Tuesday, December 11, 2012

Tuesday Watch

Evening Headlines 
  • Berlusconi Effect Rattles Markets as Gridlock Looms: Euro Credit. Former Italian Prime Minister Silvio Berlusconi rattled bond markets with a comeback bid that put the politics of budget rigor up for review and boosted speculation that the 2013 vote will yield a weak government. 
  • Spain’s Weakened Banks Shackle Builders’ Drive for Growth Abroad. Spanish builders find themselves increasingly dependent on foreign banks as they seek growth abroad to weather the worst property slump on record. “We are having more difficulties with access to credit,” said Susana Monje, chief executive officer of Grupo Essentium, a construction firm based near Madrid that turned to Germany’s Deutsche Bank AG for backing to win a contract in India this year. “There’s a label for Spanish companies and if you have that label, then you have it more difficult.”
  • China’s Stocks Fall From One-Month High as Developers Decline. China’s stocks fell, as declines by banks and property developers dragged the benchmark index down from a one-month high. Bank of Communications Co. dropped 0.7 percent as data on new lending for November missed economists’ estimates. Poly Real Estate Group Co. sank 1.4 percent from its highest close in almost five months. Kweichow Moutai Co. (600519), China’s biggest producer of baijiu liquor by market value, advanced 2.1 percent after saying its products meet government requirements. The Shanghai Composite Index (SHCOMP) sank 0.4 percent to 2,075.25 at the 11:30 a.m. local-time break, after closing yesterday at the highest level since Nov. 7.
  • Texas Instruments(TXN) Forecasts Sales In Line With Estimates. Texas Instruments Inc. (TXN), the largest maker of analog chips, gave an updated fourth-quarter sales forecast that was in line with analysts’ estimates as customers seek to keep inventory low amid lackluster demand. Sales will be $2.89 billion to $3.01 billion, the Dallas- based company said today in a statement. Analysts on average projected revenue of $2.95 billion, according to data compiled by Bloomberg. In October, Texas Instruments had said sales would be $2.83 billion to $3.07 billion. 
  • Japan Utilities Plunge on Faultline Warning Under Nuclear Plant. Kansai Electric Power Co. led declines in Japan’s utilities after geologists said an earthquake faultline may be active under a nuclear plant that holds the country’s oldest reactor. Kansai Electric shares fell as much as 9.7 percent to 701 yen, heading for the biggest decline since Oct. 23, on the Tokyo Stock Exchange today. The Topix Electric Power & Gas Index fell as much 3.5 percent.
  • Oil Trades Near Three-Week Low as Gasoline Supplies Seen Rising. Oil traded near the lowest level in three weeks in New York before a government report that may show gasoline stockpiles rose to the most in eight months in the U.S., the world’s largest crude user
  • Qatar Bankrolls Ascendant Muslim Brothers as U.A.E. Jails Them. Qatar is courting Islamist groups across the Middle East, sometimes the same ones that make its neighbors nervous. Since Mohamed Mursi became the first Muslim Brotherhood member to lead an Arab state, Qatar has promised Egypt at least $20 billion in aid and investment. Other nations in the Persian Gulf, which holds almost half the world’s oil, see the Brotherhood as a threat. Saudi Arabia has shunned it for at least two decades, and the United Arab Emirates has jailed dozens of people this year on suspicion of links to the group. Qatar’s pro-Islamist line is backed by cash, from gas reserves that have made its 2 million people the world’s richest. Its support is helping the religious parties that emerged as the biggest winners from last year’s wave of Arab revolts. At the same time, it’s causing unease among Gulf monarchies that are resistant to political change and under U.S. pressure to show a united front against Iran.
Wall Street Journal: 
Zero Hedge: 
Business Insider: 
  • Move Over, Michigan, China Is The World's Next Rust Belt. Six cities in Liaoning province, including Shenyang and Anshan, recently announced they are converting abandoned industrial sites to farmland.  Dongguan, once a booming factory center, is on the verge of bankruptcy as companies close, leaving the local government severely cash-strapped.
  • US Congress, dreading automatic cuts, eyes yet another trigger. Of the many distasteful elements to the year-end "fiscal cliff" that Washington is desperately trying to avoid, few are more loathed than the automatic, indiscriminate spending cuts scheduled to begin on Jan. 2. Yet a repeat of this agonizing drama could play out next summer. That is because Congress, as part of deal to avert the year-end fiscal cliff of steep tax increases and across-the-board budget cuts, is likely to enact another forcing mechanism, or trigger, to make sure it keeps its latest round of deficit-reduction promises. Lawmakers say automatic cuts and tax changes will be needed later because there is too little time now to get specific, with Congress racing to undo the damage it did in 2011.
  • U.S. EPA to examine claim that Ford(F) hybrids fail to get 47 mpg. U.S. regulators will review claims by Consumer Reports magazine that two Ford Motor Co hybrid models fall far short of their official fuel economy figures of 47 miles per gallon. 
  • Exclusive: SPX(SPW) in exclusive talks to buy Gardner Denver(GDI) - sources. Industrial machinery maker SPX Corp (SPW.N) is in exclusive talks to buy rival Gardner Denver Inc (GDI.N) and hopes to finalize a deal by the end of the year, four people familiar with the matter said on Monday. 
  • China Nov loans slow. China's banks lent more slowly than markets expected in November while the pace of total financing eased. Chinese banks extended 522.9 billion yuan ($83.73 billion) of new local currency loans in November, the central bank said on Tuesday, missing market expectations of 550 billion yuan. 
  • US watchdog says auditors not doing their jobs much of the time. The biggest U.S. audit firms are failing to properly test some companies' financial controls, one of the main bulwarks against fraud, an audit watchdog group said on Monday. In a broad review of the "Big Four" and second-tier audit firms, the Public Company Accounting Oversight Board said problems are numerous and growing in audits of companies' internal controls - the main method used to keep accurate books.
  • Mario Monti's exit is only way to save Italy. Italy has only one serious economic problem. It is in the wrong currency.
    “The numbers are staring them in the face. We think the story of 2013 is not about countries being forced to leave EMU but whether they choose to leave.” A “game theory” study by Bank of America concluded that Italy would gain more than other EMU members from breaking free and restoring sovereign control over its policy levers.
Want China Times:
  • Corrupt Chinese officials could deflate the real estate bubble. Chinese officials could be single-handedly easing China's real estate market price rise, said Huang Nubo, chairman of Chinese property firm Zhongkun Investment Group. China's new anti-corruption policies, announced under soon-to-be president Xi Jinping and his Politburo Standing Committee, has Chinese officials, some whom own potentially dozens of pieces of property, turning out their property pockets, reports Hexun, China's largest financial information website. The resulting flood of for-sale property could be forceful enough to make a dent in prices, said Huang. Huang places his bets on a price drop over the next two years as policies are firmly enforced throughout the country. The government weeding could actually be more effective at stabilizing China's property bubble than the recent financial caps and interest rate eases, which have failed to sufficiently halt the rise in the majority of China's cities. Anti-corruption measures will continue throughout Xi Jinping's 10-year tenure, as officially announced in November, Huang said. With financial and legal measures adding downward pressure, and the eventual launch of a property tax to rebalance supply and demand, Huang says policy might finally be enough to deflate the market.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 114.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 86.25 +.25 basis point.
  • FTSE-100 futures +.07%.
  • S&P 500 futures -.20%.
  • NASDAQ 100 futures -.08%.
Morning Preview Links

Earnings of Note

  • (JOY)/1.91
  • (COST)/.93
  • (RH)/.03
  • (NX)/.21
Economic Releases
7:30 am EST
  • The NFIB Small Business Optimism Index for November is estimated to fall to 92.5 versus 93.1 in October.
 8:30 am EST
  • The Trade Deficit for October is estimated to widen to -$42.7B versus -$41.5B in September.
10:00 am EST
  • Wholesale Inventories for October are estimated to rise +.4% versus a +1.1% gain in
  • JOLTs Job Openings for October are estimated to rise to 3600 versus 3561 in September.
  • The IBD/TIPP Economic Optimism Index for December is estimated to rise to 50.0 versus 48.6 in November.  
Upcoming Splits
  • (MTX) 2-for-1
Other Potential Market Movers
  • The weekly retail sales reports, Germany ZEW Index, 3Y T-Note auction, KeyBanc Engineering/Construction/Utilities Conference, (AGCO) analyst day, (MNST) investor meeting, (BDC) investor day, (TEVA) investor meeting and the (HI) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate 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 25% net long heading into the day.

No comments: