Oil Decline's for First Time in Three Days After Qaddafi Resignation Offer. Oil fell for the first time in three days after a report that Libya’s Muammar Qaddafi offered to relinquish power prompted speculation fighting may ease in Africa’s third-biggest producer. Crude dropped as much as 0.9 percent after al-Jazeera reported the proposal that guaranteed safe passage for the leader and his family. The interim rebel council rejected the offer, the TV channel said, without stating how it obtained the information. An Energy Department report tomorrow may show U.S. crude inventories rose 1 million barrels last week, according to a Bloomberg News survey of analysts. Crude for April delivery fell as much as 97 cents to $104.47 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.95 at 2:01 p.m. Sydney time. Yesterday, the contract gained $1.02 to $105.44, the highest settlement since Sept. 26, 2008. Prices are 28 percent higher from a year ago.
Metals Fall, Inflation Bonds Gain on Risk of Higher Rates, Unrest in Libya. Metals fell for a third day, Asian stocks fluctuated and inflation-linked bonds gained amid concern rising prices will lead China and the European Union to tighten monetary policy. Crude traded near a 29-month high after Libyan warplanes bombed rebels near an oil-export hub. Tin led the retreat, falling 2.8 percent on the London Metal Exchange, while nickel dropped 1.5 percent and lead declined 1.2 percent.
China's 10% Growth Threatens Inflation of 10%: William Pesek. If any generalization can be made about China-watchers, it’s that they are an optimistic bunch. They scour government data, energy-use tables and factory output, finding loads to smile about. China can grow 10 percent a year forever. Events on the streets of Beijing offer a timely reality check. There, economists can find ample evidence that China may be approaching the limits of its ability to grow sustainably. Inflation is among the forces unnerving the masses, a phenomenon not unlike the one inspiring uprisings in the Middle East. China is plenty spooked by a smattering of domestic protests. Clampdowns on the Internet and the foreign media have been relentless. Yet it’s the increasing focus of Premier Wen Jiabao on inflation that serves as a warning to those used to nothing but good news from China. Overheating risks are rising before our eyes. The economy may be at a dangerous turning point, one where jumps in asset and consumer prices derail an impressive run. For a Communist Party obsessed with social stability, inflation is a clear and present danger. And it’s not obvious that Chinese officials get that point. If they did, they would be telegraphing big increases in China’s currency at least to get a handle on inflation expectations. For all the talk of five-year plans, China is making things up as it goes along. Its rise differs from Europe’s and the U.S.’s. Aside from scale, the internationalization of finance creates control problems with which western powers don’t have to contend. Easy-money policies from Washington to Frankfurt to Tokyo are boosting Chinese real-estate values. As they climb, slums are emerging in cities including Beijing and Shanghai. Migrant workers and cash-strapped urban youth are hard-pressed to find affordable places to live. An undervalued yuan doesn’t help. China’s $2.8 trillion of currency reserves is the most striking side effect of its state- capitalism model. It amasses ever-growing piles of U.S. debt to maintain a competitive exchange rate. While successful for now, the policy has three negatives: it inflates the money supply, creates trade tensions and prolongs an addiction to exports. What worries China skeptics is how things will play out when the proverbial music stops. The quality of growth matters as much as the pace. Massive investment is needed to sustain economic expansion, yet all too much of it is going to national champions whose returns might never materialize. Is China setting itself up for a bad-loan crisis? No one can say for sure. Yet China’s growing inflation challenge complicates things. It means the gradualist approach favored in Beijing won’t work this time. The danger, say economists such as Glenn Maguire of Societe Generale SA in Hong Kong, is that inflation may rise as high as 10 percent by, say, the third quarter. That would cause households tremendous pain and fuel social discontent. China has made it clear that it won’t tolerate the smallest of protests. It also is warning foreign journalists about covering these gatherings and blames reporters for causing trouble, not unlike leaders from Egypt to Libya. The latest chapter of the so-called Jasmine Revolution involves people showing their frustration by taking strolls in major Chinese cities on Sundays. Blaming the media is rarely a promising sign. It suggests a government more concerned with spin than substance. China should redouble efforts to treat the underlying cause of the turmoil, not the symptoms. China’s people want less inflation, more government accountability and greater egalitarianism. Its leaders want to blame the messengers. Not a good omen, as economic indicators go.
Overseas investors sold the most Indonesian stocks in about six year after the central bank kept borrowing costs unchanged, raising concern that policymakers aren't doing enough to fight inflation. Overseas investors sold a net $672 million of shares on March 4, the most since May 30, 2005, stock exchange data show. The Jakarta Composite Index has lost 3.8% this year amid concern policy makers have fallen behind regional peers in taking steps to curb inflation. Faster inflation exacerbated by a surge in crude oil has threatened to sap consumer spending, which accounts for about two-thirds of the Indonesian economy. Inflation accelerated to a 21-month high of 7.02% in January.
