Thursday, December 20, 2012

Thursday Watch

Posted by Gary .....at 12:24 AM
Evening Headlines 
Bloomberg: 
  • White House Said to Tell Business Groups Budget Talks Stall. Obama administration officials told leaders of business and financial services groups that negotiations with House Speaker John Boehner have deteriorated in the past 24 hours, a person familiar with the meeting said. The officials told eight industry representatives at the White House that plans to vote on Boehner’s alternative proposal on taxes risk pushing the government past the deadline for spending cuts and tax increases to start, said the person, who asked for anonymity to discuss the private talks. 
  • Italian Senate Set for Budget Vote Before Monti Resigns. The Italian Senate will vote today on the budget law, paving the way for Prime Minister Mario Monti to step down before early elections next year. The upper house started debating the law yesterday, a day later than scheduled after former Premier Silvio Berlusconi’s party asked for more time to examine the bill. The Senate will vote at around 12 p.m. in Rome. The bill then goes to the Chamber of Deputies for final approval as soon as tomorrow.
  • UBS $1.5 Billion Libor Settlement Signals More to Come. UBS AG (UBSN)’s $1.5 billion settlement for manipulation of interest rates and criminal charges against two former traders paves the way for additional sanctions in a global investigation of more than a dozen banks and brokers.
  • China Banks’ Profit Growth May Slow to 7% in 2013, BoCom. Chinese banks’ profit growth may slow to between 7 and 8 percent in 2013 from an estimated 17 percent increase this year, as non-performing loans climb amid a slowing economy and more borrowers resort to bond financing, according to Bank of Communications Co. Banks may extend 9 trillion yuan ($1.4 trillion) of new loans next year, compared with a forecast of 8.4 to 8.5 trillion yuan this year, the Shanghai-based Bank of Communications, the nation’s fifth largest, said in a research note yesterday. Aggregate social financing, which includes loans, bond and equity offerings as well as trusts, may be between 16.5 and 17.5 trillion yuan, according to the note.
  • Hong Kong Property Overheating Poses Financial Risks, HKMA Says. Hong Kong’s overheated property market is increasingly disconnected from the rest of the economy and poses “macro-financial risks,” the city’s monetary authority said. Loose global monetary conditions and low interest rates may fuel mortgage borrowing that intensifies “the disconnect between property prices and economic fundamentals,” the Hong Kong Monetary Authority said yesterday in a quarterly report. Government measures to cool the market have failed to prevent home prices in Hong Kong, the world’s most expensive place to buy an apartment, doubling in four years and surpassing a previous peak in 1997. In contrast with “tepid” income growth, housing prices surged 23 percent in the year to October, the HKMA said in the report. The “overheating property market carries macro-financial risks to the economy,” the HKMA said. Mortgagors may end up “in distress when the interest rate returns to a more normal level,” the monetary authority said. Hong Kong’s economic outlook is “relatively weak” because of sluggish export demand, the HKMA said. The economy faces “downside risks, particularly for the external environment,” the report said. “The latest reading of our in-house composite index of leading indicators also points to continued soft growth in the months ahead.”   
  • China’s Stocks Decline Amid Signs U.S. Budget Talks Faltering. China’s stocks fell, dragging the benchmark index to the lowest level in a week, amid concern U.S. budget negotiations are faltering. China Vanke Co. slid 0.8 percent, sending a gauge of property stocks to a fourth day of losses. China Construction Bank Corp. paced declines for lenders after the Xinhua News Agency reported growth in banks’ 2013 net income will slow. The Shanghai Composite Index (SHCOMP) slipped 0.4 percent to 2,153.59 at 9:50 a.m. local time, with trading volumes 30 percent higher than the 30-day average for this year.
  • Syrians Pack Up to Flee Damascus as Battle for Capital Escalates. Syrian interior decorator Wassim Issa knew it was time to get out. Before leaving for Lebanon, the 37-year-old Damascus resident hadn’t had any business in six months and the proliferation of security checkpoints in the streets of the capital suggested to him things were only going to get worse. Now, Issa is trying to collect money from indebted clients before finally moving to Dubai. Most have either fled the country or are too poor to pay their bills. “My job these days is to go around and try to get the money people owe me,” Issa said last week as he munched on a cheese and ham pizza in a cafe in Chtaura, a Lebanese town with popular rest areas a few miles from the Syrian border. 
