Monday, October 08, 2012

Monday Watch

Posted by Gary .....at 12:58 AM
Weekend Headlines
Bloomberg: 
  • Europe Seeks to Contain Spanish Troubles as Finance Chiefs Meet. European officials will move to prevent Spain from dragging the single currency into a new round of convulsions this week as a series of high-level meetings aim to ease the three-year-old European debt crisis. European finance ministers meet in Luxembourg today to discuss Spain’s overhaul effort and closer banking cooperation, while on Oct. 10, Spanish Prime Minister Mariano Rajoy travels for talks with French President Francois Hollande in Paris. Germany’s Chancellor Angela Merkel tomorrow makes her first visit to Greece since the crisis began in 2009. “It feels as if we are in for a month or so of Spanish trouble,” Erik Nielsen, London-based chief global economist at UniCredit SpA (UCG), wrote in a note yesterday. Nielsen cited the risk that Spain will wait too long to request financial assistance and that a rescue package will be badly designed.
  • Merkel Arrival in Athens to Be Met by Anti-Austerity Protesters. Greek protesters are gearing up for German Chancellor Angela Merkel’s first visit to Athens since the financial crisis began with plans for strikes, rallies and a petition demanding reparations from the Nazi occupation. Greece’s need for bailouts and the German-led conditions attached to the emergency loans have made Merkel the face of austerity to Greeks. She has been depicted in the media wearing jackboots and an SS uniform. While Greek Prime Minister Antonis Samaras called her visit tomorrow a “very positive development,” opposition leaders intend a show of anger and frustration after five years of recession.
  • Cameron Says U.K. Rich Will Pay More Tax Without Mansion Levy. U.K. Prime Minister David Cameron said his government will announce additional measures to increase taxes on the rich, while ruling out a so-called mansion tax wanted by his Liberal Democrat coalition partners. He said people who save and buy large houses shouldn’t be hit “every year with a massive great tax. That’s not going to happen.”
  • Huawei, ZTE Provide Opening for China Spying, Report Says. Huawei Technologies Co. and ZTE Corp. (000063), China’s two largest phone-equipment makers, provide opportunities for Chinese intelligence services to tamper with U.S. telecommunications networks for spying, according to a congressional report to be released today. The House intelligence committee report says the two companies failed to cooperate with a yearlong investigation and to adequately explain their U.S. business interests and relationship with the Chinese government, according to a draft provided by the panel. “Based on available classified and unclassified information, Huawei and ZTE cannot be trusted to be free of foreign state influence and thus pose a security threat to the United States and to our systems,” says the report, from the committee’s chairman, Michigan Republican Mike Rogers, and its top Democrat, Maryland Representative C.A. “Dutch” Ruppersberger. 
  • Chavez Declared Winner Over Capriles in Venezuelan Election. Venezuelan President Hugo Chavez was declared the winner in his closest election fight since taking office 14 years ago, overcoming cancer surgeries to extend his self-declared socialist revolution by six more years. With 90 percent of the votes counted, the 58-year-old former paratrooper received 54 percent of the votes cast, the national electoral council said tonight. Henrique Capriles Radonski, the former governor of Miranda state, won 45 percent, the council said. Pre-election polls showed the race tightening, with some showing Capriles ahead.   
  • China Home Prices Rise a 4th Month as Sales Rebound, SouFun Says. China’s new home prices rose for a fourth month as a rebound in property sales eased developers’ funding woes, according to SouFun Holdings Ltd. (SFUN) Prices in September climbed 0.17 percent from August to 8,753 yuan ($1,393) per square meter (10.76 square feet), the country’s biggest real estate website owner said in an e-mailed statement today, based on its survey of 100 cities. The city of Kunshan in the eastern Jiangsu province had the biggest gain, with prices rising 2 percent. 
  • Sun Hung Kai Says H.K. Builders Face China-Led Cost Pressure. Hong Kong builders face increases of more than 10 percent a year in construction costs because of competition for workers and materials from projects in China, according to Sun Hung Kai (16) Properties Ltd., the world’s biggest developer by value. “We’re seeing double-digit increases every year and we’ll be seeing this for quite some time,” Victor Lui, deputy managing director at Hong Kong-based Sun Hung Kai, said in an interview. “There’re a lot of projects going on in mainland China and we are competing with them for everything: materials, workers, even architects, designers and surveyors.”
