Evening Headlines
Bloomberg:
- Euro
Bears Rule in Germany First Time Since August: Currencies. More German
companies are bearish on the euro than those that are bullish for the
first time since August, showing the luster of Mario Draghi's
do-anything pledge to support the 17-nation currency may be dimming. 38%
of German companies are positioning for the euro to fall over the next
three months, with 23% preparing for a rise, according to a survey by
Commerzbank AG, the nation's second-biggest bank. The previous month,
20% forecast a decline and 26% an increase. 41% were bulls in
September's survey.
- Global Banking Under Siege as Nations Tighten Local Rules. Global banking, a model promoted for
more than 30 years by financial conglomerates cobbled together
through cross-border mergers, is colliding with the post-crisis
reality of stricter national regulation. Daniel K. Tarullo, the Federal Reserve governor responsible
for bank supervision, announced plans last week to impose the
same capital and liquidity requirements on the U.S. operations
of foreign lenders as on domestic companies. The U.K. and
Switzerland also have proposed banking and capital rules
designed to protect their national interests.
- Paris Faces Darkness as City of Light Set for Illumination Ban. Paris's legendary label as the "City of Light" may soon lose some of its luster. The French minister for energy and environment unveiled last week a proposal for lights in and outside shops, offices, and public buildings to be turned off between 1 am and 7 am starting in July. The plan,
to be applied across French cities, towns and villages is aimed at
saving energy and money and showing "sobriety," Minister Delphine Batho
said. The move has provoked an outcry from merchants, who say the government is being insensitive to France's image as the world's no. 1 tourist destination. They say the rule, on top of existing bans on Sunday store openings and night shopping, will hurt business at a time when the French economy has barely grown for a year and unemployment is at a 14-year high.
- Medical School Students Shun Primary Care as Demand Rises. More than three-quarters of U.S.
medical students continue to shun primary care for higher-paying
specialties, setting the stage for a shortage of doctors as the
population ages and health care expands, a study found. Among medical residents who aren’t planning a career in
surgery or pediatrics, 22 percent said they expect to go into
internal medicine or primary care with the rest planning on
fields like cardiology or dermatology, a study published today
in the Journal of the American Medical Association found. About 20 to 25 percent of students have chosen primary care
in the past 10 years, down from about 50 percent in the early
1990s, said Colin West, co-author of the study. If the trend
continues, the U.S. could be short 52,000 primary care doctors
in 12 years as an aging population requires more complex care
and more people get coverage under the health-care law, a study
published last month in the Annals of Family Medicine found. “The concern many of us have is that as the baby boomers
get older and demand continues to increase, it is going to
become progressively more difficult for these patients to find
physicians,” said West, who practices internal medicine at the
Mayo Clinic in Rochester, Minnesota. “This could be a barrier
to achieving the main goal of health reform of creating greater
access to health care.”
- China’s Stocks Rise Most in Three Months; Banks, Developers Jump.
China’s stocks rose the most in three months after the government
allowed insurers to invest more in banks and investors speculated
profits at construction
and property companies will increase. The Shanghai Composite Index (SHCOMP) surged 3 percent to 2,034.58 at the 11:30 a.m. local-time break, heading for the biggest advance since Sept. 7.
- Altera(ALTR) Falls After Predicting Sales May Drop Further. Altera Corp., a maker of programmable
chips used in phone systems, fell after saying fourth-quarter
sales may decline more than analysts had estimated, citing
weaker demand for its older products. Sales will drop 8 percent to 10 percent from the third
quarter’s $495 million, the San Jose, California-based company
said in a statement today. The low end of that range would
indicate revenue of $445.5 million, compared with an average
analyst prediction of $455.2 million according to data compiled
by Bloomberg. Shares traded as low as $30.36, down 5.7 percent from their
close in New York, in extended trading following the
announcement. They had earlier fallen 5 cents, or less than 1
percent, to close at $32.18, leaving them down 13 percent this
year.
- UN’s Ban Seeks Details on $100 Billion in Climate Pledges. UN Secretary General Ban Ki-moon
joined developing nations to press for more details on how rich
nations plan to reach a three-year-old pledge to provide $100
billion in annual aid by 2020 to fight global warming, weighing
in on an issue that’s creating a rift at climate talks in Doha. “This is a matter of credibility for member states,” Ban
told reporters at a briefing yesterday. “This will be crucially
important in facilitating the promotion of a legally binding
agreement by 2015.”
