Monday, November 28, 2011

Monday Watch

Weekend Headlines


  • IMF Readying Loan of as Much as $794 Billion for Italy, La Stampa Reports. The International Monetary Fund is preparing a 600-billion euro ($794 billion) loan for Italy in case the country’s debt crisis worsens, La Stampa said. The money would give Italy’s Prime Minister Mario Monti 12 to 18 months to implement his reforms without having to refinance the country’s existing debt, the Italian daily reported, without saying where it got the information. Monti could draw on the money if his planned austerity measures fail to stop speculation on Italian debt, La Stampa said. Italy would pay an interest rate of 4 percent to 5 percent on the loan, the newspaper said. The amount could vary from 400 billion euros to 600 billion euros, La Stampa said.
  • Euro Gains Versus Dollar, Yen on Italy Aid Speculation. The euro rose against the dollar on speculation policy makers are preparing more aid for Italy to stem the spread of the region’s debt crisis. The 17-nation currency gained against the yen after La Stampa reported that the International Monetary Fund is preparing a loan for Italy and as German Finance Minister Wolfgang Schaeuble urged fast-track treaty changes to tighten budget discipline. “The story here is more of a temporary boost to the euro, but the emphasis on the word ‘temporary,’” said Joseph Capurso, a Sydney-based currency strategist at Commonwealth Bank of Australia, the nation’s biggest lender. The euro area’s “economy is in recession or near a recession, that’s going to make it much harder for the governments to cut back their deficits.” The IMF is preparing a 600-billion euro ($799 billion) loan for Italy in case the debt crisis worsens, La Stampa reported without saying where it got the information. The money would give Italy’s Prime Minister Mario Monti 12 to 18 months to implement policy changes without having to refinance the country’s existing debt, the Italian daily reported. The reported IMF funding appeared “wide of the mark,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co., wrote in a note to clients. “The IMF simply does not have the resources.” The Washington-based lender had committed $282 billion in loans as of mid-August, compared with member quotas of $383 billion and additional pledged or committed resources of about $600 billion, IMF data show.
  • Mounting Euro Breakup Risk Seen by Banks as Debt Crisis Festers. Banks around the world are sounding their loudest warnings yet that the euro area risks unraveling unless its guardians quickly intensify efforts to beat the two- year sovereign debt crisis. As European finance chiefs prepare to meet this week, and Italy seeks to raise as much as 8.8 billion euros ($11.7 billion) in bond sales, economists from Morgan Stanley, UBS AG, Nomura International Plc and other banks say governments and the European Central Bank must step up their crisis response. Failure to do so threatens to break the 17-nation currency bloc, they told clients in reports published over the past week. “Markets continue to move faster than politicians,” Mansoor Mohi-uddin, Singapore-based head of foreign exchange strategy at UBS, said in a Nov. 26 note. Investors are starting to “price in the endgame” for the euro, he said. What Deutsche Bank AG calls “a new stage of the crisis” and Nomura labels a “far more dangerous phase” is dawning as signs mount that investors are even concerned about Germany, the euro’s linchpin economy. It failed to draw bids for 35 percent of 10-year bunds sold last week and the yield on its 30-year securities had the biggest weekly gain in 14 months. The euro suffered its longest losing streak in 18 months as Spain dropped plans to sell three-year bonds, Italy paid more to borrow for two years than for 10, Standard & Poor’s trimmed Belgium’s credit rating and Portugal’s was cut by Fitch Ratings below investment grade. The Standard & Poor 500 Index had its worst Thanksgiving week since 1932 and Canadian Finance Minister Jim Flaherty said the turmoil is creating global contagion.
