Evening Headlines
Bloomberg:
- Draghi’s Bank of Italy Knew of Monte Paschi Missteps in 2010. The
Bank of Italy under former Governor Mario Draghi spotted accounting
irregularities that allowed Banca Monte dei Paschi di Siena SpA to mask
losses more than two years before the lender was forced to say it will
have to restate profit. In 2010, “a problem came to light” on Monte
Paschi’s booking of a structured deal called Santorini, Italy’s Rome-
based central bank said in a report dated Jan. 28. The Bank of
Italy alerted “other authorities” a year later and talks with
those regulators, which it didn’t identify, haven’t concluded.
It didn’t explain the delay in forcing the bank to disclose the
information.
- Samaras Last Best Greek Hope With Compliance Not Defiance.
At his first cabinet meeting after two inconclusive elections and six
weeks of turmoil had pushed Greece to the brink of exiting the euro,
Prime Minister Antonis Samaras said he’d had enough. In a seven-minute
speech, he warned his ministers to
deliver while reducing their pay by 30 percent. “I’m not
interested in good intentions,” Samaras said at the June 21
meeting, televised on state-run NET TV. “I want results.”
- Here We Go Again, Underpricing Europe Debt Risk. Greece is the most conspicuous example, as fears about its
possible exit from the single-currency area faded. But Spain and
Italy, the twin bellwethers of sentiment on Europe, show how
markets are underpricing sovereign risk -- again.
- South Korea to Fire Space Rocket as North Warns of Nuclear Test. South
Korea will attempt to launch a civilian space rocket and satellite
today as signs mount that North Korea, which sent a satellite into orbit
in December, is
preparing to test a nuclear device. The 33-meter (108-feet) KSLV-I rocket, or Naro, is set to
be fired today from a site near Goheung, 330 kilometers (200
miles) south of Seoul, with a 100-kilogram research satellite,
according to South Korea’s Ministry of Education, Science and
Technology. Naro, built with domestic and Russian technology,
has had two failed launches since 2009, while two attempts were
abandoned last year due to technical faults.
- UN Syria Envoy Says Syria Unraveling as Assad Holds On. United
Nations special envoy Lakhdar Brahimi offered the grimmest picture yet
of Syria’s descent into chaos, leaving little doubt that all diplomatic
paths have been exhausted as the conflict drags on indefinitely. Syria
is unraveling before the eyes of the world, Brahimi told the UN Security
Council in New York, according to an account provided by two UN
officials who declined to be named because the meeting was closed to
the public. The embattled regime, which has defied forecasts of its
imminent collapse, is instead surviving with no end in sight even if its
legitimacy has been irrevocably lost, said the two officials. “Brahimi
is sadly confined to playing the tragic chorus in a drama over which he
has no control,” said Richard Gowan, associate director of New York
University’s Center on
International Cooperation, said in an interview.
- Daimler to Rio Tinto Show New Surge in Deals Perilous: Real M&A. While the strongest resurgence in
dealmaking since the financial crisis is cheering investors and
emboldening acquirers, history shows that the largest mergers
are often more trouble than they’re worth. About two-thirds of company takeovers exceeding $20 billion
since 1996 -- including the unions of Pfizer Inc. and Pharmacia
Corp., Sprint Corp. and Nextel Communications Inc., and Daimler-
Benz AG and Chrysler Corp. -- generated losses for the
acquirer’s shareholders, according to data compiled by
Bloomberg. The 78 buyers lagged behind the MSCI World Index by a
median of 13 percentage points in the three years after
completing the transactions, falling 21 percent, the data show.
- California Lawmakers Propose Bullet Tax to Curb Gun Crime. California should tax bullets to pay
for mental-health programs and to put more police in crime-
ridden areas, two Democratic state lawmakers proposed. One bill, by Assemblyman Roger Dickinson of Sacramento
would impose a 5-cent tax per bullet sold to expand a program
that screens children for mental illness. A similar measure from
Oakland’s Rob Bonta would aid law enforcement in cities with the
highest violent-crime rates. A third would require licenses for
ammunition dealers and have them report all sales.
- Democrats Mull Revenue Offset to Spending Cuts, Reid Says. Senate Democrats will consider revenue-generating alternatives that could be used to offset automatic spending cuts set to take effect March 1, Majority Leader Harry Reid said today. Reid, a Nevada Democrat, said Democrats will view options at their policy retreat next week for limiting the automatic
cuts, known as sequestration. The spending reductions, to take place over nine years,
would be split evenly between defense and non-defense programs.
The Republican-controlled House has voted to replace cuts in
defense programs with other spending cuts. Democrats say new
revenue should be used to head off some of the reductions. Reid told reporters he wants to “move forward and, on
short increments, pay for the sequestration.” Later, Reid said
in an interview that he meant “maybe three months at a time,
six months at a time, a year at a time.”
- Mounting
U.S. Stock Risk Seen in Economic Data: Chart of the Day. Economic
reports are producing enough disappointing data to drag down U.S.
stocks, according to Gina Martin Adams, a Wells Fargo strategist.
