Late-Night Headlines
Bloomberg:
- Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart(WMT) and Target Corp.(TGT), is seeing a “more positive buzz” in the U.S. economy and has been getting “pretty strong” re-orders from retailers.“We’re starting to see a little bit of a creep-up in spending,” President Bruce Rockowitz said in a Bloomberg Television interview today. “Definitely, the mid-tier retailers and the discount retailers are performing pretty well.” Li & Fung the Hang Seng's best performer in the past month, rose as much as 7.8 percent to HK$31 in Hong Kong trading. The company is also seeking potential acquisitions in the U.S. and Europe and is “in a position to buy,” Rockowitz said, without identifying any targets. “The pipeline is pretty full. We see a lot of great opportunity in the United States,” he said.
- Australia, the world’s fourth- largest wheat exporter, will have “significant” quantities of the grain available for export, Agriculture Minister Tony Burke said in an interview. “At the moment we are tracking fairly well still, some parts of the country are doing exceptionally well, some have hit some periods of difficulty,” Burke said by phone from Canberra. “You’d be looking at significant availability for the export market if we are able to keep this together.” Increased supply from Australia may weigh further on prices that slumped to a two-year low in anticipation of the second- biggest global harvest on record. Farmers in Australia, which planted the fourth-biggest area to winter crops in 14 years, may produce the biggest crop in four years. “The momentum for prices unfortunately is still largely down,” Wayne Gordon, a senior analyst at Rabobank Groep NV, said by phone from Sydney. A bigger Australian crop “can only be bearish for prices,” he said.
- The U.S. Commerce Department decided to impose duties of as much as 31 percent on steel pipe from China, agreeing with American producers led by U.S. Steel Corp. that the imports were supported by unfair subsidies. The average duties on $2.8 billion in annual imports of the pipe, used in oil and gas wells, will be 21.3 percent, the Commerce Department said in an e-mailed statement today announcing the preliminary decision. The tariffs may help U.S. Steel and other domestic producers weather a drop in demand for the pipe following the collapse in oil prices last year. It also may be a precursor for a number of trade complaints against China. President Barack Obama must decide a separate case on imported Chinese tires by Sept. 17.
- Texas Instruments Inc.(TXN), the second- largest U.S. chipmaker, raised third-quarter sales and profit forecasts because of improving demand for chips used in some industrial applications, computers and consumer electronics. Profit will be 37 cents to 41 cents a share on sales of $2.73 billion to $2.87 billion, the Dallas-based company said today in a statement. Analysts had projected profit of 35 cents a share and revenue of $2.68 billion on average, according to a Bloomberg survey. Demand is beginning to recover for so-called analog chips -- semiconductors used in devices such as electronic utility meters, computer disk drives and consumer electronics. “I’m very encouraged about some of the signs we’re seeing in the chip industry,” said Tore Svanberg, an analyst at San Francisco-based Thomas Weisel Partners. He has an “overweight” rating on Texas Instruments shares, which he owns. “There is actually some true demand that is driving it.” The company also said it’s less concerned about a glut of inventory and is adding to its stockpiles. That shows increased confidence that orders are growing, Svanberg said. “Demand has continued solid to this point in the third quarter,” Vice President Ron Slaymaker said on a conference call. “We’re not aware that there’s an inventory buildup taking place.”
- Chinese thermal-coal prices, up 1.3% in August, are likely to renew this year’s decline on record inventories of the fuel and sluggish power output, according to Nomura Holdings Inc. “Spot coal prices may resume their drop,” Ivan Lee, a Hong Kong-based analyst at Nomura, wrote in a report. China ’s coal stockpiles are at a record, small mines are set to reopen, while power output and prices in Australia China Shanxi China OPEC said it will keep oil production quotas unchanged, banking on a recovery in the world economy to maintain prices near today’s $71 a barrel. The Organization of Petroleum Exporting Countries agreed to maintain total production quotas at 24.845 million barrels a day, and will urge members to adhere to their targets, OPEC Secretary-General Abdalla El-Badri in a press briefing. It’s the third time this year group has met without revising the figure.
Wall Street Journal:
- The Department of Energy isn't fully prepared to successfully manage $38 billion in Recovery Act funding, despite restructuring its protocols, the agency's inspector general said Wednesday. In a special report, Inspector General Gregory Friedman said the agency's efforts to develop and apply a control structure to oversee spending of an unprecedented amount of funding were proactive and positive. But, the inspector general said, "additional work is necessary if the department is to successfully manage Recovery Act-related risks." Chief among the criticisms, the inspector general said the agency couldn't determine if its systems would be able to handle the expected increased workload caused by the funding, and the agency couldn't ensure award recipients were able to accurately report required accounting and performance standards.
