Wednesday, September 05, 2012

Wednesday Watch

Posted by Gary .....at 12:40 AM

Evening Headlines
Bloomberg:
  • Asian Stocks Fall 5th Day as U.S. Manufacturing Contracts. Asian stocks fell, with the regional benchmark index headed for the longest losing streak in eight weeks, as economic reports from the U.S. to China and Australia stoked concern global growth is slowing. Samsung Electronics Co. (005930), South Korea’s largest exporter of consumer electronics that gets 20 percent of its revenue in America, lost 1.3 percent in Seoul. Westpac Banking Corp. (WBC), Australia’s No. 2 lender by market value, slid 1.6 percent. Fortescue Metals Group Ltd., Australia’s third-biggest iron-ore producer, plunged 9.4 percent as prices of the steelmaking material fell to a three-year low on slowing growth in China. The MSCI Asia Pacific Index dropped 0.9 percent to 116.20 as of 12:45 p.m. in Tokyo, heading for a fifth day of losses. More than three stocks declined for each that rose on the index. Volatility across the region gained before the European Central Bank meets tomorrow. “The macro backdrop is quite challenging and growth conditions are fragile obviously,” said Nader Naeimi, Sydney- based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages almost $100 billion. “The market is getting nervous about going into the ECB meeting. There’s a lot of speculation on the ECB about what they will do.”
  • Shanghai Stock Index Falls to Lowest Since 2009. China’s stock indexes fell, dragging the Shanghai Composite Index to the lowest level since February 2009, on concern the economic slowdown is deepening. Sany Heavy Industry Co. (600031), the country’s biggest machinery maker, slumped to the lowest level in two years as the Securities Times reported China’s 2012 industrial output growth may slow. Angang Steel Co. sank to a seven-year low, leading declines by material producers. China Vanke Co., the nation’s largest publicly traded property company, rose to a two-week high after August sales increased from July.
  • FedEx(FDX) Cuts Profit Forecast as Express Sales Slump on Economy. FedEx Corp., operator of the world’s largest cargo airline, said quarterly earnings will fall short of its forecast after a weak global economy damped revenue from express shipments. Profit for the quarter that ended Aug. 31 will range from $1.37 to $1.43 a share, Memphis, Tennessee-based FedEx said today in a statement. That was less than the June 19 projection (FDX) of $1.45 to $1.60 a share, and the stock (FDX) slid 3.5 percent to $84.50 at 5:21 p.m. after regular New York trading. The cut in profit adds to evidence of how Europe’s economic slump and slowing growth in Asia are dragging on FedEx, which is seeking money-saving efforts such as buyouts for some employees. The company is considered an economic bellwether because it moves goods ranging from financial documents to pharmaceuticals. “The global economy is weak and it’s impacting their business in the short run,” said Arthur Hatfield, a Raymond James & Associates Inc. analyst in Memphis. “I don’t think there’s anything inherently broken with their business.”
  • Risk Increases of Prolonged World Slowdown, BOJ’s Miyao Says. The odds of an extended world economic slowdown have increased and the Bank of Japan (8301) needs to remain ready to take decisive action if necessary, board member Ryuzo Miyao said. “The risk that the global economic slowdown will be prolonged is increasing slightly,” Miyao said in a speech in Shimonoseki, southwestern Japan today. For Japan, excessive strength in the yen may weigh on exports, profits and stock prices, Miyao said.
  • Obama Enters Convention With Lowest Incumbent Ratings Since ’84. More voters had an unfavorable opinion of President Barack Obama than favorable going into the Democratic National Convention that began tonight, with his lowest ratings among women since he took office, a poll found. An ABC News/Washington Post survey found 49 percent of registered voters disapproving of Obama, compared with 47 percent viewing him favorably. The poll gave the highest unfavorable rating of any incumbent going back to 1984, and he is the first incumbent in the survey with a higher unfavorable than favorable rating.
  • Euro May Decline to Two-Year Low on Channel: Technical Analysis.
  • Most Influential 50 in 2012 Shows Turmoil: Bloomberg Markets. The ability to move markets or shape ideas and policies. The clout to affect the price of a security or the structure of a deal. These are the attributes that define the people who hold sway in the world of finance -- those who make up the second annual 50 Most Influential list in the October issue of Bloomberg Markets magazine.
  • First Black President Can't Help Blacks Stem Wealth Drop. The employment roller coaster punched a hole in his bank balance and left his net worth “sitting at zero,” says the married father of two. “We’re easily three years behind where we would have been,” Brown says. So are millions of other African-Americans whose tenuous hold on prosperity has slipped since President Barack Obama reached the White House. The recession and anemic recovery, while painful for most Americans, have been especially punishing for blacks, stripping jobs, homes and wealth from people who have historically lagged. Today’s 14.1 percent black unemployment rate is almost twice the 7.4 percent white rate, and the racial gap -- after narrowing from 2005 to 2009 -- has widened since the recession’s June 2009 end. At Obama’s inauguration, 7.1 percent of whites were jobless compared with 12.7 percent of blacks. Amid a fitful economic recovery over the past three years, black households’ median annual income fell 11.1 percent, more than twice the 5.2 percent inflation-adjusted decline suffered by white households, according to an analysis of Census Bureau data by Sentier Research.
  • Wells Fargo(WFC) Has Biggest Risk Appetite, CreditSight Says. Wells Fargo & Co., the U.S. bank with the biggest market value, takes greater risk on its investments in stocks and bonds than competing lenders, according to a CreditSights Inc. report. Wells Fargo’s $227 billion portfolio of securities marked for sale yielded 3.97 percent at the end of June, the most among 17 of the largest U.S. banks measured by CreditSights, according to a Sept. 3 report from the New York-based financial-research firm. The company’s investments appear to have more credit and interest-rate risk than rivals, CreditSights said. “Wells Fargo’s all-in securities yield of nearly 4 percent seems indicative of a higher risk appetite,” CreditSights analysts including Peter Simon wrote in the report.
Wall Street Journal:
  • Caddell and Schoen: A Campaign in Need of a Clintonian Pivot. With his poll numbers worsening, the president needs to appeal to swing voters and independents.
  • Small Is New Order For Struggling Malls. Many struggling shopping malls are trying to find salvation by going small—in their purchasers, sales prices and, in some cases, size. As the nation's largest mall owners sell off or give up their most-troubled properties—dogged by deteriorating neighborhoods, newer rivals and online sales—smaller real-estate companies are snapping them up at discount prices and trying to find ways to pull them out their death spirals. Sometimes, that involves demolition.

