Friday, December 07, 2012

Friday Watch

Evening Headlines 
  • Draghi’s Go-to ECB Seen Risking Credibility Through Overload. Mario Draghi isn’t just battling to save Europe’s monetary union, he’s being asked to run it. The European Central Bank president is taking on more and more responsibility to keep the currency bloc afloat, from propping up bond markets to monitoring fiscal policies and assuming supervision of the region’s 6,000 banks. Economists, academics and officials past and present say the ECB is at risk of becoming overloaded, which could erode the credibility it needs to achieve its primary goal of price stability. “The ECB saved the euro,” says Andrew Bosomworth, managing director at Pacific Investment Management Co. in Munich. “But the extra responsibilities, in particular its supervisory role, put additional burdens and risks onto its mandate.” 
  • Monti Clings to Power as Berlusconi Seeks Early Vote. Italian Prime Minister Mario Monti said he plans to keep his government intact as his biggest parliamentary supporter, billionaire media magnate Silvio Berlusconi, threatens to withdraw his backing.
  • Rates to ship iron ore dropped the most since August on speculation new vessels are joining the fleet as demand declines on a slowdown in Chinese industrial output. Daily earnings for Capesizes carrying 160,000 metric tons of the steel-making raw material fell 7.4% to $12,827, the lowest since Oct. 15, according to the Baltic Exchange, the London-based publisher of freight rates. That's the biggest decline since Aug. 15, and it led the Baltic Dry Index, a broader gauge of commodity shipping costs, down 3.1% to 990 points, the bourse's figures showed today. Rates have fallen 30% since an almost 10-month high reached Oct. 23. The global fleet will expand 14% in 2012, according to data from Clarkson Plc, the world's largest shipbroker. 
  • China State-Driven Rebound at Risk as Small Firms Suffer. China’s rebound from a seven-quarter slowdown is being driven by state-funded transport projects, boosting the shares of railcar makers such as China CNR Corp. even as the benchmark stock index dropped. The focus on infrastructure and the lack of a more widespread pickup may threaten the sustainability of the economic recovery. “The recovery is uneven as the recent rebound is mainly driven by government-sponsored investment projects,” said Ding Shuang, a Hong Kong-based economist with Citigroup Inc. “Since the policy easing this time is more measured than previous rounds, the rebound is likely to be mild and may not persist. More support is needed for smaller firms to sustain growth and jobs."
  • China Deserts Dealers of Japanese Cars Over Clash. Three months after a territorial dispute led rioters to vandalize Japanese cars in China, automakers from Toyota Motor Corp. (7203) to Nissan Motor Co. are luring back buyers with discounts and guarantees. Dealers like William Chen may take more persuasion to invest in the brands. “Sales of Japanese brands plunged about a third at my outlets,” said Chen, whose family owns about 30 showrooms selling Nissan and nine other brands in the eastern city of Taizhou. “I would prefer safer brands over Japanese ones in the future.” More distributors than ever are considering quitting Japanese car brands, even as showroom traffic and orders begin to rebound, according to the China Automobile Dealers Association.
  • Dodd-Frank Swap Rules Delayed as Agency Eases Transition. The main U.S. derivatives regulator may delay applying some Dodd-Frank Act overseas swaps rules for about six months, part of a wave of last-minute exemptions and postponements designed to ease the shift to new regulations
  • Palo Alto Networks(PANW) First-Quarter Sales Miss Top Estimates. Palo Alto Networks Inc. (PANW) fell after reporting fiscal first-quarter sales that failed to meet analysts’ most bullish estimates, a sign of lofty projections for growth at the maker of firewalls and other security technologies.
  • U.S. Bancorp(USB) Lowered by Moody’s as Low Rates Damp Profit. U.S. Bancorp, the nation’s fifth- largest lender by deposits, was downgraded by Moody’s Investors Service as record-low interest rates pressure earnings. The senior debt rating was lowered to A1 from Aa3, reflecting “the inescapable challenges that even a well-managed and diverse banking franchise currently faces,” the ratings firm said today in a statement on the Minneapolis-based lender. “Among these challenges are protracted low interest rates that will place pressure on U.S. Bancorp’s net interest margin.” 
  • Netflix(NFLX) CEO Hastings Faces SEC Action Over Facebook Post.
