Tuesday, March 15, 2011

Today's Headlines

  • 'Worst Case' Nuclear Disaster in Japan Hangs on Unlikely Events. For Tokyo Electric Power Co.’s stricken nuclear reactors to release catastrophic amounts of radioactive material into the atmosphere, a rare chain of events needs to happen. Averting a full-scale meltdown -- which scientists say isn’t likely -- depends on cooling the uranium-containing rods at Fukushima Dai-Ichi’s Reactor No. 2, said S.K. Malhotra, a scientist at India’s Department of Atomic Energy in Mumbai. A worst-case outcome may occur if over-heating in the reactor culminates in the rupture of the steel lining protecting radioactive material. “In the worst scenario, an explosion could occur inside the steel pressure vessel, fuel bundles melt down and the radioactivity is exposed,” Malhotra said in a telephone interview. “I would say there is a 10 percent probability still.”
  • S&P 500 Has Fallen to 'Very Bullish' Levels, JPMorgan's(JPM) Lee Says. The Standard & Poor’s 500 Index has reached its low for 2011 after falling to 1,261.12 because of the 9-magnitude earthquake in Japan last week, according to JPMorgan Chase & Co. (JPM)’s Thomas Lee. The benchmark for U.S. equities may climb to 1,425 through the end of the year, Lee, chief U.S. equity strategist at the New York-based bank, wrote in a note today. “In a nutshell, we see the sell-off as creating potentially a very bullish opportunity,” Lee said.
  • Funds Shift From Asia Stocks to North America, HSBC Says. The world’s largest fund managers are shifting away from Asian stocks in the first quarter over inflation concerns in favor of North American equities on an improving economic outlook, said a HSBC Holdings Plc (HSBA) survey. Half of the fund managers have a positive outlook on non- Japan Asian stocks, down from 75 percent in the fourth quarter, according to the quarterly survey. All of the 12 houses, which manage a total of $3.98 trillion of assets, or 16 percent of global funds under management, are bullish about North American equities, up from 25 percent in the fourth quarter. Investors had added capital to funds investing in Asia- Pacific stocks outside of Japan from the first quarter of 2009 until the third quarter of 2010, according to HSBC data. Yet such funds have seen outflows since the fourth quarter as frequent central bank actions heightened concerns about imported inflation and rising interest rates, said Bruno Lee, HSBC’s Hong Kong-based Asia-Pacific head of wealth management. “Fund managers are looking to North American equities because of improving economic conditions, merger and acquisition activities and encouraging company reports,” Lee added. “Fund managers are lukewarm on Asia-Pacific ex-Japan due to concerns over rising inflation in the region and less bullish on Greater China equities as the market takes in the impact of ongoing austerity measures to contain inflation.”
  • Bahrain Declares a Three-Month State of Emergency as Gulf Soldiers Arrive. Bahrain declared a three-month state of emergency as a second contingent of forces from Gulf states arrived in the kingdom to support its government following persistent protests. King Hamad bin Isa Al Khalifa asked the head of the military to guarantee security, state television said. Police opened fire on protesters in the village of Sitra, killing one, the Bahrain Youth Society for Human Rights said in a statement. Hundreds of people were injured, according to Ali Al-Akri, a doctor at the emergency room of the Salmaniya Medical Complex. He didn’t have details on the kind of injuries sustained. Imposing a state of emergency “probably means they are running out of options,” said Gala Riani, a Middle East analyst at London-based forecaster IHS Global Insight. “If we see more violence against protesters than I suspect it’ll incite further unrest.”
  • G-8 Fails to Agree on Libya No-Fly Zone, Russia, Germany Opposed. Group of Eight foreign ministers failed to agree on a possible no-fly zone over Libya as rebel fighters were pushed back by Muammar Qaddafi’s forces. Foreign Minister Alain Juppe of France, which along with the U.K. has pressed for more aggressive action against Qaddafi, said he couldn’t persuade Russia to sign on to an aerial blockade as other allies, including Germany, raised objections to military intervention. Juppe hosted a meeting of his G-8 counterparts today in Paris.
  • U.S. Homebuilder Confidence Rises in March to Highest Level in 10 Months.