MarketWatch:

Business Insider:

Zero Hedge:

CNBC:

  • Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain. “The macro situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece, and I just don’t want to end up holding devalued pesetas.”Mr. Vildosola is among many who worry that Spain’s economic tailspin could eventually force the country’s withdrawal from the euro and a return to its former currency, the peseta.

Boston Herald:

  • National Debt Hits $16 Trillion; GOP Critical. The Treasury Department said Tuesday that the national debt has topped $16 trillion, the result of chronic government deficits that have poured more than $50,000 worth of red ink onto federal ledgers for every man, woman and child in the United States. The news was greeted with a round of press releases from Barack Obama’s GOP rivals, who used the grim-but-expected news to criticize the president for the government’s fiscal performance over his 3 1/2 years in office. Obama has presided over four straight years of trillion dollar-plus deficits. "We can no longer push off the tough decisions until tomorrow," said No. 2 House Republican Eric Cantor, R-Va. "It’s time to address the serious fiscal challenges we face and stop spending money we don’t have."

NY Times:

  • Banks Face Suits as States Weigh Libor Losses. The scandal over global interest rates has state officials like Janet Cowell of North Carolina working intensely behind the scenes to build a case for suing the nation’s largest banks. Ms. Cowell, the state’s elected treasurer, and several of her staff members have spent the summer combing through the state’s investments trying to determine how much the state may have lost because of suspected manipulation of the London interbank offered rate, or Libor, which is used as a benchmark for trillions of dollars of financial contracts around the world. “We think this could be as big as the mortgage crisis settlement, that this could be a really high impact situation and that we should be aggressive on this,” Ms. Cowell said, referring to the $25 billion settlement that the nation’s biggest banks entered with state attorneys general.
  • A Chinese City Moves to Limit New Cars. It is as startling as if Detroit or Los Angeles restricted car ownership. The municipal government of Guangzhou, a sprawling metropolis that is one of China’s biggest auto manufacturing centers, introduced license plate auctions and lotteries last week that will roughly halve the number of new cars on the streets. The crackdown by China’s third-largest city is the most restrictive in a series of moves by big Chinese cities that are putting quality-of-life issues ahead of short-term economic growth, something the central government has struggled to do on a national scale.