- LG Electronics Reports Wider Loss on EU Fines, TV Demand Slump. LG
Electronics Inc. (066570), the world’s second-largest TV maker,
unexpectedly reported a wider fourth- quarter loss because of European
Union price-fixing fines, slumping demand and a stronger won. The
net loss was 468 billion-won ($432 million), Seoul-based LG said in a
statement today. That compares with a loss of 112 billion won a year
earlier. The company was expected to make a profit of 88.8 billion won,
based on the average of 21 analyst estimates compiled by Bloomberg.
Wall Street Journal:
- Fitch: May Cut US Rating in Absence of Debt Ceiling Consensus. The U.S. risks a credit-rating downgrade if politicians can't reach a
consensus on the government debt ceiling this year, a Fitch Ratings
official said Wednesday. Fitch left its rating of U.S. credit at triple-A Monday after
politicians agreed to suspend the debt limit, but may review it again if
no consensus is forthcoming, said Sovereigns Managing Director Tony
Stringer at a Fitch Sovereign Credit Rating Briefing. "The views of the Republicans and Democrats are still polarized. And
they haven't shown signs that they are close to agreement to raise debt
ceiling."
- Banks Worry CFPB May Be Weakened. Banks have long complained about the sweeping powers of a new
consumer financial regulator, but now they are concerned that the agency
could be weakened. The Consumer Financial Protection Bureau is
facing a legal cloud over its authority, and the financial industry is
worried the agency's rules affecting mortgages and other parts of the
industry could be declared invalid. The trouble began last week
after a federal appeals court ruled that President Barack Obama's
appointments to a national labor panel were unconstitutional because of
the way he used the longstanding practice of making recess appointments.
- Individual Investors Help Drive Stock Surge.
Small investors are jumping back into the stock market after abandoning
it during the financial crisis.
The return by individual investors is a big reason why the Dow Jones
Industrial Average is pushing toward an all-time high. Many analysts and
strategists say individual investors are providing
another source of fuel for the stock market. One piece of evidence: A
total of $6.8 billion shifted into U.S. stock mutual funds in the first
three weeks of 2013, according to mutual-fund tracker Lipper Inc. That
is the biggest move since 2001.
- Fed Risks Losses From Bonds.
The Federal Reserve could be charting a course that leaves the highly
profitable central bank with no extra income to hand over to the U.S.
Treasury for several years. That is the conclusion of five Fed staff
economists who examined how the central bank's bond-buying programs will
affect its profitability over the long run. Several years from now,
when the economy is stronger, the Fed is expected to sell bonds and
raise short-term interest rates to tighten
credit and restrain inflation. The group found the Fed might have to
sell bonds at a loss and incur higher expenses on interest it pays to
banks on the reserves they hold at the Fed.
That, in turn, could become a political
headache for the Fed, and might even weigh on some officials today as
they decide whether to continue these programs, which are aimed at
driving down borrowing costs and spurring economic growth and hiring.
The issue could come up at the Fed's two-day policy meeting that concludes today.
- Probe of Boeing(BA) 787 Battery Intensifies.
U.S. air-safety investigators Tuesday said they are stepping up
microscopic and chemical examinations of the lithium-ion battery that
caught fire aboard a parked Japan Airlines Co. 9201.TO +0.81% Boeing BA
-0.47% 787 three weeks ago, still seeking to determine whether internal
defects may have played a role in the blaze.
- Bank of Italy Goes on the Defensive. Bank of Italy Says It Tightly Supervised Troubled Lender.
Italy's banking regulator on Tuesday said it had for years tightly
supervised Italian lender Banca Monte dei Paschi di Siena SpA, BMPS.MI
+2.29% which says it is sitting on potentially hundreds of million euros
in losses due to risky financial transactions.
Fox News:
- Pershing
Square's Bill Ackman is getting "brushback" from investors in his fund
over his battle with Herbalife(HLF), Fox Business's Charlie Gasparino
said on Twitter.
CNBC:
- More to AIG(AIG) Bailout Than Public Knows: Hank Greenberg. Former AIG Chairman and CEO Hank Greenberg said the public doesn't
know everything about what went down with the bailout of the insurance
giant and he stands by his lawsuit against the government. "In
this country the government has the right to nationalize any company,
but you have to pay for it. You can't simply take somebody's assets,"
Greenberg told CNBC's "Closing Bell."
Zero Hedge:
Business Insider:
The Blaze:
Reuters:
- Exclusive: JPMorgan bet against itself in "Whale" trade. There
is a new twist in the London Whale trading scandal that cost JPMorgan
Chase $6.2 billion in trading losses last year. Some of the firm's own
traders bet against the very derivatives positions placed by its chief
investment office, said three people familiar with the matter. The
U.S. Senate Permanent Committee on Investigations, which launched an
inquiry into the
trading loss last fall, is looking into the how different divisions of
the bank
wound up on opposite sides of the same trade, said one of the people
familiar
with the matter. The committee is expected to release a report on its
investigation in the next few weeks.
- Broadcom(BRCM) warns of lower first-quarter revenue. Chip maker Broadcom Corp
warned on Tuesday that first-quarter revenue would
decline from the fourth quarter, sending the company's shares
down almost 1 percent in late trade as investors worried about a
slowdown in the smartphone market.
