Evening Headlines
Bloomberg:
- Oil Rises for Third Day on Mideast Unrest Concern, U.S. Stockpile Decline. Oil climbed for a third day as a U.S. government report showed crude stockpiles unexpectedly dropped last week while fighting in Libya renewed concern that supply disruptions may spread to the Middle East. Futures gained as much as 0.7 percent, rising from the highest close in 29 months, after Libyan forces loyal to Muammar Qaddafi attacked rebels on the east coast where much of the country’s oil is refined and shipped. Nouriel Roubini said an escalation of unrest in the Middle East may push prices as high as $140 to $150 per barrel. U.S. crude inventories dropped for the first time in seven weeks, a report showed yesterday. “The big risk at the moment does remain around the Middle East, in particular Iran,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. Crude for April delivery gained as much as 71 cents to $102.94 in electronic trading on the New York Mercantile Exchange, and was at $102.49 at 12:42 p.m. Sydney time. Yesterday, the contract rose $2.60 to $102.23, the highest settlement since Sept. 26, 2008. Prices are up 27 percent from a year ago. Brent crude for April settlement increased 26 cents, or 0.2 percent, to $116.61 a barrel on the London-based ICE Futures Europe exchange. Yesterday, it rose 93 cents, or 0.8 percent, to $116.35, the highest since Aug. 21, 2008. Websites have called for a nationwide Saudi “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
- Food Prices to Extend Gains as Stockpiles Rebuilt, Led by Corn, UBS Says. Food prices will extend gains even as harvests expand, as exporters need to rebuild stockpiles, tightening global supplies and driving corn, wheat and soybeans higher, UBS AG said. Corn may advance to $8.30 a bushel, 15 percent higher than yesterday’s close, Dominic Schnider, director for wealth management research at UBS, said in an interview in Singapore yesterday. Wheat may jump 23 percent to $10 a bushel, while soybeans may surge 7.6 percent to $15 a bushel, he said. “We need to have at least two or three years of good harvests” to rebuild stockpiles, Schnider said. The global food price index, compiled by the United Nations’ Food and Agriculture Organization, surged to a record for a second month in January, driven by higher prices of cereals, dairy and sugar. Extending those gains may push millions more people into extreme hunger and poverty, prompting governments to pay more for food subsidies, widening national budget deficits. Food prices are already at “dangerous levels” after pushing 44 million people into poverty since June, World Bank President Robert Zoellick said Feb. 15. That adds to the more than 900 million people around the world who go hungry each day, he said.
- China Signals Potential Opposition to No-Fly Zone Over Libya. China joined Russia today in signaling potential opposition to imposing a no-fly zone over Libya if fighting continues between protesters and forces loyal to leader Muammar Qaddafi.
- Brazil Increases Key Rate to 11.75% as Inflation Threatens Bank's Target. Brazil’s central bank raised its benchmark overnight rate by a half-point for a second straight meeting to cool inflation that is approaching the upper limit of the government’s target range. The bank’s policy committee, led by President Alexandre Tombini, today voted unanimously, without a bias, to raise the Selic rate 50 basis points, or 0.5 percentage point, to 11.75 percent, matching the estimates of 44 of 51 analysts surveyed by Bloomberg. Six economists forecast a 0.75-point increase and one predicted a full percentage-point increase. “Following the process of adjustment of monetary conditions, the monetary policy committee decided, unanimously, to raise the rate to 11.75 percent a year, without a bias,” policy makers said in the statement announcing their decision. Annual inflation in the $1.57 trillion economy has accelerated every month since August, prompting the bank to raise interest rates in January for the first time since July. “There is a slowdown happening, and that helps the central bank,” said Marcelo Salomon, chief Brazil economist for Barclays Capital. “It clearly gives the bank more time to work around the necessary adjustment cycle.” Brazil’s economy expanded in December at its slowest pace in six months, after retail sales stalled and credit growth slowed, according to the central bank’s economic activity index, a proxy for gross domestic product. Inflation, as measured by the benchmark IPCA-15 index, accelerated to 6.08 percent in the year through mid-February, the fastest pace since December 2008. In the month through mid-February, prices rose 0.97 percent, the highest since April 2003. The central bank targets inflation of 4.5 percent, plus or minus two percentage points.
