Thursday, February 09, 2012

Thursday Watch

Evening Headlin
  • Greece Talks Stall as Venizelos Heads To Brussels. Greek Finance Minister Evangelos Venizelos said there is still uncertainty on the terms of a 130 billion-euro ($172 billion) rescue package for Greece ahead of a meeting of euro area finance ministers today. “There are issues outstanding that must be resolved by the time the eurogroup meets,” Venizelos told reporters in Athens today after a meeting with Prime Minister Lucas Papademos and European Union and International Monetary Fund officials that ended just before 6 a.m. “As the prime minister said, there is agreement on all the issues bar one.” The meeting with the so-called troika of lenders, representing the European Commission, the European Central Bank and the IMF, took place after leaders of the three parties supporting the government met Papademos and failed to resolve a dispute over pension cuts. The hitch came after a meeting of almost eight hours that was due to complete a package designed to help the country avert default that’s been on the table since July. Greece faces a 14.5 billion-euro bond payment on March 20 and is struggling to secure financing to avert a collapse of the economy that could spark a new round of contagion in the euro area. Papademos and the leaders of the three parties supporting the government “agreed on all the points of the program with the exception of one which requires further elaboration and discussion” with the lenders, according to an e-mailed statement from the premier’s office in Athens. “This discussion will occur immediately so that it can be completed in light of the meeting of euro area finance ministers” today.
  • ECB Taking Losses on Greek Debt Risk Sinking Italy: Euro Credit. The IMF's pressure on the ECB to take part in Greek debt writedowns may backfire by deterring the central bank from extending its program of buying bonds from distressed nations. "They will have to think of something, but it would be wrong to force the ECB to take losses," said Stuart Thomson, who helps oversee $121 billion at Ignis Asset Management in Glasgow. "The ECB taking a haircut would imply a fiscal transfer, which isn't its mandate. And the SMP would collapse if they do that. We can do without another rout in the market."
  • Draghi's First 100 Days Presage ECB Aid to Avoid Greek Default. In his first 100 days as European Central Bank President, Mario Draghi has taken unprecedented action to tackle the sovereign debt crisis. Greece may push him even further into unknown territory. Draghi will today face questions on the ECB’s possible role in helping Greece reduce its debt as the threat of a disorderly default mounts. While the ECB has remained silent on its intentions, options canvassed range from selling its Greek bond holdings at the discount price it paid for them to taking a loss on the Greek assets held in investment portfolios, two euro-area officials said late last week on condition of anonymity. At stake is whether Greece can complete a private sector deal to reduce its debt by as much as 100 billion euros ($133 billion) and secure a second bailout package that will allow it to pay its bills -- key steps toward ending the debt crisis. The ECB has been instrumental in easing the turmoil since Draghi took the reins on Nov. 1, offering banks unlimited three-year loans and reversing the two rate hikes implemented by his predecessor, Jean-Claude Trichet. “When Mario Draghi looks back this week at his first 100 days as ECB president, he can be satisfied,” said Carsten Brzeski, senior economist at ING Group in Brussels. “But pressure on the ECB to join the burden sharing on Greece has increased. Everything will be done to avoid a disorderly default, at least in the short term.”
  • Diamond Foods(DMND) Foods Names New CEO on Audit Results. Diamond Foods Inc. said Wednesday it is replacing its CEO and chief financial officer after an internal investigation found that the company improperly accounted for payments to walnut growers and it needs to restate two years of financial results. The news sent shares of the San Francisco-based company plummeting more than 43 percent in after-hours trading.
  • Japan Machine Orders Fall More-Than-Estimated 7.1% as Yen Climbs. Japan’s machinery orders fell at the fastest pace in three months in December as a faltering global economy and gains by the yen dimmed the outlook for exporters. Bookings, an indicator of capital spending, decreased 7.1 percent from the previous month, the Cabinet Office said in Tokyo today, after surging 15 percent in November. The median estimate of 29 economists surveyed by Bloomberg News was for a 5 percent decline. Japan’s exports fell for three straight months through December as European leaders grappled with the debt crisis that is driving the euro region into a recession.
  • Expats Say China's Mortgage Rules Too Restrictive. (video) China said last week it will limit mortgage loans for home purchases by foreigners to stem overseas investment in its property market as part of efforts to cool prices. Bloomberg's Stephen Engle reports from Beijing on the potential impact this new regulation may have on expatriates who call the country home.
