Evening Headlines
Bloomberg:
- Weidmann Says Bailouts Could Weaken Even Strongest Euro Members.
Bundesbank President Jens Weidmann said Europe’s current framework for
bailing out distressed nations will eventually weaken even the single
currency’s strongest members unless it is changed. “If things stay the
way they are, the consequences of unsound policies will be too easily
passed on to others,” Weidmann said in Berlin late yesterday. “Sooner or later the economically solid countries will be weakened. Liability and control have to be brought into balance.”
Germany, Europe’s largest economy, has pledged more than 300 billion
euros ($407 billion) in loans and guarantees to help shore up the
finances of euro member states such as Greece, Ireland and Portugal.
Weidmann, who’s also a member of the European Central Bank’s Governing
Council, has argued that policies including the OMT bond-purchase
program come too close
to the banned practice of financing states by printing money. Risks that have been shared via bailouts and ECB emergency
measures have already reached a “substantial level,” Weidmann
said. “If these risks rise, the culture of stability could be
eroded as if we had explicit joint liability.”
- Bank of Italy Seen Vigilant as Monte Paschi Risk Surfaced. The
Bank of Italy acted vigilantly in its oversight of Banca Monte dei
Paschi di Siena SpA (BMPS), with the discovery of accounting
irregularities leading to a criminal investigation targeting previous
management, a former senior Bank of Italy official who was involved in
the inspections said. Pressure from the central bank prompted a shakeup of
executives at the Siena-based lender last year and led to the
uncovering in January of secret documents about some
transactions hidden from regulators, said the person, who asked
not to be identified because the probe is confidential.
- Japan December Industrial Output Rises Less-Than-Forecast 2.5%. Japan’s industrial production rose
less than economists forecast, suggesting that a recovery in the
nation’s manufacturing sector is lagging a weakening yen. Output rose 2.5 percent from November, when it declined 1.4
percent, the Trade Ministry said in Tokyo today. The median
estimate of 25 economists was for a 4.1 percent gain. Production
fell 7.8 percent from the previous year.
Wall Street Journal:
- U.S. Is Preparing More Tax-Evasion Cases. The
U.S. is expanding its crackdown of offshore tax evasion,
preparing numerous criminal cases against suspected offenders, defense
lawyers involved in the cases say. Four years after an agreement between
the U.S. and Switzerland pierced a veil of banking secrecy by requiring
Swiss bank UBS AG to turn over names of account holders, defense
lawyers estimate that federal prosecutors are conducting at least 100
criminal investigations
against suspected tax evaders. The moves come as the U.S. is
turning the screws on smaller banks that may have helped taxpayers stash
money in secret overseas accounts. On Monday, a federal judge in New York approved an Internal Revenue
Service summons demanding still more records from UBS. According to
court filings, the government now is focusing on U.S. taxpayers with
accounts at smaller Swiss banks that didn't have U.S. branches but
served customers through a UBS account in Stamford, Conn.
- Risky Student Debt Is Starting to Sour. The number of student loans held by subprime borrowers is growing, and more
of those loans are souring, the latest signs that a weak job market and rising
debt loads are squeezing recent graduates. In all, 33% of all subprime student loans in repayment were 90 days or more
past due in March 2012, up from 24% in 2007, according to a Wednesday report by
TransUnion LLC. Meanwhile, the Chicago-based credit bureau found that 33% of the almost $900
billion in outstanding student loans was held by subprime, or the riskiest,
borrowers as of March 2012, up from 31% in 2007.
- Israeli Jets Blast Arms Shipment Inside Syria. Israel bombed a suspected shipment of antiaircraft missiles in Syria
on Wednesday, according to regional and U.S. officials, in its most
ambitious strike inside its neighbor's territory in nearly two chaotic
years of civil war there. The early-morning strike in a border area west of Damascus targeted a
convoy of trucks carrying Russian-made SA-17 missiles to Hezbollah, the
anti-Israel Shiite militant and political group in Lebanon, according
to a Western official briefed on the raid.
- Some Unions Grow Wary Of Health Law They Backed. Labor unions enthusiastically backed the Obama administration's
health-care overhaul when it was up for debate. Now that the law is
rolling out, some are turning sour.
