Wednesday, October 17, 2012

Wednesday Watch

Evening Headlines
  • Retirement No Option for Older Workers in Europe’s Crisis. Jean-Luc Guillaume always presumed he’d retire at about 60, just like his civil-servant father. One year from reaching that age, the biology researcher has no plans to stop working. Cutbacks to France’s retirement benefits, the European financial crisis and the cost of a recent separation have stretched out his horizons. “Financially, retirement just isn’t an option,” said Guillaume at a street demonstration against job cuts at his employer, Sanofi SA (SAN), that he had traveled to Paris from his home in Toulouse to attend. “I’m looking at 66 at the earliest.” 
  • Shipping Mess Prompts Fuel Contango Amid Go-Slow: Energy Markets. For the first time in 21 months, fuel oil markets are indicating that it's cheaper to buy supplies sooner rather than later as China's imports slump and shippers reduce vessel speeds to cut costs. Swaps for November were 50 cents a metric ton  less than December in Singapore on Oct. 12, the first time since January 2011 that the market has gone into a state of so-called contango, according to data from PVM Oil Associates Ltd. Chinese demand is shrinking just as vessels operated on behalf of commodities companies including Cargill Inc., the biggest charter of dry-bulk ships, travel at the slowest speeds possible to cut fuel expenses. That's depressing prices in Singapore, the world's largest market for so-called bunkers, where sales have slid to the lowest market for so-called bunkers, where sales have slid to the lowest level in seven months.
  • Chinese Show Deepening Concern at Officials’ Corruption. Chinese people are increasingly worried about growing income inequality and official corruption, according to a Pew Research Center survey released weeks before a once-a-decade leadership transition. Forty-eight percent of 3,177 adults surveyed said the gap between rich and poor in China is a “very big problem,” up seven percentage points from a 2008 survey, the Pew Global Attitudes Project found. Fifty percent said official corruption was a very big problem, compared with 39 percent four years ago. The poll had a margin of error of plus or minus 4.3 percentage points. 
  • IBM(IBM) Revenue Falls Short With Weaker Euro, Hardware Sales. International Business Machines Corp. (IBM), the biggest computer-services company, fell as much as 3.8 percent in extended trading after reporting third-quarter revenue that fell short of estimates as clients delayed orders. The shares (IBM) dropped 3.5 percent to $203.72 at 6:48 p.m. in New York after trading as low as $203. IBM cited an economic slowdown, especially in North America, that caused software deals to be pushed back and kept customers from signing up for business technology services packages. “The actual macro environment must be weaker than we thought,” said Josh Olson, an analyst with Edward Jones & Co. in Des Peres, Missouri. With biggest competitor Hewlett-Packard Co. (HPQ) restructuring, “you’d think there would be opportunity there for some gains. The revenue was disappointing.” “It was really a falloff that we saw in our GBS business, number one, and in our software business, number two,” Loughridge said, referring to Global Business Services. He attributed the software slowdown to a handful of deals that didn’t take place. “We thought we had those through the end of the quarter,” he said.
  • Citigroup(C) Outlook Cut to Negative by Moody's as Pandit Departs. Citigroup Inc. had its credit-rating outlook cut to negative by Moody’s Investors Service, which cited the resignations today of Chief Executive Officer Vikram Pandit and Chief Operating Officer John P. Havens. “The negative outlook reflects the risk that this unexpected management change will negatively affect Citigroup’s ongoing efforts to install improved risk-management practices throughout the firm,” the ratings firm said in a statement on the New York-based lender. 
  • Jefferies(JEF) Downgraded by Moody’s to One Level Above Junk. Jefferies Group Inc. (JEF) had its credit rating cut to one level above junk by Moody’s Investors Service, which cited concern that the New York-based investment bank may struggle to manage risk after its expansion. Jefferies was reduced to Baa3, the lowest investment grade, from Baa2, the ratings firm said today in a statement. 
Wall Street Journal: 
  • GOP Presses Hard Over Libya Attack. The issue of the Sept. 11 assault on the U.S. consulate in Benghazi is expected to be pressed by GOP presidential candidate Mitt Romney through the duration of the campaign. The two men clashed over Libya Tuesday night at their debate in Long Island, N.Y., with Mr. Obama accepting responsibility for the first time for security lapses that led to the deaths. Meanwhile, leading Republican lawmakers, while offering Mrs. Clinton some praise for her forthrightness, are still pushing for an independent commission, which was established by her office to investigate the attack, to complete its work before the Nov. 6 presidential vote. That appears unlikely.
  • Romney, Obama Trade Barbs Over Libya Attack. (video)
  • Obama, Romney Fight Over Oil Drilling. (video)
  • Interactive: Grade the candidates on their performance and more.
  • Spain's Rajoy Says Don't Believe Credit-Line Speculation. Spanish prime minister told German Chancellor Angela Merkel on telephone call "not to believe everything you hear" about Spain requesting line of credit from Europe's bailout mechanism, citing a person in the room when Merkel told German lawmakers about the call. 
