Late-Night Headlines
Bloomberg:
- The US dollar rose to the highest in almost a year against the euro as crude oil prices fell, supporting the outlook for economic growth in the world's largest consumer of the fuel. The euro fell to the lowest in 13 months against the yen before a government report tomorrow that economists say will show industrial production shrank in the 15 nations that use the currency. The New Zealand dollar dropped to its lowest level since October 2006 after the central bank Governor Alan Bollard cut the benchmark interest rate by more than economists expected.
- The Australian dollar will extend its 19% drop, judging by a plunge in the costs to ship coal and iron ore, the nation’s biggest export earners, TD Securities Ltd. said. The currency will slide 2.6% to 78 US cents by year-end because a slump in the Baltic Dry Index, a measure of shipping costs for commodities, signals demand for the raw materials Australia exports is waning, said Stephen Koukoulas, London-based head of global foreign exchange and fixed-income strategy for TD.
- New Zealand's central bank cut its benchmark interest rate by a half point to 7.5 percent, more than forecast by most economists, saying the economy is in a recession and inflation will slow.
- Japanese machinery orders fell for a second month in July, signaling manufacturers expect the global slowdown to crimp demand into next year.
- Aluminum producers will cut the fee they charge buyers in Japan, Asia’s biggest importer, by as much as 14%, the biggest drop in five years, as a slump in home and car sales slows demand.
- The cost of protecting Dubai government bonds from default doubled in the past three months on concern the emirate will be unable to maintain the borrowing that's driven its real-estate boom. Credit-default swaps protecting Dubai debt for five years traded at 220 basis points, CMA Datavision prices show, up from 110 at the beginning of June, according to data compiled by Merrill Lynch & Co. Contracts on Abu Dhabi bonds rose 57 percent in the same period to 74 basis points, CMA prices show. The Dubai Financial Market Real Estate Index tumbled 31 percent since June as traders bet the emirate won't remain immune from the fallout of the U.S. subprime-mortgage collapse. Banks worldwide are tightening lending and may be wary of Dubai, which doesn't have a credit rating or disclose data on public debt. ``Major concerns include Dubai's relatively weak macro balances and hydrocarbon assets compared to Abu Dhabi, as well as supply overhang in the real-estate market,'' said Turker Hamzaoglu, a London-based economist at Merrill Lynch. Among the real-estate projects underway in the emirate are the Disneyland-style ``Dubailand'' theme park that will be three times the size of Manhattan and a $54 billion Las Vegas-style hotel strip in the desert.
- Oil futures were little changed in New York after falling to a five-month low on a U.S. government report yesterday that showed supplies increased along the Gulf Coast as Hurricane Gustav cut refinery output. Refinery operating rates nationwide declined to 78.3 percent of capacity in the week ended Sept. 5, the lowest since 2005, when hurricanes Katrina and Rita struck the Gulf, the Energy Department said yesterday in a weekly report. Regional oil supplies rose to the highest since May. Crude has fallen about 30 percent from a record $147.27 a barrel on July 11 as high prices and slowing global economic growth reduced demand for fuels. Demand for fuels averaged over the past four weeks declined 3.8 percent, the Energy Department report showed.
- Wheat fell to a one-year low, dropping for a fourth straight session, on concern that demand for U.S. supplies is slackening as global production rises. Advance sales of U.S. wheat from June 1 to Aug. 28 were down 13 percent from the same period in 2007, U.S. Department of Agriculture data show. World production may rise 9.9 percent to a record 670.8 million metric tons in the year through May, the USDA has said. Wheat has dropped 18 percent this year after global growers planted more to take advantage of higher prices.
- Mexican billionaire Carlos Slim acquired a 6.4 percent stake in New York Times Co.(NYT), making him the third-largest investor in the newspaper publisher outside of the controlling Sulzberger family.