  • Schaeuble Says Euro Fund Needs More Work to Spur Confidence. German Finance Minister Wolfgang Schaeuble said that European governments are struggling to enact a pledge to beef up the euro rescue fund, as he called for fast- track treaty changes to tighten budget discipline as the key to calming markets. Schaeuble, in an interview with ARD television in Berlin, said that the European Financial Stability Facility recently paid a higher rate of interest on debt than France or the other AAA rated countries that guarantee the EFSF, underscoring the “crisis of confidence” in the euro area. The “decisive” answer remains budget discipline enforced by means of European Union treaty change, he said.
  • Noyer Says European Crisis Has Worsened 'Significantly'. Bank of France Governor Christian Noyer said the European crisis has worsened “significantly,” as deepening investor concern over the region bolsters market volatility. “The situation in Europe and the world has significantly worsened over the past few weeks,” Noyer said at a forum in Tokyo today. “Bond markets in the euro areas are not functioning normally. Economies outside the euro area are feeling the effects of increased uncertainty, lower growth prospects and capital repatriation.” Noyer reiterated his resistance toward buying more government bonds from the euro area to shore up confidence, saying that “any lasting liquidity backstop” must come from governments and not the central bank. Monetary authorities from the U.S. and U.K., which have been buying “significant amounts” of public debt, would be risking spikes in long-term interest rates “in a different inflation environment” and markets are already hedging against inflation “tail risks,” he said.
  • Belgium's Credit Rating Lowered by S&P on Bank Rescues, Politics. Belgium’s credit rating was cut one step to AA by Standard & Poor’s, which said bank guarantees, lack of policy consensus and slowing growth will make it difficult to reduce the euro region’s fifth-highest debt load. The rating was lowered from AA+, with a negative outlook, London-based S&P said yesterday in a statement. The action by S&P is the first downgrade for Belgium in almost 13 years and puts its credit ranking on a par with the S&P local-currency ratings of the Czech Republic, Kuwait and Chile. Belgium’s borrowing costs have surged to the highest level in 11 years in the past two months after the nation’s government agreed to buy Dexia SA’s Belgian bank unit and guarantee part of the crisis-hit lender’s liabilities for 10 years. Investors continued a selloff in Belgian bonds after six-party coalition talks ran aground this week as Liberals and Socialists clashed over how to cut the budget deficit. “One cannot ignore the current political crisis that Belgium is facing, but apart from this, this rating cut also illustrates how banking-sector issues can reverberate on the sovereign,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “The question is whether other European countries might follow, given rising tensions throughout the banking sector.”
  • Euro in Longest Losing Stretch in 18 Months as Crisis Spreads. The euro slid for a fourth week, its longest losing streak versus the dollar in 18 months, as Germany’s struggle with a bond auction signaled Europe’s debt crisis is touching the region’s most fiscally sound nations. The 17-nation currency fell for a third week against the yen as Belgium’s credit rating was downgraded and before the nation auctions securities next week, including 10-year debt. Italy and France will also sell bonds next week. “The conditions in the foreign-exchange market caught up this week with the conditions in the credit market,” Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London, said yesterday. “Before, there was a lot of selling of periphery paper for core paper. But if Germany goes, there’s no more core paper to buy -- the capital leaves the euro area.” The euro dropped 2.1 percent to $1.3239 yesterday in New York, from $1.3525 on Nov. 18. It last fell for four weeks in May 2010.
  • Spain's PP Is Preparing More Austerity Measures, Economista Says. The People’s Party, which won Spain’s Nov. 20 elections, is preparing extra austerity measures as it fears the nation’s deficit may reach 8 percent of gross domestic product this year, higher than the 6 percent target of the previous government, El Economista reported. The PP expects to find a deviation equal to 20 billion euros ($26.5 billion) and the party is now considering debating measures such as the introduction of co-payment in public services, the newspaper said, citing unidentified authors of economic reports commissioned by the PP. Other options include raising taxes on cigarettes, alcohol and fuel as well as increasing the value added tax rate, the newspaper added.
