Evening Headlines
Bloomberg:
- Societe Generale, UniCredit Join Firms Participating in Greece's Debt Swap. Societe Generale SA (GLE), France’s second-biggest bank, Assicurazioni Generali SpA and UniCredit SpA (UCG) joined firms saying they would participate in Greece’s debt swap as the country threatened to compel holdouts to take part. Greece’s six largest banks also plan to accept the offer, the country’s Finance Ministry said in a statement late yesterday. The lenders are among the biggest private holders of the nation’s sovereign debt, data compiled by Bloomberg show, making them crucial to the success of the exchange. The Greek government, which set a 75 percent participation rate as a threshold for proceeding with the transaction, said it will use collective action clauses to force holders of Greek-law bonds to accept the swap if it receives sufficient consent from investors. The goal of the exchange, which runs through March 8, is to reduce the 206 billion euros ($270 billion) of privately held Greek debt by 53.5 percent, helping avert a disorderly default that could roil markets and fuel contagion.
- Spain Lags Italy as Growth Concerns Halt Rally: Euro Credit. Spanish bonds are underperforming those of Italy as concern the Iberian nation's economy will struggle to grow has lief it trailing in a rally sparked by two rounds of extraordinary ECB lending. Spain's benchmark borrowing costs rose above Italy's for the first time in almost eight months last week after Prime Minister Mariano Rajoy said his nation's 2012 deficit would be higher than agreed at budget talks with the European Union. "The spotlight is bank on Spain's fiscal performance," said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London.
- Libor Links Deleted as Bank Lobby Group Backs Away From Scandalized Rate. Twenty-six years after helping to design the London interbank offered rate, Britain’s bank lobbyists are distancing themselves from their creation amid regulatory investigations and lawsuits. The British Bankers’ Association, the century-old lobby group that oversees the rate, last week deleted references from its website referring to its role in setting Libor. This week, it met regulators and bank executives to review the future of the benchmark. Under one option, the Bank of England’s proposed Prudential Regulation Authority would take responsibility for policing the rate, said a person with knowledge of the talks who asked to remain anonymous because discussions are private. The BBA says it isn’t seeking to cede oversight to the regulator.
- Prices Pressure Asia Central Banks to Pause. Asia-Pacific central banks will probably hold off on adding monetary stimulus this week as higher oil prices combine with diminishing concern of a euro- region meltdown to make the case for preserving firepower. South Korea and New Zealand will hold interest rates tomorrow, according to all economists surveyed by Bloomberg News. Indonesia will keep its key rate at 5.75 percent the same day after an unexpected cut last month, while Malaysia will stand pat for a fifth meeting a day later, separate surveys indicated. The 18 percent jump in crude oil since September risks spurring price pressures in a region that’s seen little slackening in job markets as employers retain workers even with exports moderating.
- Australia's Economy Comes Under Q4 Forecast. Australia’s economy expanded at half the pace economists forecast last quarter as a housing slump deterred consumer spending, sending bond yields falling and the local currency to a six-week low. Fourth-quarter gross domestic product advanced 0.4 percent from the previous three months, when it rose a revised 0.8 percent that was weaker than previously reported, a Bureau of Statistics report released in Sydney today showed. The result compared with the median of 25 estimates in a Bloomberg News survey for a 0.8 percent gain.
- Gold Set for Worst Run This Year as Commodities Slump on European Concerns. Gold may drop for a fourth day in the worst run this year as concern resurfaced that Europe’s debt crisis will slow growth, strengthening the dollar and eroding demand for alternative investments.
- Ford(F) Awards CEO Mulally $58.3M in Stock. Ford Motor Co. (F) awarded Chief Executive Officer Alan Mulally $58.3 million in stock as a reward for the automaker’s turnaround. Mulally will receive other compensation for 2011, including salary and benefits, which will be revealed in a proxy report in the coming weeks. Ford has awarded him stock worth more than $100 million the past two years.
- Sarkozy Proposes Minimum Corporate Tax. French President Nicolas Sarkozy said he’ll create a new tax that would force large French companies to pay a minimum amount of tax.
- Congress Poll Rout in India Risks Economy as Gandhi Flops Again. India's ruling Congress party was routed in regional elections, a defeat that shattered claims by its chief campaigner Rahul Gandhi to have rebuilt support and endangers the government's agenda to boost a flagging economy. Gandhi, 41, touted to replace his mother as Congress chief this year, took responsibility for the party's performance in India's most populous state of Uttar Pradesh where it was set to win 7 percent of seats. An unexpected loss in Punjab underscored how Congress is struggling to escape blame for rising prices and alleged corruption two years before a national ballot.