  • Morgan Stanley(MS) Alters Broker Pay Plan as Revenue Bonus Takes HitMorgan Stanley, the brokerage with the biggest corps of financial advisers, changed its wealth- management compensation plan to encourage brokers to increase revenue and allow them to buy discounted stock. The 2013 program pays a bonus of 2 to 5 percentage points of revenue for advisers who bring in new assets and are in the top 40 percent in revenue growth, according to terms outlined in a summary obtained yesterday by Bloomberg News. That comes at the expense of a 2 percentage-point reduction in the revenue bonus paid to all brokers who generate at least $750,000.
Wall Street Journal: 
Fox News: 
  • Tata Raps India for Driving Off Investment. Ratan Tata, the outgoing head of the Tata group, India's most global business, has warned that government inaction is driving investment away from the country and forcing groups like his own to seek growth abroad.
Zero Hedge: 
Business Insider: 
  • Exclusive: Schwab eyes commission-free ETF supermarket - sources. Corp has been quietly meeting with exchange-traded fund providers to try to persuade them to join a new network that would make ETFs available commission-free to the brokerage's 8.6 million customers. ETF providers, however, have been reluctant to sign on to Schwab's plan because they would have to pay the firm a marketing fee they say is too high, according to people with knowledge of the discussions.
  • No sign US Congress meant to limit health exchange subsidy -CBO. In a development that could complicate Republican efforts to limit funding for a key provision of President Barack Obama's healthcare law, a top congressional researcher said the issue of restricting subsidies never arose in producing the legislation. Congressional staff involved in the creation of the law did not suggest that federal insurance subsidies be restricted only to states that run their own healthcare exchanges, the head of the nonpartisan Congressional Budget Office said on Thursday.  
  • Toyota sees Japan sales dropping 20 pct in 2013 -media. Toyota Motor Corp expects Japan vehicle sales to fall by a fifth next year, in part due to the end of government tax incentives for fuel-efficient automobiles, domestic media reported, adding to the pain from a decline in China sales.
  • US stock mutual funds suffer biggest outflows this year -Lipper.
  • Michigan House approves 'right-to-work' bill to weaken unions. The Michigan House on Thursday voted to approve a "right-to-work" bill that would weaken labor union powers after Democratic representatives left the chambers in protest at the decision earlier to lock the state Capitol doors.
Yonhap News Agency: 
  • U.S. moving warships to monitor N. Korea's rocket move: Adm. Locklear. The United States has moved naval ships with ballistic missile defense to the periphery of the Korean Peninsula to keep close tabs on Pyongyang's possible rocket launch, the top U.S. military commander in Asia and the Pacific said Thursday. "It should seem logical that we will move them around so we have the best situational awareness," Adm. Samuel Locklear, head of the U.S. Pacific Command, said at a press conference in the Pentagon.
China Daily:
  • China must make progress on housing "de-inventory" to reduce the risk of a "systemic" financial crisis triggered by real estate bubbles, Chinese Academy of Social Sciences researcher Yi Zianrong writes in a commentary. Loosening the country's property market regulations would hurt efforts to reduce overcapacity in mining, steel, construction materials and other related industries, Yi said.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 112.0 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 85.50 unch.
  • FTSE-100 futures +.18%.
  • S&P 500 futures +.06%.
  • NASDAQ 100 futures +.08%.
Morning Preview Links

Earnings of Note

  • None of note
Economic Releases
8:30 am EST
  • The Change in Non-Farm Payrolls for November is estimated at 85K versus 171K in October. 
  • The Unemployment Rate for November is estimated at 7.9% versus 7.9% in October.
  • Average Hourly Earnings for November is estimated to rise +.2% versus unch. in October.
 9:55 am EST
  • Preliminary Univ. of Mich. Consumer Confidence for December is estimated to fall to 82.0 versus 82.7 in November.
3:00 pm EST
  •  Consumer Credit for October is estimated to fall to $10.0B versus $11.36B in September.
Upcoming Splits
  • (MNRK) 6-for-5
Other Potential Market Movers
  • The (CSCO) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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