Obama Said to Pick Commerce Secretary Locke as China Envoy. President Barack Obama plans to nominate Commerce Secretary Gary Locke to be the next U.S. ambassador to China, an administration official said. Locke, 61, would replace Jon Huntsman, who submitted his resignation in January to take effect April 30. Locke, who is of Chinese ancestry, is a former two-term governor of Washington.
U.S. Forms Criminal Task Force to Jointly Probe Deepwater Horizon Disaster. The U.S. Justice Department has formed the Deepwater Horizon Task Force to consolidate its investigation into possible criminal charges stemming from the drilling rig explosion that killed 11 workers and caused the worst offshore oil spill in U.S. history.
China Faces 60% Risk of Bank Crisis by 2013, Fitch Gauge Shows. China faces a 60 percent risk of a banking crisis by mid-2013 in the aftermath of record lending and surging property prices, according to a Fitch Ratings gauge. The assessment is from a macro-prudential monitor used by the ratings company, Richard Fox, a London-based senior director, said in a phone interview on March 4. Fitch sees a risk of “holes in bank balance sheets” should a property bubble burst, Fox said. China’s risk of a systemic crisis is based on the nation’s MPI3 classification, the highest of three risk categories, in a Fitch monitor begun in 2005. The indicator signaled crises in Iceland and Ireland and has been tested back to the 1980s, Fox said. Sixty percent of emerging-market countries downgraded to MPI3 face banking crises within three years, he said. China entered that classification in June. The indicator’s failures have included not sounding an alarm about the banking system in Spain, he added. The fallout from China’s lending spree may be bad loans totaling $400 billion, according to Hong Kong-based advisory firm Asianomics Ltd. China’s government is concerned at the risks posed by lending to local-government financing vehicles for stimulus projects. In his March 5 speech to lawmakers, Wen pledged a “comprehensive audit” of local-government debt, while the Ministry of Finance said separately that “local governments face debt risks that can’t be overlooked.”
Global Hedge Fund Assets May Hit Record $2.25 Trillion, Deutsche Bank Says. Global hedge fund assets may reach a record $2.25 trillion by year-end on increasing capital inflows and performance gains, according to a Deutsche Bank AG (DBK) annual investor survey. Capital inflows may quadruple to $210 billion this year from 2010, leading to a 10 percent expansion in assets, the survey released today showed. Assets rebounded to $1.917 trillion at the end of last year, closing in on the peak of $1.93 trillion in the second quarter of 2008, according to Hedge Fund Research Inc. data.
CFTC is 'Out of Step' With Global Derivative Rulemaking, Commissioner Says. The Commodity Futures Trading Commission is “out of step” with U.S. and international efforts to write rules for the derivatives market, Commissioner Jill Sommers told bankers at a conference in Washington. CFTC and Securities and Exchange Commission proposals for governing new swap-execution facilities may lead to inconsistent regulation, Sommers said today in a speech at the Institute of International Bankers annual conference in the U.S. capital.
Goldman's(GS) Pariah Status Fades With Broadbent's BOE Appointment. The Bank of England’s appointment of Goldman Sachs Group Inc. (GS) Senior European Economist Ben Broadbent to its Monetary Policy Committee shows governments are again looking to the firm for top decision makers, less than a year after it settled U.S. fraud claims. Broadbent, who has worked at Goldman Sachs since 2000, will replace Andrew Sentance at the end of May, the Treasury in London said yesterday. He joins a panel that has split four ways on policy for the first time since the central bank’s independence in 1997. Opposition parties last year pressed U.K. Prime Minister Gordon Brown to suspend Goldman Sachs from government work after the Securities and Exchange Commission sued the New York-based company in April. Brown said at the time he was shocked by the “moral bankruptcy” described in the complaint.
Wall Street Journal:
Gadhafi's Circle Debates Regime's End. Col. Moammar Gadhafi's inner circle is debating whether the man in charge of Libya since 1969 should remain in power or relinquish his role, as his government invited rebels and tribal leaders to negotiate a political solution and Western nations took steps to prepare for a possible military intervention.
West Shuns Libyan Crude. Big oil companies and Wall Street banks have stopped trading crude with Libya in response to sanctions against the country, threatening a near-shutdown of exports from the North African country and driving oil prices even higher.
Obma Restarts Terrorism Tribunals. The Obama administration on Monday lifted its freeze on new military trials at Guantanamo Bay and for the first time laid out its legal strategy to indefinitely detain prisoners who the government says can't be tried but are too dangerous to be freed. With the policy shifts, Mr. Obama is acknowledging the difficulty he has faced in trying to close the prison at the Guantanamo Bay Naval Base in Cuba, which he had ordered on his second day in office.