Wall Street Journal:
  • U.S. Plans to Sue Banks Over Bonds. Federal securities regulators plan to warn several major banks that they intend to sue them over mortgage-related actions linked to the financial crisis, according to people familiar with the matter. The move would mark a stepped-up regulatory effort to hold Wall Street accountable for its sale of bonds linked to subprime mortgages in 2007 and 2008. At issue is whether the banks misrepresented the poor quality of loan pools they bundled and sold to investors, the people said. It isn't clear which firms will receive the formal Securities and Exchange Commission enforcement warnings, known as "Wells notices."
  • Egypt Judges Detail Evidence Against Americans, Others. Foreign nongovernmental organizations are working to manipulate Egypt's postrevolutionary politics, two Egyptian judges said on Wednesday, in the latest signal that Egypt won't back down from an investigation that has bruised relations with one of America's strongest security partners in the Middle East. For the first time since the inquiry began last summer, the investigating judges detailed a body of evidence, including seized maps, videos and cash, they say implicates 43 civil-society workers, including at least 16 Americans, in acts of ill-defined political subterfuge.
  • Banks Near $25 Billion Pact on Foreclosure Probe. Government officials are on the verge of an agreement worth as much as $25 billion with five major banks, capping a yearlong push to settle federal and state probes of alleged foreclosure abuses by lenders. The agreement covers five banks: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co. Together, the five handle payments on 55% of all outstanding home loans, or about 27 million mortgages, according to Inside Mortgage Finance
  • Blackstone(BX), Partner Raise $1 Billion to Develop Shale Field. Blackstone Group LP is expected to announce Thursday that the firm and an energy company in which it invested raised $1 billion from commercial banks to develop south Texas oil fields, according to people familiar with the matter. The deal, involving GeoSouthern Energy Corp., shows the vast capital flowing into the U.S. oil patch, where some $145 billion is expected to be spent on drilling and completing onshore wells this year, nearly double the $73 billion spent in 2009.
  • Tweets About Prophet Muhammad Spark Saudi Death Threats. A 23-year-old Saudi columnist fled the country, his associates said, after tweets on the human nature of the Prophet Muhammad touched off a campaign in which prominent clerics and thousands of their followers used Twitter, YouTube, email and fax to demand the man's execution. The campaign against the writer, Hamza Kashgari, stunned many Saudis with the speed, number, and intensity of messages calling for his death.
  • Loss Prompts UBS(UBS) to Claw Back Bonuses. UBS AG has notified employees it will claw back part of the bonuses due to its best-paid investment bankers this year because of a trading scandal last year that put the unit into the red for 2011, according to a person familiar with the matter. The move is likely to further upset some top employees at a bank that has already faced problems retaining top bankers and is now in the midst of a sweeping revamp of its investment bank.
  • Google(GOOG) Near Launch of Cloud Storage Service. Google Inc. is close to launching a cloud-storage service that would rival one of Silicon Valley's hottest start-ups, cloud-storage provider Dropbox Inc., according to people familiar with the matter. Like Dropbox, Google's storage service, called Drive, is a response to the growth of Internet-connected mobile devices like smartphones and tablets and the rise of "cloud computing," or storing files online so that they can be retrieved from multiple devices, these people said.
  • New Way to Pay Doctors. UnitedHealth(UNH), Nation's Largest Insurer, Is Latest to Announce Fee Overhaul. Efforts to change how Americans pay for health care are gathering momentum on a national scale as UnitedHealth Group Inc., the largest U.S. health insurer, becomes the latest carrier to say it is overhauling its fees for medical providers.
  • CME Group(CME) Cut by S&P as MF Global Fallout Spreads. CME Group Inc. saw its credit rating cut by Standard & Poor's and could face further downgrades because of reputational damage linked to the exchange operator's role in the collapse of MF Global. Standard & Poor's Ratings Services cut CME's long-term rating by a notch to AA-, citing the potential cost of a financial safety net established for clients in the wake of the unfolding controversy surrounding the bankruptcy of MF Global Holdings' (MFGLQ).
Business Insider:
Zero Hedge:
  • Cisco(CSCO) Beats Street's Earnings Estimates, Boosts Dividend. Cisco Systems reported quarterly earnings and revenue that beat analysts' expectations Wednesday as its restructuring effort appears to finally be paying off. The company also announced plans to raise its dividend. Cisco's better-than-expected revenue growth was from more than "routing and switching," CEO John Chambers told CNBC Wednesday, it was also data centers, cloud computing and $1 billion in cost-cutting measures.