- FERC backs record market manipulation fine on Barclays(BCS). Regulators correctly found that traders
for Barclays Plc manipulated the California power market from
late 2006 to 2008 and should pay the record penalties proposed
in October, the Federal Energy Regulatory Commission staff said
in a report.
- Canadian economist says provinces should consider oil hedges. A prominent economist
recommended on Monday that Canada's provinces consider hedging
their exposure to volatile energy prices, less than a week after
Alberta's premier warned of a C$6 billion ($5.98 billion) budget
shortfall because of deeply discounted Canadian oil prices.
Financial Times:
- Wider euro ‘Tobin tax’ will net €35bn. The
eurozone’s biggest economies would raise €30bn-€35bn from their planned
levy on financial transactions, according to an expansive European
Commission proposal that ensnares trades executed in London, New York or
Hong Kong.
Telegraph:
- Spain's crisis strategy under fire as economy buckles again. Spain’s economy has tipped into an accelerating downturn as sales data and the
money supply flash serious warnings, calling into question Madrid’s
high-risk strategy of refusing an EU-IMF rescue. The country’s
retail sales plunged 10.7pc in December from a year earlier as
austerity bites deeper, one of the worst months since the crisis
began. The Spanish car lobby (Anfac) said the country’s output of
vehicles has fallen
below 2m for the first time since 1993, crashing 17pc last year. The
industry has shrunk by a third since the boom. Ominously, car exports plunged even faster at 18pc, dimming hopes that foreign
trade can lift the economy out of slump as internal demand shrinks. While
Spanish exports have been a bright spot over the past three years - keeping
pace with German exports - the momentum has faltered due to lack of
investment. Citigroup said it now expects Spain's economy to contract by 2.2pc this year
and another 2pc in 2014, pushing unemployment to 28pc. The effects of the slump will overpower any gains from fiscal austerity. The
bank said public debt will surge from 88pc to 110pc of GDP in just two years.
Sueddeutsche Zeitung:
- German Government May Accede to Cyprus Aid. Pressure from euro countries, EU Commission and ECB is so
high that Germany will probably have to support Cyprus aid package.
Finance Minister Schaeuble still has concerns about approving the aid.
The aid package may be smaller than expected.
- ECB's
Asmussen Sees Struggle Ahead for Crisis Countries. Spain Greece still
have a lot of difficulties ahead, ECB Executive Board Member Joerg
Asmussen said in an interview. Spanish health reform is needed, which is more difficult than pension reform, he said. Greece has only run "two-thirds of the marathon," and the toughest part is still ahead, Asmussen said.
China.org.cn:
- Chinese banks cautioned over financial products risks. A senior Chinese banking regulator on
Tuesday warned of risks in banks' wealth-management products, a popular
financial product in China, as a frenzy to snatch depositors has led to
non-standard operations. Some lenders have failed to disclose
sufficient information on the products to their clients, and some are
weak in risk management, Wang Yanxiu, head of the novel products
department under the China Banking Regulatory Commission, said at a
conference.
China Securities Journal:
- China Should Strengthen Property Curbs. China should impose differentiated land, tax and credit measures
to strengthen property curbs, according to a front-page commentary
written by reporters Zhang Min and Zhang Zhaohui. China should study the
elimination of credit support to speculative home buyers in areas with
fast-rising housing prices.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.0 +4.0 basis points.
- Asia Pacific Sovereign CDS Index 86.0 +2.0 basis points.
- NASDAQ 100 futures +.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:15 am EST
- ADP Employment Change for January is estimated to fall to 165K versus 215K in December.
8:30 am EST
- Advance 4Q GDP is estimated to rise +1.1% versus a +3.1% gain in 3Q.
- Advance 4Q Personal Consumption is estimated to rise +2.1% versus a +1.6% gain in 3Q.
- Advance 4Q GDP Price Index is estimated to rise +1.5% versus a +2.7% gain in 3Q.
- Advance 4Q Core PCE is estimated to rise +.9% versus a +1.1% gain in 3Q.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,500,000 barrels versus a +2,813,000 barrel gain the prior week.
Gasoline supplies are expected to rise by +1,000.000 barrels versus a
-1,738,000 barrel decline the prior week. Distillate supplies are
estimated to fall by -500,000 barrels versus a +508,000 barrel gain the
prior week. Finally, Refinery Utilization is estimated to fall by -.35%
versus a -4.3% decline the prior week.
2:15 pm EST
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
Upcoming Splits
Other Potential Market Movers
- The Spanish/Italian bond auctions, Spanish gdp data, Japan PMI data, $29B 7Y T-Note auction, (RIMM) Blackberry 10 release, weekly MBA mortgage applications report and the (KMP) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and financial 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.
Broad Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 95.0 -24.0%
- Total Put/Call .98 +1.03%
Credit Investor Angst:
- North American Investment Grade CDS Index 86.15 +.44%
- European Financial Sector CDS Index 140.22 +2.26%
- Western Europe Sovereign Debt CDS Index 99.45 +.13%
- Emerging Market CDS Index 218.39 +1.81%
- 2-Year Swap Spread 16.0 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -14.25 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .07% +1 bp
- China Import Iron Ore Spot $148.40/Metric Tonne unch.