- West Cools on No-Fly Zone. Senior U.S. defense officials tried to lower expectations of an international military intervention in Libya, as rebels, fighting off a key offensive by forces loyal to Col. Moammar Gadhafi, called for foreign airstrikes.
- Ohio Vote Puts Curbs on Unions in Reach. Ohio state senators narrowly approved a bill that would prohibit public-employee unions representing 400,000 state and local workers from bargaining over health benefits and pensions, while also eliminating the right to strike. While national attention has focused for weeks on a similar battle in Wisconsin, the vote, by 17-16 in Ohio's Republican-controlled Senate, virtually ensured that the Buckeye State will become the first to strip collective-bargaining rights from public employees as states grapple with recent gaping budget deficits. The move is especially significant because Ohio is larger than Wisconsin, and like its fellow Midwestern state, is both a stronghold of public-sector labor unions and a swing state politically.
- SEC Probe Examines Bank-Loan Practices. The Securities and Exchange Commission is scrutinizing U.S. banks that have restructured troubled loans in order to make them appear healthier than they really are, according to people familiar with the situation. Officials at the SEC are seeking information from an unknown number of regional and community banks with large concentrations of commercial real-estate loans, these people said.
- Bill Gates Says High Pension Costs Hurt Education. Billionaire philanthropist Bill Gates will step into the national debate over state budgets Thursday with a call for states to rethink their health care and pension systems, which he says stifle funding for public schools. Mr. Gates in an interview said he will use a high-profile conference Thursday in Long Beach, Calif., to urge that more attention be paid to how states calculate their employee-pension funding and health-care obligations. "These budgets are way out of whack," Mr. Gates said. "They've used accounting gimmicks and lot things that are truly extreme." The comments come after Mr. Gates spent more than a year studying the issue and enlisting the advice of leading academics and others.
- Mets Owners Threatened With More Charges. The owners of the New York Mets, who face a $1 billion lawsuit related to withdrawals they made from Bernard Madoff's investment firm, are expected to face additional allegations from a court-appointed trustee about how they may have benefitted from the multibillion-dollar Ponzi scheme if they fail to reach a settlement, according to a person familiar with the situation.
- Heads of U.S., Mexico to Meet as Tensions Rise. President Felipe Calderón will meet in Washington on Thursday with President Barack Obama in an attempt to repair relations at a time when spiraling violence in Mexico's drug war has frayed ties between the two allies.
- Fed Finds Climbing Costs Hit Shoppers. Many manufacturers are passing along higher input costs to their customers, a sign that rising prices for wheat, cotton, iron, and other commodities could increasingly reach consumers in coming months, according to the Federal Reserve's beige book survey. The report, a summary of economic conditions across the central bank's 12 regional districts, said manufacturers "in a number of districts reported having greater ability" to pass through higher costs. "Retailers in some districts mentioned they had implemented price increases or were anticipating such action in the next few months," the Fed said.
- U.S. Troops Shot in Germany; Terror Suspected. A lone gunman killed two American servicemen and wounded at least two others on a U.S. military bus outside Frankfurt Airport in what officials described as a possible terrorist attack. The shooting was the first deadly assault on U.S. military personnel in Europe in years. The official said it was too early to tell if the suspect was aligned with Al Qaeda or localized Islamic organizations in Kosovo, a former Yugoslav territory that is majority Muslim.
- Message to the GOP: Austerity Is Not Enough. Republicans won't capture the White House without a pro-growth platform.
- Obama's Health Waiver Gambit. The White House offers the mirage of state flexibility.