  • Groupon(GRPN) Posts Positive Revenue, Misses on Earnings. In its first earnings announcement since going public last year, Groupon beat on revenue but missed on earnings as user growth slowed from the breakneck pace of past quarters. "The number of active customers came in short. That means not enough people are buying Groupons,” said Sameet Sinha, an analyst at B.Riley. "Yes, you can get fewer people to buy more, but how long can that continue? You need to start investing in new customer growth."
  • Visa(V) Earnings Top Forecasts as Credit-Card Use Climbs. Visa reported a higher quarterly profit as the world's largest credit and debit card processing network benefited from consumers swiping their cards more, and authorized a new $500 million share repurchase program.
NY Times:
Seeking Alpha:
Washington Post:
  • China's Inflation Rebounds in January, Renewing Pressure to Control Living Costs. China’s inflation rebounded in January as food prices soared, renewing pressure on Beijing to control surging living costs as it tries to boost slowing growth in the world’s second-largest economy amid warnings of a global downturn. Consumer prices rose by an unexpectedly strong 4.5 percent over a year earlier, up from December’s 4.1 percent, data showed Thursday. Food prices jumped 10.5 percent, accelerating from the previous month’s 9.1 percent. “It makes us more concerned that the risk of inflation is not going away,” said Nomura economist Zhiwei Zhang. Among Chinese planners “it will reinforce concerns about inflation that already were there.” The price spike could complicate the communist government’s efforts to revive growth that slowed to a 2 1/2-year low of 8.9 percent in the final quarter of 2011. Chinese leaders are gradually easing controls to boost growth and job creation but are moving cautiously for fear of igniting a new price spiral. “In the short term, it also lowers the possibility of policy loosening,” Zhang said.
Derivatives Intelligence:
USA Today:
  • Greece must find 300M Euros savings within 15 days: government. Greece has two weeks to identify fiscal savings worth 300 million euros ($398 million) under a new bailout deal with the European Union and IMF, a senior Greek government official said on Thursday. "Greece has another 15 days to specify fiscal savings worth 300 million euros," the official said on condition of anonymity.
  • Egypt to Deploy Soldiers, Tanks Ahead of Strike. Egypt's ruling generals said on Wednesday they would deploy more soldiers and tanks across the country, an announcement seen as a warning to activists planning a national strike on the anniversary of the overthrow of President Hosni Mubarak. Campaigners demanding a swifter transition to civilian rule have called for mass walkouts and civil disobedience on Feb. 11. At least 15 people have died in street fighting in Cairo and the eastern city of Suez in recent days, unrest provoked by the death of 74 people after a soccer match.
  • Akamai(AKAM) Q4 Beats as Demand for Online Content Soars. Internet content delivery company Akamai Technologies Inc posted a fourth-quarter profit above analysts' expectations, helped by growing demand for online content, sending its shares up 12 percent in trading after the bell.
Tibet Daily:
  • China ordered a heightened state of alert and tighter "control of the society" in Tibet, citing the region's communist party chief Chen Quanguo as saying in a speech. Government officials should focus on maintaining stability and fighting separatism, Chen said.
Shanghai Securities News:
  • The China Banking Regulatory Commission will punish banks for non-compliant off-balance sheet lending, citing bankers. Non-compliant lending includes wealth management products, loan transfers and financing bills used to get around loan quotas.
Evening Recommendations
  • Reiterated Outperform on (RL), raised estimates, boosted target to $190.
Night Trading
  • Asian equity indices are -1.0% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 161.0 -4.0 basis points.
  • Asia Pacific Sovereign CDS Index 134.75 -2.25 basis points.
  • FTSE-100 futures +.33%.
  • S&P 500 futures -.07%.
  • NASDAQ 100 futures -.02%.
Morning Preview Links

Earnings of Note
  • (CBOE)/.34
  • (BDC)/.53
  • (KKR)/.75
  • (CLI)/.67
  • (PM)/1.09
  • (CPO)/1.11
  • (ALXN)/.34
  • (BG)/1.53
  • (PEP)/1.12
  • (SEE)/.49
  • (STMP)/.22
  • (ATVI)/.56
  • (LNKD)/.07
  • (NUAN)/.36
  • (ASEI)/.78
  • (EXPE)/.52
  • (PBI)/.60
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to rise to 370K versus 367K the prior week.
  • Continuing Claims are estimated to rise to 3500K versus 3437K prior.

10:00 am EST

  • Wholesale Inventories for December are estimated to rise +.4% versus a +.1% gain in November.

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The BoE Rate Decision, ECB Rate Decision, 30Y T-Bond Auction, USDA Crop report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (STT) Analyst Forum could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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