Late-Night Headlines
Bloomberg:
- The euro may fall toward a 15-month low against the dollar after forming a so-called dead cross, said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. The European currency’s 50-day moving average, currently at $1.4324, dropped below its 200-day moving average of $1.4351 today, creating a dead-cross pattern.
- The euro traded near an eight-month low against the dollar on concern a European Union summit this week will fail to address Greece’s fiscal crisis, damping demand for assets in the region. The 16-nation currency was close to the weakest in 11 months versus the yen after EU President Herman Van Rompuy said yesterday the Feb. 11 summit will focus on long-term economic strategy, making no direct reference to Greece. “Investors won’t be willing to take the risk to buy higher-yielding currencies unless organizations such as the European Central Bank and EU speak up to rescue Greece,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “If investors switch their attention to the fragility of Europe’s economy, euro weakness may accelerate.” “We are trying to implement a very difficult stability and growth program to which we are fully committed,” Greek Finance Minister George Papaconstantinou said in an interview with Bloomberg Television yesterday. “The worst possible signal which we could be sending out is one calling for outside help.”
- A gauge of corporate credit risk climbed to the highest in three months amid investor concern that “contagion” from rising government deficits in Europe may spread to other assets. Credit-default swaps on the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, rose 5.25 basis points to a mid-price of 107 basis points, according to broker Phoenix Partners Group. The index is at its highest since it was 107.02 basis points on Nov. 3, CMA DataVision prices show. “This is looking more and more like a contagion that can only be stopped via outside intervention,” Guy Lebas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC, wrote in an e-mail.
- The cost of protecting Australian government bonds from default jumped to close to a nine-month high as growing concerns about sovereign credit risk in Europe hurt other debt around the world. The cost to buy protection against an Australian sovereign default rose 6 basis points to 71 basis points, according to Deutsche Bank AG. That’s the highest since May 15, prices from CMA DataVision in New York show. The Markit iTraxx Australia index of credit-default swaps on 25 Australian companies increased 10 basis points to 115.5 basis points, the highest since Oct. 5, Deutsche Bank and CMA prices show. Other risk benchmarks in Asia also rose. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan climbed 9 basis points to 134 basis points as of 8:06 a.m. in Singapore, a five-month high
- Crude oil declined in New York on concern that the recovery in fuel demand may stall in the U.S., the biggest energy-consuming nation. Oil pared yesterday’s gain as U.S. equities dropped and the Dow Jones Industrial Average closed below 10,000 for the first time since November amid concern that deteriorating European government finances will derail the economic recovery. Prices also fell as analysts surveyed by Bloomberg News forecast a rise in crude supplies. Inventories of crude oil probably increased 1.5 million barrels from the previous week’s 329 million, the Bloomberg News survey showed before an Energy Department report. The report, scheduled for release at 10:30 a.m. Washington time tomorrow, and an inventory report by industry-funded American Petroleum Institute set for 4:30 p.m. today, may face delays because a weekend storm shut federal government offices, spokesmen for the groups said. “Oil market fundamentals remain tepid in the sense that there is obviously significant capacity with which to meet demand,” said Moore. “And demand in the U.S. in particular remains weak at the moment.” “It’s been a colder than normal winter across a lot of the northern hemisphere, including the U.S.,” said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney. “That’s helped to underpin fuel demand at a time industrial demand is still weak.”
- Posco, Asia's biggest stainless steelmaker by 2008 output, said it may raise stainless steel output by 22% this year. Production may rise to 1.8 million metric tons this year from 1.47 million tons last year, Choi Youn Joung, a spokeswoman for the Pohang, South Korea-based company said in a phone interview today.
- Washington’s respite from paralyzing snow may come to an end today as storm systems barreling across the country bring as much as 20 inches (50 centimeters) to a region still snowbound from a weekend blizzard. The latest blast of winter, which may also dump a foot of snow on New York, “is going to be accompanied by heavy winds, which will make it feel worse, and across the Northeast that wind is going to last through the weekend,” said Tom Kines, a meteorologist with AccuWeather Inc.
