Wednesday, March 16, 2011

Wednesday Watch


Evening Headlines

Bloomberg:
  • Japan Reactor Fires, Temblors Hamper Rescuers, Meltdown Battle. Japan was hit by a 5.7-magnitude aftershock and a second fire at the stricken Fukushima nuclear plant as the government struggled to overcome the aftermath of the nation’s strongest earthquake on record. The temblor hit at 5:43 a.m. 139 kilometers from Tokyo, according to the U.S. Geological Survey, while a 6.1-magnitude quake struck southwest of the capital last night. Tokyo Electric Power Co., the operator of the Fukushima Daiichi nuclear plant 210 kilometers (130 miles) north of Tokyo, said the fire was spotted by a worker around 5:45 a.m. local time. The company later said it was no longer visible. Officials were also battling to cool three damaged reactors at the same plant.
  • Japan Stocks Climb for First Time in Five Days After Selloff. Japanese stocks rose for the first time in five days on speculation a selloff that drove valuations to a 28-month low was excessive even as the country battles to prevent a nuclear disaster after its strongest earthquake. Toyota Motor Corp., the world’s largest carmaker, surged 8.5 percent. Mizuho Financial Group Inc., Japan’s third-biggest bank, surged 7.7 percent. Tokyo Electric Power Co., Asia’s biggest power generator, was set to tumble by the daily limit after the company said today a new fire broke out at a reactor following an earthquake on March 11. The Nikkei 225 (NKY) Stock Average rose 4.9 percent to 9,022.31 as of 10:58 a.m. in Tokyo. The gauge plunged 11 percent yesterday as record trading volume on the main section of the Tokyo Stock Exchange drove the average price of shares in the Nikkei to 14.7 times estimated profit, the lowest level since November 2008.
  • The cost of insuring Japanese government debt with credit-default swaps pared a decline after white smoke or steam was seen rising from a nuclear reactor. Five-year swaps on Japan traded 10 basis points lower at 110 basis points as of 11:23 am in Tokyo after earlier dropping to 105 basis points, according to Citigroup Inc.
  • Portugal's Long-Term Bond Ratings Cut to A3 From A1 by Moody's. Portugal’s long-term debt rating was cut two steps by Moody’s Investors Service, which cited a weaker growth outlook, risks to the government’s deficit- reduction plans and a possible need to recapitalize its banks. The rating was downgraded to A3, four steps from so-called junk status, according to an e-mailed statement from Moody’s yesterday, with the outlook on the grade “negative.” The euro slipped after the announcement, to $1.3982 per euro at 10:54 a.m. in Tokyo from $1.3998 yesterday. Portugal is trying to rein in the euro region’s fourth- biggest budget deficit and avoid the bailouts that Greece and Ireland needed. With the economy forecast to contract this year, the government is raising taxes and carrying out the deepest spending cuts in more than three decades, aiming to convince investors it can curb its debt. The negative outlook is justified and further cuts appear likely,” said Win Thin, senior currency strategists with strategist at Brown Brothers Harriman, in a research note after the Moody’s downgrade. “Portugal clearly will remain in the market spotlight as its 10-year yield remained above 7 percent for the 28th straight day on Tuesday.”
  • Qaddafi Forces Near Benghazi as Rebel Says World 'Failed Us'. Muammar Qaddafi set his sights on Benghazi as his forces moved into the gateway city of Ajdabiya, 100 miles from the rebel capital, and prospects faded for a NATO-led no-fly zone to hinder their advance. The embattled Libyan dictator, appearing with small group of supporters on state-run television, vowed to fight rebel “rats” and said “we are going to destroy them.” In Benghazi, hundreds of his opponents, watching the broadcast projected on the side of a building, jeered and threw shoes in disrespect, according to a live video feed shown by al-Jazeera. The Libyan army is “coming to secure Benghazi,” state-run television said. Pro-Qaddafi forces attacked on two sides of Ajdabiya using airstrikes and artillery, forcing out-gunned rebels and civilians to flee ahead of troops in tanks and personnel carriers, the Associated Press reported. There were conflicting reports on who controlled the city after nightfall. With rebels on the defensive, the Group of Eight foreign ministers failed to agree yesterday on imposing no-fly zone. The head of the rebels governing council, Mustafa Abdel Jalil, said on al-Arabiya television that the debate over a no-fly zone “doesn’t concern us now” and he called on Libyans to defend their cities. “The international community has failed us,” Ahmed Omar, a rebel army commander, said by phone from Benghazi.
