Evening Headlines
Bloomberg:
- Europe Profit Estimates Cut Most Since ’09 as Crisis Hits Danone. Analysts are cutting European profit forecasts at the fastest rate since 2009 as the region heads for a recession and growth in China slows for a sixth quarter. Euro Stoxx 50 Index (SX5E) companies will earn 240 euros a share in 2012, 6.8 percent more than in 2011, according to more than 12,000 estimates compiled by Bloomberg. That compares with a 19 percent gain predicted at the start of the year. The reduction is the biggest since 2009, when analysts trimmed by 42 percentage points. ASML Holding NV (ASML) starts the European earnings season with its results today. While Bloomberg data show analysts lowered projections for 32 members of the Euro Stoxx 50 this month, there may be more cuts to come. Corporations from French dairy producer Danone SA (BN) to SKF (SKFB) AB, the world’s largest maker of ball bearings, have reduced their forecasts and strategists at Macquarie Group Ltd. and Morgan Stanley, who base their predictions on the economy rather than individual companies, say earnings will drop as much as 10 percent this year.
- Generali Among Italy Insurers Downgraded by Moody’s. Assicurazioni Generali SpA (G) was among three Italian insurers downgraded by Moody’s Investors Service, which cited the nation’s “weakening” creditworthiness. Generali, the country’s largest insurer, had its senior debt cut to Baa2 from A2, Moody’s said yesterday in a statement on the Trieste-based company. “Generali’s ability to share further asset losses with policyholders diminishes with increasing investment losses across the portfolio,” and the insurer’s domestic-life business may be hurt by Italy’s weakening economy, Moody’s said. Moody’s has lowered bank ratings this week, saying the Italian state faces “increased risk” of being unable to support firms in distress. The company cut Italy last week to Baa2 from A3, and said further downgrades are possible as weak growth and elevated unemployment threaten the government’s plan to cut the budget deficit and rein in bond yields.
- Euro Leaders Sleepless Summits Seen Prone to Mistakes. If the leaders of the 17 euro-area countries really want to solve the debt crisis shadowing their currency, they may want to sleep on it.
- Luxury Loses as China Slowdown Reinforces Regime Change. Rolex watches and bars of gold are often handed out by those seeking favors from business associates in China. Now the gift-givers are cutting back, and the luxury industry is holding its breath. Vivian So, a 38-year-old owner of beauty salons in Shanghai, said she had been giving Rolex watches to business contacts and is shifting to wallets. William Li, manager at Hong Kong’s King’s Watch Co., who used to see mainland customers buy HK$100,000 ($12,900) watches for official gifts, said many are picking brands that cost 40 percent less.
- Wynn Misses Est.on Weaker Macau, Nevada. Wynn Resorts Ltd. (WYNN), the casino company run by billionaire Steve Wynn, reported second-quarter results that missed analysts’ estimates because of lower winnings in Macau and Nevada. Excluding items, profit totaled $1.38 a share, Las Vegas- based Wynn said today in a statement. That missed the $1.50 a share average of 23 analysts’ estimates compiled by Bloomberg. Revenue fell 8.3 percent to $1.25 billion, shy of estimates of $1.33 billion.
- Dell(DELL) CEO Sees Slowing Growth in China, Establishes Fund. Dell Inc. (DELL) Chief Executive Officer Michael Dell said the computer maker is seeing a slowdown in China, adding to the list of companies dealing with slackening growth in the world’s most populous country. “There are some challenges in China right now,” Dell said today at a conference in Aspen, Colorado. He and the company’s board plan to visit the country in early September. Asked whether sales were slowing there, Dell said, “that would be an accurate statement.”
- Lockheed(LMT) May Fire 10,000 Under Budget Cuts, Stevens Says. Lockheed Martin Corp. (LMT) may have to dismiss about 10,000 of its 120,000 employees if Congress doesn’t avert $1.2 trillion in across-the-board cuts to federal spending, according to Robert Stevens, the company’s chief. The “seat of the pants” estimate is based on expected budget cuts of about 10 percent in defense and 8 percent in other government programs, according to testimony that Stevens, chairman and chief executive officer of the world’s largest defense contractor, plans to deliver to the House Armed Services Committee tomorrow.