- New York Mayor Michael Bloomberg today said he wants President Barack Obama to promise to pay all the costs of providing security should the federal government prosecute five accused terrorists in Manhattan. A trial in downtown New York “would be very expensive and we expect the federal government to pay for it,” the mayor said at news conference in Brooklyn. “We have always had skepticism because a lot of times the federal government promises to pay and then the monies don’t come. So I’d like some assurance because the taxpayers in New York City are certainly strapped.” Bloomberg told U.S. Budget Director Peter Orszag last month it would cost more than $200 million a year to provide security for trials of Khalid Sheikh Mohammed, the accused mastermind of the 2001 attacks, and four fellow Guantanamo Bay detainees. They are set to stand trial in U.S. District Court about a quarter- mile from where the World Trade Center towers stood. The federal government hasn’t told him where it intends to hold the trial, the mayor said.
- The Shanghai Composite Index may retreat another 8.6%, almost doubling its losses so far this year, after a gauge of property stocks sank to a nine-month low, according to WJB Capital Group Inc. The 34-company China Se Shang's Property Index has tumbled 23% from a three-month high on Nov. 23 as the government curbed lending to cool the economy. The Shanghai Composite Index has dropped 12% during the same period. The 120-day correlation between the property measure and the nation's main stock index climbed to .87 yesterday, the highest in almost seven years, according to data compiled by Bloomberg. The property measure fell beneath its September low last month, indicating that the Shanghai Composite may drop beyond its lowest close that month, according to John Roque, the NY-based chief technical strategist at WJB. That implies an 8.6% retreat from yesterday's close. "The pullback in the property index suggests people are becoming less confident in China's growth," Roque said in an interview.
- The European Central Bank may be forced to delay the withdrawal of emergency lending measures because it could inflame financial-market concerns about Greece, Spain and Portugal, economists said. Investors are already dumping those countries’ assets
- Iran, OPEC’s second-largest crude producer, has at least three supertankers idling in the Persian Gulf, as oil prices decline five weeks before the group’s next meeting, vessel-tracking data show. The tankers, each bigger than the Chrysler Building, have been almost stationary for at least four weeks, according to data from the ships collected by AIS Live Ltd. The depth of the 2-million-barrel vessels sitting in the water indicates they are loaded. The amount of oil stored may expand because signals from two more idled tankers shows they are partially loaded or empty. “We are entering the season when there should be some low demand from Japan, which is a big user of Iranian crude,” Olivier Jakob, managing director of Zug, Switzerland-based oil consultant Petromatrix GmbH, said by phone. “When you have some floating storage, from Iran or from pure traders, it always adds a bit to the feeling there’s spare capacity available.”
- Copper imports by China may halve from last year's record as the government rolls back stimulus spending and curbs credit growth, according to China Minmetals Nonferrous Metals Co., the nation's largest metals trader. Shipments of refined copper may be about 1.5 million metric tons this year, down 53% from 2009, as China bids to prevent the economy from overheating, said Gu Liangmin, general manager of Minmetal's copper department. Lower imports by the world's largest metals user may help to reduce copper prices, extending this year's 12% drop. "Demand last year was driven by stockpiling, investment demand and government spending." China shipped in a record 3.18 million tons of refined copper last year, helping to boost stockpiles in the country by more than 500%. "Imports will moderate and return to pre-stimulus levels," Lin Yuhui, deputy general manager at Jinhui Futures Co., said from Shenzhen. Copper inventories in warehouses monitored by the Shanghai Futures Exchange stood at 114,302 tons last week, the highest level since April 2004. Unreported stockpiles, including those held by producers and end-users, are "in excess of 1 million tons," Minmetals Gu estimates .
Wall Street Journal:
- When Charles E. Haldeman Jr. became Freddie Mac's chief executive officer in August, the ailing housing-finance giant had already consumed $51 billion of government money to stay afloat. It's likely to need even more. Freddie's federal overseers nevertheless have instructed Mr. Haldeman to focus on something that isn't likely to make the bleak balance sheet look any better: carrying out the Obama administration plan to allow defaulted borrowers to hang onto their homes. Freddie and its larger rival, Fannie Mae, were among the first big financial institutions to receive massive federal bailouts after the financial crisis hit in 2008. Government officials have been racing to fix bailed-out car makers and banks and are pushing to reshape the financial-services industry. But Fannie and Freddie remain troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government. Nearly a year and a half after the outbreak of the global economic crisis, many of the problems that contributed to it haven't yet been tamed. The U.S. has no system in place to tackle a failure of its largest financial institutions. Derivatives contracts of the kind that crippled American International Group Inc. still trade in the shadows. And investors remain heavily reliant on the same credit-ratings firms that gave AAA ratings to lousy mortgage securities. Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflated a dangerous housing bubble.