  • Bank Capital Rules May Trigger Credit Crunch, UBI CEO Tells MF. Unione di Banche Italiane ScpA (UBI) Chief Executive Officer Victor Massiah said European bank regulators’ efforts to force banks to bolster their capital could trigger a credit crunch, Milano Finanza reported. Banks may have to cut lending to clients to meet the European Banking Authority’s capital requirements, Massiah told the newspaper in an interview. The bank won’t have any trouble paying a dividend if the EBA and Bank of Italy modify the rules, he said. UBI won’t change its business plan unless the sovereign debt crisis deepens, he told the newspaper.
  • Europe Must Act to Prevent Debt-Crisis 'Train Wreck,' Swan Says. European Union leaders must act to stop the region’s debt contagion becoming a “slow-motion train wreck” that is already crimping Australia’s economy, Treasurer Wayne Swan said. EU politicians have been “frustratingly slow” in tackling the region’s sovereign-debt crisis that has dragged on global economic growth and cut Australian government revenue, causing asset prices to fall and households to spend less, Swan said in his weekly economic note yesterday. “Europe needs to understand that financial markets don’t work on political timelines, and they are already a long way behind the curve,” Swan said. “The global economy has already paid a very high price for the failure of Europe to get its house in order.”
  • China Vice Premier Says Property Curbs at 'Critical Stage'. Chinese Vice Premier Li Keqiang said measures introduced to control the nation’s property market are at a “critical stage” and that the government should continue with the curbs, the official Xinhua News Agency reported. Li also called for increased efforts to construct and “fairly distribute” affordable housing to low-income families, Xinhua reported today. The vice premier made the remarks while visiting the city of Langfang in Hebei province on Nov. 25, during which he checked on the implementation of the government’s affordable housing policies, Xinhua reported. China’s home prices declined in 33 of 70 cities monitored by the government in October. Premier Wen Jiabao said at the end of October that the government would “firmly” maintain restrictions on real estate. Li is in line to replace Wen as premier next year, according to analysts including Willy Wo-Lap Lam, an adjunct professor of Chinese history at the Chinese University of Hong Kong.
  • Bank Commodity Staff Turnover Seen Gaining as Rules Tighten. The world’s biggest investment banks have greater staff turnover in commodities than in fixed-income and currencies because of tightening regulations on trading, according to Coalition, a London-based research company. That reflects “general market confidence and demand from non-banking competitors including trading firms, which do not have the same levels of regulatory constraints,” Coalition said in an e-mail, without giving figures. Coalition, founded in 2002, uses company announcements, its own research, media articles and information from people in the market.
  • Holiday Weekend Sales Rise to Record $52.4B. U.S. retail sales during Thanksgiving weekend climbed 16 percent to a record as shoppers flocked to stores earlier and spent more, according to the National Retail Federation. Sales totaled $52.4 billion, and the average shopper spent $398.62 during the holiday weekend, up from $365.34 a year earlier, the Washington-based trade group said in a statement today, citing a survey conducted by BIGresearch. More than a third of that -- an average of $150.53 -- was spent online. “Consumers are clearly demonstrating their desire to spend this holiday season, but are far from throwing caution to the wind when it comes to how much they will spend on gifts,” Phil Rist, executive vice president at BIGresearch, said in a statement. “Retailers will have to stick to an aggressive holiday promotion schedule to keep consumers interested.”
  • Secret Fed Loans Gave Banks Undisclosed $13 Billion. The Federal Reserve and the big banks fought for more than two years to keep details of the largest bailout in U.S. history a secret. Now, the rest of the world can see what it was missing. The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue. Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse. A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.
  • Record Gold Hoard Spurs Bullish Bets From Traders: Commodities. Gold traders are more bullish after investors accumulated the biggest-ever hoard of the metal, with Europe’s deepening debt crisis driving them to protect their wealth with this year’s second-best performing commodity. Eighteen of 26 surveyed by Bloomberg expect bullion to rise next week. Holdings in exchange-traded products backed by gold reached a record 2,350.8 metric tons on Nov. 23, now valued at $127.6 billion, according to data compiled by Bloomberg. Hedge funds and other speculators increased their net-long position, or bets on higher prices, for four weeks, the longest stretch since March, Commodity Futures Trading Commission data show.