- Brazil's central bank raised its benchmark interest rate to the highest in almost two years in a bid to cool accelerating economic growth that's stoking inflation. Policy makers led by Henrique Meirelles voted 5-3, without a bias, to increase the so-called Selic rate to 13.75 percent from 13 percent, as forecast by 40 of 41 economists in a Bloomberg survey. That raised the country's real interest rate, which is the Selic minus inflation, to the highest of all 54 countries tracked by Bloomberg. Central bankers will raise the Selic rate further to 14.75 percent by the end of the year, according to the most recent central bank survey of 100 economists published Sept 5.
- Petroleo Brasileiro SA(PBR), Brazil's state-controlled oil company, said its previously discovered Iara oil field contains an estimated 3 billion to 4 billion barrels of recoverable light crude oil, enough to supply the country for about five years. The estimate is the first for the field, which was announced in August. Iara is in the Santos Basin to the north of Tupi, a 5 billion- to 8 billion-barrel field announced in November that is the largest oil find in the Americas since 1976. If confirmed, Iara and Tupi, which sit in non-adjacent parts of the same BM-S- 11 exploration block, could almost double Brazil's 12.6 billion barrels of proven oil reserves, according to London-based BP Plc.
- The Bank of Korea kept interest rates unchanged today as policy makers await evidence last month's increase will be enough to cool the fastest inflation in 10 years. Governor Lee Seong Tae and his colleagues left the seven- day repurchase rate at 5.25 percent in Seoul.
- Al-Qaeda is planning to release a video message within 24 hours to mark the seventh anniversary of the Sept. 11 attacks on the World Trade Center and Pentagon, a U.S.-based intelligence group said.
Wall Street Journal:
- Much of the world may be struggling with the economic downturn, but life has been getting better in Columbus, Ind., Kingsport, Tenn., and Waterloo, Iowa. These out-of-the-way places have become trade hot spots as U.S. exports, fueled by the dollar's fall, continue to provide a rare spark in an otherwise gloomy economy.
- Some of the country's biggest investment banks and brokerage firms -- including Morgan Stanley, Lehman Brothers Holdings Inc., Citigroup Inc., and Merrill Lynch & Co. -- marketed allegedly abusive transactions that helped foreign hedge-fund investors avoid billions of dollars in U.S. taxes over the past decade, Senate investigators assert.
NY Times:
- China has joined the United States, Britain, Spain and others on the list of nations suffering a real estate decline. Real estate brokers say prices are down from peaks reached earlier this year, while the number of transactions has plunged. This downturn comes as the growth rate of Chinese exports has slowed — sharply in yuan terms — and stock markets have plummeted. Brokers say that sales volumes first dropped precipitously here in southeastern China, and then the decline spread across the country. Faced with few buyers, sellers started cutting their prices for residential and commercial real estate. In some neighborhoods in the southeast, prices have dropped by 10 to 40 percent.
- Hours after suffering a rare setback in a negotiating session at OPEC’s headquarters, Saudi Arabian officials assured world markets on Wednesday that they would ignore the wishes of other cartel members and continue to pump plenty of oil. The meeting could be a harbinger of things to come for the Organization of the Petroleum Exporting Countries as the cartel faces its most difficult challenge in years: how to respond to falling oil prices in a weakening global economic climate. The cartel’s president, Chakib Khelil, said the group was particularly concerned that slowing demand for oil was creating a glut in the market that might provoke a collapse in prices. The Saudi view is that lowering prices moderately now will shore up the world economy and prevent a recession that would cause oil prices to collapse. “This seems to set Saudi Arabia up as the unilateral decision-maker on output for the fall,” said Greg Priddy, an energy analyst at Eurasia Group, in a research note. “Clearly, other OPEC members are not going to trim their own production without Saudi Arabia returning to its quota. Saudi Arabia also seems to be eager to avoid headlines about it cutting production in advance of the U.S. elections.” Moderate and pro-Western states like Saudi Arabia and the United Arab Emirates are aware that high energy costs are hurting demand and might push consumers to seek alternatives to oil. These countries want to see prices fall below $100 a barrel to ease political enmity against the cartel. now that demand is weakening and prices are falling, some analysts say they believe that tensions within the group are resurfacing. In past years, OPEC has been notoriously bad at maintaining discipline in its ranks when prices fall.
