Evening Headlines
Bloomberg:
- Egyptian Credit Risk Falling to Lowest Since Protests. Egypt’s credit risk is falling to the lowest level since anti-government protests began two weeks ago and international borrowing costs are dropping as the nation’s biggest political crisis in three decades eases. The cost of insuring Egyptian sovereign debt retreated 32 basis points, or 0.32 percentage point, yesterday to 334, the lowest level since Jan. 25, according to CMA prices in London. The yield on Egypt’s 5.75 percent bond due in April 2020 slumped 39 basis points to 6.21 percent after climbing to a record 7.2 percent on Jan. 31, data compiled by Bloomberg show.
- Commodities to Beat Emerging Market Stocks in 2011, SocGen Says. Commodities will beat stocks in China, Brazil and other emerging economies this year as inflationary pressure curbs equity gains, said Societe Generale. Growth of raw-material consumption in emerging economies led by China will be sustained even as prices advance, said commodity analyst Jeremy Friesen, who was a strategist at Morgan Stanley in New York before joining the Paris-based bank. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 14 percent last year as the Dow Jones- UBS Commodity Total Return index climbed 17 percent. “Prices of commodities will have to go up to rationalize the investments to produce commodities as well as consumption,” Friesen said yesterday in a phone interview from Hong Kong. “Corporates are going to have to deal with how to be profitable and yet still facing higher costs.”
- Oil Trades Near One-Week Low on Forecast U.S. Stockpiles Gained. Oil traded near the lowest in more than a week as tensions in Egypt eased and rising stockpiles in the U.S. signaled fuel demand may be faltering in the world’s biggest crude consumer. Investors should consider selling bullish oil positions as the Egyptian crisis subsides, according to JPMorgan Chase & Co. Futures slid 1.7 percent yesterday amid government talks with the opposition. U.S. crude inventories probably rose for a fourth week, a Bloomberg News survey showed before an Energy Department report. Supplies at Cushing, Oklahoma, the delivery point for West Texas Intermediate oil, are at the highest since at least 2004. “The reason for the moderation, especially with WTI, is the continued high stocks at Cushing, coupled with the fact that some of the geopolitical unrest in Egypt seems to be abating,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. Gasoline inventories probably climbed to the highest level in almost 21 years, according to the survey. Supplies of the motor fuel increased 3 million barrels, or 1.3 percent, from 236.2 million a week earlier, according to the median of 10 analyst estimates. The projected advance would leave stockpiles at the highest since March 1990.
- Obama Said to Want Interest-Rate Relief for State Unemployment Programs. President Barack Obama is considering seeking aid for state unemployment insurance programs burdened by debt because of high unemployment rates, according to a person familiar with the discussions. As part of the 2012 fiscal budget, Obama will seek a delay of state tax increases and a suspension of interest payments on state debt, the person said on condition of anonymity before the budget is released Feb. 14. Under existing law, some states would be required to raise taxes next year due to federal rules covering shortfalls in unemployment insurance funds. Obama is proposing a moratorium on those tax increases and interest payments in 2011 and 2012, the person said. U.S. states face a total budget deficit of at least $125 billion next fiscal year and have responded with proposals to cut education, health care and other programs, according to the Center on Budget and Policy Priorities. Every state except Vermont is constitutionally required to balance its budget.
- Foreign Islamists Get Little Support in Eqypt. Iran and its ally Hezbollah have been quick to claim kinship with the mass demonstrations in Egypt, describing them as part of a "regional Islamic awakening," but the reaction from Egypt's own Islamic movement has been lukewarm. The latest endorsement of the protesters came Monday when Seyed Hassan Nasrallah, leader of the political and militant Shiite group Hezbollah, gave a televised speech to a crowd of several hundred supporters gathered at an auditorium in south Beirut waving Egyptian and Hezbollah flags. "The resistance Egyptians demonstrate does not differ from the resistance of Hezbollah during the 2006 war with Israel," Mr. Nasrallah said. "I wish to be with you and offer my blood to support your cause." Iran and Hezbollah have reveled in the upsurge of opposition to Egypt's President Hosni Mubarak, a traditional U.S. ally and one of their main rivals for regional influence. Moreover, the prospect of Egypt's Muslim Brotherhood gaining more power if Egypt holds free elections has raised fears in the U.S. that the pro-democracy movement could be hijacked by Islamists. During Friday's prayer sermon, Iran's supreme leader, Ayatollah Ali Khamenei, said the oppressed people of Egypt and Tunisia were aspiring for an Islamic state modeled after Iran and that the street demonstrations were "liberating Islamic movements."