Union leaders say many of the law's
requirements will drive up the costs for their health-care plans and
make unionized workers less competitive. Among other things, the law
eliminates the caps on medical benefits and prescription drugs used as
cost-containment measures in many health-care plans. It also allows
children to stay on their parents' plans until they turn 26.
- Slaying Fuels Anger in Chicago.
The seemingly random killing of a 15-year-old girl who performed last
week as a majorette at President Barack Obama's second inauguration is
crystallizing anger over this city's high murder rate. The slaying of
Hadiya Pendleton, as she stood with friends Tuesday
afternoon in a park, came on a day that saw the city's 40th, 41st and
42nd murders of the year, according to police. It continued an uptick in
homicides that began last year when more than 500 people were killed.
The majority were gang-related shootings on the city's troubled south
and west sides. Semiautomatic weapons are banned in the city of Chicago, as are stores
that sell guns. But guns are available in neighboring suburbs, and gun
violence here goes hand in hand with the city's gang culture and a
membership police estimate at 100,000.
- Threats Cloud Euro's Flight.
With Europe's Economy Still Hobbled, the Currency's Surge Could Soon
Stall. The euro, once on death's door, is on a monthslong tear, rising
Wednesday to its highest level since November 2011. But even some investors who helped propel the currency above $1.3560
Wednesday say it can't fly much further. Europe's economy is still in
the doldrums, they say, and a stronger euro could make the situation
worse. And with central banks elsewhere racing to push down their own
currencies, boosting the relative value of the euro, the European
Central Bank eventually could be compelled to join them.
- Henninger: Obama's Thunderdome Strategy. The president's goal is to make Republican ideas intolerable. Conventional wisdom holds that these unorthodox tactics are a
mistake, that he's going to need GOP support on immigration and such.
And by now it's conventional wisdom that when our smiling president
transforms into Mr. Hyde he is merely channeling Saul Alinsky, deploying
the tactics of community-organizing campaigns, the only operational
world he knew before this.
The real pedigree, though, is a lot heavier than community organizing in Chicago. Speaking last Saturday, Rep. Paul Ryan
said that for Barack Obama to achieve his goals, "he needs to
delegitimize the Republican Party." Annihilate, delegitimize—it's the
same thing. The good news is that John Boehner and Paul Ryan recognize
that their relationship with this White House is not as partners in
anything. They are prey.
Fox News:
MarketWatch.com:
- Facebook(FB) is mobile, but investors want more. Facebook Inc. Chief Executive Mark Zuckerberg kicked off the company’s
earnings call on Thursday proclaiming that the social network “is a
mobile company,” but investors may be more concerned about its spending
plans.
CNBC:
- Hackers in China Attacked The Times for Last 4 Months. For the last four months, Chinese hackers have persistently attacked
The New York Times, infiltrating its computer systems and getting
passwords for its reporters and other employees. After
surreptitiously tracking the intruders to study their movements and help
erect better defenses to block them, The Times and computer security
experts have expelled the attackers and kept them from breaking back in. The
timing of the attacks coincided with the reporting for a Times
investigation, published online on October 25, that found that the
relatives of Wen Jiabao, China's prime minister, had accumulated a
fortune worth several billion dollars through business dealings.
- Time to Get Off the China Stocks Train? Chinese shares are having their day in the sun, with the benchmark
Shanghai stock index trading at an eight-month high on Thursday. The
rally, however, may be close to running its course, some analysts say.
Zero Hedge:
Business Insider:
Read
more here:
http://blogs.sacbee.com/capitolalertlatest/2012/08/fiscal-analyst-hundreds-of-millions-at-risk-from-facebook-slide.html#storylink=cpy
Washington Times:
- New al Qaeda Threat. A
jihadist website posted a new threat by al Qaeda this week that
promises to conduct “shocking” attacks on the United States and the
West. The posting appeared on the Ansar al Mujahidin network Sunday and
carried the headline, “Map of al Qaeda and its future strikes.” The
message, in Arabic, asks: “Where will the next strike by al Qaeda be?” A
translation was obtained by Inside the Ring. “The answer for it, in
short: The coming strikes by al Qaeda, with God’s Might, will be in the
heart of the land of nonbelief, America, and in France, Denmark, other
countries in Europe, in the countries that helped and are helping
France, and in other places that shall be named by al Qaeda at other
times,” the threat states. The attacks will be “strong, serious,
alarming, earth-shattering, shocking and terrifying.”