- Ford(F) Escape Probed by U.S. After Arizona Crash. Ford Motor Co.’s Escape sport- utility vehicles are under investigation by U.S. auto-safety regulators for possible unintended acceleration after a January crash that killed a 17-year-old girl in Arizona.
- BHP(BHP) Iron Ore Output Rises 15% to Beat Analyst Estimate. BHP Billiton Ltd. (RIO)’s fourth-quarter iron ore production gained 15 percent as the world’s largest mining company expands operations in Australia’s Pilbara region, setting a 12th consecutive annual record. Output was 40.9 million metric tons in the three months ended June 30, from 35.5 million tons a year earlier, Melbourne- based BHP said today in a statement. That beat the 37.3 million ton median estimate of five analysts surveyed by Bloomberg. BHP, which is planning to more than double iron-ore production capacity, said today it set full-year output records across 10 operations amid a “challenging environment.” Smaller rival Fortescue Metals Group Ltd. (FMG) yesterday reported record iron ore production and said it expected a gradual rebound in China’s economy, the biggest importer of the steelmaking material.
Wall Street Journal:
- Trading Firm CEO: I Spent It. Note From Peregrine Founder Says Millions Went to Cover Losses, Pay Fines. Peregrine Financial Group Inc.'s founder said he spent most of the money allegedly embezzled from customers to cushion his trading firm's capital, fund a new corporate headquarters—and even to pay regulatory fines and fees, according to previously undisclosed parts of letters left when he attempted suicide.
- Fighting Escalates in Syrian Capital. Syrian forces and rebel soldiers moved reinforcements into Damascus as fighting intensified in the Syrian capital, where residents reported heavy shelling and street fighting for the third day in President Bashar al-Assad's seat of power.
- WSJ, FX Trader Launch Dollar Index. The Wall Street Journal and DJ FX Trader are launching The Wall Street Journal Dollar Index on Wednesday morning.
- 'You Didn't Build That'. On the President's burst of ideological candor. The Presidential election has a long way to go, but the line of the year so far is President Obama's on Friday: "You didn't build that." Rarely do politicians so clearly reveal their core beliefs. This burst of ideological candor is already resonating like nothing else Mr. Obama's said in years. The Internet is awash with images of the President telling the Wright Brothers, Thomas Edison, Henry Ford, Steve Jobs and other innovators they didn't build that. Kevin Costner's famous line in "Field of Dreams," as adapted for Mr. Obama: "If you build it, we'll still say you didn't really build it." Beneath the satire is the serious point that Mr. Obama's homily is the soul of his campaign message. The President who says he wants to be transformational may be succeeding—and subordinating to government the individual enterprise and risk-taking that underlies prosperity. The question is whether this is the America that most Americans want to build.
MarketWatch:
Business Insider:
Zero Hedge:
CNBC:
- Hendry - 'Bad Things are Going to Happen'. Hugh Hendry is lying low. The Glaswegian founder of $800m hedge fund Eclectica stepped out of the limelight last year after a series of feisty television appearances made him Britain’s best-known hedge fund manager.
- China's Rate Cuts Fall Flat as Small Firms Bypass Banks. China's bid to energize a stuttering economy by cutting interest rates twice in a month and making it more attractive for banks to take risks on private sector borrowers is falling flat with the country's most dynamic job generators — smaller firms. Red tape and tough collateral requirements mean business owners prefer to borrow from family and friends to expand in good times and, with the economy in its worst downtrend in three years, the inclination to take on bank debt is close to zero. "Business this year has fallen by two-thirds compared to last year," said a bed linen seller surnamed He, who last took a bank loan in 2009 for 400,000 yuan ($63,500).
- FedEx's(FDX) $1 Billion Post Office Contract at Risk.
IBD:
BGR:
Rasmussen Reports:
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows Mitt Romney attracting 47% of the vote, while President Obama earns 44%. Four percent (4%) prefer some other candidate, and five percent (5%) more are undecided.
Reuters:
- Intel(INTC) forecast portends weak PC sales. Top chipmaker Intel Corp (INTC.O) reduced its growth forecast, reinforcing fears that a wavering global economy and a lack of consumer interest are dampening personal computer sales. Shaky economies in Europe and the United States and a growing consumer preference for Apple Inc's iPad tablets have been taking a toll on the PC industry. The world's leading chipmaker on Tuesday cut its 2012 revenue growth forecast to between 3 and 5 percent, down from a prior forecast of "high single-digit growth."