- Time to Get Serious About American Oil. Why is Washington blocking oil exploration in states like Alaska and Louisiana when the Middle East is such a powder keg?
- Democrats Ready Spending Bill With Few Cuts: Aide. U.S. Senate Democrats are preparing a spending bill that yields no ground to House Republicans who are seeking deep cuts in government spending, a Democratic aide said on Wednesday.The spending bill would essentially keep government spending at its current level through the end of the fiscal year on Sept. 30.
Business Insider:
- An Orgy of Speculation. Ben Bernanke is confident that his policies have paved the way for a self sustaining recovery, but there's plenty of reason to be skeptical. For one thing, the Fed's zero rates and bond buying program (QE2) have had a negligible effect on unemployment and housing. And for another, they've led to a surge in speculation. That's hardly a reason to celebrate. In the last week, a number of reports confirm that hedge funds have been loading up on debt believing that improving economic data and the Fed's liquidity support will push stocks even higher. That seems like a risky bet given the unevenness of the rebound and the spreading mayhem in the Middle East. Even so, fund managers are levering-up like there's no tomorrow convinced that this is the beginning of another bull market. Here's the rundown from Bloomberg:
- Wall Street to Trade Municipal Bonds Like It Trades Mortgages. The major players in muni CDSX will be hedge funds, Lo says. "There's a lot of money sloshing round hedge funds. I wouldn't be surprised if John Paulson [who shorted residential mortgage backed security CDOs with credit default swaps and made a fortune] put a large chunk of his very large fund into a bet against the muni bond market using these CDS instruments." We know the signs this time. It remains to be seen if they will they be ignored.
- At Least Five Legal Complaints Brought Against Ray Dalio's "Demoralizing" Management Style.
- Here's That Pentagon "Financial Terrorism" Report Glenn Beck and Maria Bartiromo Are Talking About.
- Murder in Pakistan: A Chilling Message. Shahbaz Bhatti, Pakistan's federal minister for minorities, was assassinated today by Islamic extremists determined to bring down Pakistan's civilian government.
- Complete List of Which Countries Sold Weapons to Libya.
- Watch the Highlight of Today's Congressional Hearing: Ron Paul vs. The Bernank. (video)
- US Naval Update: It's a Mediterranean Party and The Enterprise is Invited - Libyan Endgame Expected Within 5-7 Days.
Forbes:
- China's High-Speed Rail, Highly Suspect. It may be another symptom of a bubble economy in which vast sums are misspent on underutilized assets. (Hmmm…like in the financial whirl of America’s “cowboy capitalism”!) “The costs are raising worries over financing,” the SCMP reports. “Major state-owned railway and rail car building companies with shares listed in Hong Kong and Shanghai [see China Railway Construction Corp., China Railway Engineering Corp. and subsidiaries ] are relying on bonds and bank loans to finance projects, with onerous repayment obligations that may be difficult to meet given the revenue projections for many projects.” It all stems from the state and the railways ministry has amassed $300 billion in debt.
- The Big Deal About the NYSE's(NYX) Big Deal: Derivatives. As regulators start to scrutinize the proposed combination of the NYSE and the Deutsche Börse, they'll need to take into account much more than just equity trading.
- Libya: Spending Oil Money Across the Globe. In the span of a few years, Libya's financial tendrils have reached across oceans, across borders and across continents.
- Bradley Manning, WikiLeaks' Alleged Source, Faces 22 New Charges. The Army has brought new charges - including one that carries the death penalty - against Pfc. Bradley E. Manning, a former intelligence analyst accused of leaking hundreds of thousands of classified military and diplomatic documents to the anti-secrecy Web site WikiLeaks.
Chicago Tribune:
- Missing Wisconsin Dems Now Face $100 Daily Fines. The 14 Wisconsin state Senate Democrats who left the state two weeks ago now face fines of $100 for each day they stay away.
