Friday, February 08, 2013

Friday Watch

Posted by Gary .....at 12:34 AM
Evening Headlines 
Bloomberg: 
  • Bemoaning Euro Strength Masks Hollande Export Woes: Euro Credit. President Francois Hollande's call for a weaker euro masks France's real issue: a loss of competitiveness against countries that share the currency. With French labor costs up about 19% in a decade and Germany's almost unchanged, France's share of euro-area exports dropped by 3.5%, more than any country in the region, according to a study published earlier this year by research group Coe-Rexecode in Paris. "France is losing the competitiveness war not just to the dollar-Asia block but also to peripheral Europe, Spain in particular," said Lena Komileva, a strategist at G+ Economics Ltd. in London. 
  • Italian Vote Seen Inconclusive as Risk of Second Election Grows. Italy’s election in three weeks may yield a hung parliament, requiring a follow-up vote to establish a governing majority, a member of poll leader Pier Luigi Bersani’s campaign said for the first time. “Returning to polls is the answer in a situation of ungovernability,” Stefano Fassina, Bersani’s head of economic policy, wrote on Twitter yesterday. Bersani’s lead in opinion polls is shrinking as former Premier Silvio Berlusconi gains. The difference between their two blocs nationally was within the 4 percentage point margin of error for a second day, according to a Tecne poll aired by SkyTG24 yesterday. The gap fell to less than 5 percentage points in six key regions that will determine the outcome in the Senate, Tecne said.
  • Draghi Finds Powerful Weapon in Words as Markets Heed His Voice. European Central Bank President Mario Draghi has found his most effective weapon is the sound of his own voice. Draghi yesterday caused the euro’s biggest drop in seven months by suggesting its recent appreciation could damp inflation, a signal that further interest-rate cuts remain a possibility. His pledge in July to buy government bonds precipitated a sea-change in sentiment that helped to shore up the 17-nation euro area economy, yet the ECB hasn’t spent a cent so far in its so-called Outright Monetary Transactions program. 
  • RBA Cuts GDP, Inflation Outlook on Currency, Investment. The Reserve Bank of Australia reduced its economic growth and inflation forecasts as investment outside the mining industry remains elusive, the labor market softens and a high local currency contains prices. “The soft outlook over the next year or so reflects a number of factors,” the RBA said in its quarterly monetary policy statement released in Sydney today. “Mining investment is expected to peak, both fiscal consolidation and the persistently high level of the Australian dollar will weigh on growth, and there is little sign of a near-term pick-up in non- mining business investment.” 
  • Japan Posts Back-to-Back Current-Account Deficit in December. Japan posted back-to-back monthly current-account deficits for the first time since 1981, highlighting challenges for Prime Minister Shinzo Abe’s campaign to revive the economy. The shortfall in the widest measure of the nation’s trade was 264.1 billion yen ($2.8 billion) in December, the Ministry of Finance said in Tokyo today. The median estimate of 23 economists surveyed by Bloomberg News was for a deficit of 144.2 billion yen. The last consecutive monthly current-account deficit was in February 1981, according to the ministry. Exports to China in 2012 fell 10.8 percent from 2011, as slower Chinese growth and a territorial dispute affected a merchandise trade relationship worth 26.5 trillion yen in 2012, according to ministry data.
  • Malaysia December Exports Unexpectedly Fall, Output Growth Slows. Malaysia’s exports unexpectedly dropped in December amid fewer shipments to the U.S. and China, while industrial production rose less than economists estimated. Overseas shipments fell 5.8 percent from a year earlier after rising a revised 2.3 percent in November, the Trade Ministry said today. The median of 17 estimates in a Bloomberg News survey was for a 1.4 percent increase.
