Friday, June 22, 2012

Friday Watch

Posted by Gary .....at 12:39 AM

Evening Headlines
Bloomberg:
  • Credit Suisse(CS) Cut 3 Levels as Moody’s Downgrades Banks. Credit Suisse Group AG credit rating was cut three levels and Morgan Stanley (MS)’s was reduced by two as Moody’s Investors Service downgraded 15 banks in moves that may shake up competition among Wall Street’s biggest firms. Credit Suisse was cut to A2, the same as JPMorgan Chase & Co. (JPM) and BNP Paribas SA (BNP), as Moody’s completed a review of global banks with capital-markets operations it announced in February. Morgan Stanley and Zurich-based UBS AG (UBSN), the other firms singled out for three-level reductions, were lowered two steps instead, the ratings firm said yesterday in a statement. “All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said in the statement. Lower ratings can lead to higher costs for borrowing and collateral. The downgrades leave Citigroup Inc. (C) and Charlotte, North Carolina-based Bank of America Corp. (BAC) as the lowest-rated banks among the 15 at Baa2, two levels above junk. Moody’s kept the long-term ratings of both lenders on negative outlook, which means they may be cut again.
  • IMF Sees Euro Crisis at Critical Stage, Sees Bank Stress. The euro area crisis has reached a “critical stage” and member nations must make a “strong commitment” to the shared currency to stop the plunge in investor confidence, the International Monetary Fund said in a report that recommended issuing common debt as one solution. “Despite extraordinary policy actions, bank and sovereign markets in many parts of the euro area remain under acute stress, raising questions about the viability of the monetary union itself,” the Washington-based organization said in a report today. “The financial and economic environment continues to deteriorate. Investors are withholding funding from member states most in need, moving capital to safe havens and driving risk premiums to new records.” Europe’s monetary system needs a closer union of its banks and more fiscal integration to “arrest the decline in confidence engulfing the region,” the IMF said. A “strong commitment” to the monetary union would restore faith in the shared currency, the organization said.
  • Rajoy’s Blown Credibility Puts Spain at Risk of Sovereign Rescue. Spanish Prime Minister Mariano Rajoy has spent much of the political capital he won seven months ago in the biggest landslide in 30 years, floundering against a crisis that risks making Spain the first $1 trillion economy to need a sovereign bailout, investors and analysts say. Rajoy, singled out by leaders at the Group of 20 summit, has been taunted by opposition lawmakers and commentators as borrowing costs soared to a euro-era record even after Spain’s banks received a 100 billion-euro ($127 billion) lifeline. Rajoy called the rescue a victory that solved lenders’ problems. “He clearly doesn’t get it,” said Gary Jenkins, founder of Swordfish Research Ltd. near London, who has tracked bond markets for more than 15 years. “Spain needs someone who can come in and grasp the seriousness of the situation and react to that, not just pretend everything’s okay.”
  • Euro Chiefs Spar on Greek, Spanish Aid. European finance ministers battled over the strategy to contain the debt crisis, with creditor countries resisting leniency for Greece and playing down market concerns about the bailout of Spanish banks. Lenders of 240 billion euros ($301 billion) to Greece offered no sign of granting extra time for the newly installed Athens government to meet deficit-cut targets. With Spain set to request as much as 100 billion euros to rescue its teetering banks, the officials quarrelled over how to design a recapitalization program that doesn’t scare investors away from Spanish government bonds. “We still need progress on this issue,” French Finance Minister Pierre Moscovici told reporters late yesterday after a meeting of euro-area finance ministers in Luxembourg. The setup of the Spanish package is so politically sensitive that it will be decided by government leaders at a June 28-29 summit. That summit, the 19th since Greece’s financial meltdown rattled the euro, will try to resolve competing visions over how to reshape the 17-nation economy, with Germany and its fiscally disciplined neighbors unwilling to foist additional burdens on their taxpayers. A foretaste of that confrontation will come later today, when German Chancellor Angela Merkel travels to Rome for crisis talks with Italian Prime Minister Mario Monti, Spanish Prime Minister Mariano Rajoy and French President Francois Hollande. The configuration reflects the shifting alliances that have left Merkel fighting increasingly on her own as concerns about Europe’s economic health migrate from small countries on the periphery to larger ones in the core.
  • France to Restrict Minimum Wage Increase to 2%, Echos Reports. The French government will restrict an increase in the minimum wage to no more than 2 percent, Les Echos reported, without citing anyone. An official decision will be taken by June 26, when the government is due to meet with labor unions and employers, the newspaper said. An increase as of July 1 will take the gross hourly minimum wage to 9.40 euros ($11.80), Les Echos reported.
  • Commodities Fall Into a Bear Market. Commodities tumbled into a bear market as U.S. reports on manufacturing, jobless claims and home sales signaled a faltering economy after the Federal Reserve refrained from announcing another round of stimulus. The Standard & Poor’s GSCI Spot Index of 24 raw materials fell 2.8 percent to settle at 559 at 3:56 p.m. New York time. The gauge has dropped 22 percent from this year’s highest close of 715.52 on Feb. 24, entering a bear market. Earlier, the measure touched 558.14, the lowest since November 2010. Metals and energy led today’s slump.
  • FDA report shows extent of problems with metal-on-metal hip implants. Almost 16,800 adverse events associated with metal-on-metal hip implants were reported in the U.S. from 2000-2011, regulators said. The reports almost quadrupled to 682 in 2008 from the year earlier, and rose again after a unit of Johnson & Johnson began recalling hip devices in 2010, according to report posted today on the Food and Drug Administration’s website. Adverse event reports in 2011 totaled 12,137 for the metal-on-metal devices, compared with 6,332 associated with other types of hip implants, according to the FDA document.
  • Made in China Not Worth Hassle for Small Firms Returning to U.S. When Sonja Zozula and Jerry Anderson founded LightSaver Technologies Inc. in 2009, everyone told them they should make their emergency lights for homeowners in China. After two years of outsourcing to factories there, last winter they shifted production to Carlsbad, California, about 30 miles (48 kilometers) from their home in San Clemente. “It’s probably 30 percent cheaper to manufacture in China,” Anderson says. Besides hassles including shipping, “it’s a question of, ‘How do I value my time at three in the morning when I have to talk to China?’” he says. As costs in China rise and owners consider the challenges of using factories 12,000 miles and 12 time zones away, many small companies have decided manufacturing overseas isn’t worth the trouble. American production is “increasingly competitive,” says Harry Moser, founder of the Reshoring Initiative, a group of companies and trade associations trying to bring factory jobs back to the U.S. “In the last two years there’s been a dramatic increase” in the amount of work returning.
  • International Game(IGT), Bally(BYI) Win Nevada Online Casino Licenses. The Nevada Gaming Commission issued its first two licenses for online betting, bringing the state with the most casino revenue a step closer to real wagering on poker from home. International Game Technology (IGT), based in Reno, Nevada, and Las Vegas-based Bally Technologies Inc. (BYI) received approvals today, according to Michael Lawton, a senior research analyst with the Nevada Gaming Control Board. Companies must still get their systems approved by independent testing laboratories before starting service, Lawton said.
  • Liquidnet Says SEC Investigating Dark-Pool Disclosures. The U.S. Securities and Exchange Commission is investigating Liquidnet Holdings Inc. for shortcomings in how the dark-pool owner guarded information about firms using its platform, according to a letter the company sent clients today. SEC staff is “conducting an investigation regarding these matters and has made additional requests for information and documents,” the operator of two equity trading venues said in an e-mail obtained by Bloomberg News. New York-based Liquidnet said the issues identified by the SEC involving its equity capital markets business have been corrected.
  • India Puts Rise to Record. (video) Options traders are paying the most on record for bearish contracts on Indian stocks versus bullish ones, protecting against declines as inflation accelerates amid concern the country will lose its investment-grade status.
  • Korea Home Price Slide Persists With Property Anxiety. Yook Jeong Soo last month renewed a two-year lease on his three-bedroom home on the outskirts of Seoul, preferring to pay the 30 percent rent increase his landlord demanded rather than buy in the city’s housing market. “The rent rise was huge, I know, but why should I bother buying a house now with borrowed money when I’m not so confident the price will go up?” said the 49-year-old office worker. “The heyday is over for the housing market.”
  • Vanishing Households Undercut Claim of Australia Shortage. Australia has almost 1 million fewer households than assumed in government forecasts of a housing shortage, raising doubts about a supply shortfall cited as the main reason the nation will avoid a U.S.-style crash. The Pacific nation had 7.8 million households, data released yesterday from the 2011 Census showed. That compared with estimates of 8.7 million as of June 2010, according to the latest figures used by the National Housing Supply Council, a group created by the government in May 2008 to monitor housing demand, supply and affordability. Australia’s population also grew by 300,000 less than previously estimated, to 21.5 million.
  • Gross Warns of Risk Assets as Aberdeen Underweight on Equities. Bill Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co., warned against risk assets, as Aberdeen Asset Management Plc (ADN) said it’s underweight on stocks. Asian shares extended a global rout after manufacturing gauges for the euro area, China and the Philadelphia region signaled contraction. The Federal Reserve this week refrained from introducing a third round of so-called quantitative easing even as the central bank cut its U.S. growth forecast. Gross, who manages $261 billion for the Pimco Total Return Fund, said in a Twitter post that risk markets are vulnerable as the “monetary bag of tricks empties.” “We’re still certainly very comfortable running our underweight equity positions that we took out in March,” said Peter Elston, the Singapore-based head of Asia-Pacific strategy and asset allocation at Aberdeen, which oversees about $270 billion. “Economies will continue to contract. There will be this realization that the governments are not perhaps as able to act as they have been in recent years,” he said in an interview with Bloomberg Television today.
Wall Street Journal:
  • A Closer Look at Bernanke's Incremental Approach. Federal Reserve Chairman Ben Bernanke has borne his share of criticism and puzzlement in the past 24 hours — both at his post-meeting press conference and in the blogosphere in places like this, this and this — for not moving more aggressively Wednesday to address a deteriorating economic outlook. The Fed could have launched a big new bond buying program, the thinking goes. Why not go ahead and do it right away, when the central bank’s forecasts for growth and unemployment look so much worse than they did in April and its inflation projections are falling?
  • Who Is That Masked Hedge Fund? It is the latest in-vogue accessory among hedge-fund managers: a "masked fund." Bridgewater Associates has "ZQPGGAV00000," John Paulson has "Paulson Fund 1" while Cliff Asness's AQR Capital Management prefers "805-1355888867." The cryptic monikers, more product barcodes than real handles, enable the hedge-fund managers to shield the identities of their funds from the prying eyes of regulators and outsiders in forms filed with the Securities and Exchange Commission. Some 150 private investment advisers opted to mask the real names of their individual funds when they complied with new rules that forced many hedge-fund firms to register with the SEC.
  • Emails Tie Goldman(GS) Manager, Rajaratnam. The ties between a top Goldman Sachs Group Inc. manager and the controversial hedge fund Galleon Group Inc. were closer than previously known.
  • Courting the Chinese Buyer. Buyers from China are pouring billions into residential property—and developers are courting them with everything from feng shui to lucky numbers.
  • EU Banks' Risk in Eyes of Beholder. Worry Is That Lenders Are Boosting Gauge of Their Health. Regulators and investors are concerned that some European banks are artificially boosting a key measure of their financial health, a worry that is further eroding market confidence in the Continent's banks. Such concerns have been building up for more than a year. But they have intensified lately, with a parade of banks announcing that they intend to increase their capital ratios—a key gauge of their abilities to absorb future losses—partly by tinkering with the way they assess the riskiness of their assets. Spanish banks, including Banco Santander SA, are among those that have announced plans to boost their capital ratios.
  • In Europe, Idle Car Factories Live On. Few places illustrate the troubles of the European auto industry better than Fiat SpA's vast Mirafiori plant near Turin, Italy. The factory was churning out cars earlier this week but suddenly became a ghost town on Thursday and Friday, its production lines silent and the company's adjacent headquarters offices almost entirely empty and darkened. The same thing happened on two day earlier this month and will again on four more days in July. Shutdowns similar to those at Mirafiori have become a regular occurrence all across Western Europe and reveal an auto-industry crisis that is quietly reaching dire proportions.
Business Insider:
 Zero Hedge:
 CNBC:

NY Times:

  • NBC News Faces Shift in Television Dominance. Struggling with declining ratings across all three franchises, however, and with news this week that the network is preparing to replace Ann Curry on “Today,” NBC executives are facing a new narrative that is being embraced by the competition. For the first time in more than a decade, NBC News appears to be adrift.
Gallup:

USA Today:

  • Women's Financial Confidence Falters. From 2011 to 2012, women became disproportionately less likely than men to pay their credit card balance in full each month, have an emergency savings fund and have a general understanding of stocks, bonds and mutual funds, the survey found. The gap between men and women widened by at least 6 percentage points in each of those cases. The survey results are particularly worrisome given women's longer life expectancy, combined with the fact that they have less income on average over time from being out of the workforce longer to care for children and subsequently less Social Security to fall back on, says Financial Finesse CEO Liz Davidson.
Reuters:
  • Ryder(R) cuts forecast on weak rental demand. Logistics company Ryder Systems Inc cut its quarterly earnings forecast, citing lower demand for its commercial rental services. The company also plans to cut costs and reduce its commercial rental fleet as it expects the weakness to continue through the year. Used vehicle inventory will be high for the remainder of the year, Ryder said in a statement. "Although commercial rental revenue has improved both year-over-year and seasonally, May results reflected lower rental growth than previously discussed," Ryder said in a statement, blaming weak demand and pricing. Ryder forecast second-quarter earnings of 90 cents to 95 cents per share, down from its earlier view of $1.07 to $1.12 per share. Higher medical benefit costs are also expected to hurt earnings. Its shares fell 9 percent to $37 in after-market trading from its Thursday close of $40.75.
  • Retail investors net sellers of equity funds-Lipper.
  • U.S. Earnings Outlook Pounded by Global Turmoil. Weakening business activity worldwide is hitting U.S. companies where it hurts, with more of them signaling disappointing results than at any time over the past decade. Many bellwether companies, including two Dow components, have come out in recent days with profit warnings, and the slowing in Europe has been cited as a major factor for those outlooks. For every company that has raised its second-quarter profit outlook, 3.6 have warned, the worst ratio since the third quarter of 2001, according to Thomson Reuters data. Firms including PepsiCo Inc, package shipper FedEx Corp and tobacco company Philip Morris all lowered earnings expectations in recent days, citing concerns about Europe. On Wednesday, Procter & Gamble Co cut its growth forecasts for the second time in two months. The consumer products giant also reduced its profit view as it deals with slowing demand in Europe and China.
  • Arch Coal(ACI) cuts tenth of workforce on weak market. Arch Coal Inc will cut about a tenth of its workforce, or 750 jobs, as it closes three higher-cost mining complexes and associated plants in response to the weak U.S. market for thermal coal.
Financial Times:
  • Troubling times for high fee ‘concierges’. The future of the battered funds of funds industry – which once accounted for as much as two-thirds of all investments in hedge funds worldwide – is coming under scrutiny. According to Hedge Fund Research, funds of funds now make up only a third of the hedge fund industry’s $2tn investor base. And many believe that is bound to shrink further.
Telegraph:

The Independent:
  • Downgrade for UK Banks Raises Fears of Credit Crunch. Some of the world's biggest banks – including Barclays, HSBC and Royal Bank of Scotland – had their credit ratings downgraded last night as a result of the eurozone crisis. Moody's downgrades came amid fears that the euro crisis will prompt another credit crunch by making banks afraid of lending to each other, or to anyone else.
The Guardian:
  • Mario Monti: we have a week to save the eurozone. Italian prime minister warns that there is no room for failure in talks between single currency's big four countries. Italy's prime minister, Mario Monti, has warned of the apocalyptic consequences of failure at next week's summit of EU leaders, outlining a potential death spiral whose consequences would become more political than economic. The Italian leader is to hold talks with Chancellor Angela Merkel of Germany, the French president, François Hollande, and Spain's prime minister, Mariano Rajoy, in the hope that the single currency's big four countries can pave the way for a breakthrough at next week's meeting. Speaking to the Guardian and a group of leading European newspapers, Monti said that, without a successful outcome at the summit, "there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries". The attacks would be focused not only on those who had failed to respect EU guidelines, but also on those like Italy, which he said had abided by the rules "but which carry with them from the past a high debt". Monti warned: "A large part of Europe would find itself having to continue to put up with very high interest rates that would then impact on the states and also indirectly on firms. This is the direct opposite of what is needed for economic growth." Outlining the result of a failure at the talks, Monti said that, faced with creeping economic paralysis, "the frustration of the public towards Europe would grow", creating a vicious circle. "To emerge in good shape from this crisis of the eurozone and the European economy, ever more integration is needed," said Monti. Yet, if the summit failed to resolve the problems quickly, "public opinion, but also that of the governments and parliament… will turn against that greater integration". Monti said he could see the beginnings of the process "even in the Italian parliament, which has traditionally been pro-European and no longer is".

Bangkok Post:
  • SCG Results Could Slow On Global Troubles. A prolonged European debt crisis and a slower-than-expected US economic recovery could weigh on the results of the Siam Cement Group (SCG) in the second half of the year. Kan Trakulhoon, the president and chief executive, said the situation in Europe has remained "worrisome", although following the recent elections, Greece has been able to form a government. Prospects for economic recovery in the US dimmed recently, especially in terms of housing, due partly to the European situation, he said. The US and Europe together account for 5% of SCG exports. However, the concern is that if the situation in the US and Europe worsens, Asean and other markets in Asia will be negatively affected.
Evening Recommendations
Wells Fargo:
  • Rated (RDEN) Outperform.
Night Trading
  • Asian equity indices are -1.50% to -.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 181.0 +6.5 basis points.
  • Asia Pacific Sovereign CDS Index 143.0 +.75 basis point.
  • FTSE-100 futures -1.05%.
  • S&P 500 futures +.31%.
  • NASDAQ 100 futures +.23%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (MLHR)/.30
  • (DRI)/1.15
  • (CCL)/.08
Economic Releases
  • None of note

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The ECOFIN Meetings and the EU Summit could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
0 comments

Thursday, June 21, 2012

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Tech/Commodity Sector Weakness, Technical Selling

Posted by Gary .....at 4:11 PM

Broad Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 19.53 +13.28%
  • ISE Sentiment Index 82.0 -1.20%
  • Total Put/Call 1.13 +21.51%
  • NYSE Arms 2.82 +172.48%
Credit Investor Angst:
  • North American Investment Grade CDS Index 116.81 +2.48%
  • European Financial Sector CDS Index 276.22 +.35%
  • Western Europe Sovereign Debt CDS Index 298.56 -2.07%
  • Emerging Market CDS Index 292.22 +4.56%
  • 2-Year Swap Spread 25.75 +1.75 basis points
  • TED Spread 39.0 +.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -53.25 -2.0 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .08% unch.
  • Yield Curve 131.0 -2 basis points
  • China Import Iron Ore Spot $137.40/Metric Tonne +.44%
  • Citi US Economic Surprise Index -64.80 -5.5 points
  • 10-Year TIPS Spread 2.07 -7 basis points
Overseas Futures:
  • Nikkei Futures: Indicating a -45 open in Japan
  • DAX Futures: Indicating -42 open in Germany
Portfolio:
  • Slightly Lower: On losses in my tech, medical, biotech and retail sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some of them
  • Market Exposure: 50% Net Long
BOTTOM LINE: Today's overall market action is very bearish as the S&P 500 breaks back below its 50-day moving average and trades near session lows on rising Eurozone debt angst, diminished global central bank stimulus hopes, more weak US economic data, tech/commodity sector weakness and rising global growth fears. On the positive side, Airline and Drug shares are holding up relatively well, falling less than -1.0%. Gold is falling -2.5%, the UBS/Bloomberg Ag Spot Index is down -1.6% and Oil is down -3.2%. The Portugal sovereign cds is down -1.8% to 915.05 bps and the Ireland sovereign cds is down -2.2% to 643.98 bps. On the negative side, Coal, Alt Energy, Oil Tanker, Energy, Oil Service, Steel, Software, Computer, Semi, Disk Drive, Networking, I-Banking, Hospital, Construction and Retail shares are under significant pressure, falling more than -3.0%. Cyclical and small-cap shares have traded poorly throughout the day. Tech shares have also been very heavy. Copper is down -2.6% and Lumber is down -2.9%. Major Asian indices were mostly lower overnight, led down by a -1.3% decline in Hong Kong. Major European indices were modestly lower. The Bloomberg European Bank/Financial Services Index fell -.5%. The Germany sovereign cds is up +1.3% to 101.12 bps, the France sovereign cds is gaining +1.78% to 197.44 bps, the China sovereign cds is up +1.9% to 119.70 bps, the Russia sovereign cds is soaring +5.7% to 234.17 bps, the Brazil sovereign cds is jumping +5.4% to 153.12 bps. As well, the Italian/German 10Y Yld spread is rising +1.5% to 421.36 bps. Weekly retail sales have decelerated to a sluggish rate at +2.5%. US Rail/Trucking Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to late-Aug. levels. Lumber is -10.0% since its Dec. 29th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -55.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -23.0% since Sept. 7th of last year. Shanghai Copper Inventories have risen +137.0% ytd. The CRB Commodities Index is now technically in a bear market, having declined -27.4% since May 2nd of last year. Overall, credit gauge deterioration remains a big worry as most key sovereign cds remain technically strong. The tech sector is under pressure today on worries over handset and pc growth. The euro currency, oil, lumber and copper all trade very poorly given global central bank stimulus hopes and recent stock gains. As well, the 10Y continues to trade too well as the yield is falling another -4 bps today to 1.62%. The AAII % Bulls fell to 32.9 this week, while the % Bears rose to 35.9. I still believe the level of complacency among US investors regarding the rapidly deteriorating situation in Europe is fairly high. The Citi Eurozone Economic Surprise Index is falling another -6.0 points to -74.3 points, which is the lowest since early Oct. of last year. The “solutions” for the European debt crisis I still hear being bandied about are only bigger kick-the-cans that will eventually lead to an even bigger catastrophe as Germany is engulfed, in my opinion. As well, some key economies in the region are likely accelerating their contractions right now. Moreover, the European debt crisis is really beginning to bite emerging market economies now, which will also further pressure exports from the region and further raise the odds of more sovereign/bank downgrades. The "US fiscal cliff "will become more and more of a focus for investors as the year progresses. Finally, the upcoming earnings season could prove more challenging than usual for big multi-nationals given US dollar strength and the precipitous declines in some key parts of the global economy during the quarter. Global central bank stimulus hopes and hopes for a Eurozone fiscal unity "solution" had been propping up stocks, but I still believe there is too much uncertainty on the horizon to conclude a durable stock market low is in place. For this year's equity advance to regain traction, I would expect to see a resumption in European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices, a US "fiscal cliff" solution and higher-quality stock market leadership. I expect US stocks to trade modestly lower into the close from current levels on rising eurozone debt angst, diminished global central bank stimulus hopes, rising global growth fears, profit-taking, technical selling, tech/commodity sector weakness and more shorting.
0 comments

Today's Headlines

Posted by Gary .....at 2:58 PM

Bloomberg:
  • Spain's Banks Need Up To $78 Billion, Report Shows. Spain’s banks would need as much as 62 billion euros ($78 billion) in capital to withstand a worst- case economic scenario, according to two consulting firms hired by the government to conduct stress tests on the lenders. Oliver Wyman Ltd. estimated banks would need between 51 billion euros and 62 billion euros should Spanish gross domestic product shrink by 6.5 percent and house prices drop 60 percent from the peak.
  • Spain Meets Bond Auction Maximum Target With Surging Costs. Spain paid the most in at least eight years to sell three-year debt ahead of the publication of its banks' capital needs that will determine how much the euro area's fourth-largest economy needs from European rescue funds. The Treasury today sold 2.22 billion euros ($2.81 billion) of bonds, the Madrid-based Bank of Spain said today. That's above a 2 billion-euro maximum target for the sale. Three-year bonds maturing in July 2015 fetched an average rate of 5.547 percent, compared with 4.876 percent on May 17, and the most since at least 2004.
  • Samaras Names Banker to Greek Cabinet as Troika Prepares Return. Greek Prime Minister Antonis Samaras appointed Vassilios Rapanos, head of the country’s biggest bank, to lead his finance team as the government prepares for talks with international creditors on relief from austerity measures. Rapanos, chairman of National Bank of Greece SA (ETE), was named as finance minister today after Samaras, the head of the New Democracy party, met with his coalition partners, socialist Pasok chief Evangelos Venizelos and Democratic Left leader Fotis Kouvelis. Demetris Avramopoulos, a former defense and tourism minister and mayor of Athens, was named foreign minister.
  • National Bank of Greece to Sell Luxury Resort as Slump Bites. National Bank of Greece SA is preparing to sell an Athenian Riviera resort, visited by world leaders and movie stars for more than half a century, in a test of the country’s ability to sell assets amid concern that it will leave the euro. The 3.3 million-square-foot (307,000 square-meter) Astir Palace complex has already drawn investors’ interest, according to Aristotelis Karytinos, general manager of real estate at the lender. The Athens-based bank and Greece’s privatization fund, which owns part of the property, will put out a public tender in coming months, he said.
  • Russian Exports Seen Threatening Europe Steel Industry, FTD Says. Russia joining the World Trade Organization means its steel exports are a threat to Europe’s steel industry, according to Karlheinz Blessing, the chief executive officer of Dillinger Huette Saarstahl AG, the Financial Times Deutschland reported. Speaking at the Economic Press Club in Dusseldorf, Blessing said Russian steelmakers have ample raw materials and produce at lower cost than German companies, and imports could lead to overcapacity in the market, the newspaper reported.
  • Moody’s Said to Be Poised to Announce Bank Downgrades Today. Moody’s Investors Service has told banks it may later today announce downgrades of the credit ratings of as many as 17 lenders and securities firms with global capital markets operations, according to two people with knowledge of the plans. The announcement may come after the close of trading in New York today, said one of the people, who asked to not be identified because the information is private.
  • Ratings Cuts at Three-Year High on China Slowdown: Brazil Credit. Brazilian companies are being downgraded at the fastest pace in three years as economic growth slows, driving up borrowing costs for companies from Usinas Siderurgicas de Minas Gerais SA to Suzano Papel & Celulose SA. S&P and Moody's Investors Service have lowered the rating and outlooks of Brazilian companies 27 times this year, compared with 21 in all of 2011.
  • Manufacturing Slump Deepens From Euro Area To China: Economy. Euro-area manufacturing output shrank at the fastest pace in three years in June and a Chinese output gauge indicated contraction as Europe’s worsening fiscal crisis clouded global economic-growth prospects. A gauge of euro-region manufacturing fell to 44.8 from 45.1 in May, London-based Markit Economics said today in an initial estimate. That’s the lowest in 36 months. The preliminary reading was 48.1 for a Chinese purchasing managers’ index from HSBC Holdings Plc and Markit. A reading below 50 indicates contraction. A gauge of German manufacturing output dropped to 44.7 in June from 45.2 in the previous month, Markit said today. The French indicator rose to 45.3 from 44.7. Euro-region gross domestic product probably dropped 0.6 percent in the second quarter, according to Chris Williamson, chief economist at Markit. In the year’s first three months, the area’s economy stalled. “The downturn is gathering pace and spreading across the region, with Germany on course for a marginal fall in GDP in the second quarter, though far steeper declines are likely elsewhere,” Williamson wrote in the statement. “Firms are preparing for conditions to worsen in the coming months, with the darker outlook often attributed to uncertainty caused by the region’s ongoing economic and political crises.”
  • China Said to Propose Keeping Limit on Local Government Loans. China’s banking regulator proposed keeping a cap on local government loans to curtail defaults while encouraging funding for railways, roads and affordable homes, a person with direct knowledge of the matter said. The China Banking Regulatory Commission suggested limiting loans to local government financing vehicles to levels reached at the end of 2011, according to a person with knowledge of the matter who asked not to be named because the proposal is confidential. The watchdog made the recommendation in a report sent to the cabinet after Premier Wen Jiabao’s call last month for the government to focus on growth, the person said.
  • Firings In US Remain Elevated and Factories Retrench: Economy. More Americans than forecast filed claims for jobless benefits and manufacturing in the Philadelphia region shrank, adding to evidence the U.S. economic expansion is weakening. Applications for unemployment insurance payments fell by 2,000 to 387,000 in the week ended June 16, Labor Department figures showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg News called for 383,000. The Federal Reserve Bank of Philadelphia’s factory index dropped to minus 16.6 in June, the lowest level since August. “The labor-market recovery appears to be stalling,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York. “We are likely to see further moderation in consumer spending, which suggests weakness in manufacturing. This provides confirmation of the Fed’s stance.” Another report today showed the fewest Americans in five months said the economy was improving in June, signaling the slowdown in employment is seeping into consumer psychology. The share of households viewing the economy as heading in the right direction fell to 22 percent this month, the lowest since January, pushing the Bloomberg monthly expectations gauge to minus 11 from minus 1 in May. The weekly Bloomberg Consumer Comfort Index was minus 37.9 in the period ended June 17, down from a four-week high of minus 36.4. “The steady drip of dreary economic data and a deteriorating labor market is reshaping public expectations,” said Bloomberg LP senior economist Joseph Brusuelas in New York. The decline “will likely result in slower spending, which in turn will likely have an adverse impact on business confidence.”
  • Sales of Existing US Homes Fall in May to 4.55M. Sales of previously owned U.S. homes declined in May, showing an uneven recovery in residential real estate. Purchases of existing properties dropped 1.5 percent to a 4.55 million annual rate last month, figures from the National Association of Realtors showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 4.57 million pace. The weakest employment gain in a year last month and limited access to credit are restraining a housing industry that’s been supported by record-low borrowing costs and cheaper properties that are drawing investors. At the current pace, it would take 6.6 months to sell existing inventory, compared with 6.5 months at the end of the prior period.
  • Commodities Fall to Lowest Since 2010 as Fed Cuts Outlook. Commodities dropped to the lowest level in almost 19 months after the U.S. Federal Reserve cut its growth outlook for the world’s largest economy. Crude fell below $80 a barrel in New York for the first time since October. The Standard & Poor’s GSCI Spot Index of 24 commodities fell for a second day, losing as much as 1.5 percent to 566.85, the lowest since November 2010, and was at 568.91 at 9:49 a.m. in London. Raw materials will enter a bear market if they finish around 570.26, or 20.3 percent below their Feb. 24 closing high.
  • Coal Excess Grows on U.S. Shale Boom, China Mines: Chart of the Day. Global coal output will exceed consumption by a record this year, surpassing the margin set in 2011, as China mines more for its power plants while U.S. utilities shift their fuel of choice to natural gas. Global coal production rose 6.2% in 2011 to a record 3.96 billion metric tons of oil equivalent, compared with a 5.4% increase in consumption to 3.72 billion tons, according to the BP Statistical Review of World Energy 2012, published last week. Coal prices at Australia's Newcastle port slumped to $83.75 a ton in the week ended June 15, the lowest since December 18,2009, as overcapacity rises, Bloomberg data show. Global coal supply will expand about 8% annually this year and next, while demand growth will decelerate, Standard Chartered Plc said in a recent report.
  • China Crude Imports From Iran Climb To Highest This Year. China’s imports of crude from Iran rose to the highest level this year even as Western nations stepped up pressure to cut purchases of the commodity from the Persian Gulf nation. China, the world’s second-biggest crude consumer, bought 2.22 million tons of oil from Iran in May, according to a report e-mailed by the Beijing-based General Administration of Customs today. That’s equivalent to more than 524,000 barrels a day, up 35 percent from the 390,000 barrels a day purchased in April. It imported 2.27 million tons, or about 537,000 barrels a day, in May last year.
  • Former Fed Chief Greenspan Says Economy 'Very Sluggish'. Alan Greenspan, the former Federal Reserve chairman, said today the U.S. economy “looks very sluggish.” Greenspan, in a television interview on Bloomberg Surveillance with Tom Keene, also said he sees “global slack” in the economy. “It looks very sluggish to me,” Greenspan said when asked about the U.S. expansion. “We have a two-stage economy in this country.”
  • BofA(BAC) Fined $2.8 Million for Overbilling 95,000 Accounts. Bank of America Corp.’s Merrill Lynch wealth-management unit was fined $2.8 million by the Financial Industry Regulatory Authority for overbilling customers by $32.2 million over an eight-year period. Merrill Lynch charged the fees to about 95,000 accounts between April 2003 and December 2011, FINRA said in a statement today. New York-based Merrill Lynch, which was acquired by Bank of America in 2009, lacked an adequate supervisory system to ensure that customers were billed in accordance with their contracts and disclosure documents, the regulator said. “Investors must be able to trust that the fees charged by their securities firm are, in fact, correct,” Brad Bennett, FINRA’s chief of enforcement, said in the statement. “When this is not the case, investor confidence is threatened.”
  • Shunning Second Car May Hurt U.S. Auto Sales: Chart of the Day. Auto sales may have less room to grow because Americans are increasingly willing to settle for owning one car or truck, according to Itay Michaeli, a Citigroup Inc. analyst. The CHART OF THE DAY displays the average number of vehicles for every U.S. driver since 1960, according to data that Citigroup compiled from the Federal Highway Administration and Ward’s Automotive Reports. Michaeli included a similar chart in a report two days ago. Last year’s average was little changed at 1.14, according to his estimate. The indicator of what he called auto density had fallen for three straight years after rising to a record 1.18 in 2007.
  • Navistar(NAV) Fined by EPA Over Technology Built With Agency. The U.S. Environmental Protection Agency is fining diesel-engine maker Navistar International Corp. for shortcomings in pollution-control technology the agency helped it develop. “EPA is entangled in a blatant conflict in regulating a business partner,” Jeff Ruch, executive director of Public Employees for Environmental Responsibility, said in an e-mail.
  • Onyx(ONXX) Wins Backing of FDA Advisory Panel for Cancer Drug. Onyx Pharmaceuticals Inc. (ONXX) rose the most in five years after winning support from a U.S. advisory panel for its drug to treat a deadly blood cancer that affects 50,000 Americans. Onyx jumped 39 percent to $62.19 at 9:39 a.m. New York time, after reaching $63 in the biggest intraday increase since February, 2007. The shares have gained 29 percent in the 12 months before today. Ligand Pharmaceuticals Inc. (LGND), which has an agreement with Onyx to explore an IV version of the medicine, increased 10 percent to $16.
  • Philip Morris Cuts 2012 Earnings Forecast on Currency Swings. Philip Morris International Inc., the world’s largest publicly traded tobacco company, cut its 2012 earnings forecast as the strength of the dollar hurts sales generated abroad by the maker of Marlboro cigarettes. Earnings per share this year will be $5.10 to $5.20 based on prevailing rates, the New York-based company said in a statement today, compared with an April forecast of $5.20 to $5.30. Philip Morris said currency shifts will cut 25 cents from EPS, more than the 15 cents forecast in April. The U.S. dollar has gained 4.5 percent against the euro in the past two months. Philip Morris, created in 2008 when Altria Group Inc. (MO) (MO) spun off its businesses outside the U.S., got 39 percent of revenue (PM) from the European Union in 2011. Philip Morris fell 2.4 percent to the equivalent of $86.39 in European trading (PM) as of 8:47 a.m. London time.
  • Blankfein Sees 80% of Goldman's(GS) Growth Coming From BRICs. Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said the firm will rely on the biggest emerging markets for most of its growth even amid increasing concern economic expansion in Brazil, Russia, India and China may be slowing.
  • Egypt Islamists Call for Protest Over Army's Power Move. Egypt’s main Islamist groups called for protests after prayers tomorrow against moves by the ruling generals to expand their powers, as a delay in presidential election results added to political tensions.
Wall Street Journal:
MarketWatch:
  • Senate Approves Sweeping Five-Year Farm Bill. The Senate on Thursday passed a sweeping, $500 billion farm bill that would end direct payments and other subsidies to farmers, while expanding crop insurance and funneling new money to “specialty” crop growers.
  • Lack of Leadership Marks G-20 Summit. The photo op at the Group of 20 economic summit this week with President Barack Obama and Russia’s Vladimir Putin showing their evident distaste for one another drew a lot of attention, but a less visible spectacle was that of Obama lecturing German Chancellor Angela Merkel on economics. That’s a picture — much like the blind leading the blind.
Fox News:
  • Supreme Court Rules Against FCC Profanity, Nudity Policy. The Supreme Court on Thursday ruled against the FCC's policy regulating curse words and nudity on broadcast television. In an 8-0 decision, the high court threw out fines and sanctions imposed by the Federal Communications Commission. The case involved some uncensored curse words and brief nudity on various networks, including Fox. "Because the FCC failed to give FOX or ABC fair notice prior to the broadcasts in question that fleeting expletives and momentary nudity could be found actionably indecent, the Commissions' standards as applied to these broadcasts were vague," the Supreme Court said in its opinion. The court said the FCC is "free to modify its current indecency policy" in light of the ruling.

CNBC.com:

  • Beware the Looming 'Monetary Cliff': Goldman's(GS) Hatzius. After reading so much about the dreaded “Fiscal Cliff” these days, market participants can add another term to their fear lexicon thanks to Goldman Sachs: the “Monetary Cliff.” On Wednesday, the Federal Reserve extended its so-called Operation Twist program (selling short-term Treasurys and using the proceeds to buy long-term Treasurys) to the end of this year. This timeline — and the central bank’s failure to explicitly extend its low-rate guidance — sets the country up for a drop-off in accommodative Fed policies, points out the firm’s chief U.S. economist, Jan Hatzius. “The economy now faces a ‘monetary cliff’ in addition to the ‘fiscal cliff,’ ” wrote Hatzius, in a note to clients. “Our forecast implies that the U.S. economy will continue to struggle with slow growth and high unemployment of more than 8 percent going into 2013. Specifically, we forecast a slowdown in real (gross domestic product) span#ExplainsLink a, span#ExplainsLink a img, span#ExplainsLink a:visited img, span#ExplainsLink a:visited {border:none;} growth to just 1.5 percent (quarter-on-quarter, annualized) in the first quarter of 2013.”
  • ECB Mulls Scrapping Sovereign Rating Rules: Sources. The European Central Bank is discussing a medium-term plan to scrap rating rules on euro zone sovereign bonds and instead set their value when used as collateral in lending operations on its own internal assessment, central bank sources said.
  • Bosses Rein in UBS Banker Who Golfs With Obama. The banker, Robert Wolf, a top UBS executive in New York, is among President Obama's leading fund-raisers, building more than $500,000 for his re-election so far this year. A regular presence at big campaign fund-raisers, Mr. Wolf, who is 50, golfs and vacations with Mr. Obama and is known for e-mailing friends photos of himself with the president. While such a close relationship might have been envied by other bankers in 2008, when much of Wall Street was infatuated with Mr. Obama and donated heavily to his presidential bid, it has been making other UBS executives uneasy of late.