Google(GOOG) Buys Next New Networks to Bolster YouTube Partner Program. Google Inc. (GOOG) said Monday it has acquired web-video development startup Next New Networks as part of the Internet search giant's effort to help content creators develop new videos and make money on its YouTube video site.
China Media Push Into the Web. As increasing numbers of Chinese go online, China's state media outlets are aggressively expanding beyond their traditional roles as propaganda outlets and competing with private Internet companies. Xinhua, the state-run news service, recently launched a search engine, Panguso.com, in partnership with state-owned telecommunications carrier China Mobile Ltd. The move comes a few months after People's Daily, a big state-run newspaper, started its own search engine, Goso.cn. The paper has also started its own Twitter-like messaging service. Meanwhile, China Central Television has launched its own online video platform, CNTV, which provides content from the monopoly broadcaster's 20 channels, as well as content from other online-video sites. But the state-run giants face challenges as they scramble to catch up with companies such as Baidu Inc., which operates China's largest search engine; Sina Corp., which runs China's most active Web-based messaging service; and Youku.com Inc., China's biggest video website.
Ted Kaufman's Friday Hearing Explains Everything That is Broken With the US Financial System. The insights proffered by the panelists and the witnesses, while nothing new to those who have carefully followed the generational theft that has been occurring for two and a half years in plain view of everyone and shows no signs of stopping, are truly a must read for virtually every citizen of America and the world: this transcript explains in great detail what absolute crime is, and why it will likely forever go unpunished. Key highlights from the transcript:
Forbes:
Obama's Recycled Energy Misdirection. President Obama has been touring the country to talk about "winning the future." And at each event, he's promised to take "clean energy from imagination to reality." Conspicuously absent from all his recent speeches, though, has been any mention of climate change, global warming or carbon-dioxide rationing. No doubt this is the result of the political fiasco surrounding his favored cap-and-trade legislation. By way of background, shortly after then-Speaker Nancy Pelosi jammed it through the U.S. House of Representatives in 2009, cap-and-trade lost favor with the American people. They recognized it for what it was: a new open-ended tax, a massive job killer and a government power grab of the energy industry. Its supporters tried to put on a brave face, but the U.S. Senate, chock full of opponents on both sides of the aisle, never even brought it up for a vote.
CNN Money:
GM's(GM) Painful Addiction? New Car Discounts Take Hold Again. Auto executives commonly refer to discount pricing of vehicles as an addiction: sure to bestow pleasurably higher sales volume, at least for awhile, but difficult to kick and potentially destructive over time.
Speculators Double Down on Oil. Big traders are betting the ranch that oil prices will keep rising, testing the pain threshold of an economy that is not exactly setting records as is. Large noncommercial speculators – firms that play the futures markets without taking delivery – added to their long position in West Texas Intermediate crude by 50,200 contracts last week, according to Commodity Futures Trading Commission data. The surge of speculative money into the oil futures pits shows that big financial players are expecting the price of WTI crude to surge well above the recent $105 or so seen last week. If they are right, it will bring $4 gasoline a step closer. That will not be good news for most consumers, though it could help some big energy traders score big paydays, thank goodness. You would hate to see the talent fail to get its due. "It does not get any clearer which way Wall Street is trying to take oil," says Stephen Schork, who writes the Schork Report energy markets newsletter in Villanova, Pa. Schork notes that speculators now own nearly six times as many barrels of oil – 268,622 futures contracts representing nearly 269 million barrels – as can be stored at the WTI trading hub in Cushing, Okla. And since the CFTC numbers released Friday only go through last Tuesday, they likely underestimate the degree of speculative fervor building in the energy markets. Olivier Jakob, who covers energy markets for Petromatrix in Zug, Switzerland, estimates that traders added 40,000 to 50,000 crude contracts to their long positions in the second half of last week. That would take them up to seven times the Cushing capacity, a level he calls "extraordinary." The speculative fervor is so remarkable that the big trading firms now have nearly twice as many long contracts open as they did in 2008, when oil spiked to $147 in the summer, a development that either foreshadowed or caused the global economic meltdown, depending on how you look at it. All this seems to point to a further rise in oil prices, which will only add to the squeeze on consumers' wallets. If oil and other commodity prices continue skyward, it is only a matter of time till the economy cries uncle, it stands to reason. $4 gasoline this spring could spell slowdown in the fall or winter, Goldman Sachs economists say. "Our analysis shows the maximum impact of oil on growth occurring with a lag of 3-4 quarters, which would point to a peak impact in late 2011," Goldman's Jan Hatzius wrote in a note to clients Friday. This is not the ideal time for a big impact from higher oil prices, what with the United States banking on a growth spurt to get out from under a massive debt burden. That said, Jakob notes that prices could also fall, believe it or not -- with equally interesting ramifications. A huge level of speculative interest "is fine as long as fighting intensifies in Libya or protests continue in Bahrain," Jakob writes, "but on any signs of conflict resolution there will be historic level of speculative investments that will need to be unwound."