  • Pakistan Cuts NATO Supply Lines After Alleged Border Attack. Pakistan cut supply lines to NATO troops in Afghanistan and ordered a U.S. withdrawal from a drone base after reports that helicopters of the U.S.-led NATO force in Afghanistan killed at least 24 Pakistani soldiers in an attack on a border post. Prime Minister Yousuf Raza Gilani “strongly condemned” the attack and ordered the Foreign Ministry to address the incident “in the strongest terms” with the North Atlantic Treaty Organization and the U.S., his spokesman said yesterday in an e-mailed statement. The Cabinet’s defense committee held an emergency meeting and ordered the U.S. to withdraw from the Shamsi Airbase within 15 days. Army Chief of Staff Ashfaq Kayani said the attack was a “blatant and unacceptable act,” and demanded urgent action against those responsible. NATO and the U.S. said the incident is being investigated.
  • Egypt's New Premier Shunned as One Killed in Fresh Violence. One person died in clashes with police in Cairo as protesters rejected the military’s appointment of new Prime Minister Kamal el-Ganzouri and demanded the generals cede power. Field Marshal Mohamed Hussein Tantawi, head of the ruling army council, said he gave el-Ganzouri “full prerogatives,” state-run television reported yesterday. Hundreds spilled over from Tahrir Square and started a sit-in in front of the nearby Cabinet building to protest el-Ganzouri’s appointment. One person died in clashes with police today at the site, state-run Nile News reported. The council said parliamentary elections scheduled to start Nov. 28 won’t be postponed and that it will stay in power until a presidential poll in June. Voting will take place over two days instead of one during each round, the Cabinet said on its Facebook page. In Cairo’s Abassiya Square, a one-day counter- protest backing the military grew into thousands after prayers on Friday.
  • Posco to Hit Stainless Steel Output Record on Emerging Demand. Posco, the world’s biggest maker of stainless steel, will report record production this year, saying it expects to maintain that pace in 2012 supported by demand from emerging markets. Output of the alloy used in cars and home appliances may reach about 3.16 million metric tons this year, up from about 2.9 million tons in 2010, Suh Young Sea, senior vice president at the Pohang, South Korea-based company, said in an interview in Seoul. Posco, the world’s third-biggest steelmaker, last month said it will continue expanding in emerging markets, including China and India. Stainless-steel makers in Europe face overcapacity, higher raw-material costs and falling prices.
  • Pakistan Says Air Attack Erases Progress in Repairing U.S. Ties. Pakistan said an attack by the American-led NATO force based in Afghanistan that killed 24 Pakistani soldiers had triggered “rage” in the nuclear-armed nation and reversed progress in repairing ties with the U.S. Foreign Minister Hina Rabbani Khar in a phone call with Secretary of State Hillary Clinton yesterday explained decisions made by the Cabinet’s defense committee to close border crossings to trucks shipping supplies for the U.S. military in Afghanistan and order American personnel out of the Shamsi Airbase in Baluchistan province within 15 days, according to an e-mailed statement from the foreign ministry. Khar told Clinton of “the deep sense of rage felt across Pakistan at the senseless” loss of life, the statement said. The air attack on border posts “negates the progress made by the two countries on improving relations and forces Pakistan to revisit the terms of engagement,” yesterday’s statement cited Khar as saying.
Wall Street Journal:
  • Europe's Leaders Pursue New Pact. Euro-zone leaders are negotiating a potentially groundbreaking fiscal pact aimed at preventing the currency bloc from fracturing by tethering its members even closer together. The proposal, which hasn't yet been agreed to, would make budget discipline legally binding and enforceable by European authorities. Officials regard the moves as a first step toward closer fiscal and economic coordination within the currency area. That would mark a seminal shift in the governance of the 17-nation euro-zone.