Business Insider:

Zero Hedge:

New York Times:
  • France and Germany Fae Delicate Talks Over Economy. Armed with a new mandate and a solid legislative majority, France’s François Hollande is off to do battle with Germany in the name of growth, prosperity and human decency. Or that’s the popular image, at least, of what is in fact a more delicate and nuanced relationship between the new French president and the German chancellor, Angela Merkel.
Benzinga:
  • Whitney Stands By Call On Municipal Defaults. Meredith Whitney, widely known as the first bank analyst to call to light the risks of the sub-prime market, is standing by her call that some U.S. states and municipalities remain financially vulnerable. In an interview with Bloomberg Television's "Risk Takers" program, Whitney cleared the air about her controversial view on the financial health of U.S. states and cities.

CNN:

FINalternatives:
  • Hedge Funds Fall In Early June. Hedge funds extended their May—and April—losses in the first half of this month, one industry benchmark shows. The HFRX Global Hedge Fund Index shed 0.54% on the month through June 15. The decline leaves the index up just 0.97% on the year. Only one of the 15 strategy, sub-strategy and regional indices complied by Hedge Fund Research for the HFRX suite was in the black in the first two weeks of June, and it only barely: Fundamental value equity funds rose a microscopic 0.03% (0.54% YTD). The rest of the report was a sea of red. Macro funds and commodity trading advisers lost 1.06% (down 1.57% YTD), relative value arbitrage funds 0.42% (up 1.72% YTD), and equity hedge fund and event-driven funds 0.38% apiece (up 0.27% and 3.18% YTD, respectively). Systematic diversified funds took the biggest loss in early June, dropping 1.89% (down 2.6% YTD). Equity market neutral funds lost 0.98% (down 4.5% YTD), special situations 0.52% (up 1.52% YTD) and convertible arbitrage 0.47% (up 2.73% YTD).

Reuters:

  • US Ex-Im Bank signs $1 bln pact with Russia's Sberbank. The U.S. Export-Import Bank on Thursday said it has signed a $1 billion financing arrangement with Sberbank, Russia's largest financial institution, to boost exports of U.S. aircraft, energy equipment and other goods and services to the former Cold War enemy. The action comes as Russia is the verge of entering the World Trade Organization and the U.S. Congress is facing a vote on whether to establish "permanent normal trade relations" by repealing a 1974 provision that makes favorable U.S. tariff rates for Russia conditional on the rights of Jews to emigrate.
  • Big investors eye loading up on hedge funds: survey. Pension funds, endowments and charities may soon heap more hedge funds into their portfolios. Nearly one third of institutional investors said they have too much cash on hand and not enough money invested in hedge funds, according to a poll released by Russell Investments on Tuesday. "At least 30 percent of respondents indicated they were below their target weights in hedge funds, private real estate and private equity," Russell wrote in its 2012 Global Survey on Alternative Investing, a biennial survey.
  • CarMax(KMX) shares down as wholesale unit disappoints. CarMax Inc, a retailer of new and used cars, posted a quarterly profit that missed analysts' estimates as its wholesale business sold fewer cars. The largest retailer of used cars in the United States said although more people visited its stores to sell their cars during the quarter compared with a year earlier, the visits did not translate into as many buys by the company.

Financial Times:

  • Germany Infected By Eurozone Woes. (graph) The eurozone is stuck firmly in a sharp economic contraction, with the region’s escalating debt crisis hitting Germany with increasing severity, according to a closely watched survey.

Telegraph:

meps:

  • MEPS Reports Weaker Northern European Steel Prices As Demand Declines. The market for flat products in northern Europe remains very weak. Activity levels in mainland Europe are very depressed and, although demand in the Nordic region is better, research at the beginning of June revealed falling transaction values throughout all the countries reviewed.

Handelsblatt:

  • States represented in the euro-area rescue fund may lack seniority in the event that Spain cannot repay aid granted, citing European Union officials. EU officials are considering the move, adding that Spain will today formally request financial help for its banks. The Spanish government will seek a direct injection of aid to its lenders, circumventing the state administration, a move Germany opposes.

Digi Times:

  • Branded Handset Vendors Cutting Orders to Component Suppliers, Say Sources. A number of branded handset vendors, including Nokia, Motorola Mobility, Samsung Electronics, LG Electronics, Sony Mobile Communications, RIM, HTC, Huawei Device and ZTE, have reduced their orders to Taiwan-based handset component suppliers recently, with the reduction expected to swell into the third quarter, according to industry sources. A crunch in buying activities in Europe combined with a slowdown in growth momentum for smartphones in North America has induced branded vendors to revise downward their orders for parts and components, the sources explained. The ratios of reduction ranged from 5-10% for vendors which slashed their orders in small scale, but some vendors cut orders as much as 20-30%, noted the sources. Although some vendors will launch new models in the third quarter, the traditional peak season for component suppliers in the third quarter may not happen this year, said the sources. With the exception of display sizes and clock frequencies of CPUs, the competition of hardware specifications for smartphones has nearly reached the end stage, making it difficult for branded vendors to push sales as well as to figure out the projected shipment volumes for new models, the sources commented.
0 comments

Bear Radar

Posted by Gary .....at 1:25 PM

Style Underperformer:
  • Small-Cap Growth -2.33%
Sector Underperformers:
  • 1) Coal -4.53% 2) Gold & Silver -4.44% 3) Oil Service -4.01%
Stocks Falling on Unusual Volume:
  • TGA, ECA, CHU, IMO, RHT, HES, CELG, BBBY, PEET, NLNK, SCVL, DIOD, BRKR, AIRM, TESO, ROSE, HCII, ATHN, MOLX, CERN, PATK, SYNA, DNKN, AREX, PLXS, HEI, MAIN, CYS, UCO, CXO, EOG, CBT, DCI, UA, LQDT, BRKR, KMX and CLC
Stocks With Unusual Put Option Activity:
  • 1) FTR 2) BBBY 3) SYMC 4) CCL 5) APC
Stocks With Most Negative News Mentions:
  • 1) AIG 2) ADM 3) CELG 4) BAC 5) GOOG
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:19 AM

Style Outperformer:
  • Large-Cap Value -1.01%
Sector Outperformers:
  • 1) Utilities +.17% 2) Airlines +.15% 3) Drugs +.03%
Stocks Rising on Unusual Volume:
  • CAG, PEET, SZYM, XCO, ONXX, ARNA, PCYC, PANL and OSIR
Stocks With Unusual Call Option Activity:
  • 1) MNKD 2) BBBY 3) ONXX 4) RHT 5) ARNA
Stocks With Most Positive News Mentions:
  • 1) BBY 2) NUVA 3) CHK 4) CAG 5) ONXX
Charts:
0 comments