- Nvidia Corp. (NVDA) plans to unveil software to reduce battery drain in notebook computers that use high-powered graphics cards
- Amid churning doubts over his political future, New York Gov. David Paterson has told one of his closest advisers that he will officially announce his campaign for governor next week. William Lynch, a Harlem lobbyist and political aide, said Mr. Paterson will give a "major statement on why he's running" and will travel around the state to make clear his intentions. "He's running,"
- It was a top-of-the-market deal for a top-of-the-market luxury. In 2007, Goldman Sachs Group Inc. and Canada's Onex Partners paid $3.3 billion for airplane maker Hawker Beechcraft Corp., betting the wealthy would splurge on a new generation of private jets. Since then, the Wichita, Kan., company has come crashing down to earth. Goldman's investing arm, Goldman Sachs Capital Partners, has written down the value of Hawker by 85%, according to a Sept. 30 letter to investors
- How to Keep the Scary US Debt From Eating Up Your Assets
CNBC:
- I'm not sure where he's living , but Lenny Dykstra is back in the investing game. The baseball great who filed for bankruptcy last year and lost both of his homes now has a Web site called Nails Investments .
IBD: Stock in Riverbed Technology (RVBD) has powered up through the downturn by boosting the productivity of corporate networks and their employees, thus providing a fairly quick return on the cost of its products
NY Times:
- In the headquarters of the Securities and Exchange Commission, Mr. Madoff’s name is rarely spoken. More than seven months after he was sentenced to prison for orchestrating a global Ponzi scheme, shaken S.E.C. employees are still struggling to come to grips with how they failed to catch him before it was too late. Many here refer to the scandal — a $65 billion fraud that, despite several red flags, went undetected by the S.E.C. for more than two decades — as “the event” or “the incident.”
Business Insider:
- The world's tallest skyscraper has unexpectedly closed to the public a month after its lavish opening
Politico:
- During his State of the Union address, President Barack Obama promised that jobs would be his No. 1 priority. He didn’t say “some” jobs — he said jobs. Obama and his administration have immediately made it clear that they will continue to pick winners and losers in our economy. The president’s recent fiscal year 2011 budget proposal opened up the administration’s latest front in the war on jobs in the Western United States. While Obama and members of his administration were quick to describe the budgetary taxes and regulations as part of their battle against Big Oil, the truth is that these measures directly hurt American workers and kill red, white and blue jobs. This couldn’t come at a worse time. In Wyoming, oil and gas producers and related industries are already struggling to make ends meet. The rig count is down, and folks have been laid off. The Wyoming Department of Employment reports that employment in the state’s oil and gas industry increased slightly in November 2009, after a loss of thousands of jobs over the previous year. The last thing energy workers need is for the administration to take steps that will send them back to the unemployment line. The president’s new budget includes several measures that will discourage job creation in the West
- Sen. Ben Nelson (D-Neb.) announced Monday evening that he will support a Republican-led filibuster over President Barack Obama's nominee to serve on the National Labor Relations Board. The move is likely to infuriate labor groups who have fought hard for Craig Becker's nomination to serve on the five-member NLRB - and will likely give Republicans enough support to sustain a filibuster Tuesday. “Mr. Becker’s previous statements strongly indicate that he would take an aggressive personal agenda to the NLRB, and that he would pursue a personal agenda there, rather than that of the administration,” Nelson said in a statement. “This is of great concern, considering that the board’s main responsibility is to resolve labor disputes with an even and impartial hand."
zerohedge:
- What Do Rising Sovereign Credit Default Swaps Mean?
- The Ever Increasing Parallels Between AIG and Greece...And The CDS Puppetmaster Behind It All .