Reuters:
Icahn Explores Sale of Federal-Mogul(FDML): Sources. Billionaire investor Carl Icahn is in the early stage of exploring a sale of Federal-Mogul Corp and has hired financial advisers to assist on the process, people familiar with the matter said.
IMF: Signs of Overheating in Emerging Markets. Emerging market economies that powered the global recovery may be growing too fast for their own good as inflation pressures build, a top International Monetary Fund official said on Monday. China, Brazil and other fast-growing nations have struggled to contain inflation and control heavy inflows of investment money. Although the IMF has been warning for months of the risks of price pressure, the comments by the Fund's first deputy managing director, John Lipsky, suggested the IMF is growing increasingly concerned. "For the emerging economies, growing at 6.5 to 7 percent, their margins of excess capacity have been largely used up, and as a result we're starting to see incipient signs of overheating," Lipsky told Reuters Insider in an interview. Rising oil prices have compounded the inflation problem, but Lipsky said the IMF has not cut its growth forecast because it thinks the oil price spike will prove temporary. The latest worries about supply disruptions created a "fear factor" that drove oil above $100 a barrel, which if sustained would pose a bigger threat to growth. Rising food prices are also worrisome, particularly for poorer countries where food consumes a larger percentage of household budgets, he said. The cost of food was one of many reasons behind the recent upheaval in Egypt and Tunisia. "We have to be concerned even in places where there is no political upheaval," Lipsky said. "The social strains and real difficulties for poor residents in many economies is something that has to be attended to." Zhu Min, special adviser to the IMF's managing director, said China's loan growth was too strong and addressing that was key to safely slowing down the economy. "It's a fundamental challenge," he said during a presentation to an economists' group meeting in Arlington, Virginia. "So that's a concern, overheating. In China, slowing down economic growth is important."
Job Outlook Muted in Developed Economies: Manpower. The employment traffic light is flashing yellow in most corners of the world. Job prospects have improved in 18 large economies from three months ago but are flat in eight countries and weaker in 13 others as employers exercise caution, unwilling to take on workers until economic growth accelerates. Hiring plans for the second quarter are unchanged in the United States and Britain, and are down in several Western European countries, according to a quarterly survey by global employment services company Manpower Inc.
A Million Libyans Need Aid: UK, France Seek No-Fly Zone. Britain and France said they were seeking U.N. authorisation for a no-fly zone over Libya, as Muammar Gaddafi's warplanes counter-attacked against rebels and aid officials said a million people were in need. Al Jazeera television said rebels had rejected an offer by Gaddafi to hold a meeting of parliament to work out a deal under which he would step down. With civilians surrounded by forces loyal to Gaddafi in two western towns, Misrata and Zawiyah, fears grew of a rising humanitarian crisis if the fighting continued.
Connecticut Hedge Fund Manager Pleads Guilty Over Ponzi Scheme. A Connecticut hedge fund manager pleaded guilty on Monday to running a multiyear Ponzi scheme that may have defrauded investors out of hundreds of millions of dollars, U.S. prosecutors said. Francisco Illarramendi, 42, pleaded guilty to five criminal counts including securities fraud, wire fraud and conspiracy to obstruct justice and defraud the U.S. Securities and Exchange Commission, U.S. Attorney David Fein in Connecticut said. Two other men, Juan Carlos Guillen Zerpa and Juan Carlos Horna Napolitano, are being detained following their arrests Thursday on conspiracy and obstruction charges, he added.
Urban Outfitters(URBN) Q4 Profit Misses Estimates; Shares Down. Urban Outfitters Inc's quarterly earnings missed market estimates for the first time in two years as discounts and higher shipping costs snip margins, sending its shares down 9 percent.
Australia's governing Labor party's primary voter support slumped to 30%, the lowest on record, after Prime Minister Julia Gillard proposed a new carbon pricing plan, a Newspoll opinion survey shows. Gillard's voter satisfaction rating dropped to 39% in the poll of 1122 people conducted between March 4 and March 6, from 50% two weeks before, the poll said.
South China Morning Post:
China Slows Rate of Infrastructure Spending. Caution governs annual investment planning. The mainland expects to continue increasing spending on transport and infrastructure this year but at a more cautious pace, according to the Ministry of Transport. For its two largest ports, that means Shanghai plans moderate growth, while Shenzhen is reviewing its expansion on fears of slowing global trade.