  • Australian Banks Seeing ‘Relentless’ Increase in Costs, ANZ Says. Australian banks are seeing a “relentless” increase in costs even as they shift their reliance to deposits from wholesale funding, Australia and New Zealand Banking Group Ltd. Chief Executive Officer Phil Chronican said. The cost of funding has “gone up and up, although it has stabilized this year,” Chronican said in an interview on the Inside Business program on the Australian Broadcasting Corp. “We’re refinancing this year borrowings that were made three, four and five years ago at materially lower costs.”
  • Japan’s China Row May Spur GDP Fall This Quarter, JPMorgan Says. Japan’s territorial spat with China may cause the Japanese economy to contract this quarter and hasten a current account slide as exports decline and Chinese tourism to Japan drops off, according to a JPMorgan report. The dispute will knock 0.8 percentage point off Japan’s gross domestic product in the October-December period, JPMorgan Securities Japan Co. economists Masaaki Kanno and Masamichi Adachi wrote in an e-mailed note yesterday. They now estimate fourth-quarter GDP will contract 0.8 percent from the previous quarter, compared with a previous estimate of no growth.
  • World Bank Sees East Asia Growth Sliding to 11-Year Low on China. The World Bank said policy makers in Asia’s emerging economies have room to ease monetary and fiscal policies as China’s slowdown drags the region’s growth to an estimated 11-year low this year. Growth in developing East Asia, which excludes Japan and India, will probably ease to 7.2 percent from 8.3 percent in 2011, the Washington-based lender said in a report today. That is the slowest pace since 2001, according to World Bank data, and lower than a forecast in May of 7.6 percent. The International Monetary Fund is set to revise down its global outlook for this year tomorrow at an annual meeting in Tokyo where officials will tackle a slowdown triggered by Europe’s sovereign-debt crisis.  
  • A 'Flash Crash' Hits India, Markets Wary of Repeat. (video)
  • Copper Rally Is Overdone, Set to Move Lower, INTL FCStone sees copper falling to around $8,050/t in next four weeks. Steel, iron ore are also "vulnerable" as steelmills are not cutting back enough output, keeping the market oversupplied, the co. said.
  • Former SEC Watchdog Kotz Violated Ethics Rules, Review Finds. The former internal watchdog for the U.S. Securities and Exchange Commission violated ethics rules by overseeing investigations that touched on people with whom he had “personal relationships,” an outside review found. H. David Kotz, who resigned as the agency’s inspector general in January amid questions about his tactics and conduct, shouldn’t have participated in a probe of the SEC’s office re- organization because he engaged in “extensive” and “flirtatious” communications with an employee associated with the project, according to the review. 
  • Foxconn Labor Disputes Disrupt IPhone Output for 2nd Time. Foxconn Technology Group, the assembler of Apple Inc.(AAPL) iPhones, had to stop production for the second time in as many weeks after factory-line workers at one of its plants protested against increased pressure.
Wall Street Journal:
Business Insider:
Zero Hedge:
CNBC: 
  • Europe’s Richer Regions Want Out. Catalonia may be the catalyst for a renewed wave of separatism in the European Union, with Scotland and Flanders not far behind. The great paradox of the European Union, which is built on the concept of shared sovereignty, is that it lowers the stakes for regions to push for independence. While a post-national European Union may be emerging out of the euro zone crisis, with a drive for more fiscal union and more centralized control over national budgets and banks, the crisis has accelerated calls for independence from member countries’ richer regions, angry at having to finance poorer neighbors. 
  • Deadly Meningitis Outbreak Increases to 91 Cases. U.S. health officials on Sunday reported an additional 27 cases in a fungal meningitis outbreak linked to steroid injections that has killed seven people and now affected 91 in nine states.
New York Times:
  • Citing U.S. Fears, Arab Allies Limit Syrian Rebel Aid. For months, Saudi Arabia and Qatar have been funneling money and small arms to Syria’s rebels but have refused to provide heavier weapons, like shoulder-fired missiles, that could allow opposition fighters to bring down government aircraft, take out armored vehicles and turn the war’s tide. While they have publicly called for arming the rebels, they have held back, officials in both countries said, in part because they have been discouraged by the United States, which fears the heavier weapons could end up in the hands of terrorists. As a result, the rebels have just enough weapons to maintain a stalemate, the war grinds on and more jihadist militants join the fray every month. 