Crain's Chicago Business:
- An Illinois bill would ban the state's public pension funds from any investments that trade derivatives in non-public markets and would require divestment of any such existing derivative investment within one year of the bill's effective date
DenverPost.com:
- Cap-and-trade bills bad news for Colorado jobs
Forbes:
- The High Cost Of The US Budget by David Malpass and Eric Singer
- The World's Most Powerful People
- Guru's Six Best Tech Stocks For 2010
American Interest Online:
- The Great IPCC Meltdown Continues. It’s not just the threat of Himalayan glaciers disappearing by 2035. Now another headline grabbing IPCC scare story is melting away. A report in Sunday’s London Times highlights new humiliations for the IPCC. “The most important is a claim that global warming could cut rain-fed north African crop production by up to 50% by 2020, a remarkably short time for such a dramatic change. The claim has been quoted in speeches by Rajendra Pachauri, the IPCC chairman, and by Ban Ki-moon, the UN secretary-general.” There is however one teensy-weensy little problem. As Professor Chris Field, the lead author of the IPCC’s climate impact team has now told reporters that he can find “no evidence” to support the claim in the IPCC’s 2007 report
Reuters:
- Electronic Arts Inc (ERTS) warned that fiscal 2011 earnings would miss Wall Street expectations as it grapples with a lack of blockbuster new games after a succession of missed targets and restructurings. Shares of the U.S. video game publisher fell 8 percent after its current-quarter forecast also missed analysts' expectations on Monday
- FACTBOX-Republican US healthcare reform proposals
- Hartford Financial Services Group Inc (HIG) posted its first quarterly profit since mid-2008, as rising stock markets helped bolster investment income in its life insurance business. The results beat expectations and signal the giant life and property insurer may be turning itself around after suffering massive losses on stock market-linked annuities and investments. Those losses forced Hartford to take $3.4 billion of government bailout money. But even with the profit, Hartford's shares fell 4 percent in after-hours trading to $22.49 after the company offered a 2010 earnings forecast that seemed to offer ample room for the company to miss analysts' current average forecast
Financial Times:
- DE Shaw, the world’s third-largest hedge fund, has established a special in-house team to look at buying up portfolios of distressed assets and is targeting the holdings of rival hedge fund firms. The DE Shaw Portfolio Acquisitions Unit – launched late last year – aims to capitalize on the steep discounts at which many illiquid assets are still trading, as well as a widespread desire among many investors to cut loose portfolios that have yet to recover after last year’s market rallies
T elegraph:
- It is a perfect day for skiing at Yabuli International ski resort, China's first purpose-built winter sports destination. The skies are powder-blue, winds mercifully light given the -12C temperatures and the snow immaculately groomed by a squadron of imported German piste-bashing machines. Even more perfect, for those used to threading their way down the crowded slopes of Europe or the USA, is that the runs carved through the native pine forests of China's far northeastern province of Heilongjiang are deserted to the point of eeriness. "Where is everyone?" wondered my ski partner as we carved our way down a black run in splendid isolation – the very same question being posed by international resort developers who only four or five years ago were predicting a massive boom in Chinese skiing. But as so often in China the enticing back-of-the-envelope calculations – the numbers of newly wealthy middle classes multiplied by annual rises in domestic tourism revenues of more than 10pc – have proved hopelessly optimistic
Der Spiegel:
- How Goldman Sachs(GS) Helped Greece to Mask its True Debt . Goldman Sachs helped the Greek government to mask the true extent of its deficit with the help of a derivatives deal that legally circumvented the EU Maastricht deficit rules. At some point the so-called cross currency swaps will mature, and swell the country's already bloated deficit .
AFP:
- Supreme leader Ayatollah Ali Khamenei said on Monday that Iran is set to deliver a "punch" that will stun world powers during this week's 31st anniversary of the Islamic revolution."The Iranian nation, with its unity and God's grace, will punch the arrogance (Western powers) on the 22nd of Bahman (February 11) in a way that will leave them stunned," Khamenei, who is also Iran's commander-in-chief, told a gathering of air force personnel.
South China Morning Post:
- Beijing's efforts to cool the mainland property market appear to be working, with a prime commercial site in Shanghai selling for 22 per cent less than the price it fetched nearly three years ago.
Evening Recommendations
Citigroup:
- Reiterated Buy on (LNCR), target $47.
- Reiterated Sell on (ANF), lowered estimates, target $25.
Night Trading
Asian indices are -1.25% to +.50% on avg.
Asia Ex-Japan Inv Grade CDS Index 134.0 +7.50 basis points.
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Earnings of Note
Company/Estimate
- (NYX)/.48
- (CVH)/.56
- (TAP)/1.10
- (IACI)/.02
- (BIIB)/1.05
- (KO)/.66
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Economic Releases
8:30 am EST
- Wholesale Inventories for December are estimated to rise +.5% versus a +1.5% gain in November.
Upcoming Splits
- None of note
Other Potential Market Movers
- The NFIB Small Business Optimism Index, IBD/TIPP Economic Optimism Index, Treasury's $40B 3-Yr Note Auction, $26 B 1-Year Note Auction, API Energy Inventory report, (TXT) analyst day, (SIVB) analyst day, weekly retail sales reports and the ABC consumer confidence reading
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial stocks in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