- Citi US Economic Surprise Index -7.0 -7.3 points
- 10-Year TIPS Spread 2.54 +1 bp
Overseas Futures:
- Nikkei Futures: Indicating +78 open in Japan
- DAX Futures: Indicating +5 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Libor Lies Revealed in Rigging of $300 Trillion Benchmark. Every morning, from his desk by the bathroom at the far end of Royal
Bank of Scotland Group Plc’s trading floor overlooking London’s
Liverpool Street station, Paul White punched a series of numbers into
his computer. White, who had joined RBS in 1984, was one of the employees responsible
for the firm’s submissions for the London interbank offered rate, or
Libor, the global benchmark for more than $300 trillion of contracts
from mortgages and student loans to interest-rate swaps.
- RBS Drops as U.S. Authorities Said to Ask for Libor Plea. Royal
Bank of Scotland Group Plc fell the most in four months as U.S.
authorities push for criminal charges in the probe into allegations that
Britain’s
biggest publicly owned lender tried to rig interest rates. The U.S. Justice Department has extended talks to press the
Edinburgh-based bank for a guilty plea in any settlement, said
two people familiar with the negotiations. RBS may pay about 500
million pounds ($786 million) to U.S. and U.K. authorities to
settle the claims as soon as next week, another two people with
knowledge of the negotiations said.
- Ford(F) Sees European Losses Worsening Since October Outlook. Ford
Motor Co., the second-largest U.S. automaker, said it expects to lose
about $2 billion in Europe this year as a likely recession in the region
continues to sap demand for cars. Ford Europe lost $732 million
in the fourth quarter and $1.75 billion in the region for the full year,
more than its previous forecast given in October of about $1.5 billion.
The deficit will be worse in 2013 than Ford’s previous projection for a
similar loss to a year earlier because a Europe-wide recession is
likely this year, Chief Financial Officer Bob Shanks told reporters
today. “We’re seeing weakness in the industry; certainly it will be lower than last
year,” Shanks said during a briefing at Ford’s headquarters in Dearborn,
Michigan. “It’s just a very tough economic environment in Europe. We
have a lot of difficult times in front of us.” Ford
shares fell, even though fourth-quarter sales and profit exceeded
estimates. Ford slid 4 percent to $13.23 at 9:59 a.m. New York time.
- Egypt Defense Chief Warns of ‘Collapse of State’ Amid Unrest. Egypt’s defense chief warned that political unrest
could bring about the “collapse” of the state, after almost a week of
street battles killed dozens and piled pressure on President Mohamed Mursi.
After ignoring a curfew last night, protesters in the Suez Canal
province of Port Said -- one of three areas the president has placed
under emergency rule -- vowed today to continue their defiance.
Yesterday, the main secular opposition bloc rejected calls by Mursi for a
national dialogue, saying “serious” political discourse was needed, not
security solutions. The conflict between the political forces “and
their disagreement on running the country may lead to the collapse of
the state,” Defense Minister Abdelfatah Al-Seesi was quoted as saying in
a statement posted on the armed forces’
official Facebook page. The political instability and economic
challenges “represent a real threat to Egypt’s security.”
- Tanker Glut Worsens on Steepening OPEC Production Cuts. OPEC’s
deepest output cut since the
global recession in 2008 is creating the biggest surplus of oil tankers
in the Persian Gulf in at least three years and lowering earnings for
Frontline Ltd. and other ship owners. The Organization of Petroleum
Exporting Countries reduced daily supply by almost 1 million barrels in
the four months through December, equal to one fully loaded supertanker
every two days, data compiled by Bloomberg show. Saudi Arabia, Iran and Iraq led the retreat, leaving 24 percent more ships than
cargoes in the world’s largest oil-producing region, the most
for the time of year since at least 2010, according to weekly
surveys of shipbrokers and owners by Bloomberg.
- Oil Rises to Four-Month High. Crude
oil for March delivery rose 78 cents, or 0.8 percent,
to $97.22 a barrel at 9:26 a.m. on the New York Mercantile Exchange.
Futures touched $97.32, the highest intraday price since Sept. 17. The
average volume of all contracts traded at that time was 10 percent above
the 100-day average. Brent crude for March settlement increased 4 cents to
$113.52 a barrel on the London-based ICE Futures Europe
exchange. The volume of all contracts traded was 27 percent
above the 100-day average.
- Apple(AAPL) Debuts IPad With More Memory Amid Mounting Competition. Apple Inc. debuted an iPad with
twice the memory of older models, offering users more space to
store movies, videos and books amid mounting competition in the
tablet market. The new iPad with 128 gigabytes of storage will be
available starting Feb. 5 priced at $799 for a Wi-Fi version and
$929 for a device that also offers a cellular connection,
Cupertino, California-based Apple said today in a statement.
- Overdue Student Loans Reach ‘Unsustainable’ 15%, Fair Isaac Says. Delinquency rates on student loans
made in the past two years stand at 15 percent in the U.S. as
recent graduates struggle to find jobs, Fair Isaac Corp. (FICO) said. The rate for 2010 through 2012 compares with 12.4 percent for loans made from 2005 to 2007, Fair Isaac’s FICO Labs said in
a statement today, citing data from October. Average student-
loan debt last year rose to $27,253 from $17,233 in 2005, and
almost 60 percent of bank managers surveyed in December expect
delinquencies to worsen in six months, FICO said.