  • Import Prices in U.S. Increase More-Than-Estimated 1.4% on Oil, Food Costs. The cost of goods imported into the U.S. rose more than forecast in February, led by further gains in commodities that companies are struggling to pass along to their customers. The 1.4 percent increase in the import-price index exceeded the 0.9 percent median estimate in a Bloomberg News survey and followed a 1.3 percent rise in January, Labor Department figures showed today in Washington. Prices excluding fuel rose 0.3 percent in February, less than half the 0.7 percent jump a month earlier, today’s Labor Department report showed. The cost of consumer goods was up 0.3 percent from the same month in 2010. Import prices excluding all fuels rose 3.6 percent from February 2010, the biggest gain in more than two years, partly a reflection of food costs. Food costs over the past 12 months posted the biggest gain since records began in 1977. Imported goods are also more expensive because of the weakening dollar. Since reaching a one-year high on June 7 of last year, the dollar has fallen 9 percent against a trade- weighted basket of major currencies.
  • Manufacturing in NY Area Grew at Faster Pace in March Amid Recovery. Manufacturing in the New York region accelerated in March at the fastest rate in nine months, a sign factories remain at the forefront of the economic expansion. The Federal Reserve Bank of New York’s general economic index rose to 17.5 from 15.4 in February. Economists projected an increase to 16.1, based on the median forecast in a Bloomberg News survey. A measure of factory employment rose to 9.1 from 3.6. The gauge of new orders decreased to 5.8 from 11.8 last month, and a measure of shipments fell to 1.6 from 11.3. An index of prices paid for raw materials increased to 53.3, the highest since August 2008, from 45.8 in February, while prices received increased to 20.8, the highest since September 2008, from 16.9.
  • Hedge Fund Energy Speculation Highest on Record, CFTC's Bart Chilton Says. Hedge funds and other speculators have increased their positions in energy markets by 64 percent since June 2008 to the highest level on record, according to data released by U.S. Commodity Futures Trading Commissioner Bart Chilton. Speculative positions accounted for more than one million energy futures equivalent contracts as of January, according to the data. Positions in metals and agricultural contracts have increased about 20 percent, Chilton said in a speech. Chilton said the data shows the need for the CFTC, as part of the Dodd-Frank financial overhaul, to curb speculation on raw materials such as oil, natural gas and wheat. “We were given new authority to place limits on speculation as part of the new financial reform law, but we haven’t done that yet and we need to pronto,” he said in a statement before the speech.
  • Crude Oil Drops as Loss of Demand in Japan Outweighs Middle East Tension. Oil dropped to a two-week low as concern that damage from Japan’s earthquake will curb crude demand outweighed speculation of supply disruptions in the Middle East. Oil fell as much as 4.4 percent as a third explosion and fire struck Tokyo Electric Power Co.’s Fukushima plant.
  • EU 'Can't Afford' to Delay Short-Selling Rules, Barnier Says. The European Union “can’t afford to delay” proposals to restrict short selling over concerns the measures might harm liquidity in the sovereign-debt market, said Michel Barnier, the region’s financial services commissioner. Barnier and French Finance Minister Christine Lagarde pushed for the rules to limit some short selling after other finance ministers complained the plans gave too much power to new pan-European regulators and might harm the ability of investors to hedge risk using debt issued by countries. Governments in the 27-nation EU and lawmakers in the European Parliament are considering, in particular, measures to restrict so-called naked short selling.
  • Precious Metals Falls as Some Investors Make Up for Drops in Other Assets. Gold dropped the most in eight weeks in New York as some investors sold the metal to raise cash as commodities and equities slid. Silver plunged and palladium and platinum slipped on concern industrial demand will wane. “It is all related to the situation in Japan and some people might have to sell whatever they can to raise funds,” Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany, said today by phone. “With carmakers’ plants closed, there is less demand. As long as the situation is uncertain in Japan, the risk is that that the knife may fall further.” Gold futures for April delivery slipped as much as $44.20, or 3.1 percent, to $1,380.70 an ounce, the lowest price since Feb. 17, and were at $1,398.80 at 10:52 a.m. on the Comex in New York. A close at that price would be the biggest retreat since Jan. 14. Silver futures dropped the most since Jan. 20 and palladium and platinum declined to the lowest levels since at least December.
  • Rice May Extend Decline, Limiting Food Costs, UN's Calpe Says. Rice, the staple for half the world, will probably drop on increased supplies, trailing other grains and curbing record food costs, the United Nations said. Global stockpiles will increase 4.6 percent to 137 million metric tons by the end of this season, the highest level since 2002, Concepcion Calpe, senior economist at the UN Food & Agriculture Organization, said in an interview. Rice may drop 9.3 percent to $12 per 100 pounds in two months, said Jonathan Barratt, managing director at Sydney-based Commodity Broking Services Pty, who correctly predicted last year’s advance to $15. Rice declined 1.1 percent to $13.23 per 100 pounds today as grains tumbled amid a rout in global markets.