Shanghai Securities News:
Around 62% of a total 175 airports in China made losses last year, citing Liang Ningsheng, an official at the country's Civil Aviation Administration.
Evening Recommendations Citigroup:
Upgraded (EXPE) to Buy, target $29.
Reiterated Buy on (EPB), target $41.
Night Trading
Asian equity indices are -.25% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 108.50 +1.0 basis point.
Asia Pacific Sovereign CDS Index 119.25 +.5 basis point.
The NFIB Small Business Optimism Index for February is estimated to rise to 95.0 versus a reading of 94.1 in January.
Upcoming Splits
None of note
Other Potential Market Movers
The weekly retail sales reports, $32 Billion 3-Yr T-Notes Auction, $23 Billion 1-Year T-Bills auction, IBD/TIPP Economic Optimism Index for March, (TXN) mid-quarter update, (IBM) investor briefing, (BAC) investor conference, (NYX) investor day and the (NVDA) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares 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.
North American Investment Grade CDS Index 84.51 +1.22%
European Financial Sector CDS Index 117.50 +.91%
Western Europe Sovereign Debt CDS Index 175.17 bps +1.15%
Emerging Market CDS Index 208.63 -2.12%
2-Year Swap Spread 20.0 -1 bp
TED Spread 21.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .10% -1 bp
Yield Curve 281.0 unch.
China Import Iron Ore Spot $172.80/Metric Tonne -2.15%
Citi US Economic Surprise Index +93.20 -4.3 points
10-Year TIPS Spread 2.53% +4 bps
Overseas Futures:
Nikkei Futures: Indicating -50 open in Japan
DAX Futures: Indicating -2 open in Germany
Portfolio:
Slightly Lower: On losses in my Retail, Tech and Medical longs
Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and then covered some of them
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades lower, despite a pullback in oil from session highs, stable long-term rates and buyout speculation. On the positive side, Computer, Disk Drive, Utility and Restaurant shares are higher on the day. The Saudi sovereign cds is falling -2.81% to 129.34 bps. The UBS-Bloomberg Ag Spot Index is down -.4%. On the negative side, Gaming, Construction, Networking, Semi, Ag, Alt Energy and Coal shares are under significant pressure, falling more than 1.75% on the day. Cyclicals and small-caps are underperforming. The Portugal sovereign cds is rising another +1.59% to 490.17 bps, the Egypt sovereign cds is gaining +2.42% to 374.72 bps and the Greece sovereign cds is gaining another +5.04% to 1,037.50 bps.The Greece sovereign cds is very close to its record high set on 12/31/10 at 1,074.08 bps. The Citi Eurozone Economic Surprise Index is falling to +5.1 today, which is the lowest level since April 15th, 2010. The avg. US price for a gallon of gas is up another .04/gallon today to $3.51/gallon. It is now up .39/gallon in 18 days. The US dollar continues to trade poorly, notwithstanding today's small bounce. Oil is rising another +.4%, copper is falling -3.02% and gold is rising +.44%. China Iron Ore Spot is down -10.0% in 2 weeks. The stock bears are winning today, but have been unable to gain meaningful downside traction. Equity investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Oil will likely continue to grind higher until the situation in Saudi calms. It is hard to see this happening before next Friday's "day of rage". However, speculation by funds in oil is at very extreme levels and likely caps significant near-term upside in the commodity barring any new developments in the region. I continue to believe any significant reversal lower in oil to below $100/bbl would lead to new 52-week highs in stocks. I expect US stocks to trade mixed-to-lower into the close from current levels on rising energy prices, growing Mideast unrest, emerging market inflation fears, eurozone debt angst, more shorting and technical selling.
Qaddafi Escalates War Against Rebels as Libya Fight Deepens. Libyan troops loyal to Muammar Qaddafi used artillery and helicopter gunships to block rebels from advancing west from the oil hub of Ras Lanuf toward the leader’s hometown of Sirte. Rebel fighters withdrew from Bin Jawad, 110 miles (160 kilometers) east of Sirte, after battling reinforced pro-Qaddafi troops, said Khaled el-Sayeh, a coordinator between the opposition’s military forces and its interim ruling council in Benghazi. Nine rebels and two of Qaddafi’s soldiers were killed in the fighting, he said. The rebels said today they will bring in reinforcements from the east, the Associated Press reported.