- Wanxiang Wins U.S. Approval to Buy Battery Maker A123.
Wanxiang Group Co., China’s biggest auto-parts maker, won approval from
the Committee on Foreign Investment in the U.S. to buy most of the
assets of A123 Systems Inc. (AONEQ), the bankrupt electric-car battery
maker backed with U.S.
government funds.
Wall Street Journal:
- Comex Copper Erases Gains on Large Rise in Stockpiles.
Copper futures eased Tuesday after a large jump in warehouse stockpiles
of the metal pushed some traders to cash out. The amount of copper
stored at London Metal Exchange-monitored
warehouses climbed by 9% on Monday, according to exchange data released
early Tuesday. The rise was almost entirely the result of 31,425 metric
ton increase in stocks held at warehouses in Antwerp, Belgium. Supply-and-demand
indicators are under the microscope this year
because of widespread expectations that global production of the
industrial metal will outpace demand for the first time since 2009. The
amount of copper held in LME warehouses is up 61% since the beginning of
November, to 371,750 tons.
Fox News:
- Aide to Egyptian President Morsi claims Holocaust a US hoax. A key figure in Egyptian President Mohammed Morsi's government called
the Holocaust a hoax cooked up by U.S. intelligence operatives and
claimed the 6 million Jews who were killed by Nazis simply moved to the
U.S. The outrageous claims, by Fathi Shihab-Eddim, a senior figure close
to President Morsi who is now responsible for appointing the editors of
all state-run Egyptian newspapers, came as the world marked Holocaust
Remembrance Day on Jan. 27, and also as the U.S. continues to assess its
relationship with the increasingly radical Arab state.
CNBC:
- QE Program a 'Disaster', Say UK Saving and Pension Groups. The
policy of quantitative easing (QE) pursued by the Bank of England since
2008 has hurt the nation's savers and any further stimulus would have
marginal benefits, according to evidence heard by U.K. policymakers. "QE (quantitative easing)is an inflationary policy as they admit, and with
inflation currently running higher than the increase in wages, it isn't
just savers and pensioners, it's everybody who is suffering and feeling
the pinch," Simon Rose from the group Save our Savers said at a
meeting of the U.K. parliament's Treasury committee. He argued that
millions are now worse off. "From the saver's point of view, QE has
been an utter disaster, both whether they're saving through a pension
fund or whether they're saving through cash deposits." With inflation
now above the current interest rate, Rose said that the resulting
negative interest rate means that savers are unable to preserve the
value of their cash. "It's quite an appalling confiscation of wealth,"
he said.
Business Insider:
AdAge:
- YouTube Set to Introduce Paid Subscriptions This Spring. A new chapter in online video is about to begin. YouTube is prepping to
launch paid subscriptions for individual channels on its video platform
in its latest attempt to lure content producers, eyeballs, and
advertiser dollars away from traditional TV, according to multiple
people familiar with the plans.
The Blaze:
Reuters:
- Exclusive: Researchers warn of widespread networking gear bugs. Bugs in widely used networking technology expose tens of millions of personal
computers, printers and storage drives to attack by hackers over the regular
Internet, researchers with a security software maker said. The long list of devices includes products from manufacturers including
Belkin, D-Link, Cisco Systems Inc's Linksys division and Netgear.
- D.R Horton's(DHI) profit soars as prices rise; orders jump. Top U.S homebuilder D.R. Horton Inc's
quarterly profit more than doubled as it sold more homes
at higher prices, and the company reported a 39 percent jump in
orders, underlining a firming U.S. housing recovery. Shares of the company rose as much as 7 percent to $22.75 on
the New York Stock Exchange in early morning trade, adding to
the nearly 50 percent jump seen in the stock in the last 12
months.
Financial Times:
- China averts local government defaults. Chinese
banks have rolled over at least three-quarters of all loans to local
governments that were due to mature by the end of 2012, an indication of
the immense challenge facing China in working down its debt load. Local governments borrowed heavily from banks to fuel China’s stimulus programme during the global financial crisis
and are now struggling to generate the revenue to pay them back, a
shortfall that could cast a shadow over Chinese economic growth.
Telegraph:
Handelsblatt:
- German
Ifo Jobs Index Unexpectedly Falls. The jobs index published by
Germany's Ifo economic institute erased recent gains, falling to 106.6
in January from 106.9.