Thursday Watch

Posted by Gary .....at 1:05 AM

Evening Headlines
Bloomberg:
  • Merkel Balks at Sovereign Debt Purchases to Overcome Crisis. German Chancellor Angela Merkel balked at committing to direct sovereign debt purchases through the euro-area bailout fund, pushing back on calls by the bloc’s leaders who backed the measure as a way to ease the crisis. Such a move, while legally possible, “is not up for debate” at present, Merkel said yesterday in Berlin. French President Francois Hollande championed the idea of using the European Stability Mechanism to purchase indebted countries’ bonds as a way to counter rising yields. Just returned from the Group of 20 summit in Los Cabos, Mexico, Merkel said: “I haven’t heard about such things.” “There is no concrete planning that I know about, but there is the possibility of purchasing sovereign bonds on the secondary market,” Merkel told reporters in Berlin after meeting with Dutch Prime Minister Mark Rutte. “But this is a purely theoretical statement about the legal situation.” Merkel’s non-committal stance on the measure opens a fresh conflict as euro finance ministers meet today and Italian Prime Minister Mario Monti hosts a four-way summit in Rome tomorrow.
  • IOU Maturities Cut With European Banks Roiled: Credit Markets. Average maturities on corporate IOUs relied on for everyday needs from payroll to rent are at about the lowest this year as U.S. money-market mutual funds seeks to curb risk with Europe's debt crisis escalating. Declining maturities on commercial paper held by prime funds, a leading indicator of stress, have fallen to 40 days as of June 15 from 45 days at the end of April, according to figures from Crane Data LLC compiled by Credit Suisse Group AG.
  • Italy, Spain Heading for Full Bailouts, Fidelity’s Stuttard Says. Italy and Spain, which account for more than a quarter of the euro-area economy, are heading for sovereign bailouts in the next 12 months that will send shockwaves through the global economy, Fidelity Investments’s Jamie Stuttard said. Both sovereigns will likely stumble over debt auctions in the next year, forcing European authorities to find official funding for them to hold the single-currency area together, Stuttard, Fidelity’s head of international bond portfolio management in London, said in a telephone interview on June 19.
  • Italians Openly Dodge Property Tax in Test for Monti’s Austerity. Luciano Di Pardo, a lawyer in Milan, is dodging Italian Prime Minister Mario Monti’s new real estate tax. “I didn’t pay it,” Di Pardo, 75, said of the levy that was the centerpiece of Monti’s austerity budget. “I get that we are on the edge of failure and disaster, but you can’t keep taking from ordinary people.” The new levy, which should have cost Di Pardo about 500 euros ($630) when the first payment was due on June 18, may mark the limit of how much Monti can squeeze out of taxpayers. The belt-tightening is also sinking the prospects of Monti’s supporters in parliament and deepening Italy’s fourth recession since 2001.
  • ECB's Coeure Tells FT EU Fiscal Union Is a `Necessity'. European Central Bank executive board member Benoit Coeure sees increased economic integration in the European Union as an essential step toward stability, the Financial Times reported, citing an interview. Coeure, who is responsible for the ECB’s market operations, told the FT that his answer to people who are in doubt about “the necessity of fiscal union” is that “if they want to keep the euro and have the benefits that the euro has brought to their economies, they have to make steps towards a fiscal union.” Europe is in the third year of an economic crisis and reaching a point where “deeper questions are being asked,” the FT cited Coeure as saying. Central to those questions is the shape of a future banking and fiscal union to bolster the monetary union, Coeure said, according to the newspaper. Without such strengthening, “the system will not be stable and we will continue to experience crises,” Coeure told the FT. Couere said a cut in the ECB’s main interest rate -- at 1 percent since December -- was “discussed at the last governing council meeting,” and that he “would expect the next council to discuss it again,” the FT reported. While he supports using the EU’s bailout fund to intervene in government bond markets as a stopgap measure, he is not eager for the ECB to take on that role, saying that the Securities Markets Program isn’t considered “the best instrument to use at the current juncture” because it’s not advisable to “mix the central bank with the fiscal authorities,” he told the newspaper.
  • Citigroup(C) Faces $5 Billion Hit on Dollar’s Rise. Citigroup Inc. book value could take a $3 billion to $5 billion “hit” this quarter as currencies in some of its biggest markets decline against the U.S. dollar, said Charles Peabody of Portales Partners LLC. The Mexican peso and the Brazilian real are among currencies that have weakened, which could lead to “value destruction” for Citigroup, according to Peabody, an analyst for New York-based Portales who was interviewed today by Tom Keene on “Bloomberg Surveillance.” The bank disputed Peabody’s conclusion in an e-mailed statement. Citigroup, ranked third by assets among U.S. lenders, relies on developing nations for more than half its profit as Chief Executive Officer Vikram Pandit pushes deeper into regions such as Latin America and Asia. The New York-based bank has an “intense focus on capturing emerging-market trade,” Pandit, 55, told shareholders in a March 9 letter. Peabody based his comments on a June 18 analysis of Citigroup’s foreign revenues from more than half a dozen “influential geographies (C)” and what they’re worth when converted into dollars from currencies ranging from the British pound and Turkish lira to the Korean won. There have been “extreme movements” in some of these markets in the second quarter, including the Mexican peso, the Brazilian real, the Indian rupee and the Polish zloty, he wrote. The peso and Turkish lira had the biggest impact on currency translation adjustments in the first quarter, he said, citing Citigroup’s quarterly filings.
  • China Manufacturing Slump May Match That of 2008 Crisis. China’s manufacturing may shrink for an eighth month in June, matching the streak during the global financial crisis in a signal the government’s stimulus has yet to reverse the economy’s slowdown. The 48.1 preliminary reading for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics today compares with a final 48.4 for May. A reading above 50 indicates expansion. If confirmed on July 2, it would equal the run of below-50 readings from August 2008 to March 2009.
  • China’s Stocks Decline to 3-Month Low on Manufacturing Concern. China’s stocks fell, dragging the benchmark index to the lowest level in three months, after a report showed China’s manufacturing may shrink for an eighth month in June and the U.S. cut its economic growth estimates. Jiangxi Copper Co. and China Shenhua Energy Co. the biggest copper and coal producers, declined at least 2 percent on concern demand for commodities will slow. Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. fell after the 21st Century Business Herald said the four biggest lenders saw net deposits decline by a combined 460 billion yuan ($72 billion) in the first two weeks of this month. The Shanghai Composite Index (SHCOMP) lost 35.5 points, or 1.6 percent, to 2,257.38 at the 11:30 a.m. local-time break, set for the lowest close since March 29 and a weekly decline as financial markets are closed tomorrow for a holiday.
  • Hanwha Chemical Says Polysilicon Glut to Last Until 2014. The oversupply of polysilicon on world markets may last until at least 2014, pushing more high- cost producers of the raw material used for solar panels into bankruptcy, Hanwha Chemical Corp. (009830) said. The unit of Hanwha Group, which has built a supply chain of solar businesses through acquisitions since 2010, is “skeptical for the moment” about acquisitions as many of the polysilicon assets put up for sale are inefficient, Senior Vice President J.C. Song said in an interview in Seoul. “The polysilicon prices are now covering cash costs at a handful of top-tier producers, which means they are below production costs for the remaining ones,” Song said yesterday. “While it limits expansion and new entrances, the glut may continue until 2014 or 2015.”
  • Flaherty Said to Tighten Canada Mortgage Rules to Avert Bubble. Canadian Finance Minister Jim Flaherty will tighten mortgage-length rules for the third-time as the Group of Seven country with the soundest government finances tries to avert a household debt crisis, a government official said. Flaherty will shorten the maximum amortization period on mortgages the government insures to 25 years from 30 years, the person said, speaking on condition they not be identified because the decision hasn’t been made public. The changes were first reported by the Canadian Broadcasting Corp. in a report that was confirmed by the government official.
  • Obama Spends More Than He Raises as Aides See Romney Edge. President Barack Obama spent more on his re-election effort last month than he raised, ending May with $109.7 million cash on hand, according to U.S. Federal Election Commission reports filed today. The $39.1 million his campaign took in was outpaced by $44.6 million it paid for television advertisements, employees, offices and other expenses, the reports show. The spending rate is a reversal from the past three months, when the campaign was taking in millions of dollars more than it was spending.
  • SEC Said to Depose SAC's Cohen in Revived Insider-Trading Probe. Steven A. Cohen, the billionaire manager of SAC Capital Advisors LP, is facing renewed scrutiny from U.S. regulators over whether he made illegal trades based on inside information, two people familiar with the matter said. Cohen, 56, was recently deposed by Securities and Exchange Commission investigators in New York about trades made close to news such as mergers and earnings that generated profits at his hedge fund, said one of the people, who asked not to be identified because the investigation isn't public. Neither Cohen nor SAC Capital, which oversees about $14 billion, has been accused of wrongdoing.
Wall Street Journal:
  • Vote to Sanction Holder Escalates Gun-Probe Fight. A standoff between Republicans and the Obama administration over a botched gun-trafficking operation escalated Wednesday, with a House committee voting to hold Attorney General Eric Holder in contempt of Congress.
  • Lawmakers Push for Overhaul of IPO Process. A bipartisan group of lawmakers called on regulators to overhaul the way initial public offerings are conducted, concerned that last month's flubbed stock sale by Facebook Inc. shows the current system unfairly punishes small investors. In a letter to Securities and Exchange Commission Chairman Mary Schapiro, Rep. Darrell Issa (R., Calif.) prodded the agency to revamp rules for pricing and disclosure in IPOs.
  • Israeli Strike on Iran Stays on Hold, for Now. Israel is unlikely to launch a strike on Iran as long as sanctions on Tehran intensify and diplomatic efforts continue, despite the failure of international talks in Moscow this week, Israeli officials and security experts said. That puts Israeli leaders in a bind: While lack of progress on diplomatic attempts to curb Iran's nuclear program bolsters Israel's position that Tehran won't compromise, it needs to wait for diplomacy and sanctions to be exhausted so it can better persuade others to join it in taking tougher measures, analysts said.
  • Egypt Fraud Probe Stalls Vote Result. Panel Delays Naming of New President as Muslim Brothers Warn of Mayhem if It Is Denied Victory. Egypt's Presidential Election Commission delayed the announcement of a winner of the weekend poll so it could investigate fraud claims by both contenders, deepening suspense and suspicion as the country waited to learn who would be declared its first freely elected president.
  • Regulators Back Off Tougher Curbs on Oil. Europe and Syria took center stage at the Group of 20 meeting in Los Cabos, Mexico, this week. But in the oil industry, all eyes were on a report that signaled regulators are backing away from efforts to ratchet up scrutiny of the $2 trillion-a-year market. In an interim report to the G-20, ahead of final recommendations later this year, the International Organization of Securities Commissions, an association of global financial-markets regulators such as the Securities and Exchange Commission, retreated from an earlier proposal to set up a regulatory body to oversee the so-called physical oil market.
  • Plugging the National Security Leaks. Accountability is the key. A Congressional investigation makes more sense than a special prosecutor.
Business Insider:
 Zero Hedge:
 CNBC:

IBD:

NY Post:

  • JPMorgan(JPM) Trading Loss Could Reach $6 Billion. JPMorgan Chase has lopped more than two-thirds of its London Whale-trading blubber, but the debacle still could cost CEO Jamie Dimon $4 billion to $6 billion in trading losses, according to people familiar with the matter. Sources tell The Post that the vast majority of the esoteric derivative trade has been unwound.
Gallup:
USA Today:
 Reuters:
  • Investors fled Europe-linked hedge funds in May-report. Investors cut their exposure to hedge funds that invest in and are located in Europe during May as the euro zone financial crisis wrought havoc on global markets, data showed on Wednesday. Investors last month withdrew about $9.3 billion from hedge funds located in Europe and pulled $9.1 billion from hedge funds that invest mostly in Europe, hedge fund tracking firm eVestment|HFN found. "The higher rate of decline has been from those funds investing primarily in European markets and the reason is fairly straightforward; a lack of desire for exposure to European corporates, whether hedged or not, which are being impacted by the region's slowing growth and sovereign difficulties," said Peter Laurelli, vice president of research at eVestment|HFN.
  • Bed Bath(BBBY) costs rise; fending off Amazon(AMZN). Bed Bath & Beyond Inc gave a weaker-than-expected profit outlook for the current quarter as it spends sooner than expected to improve its e-commerce business, sending the U.S. home goods chain's shares down about 11 percent.
  • Red Hat(RHT) Forecasts Weak 2nd Qtr, Shares Fall. Red Hat Inc, the world's largest distributor of Linux operating software, forecast second-quarter revenue below Wall Street estimates after quarterly billings fell short of analysts' expectations. Shares of Red Hat fell 10 percent in after-market trading.
Telegraph:

The Independent:
  • Bank Regulator Warns Hedge Funds of Crunch. The Bank of England regulator Robert Jenkins yesterday warned senior hedge fund managers to beware of a potential massive clampdown on their trading activities if the eurozone crisis triggers a return to the kind of liquidity crunch that followed the collapse of Lehman Brothers. In a stark warning to traders who have become complacent again with the assumption that liquidity in financial markets – the willingness of investors to buy and sell assets – could be taken for granted, Mr Jenkins, pictured, warned that this may not be the case. "Short-term traders count on it; algo [algorithmic "black box"] trading depends on it. Long/short strategies presume you can short... "But here's the thing: confronted with sudden surges in cross-border flows, elected government will attempt to intervene in the interests of stability generally and to protect their taxpayers specifically, " Mr Jenkins said. He added that "like air and water, market liquidity is no longer limitless and no longer free".
China Times:
  • Lenovo Cuts PC Shipment Guidance to 13%-15% Growth. Co. told suppliers it will lower guidance of its global PC shipment growth for this year to 13%-15%, from previous forecast of 20%-25%. Shares fell as much as 7.2% today on 45% above avg. volume. Dell(DELL) shipments growth will be flat vs. earlier guidance of about +5% y/y.
21st Century Business Herald:
  • China 4 Big Banks Lost 460b Yuan Deposits in Early June. Industrial and Commercial Bank of China Ltd., China Construction Bank Corp., Bank of china Ltd. and Agricultural Bank of China Ltd. saw net deposits decline by a combined 460b yuan in the first two weeks of this month, citing a lender.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -1.25% to -.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 174.50 -4.5 basis points.
  • Asia Pacific Sovereign CDS Index 142.25 -2.0 basis points.
  • FTSE-100 futures -.36%.
  • S&P 500 futures -.45%.
  • NASDAQ 100 futures -.38%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (KMX)/.53
  • (CAG)/.50
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 383K versus 386K the prior week.
  • Continuing Claims are estimated at 3278K versus 3278K prior.

8:58 am EST

  • The preliminary Markit US PMI for June is estimated to fall to 53.3 versus 54.0 in May.
10:00 am EST
  • Philly Fed for June is estimated to rise to 0.0 versus -5.8 in May.
  • Existing Home Sales for May are estimated to fall to 4.57M versus 4.62M in April.
  • The House Price Index for April is estimated to rise +.4% versus a +1.8% gain in March.
  • Leading Indicators for May are estimated to rise +.1% versus a -.1% decline in April.

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The ECB's Draghi speaking, Spanish bond auction, Spanish mark-to-market audit results, Eurozone PMI, Bloomberg Economic Expectations Index for June, weekly Bloomberg Consumer Comfort Index, week EIA natural gas inventory report, (PM) investor day, (VRX) investor day and the (HOT) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the day.
0 comments
Subscribe to: Posts (Atom)