- Romney Wins Ohio. Mitt Romney eked out a narrow win in Ohio and extended his delegate lead on Super Tuesday, but voters failed to deliver a decisive victory that could have brought a swift end to the Republican nominating contest. Mr. Romney notched wins in Ohio, Massachusetts, Idaho, Virginia, and Vermont, while Newt Gingrich took Georgia and Rick Santorum won Tennessee, Oklahoma and North Dakota. Alaska returns were the last tallied.
- Romney Extends Delegate Advantage. Mitt Romney appeared poised to extend his lead in delegates for the Republican presidential nomination even as voters in Super Tuesday contests handed out wins to each of the three main candidates.
- Young Adults See Their Pay Decline. Young people entering the job market are taking the brunt of the downward pressure on wages caused by high unemployment, according to a new analysis of pay trends. In data compiled for a coming report, the Economic Policy Institute, a center-left think tank in Washington, found that the average inflation-adjusted hourly wage for male college graduates aged 23 to 29 dropped 11% over the past decade to $21.68 in 2011. For female college graduates of the same age, the average wage is down 7.6% to $18.80.
- Carefully Orchestrated Moves Set Stage for Greek Debt Deal. Greece is unlikely to get all of its bondholders to agree willingly to a debt-restructuring plan before a Thursday deadline, but it repeated Tuesday that it is ready to force the deal through by other means. Greece stepped up pressure on its creditors Tuesday, saying it won't have money available to pay bondholders who resist. Creditors have until Thursday evening to decide whether they will accept the deal, which replaces existing bonds with a package of new securities with less than half of the face value.
- Why Bad Money in China Drives Out The Good. China to suffer as long as politics placed above market.
- Morgan Stanley(MS): There's Something Weird Going On With The Economic Data.
- Colts Will Release Peyton Manning on Wednesday.
- Pandora(P) Tanks After a Miss on EPS, Revenue.
IBD:
The Detroit News:- Air Force Plans to Cut 850 Jobs in Michigan. The U.S. Air Force said late Tuesday that Michigan could lose more than 850 full- and part-time jobs as part of proposed cuts at Selfridge Air National Guard Base and Kellogg Air Guard Station in Battle Creek — worse than earlier predictions. The cuts would include more than a quarter of the state's Air National Guard.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -15 (see trends).
- Exclusive: Netflix(NFLX) in Talks for Cable Partnership. Netflix Chief Executive Reed Hastings has quietly met with some of the largest U.S. cable companies in recent weeks to discuss adding the online movie streaming service to their cable offerings, according to sources familiar with matter.
- Obama Mulls Giving Moscow Data on Missile Defense. The Obama administration disclosed on Tuesday that it is considering sharing some classified U.S. data as part of an effort to allay Russian concerns about a controversial antimissile shield.
- ASMI(ASMI) 4th Quarter Net Profit Falls. Dutch chip gear maker ASM International NV reported lower fourth-quarter sales as customers held back orders, and said it sees lower sales in the current quarter. New orders booked in the fourth quarter but not yet paid for -- the best indication of future earnings -- was down 17 percent from the previous quarter.
- Cypress Semiconductor(CY) Forecasts Weak 1st Qtr. Chipmaker Cypress Semiconductor forecast a first quarter below analysts' expectations as it saw fewer orders from some wire line and handset customers.
- Athens Issues Threat to Bond Holdouts. Greece has threatened to default on any of its bondholders who do not take part in a €206bn debt restructuring that officials believe is key to returning Athens to solvency, a move that turns up the heat on potential holdouts ahead of a deadline on Thursday. The Greek public debt management agency said in a statement Athens "does not contemplate the availability of funds" to pay private investors who hold on to their bonds once the restructuring occurs. The transaction is projected to wipe €100bn from Greece's debt pile, but 95 per cent of bondholders must participate for that target to be reached. "There is no commitment not to pay, but there is a threat," said Charles Blitzer, a former senior IMF official. "If you don't maximise participation, you're asking for more stress in the programme or more [bailout] money from the official sector."