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -6.0% 2) Computer Hardware -4.11% 3) Networking -2.23%
Stocks Falling on Unusual Volume:
- VMW, STX, BMC, RBS, WDC, INXN, RAX, E, NIHD, CEL, CVC, IRE, EGY, ROG, ASH, EMC, FURX, KLIC, NTGR, RCII, WCC, OLN, MNRO, E, PII, NEU, LXK, OSTK, EOPN, BMRN, PPO, F, YHOO, EDU, GWAY, PNR, MKSI, FIO and BCEI
Stocks With Unusual Put Option Activity:
- 1) VMW 2) XLP 3) BIIB 4) EWW 5) JNPR
Stocks With Most Negative News Mentions:
- 1) BMC 2) HTLF 3) FTNT 4) ASH 5) NTGR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.44% 2) Energy +1.85% 3) I-Banks +.96%
Stocks Rising on Unusual Volume:
- HES, VLO, CIT, WNR, RPRX, GNTX, DDD, DHI, BTU, JCP and ATI
Stocks With Unusual Call Option Activity:
- 1) KMB 2) HCA 3) VMW 4) OPK 5) CTXS
Stocks With Most Positive News Mentions:
- 1) TUP 2) JEC 3) FITB 4) LEN 5) ANF
Charts:
Evening Headlines
Bloomberg:
- Draghi-Inspired Rally Risks Nations Dodging Reforms: Euro Credit. ECB President Mario Draghi's success in driving down borrowing costs for the most indebted euro nations risks lowering their incentives to tackle budget deficits, revive growth and reduce unemployment. "Having taken away the breakup risk for Europe, what they've got now is a crisis that is chronic rather than acute," said Stuart Thomson, who helps oversee $109 billion at Ignis Asset Management in Glasgow. "Europe is doing exactly what Japan has done. When there is a crisis, there will be a response, improvement and then complacency. Europe is in a complacency period now."
- ECB Said to Object to 15-Year Commitment on Anglo Irish Rescue. European Central Bank policy makers
rejected an Irish government plan designed to fund the rescue of
the former Anglo Irish Bank Corp. for at least 15 years,
according to three people with knowledge of the discussions.
- Monti Minister to Defend Paschi Bailout After Losses Uncovered. Finance
Minister Vittorio Grilli today will defend Italy’s planned 3.9
billion-euro ($5.3 billion) rescue of Banca Monte Paschi di Siena SpA as
lawmakers
question whether the lender deserves aid after hiding losses.
- China Communists to Control Size of Party Amid Corruption Fight. China’s
ruling Communist Party will control the size of the organization as it
seeks to weed out “unqualified members,” the official Xinhua News Agency
said, citing a meeting overseen by party leader Xi Jinping. Some party members are “corrupt and degenerate,” members
of the ruling Politburo said, affecting the party’s “vigor and
vitality,” according to the Xinhua report. The party had 82
million members as of last year.
- Beijing Recommends Residents Stay Indoors as Pollution ‘Serious’. Beijing recommended the city’s
residents stay indoors today to avoid exposure to “serious” levels of air pollution in the Chinese capital.
- IMF Set to Pare South Korea 2013 Growth Estimate to About 3%. The full-year expansion may be about 3 percent, compared
with a 3.9 percent estimate in September last year, country
mission chief Hoe Ee Khor said in an interview in Seoul after
meeting with South Korean officials last week.
- Tanker Glut Worsening as OPEC Cuts Most Since Recession: Freight. OPEC's deepest output
cut since the global recession in 2008 is creating the biggest surplus
of oil tankers in the Persian Gulf in at least three years and lowering
earnings for Frontline Ltd. and other ship owners. OPEC reduced daily
supply by almost 1 million barrels in the four months through December, equal to one fully loaded supertanker every two days, Bloomberg data show. Saudi Arabia, Iran and Iraq led the retreat, leaving 22% more ships than cargoes in the world's largest oil-producing region, the most for the time of year since at least 2010, according to weekly surveys of shipbrokers and owners by Bloomberg.
- Dubai Suitcases of Cash Circumvent Loan Rules: Mortgages. Cash is king in the Persian Gulf emirate’s rebounding
property market, limiting the power of regulators to control
rising prices that fueled the last property bubble by imposing
restrictions on mortgage loans to foreigners. Buyers from Iran to
Russia to Greece are paying cash in as many as 70 percent of Dubai home
purchases, up from 49 percent in 2007, according to
researcher Reidin.com.
- Egyptians Protest for Fifth Day, Opposition Spurns Talks. Egyptian security forces clashed
yesterday with protesters for a fifth day as the main opposition
leaders snubbed a call for dialogue by President Mohamed Mursi. The
violence came hours after Mursi instituted a state of
emergency in three restive provinces and said transgressors
would be dealt with firmly. Protests were held to mark the anniversary
of the bloodiest day in the 2011 uprising that ousted Hosni Mubarak. At
least one person was killed, adding to
a death toll of about 50 since Jan. 25.
- Caterpillar(CAT) Considers ‘All Options’ as Probe Continues. Caterpillar Inc., the largest maker
of construction and mining equipment, said it’s considering
“all options” to recover losses from false accounting at a
Chinese business that led to a $580 million writedown. The company is also seeing how it can hold those
responsible to account for the “multiyear, coordinated
accounting misconduct,” Chairman and Chief Executive Officer
Doug Oberhelman said yesterday. “We are not done,” Oberhelman said on the company’s
fourth-quarter earnings conference call with analysts. “We are
putting in more effort to finish our investigation.”
- Watchdog Says U.S. Treasury Failed to Curb AIG(AIG), GM(GM) Pay. The
U.S. Treasury Department “failed to rein in excessive pay” at
bailed-out American International Group Inc. (AIG), General Motors Co.
(GM) and Ally Financial Inc. (ALLY), the rescue program’s inspector
general said. Sixteen of the 69 top employees at the three companies had
2012 pay packages worth at least $5 million and all but one had
total compensation of $1 million or more, the Special Inspector
General for the Troubled Asset Relief Program said in a report
today.