ABC News:

  • Red Carpet for Solyndra Figure at Democratic Convention. The Obama campaign rolled out the red carpet this week for a former top Energy Department official who was at the center of the ill-fated government loan to Solyndra, a California solar panel firm that wound up in bankruptcy. Steven J. Spinner joined other top fundraisers for a VIP tour of the Democratic National Convention floor in Charlotte Monday evening, posing and waving for a photographer while standing behind the podium. When he saw ABC News cameras, however, he ran for the exit.
Rasmussen Reports:
Reuters:
  • HSBC China services PMI weakens to one-year low of 52.0. China's services sector grew at its slowest pace in a year in August, even though firms are hiring more workers at higher wages, a private sector survey showed on Wednesday, following gloomy manufacturing polls earlier in the week. The HSBC services sector Purchasing Managers' Index fell to 52.0 in August from 53.1 in July, but remained above the 50-point line that delineates expansion from contraction. A new business sub-index expanded at its slowest rate since August 2011, weighing on the headline figure. An employment sub-index rose to 52.7, its highest since November, while input prices, which primarily reflect labour costs, were at their highest since May.
  • Solyndra backers could reap $341 million in tax breaks. Investment funds that were early backers of Solyndra LLC stand to reap up to $341 million in tax breaks from its bankruptcy, according to court documents filed on Tuesday, a prospect that could add fuel to the political firestorm around the failed solar panel maker. The U.S. government, which lent Solyndra $528 million and may never recover the money, had demanded that the company reveal the value of future tax breaks available to Madrone Partners and Argonaut Ventures, a fund which is controlled by a foundation linked to Democratic fundraiser George Kaiser. News of possible tax breaks for investors with ties to the Democratic Party could spark a new round of Republican attacks on the Obama administration for its decision to back Solyndra.
  • S&P Report Says China's Metals Sector Faces A Profit Slump.
  • Fortescue shares fall 10 pct on iron ore price slide. Shares in Australia's Fortescue Metals Group fell as much as 10 percent in early trade on Wednesday after iron ore prices hit fresh lows.
  • Finisar(FNSR) 1st-qtr misses Wall Street view, sees weaker 2nd-qtr profit. Finisar Corp reported first-quarter results that fell short of Wall Street expectations as the optical communication components maker continued to grapple with slowing demand in Europe and China, and forecast a weak second-quarter profit.

Financial Times:

  • Deutsche Bank(DB) cuts equities sales staff in Asia. Deutsche Bank cut 10 per cent of its Asian equities sales and trading staff on Tuesday, according to people familiar with the situation, as a long-expected cull across the industry in the region gets under way.
  • US accuses BP of gross negligence in gulf. The US Department of Justice intends to prove at trial that gross negligence or wilful misconduct by BP caused the 2010 Deepwater Horizon disaster in the Gulf of Mexico, government lawyers have said, in the clearest statement yet that they are seeking the maximum possible penalties from the British oil group.

Telegraph:

  • Brinkmanship as Spain warns over bail-out terms. Spain has issued a veiled warning that it will not accept a full bail-out from Europe if the terms are too harsh, a move that would paralyse the European Central Bank and call the euro’s survival into question.
China Daily:
  • China is considering taking retaliatory measures against a likely European Commission probe into photovoltaic companies of the Asian nation, citing an official at the Ministry of Commerce. The ministry is "not optimistic" about results of recent consultations with the EU over the solar issue, the person said.
China Business News:
  • The combined net loss at 80 large to medium-sized Chinese steel cos. for July was 1.98b yuan, citing a document from the China Iron and Steel Association. 38 had losses totaling 3.6b yuan for the month, the report said.
Securities Times:
  • China's 2012 industrial output growth may slow to about 10%, from 13.9% in 2011 and 15.7% in 2010, citing a joint report by the Ministry of Industry and Information Technology and the Chinese Academy of Social Sciences. The manufacturing industry is facing weakening demand and production overcapacity, according to the report.
Shanghai Securities News:
  • The China Banking Regulatory Commission has required lenders to count interbank payment financing due by year-end as on-balance-sheet lending, citing a notice from the commission. This will help stop banks from skirting loan quotas through interbank payment financing.
Evening Recommendations
Piper Jaffray:
  • Rated (DGI) Overweight, target $27.
Night Trading
  • Asian equity indices are -1.25% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 150.5 -3.5 basis points.
  • Asia Pacific Sovereign CDS Index 122.0 -3.0 basis points.
  • FTSE-100 futures +.19%.
  • S&P 500 futures -.30%.
  • NASDAQ 100 futures -.20%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (MW)/4.13
  • (PAY)/.70
  • (HRB)/-.37
  • (DG)/.64
  • (KFY)/.18
Economic Releases
8:30 am EST
  • Final 2Q Non-Farm Productivity is estimated to rise +1.8% versus a prior estimate of a +1.6% gain.
  • Final 2Q Unit Labor Costs are estimated to rise +1.4% versus a prior estimate of a +1.7% gain.

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The Eurozone Services PMI, Bank of Canada rate decision, weekly retail sales reports, weekly MBA mortgage applications report, ISM New York for August, BofA Merrill Industrials/Materials Conference, Robert W. Baird Health Care Conference, Cowen Consumer Conference, Barclays Back to School Conference, Goldman Retail Conference, Keefe Bruyette Woods Insurance Conference, Jefferies Global Shipping Conference and the CSFB Automotive/Transports Conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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