  • Bahrain Call for Troops Fails to End Protests as Hundreds Hurt. The Saudi Arabian-led military intervention in Bahrain failed to end demonstrations in the island-kingdom as hundreds were injured in clashes with security forces yesterday and two lawmakers resigned in protest. Bahrain declared a three-month state of emergency as a second contingent of forces from Gulf states arrived in the kingdom. Police opened fire on protesters in the village of Sitra, the Bahrain Youth Society for Human Rights said. At least two people were killed and 250 people injured during clashes, Ali Al-Akri, a doctor in the emergency room of the Salmaniya Medical Complex, said in an interview. “This is a very tricky, delicate moment,” David Ottaway, senior scholar at the Washington-based Woodrow Wilson Center said in a telephone interview yesterday. “I wouldn’t be surprised if things get a lot worse.”
  • Crude Oil Falls to Two-Week Low as Japan Fuel Demand May Drop After Quake. Oil fell to the lowest in two weeks in New York amid concern that the earthquake in Japan may reduce fuel demand in the world’s third-largest crude user. About 1.3 million barrels a day, or 29 percent, of the country’s refining capacity was closed after the country’s largest temblor on record. “The Middle Eastern premium seems to be eroding as we concentrate in an uptick in supply as a result of Japan shutting down refining capacity,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. Crude for April delivery fell as much as 96 cents to $96.22 a barrel in electronic trading on the New York Mercantile Exchange, the lowest intraday price since Feb. 25. It was at $96.23 at 11:28 a.m. Singapore time.
  • Crude oil may fall to $92 a barrel after declining from a 29-month high, according to a technical analysis by brokerage Auerbach Grayson. Futures are "still working off overbought conditions and a speculative blow-off top," said Richard Ross, a technical analyst with the NY brokerage. Oil may drop to $92.30, where its 50-day moving average meets with previous resistance, according to the analysis.
  • Chu Says No Need to Suspend New U.S. Nuclear Plant Permits. Energy Secretary Steven Chu said the U.S. doesn’t need to suspend work on new nuclear permits while investigating the crisis in Japan, where officials are struggling with reactors damaged by an earthquake and tsunami. The Nuclear Regulatory Commission review is long enough that revisions can be made to reflect findings from the examination of failures at Tokyo Electric Power Co.’s Daiichi nuclear station, he said. “If you look at the process in which the NRC approves going forward with construction projects and nuclear reactors, it’s a thoughtful process,” Chu told reporters today after appearing before the House Appropriations subcommittee on energy and water development. “It’s a multiyear process and because of its very nature, I think these things can proceed.”
  • Zillow.com Is Said to Hire Citigroup(C) to Manage Its Initial Public Offering.
Wall Street Journal:
  • Setback in Reactor Fight. Japan faced new setbacks in its struggle to tame a quake-ravaged nuclear complex, as a fresh fire broke out there early Wednesday and new threats emerged in previously unaffected parts of the plant. Japan's nuclear safety agency said two workers are missing at the stricken plant's No. 4 reactor, the same one where the fire had broken out. It was the second fire there in consecutive days. It appeared to be extinguished, but later in the morning white smoke began billowing from the compound. The circumstances of the workers' disappearance remained unclear. Plant operators said it's impossible to send people to the No. 4 reactor due to radiation levels. Separately, officials at the plant are weighing whether to use a helicopter to dump water into pools where radioactive waste is stored and cooled, in hopes of preventing the waste from igniting and releasing radioactivity. The latest developments suggest that the disaster at the Fukushima Daiichi nuclear power plant is far from tamed. The plant has been emitting radiation for days, at levels that won't cause an immediate health threat beyond the plant property, following severe damage from last week's quake and tsunami.
