Evening Headlines
Bloomberg:
- Euro Holds Gains Versus Dollar, Yen Before Merkel and Lagarde Meeting. The euro held a one-day gain versus the dollar before Germany’s chancellor and the International Monetary Fund’s managing director meet amid optimism Europe’s leaders are taking steps to resolve the debt crisis. The 17-nation currency remained higher against the yen after yesterday’s advance as the leaders of Germany and France discussed a rulebook for closer fiscal union within the euro area. The franc maintained a three-day gain versus the euro on prospects traders may test Switzerland’s currency ceiling after central-bank Chairman Philipp Hildebrand’s resignation. The Australian and New Zealand dollars climbed as Asian stocks rose, boosting demand for higher-yielding assets. “Some positive comments from European leaders are assisting the euro, though traders are cautious, waiting to see what action plan is put in place and how bond yields react,” said Tim Waterer, a currency dealer at CMC Markets in Sydney.
- Soros Says Europe's Debt Woes 'More Serious' Than 2008 Crisis. Billionaire investor George Soros said Europe’s sovereign-debt woes are “more serious” than the financial crisis of 2008 and that the world faces the prospect of a “vicious circle” of deflation. “We have a more dangerous situation now than in 2008,” Soros, 81, said in response to a question at an event in the southern Indian city of Bangalore today. “The crisis in Europe is more serious than the crash of 2008.”
- Copper imports by China, the biggest consumer, fell 5.1% last year, the first annual drop since 2008, amid destocking and slowing demand growth, customs data showed today.
- Biggest Rubber Glut Since 2004 Cuts Michelin Costs: Commodities. Rubber plantations from Indonesia to Ivory Coast will tap a global crop this year that will create the biggest glut since at least 2004, cutting costs for Bridgestone Corp., Michelin & Cie. and other tiremakers. The market will switch to a 413,000-metric-ton surplus, from an 87,000-ton shortage in 2011 that helped drive rubber to a record in February, Goldman Sachs Group Inc. estimates. Prices fell since then on prospects for more supply and slower growth in China, the largest consumer. Futures will drop as much as 10 percent to 240 yen ($3.12) a kilogram (2.2 pounds) in Tokyo this year, the lowest since November 2009, the median estimate in a Bloomberg survey of 14 analysts and traders shows. Commodities posted their first annual loss in three years in 2011 as China, the biggest user of everything from coal to cotton to copper, slowed growth to cool inflation that reached a three-year high in July. Auto sales in the nation rose 2.6 percent in the first 11 months of last year, down from 32 percent in 2010, industry data show. That’s adding to pressure on raw-material prices, already weakening as economists surveyed by Bloomberg forecast the slowest global growth since 2009. “The outlook for rubber prices is linked to global and Chinese economic growth,” said Chris Pardey, chief executive officer of Singapore-based RCMA Commodities Asia Group, which trades natural and synthetic rubber. “My view is negative on the global economy and therefore negative on rubber.”
- Alcoa(AA) Posts First Quarterly Loss Since 2009. Alcoa Inc. (AA), the largest U.S. aluminum producer, reported its first quarterly loss in more than two years after prices tumbled for the lightweight metal. The fourth-quarter net loss was $191 million, or 18 cents a share, compared with net income of $258 million, or 24 cents, a year earlier, the New York-based company said yesterday in a statement. The loss excluding restructuring costs was 3 cents a share, matching the average projection from 18 estimates compiled by Bloomberg. Sales rose 6 percent to $5.99 billion from $5.65 billion. The loss is Alcoa’s first on an adjusted basis (AA) since the second quarter of 2009, when the company was dealing with a slump in aluminum prices that followed the global financial crisis. Aluminum fell in 2011, with the benchmark three-month price in London averaging 11 percent lower in the fourth quarter than a year earlier, and Alcoa said last week it would close 12 percent of its smelting capacity. The loss “makes it very much an uphill battle” to meet analysts’ current expectations in 2012, Jorge Beristain, an analyst at Deutsche Bank AG who rates the shares “hold,” said by phone yesterday. Alcoa needs earnings before interest, taxes, depreciation and amortization “to essentially double in the next quarter and then stay at that level for the next four,” he said.
- Juniper(JNPR) Shares Drop After Reduced Fourth-Quarter Sales, Profit Forecast. Juniper Networks Inc. (JNPR) tumbled in late trading after saying fourth-quarter revenue and profit were probably lower than forecast, citing weaker-than-expected demand for routers from telecommunications-service providers. Sales based on preliminary results were $1.11 billion to $1.12 billion in the quarter, less than an earlier company prediction of $1.16 billion to $1.22 billion, Sunnyvale, California-based Juniper said in a statement today. Per-share earnings, excluding certain expenses, were 26 cents to 28 cents, compared with a prior forecast of 32 cents to 36 cents. Juniper fell 6.4 percent to $20.15 at 4:16 p.m. in extended New York trading after the revised outlook was released. The stock has tumbled 43 percent in the past year, while larger competitor Cisco Systems Inc. (CSCO) has fallen 9.5 percent. The Standard & Poor’s 500 Index was little changed. Juniper plans to provide full fourth-quarter results on Jan. 26. In addition to a drop in sales and profit, the company said its operating margin will be below the previous forecast of 21 percent to 23 percent.
