Evening Headlines
Bloomberg:
- Hollande Seen Unlikely Following Schroeder in Overhaul.
“We were sure that nationalization would happen,” said
Martin, a representative at the Florange plant for CFDT union,
which will lead a protest at the presidential palace on Jan. 23. “We
were promised a law to prevent Mittal from shutting the site. Today
there’s no law and the blast furnaces are shut. The government’s
decision was a slap in the face.” Hollande’s equivocation illustrates
the conflicting pressures in restoring his nation’s competitiveness and
closing the gap with Germany.
- Telefonica(TEF) Debt Cuts Don’t Fix Spanish Pain.
Just before Christmas, top managers of Telefonica SA (TEF) gathering in
a Madrid cinema tried to remain upbeat after a year in which the
company had scrapped its
dividend and sold off assets. While they were quick to point out
that those steps had stabilized the company’s finances, they
couldn’t avoid the bad news in their biggest market, Spain.
- East European Bankers Warn Bad Debt Is Hampering Credit Recovery. Bad debt in eastern Europe, already
exceeding a third of all lending in several countries, will stay
at high levels and cast a pall over hopes of restoring credit
growth, according to the region’s leading bankers.
- China FDI Shows Full-Year Decline as Economic Expansion Slows. China’s
foreign direct investment declined for the first full year since 2009
as economic growth slowed and manufacturers relocated to markets with
cheaper labor, contrasting with outbound spending that surged to a
record. Inbound FDI dropped 4.5 percent in December from a year earlier to $11.7 billion, the 13th decline in 14 months,
according to Ministry of Commerce data released in Beijing today. For
the full year, inflows fell 3.7 percent to $111.7 billion, while China’s
non-financial investment abroad increased 28.6 percent to $77.2
billion. China is gradually losing its advantages as a destination for
workshops and plants as land and labor costs rise, while deploying some
of its
$3.3 trillion in foreign-exchange reserves in growth opportunities
abroad. “It’s an inevitable trend that labor costs will keep rising in
China --
not only in coastal areas but also in inland regions,” Shi Lei, a
Beijing-based analyst with broker Founder Securities Co., said before
the report. “The country will not be an ideal place for low-end
manufacturing.”
- Asian Stocks Drop on Overheating Signs; Nikkei 225 Falls. Asian
stocks fell, with the regional benchmark index heading for its first
loss in three days, amid signs markets are overbought and as Japanese
shares retreated as a stronger yen dimmed the outlook for export
earnings. Honda Motor Co. (7267), which gets 81 percent of its auto sales overseas, slipped 2.1 percent in Tokyo. Industrial
& Commercial Bank Ltd., the world’s biggest lender by market value,
fell 1.2 percent in Hong Kong after Premier Wen Jiabao said China
should “gradually” establish a property tax system.
- India Banks System Face Worsening Asset Quality, IMF Says.
India’s financial system has been made vulnerable by a deterioration in
bank assets and a lack of capital as the economy slowed, according to
the International Monetary Fund. “The main near-term risks to the financial system are a worsening of bank asset quality and renewed pressures on
systemic liquidity,” the Washington-based lender said in a
statement today. Stress tests have shown the risks are
“manageable” for now, according to the IMF, which concluded
its assessment of India’s financial stability in February 2012. Increasing involvement of the state in the financial
industry leaves the government exposed to losses at banks and is
acting as a brake on economic growth, the IMF said.
- Apple(AAPL) Lets Buyers on China Web Pay in 2-Year Installments. Apple Inc. (AAPL) began allowing users of
its Chinese website to pay in installments as the company looks
for ways to make iPhones and MacBook laptops more affordable in
the world’s largest computer and mobile-phone market.
Wall Street Journal:
- Banks Seek Help on Iran Cyberattacks.
Major U.S. banks are pressing for government action to block or
squelch what Washington officials say is an intensifying Iranian
campaign of cyberattacks against American financial institutions.
Financial firms have spent millions of dollars responding to the
attacks, according to bank officials, who add that they can't be
expected to fend off attacks from a foreign government. Defense
officials have said Iran's government is behind the assault. Officials
from several affected banks, including PNC Financial Services Group
Inc., SunTrust Banks Inc. and BB&T Corp., are urging the U.S.
government to stop or mitigate the attacks, according to investigators.
- Beyond Herbalife(HLF): The War Between Direct Sellers And Short Sellers. Hedge-fund
manager William Ackman’s $1 billion bet against nutritional-products
maker Herbalife Ltd. is again shining a light on direct-selling
companies, prompting investors to evaluate investing in an industry that
seems a magnet for controversy.
- Jeffrey Scott Shapiro: A Gun Ban That Misfired. What I saw as a prosecutor in Washington, D.C., makes me wary of strict firearms laws.
- Richard Vedder: The Wages of Unemployment. Labor-force participation has declined since 2000, and among the reasons are soaring government benefits.
Fox News:
- NY approves sweeping gun control package, owners worry about new rules. New York on Tuesday became the first state to approve a comprehensive
set of gun control laws in response to last month’s mass shooting at a
Connecticut elementary school, amid concerns among gun owners that the
spate of changes to local and state gun laws could make them targets of
overzealous politicians and prosecutors.
CNBC:
Zero Hedge:
Business Insider:
Washington Post:
- U.S. weighs military support for France’s campaign against Mali militants. The
Obama administration is considering significant military backing for
France’s drive against al-Qaeda-linked militants in Mali, but its
support for a major ally could test U.S. legal boundaries and stretch
counterterrorism resources in a murky new conflict. The United
States is already providing surveillance and other intelligence help to
France and may soon offer military support such as transport or
refueling planes, according to U.S. officials, who stressed that any
assistance would stop short of sending American combat forces to the
volatile West African nation.
