Wednesday, March 21, 2012

Thursday Watch


Evening Headlin
es
Bloomb
erg:
  • Ireland Said to Ready Bank-Debt Proposal for ECB Review. Irish Central Bank Governor Patrick Honohan will probably ask the European Central Bank Governing Council today for permission to effectively delay a cash payment on its banking debt, as the country tries to ease the burden of saving its financial system, said two people with direct knowledge of the matter.
  • Emirates Says 'Whole Load of Airlines' Will Fail in Fuel Squeeze. Emirates, the biggest airline by international traffic, said more carriers will go bust this year as fuel costs and sluggish economies undermine profitability. “We can reel off a whole load of airlines that are teetering on the brink or are really gone,” Tim Clark, the Dubai-based carrier’s president, said in an interview. “Roll this forward to Christmas, another eight or nine months, and we’re going to see this industry in serious trouble.”
  • Masters of the Universe Start to Challenge Ben Bernanke. Never mind that inflation has been running consistently above the Fed’s announced goal of 2 percent. Why would the Fed, with a $2.9 trillion balance sheet, a near-zero benchmark rate for the fourth year running, and a recent history of inflating asset bubbles, be so eager to provide more stimulus when the economy is clearly improving?
  • Tarullo Says Regulators Need to Weigh Volcker Rule Objections. Federal Reserve Governor Daniel Tarullo said U.S. regulators must weigh objections raised by banks and governments to restrictions on proprietary trading under the Dodd Frank Act overhauling financial supervision. “U.S. regulators will need to carefully consider the concerns that have been raised and the broader international implications of the Volcker rule as we work to finalize our implementing rules,” Tarullo said in testimony he plans to deliver to the Senate Banking Committee tomorrow. The central bank released his comments today.
  • JPMorgan(JPM), Wells Fargo(WFC) Employees Join Goldman Sachs(GS) Among Top Obama Donors. President Barack Obama's largest campaign donors last month included employees of Wells Fargo & Co.(WFC), JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to an analysis of Federal Election Commission records. Their support indicates that Wall Street, which gave Obama $16 million for his successful 2008 White House run, is opening its checkbook again for the president. The contributions helped Obama raise $21 million in February, including $6.5 million transferred from a joint fundraising committee with the Democratic National Committee. Obama has also focused on technology companies. Employees of Microsoft Corp.(MSFT), based in Redmond, Washington, donated $91,881, his biggest source of contributions from those listing an employer, according to a computer-assisted analysis of FEC reports filed today. Microsoft employees and their families have given almost $300,000 to Obama's re-election, more than anyone else, according to FEC records and the Center for Responsive Politics.
  • AMR Said to Ready Bankruptcy Court Bid to Dump Contracts. American Airlines (AMR) plans to begin a U.S. bankruptcy-court process for rejecting union contracts by next week after failing to reach a deal to cut labor costs, two people familiar with the matter said. American’s parent, AMR Corp., will probably ask for court approval within a week to reject collective bargaining contracts barring last-minute agreements with its unions on concessions, said the people, who declined to be identified because it’s a confidential matter.
Wall Street Journal:
  • North Korea, Iran Expected to Dominate Nuclear Talks. North Korea and Iran are expected to dominate President Barack Obama's trip to South Korea this weekend, as concerns mount about Tehran's nuclear ambitions and Pyongyang's preparations for a satellite launch the U.S. and its allies said they believe is largely for military purposes.
  • Diamond Foods(DMND) in Talks With Potential Investors.
  • Deutsche Bank(DB) Shields US Unit From Dodd-Frank. Deutsche Bank AG changed the legal structure of its huge U.S. subsidiary to shield it from new regulations that would have required the German bank to pump new capital into the U.S. arm. The bank on Feb. 1 reorganized its U.S. subsidiary, known as Taunus Corp., so that it is no longer classified as a "bank holding company," according to disclosures by the bank and on the U.S. Federal Reserve's website. Deutsche Bank is at least the second large European bank to make such a change, following in the footsteps of the U.K.'s Barclays PLC.