- Millions of Americans watched President Barack Obama's speech last night to a joint session of Congress. Much of it was familiar, having been delivered in at least 111 speeches, town halls, radio addresses and other appearances on health care. But his most revealing remarks on the topic came on Monday, at a Labor Day union picnic in Cincinnati. There Mr. Obama accused critics of his health reforms of spreading "lies" and said opponents want "to do nothing." These false charges do not reveal a spirit of bipartisanship nor do they create a foundation for dialogue. It is more like what you'd say if you are planning to jam through a bill without compromise. Which is exactly what Mr. Obama is about to attempt.
- Google(GOOG), which is often in the crosshairs of newspaper publishers, thinks it can help newspaper companies get paid for their work. The search giant is planning to upgrade its existing Google Checkout payment service to handle a broad suite of billing and subscription services targeted at premium content creators like newspapers, according to a memo the company recently submitted to the Newspaper Association of America.
- Foreign banks that entered oil-derivative contracts with some Chinese airlines and shippers could find they have little recourse if the companies make good on threats to default on obligations. This week, China's State-Owned Assets Supervision and Administration Commission offered encouragement to some Chinese companies to challenge losses stemming from derivatives used to protect against sudden spikes in the price of fuel. Some of China's biggest airlines and shippers lost hundreds of millions of dollars last year on derivative trades when the price of oil plunged. They are now seeking to claw back those losses.
- The cost to protect against defaults on U.S. corporate bonds using a benchmark derivatives index fell to the lowest in four weeks. Credit-default swaps on the Markit CDX North America Investment-Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, declined 2.5 basis points to 113.5 basis points as of 5:15 p.m. in New York, according to CMA DataVision. The index has dropped about 11 basis points the past week and is trading at the lowest level since Aug. 11, according to CMA DataVision prices.
- Even more so now than way back in 1992: It's still the economy, stupid.
- Among its many features, Apple's iPhone is equipped with GPS and includes manual, written driving directions built into its standard Maps application. But that function doesn't automatically bring up each turn sequentially, and it lacks voice prompts. Now, a number of companies have launched, or will soon launch, iPhone apps that do offer voice-prompted, automated, turn-by-turn navigation.
- Iran rejected any compromise with the West over its nuclear program Wednesday, as blunt comments from the Obama administration over Tehran's bomb-making capability suggested that the two sides were headed toward a renewed diplomatic crisis. Iran offered Western officials a long-awaited package of proposals to restart negotiations over its nuclear program. But diplomats who viewed the offer Wednesday said the document of fewer than 10 pages essentially ignored questions over Iran's production of nuclear fuel and instead focused broadly on other international issues. It made no mention of Tehran's willingness to suspend its uranium-enrichment activities or to enter into substantive talks about the future of its nuclear program, they said. Meanwhile, the U.S. envoy to the International Atomic Energy Agency made the Obama administration's strongest comments yet on Iran's nuclear threat. Speaking at the board meeting of the IAEA in Vienna, Glyn Davies warned on Wednesday that Iran has enough fissile material to produce a nuclear bomb, if Tehran enriches the uranium to weapons-grade level. "Ongoing enrichment activity...moves Iran closer to a dangerous and destabilizing possible breakout capacity," he said. Iran denied the U.S. allegations.
MarketWatch.com: A rally last month in bank stocks such as Bank of America Corp. boosted returns of some hedge funds, including funds run by Paulson & Co. Managers focused on financial-services stocks returned 4.29% on average in August, according to industry consultant Hennessee Group LLC. That was the best performance of any strategy last month. These types of hedge funds are now up 22.77%, on average, so far this year, the fifth-best strategy, Hennessee's data show.
NY Times:
- Apple’s(AAPL) chief executive, Steven P. Jobs, discussed his health and Apple’s new product line in an interview Wednesday with David Pogue, the personal technology columnist for The New York Times. Here are excerpts from their exchange:
- The number of children dying before their fifth birthdays each year has fallen below nine million for the first time on record, a significant milestone in the global effort to improve children’s chances of survival, particularly in the developing world, according to data that Unicef will release on Thursday. The child mortality rate has declined by more than a quarter in the last two decades — to 65 per 1,000 live births last year from 90 in 1990 — in large part because of the widening distribution of relatively inexpensive technologies, like measles vaccines and anti-malaria mosquito nets. Other simple practices have helped, public health experts say, including a rise in breast-feeding alone for the first six months of life, which protects children from diarrhea caused by dirty water. Wealthy nations, international agencies and philanthropists like Bill and Melinda Gates have committed billions of dollars to the effort. Schoolchildren and church groups have also pitched in, paying for mosquito nets and feeding programs. Taken together, they have helped cut the number of children under 5 who died last year to 8.8 million — the lowest since records were first kept in 1960, Unicef said — from 12.5 million in 1990. “That’s 10,000 less children dying per day,” said Unicef’s executive director, Ann M. Veneman.