- Florida Casino Plan Clears First Hurdle With Senate Panel. Florida would become the most populous state with full casino gambling outside American Indian control under a proposal that cleared its first legislative hurdle today. The vote in the Senate Regulated Industries Committee would allow the fourth-largest state by population to have as many as three Las Vegas-style casinos, with dealers and table games in addition to slot machines.
- Threat to Hormuz Shipping Seen Receding as EU Plans Sanctions. Iran is unlikely to shut down oil shipping through the Strait of Hormuz in response to Western sanctions, President Barack Obama’s former adviser on Iran said. Oil prices fell today as concern eased that Iran would attempt to impede shipping through the Strait, which accounts for about a fifth of the oil traded globally. The decline occurred even as tensions increased, with Iran announcing it has taken another step in its nuclear program and that it had sentenced to death a former U.S. soldier of Iranian descent accused of spying. “Do I really think that they’re going to go ahead and try to shut down the Straits of Hormuz?” Dennis Ross, who served two years on the National Security Council as Obama’s special assistant on Iran, said today in an interview at Bloomberg’s office in Washington. “I do not. They will be the ones who suffer the most from that.”
- Panel to Watch Beijing. President Barack Obama plans to create a U.S. government task force designed to monitor China for possible trade and other commercial violations as part of a larger White House effort to get more assertive with Beijing this election year, people familiar with the matter said. The group, called the Enforcement Task Force, will aim to enforce U.S. trade rules. Despite the generic name, officials said the group is specifically meant to target China.
- Hostess Preparing to File for Bankruptcy Protection.
- How Microbes Teamed to Clean Gulf. Scientists Studied 52 Species of Bacteria and Water Currents to Explain Demise of Oil and Gas Plum.
- China Is Expected to Resist Oil Shift. U.S. Treasury Secretary Timothy Geithner is likely to get a skeptical hearing in Beijing on Tuesday and Wednesday as he presses leaders to reduce purchases of Iranian oil and explains tough new U.S. sanctions rules meant to hobble Iran's financial sector.
- The Stephanopoulos Standard. Republicans can turn media bias to their advantage. A funny thing happened on the way to the New Hampshire primary: ABC moderator George Stephanopoulos embarrassed himself on national television with questions plainly intended to embarrass the Republican candidates. Therein lies a lesson.
MarketWatch:
- Australia's Biggest Economic Threat Is China. Australia has been one of the world’s best performing economies during the economic crisis, attracting strong investment interest from overseas investors. But the outlook is cloudy.
Zero Hedge:
CNBC:
- China Trade Growth Slows to 2-Year Lows in December. Annual exports grew 13.4 percent in December, just below the 13.5 percent forecast in a Reuters poll of 23 economists and the slackest pace of expansion since November 2009 — excluding the volatile month of February last year when the Lunar New Year holiday disrupted activity. Growth in imports slowed to a 26-month low of 11.8 percent, well below the 17 percent forecast."The main disappointment is with imports, which show a much weaker number compared to November and are way below consensus," said Kevin Lai, an economist at Daiwa Capital Markets, in Hong Kong. "That means the boost in November was temporary, the domestic economy is slowing sharply."
- Why Earnings May Be Better Than All The Dire Forecasts.
- Hopes for Fresh Chinese Reforms Dashed. Signs that China is losing its appetite for key financial reforms are fuelling concerns that the country will remain on a path of unbalanced growth, increasing the chances of a future economic crisis.
- Ackman Plans Proxy Fight at Canadian Pacific(CP). Mr. Ackman, whose firm, Pershing Square Capital Management, is the largest shareholder in the railway, raised the specter of a proxy fight in a interview shortly after John E. Cleghorn, the chairman of Canadian Pacific, released an open letter to shareholders supporting Fred Green, the current chief executive, and his long-term plans for the company.
- UniCredit's Weak Share Offering Is Poor Omen in Europe. UniCredit, Italy’s largest bank, is undergoing a trial by fire in the stock market, underscoring the challenges that European banks face in trying to right themselves. Shares of UniCredit have been in free fall as investors have balked at a new stock offering meant to bolster the bank’s capital. Since last week, UniCredit’s market value has plunged by more than 40 percent. It is a bad omen for struggling European banks. At the behest of regulators, the region’s financial institutions must raise a combined $145 billion by June. But banks may have a tough time convincing investors to plow more money into the beleaguered industry if UniCredit’s experience is any indication. “I think this should scare policy makers,” said Nicolas Véron, a senior fellow at Bruegel, a research institute in Brussels. “Banks have been saying for some time that it’s impossible for them to raise money collectively in this market.