- GAO: Medicare Losing $48 Billion. Nearly 10 percent of all Medicare payments are fraudulent or otherwise improper, and the government isn’t doing enough to stop them. That’s the conclusion of a Government Accountability Office report released Wednesday. The report, issued at the request of a House subcommittee investigating Medicare and Medicaid fraud, estimates that the federal government is losing $48 billion on the improper payments – a significant amount for a program that “is fiscally unsustainable in the long term” unless action is taken.
Reuters:
- China's annualized inflation for the first quarter of the year will likely exceed 5%, citing Fan Jianping, head of economic forecasting at the State Information Center.
- Monster U.S. Online Jobs Index Rises in February. A monthly gauge of online labor demand in the United States rose 4 percent in February compared with the same month a year ago, led by gains in the utilities and retail sectors, according to data released on Thursday. Compared with January, Monster Worldwide Inc(MWW), an online recruiting firm, said its monthly index rose by 6 percent in February.
- QE-2 May Be Peak for Profits by US Primary Dealers. The securities firms waiting to join the ranks of the U.S. primary dealers may be in a race against the clock -- the QE-2 clock. Several firms are waiting for approval from the Federal Reserve Bank of New York to become primary dealers, designated banks and securities dealers responsible for dealing directly with the New York Fed and the Treasury Department. The sooner they get approved, the sooner they'll get a cut of the Fed's quantitative easing business, set to end in June.
- SEC Eyes Hedge Fund Bonus Curbs. The US financial regulator has proposed a clampdown on hedge fund bonuses deemed to encourage dangerous risk-taking. The Securities and Exchange Commission (SEC) voted yesterday for a proposal that would force brokers and investment advisers, including hedge funds, with more than $1bn (£610m) in assets to reveal staff bonus arrangements annually. The regulator could then ban bonuses if they were judged to cause excessive risk-taking. The proposal by the SEC, which failed to win the backing of the regulator’s two Republican commissioners, follows a similar proposal made last month for banks by the Federal Deposit Insurance Corporation (FDIC), a fellow regulator.
- Saudi Arabia Contagion Triggers Gulf Rout. Fears of sectarian uprisings in Bahrain and Saudi Arabia have set off the first serious wave of investor flight from the Gulf, compounding market turmoil as civil war in Libya pushes Brent crude over $116 a barrel. Saudi Arabia’s Tadawul stock index has tumbled 11pc in wild trading over the past two days, led by banks and insurers. Dubai’s bourse has hit a 7-year low. The latest sell-off was triggered by the arrest of a Shi’ite cleric in the Kingdom’s Eastern Province after he called for democratic reforms and a constitutional monarchy. The province is home to Saudi Arabia’s aggrieved Shi’ite minority and also holds the country’s vast Ghawar oilfield, placing it at the epicentre of global crude supply. “Unrest in this region can have fatal consequences for the world,” said JBC Energy. “The plunge on the Saudi stock exchange can be interpreted as a sign of waning trust.”
- The gunman who killed two U.S. airmen at Frankfurt Airport was specifically targeting American military personnel, citing officials familiar with the matter. Investigators haven't determined whether the attacker, identified as a citizen of Kosovo, was acting alone or as part of an organized group.
- US Obsessed With Doing Nothing About Debt Says Hedge Fund Guru Julian Robertson. THE US Federal Reserve's policy of printing money -- quantitative easing -- is pushing up commodity prices sharply, according to the world's best known hedge fund manager, Julian Robertson. Speaking in Sydney yesterday, the US-based founder of the legendary Tiger Fund said quantitative easing was encouraging reckless spending and sending investors to non-cash assets as they sought a safe place for their investments. "Not just gold and silver but cotton, soybeans, you name it, they're all rising," he said, noting that the US dollar was now no longer the safe haven it was. "It's not my refuge," he said emphatically. He said the US approach to rectifying its financial problems was making it look as though "things will go along OK" when they would not, in the long run. "We are obsessed with not doing anything about it," he said, referring to the debt burden and the giant budget deficit left over from the global financial crisis. Looking at the US economy, Mr Robertson said: "We are broke, broker than all get out. "We prefer to put on the Santa Claus suit and celebrate Christmas" rather than address underlying problems in the US economy such as the budget deficit. China was "a fascinating place and a new market", but far from a simple boom story. "There are more price dislocations, both ways, in stocks there, than almost anywhere else," he said. But he is not convinced overseas demand will fuel growth in China forever. "Demand out of China is going to depend on whether other economies around take up the supply of goods that China produces," he said. Alex Robertson said that there was a serious demographic problem from the effects of the one-child policy: "Men will outnumber women, and that could impede the economy."