  • Financial Markets Starting to Price in Endgame for Euro - UBS. Financial markets are pricing the possibility of the break up of the euro area as rising German bund yields signal that the crisis is reaching its endgame, UBS, the world's third-biggest foreign exchange bank said in a research note Saturday. Yields on 10-year German bunds have risen above premiums investors demand from governments in the U.K., Switzerland, U.S and Japan this week, in a sign that investors are getting increasingly nervous about the outcome of the sovereign debt crisis in Europe, the bank said. "Fixed income investors are betting that either Germany moves towards a fiscal union with its euro-zone partners or that, without the ECB willing to buy unlimited amounts of sovereign bonds in the secondary markets, the euro-zone will break apart," said Mansoor Mohi-uddin, a currency strategist at UBS in the note. "A weak German bund auction this week has crystallised concerns about the future of the euro," said Mohi-uddin. He added that unless the European Central Bank agrees to provide unlimited support to markets by buying European sovereign bonds, the currency area is in danger of falling apart before politicians come up with a solution. "Financial markets continue to move faster than politicians." Meanwhile, credit downgrades to Belgium, Portugal and Hungary have further damaged investors' views on the monetary area. Still, Mohi-uddin said another explanation to rising bunds yields might be that markets are downbeat about the prospects of Germany's fiscal position if the country moves to a closer fiscal union with its weaker European partners. "If [a closer union] involves fiscal transfers to shore up the single currency area then Germany's fiscal position itself will deteriorate," he added. UBS is the latest major bank to join an increasing number of financial players who in recent weeks said that risks the monetary area could break up are rising fast.
  • Ireland To Inject EUR1B Into Irish Life After Sale Talks Fail. The Irish government has confirmed it will need to inject about EUR1 billion to complete the recapitalization of Irish Life & Permanent PLC (IL0.DB) after talks to buy its life business fell through.
  • Pentagon Cutbacks Force New Strategy at Rockwell Collins(ROK). Rockwell Collins Inc., which has relied heavily on sales of cockpit electronics for U.S. military aircraft, is looking for new avenues of growth.
  • ICAP Testing Trades In Greek Drachma Against Dollar, Euro - Executives. ICAP Plc is preparing its electronic trading platforms for Greece's potential exit from the euro and a return to the drachma, senior executives at the inter-dealer broker said Sunday. ICAP is the latest firm to disclose such preparations, joining the growing ranks of banks, governments and other key players in the global financial system whose officials are worried enough about the stability of the common currency to be making contingency plans for a possible break-up.
  • 'Sell' Ratings Rare on Chinese Stocks. Investors have soured on many Chinese companies on fears of a slowing economy and worries about accounting fraud and corporate governance. But for analysts at investment firms, the stocks remain a hot ticket. In bullishness reminiscent of the technology bubble of the 1990s, analysts who work for investment banks based around the world rate nearly every Chinese stock they cover as a "buy." While these analysts generally are a bullish lot, they are far more positive on Chinese banks, tech companies, retailers and the like than they are on companies based elsewhere. According to data compiled by independent research firm Forensic Asia Ltd., analysts have 19.2 "buy" recommendations on Chinese stocks for every one "sell" recommendation.
  • GM's(GM) Volt Woes Cast Shadow on E-Cars. For the past several years, the federal government has spent hundreds of millions of dollars promoting the development of electric cars. Now regulators are investigating whether the big battery packs used by one of them pose a safety risk in the event of an accident.
  • Obama Swing-State Visits Surpass Presidential Record. When President Barack Obama jets to Scranton, Pa., Wednesday to promote his jobs package, he'll log his 56th event in a presidential battleground state this year, putting him well ahead of President George W. Bush's record-breaking swing-state travel in 2003. Mr. Obama's extensive travels this year have opened the president to criticism from Republicans that he is intertwining campaigning and governing at a time when he has called for bipartisanship on intractable national problems. Most of the cost is typically born by taxpayers.