Financial Times:
  • EU braced for budget fight with UK. Brussels is bracing itself for a battle with David Cameron as fears grow that the British prime minister will block a proposed €1tn seven-year spending plan and push for a two-tier EU budget. Mr Cameron is understood to be interested in Brussel’s longer-term plan of a separate spending programme for the eurozone, with UK and European officials considering a compromise that would see the EU budget split in two – marking a further acceleration towards a divided Europe.
Telegraph: 
  • IMF to cut growth forecast for UK in gloomy global outlook. The International Monetary Fund is expected to cut its growth forecast for the UK next week, when it downgrades the outlook for the global economy.
  • ECB board member shuts door on Greek pleas for leniency. Greece cannot have more time to repay its debt to the European Central Bank because it would be illegal and "illogical", board member Joerg Asmussen has said, as he shut the door on pleas for leniency from the bank.
  • Spain's jobless flee to Argentina. Desperate Spaniards are fleeing in their thousands to set up new lives in Argentina, preferring rampant inflation to the prospect of searching for a job in a country with the highest unemployment rate in the industrialised world.
Weslt am Sonntag:
  • Greece may miss its target of reducing debt to 120% of GDP in next eight years, citing people familiar with Greek talks. Greece faces debt of 140% of GDP in 2020. The German government has ruled out a third rescue package or cancellation of its share of debt.
  • Greece is sure to exit the euro, Ifo Institute for Economic Research President Hans-Werner Sinn said. Economic problems to arise if Greece remains in the euro are "simply not solvable," citing Sinn. A temporary Greek exit is "better for the Greeks and better for us," he said.
El Pais:
  • Spain to Lend EU560m to Catalonia for Past Due Bills. Spain to make payment to region on Tuesday, citing people in the Budget Ministry. Cash will be used by Catalonia to pay down liabilities including EU387m of bills past due dates to hospitals, schools.
  • Canary Islands Request EU757m From Spain Rescue Fund. Region will use loan to repay debt, citing Javier Gonzalez, head of the Canary Islands finance office.
La Figaro:
  • The French government is looking into ways to get companies such as Google Inc.(GOOG), Microsoft(MSFT) and Apple Inc.(AAPL) to pay more taxes in France on revenue they make in the country.
Nikkei:
  • Japanese Automakers to Cut Chinese Production. Japan's three largest automakers plan to cut production to half of normal levels as workers return from holidays this week. Steps will mean 30,000-40.000 fewer vehicles from each maker over a month. Cuts expand on reductions made before last week's holiday. Automakers to monitor anti-Japan protests in China.
  • Asahi Glass Halts Solar Output at Tennessee Plan. Inventory build up of glass for solar cells leads co. to halt production, lay off half of 120 employees. Inventory at the Tennessee plant is about 4-5 months and co. wants inventory at 2 months.
Yonhap News Agency: 
  • N. Korea's trade with China nearly tripled over past 5 years. North Korea's trade with China nearly tripled over the past five years, South Korean government data showed Sunday, underscoring the isolated North's growing economic reliance on its major ally. Trade between North Korea and China stood at US$5.63 billion last year, up 284 percent from $1.98 billion in 2007, Seoul's unification ministry said in a report to the National Assembly.
Vietnam News:
  • Vietnam Property Projects Delayed by Finance Problems. 900 of 1,108 property projects in Ho Chi Minh City unfinished due to financial problems, citing city's construction dept. figures.
Jerusleum Post: 
  • Analysis: Iran, Hezbollah likely behind UAV trespass. Of all the hostile elements seeking to harm Israeli national security, only two have the capability, track record and motivation to send drones into Israeli airspace: Iran and its Shi’ite proxy Hezbollah.
Haaretz:
Weekend Recommendations
Barron's:
  • Made positive comments on (BCO), (VIAB) and (JCI).
  • Made negative comments on (SHF).
Night Trading
  • Asian indices are -1.0% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 129.50 unch.
  • Asia Pacific Sovereign CDS Index 109.25 -.75 basis point.
  • FTSE-100 futures -.50%.
  • S&P 500 futures -.21%.
  • NASDAQ 100 futures -.22%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • None of note
Economic Releases
  •  None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The EU Finance Ministers meeting, activation of Europe's ESM, Troika report on Greece, Germany trade balance and the China HSBC Services PMI could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.

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