  • BRICs Fall From Google(GOOG) Favor as Searches Drop With Brazil. The BRICs are falling off the investment map. The term for Brazil, Russia, India and China, where stocks gained 424 percent during the decade ended 2010, appeared in the fewest news stories last month since November 2008, according to data compiled by Bloomberg. BRIC searches on Google Inc.’s website fell to a seven-year low in December, while mutual funds that invest in the biggest emerging markets had outflows in 46 of the past 47 weeks.
  • Zinc Leads Metals Slump as Europe Crisis Fuels Demand Concerns. Zinc fell to the lowest price this week, leading a slump for industrial metals, on renewed concern that Europe’s debt crisis is worsening and will curb demand. Industrial output in Spain dropped for a 16th month in December, a report showed today. European Central Bank President Mario Draghi said risks to the region’s economy remain on the “downside.” The dollar rose against a basket of six currencies including the euro, reducing the appeal of metals as alternative assets. Financial markets in China, the world’s biggest metals user, will be shut next week for Lunar New Year celebrations.
Wall Street Journal:
  • Probe Adds to Rating Firms' Woes. New York's top prosecutor has launched a probe into the conduct of the three major credit-ratings firms, according to a person familiar with the matter, opening another legal front for an industry that remains in the cross hairs of state and federal investigators. New York Attorney General Eric Schneiderman this week subpoenaed Standard & Poor's Ratings Services and formally requested information from Moody's Investors Service and Fitch Ratings to examine ratings they issued in the run-up to the financial crisis, the person said. His office is investigating the ratings the three firms issued on mortgage-backed deals before the crisis, the person said.
  • Rate-Rig Spotlight Falls on 'Rain Man'. Many anonymous traders are implicated in the tall stack of documents regulators published this week detailing Royal Bank of Scotland Group attempts to rig the lending benchmark known as Libor. But only one trader is cited by name: a 33-year-old so brainy yet socially awkward that colleagues nicknamed him "Rain Man."
  • Obama Blocked Rebel Arms. White House Opposed Pentagon, CIA, State Plan to Ship Weapons to Syrian Resistance. A proposal to arm Syrian rebels was backed by the Pentagon, the State Department and the Central Intelligence Agency, but the White House decided not to act on the plan. Defense Secretary Leon Panetta and Gen. Martin Dempsey, the chairman of the Joint Chiefs of Staff, revealed publicly for the first time at a Senate hearing on Thursday that they supported the proposal last year by senior officials including then-Secretary of State Hillary Clinton and then-CIA director David Petraeus.
  • Iran Leader Rebuffs Direct Talks With U.S. Iran's Supreme Leader Ayatollah Ali Khamenei rejected a U.S. proposal for one-on-one talks, dimming hopes that the two countries would resume diplomatic relations soon. Mr. Khamenei, who has the final decision on key state matters, was responding for the first time to an offer Vice President Joe Biden made last week to hold one-on-one talks with Iran whenever Mr. Khamenei was ready.
  • Scant Pickup in Economic Growth Seen for 2013. Economists are forecasting the same steady, if unspectacular, growth this year that they were expecting in 2012. Last year's predictions proved too optimistic, but they say this year the economic fundamentals are sturdier. At the start of last year, economists surveyed by The Wall Street Journal were on average predicting 2.4% year-over-year growth in gross domestic product for 2012. The Commerce Department last week said the expansion was a more tepid 1.5%. It was the second year in a row that actual GDP came in below economists' forecasts. For 2013, the economists again expect the economy to grow 2.4%.
  • The Real Problem With Obama's Drone Memo. The U.S. has dropped the clarity of the rules of war for the vague balancing tests that govern cops on the beat. President Obama's antiterrorism policies are drawing new fire after this week's leak of the administration's legal memo defending the targeted killing of Americans. According to the Justice Department white paper obtained by NBC News, the U.S. can kill a citizen who is "continually planning attacks" for al Qaeda when an "informed, high-ranking" official decides that the target "poses an imminent threat" and capture is "infeasible."