  • Dining Out Is In as Tax Cuts Lift Darden(DRI), Texas Roadhouse(TXRH). Americans are back to eating out at Cheesecake Factory Inc. (CAKE) and Texas Roadhouse Inc. (TXRH), putting the restaurant industry on track for its best showing in more than three years as the recovery broadens. Sales at full-service eateries, where customers pay after a meal rather than before, will rise 0.7 percent in 2011 after adjusting for inflation, the first year-over-year increase since 2007, according to a National Restaurant Association forecast by Malcolm Knapp, a New York-based consultant who has monitored the industry since 1970. Buoyed by savings from payroll-tax cuts and improving job prospects, households are starting to indulge on discretionary items. The pickup may help jump start a restaurant rebound after a record stretch of sales declines and reinforces growing strength in household spending, which accounts for about 70 percent of the economy. “Consumers are finding some retail therapy in things like eating out,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “They may not be ready for that two-week vacation in Europe yet, but they’ll go to a restaurant once every couple of weeks. It’s an affordable luxury.”
  • Iran Opposes Saudi 'Meddling' in Bahrain After Troop Deployment. Iran’s Foreign Ministry accused Saudi Arabia and other Gulf countries of interfering in Bahrain’s domestic affairs by sending troops to help quell protests by mostly Shiite Muslim opposition groups. “The presence of foreign troops and meddling into Bahrain’s internal affairs will only further complicate the issue,” Foreign Ministry spokesman Ramin Mehmanparast said in a Tehran press conference today.
  • ECB Rate Increase is Less of a Done Deal as Japan Disaster Aftermath Looms. Investors and economists are paring bets that the European Central Bank will raise interest rates next month as the aftermath of Japan’s biggest earthquake overshadows prospects for the global economy. Money-market futures fell, indicating investors are curbing expectations that the ECB will proceed with lifting borrowing costs after stocks, bond yields and commodities slumped on concern a nuclear disaster is unfolding in Japan. Economists at Nomura International Plc, Lloyds Bank Corporate Markets and Royal Bank of Scotland Group Plc said the ECB may wait to assess the impact on markets and the global economy.
  • Japan ETF Loss Trails MSCI Index as U.S. Traders See Rebound. Trading in an exchange-traded fund linked to Japanese stocks shows investors expect shares in the world’s third-largest economy to rebound when trading resumes. The iShares MSCI Japan Index Fund tracking 323 securities fell 1.8 percent to $9.87 at 1:15 p.m. in New York after earlier reaching $9.24, its lowest intraday level since July. That compares with the 9.1 percent plunge in the MSCI Japan Index earlier, data compiled by Bloomberg show.

Wall Street Journal:
  • Japan Officials Make Gains as Nuclear Crisis Sparks Rift. Japanese officials appeared to regain partial control of an earthquake-damaged nuclear complex on Tuesday, even as new worrying signs in previously unaffected parts of the plant plan indicated that the worst may not be over. The apparent shift in the struggle to tame four of the six reactors at the Fukushima Daiichi nuclear complex also exposed a rift Tuesday between the highest levels of Japanese government and the plant operator, Tokyo Electric Power Co., underscoring the confusion and mixed messages over five days that frightened a nation and put a cloud over a planned global expansion of nuclear power. Officials said radiation levels at the Fukushima Daiichi nuclear power plant had dropped significantly after spiking in the wake of an explosion Tuesday morning local time that appeared to have damaged a containment structure, which is designed to keep radiation from leaking out. Authorities continued to pour seawater on the damaged reactor, known as the No. 2 reactor, in an effort to cool it. "We need to see how things will go at the No. 2 unit for a little bit longer before we can call it stable," said Yukio Edano, Japan's chief cabinet secretary.
  • Latest Japan News at a Glance.
  • Total SA in Talks With U.S. to Settle Iran Probe. Total SA said it is in negotiations with the U.S. authorities to settle a probe over allegations that the French energy company paid bribes to Iranian officials to obtain contracts. The Securities and Exchange Commission and the Justice Department have been investigating Total's pursuit of contracts in the early 2000s to develop parts of Iran's South Pars gas field, among the world's largest.
  • Biggs Says He's Buying Japanese Stocks. After the selloff in Japanese stocks, one big-name investor says now is the time to buy. Barton Biggs, the former chief strategist at Morgan Stanley who now runs $1.4 billion hedge fund Traxis Partners LP, says he's begun to buy up shares in Japan.