  • For Nasdaq's(NDAQ) Greifeld, an NYSE(NYX) Bid Is All but Certain. Nasdaq OMX Inc. Chief Executive Robert Greifeld is determined to mount a counterbid for NYSE Euronext, say people close to him. The market is expecting a new offer. NYSE shares ended Tuesday at $37.02, above the $35-a-share offer from Germany's Deutsche Börse AG. Nasdaq shares dropped 2.1% Tuesday to $25.82. But as the outlines of his approach come into view, it is clear that Mr. Greifeld will face a most difficult journey. At the least, he will have to win five different battles. They include:
  • Coupons Website Seeks Funds. LivingSocial Inc., a website offering daily coupons, is in active talks with investors to raise around $500 million to help fuel its expansion and keep up with rival Groupon Inc., according to people familiar with the matter.
  • Banks Probed in Libor Manipulation Case. The London interbank offered rate, set daily in London, is one of the world's most important benchmarks. Now, U.S. investigators are probing whether U.S. and European banks manipulated it.
  • Netflix(NFLX) in Talks to Begin Original Series. Netflix Inc. is in advanced talks to distribute a forthcoming television series directed by David Fincher and starring Kevin Spacey, said people familiar with the talks. If such a deal were to come to fruition it would add a new competitor to the television industry by increasing the degree to which Netflix competes with premium-cable television channels like Time Warner Inc.'s HBO.
  • Make the Bush Tax Cuts Permanent by Newt Gingrich and Peter Ferrara.
  • Arabs Love the Pax Americana. Fearing a U.S. Retreat, the Saudis Move into Bahrain.
  • Ohio Governor Poses Steep Cuts to Trim Deficit. Ohio Gov. John Kasich, mirroring the moves of other newly elected Republicans, proposed a two-year budget Tuesday that would close an $8 billion gap by selling prisons, reshaping Medicaid and sharply cutting aid to cities.
CNBC:
MarketWatch:
  • CBOE's VIX 'Fear Index' Sees Record Volume. "Today marked the first time in CBOE's history that VIX options volume topped the one-million-contract benchmark in a single trading session, as a reported 1,038,002 contracts changed hands," CBOE said in a statement. The mark passed a previous single-day high of 716,815 contracts traded on December 3, 2009, the exchange operator said.
  • Earthquake to Cost 3% of Japanese GDP: Barclays. Damage from Friday's earthquake and tsunami in Japan are likely to tally 15 trillion yen ($184.2 billion), or about 3% of the country's gross domestic product, according to an estimate by Barclays Capital. The bank's Tokyo-based economists said regions affected by the quake account for 6% to 7% of the Japanese economy, making the current disaster similar in scope to the 1995 Great Hanshin-Awaji earthquake centered in Kobe. Friday's temblor affected a region with an industrial infrastructure "surprisingly similar" to Hyogo prefecture, the area most affected in the 1995 disaster. Manufacturing makes up about a quarter of both regions, while services account for about one-fifth, and wholesale and retail about one-tenth, Barclays said.
Business Insider:
Zero Hedge:
New York Times:
  • New Front in War Between Companies and Hedge Funds. War is brewing: proxy season is fast approaching, and companies are gearing up for their annual fight against activist hedge funds. Now an opening salvo from the prominent law firm Wachtell Lipton Rosen & Katz could, if successful, tilt the battlefield significantly in companies’ favor. The law firm has asked the Securities and Exchange Commission to amend the takeover rules to limit the ability of hedge funds to quickly acquire positions in companies. Wachtell argues that these changes are necessary to prevent hedge funds from surreptitiously building large positions.
CNN Money:
  • Debt Leaves No Wiggle Room for Disasters. Earthquakes. Tsunamis. Nuclear crises. Disasters are one reason why Washington should get the government's long-term debt under control. The argument is straightforward, but not often discussed: Already high levels of debt leave the economy even more vulnerable in the wake of unexpected natural and man-made disasters. Markets are looking for some reassurance that the country has a credible plan to reduce U.S. debt over the long run, even if the measures in the plan wouldn't go into effect right away. Until lawmakers produce such a plan, or at least provide a series of stringent budget controls while they work on a plan, Walker said, "we're playing a dangerous game."