- Private equity-owned firm alleges U.S. government discrimination. A shipping company owned by the world's largest private equity firm filed a lawsuit against the U.S. Department of Transportation on Tuesday alleging its application for financing support was being held up on purpose due to its ownership. American Petroleum Tankers LLC (APT), which transports refined petroleum products between ports in the United States and is controlled by The Blackstone Group LP(BX), claims it is being discriminated against because of its private equity ownership.
- CSX(CSX) profit up as autos, intermodal offset coal. CSX Corp reported higher quarterly profit and said revenue and volume were little changed from a year ago as increases in consumer goods segments helped offset a drop in utility coal shipping. Higher automobile, export coal and intermodal shipments partially made up for the dip in domestic coal shipments.
- Rovi estimates second-quarter below Street, cuts outlook. Digital media services provider Rovi Corp (ROVI.O) estimated second-quarter results below analysts' expectations and cut its full-year forecast, sending its shares down 26 percent after the bell.
- Bank of America(BAC), Syncora settle mortgage fraud lawsuit. Bank of America Corp has agreed to pay $375 million to settle a case brought by bond insurer Syncora Guarantee over toxic mortgage-backed securities at the center of the 2008 financial crisis.
- Air China says H1 net profit to more than halve. Air China, the country's flagship air carrier, expects first-half net profit to more than halve due to a slowdown in airline industry growth and high prices for jet fuel, it said on Tuesday. Air China's announcement came days after Chinese airlines such as China Eastern Airlines and China Southern Airlines Co Ltd issued similar profit warnings.
Financial Times:
- Hollande scraps tax breaks on overtime. France’s socialist government is tearing up one of the key labour market measures introduced by former centre-right president Nicolas Sarkozy under his once-winning slogan: “Work more to earn more”.
Telegraph:
- The euro graph of doom. Graphics can often tell a story better than words. For those who think the euro already doomed, the following graphic, drawn from the International Monetary Fund's latest Global Financial Stability Report, tells it all.
- Fund managers expect more trouble in Germany. Fund managers from across the world have begun to doubt Germany’s ability to withstand further shocks from the region’s debt crisis, registering a stark change in view since the late spring.
Xinhua:
- China Starts Formation of City on Disputed Islands. China on Tuesday set up an organizing committee for the legislative body of Sansha, officially beginning the formation of the government of the newly established city in the South China Sea. The committee was set up by the Standing Committee of the Hainan Provincial People's Congress on Tuesday morning in Haikou, capital of China's southernmost island province, according to the Standing Committee.
China Securities Journal:- China 3Q Export, Import Growth May Be 'Low'. China's export situation is not "optimistic" for the second half of this year, Xiao Xinyan and Liu Jianying, researchers at a research institute under the Ministry of Commerce, wrote in an article.
Evening Recommendations
Night Trading- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 167.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 135.50 -.5 basis point.
- FTSE-100 futures +.39%.
- S&P 500 futures -.23%.
- NASDAQ 100 futures -.16%.
Morning Preview Links
Earnings of NoteCompany/Estimate
- (ABT)/1.22
- (NTRS)/.75
- (PNC)/1.22
- (BLK)/3.00
- (USB)/.70
- (HON)/1.11
- (SWK)/1.52
- (BK)/.51
- (BAC)/.15
- (STJ)/.87
- (GWW)/2.62
- (QCOM)/.86
- (SYK)/.98
- (XLNX)/.45
- (IBM)/3.43
- (KMI)/.25
- (AXP)/1.09
- (YUM)/.70
- (EBAY)/.55
- (FFIV)/1.14
Economic Releases8:30 am EST- Housing Starts for June are estimated to rise to 745K versus 708K in May.
- Building Permits for June are estimated to fall to 765K versus 780K in May.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,300,000 barrels versus a -4,696,000 barrel decline the prior week. Distillate supplies are estimated to rise by +1,300,000 barrels versus a +3,112,000 barrel gain the prior week. Gasoline inventories are estimated to rise by +1,200,000 barrels versus a +2,752,000 barrel gain the prior week. Finally, Refinery Utilization is expected to rise by +.25% versus a +.7% gain the prior week.
2:00 pm EST
Upcoming Splits
Other Potential Market Movers
- The Fed's Bernanke testifying before the House Financial Services Committee, (PAYX) investor day and the weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