- BMC Software(BMC) Drops on Profit Forecast Miss. BMC
Software Inc. (BMC), a maker of programs that help companies update
servers and personal computers, fell in late trading after forecasting
fiscal 2013 profit that missed analysts’ estimates, a sign it’s
struggling to clinch big contracts. Shares declined as much as 9.5
percent to $40.26 in late trading after saying in a statement that
profit excluding some items will be $3.35 to $3.45 a share for fiscal
2013, which ends
in March.
Wall Street Journal:
- U.S. Wants Criminal Charges for RBS.
U.S. authorities are pushing for a settlement of interest-rate-rigging
allegations with Royal Bank of Scotland Group that would result in a
unit of the big British bank pleading guilty to criminal charges in
addition to paying a penalty, according to
people briefed on the negotiations. RBS executives are resisting
any guilty plea, fearful that it could lead clients to cut off activity
with the bank and that it could increase exposure to costly litigation,
some of these people said. The negotiations reflect a newly tough stance
by U.S. authorities, who until recently have faced criticism for rarely
pursuing criminal action against big banks.
- U.S. to Expand Role in Africa. Military
Pact With Niger Brings American Forces Closer to Conflict in Mali. The
U.S. signed an agreement Monday with the West African country of
Niger that clears the way for a stepped-up American military presence on
the edges of the conflict in neighboring Mali. The U.S. and France are moving to create an intelligence hub in Niger
that could include a base, near Mali's border, for American drones that
could monitor al Qaeda-linked militants in Mali's vast desert north,
U.S. officials said.
The moves show the extent to which the
U.S. and France are girding for what could be an open-ended campaign
against the militants in North and West Africa.
- Media Firms Probed on Data Release. Investigators Examined if Economic Figures Were Given Early to Clients; No Criminal Charges Seen. Law-enforcement authorities have conducted a wide-ranging
investigation into whether media companies facilitated insider trading
on Wall Street by prematurely releasing market-moving government data,
according to people familiar with the probe. The federal investigation examined whether news organizations used
high-speed transmission systems to give some investors access to
economic data a fraction of a second before the official release time,
according to officials familiar with the probe. Among the media
companies investigated were Bloomberg LP, Thomson Reuters Corp. and the
Dow Jones & Co. unit of News Corp, which are the leading conduits of
federal economic data to traders right after release, though not the
sole ones.
- Room for Favors in 'Cliff' Deal. The New Year's Day legislation that averted tax increases for
millions of Americans brought an unwelcome surprise for Elekta AB, a
Swedish maker of radiation tools designed to battle brain tumors.
A provision, inserted at the last minute, sharply cut Medicare payments
for the company's product while leaving unchanged those of its direct
competitor, Varian Medical Systems Inc., of Palo Alto, Calif.
- Too Soon to Celebrate for Europe's Banks. The rosy tint was nowhere more apparent than in the Davos-thinking
about battered European banks. The financial cognoscenti were uttering
phrases like "the beginning of the end" and "the worst is over," while
bank executives pointed to their companies' resilient dynamism, to coin a
phrase, in the face of adversity. "The trust in the euro and the
European banking sector has come back," proclaimed the head of a large
European lender. I wouldn't pop the champagne, spumante and cava just
yet.
- Immigration Breakout. A promising Senate framework, if Obama really wants a deal.
- John Taylor: Fed Policy Is a Drag on the Economy. While borrowers like near-zero interest rates, there is little incentive for lenders to extend credit at that rate.
As they meet this week, Federal Reserve Chairman Ben Bernanke and his
colleagues will be looking at an economic recovery that has been far
weaker than expected. Early in 2010 they predicted that growth
in 2012 would be a robust 4%. It turned out to be a disappointing 2%.
And as the recovery fell short of their expectations, they continued and
then doubled down on the emergency interventions used in the panic in
2008.
Fox News:
- Boy Scouts considering dropping nationwide ban on gay members, leaders. The Boy Scouts of America is considering dropping a longtime ban on
gay members, leaving such membership and leadership decisions up to
local sponsors. “The BSA is discussing potentially removing the national membership
restriction regarding sexual orientation,'' spokesman Deron Smith said
in a statement obtained by FoxNews.com. "This would mean there would no
longer be any national policy regarding sexual orientation, but that the
chartered organizations that oversee and deliver Scouting would accept
membership and select leaders consistent with their organization’s
mission, principles or religious beliefs."
- Draft UN climate report shows 20 years of overestimated global warming, skeptics warn. A preliminary draft of a report by the U.N.’s Intergovernmental Panel
on Climate Change was leaked to the public this month, and climate
skeptics say it contains fresh evidence of 20 years of overstated global
warming. The report -- which is not scheduled for publication until 2014 --
was leaked by someone involved in the IPCC’s review process, and is
available for download online. Bloggers combing through the report
discovered a chart comparing the four temperature models the group has
published since 1990. Each has overstated the rise in temperature that
Earth actually experienced. “Temperatures have not risen nearly as much
as almost all of the climate models predicted,” Roy Spencer, a
climatologist at the
University of Alabama at Huntsville, told FoxNews.com. “Their
predictions have largely failed, four times in a row... what
that means is that it's time for them to re-evaluate,” Spencer said.