- SEC Probe May Spur More Chinese Delistings, Dorsey Says. More U.S.-listed Chinese companies
are under the threat of going private or being delisted after
U.S. regulators accused accounting firms’ affiliates of blocking
probes into potential fraud, Dorsey & Whitney LLP said. Deloitte Touche Tohmatsu CPA Ltd., Ernst & Young Hua Ming
LLP, KPMG Huazhen and PricewaterhouseCoopers Zhong Tian CPAs
Ltd. have refused to cooperate with accounting investigations
into nine companies whose securities are publicly traded in the
U.S., the Securities and Exchange Commission said in an
administrative order yesterday. BDO China Dahua Co. was also
named by the SEC in the action.
- Ackman-Backed CEO Cuts Canadian Pacific(CP) Workforce by 23%. Canadian Pacific Railway Ltd. (CP) plans
to cut about 23 percent of its workforce in four years as Chief
Executive Officer Hunter Harrison, hired after a proxy fight by
hedge-fund manager William Ackman, boosts profitability at the
least efficient of North America’s large railroads. The company plans to trim its workforce of 19,500 employees
and contractors by 4,500 through 2016, using job cuts and
attrition, the railroad said before Harrison outlined his
strategy with investors in New York. The new CEO is also closing
container-car terminals and re-evaluating assets from the 2007
acquisition of Dakota Minnesota & Eastern Railroad.
- Paulson Said to Blame Bet Against Europe for Most of Loss. John Paulson, manager of $20 billion
in hedge funds, told investors that the bulk of his losses this
year came on bets that the European sovereign-debt crisis would
worsen, according to a person familiar with the matter. Paulson, speaking to clients at his firm’s annual meeting
yesterday in New York, said he has reduced those positions
following European Central Bank President Mario Draghi’s
comments in July that the ECB was committed to preserving the
euro, said the person, who asked not to be identified because
the meeting was private.
Wall Street Journal:
- GOP Deficit Plan Irks Conservatives. Discord Complicates Negotiating Position of Boehner, Who Punished Four House Members; Obama Calls for Higher Taxes.
Conservatives on Tuesday took aim at House Speaker John Boehner's
deficit-reduction proposal in the fiscal cliff talks, a dispute that was
aggravated by Mr. Boehner's decision to remove some conservatives
from prized committees. Rep. Jim Jordan (R., Ohio), who heads the
Republican Study Committee,
an influential group of conservatives, criticized the $800 billion in
new tax revenue included in Mr. Boehner's proposal to the White House.
"The bad news is that it is a tax increase, and I am not going to vote
for a tax increase because it hurts economic growth," Mr. Jordan said.
- Ryan, Rubio Seek Party Rebranding. Two
of the Republican Party's most prominent voices, Rep. Paul Ryan of
Wisconsin and Florida Sen. Marco Rubio, laid out their visions for
broadening the GOP's economic message in dual speeches Tuesday, as
conservatives seek new moorings in the aftermath of Mitt Romney's
presidential defeat last month. The speeches revealed Mr. Ryan and Mr. Rubio—respectively, the
party's most recent vice-presidential nominee and a freshman senator
seen as a rising star—moving briskly to rebrand both themselves and
their party at a time of debate and introspection over how to steer the
GOP in a new direction. The men, both seen as potential 2016 presidential hopefuls, used a
packed awards dinner hosted by the Jack Kemp Foundation to lay out their
views on the role of government in strengthening the middle class and
assisting the poor.
- EU Banks to Repay Cheap Loans. Payments May Be Sign of Health, But Concern That Some Lenders Will Leave the Hospital Too Soon.
- Firms Turn Their Backs On Southern Europe.
- Detroit's Unsold Cars Pile Up.
- Hype Better Than Sales for Target(TGT)-Neiman Marcus Tie-Up.
- Big Lots(BIG) Chief Probed by SEC. The Securities and Exchange Commission launched an inquiry into a
$10 million sale of stock by Big Lots Inc. Chief Executive Steven
Fishman before the company announced news that sank its stock, a person
familiar with the inquiry says. Big Lots said Tuesday that Mr.
Fishman, 61 years old, intends to retire in order to spend time with his
family. The discount retailer said it hadn't been contacted by the SEC
and that the timing of Mr. Fishman's departure was coincidental to any
regulatory interest.
- U.S. Oil Output Hits Nearly 15-Year High.
- The Budget Baseline Con. How Washington fools the public about spending 'cuts.'
If the fiscal cliff talks make Lindsay Lohan look like a productive
member of society, perhaps it's because President Obama and John Boehner
are playing by the dysfunctional Beltway rules. The rules work if you
like bigger government, but Republicans need a new strategy, which
starts by exposing the rigged game of "baseline budgeting."
