppers returned to stores to take advantage of post-Christmas discounts, dodging a snowstorm that assailed the East Coast. Sales for the week ended Jan. 1 rose 0.4 percent from the previous week, according to a chain-store sales index released today by New York-based International Council of Shopping Centers and Goldman Sachs Group Inc. That compared with a 1 percent gain a week earlier.
Bloomberg Businessweek:
  • In the Works: A Google(GOOG) Mobile Payment Service? Google (GOOG) is considering building a payment and advertising service that would let users buy milk and bread by tapping or waving their mobile phones against a register at checkout, two people familiar with the plans say. The service may make its debut this year, say the two, who requested anonymity because the plans haven't been announced.
CNBC:
  • Regional Banks to See Loan Growth: Credit Suisse. U.S. regional banks could see better loan growth in 2011 and 2012 as they resecuritise and sell off legacy commercial mortgage-backed securities (CMBS) to private equity funds and others, Credit Suisse said.
Business Insider:
Zero Hedge:
New York Times:
  • G.O.P. Sets Up Huge Target for Budget Ax. The incoming Republican majority in the House is moving to make good on its promise to cut $100 billion from domestic spending this year, a goal eagerly backed by conservatives but one carrying substantial political and economic risks. House Republican leaders are so far not specifying which programs would bear the brunt of budget cutting, only what would escape it: spending for the military, domestic security and veterans. Even if adopted by the House, the Republicans’ budget is unlikely to be enacted in anything like the scale they envision, since Democrats retain a majority in the Senate and President Obama could veto annual appropriations bills making the reductions. But the effort is more than symbolic: in particular it could give House Republicans increased leverage in budget negotiations with the White House this winter and spring, when the administration must get Congress to raise the federal debt limit or risk a government financing crisis.
  • Strained States Turning to Laws to Curb Labor Unions. Faced with growing budget deficits and restive taxpayers, elected officials from Maine to Alabama, Ohio to Arizona, are pushing new legislation to limit the power of labor unions, particularly those representing government workers, in collective bargaining and politics. State officials from both parties are wrestling with ways to curb the salaries and pensions of government employees, which typically make up a significant percentage of state budgets. On Wednesday, for example, New York’s new Democratic governor, Andrew M. Cuomo, is expected to call for a one-year salary freeze for state workers, a move that would save $200 million to $400 million and challenge labor’s traditional clout in Albany. But in some cases — mostly in states with Republican governors and Republican statehouse majorities — officials are seeking more far-reaching, structural changes that would weaken the bargaining power and political influence of unions, including private sector ones.
CNNMoney:
onwallstreet:
FINalternatives:
Hedge Funds Review:
Resource Investor:
AppleInsider:
  • Apple's(AAPL) Holiday iPhone, iPad and Mac Sales Stronger Than Expected - Report. Whitmore said demand for the iPad, which remains "largely unchallenged" in the market, is tracking ahead of his model, and has accordingly increased sales estimates from 6 million to 6.5 million for the fourth quarter of calendar 2010. He also sees Apple selling 28 million iPads in 2011, up from his previous estimate of 22 million. "Apple continues to benefit from the strongest product offering in its history and the strong double-barreled product cycle is driving massive global demand for iPads and iPhones," he wrote. "Both categories are benefiting from additional carriers, international expansion, and limited competition." The analyst also upped his iPhone sales projections for the holiday period to 16 million, up a million from the previous estimate of 15 million. He now expects Apple to sell 60 million iPhones in calendar year 2011, up from 55 million. Whitmore's estimates do not, however, include the prospect of a Verizon iPhone, widely reported to become available in early 2011. He believes that the addition of Verizon as a U.S. carrier could bump Apple's iPhone sales up by 5 million to 7 million units. "We expect a CDMA based iPhone to be a significant positive for AAPL with limited cannibalization at AT&T," he said. "Our DB colleague Brett Feldman, who covers Telecom Services, estimates that Verizon will add roughly 15M iPhones in 2011 with 6M cannibalized from AT&T."