- China Lower GDP Target Is Healthier. In response to Premier Wen Jiabao's announcement in his government work report delivered to the ongoing session of the National People's Congress that China will set its GDP growth for 2012 at 7.5 percent, stock markets, especially the Hong Kong stock market, fell drastically amid concerns about China abandoning its years-long efforts to maintain an 8 percent economic growth rate. However, the markets should not over-interpret China's lowered economic growth target. By decelerating its GDP growth to 7.5 percent, the slowest since 2005, the Chinese government aims to promote the quality of its economic growth. The slightly lowered GDP target is a reflection of China's determination to reduce its dependence on GDP-centered economic development and push for a long-overdue economic transformation. It also demonstrates the Chinese government's efforts to expand domestic demand to promote its sustainable economic growth at a time when the global economic recovery remains impotent. country's rapid economic growth since reform and opening-up, especially in the last decade, has been achieved largely on an extensive basis. This is one of the main reasons for some at home and abroad casting doubt on the quality of the country's GDP and its statistical accuracy. Some economists have also doubted China's ability to sustain its economic growth, arguing that it can no longer maintain economic growth which has been attained at the cost of the environment and the well-being of the majority of ordinary people. It is natural that China should strive to improve its economic growth quality, especially after several decades of high-pace development, in order to address such misgivings. Raising the quality of the country's GDP will require efforts to boost its economic growth without excessive exhaustion of its resources and a deteriorating environment. It should also not draw on future economic development potential in pursuit of short-term performance. To attain these targets, China badly needs to make some policy and systematic arrangements to ensure that none of its GDP growth measures will damage its efforts for environmental protection and sustainable development. An excessive credit expansion has made China a real estate-dependent economy over the past years. Under a series of preferential credit policies, the concentrated flow of domestic funds to the real estate market has seemingly transformed the country into the largest construction site in the world. Such a property-dependent economic development model has seriously eroded the country's future development potential and also endangered its sustainable development. Much worse, the huge real estate bubble has also brought huge risks to the country's financial market and simmering social contradictions as the result of the uneven wealth distribution it has caused. At the same time, the real estate-supported economic growth has also hampered China's efforts to transform its economic pattern, squeezed residents' consumption capabilities and slowed the country's ongoing industrial structural adjustments. At a time when the domestic real estate market has produced a serious "squeezing effect" on other industries, what the country should do is extricate itself from the housing-hijacked economic development model and improve its GDP quality. So the country should not relax its regulation of the housing market in order to return property prices to a reasonable level.
- China can use trade measures against U.S. trade protectionist policies, such as the recent bill passed by the U.S. Congress, citing Yuan Zheng, a researcher at the Chinese Academy of Social Sciences' institute of American studies.
- Combined sales at China's 77 largest steelmakers fell 8.5% in January from a year earlier to 260b yuan, citing an official at the China Iron and Steel Association. Profitability in February and after aren't optimistic, the official said.
- China Banking Regulatory Commission Assistant Chairman Yan Qingmin said the regulator will study stock investments by bank wealth management product funds, citing an interview. The regulator may limit the proportion of stock investments by the funds to control risk, Yan said.
- None of note
- Asian equity indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 170.0 +8.0 basis points.
- Asia Pacific Sovereign CDS Index 135.25 +2.75 basis points.
- FTSE-100 futures -.23%.
- S&P 500 futures +.17%.
- NASDAQ 100 futures +.18%.
Earnings of Note
Company/Estimate
- (CIEN)/-.04
- (PLCE)/.90
- (TFM)/.38
- (AEO)/.35
- (BF/B)/1.00
- (HOV)/-.42
- (MW)/-.13
- (SMTC)/.31
- (PLL)/.74
- (HRB)/.07
- (KFY)/.30
8:15 am EST
- ADP Employment Change for February is estimated to rise to 215K versus 170K in January.
- Final 4Q Non-Farm Productivity is estimated to rise +.8% versus a prior estimate of a +.7% gain.
- Final 4Q Unit Labor Costs are estimated to rise +1.2% versus a prior estimate of a +1.3% gain.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +4,160,000 barrel gain the prior week. Distillate supplies are estimated to fall by -1,650,000 barrels versus a -2,069,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -1,600,000 barrels versus a -1,600,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a -1.9% decline the prior week.
3:00 pm EST
- Consumer Credit for January is estimated at $10.45B versus $19.308B in December.
Upcoming Splits
- (HMST) 2-for-1
- (RES) 3-for-2
Other Potential Market Movers
- The weekly MBA Mortgage Applications report, German 5Y Bond auction, Wedbush Tech/Media/Telecom Conference, CSFB Communications/Networking Equipment Conference, Morgan Stanley Utilities Conference, Goldman Sachs Ag Biotech Forum, (GE) Investor Meeting, (HON) Investor Conference and the (BEBE) Investor Day could also impact trading today.