Barron's: 
CNBC: 
  • Banks Need to Reduce Risk: Krawchek. (video) It's high time to talk about reducing risk in the banks, former Bank of America Wealth Management President Sallie Krawcheck said Thursday on CNBC. On "Fast Money," she said that it was "probably pretty unlikely" that any of the too-big-to-fail financial institutions would be broken up. "Heck, we couldn't even do money fund reform, which is pretty clear we need, given the risk there," she said. Krawcheck said that the problem was not being addressed. "What we do really need to have a discussion of – and we're not, as a country – is reducing the risks in the banks. Is the risk wrung out to good enough degree? Is there enough capital?" she said. "That's not a discussion we're having head-on right now."
  • Just How Skewed Is China's Trade Data? China's January trade data on Friday appear impressive at first glance, but beneath the favorable Lunar New Year distortions, the global and domestic demand picture remains fragile, economists tell CNBC. "The import data suggests that underlying demand domestically is not as strong as we think," Liu Li-gang, chief China economist at ANZ told CNBC. 
Zero Hedge: 
Business Insider: 
NY Times:
  • Business and Labor Unite to Try to Alter Immigration Laws. After decades of friction over immigration, the nation’s labor unions and the leading business association, the Chamber of Commerce, have formed an unusual alliance that is pushing hard to revamp American immigration laws. 
  • Hewlett(HPQ). Directs Its Suppliers in China to Limit Student Labor. Hewlett-Packard, one of the world’s largest makers of computers and other electronics, is imposing new limits on the employment of students and temporary agency workers at factories across China. The move, following recent efforts by Apple to increase scrutiny of student workers, reflects a significant shift in how electronics companies view problematic labor practices in China.
The Blaze:
Reuters: 
  • Justice Department, states weigh action against Moody's(MCO). The Justice Department and multiple states are discussing also suing Moody's Corp for defrauding investors, according to people familiar with the matter, but any such move will likely wait until a similar lawsuit against rival Standard and Poor's is tested in the courts. Inquiries into Moody's are in the early stages, largely because state and federal authorities have dedicated more resources to the S&P lawsuit, said the sources, who were not authorized to speak publicly about enforcement discussions.
  • Exclusive: Dell(DELL) shareholder Southeastern unhappy with buyout. Dell Inc's largest independent shareholder, Southeastern Asset Management Inc, has told the computer maker that a $24.4 billion buyout bid undervalues it, adding to a chorus of investor dissatisfaction with the landmark deal to take it private, two sources close to the situation said. Southeastern has privately told the company that it is "disturbed" by a $13.65 per share offer for the third-largest PC maker by a consortium led by founder and CEO Michael Dell, and instead believes Dell is worth $20 per share, the sources said on Thursday.
  • FED FOCUS-When time's ripe, Fed officials see tapering bond buying. The U.S. Federal Reserve should scale back rather than abruptly end its massive bond-buying stimulus once the labor market gets its legs, a growing number of Fed policymakers say. Chicago Federal Reserve Bank President Charles Evans, one of the central bank's most aggressive doves, became the latest top Fed official to publicly embrace such a strategy.  
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.50%  to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 115.50 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 88.5 -.25 basis point.
  • FTSE-100 futures +.37%.
  • S&P 500 futures +.13%.
  • NASDAQ 100 futures +.18%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (AXL)/.15
  • (BLC)/.35
  • (CBOE)/.42
  • (ETR)/1.71
  • (LH)/1.62
  • (LPX)/.21
  • (MCO)/.69
  • (CCJ)/.43
Economic Releases
8:30 am EST
  • The Trade Deficit for December is estimated at -$46.0B versus -$48.7B in November.
  • Wholesale Inventories for December are estimated to rise +.4% versus a +.6% gain in November.
Upcoming Splits
  • None of ntoe
Other Potential Market Movers
  • The Fed's Kocherlakota speaking, China inflation/trade data, Eurozone Trade/Production/CPI data, (GLW) investor meeting, USDA crop report and the (MAT) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity 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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