- New Chief of Staff: Former Hedge Fund Exec. at Citigroup(C), Made Money Off Mortgage Defaults. From 2006-2008, Jack Lew was chief operating officer of Citibank's alternative investments division. And it was his division that made billions of dollars betting "U.S. homeowners would not be able to make their mortgage payments," as the Huffington Post reported. The piece also reported: “Lew made millions at Citi, including a bonus of nearly $950,000 in 2009 just a few months after the bank received billions of dollars in a taxpayer rescue, according to disclosure forms filed with the federal government. The bank is still partly owned by taxpayers.” Of course, one should not begrudge Lew his personal, professional, and financial successes. But one might wonder what kind of message the president is sending with this appointment.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 23% 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 -19 (see trends).
Reuters:
- Exclusive: SocGen Sees 2012 Investment-Bank Revenue Slump. French bank Societe Generale is forecasting a "significant" drop in 2012 investment-bank revenue compared with 2011, weighed by higher funding costs and efforts to slash its balance sheet, according to an internal memo obtained by Reuters on Monday. France's second-biggest listed bank has also decided to exit or strongly reduce property, shipping and aircraft financing activities, as well as physical energy trading in North America, according to the 245-page memo sent to employee representatives. "(SocGen) CIB expects a significant drop in revenues for 2012 compared with 2011, weighed by higher charges linked to funding and balance-sheet reduction," the memo said.
- Iran Starts Uranium Enrichment, Condemns American to Death. Iran has begun enriching uranium deep inside a mountain and sentenced an American to death for spying, angering the West and undermining hopes that diplomacy could avert further sanctions or war. The start of enrichment at the Fordow bunker near the Shi'ite Muslim holy city of Qom was confirmed on Monday by an Iranian official in Tehran and by the Vienna-based International Atomic Energy Agency.
- SMSC(SMSC) Forecasts Q4 Loss, Shares Down. Chipmaker Standard Microsystems Corp posted third quarter below analysts' expectation on lower demand, and forecast a fourth-quarter adjusted loss. Shares of the company fell 9 percent in extended trade, after closing at $24.98 on the Nasdaq on Monday.
- Gold Feels Weight of Paulson Curse. When John Paulson’s hedge fund bought almost 100 tonnes of gold in early 2009, the public support from one of the world’s most respected hedge fund managers was a boon for the bullion market. Now Mr Paulson’s enormous investment seems more like a curse.
- Can the Euro Survive Another Year? We won't know for sure whether the single currency will keep on muddling through until eurozone policymakers face up to their predicament – that sustaining the euro requires more or less indefinite transfers of money from richer to poorer regions. That's the reason Germans are so opposed to ECB bond purchases, for such buying is in essence as much a form of liability transfer between governments as outright eurobonds. As long as policymakers keep burying their heads in the sand of Tobin taxes and other such diversions, this underlying choice goes unaddressed.
- Germany's Stance on Financial Transaction Tax Risks French Rift. Angela Merkel has warned that German support for the financial transaction tax (FTT) is not guaranteed, in a move that could open up a rift with France just days before the next European summit.
- China's largest export provinces of Guangdong, Jiangsu and Zhejiang cut their trade-growth forecasts for this year, citing local officials. Guangdong's 2012 import and export growth may be 7.5%, compared with 16% last year, citing Liang Yaowen, the province's director-general of the Dept. of Foreign Trade and Economic Cooperation, as saying. Jiangsu's 2012 trade is likely to increase 8%, compared with 15% last year, citing Zhu Min, head of the province's commerce dept., as saying. Zhejiang's exports will probably rise 10% this year, compared with 19.9% in 2011; while its total trade may gain 11%, compared with 22% last year, citing Jin Yonghui, head of the province's commerce dept., as saying.
South China Morning Post:
- Toy Firms Fear Crisis Will Cut Into Sales. As some manufacturers try to raise factory-gate prices at toy fair, firms exposed to the euro-zone crisis and US may see 30 per cent sales decline. Tensions between buyers and exhibitors flared yesterday at the Hong Kong Toys and Games Fair as manufacturers raised factory-gate prices by about 10 per cent to offset swelling costs amid fears that sales could fall.
Evening Recommendations
- None of note
- Asian equity indices are -.25% to +1.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 209.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 160.50 +1.0 basis point.
- FTSE-100 futures +.71%.
- S&P 500 futures +.45%.
- NASDAQ 100 futures +.52%.
Earnings of Note
Company/Estimate
- (SNX)/1.15
7:30 am EST
- The NFIB Small Business Optimism Index for December is estimated to rise to 93.8 versus 92.0 in November.
10:00 am EST
- The IBD/TIPP Economic Optimism Index for January is estimated to rise to 45.3 versus 42.8 in December.
- Wholesale Inventories for November are estimated to rise +.5% versus a +1.6% gain in October.
Upcoming Splits
- None of note
- The Fed's Esther George speaking, Fed's Williams speaking, JOLTs Job Openings report for November, 3-Year Treasury Note Auction, weekly retail sales reports, Needham Growth Conference, Goldman Sachs Energy Conference, Deutsche Bank Auto Industry Conference and the CES 2012 could also impact trading today.
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