  • Accounting Boards Weighs Tightening 'Repo' Rules. Accounting rule makers will consider whether to tighten standards further on the use of a controversial financing technique used at Lehman Brothers Holdings Inc. and MF Global Holdings Ltd.
  • Pimco: We're Bullish On U.S. Dollar. Pacific Investment Management Co. has for the remainder of this year abandoned its long-held negative stance against the dollar and is joining others who are predicting it will rise over the short-term. Scott Mather, the head of global bond portfolio management at Newport Beach, Calif.-based Pimco, said Wednesday that the giant asset management firm is buying the dollar primarily against its three peers–the euro, the pound and the Australian dollar.
  • UPDATE: McDonald's Chief Skinner Steps Down; COO Named As Replacement.
  • French Close In on Gunman. French authorities publicly identified the suspect in a series of shootings of soldiers, schoolchildren and a teacher, characterizing him as an Islamist radical who had been planning to strike again Wednesday. In a day of revelations and turns that gripped France, special forces descended on a Toulouse neighborhood at 3 a.m. Wednesday and surrounded a four-story apartment building, where the standoff continued into Thursday morning.
  • Leaders Urge GOP to Unify, Back Romney. Republican officials and strategists, increasingly weary of the divisive presidential-primary fight, stepped forward Wednesday to call for the party to unify behind Mitt Romney and for his rivals to accept his nomination as inevitable.
  • China Reins In Chatter as Rumors Run Wild. Bo Xilai Searches Are Blocked as Talk of a Coup, Party Intrigue Overwhelms Censors, Ending Initial Hands-Off Approach. China's social-media services, which had allowed wide discussion of controversial politician Bo Xilai since his ouster last week, are now cracking down on searches for his name, as his downfall seems to have put much of the country on edge and given rise to fevered rumors of political infighting.
  • The Supreme Court Weighs ObamaCare. Congress's power to regulate interstate commerce is broad but not limitless.
Business Insider:
CNBC:
  • China Factory Activity Shrinks for Fifth Month: HSBC Flash PMI. China's manufacturing sector activity shrank in March for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index showed on Thursday. The PMI, the earliest indicator of China's industrial activity, fell back from February's four month high, slipping to 48.1, within a whisker of the level that economists at HSBC consider a crucial level dividing decline from growth. Slowing activity could mean a further relaxation of monetary policy to help underpin growth in the world's second biggest economy, but lingering inflation risks uncovered by the survey highlight the dilemma facing China's policy makers who are determined to keep a lid on prices. The PMI reading, down from February's 49.6, is likely to reinforce the more bearish views on China's economic trajectory. The fall in the new orders sub-index to 46.2 had a particularly bearish effect on the overall index, as it is the single biggest of the five component items comprising the PMI.
  • Mobile Banking: Apple(AAPL) Customers Hungry For iBank. Personal banking with Apple? It could happen. With the growing trend toward mobile banking, Apple is already serving as a digital "bank branch" for many iPhone and iPad users. All the Cupertino-based company needs to do now is provide their own virtual teller-like services. And it looks like they might be doing just that.
  • Threat of Refinery Union Strike Could Push Gas Prices Higher. Union workers at Tesoro’s Anacortes, Washington refinery have authorized their representatives to call for a strike, one month after rejecting a new contract over benefit issues.
  • Alaska Champions $40 Billion Pipeline Plan. BP(BP), Exxon Mobil(XOM) and ConocoPhillips(COP) are in discussions about a $40 billion project to export liquefied natural gas from Alaska to Asia, potentially opening up large but stranded reserves that currently have no route to market.