Read
more here:
http://blogs.sacbee.com/capitolalertlatest/2012/08/fiscal-analyst-hundreds-of-millions-at-risk-from-facebook-slide.html#storylink=cpy
Chicago Tribune:
- Republicans push alternative to default in debt-ceiling battle. Republican lawmakers are preparing to introduce legislation to direct
the U.S. Treasury to make interest payments on U.S. bonds first and then
prioritize other government outlays in case Congress does not raise the
debt ceiling. Supporters of the idea see it as a
politically palatable alternative to default, which could rattle markets
as occurred in the summer of 2011. The likelihood of another
market-unsettling event is challenging Republicans to find another idea
as they use the debt ceiling as leverage to extract spending cuts from
President Barack Obama.
Reuters:
- World Bank cuts growth outlook as advanced nations drag. A
frustratingly slow economic recovery in developed nations is holding
back the global economy, the World Bank said on Tuesday, as it sharply
cut its outlook for world growth in 2013. The World Bank forecast
that global gross domestic product will inch up 2.4 percent this year,
from 2.3 percent in 2012. In its last forecast in June, the bank
projected global growth would reach 3.0 percent in 2013. The World Bank
also cut its forecast for developing countries, which last year grew at
their slowest pace in a decade, to 5.5 percent in 2013 from 5.9 percent
in the June forecast. It said growth in these countries should slowly
pick up, reaching 5.7 percent next year and 5.8 percent in 2015.
- ANA grounds all Boeing 787s for inspections after emergency landing. All
Nippon
Airways Co is grounding all 17 of its Boeing 787 planes for inspection
after one of its Dreamliners made an emergency landing in western Japan
on Wednesday, the Japanese air carrier told Reuters. ANA said
instruments on a domestic flight early Wednesday indicated a battery
error, but all
passengers and crew evacuated safely by using the plane's inflatable
slides, ANA said.
- Japan's Abe turns to SE Asia to counter China. The last time he was prime minister of Japan, Shinzo Abe's inaugural foreign trip was to China. In the job again 7 years later and relations with Beijing now chilly, Abe is turning first
this time to the rising economic stars of Southeast Asia.
- Japan's growth hurt by row with China - World Bank. Japan's
economy contracted in the second half of 2012 and is on track for
lackluster growth of 0.8 percent this year, hurt in part by a
territorial row with China, the World Bank said in a report on Tuesday. Relations between China and Japan, the world's biggest economies after the United States, have deteriorated sharply since September, when the Japanese government
purchased islands that China claims in the East China Sea.
- U.S. plays down media report that Syria used chemical weapons.
- US cities short billions for public pensions-Pew. States are not alone in
racking up massive public pension bills: U.S. cities need
hundreds of billions of dollars to make good on their promises
of retirement healthcare and income to workers.
Telegraph:
Mainichi:
- Japan May Deploy Jets to Area Near Disputed Islands. Japan Self-Defense Forces consider deploying fighter jets to Sakishima islands, west of Okinawa's main island. The location is closer to the disputed islands than the current air base in Naha.
Nikkei:
- The U.S. govt. asked Japan's Self-Defense Force to refrain from firing warning shots if it encounters Chinese surveillance planes over the disputed islands, citing a meeting between U.S. and Japan top govt. officials earlier this month.
Kyodo:
- Japan's Transport Ministry recognizes today's emergency landing of ANA B787 as a serious incident that could have led to an accident.
South China Morning Post:
- Shenzhen Sets 2013 Growth Target of 9%, Lowest in Decades. Growth last year was 10%, unchanged from 2011 and lowest since city became a special economic zone in 1979, citing Mayor Xu Qin's remarks to municipal legislators. The city had >27% average annual growth in 1980-2006 period.
China Securities Journal:
- China may ask tier-1 cities to increase land supply this year to stabilize land prices, citing a person from the industry.
Ming Pao Daily:
- President Hu Jintao expressed support for Hong Kong Chief Executive Leung Chun-ying's measures to curb the rise in housing prices, citing people with knowledge of a meeting between the two.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 108.0 +4.0 basis points.
- Asia Pacific Sovereign CDS Index 86.0 +2.5 basis points.
- NASDAQ 100 futures +.15%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (SCHW)/.15
- (CMA)/.65
- (USB)/.75
- (NTRS)/.75
- (MTB)/1.17
- (BK)/.54
- (JPM)/1.22
- (GS)/3.66
- (FUL)/.56
- (KMI)/.35
- (EBAY)/.69
Economic Releases
8:30 am EST
- The Consumer Price index for December is estimated unch. versus a -.3% decline in November.
- The CPI Ex Food & Energy for December is estimated to rise +.2% versus a +.1% gain in November.
9:00 am EST
- Net Long-term TIC Flows for November are estimated to rise to $25.0B versus a $1.3B in October.
9:15 am EST
- Industrial Production for December is estimated to rise +.3% versus a +1.1% gain in November.
- Capacity Utilization for December is estimated to rise to 78.5% versus 78.4% in November.
10:00 am EST
- The NAHB Housing Market for January is estimated to rise to 48.0 versus 47.0 in December.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,200,000 barrels versus a +1,314,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +2,700,000 barrels versus
a +7,412,000 barrel gain the prior week. Distillate Inventories are
estimated to rise by +1,500,000 barrels versus a +6,777,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to fall by -.75% versus a -1.3% decline the prior week.
2:00 pm EST
Upcoming Splits
- (HEP) 2-for-1
- (SGA) 4-for-3
Other Potential Market Movers
- The Fed's Fisher speaking, Fed's Kocherlakota speaking, Eurozone CPI data, Australia unemployment data, Iran/IAEA Talks, weekly MBA mortgage applications report and the (SE) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