American Banker:
  • Mobile Pay Tests May Boost Google(GOOG) Ads. Google Inc.'s interest in near field communication technology, which it is testing in a payment trial, might be more about advertising than establishing its own payments network. "NFC for Google is a means to really extend their current business practices and bring Internet advertising into the physical world," Nick Holland, a senior analyst with Yankee Group, said. "For Google, the bigger picture would be maybe offering promotions at the point of sale." Holland's observation follows a Bloomberg News report that Google is preparing to launch an NFC trial in San Francisco and New York this summer. The test would call for the Mountain View, Calif., company to pay for and install thousands of contactless readers from VeriFone Systems Inc. at merchant locations.
LA Times:
  • YouTube Becoming a Strategic Model for Parent Google(GOOG). Once derided as Google's folly, the home of cheesy cat videos and the money-losing stepchild of an otherwise wildly profitable company, YouTube is emerging as a model for the more nimble, faster-paced company Google co-founder Larry Page hopes to foster as he takes the reins as chief executive. That's quite a shift. Though YouTube was a cultural phenomenon when Google Inc. bought it in 2006, it was bleeding money — losing nearly half a billion dollars as recently as 2009, by one estimate. And though YouTube wasn't Google's Siberia, it wasn't exactly a mecca for many ambitious Googlers. But now, YouTube's revenue has grown dramatically. Many Google employees increasingly see it as an attractive place to work, with a less bureaucratic environment that lets them run with their ideas. Page, by all accounts, is looking to inject that same energy into Google, spurring the mother company to innovate more quickly in its rivalry with fast-moving Facebook.
Copper Investing News:
  • Copper Resilient to Earthquake Aftermath. According to Deutsche Bank (DB), Japan’s copper consumption may drop by as much as 50,000 metric tonnes over three-months, however, this could then be offset by demand of three times this magnitude as reconstruction projects take off, Deutsche Bank added that copper and zinc are most likely to benefit from the reconstruction efforts.
ABC News:
Commercial Times:
  • Hon Hai Group's Apple(AAPL) products components are enough for up to four months of production.
Kyodo News:
  • Pressure in Tokyo Electric Power Co.'s Fukushima Dai-Ichi No. 3 reactor is stable, citing Japan's nuclear safety agency.
  • Japan's nuclear safety agency ordered workers at Tokyo Electric Power Co.'s Fukushima Dai-Ichi nuclear power plant to evacuate because of high radiation levels.
NHK:
China Business News:
  • Sun Gongsheng, head of China central bank's Nanjing branch, said banks may have credit risks if the property market falls sharply.
Evening Recommendations
Citigroup:
  • Reiterated Buy on (OPEN), target $108.
Keybanc:
  • Rated (URI) Buy, $42.
Night Trading
  • Asian equity indices are -.25% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 112.50 -3.5 basis points.
  • Asia Pacific Sovereign CDS Index 124.25 +5.25 basis points.
  • S&P 500 futures -.03%.
  • NASDAQ 100 futures unch.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (FSS)/.08
  • (PEGA)/.40
  • (GES)/1.06
Economic Releases
8:30 am EST
  • Housing Starts for February are estimated to fall to 566K versus 596K in January.
  • Building Permits for February are estimated to rise to 570K versus 562K in January.
  • The Producer Price Index for February is estimated to rise +.7% versus a +.8% gain in January.
  • The PPI Ex Food & Energy for February is estimated to rise +.2% versus a +.5% gain in January.
  • The Current Account Deficit for 4Q is estimated at -$110.0B versus -$127.2B in 3Q.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,300,000 barrels versus a +2,516,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,400,000 barrels versus a -3,977,000 barrel decline the prior week. Gasoline supplies are expected to fall by -1,500,000 barrels versus a -5,494,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a +1.1% gain the prior week.
Upcoming Splits
  • (LEA) 2-for-1
Other Potential Market Movers
  • The Fed's Parkinson speaking, weekly MBA mortgage applications report, CSFB Small-Mid Company Transport Conference, Needham Consumer Lifestyle Conference, UBS Engineering/Construction Conference and the (ARUN) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and contstruction shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.

1 comment:

Anonymous said...

http://www.nytimes.com/2011/03/16/world/asia/16contain.html?_r=2&nl=todaysheadlines&emc=globasasa24