  • Online Sales Help Drive Williams-Sonoma's(WSM) Profit. Home-furnishings and kitchen-gadgets retailer Williams-Sonoma Inc. said Tuesday that its fiscal fourth-quarter profit rose a better-than-expected 28%, helped by demand at its namesake chain and Pottery Barn stores as well as online orders. The company said its online sales surged 27% and comparable-store sales climbed 5.2%. Shares of Williams-Sonoma jumped 11%.
Business Insider:
Zero Hedge:
Washington Post:
  • FDIC Too Slow to Sue Officers and Directors at Failed Banks, Critics Say. As the chief undertaker of the Great Recession, the Federal Deposit Insurance Corp. has briskly shuttered 345 failed banks since 2008, at a cost to the government insurance fund of about $76 billion. But the regulator has sued only a handful of officers and directors to recover some of that money, despite a pattern of risky behavior by executives at many failed banks described by the agency’s own watchdog in a recent analysis. To date, the FDIC has sued officers and directors at only five of the 345 banks that have collapsed since 2008, or about 2 percent. The 39 former executives named in the civil lawsuits are fighting the FDIC’s accusations of negligence and mismanagement. And time is running out for the FDIC to file lawsuits in some of the early bank failures because of a three-year statute of limitations.
  • Major Chemical Capacities Remain Offline in Japan Following Quake. Many chemical plants remain offstream in Japan following the massive earthquake and tsunami that struck the northeast of the country on March 11. Leading Japanese chemical producers report taking plants offstream as a precautionary measure and as a result of power outages. Reported damage to chemical units is not substantial, however. Most of the temporary shutdowns are in Chiba and Ibaraki prefectures, on the coast to the east of Tokyo.
  • Overwhelming iPad 2 Demand Continues, Apple's(AAPL) Online Orders Now Ship in 4-5 Weeks. Apple on Tuesday was forced again to delay estimated shipping times for new iPad 2 orders, as those who buy must now wait four to five weeks for their order to be sent. Yet another delay comes as stock of the iPad 2 around the U.S. is believed to be entirely sold out at all locations, including Apple's retail stores and partners. Some select Apple stores with new shipments of the iPad 2 are set to open early today, while many other stores await more stock in the face of crushing demand. The latest delay applies to all models of the iPad 2, including Wi-Fi and both 3G models from AT&T and Verizon. It also includes all capacities: 16GB, 32GB and 64GB.
ABC News:
Washington Examiner:
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 20% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -22. That is the president’s lowest rating since September (see trends).
  • GOP Rejects EPA's Climate Finding. House Energy and Commerce Committee Republicans don't want Congress to go on record accepting the ideas that global warming is “unequivocal” and humans are likely the cause. Without the votes to stop the committee from passing legislation Tuesday to block the EPA’s climate rules, Democrats on the panel were left to score political points by forcing their colleagues across the aisle to vote on the science underpinning those rules. Ranking member Henry Waxman (D-Calif.) offered a measure stating that Congress accepts the EPA’s finding that “warming of the climate system is unequivocal.” The amendment was defeated on a party-line vote, with 20 Democrats voting in favor, and 31 Republicans opposing the measure.
  • Supply of Polysilicon Facing Shortage as Japan Implements Power Brownout. With the Japan government implementing power brownout policy on March 14, Japan-based polycrystalline silicon (poly-Si) and silicon wafer makers may be forced to stop their production for one month. Since most of these capacities are supplied to the semiconductor industry and poly-Si capacity in Europe and the US are all booked, the related semiconductor players may soon be out of poly-Si supply, according to industry sources. The power brownout will also disrupt manufacturers outside of northeast Japan, especially upstream material production such as poly-Si, which is a time-intensive process, and ingot production is the same. Japan-based poly-Si supplier M.Setek, located in the Sendai region, mostly produces for the solar sector. Tokuyamoa, Mitsubishi Chemicals, Sumitomo Chemical and Shin-Etsu provide materials for the semiconductor sector. Shin-Etsu reportedly has already halted production, and the other chemical engineering companies should see decreased output. With other international material supplies such as Hemlock, REC, Wacker and MEMC all running at full capacity, companies that rely on Japan-based suppliers for materials will have a difficult time transferring orders. As for wafer production, the power brownout will have the same impact on manufacturing lines. Northeast Japan is an important area for the semiconductor supply chain. Wafer demand within Japan in the near term is expected to decrease, but semiconductor companies outside of Japan could see more business due to order transfers.

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