Greek Debt Rating Cut Three Steps to B1 by Moody's on Rising Default Risk. The cost of insuring Greek debt against default rose to a record after Moody’s Investors Service cut the country’s credit rating by three notches. The Finance Ministry in Athens called the move, which sent its rating to B1 from Ba1, “completely unjustified.” Moody’s said lagging tax collection and “implementation risks” would make it more difficult to reach budget-cutting targets in a 110 billion-euro ($154 billion) bailout. “The risk has materially increased of a default event,” said Sarah Carlson, Moody’s senior analyst for Greece, said in a telephone interview today from London. “Our central view is that the Greek government will achieve its objectives and it won’t need to impose losses on credits, but there are material risks to that outcome.”Credit-default swaps on Greece jumped 50 basis points to a record 1,036, according to CMA. The yield on 10-year Greek notes rose 11 basis points to 12.36 percent, the most in the euro region. The premium that investors demand to hold the bonds instead of benchmark German bunds widened 9 basis points to 907 basis points, the highest since Jan. 10. The outcome of EU summits this month won’t significantly affect Greece’s long-term prospects, Carlson said. “We did consider a range of likely outcomes, but really our concern is much more long term,” she said. “Whatever decisions are taken at the end of the month are not something that would change our long-term outlook.” The Moody’s decision “was hardly a surprise, but it did remind the market of Greece’s deteriorating finances, the high interest-rate burden they face along with the roll-over risk and potential need for restructuring,” said Charles Diebel, head of market strategy at Lloyds Bank Corporate Markets in London. “Greece at this point in time is in considerable trouble.”
Oil Rises to 29-Month High; Citigroup Sees Brent 'Fear Premium'. Oil rose to a 29-month high in New York as escalating violence in Libya bolstered concern that supply disruptions may spread through the Middle East. Crude climbed 1 percent after fighting between Libyan rebels and troops loyal to Muammar Qaddafi intensified. Hedge funds raised purchases of futures to a record for a second week on speculation unrest will cut output further. Citigroup Inc. increased its Brent oil price estimate, saying the threat of more disruptions supports a “fear premium.” “The focus remains on Libya and on fears of a contagion effect that will impact other oil-exporting countries in the Middle East,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Libya appears to be spiraling into civil war, which will keep prices rising.” Crude oil for April delivery rose $1.02 to $105.44 a barrel on the New York Mercantile Exchange, the highest closing price since Sept. 26, 2008. The contract is up 29 percent from a year ago. Brent crude oil for April settlement slipped 79 cents, or 0.7 percent, to $115.18 a barrel on the London-based ICE Futures Europe exchange.
Oil at $110 May Trigger Pain U.S. CEOs Weathered at $100. A recovering economy helped U.S. chief executive officers weather crude’s surge past the $100 mark. At $110 a barrel, the pain would start to kick in. As oil traded at 29-month highs last week on concern that violence in Libya would further crimp Middle Eastern supplies, CEOs said they were waiting to see how much the price rises, and for how long. “Any time something like oil goes up dramatically overnight, it becomes very hard to adequately plan,” said Samuel Allen, 57, chairman and CEO of Deere & Co. (DE), the world’s largest maker of agricultural equipment. “It has caused us to be more careful or cautious in watching the outlook, but we have still moved forward with all our plans.” Corporate assumptions would have to start changing when oil reaches $110 a barrel, according to economists such as Chris Low of FTN Financial in New York.
Evans Says Hurdle 'High' for Fed to Alter Bond Purchase Plan. Chicago Federal Reserve Bank President Charles Evans said the hurdle for altering the Fed’s current $600 billion Treasury purchase plan is “high,” and that a tapering of the purchases is unlikely. “It looks more and more to me like $600 billion is a good number,” Evans, 53, said today in an interview today with CNBC. “I continue to think the hurdle is pretty high” for changing the program and “we’re going to continue to need short-term interest rates to be low for an extended period of time.” Rising oil prices are a “headwind for the real economy” and yet shouldn’t lead to higher underlying inflation, said Evans, who votes on the Federal Open Market Committee this year. Treasury markets are “so deep and liquid that there doesn’t seem to be a need” to taper the purchases, Evans said. “I wouldn’t be surprised that if we decide to end it, we just end it,” he said, referring to the purchase plan.
Goldman(GS) Leads M&A List Spurred by Commodities Demand in BRICs. The merger boom that started in 2010 isn’t looking like any of the past three. The takeover binge of the 1980s was fueled by Michael Milken’s junk bonds; the late- 1990s wave of Internet and telecom deals, by inflated stock prices; and the private-equity frenzy that produced a record year for deals in 2007, by leveraged loans. The more recent surge comes from the expanding BRIC economies -- Brazil, Russia, India and China -- and beyond. Deals are rising among the companies that supply raw materials to these countries. Worldwide deals in energy, power and basic materials made up about a third of the merger and acquisition market in 2010, compared with about 20 percent in the previous decade, according to data compiled by Bloomberg. Companies with headquarters in emerging markets played a role in more than a third of 2010 takeovers, about twice their historical share.