CNBC:
- Yahoo(YHOO) Earnings Beat; Revenue Outlook Is Light. Yahoo reported fiscal fourth-quarter earnings that topped expectations,
but its first-quarter revenue guidance was a bit lower than analyst
estimates. The stock remained higher after-hours as Wall Street cheered
the search giant's revenue growth.
Zero Hedge:
Business Insider:
Forbes:
- The Next Great(er) Recession Now Baked In The Cake? It’s basic cause and effect. Monetary inflation causes economic busts. And the larger the monetary inflation, the larger the bust.
As brilliantly explained by the Austrians (see here), monetary
inflation distorts interest rate and price signals. As a consequence,
businesses embark on projects and consumers make purchases
and/or investment decisions that turn out to be mistakes, malinvestments
if you will, that sooner or later must be liquidated.
CNN:
-
Gun background checks surged in last 6 weeks. Gun sales soared at the end of last year, and the trend has continued into 2013. Since 1998, eight of the 10 highest days for gun
background checks have taken place since the school shooting in
Newtown, Conn., on Dec. 14, according to the FBI.
FINalternatives:
- Report: Hedge Funds Quit New York For Florida, Low Taxes. While New York may be irresistible to new hedge funds compared to
nearby Greenwich, Conn., it's got nothing on southern Florida, according
to one tabloid report. Hedge funds are flocking to Palm Beach County, drawn by low tax rates and, of course, the weather, the New York Post
reports. The county, located about 40 miles north of Miami, has
recently opened an office charged with luring hedge funds down from New
York. "We're not doing a multi-million-dollar marketing campaign," Kelly
Smallridge, head of the Palm Beach County Business Development Board,
told the Post. "We don't need to. They're coming to us."
Reuters:
- Seagate(STX) results beat estimates; sees lower 3rd-qtr revenue. Seagate
Technology Plc forecast third-quarter revenue below analysts'
estimates, on muted demand for its hard disk drives as consumers pick
smartphones and tablets over PCs, sending its shares down 4 percent
after the bell.
- Mali to receive $18.4 million loan from IMF. Mali, the
strife-torn West African nation, has been approved to receive an $18.4
million loan from the International Monetary Fund to help stabilize its
economy over the next 12 months, the IMF said on Monday.
- VMware(VMW) to cut jobs, disappoints with 2013 outlook. Software maker VMware Inc plans to cut about 7 percent of its workforce
as part of a restructuring, and it gave a cautious outlook for 2013 due
to a decline in U.S. federal government spending and the likelihood of
more tough economic times in Europe. The company's shares fell 14.6 percent in after-hours trading.
Financial Times:
- Hedge fund managers raise bets on stocks. Hedge
funds raised their bets on stocks in January, according to Credit
Suisse, adding to the sense of optimism on Wall Street as traders become
willing to take more risk. It comes as TrimTabs predicted inflows of
$55bn to US equity mutual
funds and exchange traded fund for January, an all-time record for the
first month of the year, suggesting broad based support for the stock
market rally among investors. Gross
leverage of hedge funds trading with the bank was 2.65 times their
underlying assets, above the highs of last year, he said. The net
proportion of trades that are long stocks, rather than short, is at its
highest since early 2011, before the European debt crisis began to roil
markets.
Telegraph:
- Davos: Britain faces up to reality as Europe clings to dreams. One of the most refreshing things about going to the World Economic Forum in
Davos is that it reminds you just how irrelevant to much of the rest of the
world the political and economic concerns of our little island really are.
- France 'totally bankrupt', says labour minister Michel Sapin. France's labour minister sent the country into a state of shock on Monday
after he described the nation as “totally bankrupt”. Michel Sapin made the gaffe in a radio interview, which left French President
Francois Hollande battling to undo the potential reputational damage. “There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is
why we had to put a deficit reduction plan in place, and nothing should make
us turn away from that objective.”
Evening Recommendations
Oppenheimer:
- Rated (DGX) Underperform, target $53.
Night Trading
- Asian equity indices are unch. to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 84.0 -1.0 basis point.
Morning Preview Links
Earnings of Note
Company/Estimate
- (AKS)/-.35
- (EMC)/.52
- (IP)/.65
- (VLO)/1.20
- (DHR)/.86
- (CIT)/.61
- (LLY)/.79
- (LXK)/.90
- (BSX)/.11
- (HOG)/.31
- (TUP)/1.68
- (F)/.25
- (PFE)/.44
- (DHI)/.14
- (GLW)/.32
- (X)/-.76
- (BTU)/.26
- (ITW)/.91
- (NUE)/.30
- (RHI)/.41
- (AMZN)/.27
- (BRCM)/.74
- (RYL)/.50
- (BXP)/1.24
- (JLL)/2.62
- (PII)/1.23
- (GNTX)/.26
- (AMG)/2.43
Economic Releases
9:00 am EST
- The S&P/CS Home Price Index 20 City MoM% SA for November is estimated to rise +.7% versus a +.66% gain in October.
10:00 am EST
- Consumer Confidence for January is estimated to fall to 64.0 versus 65.1 in December.
Upcoming Splits
Other Potential Market Movers
- The $35 Bln 5Y T-Note auction, weekly retail sales reports, German consumer climate index and the TD Securities Mining Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity 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.