- Cash Buyers Lift Housing. Buyers in markets around the U.S. are snapping up homes in all-cash deals, betting that prices are at or near bottom and breathing life into some of the nation's most battered housing markets.
- Pay Gap Widens at Big Law Firms as Partners Chase Star Attorneys. Some of the biggest law firms are paying outsize salaries to star attorneys, in some cases 10 times what they give other partners, in a strategy that is stretching compensation gaps and testing morale at firms.
- Chipotle(CMG) Under Scrutiny by ICE. Chipotle Mexican Grill Inc., a burrito chain that owns and operates about 1,100 outlets across the U.S., was forced to let go of hundreds of workers in Minnesota over recent weeks amid an immigration probe that has spread to other states.
Zero Hedge:
- Ratigan and Fleckenstein Explain The Fed's Role In Recent Food Price Ignited Revoluations. (video)
- Time Lapse Interactive Video of Global Debt: 1870-2010.
- In Europe, an Effort to Shed Light on Short-Selling. The hedge fund manager David Einhorn does not seem to mind revealing his bets against a company, at least on his own terms. Over the years, Mr. Einhorn, the founder of Greenlight Capital, has announced several major short positions, most notably in 2008 when he publicly derided Lehman Brothers just months before the investment bank collapsed. But now Mr. Einhorn and other large investors do not have a choice in France, where regulators started requiring money managers to disclose on a daily basis the stocks they bet against in the country.
- Ex-Dow(DOW) Scientist is Convicted of Selling Secrets in China. A jury in Baton Rouge, La., on Monday found a former scientist guilty of conspiring to steal company secrets and sell them to firms in China, the Justice Department said.
- Concerns Grow Over Egypt's WMD Research. With Egypt in revolt and the country’s future uncertain, concern is growing over whether a new government in the Arab world’s most militarily and industrially advanced country could accelerate an arms race in one of the world’s most volatile regions. At the heart of the concern is intelligence indicating that Egypt has quietly carried out research and development on weapons of mass destruction, including nuclear, chemical, biological and missile technology. The research and development has continued virtually without pause over the past three decades, according to interviews with U.S. officials and a review of intelligence and other government documents by NBC News. Specifically, the intelligence indicates that Egypt has carried out experiments in plutonium reprocessing and uranium enrichment,
helped jump-start Saddam Hussein’s missile and chemical weapons programs in Iraq, and worked with Kim Jong Il on North Korea’s missile program. “If we found another country doing what they’ve done, we would have been all over them,” said a former U.S. intelligence official, speaking on condition of anonymity. The reason the U.S. didn’t move, officials say, was Egypt’s role as a staunch U.S. ally and stabilizing force in the Middle East and later as a key player in U.S. counterterrorism efforts. If Egyptian President Hosni Mubarak is forced to step down, new leadership in Cairo could mean a radical change in that relationship, analysts say. In fact, at least one nuclear proliferation analyst believes that a shift may already be under way in Egyptian policy and that the U.S. may have to deal with Cairo withdrawing from the Nuclear Non-Proliferation Treaty which it signed and ratified in 1968. And Cairo already has given indications that it may harbor nuclear ambitions, according to analysts inside and outside the U.S. government.
- Democratic Moderates Chart Own Course on Health Care Reform. A handful of moderate Senate Democrats are looking for ways to roll back the highly contentious individual mandate — the pillar of President Barack Obama’s health care law — a sign that red-state senators are prepared to assert their independence ahead of the 2012 elections. They haven’t decided whether to propose legislation, but any effort by moderate Democrats that takes aim at the individual mandate could embarrass Obama and embolden Republicans who are still maneuvering to take down the health care law. And it’s not just health care. The senators are prepared to break with the White House on a wide range of issues: embracing deeper spending cuts, scaling back business regulations and overhauling environmental rules. The moderates most likely to buck their party include Sens. Joe Manchin of West Virginia, Ben Nelson of Nebraska, Claire McCaskill of Missouri and Jon Tester of Montana — all of whom are up for reelection in 2012 and represent states Obama lost in 2008. The goal is to lay down a record of bipartisan compromises with Republicans, but it could also put Obama at odds with key centrists, right at the moment the president himself is looking to forge a more centrist path.