CNN:
- Regulations are killing my business. These
small businesses are being squeezed by local regulations requiring
specific licenses. All are fighting back with the help of the
Institute for Justice, a civil liberties law firm.
USA Today:
Reuters:
- EU freezes 900 mln euros to Poland pending fraud probe. The European Union has frozen
about 890 million euros ($1.20 billion) in aid earmarked for
building Polish roads because of a suspected fraud by
contractors, a Commission spokeswoman said on Wednesday. The
suspension, which is likely to be only temporary, comes
at an awkward time for the Polish government which is already dealing
with a sharp economic slowdown and thousands of lay-offs in the
construction industry. Poland's Deputy Minister for Regional Development, Adam Zdzieblo, said the decision was "completely incomprehensible"
and based on questionable assumptions.
- Isn't the Chinese property bubble obvious?
Divergent views are emerging over whether
there is a bubble building in the Chinese property sector, which
has produced a string of aggressive high-yield issues this year,
the most recent of which was Greentown China's conveniently
successful US$400m bond this week. The recent hot flow of money into
Chinese high-yield property bonds, much of it from private banks unable
to earn a decent return elsewhere, had the look and feel of a sector
overheating, and many have indeed traded down in secondary. If it looks like a bubble and inflates like a bubble, then
it will ultimately pop like a bubble.
- Electronic Arts(EA) slashes 2013 outlook as industry struggles. Electronic Arts Inc slashed its fiscal 2013 earnings forecast after a weaker-than-expected holiday quarter marked by disappointing sales of its "Medal of Honor" title, as the industry
struggles with flagging demand. Chief Financial Officer Blake Jorgensen said the earnings
forecast had been adjusted downward, to take into account
uncertainties in the seasonally weaker March quarter. "The economy hasn't gotten any stronger," he told Reuters in
an interview.
- Qualcomm(QCOM) beats street, raises guidance, shares rise. Qualcomm Inc beat Wall Street expectations for its fiscal first-quarter earnings and revenue and raised its financial targets for 2013 due to growing demand for smartphones and high-speed wireless services. Qualcomm shares rose 6 percent in late trade on Wednesday as
the outlook from the leading supplier of chips for cellphones
wowed investors in contrast with sluggish demand at chip makers
such as Texas Instruments and Broadcom Corp.
- Sands 4th-qtr profit below view as Las Vegas weak. Casino
operator Las Vegas Sands Corp, owned by billionaire Sheldon Adelson, on
Wednesday posted lower-than- expected fourth-quarter earnings as weak
results in Las Vegas dampened a strong performance in Asia. But revenues topped estimates and the company boosted its
quarterly dividend by 40 percent to 35 cents a share, helping to
drive shares of Sands up 3.8 percent in after-hours trade.
Telegraph:
China Securities Journal:
- The
China Securities Regulatory Commission may raise the leverage ratio for
securities companies to help "boost profitability", citing Li Geping,
secretary general of the Securities Association.
China Times:
- China's
Beijing city has submitted a property tax trial plan to the State
Council for approval, citing an unnamed person close to the local
finance and tax department. The property tax may be imposed in the city
as early as 1H, citing the person.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 114.0 +4.0 basis points.
- Asia Pacific Sovereign CDS Index 89.0 +3.0 basis points.
- NASDAQ 100 futures -.18%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The 4Q Employment Cost Index is estimated to rise +.5% versus a +.4% gain in 3Q.
- Personal Income for December is estimated to rise +.8% versus a +.6% gain in November.
- Personal Spending for December is estimated to rise +.3% versus a +.4% gain in November.
- The PCE Core for December is estimated to rise +.1% versus unch. in November.
- Initial Jobless Claims are estimated to rise to 351K versus 330K the prior week.
- Continuing Claims are estimated to rise to 3171K versus 3157K prior.
9:45 am EST
- The Chicago Purchasing Manager report for January is estimated to rise to 50.5 versus 50.0 in December.
Upcoming Splits
Other Potential Market Movers
- The China Official PMI data/HSBC PMI data, Challenger Job Cuts report for January, Canadian gdp report, weekly EIA natural gas inventory report, RBC Consumer Outlook Index for February, weekly Bloomberg Consumer Comfort Index and the NAPM-Milwaukee report for January could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