  • Accenture(ACN) Falls as First-Quarter Consulting Revenue Declines. Accenture Plc (ACN), the world’s second- largest technology-consulting company, fell in afterhours trading as first-quarter sales of advice dropped, with customers remaining tentative on spending projects. Revenue from consulting, the company’s biggest unit, fell 3 percent from a year earlier to $3.96 billion, declining for the third straight quarter. Total sales climbed 2.1 percent to $7.22 billion, compared with the $7.3 billion average estimate of 19 analysts polled by Bloomberg.
  • Bed Bath & Beyond(BBBY) Drops After Profit Forecast Trails Estimates. Bed Bath & Beyond Inc. (BBBY), the operator of more than 1,400 home-furnishing stores, declined in extended trading after projecting full-year profit that trailed analysts’ estimates. Bed Bath & Beyond fell 3.6 percent to $58.10 at 4:55 p.m. in extended trading after the announcement.
  • Fannie Mae, Freddie Mac Libor Loss Tops $3 Billion in Audit. Fannie Mae and Freddie Mac may have lost more than $3 billion tied to the rigging of a key interest rate, according to internal memos by the auditor of the Federal Housing Finance Agency. Inspector General Steve A. Linick urged FHFA Acting Director Edward J. DeMarco in a Nov. 3 memo that has not been made public to investigate the potential losses tied to manipulation of the London Interbank Offered Rate. “We conducted a preliminary analysis of potential Libor- related losses at Fannie and Freddie and shared that with FHFA, recommending that they conduct a thorough review of the issue,” Kristine Belisle, a spokeswoman for the Inspector General, said in an e-mail. “FHFA agreed to study the matter further.”
  • Chaebol Founder Dismantles Life’s Work as Slump Deepens: Freight. Kang Duk Soo spent eleven years turning a failing ship-engine maker into a conglomerate with $23 billion in assets. He is now dismantling it. His STX Group put the controlling stake of its shipping unit up for sale last week as it tries to raise 2.5 trillion won ($2.3 billion) to pay off debt. It’s already spent nearly a year looking for a buyer for its affiliated offshore-vessel maker. 
  • Copper Near Lowest Level in Two Weeks on U.S. Budget Talk. Copper declined to the lowest level in almost three weeks amid concerns that budget negotiations deteriorated in the U.S. Metal for delivery in three months fell as much as 0.5 percent to $7,885 a metric ton, the lowest since Nov. 30, before trading at $7,886 on the London Metal Exchange at 10:30 a.m. in Shanghai. Copper for delivery in March on the Shanghai Futures Exchange fell 1 percent to 57,070 yuan ($9,161) a ton.
Wall Street Journal: 
  • U.S. Expands Child Online Privacy Law to Cover Apps, Social Networks. U.S. regulators broadened decade-old rules governing children's privacy online to cover new areas like smartphones, but amid pressure from the technology industry backed away from proposals that could have made companies like Facebook Inc. and Apple Inc. more responsible for violations. The Federal Trade Commission said it would change how it implements the Children's Online Privacy Protection Act of 1998, or Coppa, to reflect the growth of social networks and smartphone apps among children.
Fox News:
MarketWatch.com:
  • Jabil(JBL) Q1 profit falls on higher costs; revenue up. Jabil Circuit Inc.'s JBL +0.87% fiscal first-quarter earnings fell 6.2% as increased overhead costs and other expenses masked the electronics contractor's growing revenue. Shares rose 5.3% to $19.55 after hours as the results beat the company's expectations. 
CNBC: 
  • Boehner Challenges Obama With 'Plan B' Showdown. House Speaker John Boehner pressed his backup tax plan Wednesday despite a White House veto threat, saying it will be approved Thursday by the GOP-controlled House."Then the president will have a decision to make," Boehner said. "He can call on the Senate Democrats to pass that bill, or he can be responsible for the largest tax increase in American history."