- China is moving away from the double-digit growth era in the next five years because of the threat of inflation and environmental problems. China can no longer sustain high investment, high consumption and low benefit growth, the commentary said.
- China's central bank will raise the reserve requirement ratio "shortly" to ease liquidity pressure, citing analysts.
- China should levy a property tax in regions with surging real estate prices, citing Yan Qingmin, an assistant chairman of the China Banking Regulatory Commission. The banking regulator will enhance efforts to prevent risks stemming from property loans, citing Yan. The effects of lending policies in property curbs should not be exaggerated, citing Yan.
- China's consumer prices may rise about 4% in February, citing Wang Xiaoguang, a researcher with the Chinese Academy of Governance. The country is facing strong inflation expectations, citing Pan Jiancheng, deputy director-general of the China Economic Monitoring and Analysis Center of the National Bureau of Statistics.
- Only 6% of Chinese People See Themselves as Happy, citing a survey of about 1,350 people carried out by government information portal china.com.cn. Almost 40% of those surveyed believe that happiness is determined by how wealthy a person is, and people living in first-tier cities are the least content due to pressure from the high prices of housing and traffic congestion, citing the results of the poll. Zhang Jing, a 25-year-old procurement agent at a Shanghai-based foreign-invested company, described her life as "unexciting" to China Daily, saying entertainment was rare. "More than one-third of my salary goes on the rent and the rest has to cover transportation and food. In the end, my disposable income is almost nothing," she said. Zhang Lifan, a well-known expert on China's modern history, noted that it is imperative that the government redistributes the fruits of economic development so more people benefit because the widening wealth gap is "tearing society apart". According to a World Bank report, the Gini coefficient for China is now close to 0.5, which points to an unequal distribution of income that could lead to social unrest. On the Gini coefficient, 0.4 is considered as the threshold of serious inequality.
Citigroup:
- Reiterated Sell on (IR), target $41.
- Asian equity indices are -.50% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.50 -.5 basis point.
- Asia Pacific Sovereign CDS Index 120.0 +.75 basis point.
- S&P 500 futures +.45%.
- NASDAQ 100 futures +.37%.
Earnings of Note
Company/Estimate
- (COO)/.67
- (BIG)/1.38
- (HNZ)/.82
- (KR)/.44
- (GCO)/1.29
- (NOVL)/.06
- (DLM)/.40
8:30 am EST
- Initial Jobless Claims for last week are estimated to rise to 395K versus 391K the prior week.
- Continuing Claims are estimated to rise to 3815K versus 3790K prior.
- Final 4Q Non-Farm Productivity is estimated to rise +2.3% versus a prior estimate of a +2.6% gain.
- Final 4Q Unit Labor Costs are estimated to fall by -.5% versus a prior estimate of a -.6% decline.
- ISM Non-Manufacturing for February is estimated to fall to 59.3 versus 59.4 in January.
- None of note
- The Fed's Kocherlakota speaking, Fed's Lockhart speaking, ICSC Feb. Chain Store Sales, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, RBC Capital Restaurant/Leisure Investor Day, (A) analyst meeting, (ANSS) investor day, (SWK) analyst day, (JNPR) analyst meeting and the (MXIM) analyst day could also impact trading today.
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