- Three members of Congress, armed with a new report that they say proves that excessive oil speculation is distorting consumer energy prices, are renewing their efforts to exclude many institutional investors from the nation’s commodity markets. Using publicly available data, the report argues that institutional commodity investors, specifically through index funds, drive up commodity prices. If the nation’s oil use continues to fall at this rate, “this will be the weakest annual demand since the early 1980s,” said Kevin Norrish, director of Barclays Capital commodity research in London. “Due to data lags, that is just now becoming apparent.”
CNBC:
- Hedge fund manager Jim Chanos, who makes money betting that companies' stock prices will fall, said financial stocks have probably seen the worst and his fund has fewer short positions now than it did in the past.
- Director compensation at the biggest U.S. companies continued to rise in 2007, in contrast to chief executive pay, which dropped sharply last year amid a slowing economy and weakening corporate performance, a study found.
CNNMoney.com:
- 20 best countries for startups.
IBD:
- Global Payments(GPN): Credit Card Transaction Processor Grows As the World Goes Plastic.
BusinessWeek.com:
- Best US Entrepreneurs 25 and Under.
Reuters:
- The health of the largest U.S. financial firms is on the mend as the fallout from the subprime mortgage crisis begins to moderate, the managing director of a leading international banking lobby said on Thursday. "The health of the largest 20 to 30 U.S. financial institutions is improving," Charles Dallara of the Institute of International Finance (IIF) said at a news conference in Tokyo. The IIF is based in the United States and represents more than 380 of the world's biggest financial institutions.
- The average team in the National Football League is now worth more than $1 billion, marking the first time any sports league has surpassed that level, according to a report released on Wednesday.
- The U.S. Labor Department should provide pension plans with guidance on investing in hedge funds and private equity, a report issued by the Government Accountability Office (GAO) said on Wednesday. The report found that pension plans are investing more and more in alternate investments like hedge funds, which are traditionally less transparent and riskier.
- Home Depot Inc (HD) is touting everyday low prices and energy saving products while cutting back on special offers as the home improvement retailer caters to increasingly cost-conscious consumers.
Financial Times:
- Outflows from emerging markets bond and equity funds reached $29.5bn over the past three months, the highest level since at least 1995, with withdrawals gathering pace over the past week. Investors headed for the exits as rising fears over slowing world growth and the state of the banking system over the past week added pressure on emerging markets - which were already reeling from weaker commodity prices, inflationary pressures, a stronger dollar and geopolitical concerns.
- Dmitry Medvedev, Russian president, tried to bolster confidence in the country's plunging stock market on Wednesday as the central bank injected more than $10bn (€7.1bn, £5.7bn) into the banking system to alleviate a chronic credit shortage. The RTS stock market index fell 4.4 per cent as investors ignored his remarks.
Late Buy/Sell Recommendations
Piper Jaffray:
- Rated (ITRI) Buy, target $120.
Oppenheimer:
- Rated (AUXL) Outperform, target $44.
William Blair:
- Rated (AIRM) Outperform.
Night Trading
Asian Indices are -2.25% to -.5% on average.
S&P 500 futures -.44%.
NASDAQ 100 futures -.55%.
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Economic Releases
8:30 am EST
- The Trade Deficit for July is estimated to widen to -$58.0 billion versus -$56.8 billion in June.
- The Import Price Index for August is estimated to fall -1.8% versus a +1.7% increase in July.
- Initial Jobless Claims for last week are estimated to fall to 440K versus 444K the prior week.
- Continuing Claims are estimated to rise to 3460K versus 3435K prior.
2:00 pm EST
- The Monthly Budget Deficit for August is estimated to shrink to -$107.3 billion versus -$117.0 billion in July.
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- None of note
Other Potential Market Movers
- The weekly EIA natural gas inventory report, BMO Capital Real Estate Conference, Jeffries Tech Conference, Deutsche Bank Tech Conference, Keybanc Basic Materials Conference and Morgan Stanley Industrials Conference could also impact trading today.