Friday, December 14, 2012

Friday Watch

Evening Headlines 
  • German-French Sparring Over Euro Caps 2012 Crisis Fight. European Union leaders capped a third year of debt-crisis management with Greece obtaining fresh financial aid, a euro bank regulator taking shape, and Germany and France sparring over what to do next. German Chancellor Angela Merkel and French President Francois Hollande, stewards of the euro area’s top two economies, promoted conflicting visions of how to revamp economic management once the fiscal crisis subsides.
  • EU Seeks Plan to Handle Failing Banks Amid Cost Concerns. European Union chiefs pledged to seek a joint strategy for handling failing banks as German Chancellor Angela Merkel demanded taxpayers be spared the costs. Leaders agreed to start work next year on a single resolution mechanism for euro-area banks to complement the European Central Bank oversight role approved yesterday by European finance chiefs. Lenders should underwrite financial stability by repaying governments as needed, EU leaders said. Resolution “may not be at the cost of the taxpayers, but has to be structured so that those responsible for the failures of the banks carry the burden,” Merkel told reporters at 2:15 a.m. after nine hours of talks in Brussels.
  • Euro Negative Yield Hits Jobless Spaniard to Munich Fund Manager. Divorced and unemployed, Fran Lopez is back at home with his parents again. Five years ago, he was living in Madrid’s wealthiest suburb with his wife and new-born daughter and earning as much as 4,000 euros ($5,175) a month upgrading electricity substations for Iberdrola SA (IBE), Spain’s largest utility. Now Lopez, 26, is studying for his high-school diploma. “I’m starting from zero,” Lopez said. “They want a load of qualifications. So I’m studying. My aim is to work, and if there’s no work, I’ll keep studying.”
  • UN Telecom Treaty Approved Against U.S. Web-Censorship Concerns. An agreement to update 24-year-old United Nations telecommunications rules was approved against the opposition of countries including the U.S. and the U.K., whose delegates walked out on the talks on concerns about Internet regulation and censorship. The new pact includes measures that would give countries a right to access international telecommunications services and the ability to block spam, which delegations that declined to sign the amended text argued would pave the way for government censorship and control over the Web. Canada, Denmark, Australia, Norway, Costa Rica, Serbia and others followed the U.S. in refusing to sign on these grounds. The treaty is not binding for the countries that didn’t sign it. “It’s with a heavy heart and a sense of missed opportunity that the U.S. must communicate that it’s not able to sign the agreement in its current form,” the U.S. delegation said in a statement at the plenary after the final changes were adopted last night.
  • Japan Tankan Business Confidence Falls to Near 3-Year Low. Big Japanese manufacturers are the most pessimistic in almost three years after a diplomatic dispute with China and Europe’s austerity measures dragged exports to a fifth monthly decline in October. The quarterly Tankan index for large manufacturers fell to minus 12 in December from minus 3 in September, the Bank of Japan (8301) said in Tokyo today, a fifth straight negative reading and the lowest since March 2010. The median estimate of 25 economists surveyed by Bloomberg News was for minus 10. A negative figure means pessimists outnumber optimists.
  • China Stocks Rally Most in Three Months After HSBC Factory Data. China’s stocks rose the most in three months after a survey showed the nation’s manufacturing may expand at a faster pace this month and amid speculation Ping An Insurance (Group) Co. is buying shares. The Shanghai Composite Index (SHCOMP) climbed 2.9 percent to 2,120.84 at the 11:30 a.m. local-time break.
  • Prices in China for marbled pork meat rose 2.5% to 26.17 yuan a kilogram between Dec. 1 to 10 as compared with the previous ten days, the National Bureau of Statistics said.
  • Bank of America(BAC) Says MBIA(MBI) Defaulted on Contested Securities. Bank of America Corp. (BAC) said it’s issued a notice of default to MBIA Inc. (MBI) after buying some of the bond insurer’s notes in an attempt to block a legal maneuver in their three-year dispute over toxic mortgage assets. Bank of America, which failed to persuade investors to sell it a majority of the $329 million of 5.7 percent bonds due in 2034 that were outstanding early in November, said in a statement yesterday that it has acquired $136 million of the notes. MBIA said on Nov. 26 that it repurchased $170 million of the securities, leaving $159 million in investors’ hands, according to data compiled by Bloomberg.
Wall Street Journal: 
  • Trading Plans Under Fire. In 2007, a top securities regulator warned that executives could be abusing preset plans to buy and sell their companies' stock "to facilitate trading based on inside information." "We're looking at this—hard," Linda Chatman Thomsen, then-enforcement chief at the Securities and Exchange Commission, told a conference of corporate lawyers. Since then, corporate insiders have filed more than one million forms with the SEC related to changes in ownership of their shares. The agency has brought more than 260 cases alleging insider-trading since the speech—but securities-law experts say very few of the cases allege fraud by executives trading their companies' stock.
  • Oversupply Buries Raw Materials. A glut of raw materials from crude oil to copper and cotton is driving down prices and dimming the outlook for commodities over the next few months. Stores of crude in the developed world are forecast to end 2012 at a two-year high, thanks largely to a slowdown in world demand growth and an unexpected surge in production in the U.S. In China, copper stockpiles are at record levels as the country's slowing economy limits use of the metal. Cotton bales held in warehouses are predicted to reach an all-time high next year. With global demand still weak, supplies are likely to continue to loom over the market in 2013, investors and analysts say.