- Investors Are Evacuating Emerging Markets Funds. Investors are fleeing emerging markets funds — which may in itself push down those markets further. Worldwide, investors yanked a record $7 billion from emerging markets funds the week ended Feb. 2, according to EPFR, which tracks the funds. That's about 1% of the funds tracked by EPFR, says Brad Durham, the company's managing director. The average emerging markets fund, which invests in small or developing stock markets, has fallen 2.8% this year, according to Lipper. The turmoil in Egypt may have prompted some investors to flee. The country's stock market — currently closed — has fallen 21.1% this year.
Reuters:
- Muslim Brotherhood Warns It Could Quit Talks With Egyptian Government. U.S. President Barack Obama said on Monday talks to resolve Egypt's crisis were making progress, but the main Islamist opposition in Cairo said it could quit the process if protesters' demands were not met. Obama's comments seemed to contradict those by Egyptian opposition figures who reported little progress in talks over demands including the immediate exit of President Hosni Mubarak. Protesters barricaded in a tent camp in Tahrir Square in the heart of Cairo have vowed to stay until Mubarak quits and hope to take their two-week campaign to the streets with more mass demonstrations on Tuesday and Friday. The potential rise to power of the banned Muslim Brotherhood, widely seen as by far the best organised opposition group, troubles Egypt's Western allies and neighbour Israel, which has a peace treaty with the Arab country. Obama said on Sunday the Brotherhood lacks majority support. On Monday the White House expressed concern about the group's "anti-American rhetoric", but stopped short of saying it would be against the group taking a role in a future government.
- Islamist Rebel Says He Ordered Russian Bombing. Islamist rebel leader Doku Umarov said on Monday he had ordered a suicide bombing that killed 36 people at Russia's busiest airport last month. Umarov, 46, speaking in a video carried by the Islamist website www.Kavkazcenter.com, said there would be further such attacks in pursuit of an independent Muslim state governed by Sharia law in Russia's Caucasus region -- a territory embracing Chechnya, Dagestan and other nearby territories. Umarov appeared in the video, apparently made on the day of the January 24 attack on Moscow's Domodedovo airport, wearing combat fatigues, talking quietly and hesitantly. "The special operation today in Moscow ... was carried out on my orders," said Umarov, who styles himself the Emir of the Caucasus. "These special operations will continue ... to show the chauvinist regime of (Russian Prime Minister Vladimir) Putin in Moscow ... that we can carry out these operations where we want and when we want," he said, pointing a finger toward the camera. The attack bore the hallmark of Caucasus rebels but Monday's video was the first time Umarov had claimed direct responsibility for it.
- Veeco(VECO) Sees Q1 Below Est On Longer Sales Cycle. Chip gear maker Veeco Instruments Inc expects a longer sales cycle and forecast first-quarter results below analysts' estimates, sending its shares down 9 percent in extended trading.
- Synchronoss Tech(SNCR) Sees Strong Q1 on Customer Ramps. Communication software maker Synchronoss Technologies Inc forecast better-than-expected first-quarter earnings on robust demands from a customer.
Citigroup:
- Reiterated Buy on (DHR), target $57.
- Reiterated Buy on (K), target $61.
- Reiterated Buy on (HUM), raised estimates, boosted target to $71.
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 104.0 -3.5 basis points.
- Asia Pacific Sovereign CDS Index 115.25 -4.75 basis points.
- S&P 500 futures +.01%.
- NASDAQ 100 futures +.03%.
Earnings of Note
Company/Estimate
- (SLE)/.25
- (AVP)/.66
- (BZH)/-.49
- (CVH)/.86
- (WMG)/-.19
- (VSH)/.44
- (AGCO)/.76
- (MLM)/.18
- (NYX)/.43
- (DIS)/.55
- (BWLD)/.53
- (ILMN)/.29
- (OPEN)/.22
- (PBI)/.61
- (PPS)/.33
- (ASEI)/1.40
- (CERN)/.84
7:30 am EST
- The NFIB Small Business Optimism Index for January is estimated to rise to 94.0 versus a reading of 92.6 in December.
- None of note
- The Fed's Fisher speaking, Fed's Lockhart speaking, Fed's Lacker speaking, JOLTs Job Openings for December, IBD/TIPP Economic Optimism for February, weekly retail sales reports, weekly ABC Consumer Confidence reading, $32 billion 3-Year Treasury Notes Auction, $22 billion 1-Year Treasury Bills Auction, Barclays Industrial Conference and the (EMC) strategic forum could also impact trading today.
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