  • Climategate 2.0. A new batch of leaked emails again shows some leading scientists trying to smear opponents. Last week, 5,000 files of private email correspondence among several of the world's top climate scientists were anonymously leaked onto the Internet. Like the first "climategate" leak of 2009, the latest release shows top scientists in the field fudging data, conspiring to bully and silence opponents, and displaying far less certainty about the reliability of anthropogenic global warming theory in private than they ever admit in public. The scientists include men like Michael Mann of Penn State University and Phil Jones of the University of East Anglia, both of whose reports inform what President Obama has called "the gold standard" of international climate science, the Intergovernmental Panel on Climate Change (IPCC).
  • Lehman Days for Europe? Markets are forcing higher government bond rates to compensate for questionable sovereign finances, and banks are under regulatory pressure to shrink their balance sheets. But where are the buyers for all this debt?
  • Rio Tinto(RIO): Europe, U.S. worries hitting sentiment. Mining giant Rio Tinto Ltd. said Monday that "continuing stresses in the euro zone and a weaker outlook for the U.S. economy are inevitably affecting customer sentiment, which has become more negative in recent months." Rio Tinto chief executive Tom Albanese said that "for the near term I am concerned about the general softening of prices when we continue to see cost escalation and strong currencies in Australia and Canada." Albanese added that the impact of current economic concerns on the business is manageable unless financial markets deteriorate substantially.
  • Moody's: Mounting Pressure on All EU Sovereign Ratings. Moody's Investors Service said on Monday the rapid escalation of the euro zone sovereign and banking crisis is threatening the credit standing of all European sovereigns. "While Moody's central scenario remains that the euro area will be preserved without further widespread defaults, even this `positive' scenario carries very negative rating implications in the interim period," the agency said in a report. Moody's also noted the political impetus to implement an effective resolution plan may only emerge after a series of shocks, which may lead to more countries losing access to market funding and requiring a support program. "This would very likely cause those countries' ratings to be moved into speculative grade in view of the solvency tests that would likely be required and the burden-sharing that might be imposed if (as is likely) support were to be needed for a sustained period."
  • Engineer's Return to China Leads to Jail and Limbo. After two decades of working as a successful engineer in the United States, Hu Zhicheng decided to return to China in 2004 and apply his rich experience to designing catalytic converters for the nation’s booming automotive industry. “I saw how polluted the air was here, and thought I could make a difference,” said Mr. Hu, a naturalized American citizen who has a doctorate in engineering. Now it seems he cannot leave. The last three times he tried to board an airplane and return to his family in Los Angeles, Mr. Hu, 49, was turned away by Chinese border agents who claimed that he was a wanted man. The problem is, he cannot find out exactly who wants him and why.
Business Insider:
Zero Hedge:
NY Times:
  • Slipping Backward on Swaps. It is perhaps unsurprising that players in the derivatives market want to thwart one of the worthier aims of the Dodd-Frank financial regulation: to bring transparency to the huge market for instruments known as swaps. Now some in Congress, on both sides of the aisle, are trying to block that goal, too.
San Francisco Chronicle:
  • Occupy Protests Can't Stop S.F. Shoppers. Bargains and a pretty holiday tree trumped politics Friday night. Occupy SF activists had hoped to keep shoppers out of downtown San Francisco stores to protest corporate greed, but no matter how hard they yelled, shoppers shoved right on by.