Rajaratnam Trial May Tarnish Goldman(GS), McKinsey, Spark Lawsuits. Goldman Sachs Group Inc. (GS), McKinsey & Co. and Intel Corp. (INTC) are among the companies that may be sued or suffer damage to their reputations after witnesses at the trial of Galleon Group LLC co-founder Raj Rajaratnam describe insider leaks. Rajaratnam, 52, goes on trial tomorrow for trading on tips gleaned from sources inside these and other companies, including Morgan Stanley, International Business Machines Corp. (IBM) and Moody’s Investors Service Inc. If the billionaire native of Sri Lanka is convicted by a Manhattan jury, U.S. prosecutors may seek to jail him for more than 10 years.
Teacher Security Blanket May Shred as Governors Hit 'Ignorance Factories'. U.S. public-school teachers are facing the biggest challenge to their job security in more than half a century as politicians target seniority rules that make the last hired the first fired when jobs are cut. New Jersey Governor Chris Christie, a Republican, Los Angeles Mayor Antonio Villaraigosa, a Democrat, and New York Mayor Michael Bloomberg, an independent, are among officials pushing for changes in laws in coming months to let them fire underperforming teachers. As budget cuts threaten the jobs of thousands of school employees, officials are demanding the right to keep the most talented, even if they’re the least experienced. The proposed changes may undercut the power of teachers’ unions. They intensify the debate on how to judge instructor’s effectiveness as U.S. students lag behind international peers.
The US dollar may reverse declines that have seen the currency drop 3.5% this year after bets on its depreciation against its major counterparts climbed to the most on record, according to UBS AG. Bets on the dollar weakening, so-called net shorts, surged in the week ended March 1 to the highest since the CFTC began publishing the data in 2003. "Investors should prepare for possible unwinding of these negative bets against the dollar, which are extreme at the moment."
Fed's Fisher Says He May Vote to Curtail Asset Purchase Program. Federal Reserve Bank of Dallas President Richard W. Fisher said he might vote to cut short the central bank’s program of large-scale asset purchases if he believed it to be “counterproductive.” “I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it,” Fisher said in the text of a speech today in Washington. Fisher repeated that he would vote against extending or enlarging the purchases “barring some frightful development.” “The liquidity tanks are full, if not brimming over,” Fisher said at the Institute of International Bankers Annual Washington Conference. “The Fed has done its job. What is needed now is for business to be incentivized to commit that liquidity to creating American jobs. This is the task of the fiscal authorities, not the Federal Reserve.” The program “might well retard job creation,” Fisher said, if it leads to rising inflation expectations or a perception that the Fed was enabling the “fiscal irresponsibility” of Congress. This fiscal year’s budget deficit is projected to reach $1.5 trillion, according to a Congressional Budget Office estimate released Jan. 26. The deficit was $1.29 trillion last year after a record $1.42 trillion in 2009. “The U.S. economy is afflicted with the pathology of structural deficits,” Fisher said. “This leaves the nation poorly positioned to weather the next recession or shock to come our way. I devoutly hope our next downturn won’t come for quite some time, but it surely will come eventually.”
Western Digital(WDC) Agrees to Buy Hitachi Unit for $4.3 Billion. Western Digital Corp. (WDC), the largest maker of computer hard-disk drives, agreed to buy a rival unit of Hitachi Ltd. (6501) for about $4.3 billion in cash and stock to reduce costs as the industry shrinks amid waning demand. Western Digital will pay $3.5 billion in cash and give Hitachi 25 million of its shares, the companies said in a statement today. Hitachi will own about 10 percent of Irvine, California-based Western Digital after the deal is completed and will gain two seats on the company’s board.
Wall Street Journal:
Gadhafi Forces Strike Rebels; No-Fly Plan Discussed. Forces loyal to Col. Moammar Gadhafi launched airstrikes on a rebel-held town Monday to check the rebels' advance west toward the capital, as the U.S. and allies said they were discussing military options.
Bahrain Protesters Defy Police. Hundreds of hard-line Bahraini opposition protesters gathered in Manama's financial center on Monday, defying a police order to disperse, in a new escalation of tensions between antigovernment demonstrators and the ruling Al-Khalifa family. A small number of protesters pitched tents Sunday night at the base of two skyscrapers in the heart of the financial center, but were warned by police to move on, demonstrators said. Amid fears of a crackdown, the number of protesters began to swell, with hundreds calling for the fall of the ruling family and choking traffic at one of the capital's busiest intersections.