Zero Hedge: 
Business Insider: 
Reuters: 
  • Morgan Stanley(MS) advises pulling money from Paulson funds. Billionaire hedge fund manager John Paulson has gotten another dose of bad news. Morgan Stanley Smith Barney is recommending that its financial advisers pull client money out of Paulson's Advantage and Advantage Plus funds, a person familiar with the matter said on Wednesday. Morgan Stanley had been watching Paulson's performance for months and prepared for this move when it told advisers last spring to stop putting new money into those funds, advisers with the firm have said.
  • Greece facing critical year, says finance minister - FT. Greece is facing a critical year that hinges on its three-party ruling coalition sticking together and following the bailout programme agreed with the European Union and the International Monetary Fund, Finance Minister Yannis Stournaras said in the Financial Times on Thursday. "We can make it next year if we can stick to the programme agreed with the EU and IMF. The break would be if the political system finds the situation too difficult to handle," he said in an interview with the newspaper. "Our partners' decision to give us so much money - more than we expected - removes a large part of the risk...we still face the possible risk of bankruptcy," he said. 
  • US State Dept officials resign under pressure over Benghazi killings. Three senior U.S. State Department officials were asked to resign after an official inquiry harshly criticized their offices for failing to provide adequate security at the U.S. mission in Benghazi, Libya, before it came under attack in September, a U.S. official said on Wednesday.
  • U.S. dock workers' talks come to a halt, potential strike looms. Dock workers on the U.S. Atlantic and Gulf coasts moved closer to a potential strike, which would disrupt the delivery of everything from furniture to coffee, after talks broke down between their union and the organization representing shipping companies and ports. "They've authorized the (ILA) president to call one if necessary but we still have time between now and the end of this extension," said International Longshoremen's Association (ILA) spokesman Jim McNamara, referring to a potential strike.
Telegraph:
Xinhua:
  • Sluggish global economic recovery to be long-lasting: Chinese Vice Premier Wang. The sluggish global economic recovery is going to be long-lasting, Chinese Vice Premier Wang Qishan said on Wednesday. Wang said this in his opening remarks to the plenary session of the 23rd Session of China-U.S. Joint Commission on Commerce and Trade (JCCT), which he co-chaired with Acting U.S. Commerce Secretary Rebecca Blank and U.S. Trade Representative Ron Kirk. The global economy is still facing severe and complex challenges, and the only certainty among the uncertainties is that the sluggish global economic recovery would continue for a long time to come, Wang said.
Financial News:
  • China Can't Neglect Inflation, Property, LGFV Risks. China can't neglect inflationary pressure and potential risks in the property market, local government financing vehicles and private lending, Financial News said in an unsigned front-page commentary.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.0% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 108.0 unch.
  • Asia Pacific Sovereign CDS Index 85.25 +.75 basis point.
  • FTSE-100 futures -.41%.
  • S&P 500 futures -.37%.
  • NASDAQ 100 futures -.22%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (AM)/.55
  • (KMX)/.38
  • (CCL)/.12
  • (CAG)/.55
  • (DRI)/.27
  • (DFS)/1.11
  • (KBH)/.06
  • (NX)/.21
  • (SCHL)/2.05 
  • (CTAS)/.62
  • (MU)/-.20
  • (NKE)/1.00 
  • (RHT)/.29
  • (RIMM)/-.35
  • (RECN)/.16
  • (TIBX)/.37 
Economic Releases
 8:30 am EST
  • Final 3Q GDP is estimated to rise +2.8% versus a prior estimate of a +2.7% gain.
  • Final 3Q Personal Consumption is estimated to rise +1.4% versus a prior estimate of a +1.45 gain.
  • Final 3Q GDP Price Index is estimated to rise +2.7% versus a prior estimate of a +2.7% gain.
  • Final 3Q Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.1% gain.
  • Initial Jobless Claims are estimated to rise to 360K versus 343K the prior week.
  • Continuing Claims are estimated to rise to 3200K versus 3198K prior.    
10:00 am EST 
  • Philly Fed for December is estimated to rise to -3.0 versus -10.7 in November.
  • Existing Home Sales for November are estimated to rise to 4.9M versus 4.79M in October.
  • Leading Indicators for November are estimated to  fall -.2% versus a +.2% gain in October.
  • The House Price Index for October is estimated to rise +.3% versus a +.2% gain in September.   
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone inflation data, BoJ rate decision, weekly EIA natural gas inventory data, Bloomberg Economic Expectations Index for December and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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