Fox News:
  • Aggressive Easing Wrong Medicine for Japan: Roach. "I don't think it's going to work. QE (quantitative easing) is good at containing the downside, addressing crisis and disruptive markets, but it definitely doesn't give you traction in regenerating demand in the real economy," Yale University senior fellow Stephen Roach told CNBC on Friday.
  • Rice Withdraws From Sec of State Running. Susan Rice withdrew her name from consideration as U.S. secretary of state Thursday in the face of what promised to be a difficult Senate confirmation battle.
Zero Hedge:
Business Insider:
Washington Post:
  • Solar firms probed for possible ‘misrepresentations’ in getting public money. Three of the country’s most prolific installers of residential solar panels are under federal investigation to determine if they inflated the cost of their work to increase the payments they would receive from the government, according to government and industry officials familiar with the probe. SolarCity, SunRun and Sungevity have received subpoenas from the Treasury Department’s office of inspector general for financial records to justify more than $500 million in federal grants and tax credits the firms tapped for performing work. The probe seeks to determine whether the companies accurately reported the market value of their costs when applying for federal reimbursement, which was calculated at one-third of the costs.
  • Moody's revises Illinois outlook to negative on pensions. Illinois' public pension funding problems, likely to persist if not worsen, led Moody's Investors Service on Thursday to revise the state's credit outlook to negative from stable, putting more pressure on state lawmakers to act. Illinois' finances are buckling under a $96.8 billion unfunded pension liability while Governor Pat Quinn and various state lawmakers are pushing to get various reform measures passed by the legislature in early January.
  • United Tech(UTX) sees 2013 profit up about 13 percent. United Technologies Corp expects its profit to rise about 13 percent next year, with growing demand for its systems that are used in buildings helping to offset lower U.S. defense spending. The world's No. 1 maker of elevators and air conditioners, whose other businesses include jet engines and helicopters, on Thursday projected 2013 earnings of between $5.85 to $6.15 per share. The midpoint would represent a 13 percent rise from the $5.32 per share it expects to report for 2012. Analysts, on average, expect 2013 earnings of $6.12 per share, according to Thomson Reuters I/B/E/S.
  • VeriFone(PAY) says slowdown in Latin America to hurt profit. Credit card swipe machine maker VeriFone Systems Inc forecast smaller-than-expected earnings for the current quarter due to a slowdown in Latin America, sending its shares down 6.6 percent after the bell. The company forecast earnings of 70 cents to 73 cents per share on revenue of $490 million to $500 million for November-January. Analysts on average were expecting earnings of 75 cents per share on revenue of $498.4 million, according to Thomson Reuters I/B/E/S. "We see single-digit growth in Latin America following two years of nearly 40 percent average growth," Chief Executive Doug Bergeron said on a conference call.
  • Adobe(ADBE) forecasts weak 2013 results, expects growth beyond. Adobe Systems Inc, maker of Photoshop and Acrobat software, forecast full-year results below analysts' estimates but expects profit and earnings to grow 2013 onwards. The company forecast adjusted earnings of about $1.40 a share on revenue of about $4.1 billion for 2013. Analysts on average were expecting earnings of $2.35 per share on revenue of $4.47 billion, according to Thomson Reuters I/B/E/S.
Securities Times:
  • China's property market may face a risk of collapse in some areas, while at the same time other areas may see price rebounds if curbs aren't implemented effectively, citing a Chinese Academy of Social Sciences report.  
  • A man stabbed 22 primary school children in the central province of Henan, according to the propaganda bureau of Guangshan county, where the attack took place.
Evening Recommendations 
Keefe Bruyette:
  • Downgraded (CME) to Underperform, target $47.
  • Downgraded (CIEN) from Overweight to Underweight, target $11.
Night Trading
  • Asian equity indices are -.75% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 111.0 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 84.25 -.75 basis point.
  • FTSE-100 futures +.26%.
  • S&P 500 futures +.28%.
  • NASDAQ 100 futures +.24%.
Morning Preview Links

Earnings of Note

  • None of note
Economic Releases
 8:30 am EST
  • The Consumer Price Index for November is estimated to fall -.2% versus a +.1% gain in October.
  • The CPI Ex Food & Energy for November is estimated to rise +.2% versus a +.2% gain in October.    
 8:58 am EST
  • Preliminary Markit US PMI for December is estimated to fall to 51.8 versus 52.4 in November.
9:15 am EST
  • Industrial Production for November is estimated to rise +.3% versus a -.4% decline in October.
  • Capacity Utilization for November is estimated to rise to 78.0% versus 77.8% in October.
Upcoming Splits
  • (SCL) 2-for-1
Other Potential Market Movers
  • The French/German Flash PMIs, Eurozone Unemployment, 140M share (FB) lock-up expiration, (CNC) investor day, (LUV) investor day, (ITW) investor meeting and the (SMG) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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