Airlines to Load On More Fees. After Checked Bags, Carriers Seek to Charge for Early Boarding, Fancier Foods and Reclining Seats.
"China is on the verge of exporting inflation globally," according to Andrew Milligan, head of global strategy at Standard Life Investments. Chinese producer prices for light industry, including toys and home appliances, rose faster in December than they did when the inflation rate peaked in July 2008. Prices were 4.8% higher than a year ago. Rising wages are largely responsible for the pickup in inflation, Milligan wrote today. Pay for rural migrant workers rose last year by about 15%, exceeding a 10% increase in average urban wages, he wrote. Land, energy and environmental costs are contributing to price increases as well, he said. Sale prices for land advanced 14.8% in the fourth quarter from a year earlier after surging more than 20% in each of the first three quarters. "Long-term inflation trends are a concern," Milligan wrote. "The authorities are behind the curve, and have more to do."
Ciena(CIEN) Shares Drop After Disappointing Forecast. Ciena Corp. reported a wider net loss for its fiscal first quarter Monday despite a sizable jump in revenue, which came in even higher than analysts expected. However, Ciena’s (CIEN25.42, -3.39, -11.77%) shares slumped more than 9% by midmorning after the maker of optical-networking gear issued a lower-than-expected revenue forecast for the current quarter.
CNBC.com:
Hedge Fund Titans Struggling to Outrun S&P. Some of the best-known hedge funds have struggled this year to outperform the stock market, with many turning in 3 percent or 4 percent year-to-date returns during a period where the S&P 500 was up nearly 6 percent.
Will California Fall into 'The Black Hole'?California only has a short amount of time to fix its troubled economy,with an $84 billion budget and $24 billion deficit, or else it will deteriorate to the point of no return, Sean Egan, founding partner and president of Egan-Jones Rating Company, told CNBC on Monday.
Gaddafi 'Unlikely' to Leave Libya Despite Report: US. Libyan leader Muammar Gaddafi is "unlikely" to be seeking safe passage out of his war-torn country despite a BBC report that he was preparing to leave, US officials told NBC News.
Obama to Restart Guantanamo Trials. The Associated Press has learned that President Barack Obama is approving the resumption of military trials for detainees at the U.S. prison at Guantanamo Bay, Cuba, ending a two-year ban. A senior military official says Obama will issue an executive order Monday. Defense Secretary Robert Gates will rescind his January 2009 ban against bringing new cases against the terror suspects at the detention facility. Obama vowed when he took office to close the detention facility at Guantanamo, but officials have recently acknowledged that closure is not likely because of questions about where terror suspects would be held.
Charlotte Observer:
Analysts Have Hard Questions for Bank of America(BAC). Investors will be looking for answers about lingering mortgage losses and future growth strategies at Bank of America’s investor conference Tuesday, but they shouldn’t expect any big surprises, analysts say.
Rasmussen Reports:
54% Favor Repeal of Health Care Bill. The latest Rasmussen Reports national telephone survey of Likely Voters shows that 54% favor repeal of the law, including 44% who Strongly Favor repeal. Thirty-nine percent (39%) oppose repeal of the law, including 31% who are Strongly Opposed.
Reuters:
Morgan Stanley(MS) Cancels All Libya Oil Trade. Wall Street bank Morgan Stanley has stopped trading crude and refined products with Libya to comply with U.S. sanctions against the Gaddafi government, a source familiar with the firm's transactions said. All contracts were cancelled over the past week "due to the OFAC," he said, referring to the U.S. Office of Foreign Assets Control, which controls trade sanctions.
Rising Food Prices Could Force US Eatery Overhaul. Record-high food prices could be the tipping point this year for U.S. restaurants already struggling with high debt loads and tight-fisted consumers. The economic downturn and drop in consumer spending has sent a handful of restaurant chains -- such as Uno Chicago Grill pizza, Fuddruckers and Charlie Brown's Steakhouse -- into bankruptcy court during the past year. And 2011 is not likely to be much better, experts say.
Financial Times:
The European Banking Authority plans to introduce a "near-fail" category into the stress-test process as part of a more robust mechanism for compelling weaker banks to recapitalize.
China Reserve Ratio May Increase This Week. CHINA'S central bank may raise bank reserve requirement ratio as early as this week as it continues to step up its fight against inflation because China has prioritized keeping prices stable in this year's government agenda, analysts said yesterday. In his government work report delivered to the annual session of the National People's Congress over the weekend, Premier Wen Jiabao reaffirmed the central government's determination to battle inflation this year. "It's rare to see 15 mentions of pricing in the government's prudent work report," said Lu Zhengwei, Industrial Bank's senior economist said yesterday. "As short-term policy follow-up, one more reserve requirement increase is likely to come between March 11 and March 20," Lu said.