Benzinga:
  • Qualcomm(QCOM) Near Deal for Atheros(ATHR). The New York Times DealBook is reporting that Qualcomm (NASDAQ: QCOM) is near a deal to by Atheros Communications, Inc. (NASDAQ: ATHR). Qualcomm would pay about $45 per share for the company, or $3.5 billion in cash. A deal could be announced as soon as tomorrow.
Media Beat:
  • Google's(GOOG) Chrome Browser Hits 10% Market Share. While Microsoft’s Internet Explorer is still the dominant Web browser, Google’s Chrome has been growing consistently, as is evident from a new report from NetApplications. The report shows that Chrome’s slice of the market more than doubled during the past year, from 4.63 percent in December 2009 to 9.98 percent in December 2010.
Politico:
  • Darrell Issa Asks Business: Tell Me What to Change. Rep. Darrell Issa (R-Calif.) wants the oil industry, drug manufacturers and other trade groups and companies to tell him which Obama administration regulations to target this year. The incoming chairman of the House Oversight and Government Reform Committee - in letters sent to more than 150 trade associations, companies and think tanks last month - requested a list of existing and proposed regulations that would harm job growth.
Reuters:
  • Interview - Greece Not Discussing Debt Restructuring - Finmin. Greece is sticking to its plan to return to bond markets sometime in 2011, depending on market conditions, and also issue "diaspora" bonds to Greeks abroad, Papaconstantinou said. He said discussions with China on buying Greek bonds, as agreed during a visit to Athens by Chinese Prime Minister Wen Jiabao in October, were progressing but could say nothing about the amount or timing of any purchases. The EU would discuss extending the repayment term of the emergency loan to Greece in January, to avoid a hump in 2014-15 and be more in line with Ireland, the second euro zone country to request help. "We would like the lengthening to cover the entire (bailout) not only the part that has not been disbursed but also the part that has been disbursed. This is something that the Commission is positive about, we have to wait for the final decision by the Eurogroup," Papaconstantinou said. He added he was confident the EU would come to an agreement on the issue of joint euro zone bonds in the near future and that the bloc would make the right decisions to exit the debt crisis. E-bonds would effectively mean all 17 euro zone countries financing a portion of their debt together and sharing a credit rating, something Germany has strongly opposed.
Le Figaro:
  • French police and intelligence officers are preparing for possible attacks on Coptic churches in and around Paris, citing intelligence officials. Lists of Coptic congregations in the Ile-de-France region have been circulated on websites associated with Islamic extremists.
De Telegraaf:
  • The Dutch National Coordiator for Counter-Terrorism asked police to keep a watchful eye on Coptic churches in the Netherlands, citing a spokesman for the agency. The measures come in response to the Jan. 1 attack on a Coptic church in Alexandria, Egypt, and are unrelated to lists circulating on the Internet of possible terror targets, citing the agency. Coptic churches in Amsterdam, Utrecht and Eindhoven are on the lists.

Financial Times Deutschland:
  • Amazon.com(AMZN) is accelerating expansion in Europe to boost sales. Amazon is hiring workers at its European headquarters in Luxembourg to speed up expansion. The company also plans to add a second logistics center in the western German state of North Rhine-Westphalia this year to serve customers in neighboring Belgium and the Netherlands.
Sueddeutsche Zeitung:
  • Pacific Investment Management Co. has stopped buying the government bonds of Europe's so-called peripheral countries, Andrew Bosomworth, a Munich-based fund manager at Pimco, said. "In light of the elevated credit risk of the three countries Portugal, Greece, Ireland, we're not putting in any more money there; we withdrew most of the month," Bosomworth said. "We're also not investing new money in countries with contagion risks even if they're solvent like Spain and Italy; we underweight them considerably."

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