Oakland Tribune:
  • California Ports Slump Ahead of Holiday Shopping Season. The Port of Oakland and other California ports have suffered a slump in volume in recent months -- an unsettling sign that could portend sluggish sales ahead of the crucial holiday shopping season. The slowdown for imports suggests merchants curbed orders for overseas products due to fears of lackluster consumer demand. Despite reports of a busy Thanksgiving and Black Friday launch for Christmas sales, merchants may still have to grapple with feeble shopping activity in December. At the ports of Oakland, Los Angeles and Long Beach, the year started out great. Month after month, volumes were up compared with the same month a year ago. Signs pointed to an improved economy. By midsummer, though, things began to go awry for the California ports as the volume of cargo began to sink. The slump arrived in August and continued through September and October. "Those months are our peak season, the run-up before the holiday season," said Lawrence Dunnigan, manager of business development with the Port of Oakland. "All of the imports are very soft this year." From August to October of this year, the ports of Oakland, Los Angeles and Long Beach all endured a decline in total volume compared with the same period the year before. The statistics are based on a combined total of imports and exports at the trio of commerce hubs:
Seeking Alpha:
Wall Street All-Stars:
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).
USA Today:
  • Cameroon Eyes 50% Hike in Oil Output in 2012. Cameroon could produce some 36.5 million barrels of oil next year, the equivalent of 100,000 barrels a day and over 50 percent up on the "conservative" estimate of the central African state's 2012 budget, a state oil company official told Reuters. The senior National Hydrocarbons Corporation (SNH) official said two new wells were expected to go into production during the first quarter of 2012. "What you are seeing in the finance bill is just a very conservative estimate," said the official who requested anonymity as he was not authorised to talk to reporters.
  • Baidu(BIDU) to Invest 3 Billion Yuan to Help Chinese SMEs. China's largest search engine Baidu Inc said on Monday it will invest 3 billion yuan ($470.6 million) by the end of 2015 to help 2 million small- and medium-sized enterprises expand their businesses. As part of the investment, Baidu will groom 100,000 search marketing professionals, help small- and medium-sized enterprises develop their service platforms, provide free marketing about less developed regions and help government departments in their research on business, Baidu said, confirming a Xinhua report issued late on Sunday.
Financial Times:
  • Appetite Grows for Hedge Fund Launches. The “Darwinian” shake-up of the hedge fund industry over the past few years is prompting increased interest from investors in “next-generation” managers hoping to be the next Alan Howard or George Soros.
  • Fitch Backs Calls for Sovereign CDS Reform. Calls to reform the market for insuring against the default of sovereign debt have been backed by a leading credit rating agency following the voluntary deal for exchanging Greek bonds proposed last month.
  • Banks Scramble to Plug Capital Deficits. “This is the first mass bank recapitalisation exercise where basically no money is going to be raised,” says one banking analyst. The result is that the capital flowing into the banking system is likely to be only a fraction of the €106bn the EBA estimated was required last month – itself a low figure compared with the €200bn put forward in September by the International Monetary Fund.
  • Gingrich Backed by Key New Hampshire Newspaper. Newt Gingrich’s political resurrection has received another boost, with the Republican former house speaker winning the coveted endorsement of the largest newspaper in New Hampshire, a key state in early primaries.
  • Should The Fed Save Europe From Disaster? Even if EU leaders could agree on fiscal union and joint debt issuance – which they can’t – such long-range changes cannot solve the immediate crisis at hand. The push for treaty changes has become a vast distraction. So the question arises, should the rest of the world take over management of Europe to prevent or mitigate disaster? Specifically, should the US Federal Reserve assume leadership as a monetary superpower and impose policy on a paralyzed ECB, acting as a global lender of last resort?
Sky News:
  • Exclusive: Banks Hit Back Over Levy Hike. George Osborne will maintain the heat on Britain’s banks next week by increasing the levy on their balance sheets to ensure that it delivers £2.5bn to Treasury coffers this year. I understand that Treasury officials are putting the finishing touches to plans to increase the rate at which the levy is applied from 0.075 per cent of their balance sheets to around 0.1 per cent (although that latter number is still moving, I’m told). The hike in the levy will form part of the Chancellor’s autumn statement on Tuesday (barring any last-minute changes, officials tell me). The Treasury declined to comment. The motivation for the increase is part-political, part-economic.