Fox News:
- Egyptian President Morsi leaves presidential palace as protests turn violent. (video) Egyptian President Mohammed Morsi left the presidential palace
Tuesday as violence erupted between police and at least 100,000
protesters gathered in Cairo. In a brief outburst, police fired tear gas to stop protesters
approaching the palace in the capital's Heliopolis district. Morsi was
in the palace conducting business as usual while the protesters gathered
outside. But he left for home through a back door when the crowds "grew
bigger," according to a presidential official who spoke on condition of
anonymity because he was not authorized to speak to the media.
CNBC:
Zero Hedge:
Business Insider:
NY Times:
- Global Shipping Industry’s Troubles Are Threat for Biggest German Banks. For all the talk about Germany’s financial
exposure to Greece, it turns out that some German banks have a problem
of more titanic proportions — their vulnerability to the global shipping
trade. Germany’s 10 largest banks have 98 billion euros, or $128 billion, in
outstanding credit or other risks related to the global shipping
industry, according to Moody’s Investors Service. That is more than
double the value of their holdings of government debt from Greece,
Ireland, Italy, Portugal and Spain. And it is more than any other
country’s financial exposure to the shipping industry, which is in the
fifth year of a recession. Moreover,
German banks bear a generous share of the blame for spawning that
recession. By helping to finance and market funds used to build and buy
ships, a popular tax shelter, the banks helped create a glut in large
container ships that has led to a collapse in cargo hauling prices
worldwide.
Read
more here:
http://blogs.sacbee.com/capitolalertlatest/2012/08/fiscal-analyst-hundreds-of-millions-at-risk-from-facebook-slide.html#storylink=cpy
CNN:
- Schäuble puts brake on bank union plan. Plans to create a eurozone banking union hit a brick wall on Tuesday
after Germany's influential finance minister cautioned over moving too
quickly, casting doubts over whether the EU would seal a deal by the end
of the year. The objections from
Wolfgang Schäuble come just a week before a summit of EU leaders and
raise the prospect of a significant delay to establishing a single
eurozone banking supervisor, a reform billed as critical to rebuilding
confidence in the bloc's shaky financial sector.
Reuters:
Financial Times:
- Republicans in capital gains tax fight. Republicans
in the House of Representatives are fighting tax increases on capital
gains and dividends, ruling out investment income as an acceptable
source of additional revenues in increasingly urgent talks to avert the
fiscal cliff. The debate on investment income highlights the difficulty in finding
common ground in the talks – with less than a month to go before the US
economy is otherwise walloped by a $600bn mix of annual spending cuts
and tax hikes that could tip it back into recession.
Evening Recommendations
Stifel Nicolaus:
- Rated (HON) Buy, target $72.
Night Trading
- Asian equity indices are unch. to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 114.0 +1.5 basis points.
- Asia Pacific Sovereign CDS Index 85.0 +1.0 basis point.
- FTSE-100 futures +.40%.
- S&P 500 futures +.33%.
- NASDAQ 100 futures +.38%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (FRAN)/.22
- (GIII)/2.35
- (BF/B)/.78
- (TTC)/.01
- (MW)/.97
- (SNPS)/.47
- (FNSR)/.14
Economic Releases
8:15 am EST
- The ADP Employment Change for November is estimated to fall to 125K versus 158K in October.
8:30 am EST
- Final 3Q Non-farm Productivity is estimated to rise +2.8% versus a prior estimate of a +1.9% gain.
- Final 3Q Unit Labor Costs are estimated to fall -1.0% versus a prior estimate of a -.1% decline.
10:00 am EST
- Factory Orders for October are estimated unch. versus a +4.8% gain in September.
- The ISM Non-Manufacturing Composite for November is estimated to fall to 53.5 versus 54.2 in October.
10:30 am EST
-
Bloomberg consensus estimates call for a weekly crude oil inventory
decline of -500,000 barrels versus a -347,000 barrel decline the prior
week. Gasoline supplies are estimated to rise by +1,550,000 barrels
versus a +3,865,000 barrel gain the prior week. Distillate inventories
are estimated to rise by 850K barrels versus a -800,000 barrel decline
the prior week. Finally, Refinery Utilization is estimated to rise by
+.5% versus a +1.1% gain the prior week.
Upcoming Splits
Other Potential Market Movers
- The Eurozone Services PMI report, weekly MBA mortgage applications report, (LOW) investor conference, (DOX) investor day and the (ARG) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.