Politico:
- President Barack Obama tried to regain the offensive Wednesday night with an aggressive pushback against opponents of health care reform – yet he stopped short of a mandatory prescription for a government-run insurance option. The tightrope walk on the signature issue of his presidency had two goals – soothing the divided Democrats gathered to hear him in the House chamber, while offering clarity to an American public that is skeptical and confused about what health care reform means for them.
- Rep. Charles Boustany pounded back in the GOP response to President Barack Obama’s health care speech Wednesday evening, sharply rebuking Obama for what he characterized as a sweeping package steep in costs and short on benefits for families and small businesses. Boustany, a Louisiana Republican who has worked as a doctor for more than 20 years, reserved his sharpest criticism for Obama’s refusal to strike down a public option. “The president had a chance tonight to take government-run health care off the table,” said Boustany. “Unfortunately, he didn't do it.”
Rasmussen:
- Seventy-eight percent (78%) of U.S. voters say every American should be allowed to purchase the same health insurance plan that members of Congress use. A new Rasmussen Reports national telephone survey finds that only seven percent (7%) of voters disagree and 15% are not sure.
Reuters:
- U.S. labor markets could take years to recover from the setbacks of the current recession, which have pushed the unemployment rate to a 26-year high, top Federal Reserve policy-makers said on Wednesday. But the officials said the Fed may need to end its ultra-accommodative policy stance long before the jobless rate starts to plummet if inflation starts to rise. For now, though, that seems some way off given the tentative nature of the economic recovery.
- These are the best-performing analysts covering Goldman Sachs Group (GS), Morgan Stanley, Bank of America (BAC) and Citigroup (C) in 2008 and so far this year:
Financial Times:
- Al Gore, the former US vice-president turned environmental evangelist, has taken a stake in Ocado’s latest fundraising as the retailer gears up for a possible flotation. Alongside the almost 1 per cent stake taken by Mr Gore’s Generation Investment Management, Fidelity International, one of the biggest UK investment groups, has also taken an up to 2 per cent stake as part of a £50m ($83m) fundraising by Ocado.
- Bank of China is planning to launch a fund to invest in hedge funds, the latest sign of keen interest in the alternative investment industry from the world’s third-largest economy. The new fund of funds will be launched next year, according to people familiar with the situation, and will be offered via Bank of China Suisse, the Geneva-based private banking operation established by BoC in November last year.
- The private equity real estate fund group of Goldman Sachs (GS) has made its first European debt investment since the beginning of the slump, marking the start of a new push into the distressed property market. Goldman Sachs’ Whitehall fund group, one of the largest investors in property debt over the past two decades, has acquired almost 900 non-performing and sub-performing loans backed by Italian residential property, which had an original value of about €120m ($174m).
- Brazil’s prospects of becoming a leading oil producer increased on Wednesday when it emerged that a giant offshore field could be double the size of BP’s discovery last week in the Gulf of Mexico. Petrobras, the national oil company, reported that the Guará field contained the equivalent of 1.1bn to 2bn barrels of recoverable oil and gas. BP’s Tiber field, which BP called a “giant” discovery last week, is unofficially estimated to contain 500m-1bn recoverable barrels.
Nikkei English News:
- Sony Corp. intends to cease production of floppy-disk drives at the end of this month. Sony manufactured more than 5 million floppy-disk drives in 2008.
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (JWN), target $36.
- Upgraded (TLB) to Buy, target $9.50.
- Reiterated Buy on (CMCSA), target $20.
- Reiterated Buy on (TWC), target raised to $45.
Morgan Stanley:
- Reiterated Overweight on (SWKS), boosted target to $15.
Oppenheimer:
- Rated (ATW) Outperform, target $41.
- Rated (DO) Outperform, target $120.
- Rated (PDE) Outperform, target $38.
Night Trading
Asia Ex-Japan Inv Grade CDS Index 124.0 -5.50 basis points.
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Economic Releases
8:30 am EST
- The Trade Deficit for July is estimated to widen to -$27.3 Billion versus -$27.0 Billion in June.
- Initial Jobless Claims for last week are estimated to fall to 560K versus 570K the prior week.
- Continuing Claims are estimated to fall to 6200K versus 6234K prior.
10:30 am EST
- Natural gas supplies are estimated to rise by 72 bcf versus a 65 bcf injection the prior week.
11:00 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,850,000 barrels versus a -372,000 barrel decline the prior week. Gasoline supplies are expected to fall by -1,500,000 barrels versus a -2,969,000 barrel drawdown the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +1,179,000 increase the prior week. Refinery Utilization is expected to fall by -.38% versus a +3.06% gain the prior week.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