  • Germany and France want euro-area countries to agree by as early as January on new rules for greater fiscal discipline. German Chancellor Angela Merkel and French President Nicolas Sarkozy may seek to conclude a treaty on new fiscal rules on a state-by-state basis to speed up ratification, without saying where it got the information.
  • Cyprus can no longer delay a credible fiscal consolidation package as its financial sector is at risk, European Central Bank governing council member Athanasios Orphanides, who is also governor of the Central Bank of Cyprus said in a report today.
  • The German government's council of independent economic advisers opposes joint euro-area borrowing, citing Wolfgang Franz, head of the five-member panel, as telling the weekly magazine in an interview to be published on Nov. 28.
  • Danish support for the euro is at an all-time low, citing a poll by Megafon commissioned by the newspaper and television station TV 2. 65% of those asked would vote against joining the single currency if a vote were held tomorrow, compared with 24% in favor, citing the poll.
Il Sole 24 Ore:
  • The Italian government, led by Prime Minister Mario Monti, may introduce additional austerity measures as much as $20 billion on Dec. 5. Monti may levy a tax on first homes, increase value-added tax, and introduce anti-evasion measures on transactions of more than 300 euros to 500 euros. The introduction of a wealth tax is still uncertain.
Beijing News:
  • Chinese toll road operators in 30 provinces owed a total of 2.3t yuan in debt as of Nov. 11, citing He Jianzhong, a spokesperson from the Ministry of Transport.
  • China "shouldn't panic' about the country's economic slowdown, citing Pan Jiancheng, deputy director-general of the National Bureau of Statistics' China Economic Monitoring and Analysis Center.
Shanghai News:
  • China Banking Regulator Warns of 2012 Property Risks. Banking sector is closely related to property development loans and mortgages, citing China Banking Regulatory Commission's assistant chairman Yan Qingmin.
China Securities Journal:
  • China May Face Pressure to Raise Rates in 2Q 2012. China will likely maintain "stable" monetary policies next year with "appropriate" minor adjustments, citing analysts and market sources.
  • China's home-grown automakers may see "flat or negative" sales growth next year, citing Great Wall Motor Co. Vice President Jia Yaquan.
Hong Kong Economic Times:
  • Property group Knight Frank LLP says Hong Kong luxury home prices may fall as much as 10% next year.
Weekend Recommendations
  • Made positive comments on (Y), (JOE), (GY), (NFLX), (GD), (RAH), (RNO), (HIT), (EGU) and (MDP).
  • Made negative comments on (HAS), (TSLA) and (SLG).
Night Trading
  • Asian indices are -.25% to +1.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 231.0 +4.0 basis points.
  • Asia Pacific Sovereign CDS Index 173.0 +6.5 basis points.
  • FTSE-100 futures +.85%.
  • S&P 500 futures +1.86%.
  • NASDAQ 100 futures +1.79%.
Morning Preview Links

Earnings of Note
  • (HI)/.36
  • (CPRT)/.58
Economic Releases
10:00 am EST
  • New Home Sales for October are estimated at 313K versus 313K in September.
Upcoming Splits
  • (SXL) 3-for-1
Other Potential Market Movers
  • The US/EU Summit, Dallas Fed Manufacturing Activity Index for November and the CSFB Tech Conference could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by commodity and technology shares in the region. I expect US stocks to open higher and to weaken into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the week.

1 comment:

theyenguy said...

In breaking news, AP reports Obama Hosts EU Leaders In White House Summit Over Debt Crisis President Obama and Treasury Secretary Geithner will meet at the White House with European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso and EU foreign policy chief Catherine Ashton as European countries struggle to bolster confidence in the euro currency.

And in commentary of the IBD report Kansas City Southern Firing On All Cylinders, the stock value of KSU fell 7.6%, for the week ending November 25, 2011. US Railroads are the final market sector to turn lower as fears of sovereign insolvency and failure of global growth arise, as is communicated by the chart of KSU relative to US Basic Materials, KSU:IYM.