IBD:

NY Times:

LA Times:

  • Marine Sergeant Being Dismissed for Criticizing Obama. The Marine Corps is moving to boot out a Marine for having made "political statements" about the commander-in-chief on a Facebook page. Sgt. Gary Stein, 26, a nine-year veteran, put comments on a Facebook page called the Armed Forces Tea Party page that said he would not follow unlawful orders from President Obama such as ordering the killing of Americans or taking guns away from Americans. He also criticized comments made by Defense Secretary Leon Panetta about Syria.
Forbes:
ars technica:
  • Anonymous Revives LulzSec for New Campaign of Hacks and Attacks. With the arrest of its members and the revelation that its leader was an FBI informant, one might have thought that LulzSec would fade into history. Apparently not. A YouTube video posted at the weekend has announced that LulzSec will return. On April 1st the group will be back, and attack corporations and governments, promising "epic operations and pranks."
Reuters:
  • Goldman(GS) Conducts Company-Wide Email Review for "Muppet" - Sources. Goldman Sachs Group Inc has begun scanning internal emails for the term "muppet" and other evidence that employees referred to clients in derogatory ways, Chief Executive Lloyd Blankfein told partners in a conference call this week, according to people familiar with the call. The company-wide email review comes after an executive director named Greg Smith resigned last week in a scathing op-ed column in the New York Times in which he said he saw five Goldman managing directors refer to clients as "muppets," at times over internal email.
  • Apple's(AAPL) New iPhone Will Use Bigger 4.6-Inch Display - Report. Apple Inc's new iPhone will have a sharper and bigger 4.6-inch "retina" display and is set to be launched around the second quarter, a South Korean media reported on Thursday.
  • Portugal Faces General Strike in Test of Austerity. Portugal faces a general strike by workers angered by austerity measures imposed as a condition of a 78-billion euro bailout last year but doubts remain as to whether Thursday's stoppage will receive widespread support. Portugal's largest union, the CGTP, hopes to mobilise mass support but the Portuguese have shown little interest in imitating the kind of protests seen in Greece, despite record unemployment and the worst recession in decades. Some economists fear Portugal may be pushed into seeking a second bailout from its European partners, but the centre-right government is betting that relative public apathy will help it impose painful spending cuts and policy reforms in order to drag the country out of its debt crisis.
  • Urban Outfitters(URBN) CFO Eric Artz Resigns.
  • Sonic 2Q Sales Miss Market Expectations, Shares Fall. Drive-in restaurant chain Sonic Corp reported a slightly better-than-expected quarterly profit, but missed revenue expectations and said it may continue to see weak sales, sending its shares down 5 percent in after-market trade.
  • US Manufacturers See Higher China Solar Duties Ahead. U.S. solar panel manufacturers are still optimistic of winning substantial duties on solar panel imports from China, despite an initial U.S. government ruling that many found surprisingly low, the lead attorney for the industry group said on Wednesday.
Financial Times:
  • Germany Warns on Keeping EU Market Open. A Brussels proposal on public procurement sends a “protectionist signal” to China that could trigger retaliation and damage the single market, the German government has argued, taking aim at an initiative championed by Nicolas Sarkozy, president of France. The stark German warning, contained in an informal position paper, emerged as the European Commission announced plans that would allow the European Union to exclude foreign companies from public contracts if their own public procurement markets were closed.

Telegraph:

  • US Grip on World Bank Challenged. America's traditional grip on the presidency of the World Bank is expected to be challenged for the first time with the nominations for the post from Nigeria and Colombia. The Nigerian finance minister, Ngozi Okonjo-Iweala, and former Colombian finance minister, Jose Antonio Ocampo, are reportedly being put forward to replace Robert Zoellick who is retiring. Ever since the World Bank was established at the Bretton Woods conference after the Second World War, an American has always led it. The understanding also upholds the traditional that a European always heads the International Monetary Fund, created in the wake of the same conference. Leaders of developing economies have called for a break in the tradition but have so far failed to get enough support from other countries. Sources told Reuters that Mr Okonjo-Iweala and Mr Ocampo have gathered support from key countries such as South Africa and Brazil.

Sueddeutsche Zeitung:
  • Bundesbank President Jens Weidmann criticized the German government's 2013-2016 budget plans said the country's budget deficit needs to be lowered faster, citing an interview. It's "not very ambitious" that the structural deficit will rise this year and that the government seeks to balance the budget by 2016, Weidmann said.
Xinhua:
  • Chinese State Researcher Yu Bin: There is no room for the PBOC to relax monetary policy.
21st Century Business Herald:
  • Banks, Trusts Tighten Credit in China's Dalian. Trust firms were ordered by banking regulator to "immediately" report on business status of Dalian-based companies who do business with them, citing people. Trust firms halted some projects in Dalian after regulators ordered them to. Banks are getting cautious on lending in Dalian and banks' headquarters are watching their Dalian branches closely.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 153.0 +3.0 basis points.
  • Asia Pacific Sovereign CDS Index 113.50 -.5 basis point.
  • FTSE-100 futures -.35%.
  • S&P 500 futures -.16%.
  • NASDAQ 100 futures -.16%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (PERY)/.38
  • (IHS)/.81
  • (DG)/.82
  • (CAG)/.48
  • (FDX)/1.35
  • (GME)/1.72
  • (NKE)/1.16
  • (CPWM)/1.50
  • (MU)/-.19
  • (SCS)/.14
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 350K versus 351K the prior week.
  • Continuing Claims are estimated to rise to 3380K versus 3343K prior.

10:00 am EST

  • The House Price Index for January is estimated to rise +.3% versus a +.7% gain in December.
  • Leading Indicators for February are estimated to rise +.6% versus a +.4% gain in January.

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The Fed's Bernanke speaking, Fed's Evans speaking, 10Y TIPS auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for March and the (CAB) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

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