  • Spain Aid Faces Diplomatic Tangle. A potential Spanish request for financial aid is becoming caught up in tangled diplomacy between euro-zone capitals, despite Madrid's new willingness to push ahead. A day after a senior Spanish official told reporters that German concerns were preventing Madrid from seeking assistance, German officials insisted Spain hadn't indicated it wants aid. Italy, meanwhile, continued to urge Spain to apply for help in the hope that the step would ease market pressure on its own bonds. Germany worries that a request may have the opposite effect, by fanning investor fears that Italy will be next in line to need a bailout.
  • Postal Service Hits Borrowing Limit. The U.S. Postal Service in September hit its $15 billion borrowing limit from the U.S. Treasury for the first time in its history, leaving the agency with only the revenue it takes in from selling stamps, shipping and other services to cover its enormous operating costs. The Postal Service has added $2.4 billion to its debt since June 30, pushing the agency to its borrowing cap, a spokesman said Tuesday.
  • Electric Car Crash. Obama's green energy industrial policy turns up in Chapter 11. Mitt Romney quipped in the first Presidential debate that the problem with the Obama Administration's green energy investing isn't that it tried to pick winners and losers, but that "you pick the losers." He was being generous. Another big green Administration favorite went belly-up on Tuesday with the Chapter 11 filing by battery-maker A123 Systems Inc(AONE).
Fox News:
Zero Hedge:
Business Insider:
  • INSIGHT-Brazen Islamic militants showed strength before Benghazi attack. In the months before the deadly attack in Benghazi, Libya, U.S. and allied intelligence agencies warned the White House and State Department repeatedly that the region was becoming an increasingly dangerous vortex for jihadist groups loosely linked or sympathetic to al Qaeda, according to U.S. officials. Despite those warnings , and bold public displays by Islamist militants around Benghazi, embassies in the region were advised to project a sense of calm and normalcy in the run-up to the anniversary of the Sept. 11 attacks in the United States. So brazen was the Islamist presence in the Benghazi area that militants convened what they billed as the "First Annual Conference of Supporters of Shariah (Islamic law)" in the city in early June, promoting the event on Islamist websites. Pictures from the conference posted on various Internet forums featured convoys flying al Qaeda banners, said Josh Lefkowitz of, a firm that monitors militant websites. Video clips showed vehicles with mounted artillery pieces, he added. A research report prepared for a Pentagon counter-terrorism unit in August said the Benghazi conference brought together representatives of at least 15 Islamist militias. Among the paper's conclusions: these groups "probably make up the bulk of al Qaeda's network in Libya."
  • Environmentalists sue California to stop fracking. Environmental groups sued the state of California on Tuesday in an effort to stop hydraulic fracturing as regulators attempt to devise new rules for the controversial oil and gas extraction practice. The lawsuit accuses the regulator, the California Department of Conservation, Division of Oil, Gas, and Geothermal Resources, with failing to evaluate the risks, even though fracking was used for more than 600 wells in the state last year. 
  • Intuitive Surgical(ISRG) procedure growth disappoints. Intuitive Surgical Inc on Tuesday lowered its full-year forecast for procedure growth after posting a disappointing growth rate of 22 percent for surgeries using its high-priced da Vinci robots in the third quarter. Intuitive's shares dropped more than 4 percent after it reported its third quarter results. The company said it now expects 2012 procedure growth of 24 percent, down from its prior view of 25 percent to 27 percent.
  • Fortinet(FTNT) cuts full-year forecast; shares sink. Network security products maker Fortinet Inc cut its full-year forecast, hurt by weak demand in southern Europe and slow growth in China, sending its shares down 18 percent.
China Business News:
  • China Regulators Consider 10% Income Tax for QFII. Tax rate of 10% may be applied to income earned inside China by qualified foreign institutional investors.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 121.50 -3.5 basis points.
  • Asia Pacific Sovereign CDS Index 99.25 -10.25 basis points.
  • FTSE-100 futures -.09%.
  • S&P 500 futures -.16%.
  • NASDAQ 100 futures -.29%.
Morning Preview Links

Earnings of Note

  • (CMA)/.66
  • (NTRS)/.74
  • (USB)/.73
  • (DGX)/1.18
  • (HAL)/.67
  • (SWK)/1.45
  • (MTB)/1.86
  • (BLK)/3.32
  • (ABT)/1.28
  • (BK)/.54
  • (BAC)/.16
  • (PEP)/1.16
  • (STJ)/.81
  • (PJC)/.30
  • (SYK)/.98
  • (XLNX)/.41
  • (EBAY)/.54
  • (AXP)/1.09
  • (LRCX)/.41
  • (ETH)/.29
  • (STLD)/.12
Economic Releases
8:30 am EST
  • Housing Starts for September are estimated to rise to 770K versus 750K in August.
  • Building Permits for September are estimated to rise to 810K versus 803K in August.
10:30 am EST
  •  Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +1,672,000 barrel gain the prior week. Distillate supplies are expected to fall by -1,500,000 barrels versus a -3,177,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +500,000 barrels versus a -534,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.25% versus a -1.5% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The China Retail Sales/Production/GDP data, China Home Price data and the weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and commodity 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.

No comments: