Thursday, January 17, 2013

Thursday Watch

Posted by Gary .....at 12:27 AM
Evening Headlines 
Bloomberg: 
  • Al-Qaeda Group Holding Western Hostages Demands France Quit Mali. An al-Qaeda-linked group in Algeria took American, Norwegian and British workers hostage in a pre- dawn attack the group said is intended to force France to end its offensive against Islamist insurgents in neighboring Mali. The attackers on an Algeria natural gas complex, which is partly operated by BP Plc, held more than 20 foreigners hostage after releasing Algerian citizens, according to the Algerian Press Service. The militant group, calling itself the “Signatories by Blood,” is demanding that France end its military attacks in Mali, according to Mauritania’s private ANI news agency. The French action is aimed at al-Qaeda affiliates and Tuareg separatists that have taken control of the northern half of the nation and were advancing toward the capital.
  • French Ground Forces to Attack Mali Rebel Territory. French ground forces advanced toward northern Mali to engage Islamist militants as West African soldiers prepared to join the fight against the insurgents. French soldiers moved from the capital, Bamako, for the start of what they expect will be “a guerrilla-like conflict,” Admiral Edouard Guillaud, France’s chief of defense staff, said yesterday on Europe 1 radio from Paris.
  • Italy’s Bersani Pushes for Payroll Tax Cut Financed by Wealthy. Pier Luigi Bersani, the front-runner in next month’s Italian election, is pushing for a payroll-tax cut and would finance it by raising taxes on the rich and cracking down on fiscal evasion. “There is room to finance a reduction of these burdens,” Bersani said late yesterday in an interview televised on Canale 5’s “Italy Asks” program. “A redistribution within the fiscal system is possible; something progressive can be done.”
  • Cameron Seen Highlighting Work, Finance in Looser EU Ties. Prime Minister David Cameron, seeking to give his vision of a looser U.K. relationship with the European Union in a speech tomorrow, may place bringing home decision-making on finance, the courts and labor at the heart of his pitch.
  • Chinese Dump Equities as Foreigners Rush in: Chart of the Day. Chinese regulators are accelerating approvals for overseas firms to buy the country's securities at a record pace as local investors abandon equities. The State Administration of Foreign Exchange awarded $15.8 billion of quotas for qualified foreign institutional investors to trade stocks and bonds in 2012, according to regulatory data compiled by Bloomberg. That's more than the previous five years combined. Stock accounts containing funds fell by 1.75 million to 55.2 million last year, the first annual loss since at least 2008.
  • Default Alarm Rings as Trust Loans Jump Sevenfold: China Credit. A seven-fold jump in last month’s lending by China’s trust companies is setting off alarm bells for regulators to guard against the risk of default. So-called trust loans rose 679 percent to 264 billion yuan ($42 billion) from a year earlier, central bank data showed on Jan. 15. That accounted for 16 percent of aggregate financing, which includes bond and stock sales. The amount of loans in China due to mature within 12 months doubled in four years to 24.8 trillion yuan, equivalent to more than half of gross domestic product in 2011, and the People’s Bank of China has set itself a new goal of limiting risks in the financial system.
  • Abe Stimulus Risks Fizzling as Citigroup(C) Sees Japan Job Gap. Japan’s 10.3 trillion yen ($117 billion) fiscal stimulus may add less than a quarter of the jobs the government predicts, casting doubt on Prime Minister Shinzo Abe engineering a sustained recovery. Even with more central bank easing, most of the impact of Abe’s spending won’t spread far beyond public works projects, Citigroup Inc. (C) says. It estimates that 100,000 jobs will be created, compared with the government’s figure of 600,000. BNP Paribas SA (BNP) says 150,000.
  • Singapore Exports Drop Most in 14 Months as Recovery Delayed. Singapore’s exports declined the most in 14 months in December as manufacturers shipped fewer electronics and pharmaceuticals, hurting economic recovery. Non-oil domestic exports slid 16.3 percent from a year earlier, after a revised 2.6 percent drop in November, the trade promotion agency said in a statement today. The median of 18 estimates in a Bloomberg News survey was for a 7.6 percent decline. The drop was the most since October 2011, based on previously reported data. Exports rose 0.5 percent in 2012, the worst performance in three years, according to Bloomberg calculations. “The ugly export reading raises the specter of recession once again,” Chua said. “There is a high likelihood that industrial production also contracted sharply in December. These are signs that Singapore’s manufacturing is facing hollowing out pressures, especially given the better trade data seen in Northeast Asia and Malaysia.” Singapore’s electronics shipments by companies such as Venture Corp. fell 19.1 percent in December from a year earlier, after slipping 16.5 percent the previous month.
  • Boeing(BA) 787 Fleet Grounded by U.S. in First Since 1979. U.S. regulators’ decision to temporarily ground Boeing Co.’s 787 Dreamliner, their first move involving an entire model in 34 years, came five days after Transportation Secretary Ray LaHood proclaimed it safe. The Federal Aviation Administration, which certified the plane in 2011, ordered flights on the 787 halted until airlines can show the plane’s lithium-ion batteries “are safe and in compliance,” according to an agency statement yesterday. It didn’t say how they should accomplish that.
  • Brazil to Hold Key Rate as Inflation Quickens Amid Slow Growth. Brazil’s central bank signaled it will keep borrowing costs at a record low this year as it tries to manage faster inflation amid a slower than expected recovery. While inflation is slowing in Mexico and Chile, price pressures are building in Brazil as the government pumps demand by reducing taxes and expanding credit amid record low unemployment. At the same time, a contraction in investment and industrial output is complicating President Dilma Rousseff’s efforts to revive the slowest growth in three years.
  • Business Groups Propose Raising Age for Entitlement Benefits. The Business Roundtable, which represents chief executives of major U.S. companies, proposed shoring up Social Security and Medicare by raising the eligibility age without increasing taxes on income subject to the Social Security payroll tax. 
Wall Street Journal: 
  • Militants Grab U.S. Hostages. About 40 Foreigners Taken in Algeria; Islamists Claim Responsibility, Blame French. Militants with possible links to al Qaeda seized about 40 foreign hostages, including several Americans, at a natural-gas field in Algeria, posing a new level of threat to nations trying to blunt the growing influence of Islamist extremists in Africa.
  • A Health Scare for Small Businesses. Ahead of Health-Care Law, Small Firms Worry About Crossing the Crucial 50-Person Threshold. During her two-plus years in business, Elizabeth Turley has steadily recruited new employees for her apparel company, Meesh & Mia Corp., to keep pace with its rapid growth. But this year could be different. Instead of increasing her staff, she plans to hire independent contractors for tasks that can be outsourced, such as marketing and product development. Her reason? Meesh & Mia is on the cusp of having 50 full-time employees. If the company hits that threshold, it will have to provide health coverage that meets government standards or potentially pay a penalty.
Fox News:
  • Treasury Picks Citgroup(C), J.P. Morgan(JPM) to Sell Its GM(GM) Shares. Treasury will pay the banks one penny per share sold, according to the agreement posted on the site. Treasury said in December that the government's remaining stake in GM would be sold over the next year to 15 months. Selling the shares will close out the government's stake in the company, which was a result of the financial crisis bailout, known as the Troubled Asset Relief Program. Taxpayers invested about $50 billion in GM under TARP. The government sold part of its GM stake in a late-2010 initial public offering. The Treasury had been reluctant to sell the remaining shares because it would book a loss on the initial investment. One watchdog estimated that the Treasury would need to sell GM at about $52.39 a share to break even. GM shares closed down 4.2% at $29.31 Wednesday.
  • Obama, Biden gun control proposals assailed as 'light' on Hollywood, gaming industry. In the days following last month’s massacre at Sandy Hook Elementary School in Newtown, Conn.,  President Obama promised to convene a broad national dialogue about the causes of gun violence. But in the proposals that the president put forward on Wednesday, selected from a range of options prepared for him by Vice President Biden, critics noticed what they considered to be a large hole. “It looks like the entertainment industry, once again, is getting off light,” said Dan Isett, director of public policy at the Parents Television Council, a non-profit organization formed 16 years ago to help parents shield children from the violence, sex and profanity offered in TV shows, movies, video games and online fare.
MarketWatch.com: 
  • Columbia Sportswear(COLM) lowers outlook; shares tumble. Columbia Sportswear Co. lowered its fourth-quarter expectations as the maker of active outdoor apparel's net sales were hurt by mild winter weather in North America during most of the holiday shopping season, lower customer traffic in key markets and a more promotional environment. Shares fell 7.1% to $48.45 in recent after-hours trading.
CNBC:
  • Fed Hawk Voices Doubts Over Benefits of Bond Buying. A senior Federal Reserve official voiced skepticism on Wednesday about the benefits of additional asset purchases by the U.S. central bank, while a more dovish policymaker maintained his campaign for additional policy easing. Dallas Federal Reserve President Richard Fisher, in remarks that were mainly about the need to reorganize banks that were "too big to fail," said the effectiveness of the Fed's massive bond purchases in helping the economy was fading. 
  • Why Brazil's Once-Booming Economy Is Losing Its Shine. "The last decade was very good for Brazil," James Lockhart Smith, head of Latin America, Maplecroft, told CNBC. "Now, Brazil is having to compete with a lot of other countries and it has an Achilles heel in the cost of doing business, so it's much more complicated to generate growth."
Zero Hedge: 
Business Insider: 
LA Times:
CNN:
  • Gun industry thrives in face of ban proposal. Gun stocks rose Wednesday, even as President Obama called on Congress to pass an assault weapon ban. The stock prices for Smith & Wesson Holding Co. (SWHC) and Sturm, Ruger & Co. (RGR) rose about 4%.
Reuters:
  • Google(GOOG) snaps up junk bonds in desperate grab for yield. Corporate treasurers at companies like Google (GOOG) are being forced by the Federal Reserve's low-rate policy to invest in ever-riskier credit products, including longer-dated investment-grade bonds, junk bonds and leveraged loans, according to buyside and sell-side sources. In an effort to get a return on their mountains of cash at hand, Google and others have purchased high-yield bonds and leveraged loans, while names like Microsoft and Apple (AAPL) are said to have dabbled in non-investment-grade securities. "Many of the companies with the largest levels of cash on hand have bought high-yield bonds and one of the big areas of interest this year is leveraged loans," said a fund manager at one of the biggest US investment firms. "Some are also looking at emerging market local debt as a category," he said, although far fewer than those going down the credit spectrum and into non-investment-grade loans and bonds.
  • Nearly $1 trillion of debt at risk of downgrade to junk in 2012-S&P. The amount of sovereign and corporate credit on the cusp of being downgraded to junk status more than quadrupled in 2012, due primarily to an erosion in the credit quality of the world's banking sector, Standard & Poor's data showed on Wednesday. At the end of last year, S&P rated $984.8 billion worth of debt, from 52 separate issuers, one step away from speculative grade, also referred to as junk. At the end of 2011, the number of credits that were one downgrade away from junk status was 38, representing $227.4 billion. "Most of the downward pressure that affected potential 'fallen angels' was because of the European credit crisis," Diane Vazza, credit analyst at S&P, told Reuters, referring to issuers whose ratings are close to being cut to junk.
  • EBay(EBAY) holiday quarter sales jump; 2013 forecast cautious. EBay Inc reported holiday quarter results that just beat Wall Street expectations, but the e-commerce company also gave a cautious forecast for 2013. EBay shares climbed 1.7 percent to $53.80 in after-hours trading following the announcement.
  • Fed's Kocherlakota: lowering interest rates is not a panacea. Lowering interest rates helps boost the economy and bring down unemployment, a top Federal Reserve official said on Wednesday, echoing exactly the phrasing of Fed Chairman Ben Bernanke on the effectiveness of monetary policy, but advocating a different way of getting there. 
Telegraph:
Les Echos:
  • French Business Failures Rise 12.5% in Fourth Quarter. More than 16,000 failures registered, a rate not seen since the worst moments of the fiscal crisis, citing a report by business information group Altares. Failures are 12.5% higher than the year-earlier quarter.
China Daily:
  • U.S. Quantitative Easing May Lead to Global Price Rises. Several rounds of quantitative easing by the U.S. may lead to rises in global commodites and capital prices, Chinese Academy of Social Sciences researcher Gao Haihong wrote in a 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 110.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 87.75 +1.75 basis points.
  • FTSE-100 futures -.31%.
  • S&P 500 futures -.27%.
  • NASDAQ 100 futures -.24%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (UNH)/1.20
  • (BBT)/.71
  • (PNC)/1.48
  • (BLK)/3.73
  • (FITB)/.41
  • (FAST)/.33
  • (BAC)/.20
  • (C)/.96
  • (INTC)/.45
  • (COF)/1.51
  • (XLNX)/.37
  • (SUN)/.71 
Economic Releases
8:30 am EST
  • Housing Starts for December are estimated to rise to 890K versus 861K in November.
  • Building Permits for December are estimated to rise to 905K versus 899K in November.
  • Initial Jobless Claims are estimated to fall to 368K versus 371K the prior week.
  • Continuing Claims are estimated to rise to 3150K versus 3109K prior.
 10:00 am EST
  •  Philly Fed for January is estimated to fall to 6.0 versus a reading of 8.1 in December.
Upcoming Splits
  • (HEP) 2-for-1
  • (SGA) 4-for-3
Other Potential Market Movers
  • The Fed's Lockhart speaking, ECB monthly report, China GDP report, (GPN) investor day, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the Bloomberg Economic Expectations Index for January could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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