Evening Headlines
Bloomberg:
- EU Opens Way for Easier Budgets After Italian Austerity Backlash. European finance ministers opened
the way for looser budget policies after a backlash against
austerity thrust Italy into political limbo and shattered months of relative stability in European markets.
Italy’s deadlocked election, France’s refusal to make deeper budget
cuts and protests against the shrinking of the welfare state across
southern Europe escalated the rebellion against the German-led
prescription for fighting the debt crisis. Economic strains “may also
justify in a certain number of cases reviewing deadlines for the
correction of excessive deficits,” European Union Economic and Monetary
Commissioner Olli Rehn told reporters late yesterday after a meeting of euro-
area finance ministers in Brussels.
- Euro Chiefs Won’t Rule Out Cyprus Depositor Losses. European finance ministers left open
the possibility of saddling bank depositors and bondholders with
some of the costs of an aid package for Cyprus, potentially
unsettling markets as the bailout negotiations drag on. Dutch Finance Minister Jeroen Dijsselbloem declined to rule
out a “bail in” of Cypriot depositors, even after concern over
the treatment of bank account holders prompted the first signs
of capital flight from the island.
“All the questions on the elements” will be dealt with by
late March, Dijsselbloem told reporters after chairing a meeting of euro-area finance ministers in Brussels yesterday.
- Wegelin Must Pay $58 Million in U.S. Tax Prosecution. Wegelin & Co. was ordered to pay
U.S. authorities almost $58 million at the end of a criminal
case after the Swiss bank pleaded guilty to helping American taxpayers hide more than $1.2 billion from the Internal Revenue Service.
- China
Bull Market Ending as Financials Plunge: Chart of the Day. A slump by a
Chinese equity gauge of banks, property developers and insurers in the
past month is signaling the end to a bull-market rally by the nation's
stocks as the government takes steps to prevent asset bubbles. Peaks in
the relative performance of financial shares versus the broader market
have foreshadowed bear-market declines in the CSI 300 Index, according
to data compiled by Bloomberg. "The stock rally is over," Zhou Binglin, a
senior economist at Guosen Securities Co. in Shenzhen, said March 1.
Banks and developers are "leading indicators," with real estate
accounting for about 20% of the economy, he said.
- China Boosts Defense Spending as Military Modernizes Arsenal. China will boost defense spending
10.7 percent this year as the government modernizes its military
arsenal and adopts a more assertive stance in territorial
disputes with its neighbors. Military spending is set to rise this year to 740.6 billion
yuan ($119 billion) from 669.1 billion, the Ministry of Finance
said in a report.
- RBA Holds Key Rate at 3%, Reiterates Scope to Ease Further. Australia’s
central bank kept its benchmark interest rate unchanged at a
half-century low and reiterated it has room to cut further if needed to
boost demand. Governor Glenn Stevens and his board left the
overnight cash-rate target at 3 percent, the Reserve Bank of Australia
said in a statement today in Melbourne. The decision was
predicted by 27 of 29 economists surveyed by Bloomberg. Two
forecast a 0.25 percentage point cut.
- Netanyahu Warns Iran Stalling While Biden Presses Talks. Israeli Prime Minister Benjamin Netanyahu said that Iran is using negotiations over its nuclear
program to stall for time to develop an atomic weapon, even as
Vice President Joe Biden said the U.S. favors diplomacy to stop
Iran from getting one. “Diplomacy has not worked,” Netanyahu, speaking via
satellite, today told the largest gathering in Washington of a
pro-Israel U.S. lobbying group. Iran is “running out the
clock,” he said. “It has used negotiations, including the most
recent ones, in order to buy time to press ahead with its
nuclear program.”
Wall Street Journal:
- China Moves to Temper Growth. Property Bubble Is a Key Concern. China's ambitions for more moderate growth come after decades of
double-digit increases and are a centerpiece of new leaders' plans to be
detailed during the annual National People's Congress, which began
Tuesday.
"We should unswervingly take expanding
domestic demand as our long-term strategy for domestic development,"
said Premier Wen Jiabao, delivering his final report to the congress
after 10 years at the helm. The key to that change, he said, is to
"enhance people's ability to consume."
- Italy, Spain Close the Risk Divide. Italy's political uncertainty, coupled with relative stability in
Spain, brought the gap between the two countries' bond yields to the
narrowest point in almost a year on Monday, Financial markets shuddered when last
month's parliamentary election in Italy left Europe's third-largest
economy without any clear leadership. Since then, yields on 10-year
Italian bonds have risen by half a percentage point to 4.867% on Monday,
according to Tradeweb.
- Money-Laundering Suspicion Stalls Europe's Latest Bailout. Cyprus's newly elected government is bargaining for a €17 billion bailout from its euro-zone peers. But the little island won't get a cent until it wrestles with a
long-standing issue: money laundering. Cyprus's reputation as a transit
point for shady cash, and its unusual connections to Russia, are making
many of its would-be rescuers nervous.
- Gardner Denver(GDI) Expected to Fetch More than $75 Per Share From KKR.
- U.S., China Reach Deal on North Korea Sanctions. The U.S. and China have reached a deal on a new set of sanctions
against North Korea in response to its test of a nuclear weapon last
month, U.N. diplomats said. The resolution, which will enforce some existing sanctions and
include new ones, will be introduced at a U.N. Security Council meeting
on Tuesday, a diplomat said. China has already voted for three sets of
sanctions against its reclusive ally for its past nuclear tests and
ballistic missile launches, both banned by the Security Council.
- Young Adults Retreat From Piling Up Debt. Young people are racking up larger amounts of student debt than ever
before, but fresh data suggest they are becoming warier of borrowing in
general: Total debt among young adults dropped in the last decade to the
lowest level in 15 years.
A typical young U.S. household—defined
as one led by someone under age 35—had $15,000 in total debt in 2010,
down from $18,000 in 2001 and the lowest since 1995, according to a
recent Pew Research Center report and government data. Total debt
includes mortgage loans, credit cards, auto lending, student loans and
other consumer borrowing.
In addition, fewer young adults carried
credit-card balances and 22% didn't have any debt at all in 2010—the
most since government tracking began in 1983.
- Venezuela Says Chávez Has New Infection, Breathing Problems Worsen.
- Carbon Power Politics. The next EPA chief and next phase of the Obama green agenda. President Obama gave his second-term global warming agenda a lot more
definition Monday with a new Environmental Protection Agency chief to
replace Lisa Jackson. Picking Gina McCarthy, one of her top lieutenants
and the architect of some of the agency's most destructive carbon rules,
is a sign he intends to make good on his vow of "executive actions" if
Congress doesn't pass cap and tax.
MarketWatch.com:
CNBC:
- Tumbling Oil Prices May Have Further to Fall. Oil prices, at 2013 lows, could continue to feel pressure, if the
global economy turns out to be weaker than expected and production
continues to grow in places like the U.S., Brazil and Iraq, according to
James Burkhard, vice president and head of oil market research at IHS. "We're
going from three million barrels to four million barrels of spare OPEC
productive capacity this year," he said, shortly after participating in a
panel discussion at the annual IHS CERAWeek conference in Houston.
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
- Europe faces an impossible challenge - why can't Olli Rehn see it? "There is no alternative". That was again the message this weekend
from our old friend Olli Rehn in telling Der Spiegel that the eurozone's
miscreant periphery has no option but to stick to the assigned path of
budgetary consolidation.
With Italy in open political revolt and much of the rest of the Club Med deep
in the grips of an apparently inescapable depression, there is, he said, no
room for manoeuvre. Normally when something isn't working, you try a
different approach, but the luckless European economics chief finds himself
so locked into the task of defending the indefensible – the single currency
- that he is unable to offer alternatives.
Jiji:
- Ex-BOJ Deputy
Says More Money Supply Won't Beat Deflation. Jiji cities an interview
with former Bank of Japan Deputy Governor Yutaka Yamaguchi.
Evening Recommendations
RBC Capital:
- Rated (NFLX) Outperform, target $210.
Night Trading
- Asian equity indices are +.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 85.0 -.25 basis point.
- NASDAQ 100 futures +.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (CKP)/.17
- (LNCR)/.61
- (SWHC)/.23
- (PAY)/.49
Economic Releases
10:00 am EST
- ISM Non-Manufacturing Composite for February is estimated to fall to 55.0 versus 55.2 in January.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Lacker speaking, Eurozone Services PMI/Retail Sales, Australia
gdp report/rate decision, Brazil rate decision, weekly retail sales
reports, IBD/TIPP Economic Optimism Index for March, (XLNX) investor
day, Deutsche Bank Gaming/Lodging Conference and the Citi Financial
Services Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial 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.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 102.0 +22.89%
- Total Put/Call 1.14 -3.39%
Credit Investor Angst:
- North American Investment Grade CDS Index 84.74 -1.89%
- European Financial Sector CDS Index 159.05 -2.79%
- Western Europe Sovereign Debt CDS Index 101.49 -1.30%
- Emerging Market CDS Index 242.12 -.74%
- 2-Year Swap Spread 14.0 +.25 bp
- TED Spread 19.75 +1.5 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -20.0 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .09% -1 bp
- China Import Iron Ore Spot $148.80/Metric Tonne -1.20%
- Citi US Economic Surprise Index 5.20 -1.5 points
- 10-Year TIPS Spread 2.55 +1 bp
Overseas Futures:
- Nikkei Futures: Indicating +103 open in Japan
- DAX Futures: Indicating +40 open in Germany
Portfolio:
- Higher: On gains in my retail/biotech sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- Italy's Debt Highest Since Dictator Mussolini: Chart.
Italy’s public debt rose to the highest level since Benito Mussolini
won elections 89 years ago, paving the way for his 20-year dictatorship.
The CHART OF THE DAY shows debt jumped in 2012 to 127 percent of gross domestic product from 120.8 percent a year
earlier. That’s the most since 1924, when Mussolini won 64
percent of the popular vote in elections that opposition members
said were marked by irregularities.
- Grillo’s Party May Consider Senate Walk-Out on Gridlock. Beppe
Grillo’s senators-elect, who
hold a blocking minority in Italy’s upper house of parliament, may
consider staging a confidence-vote walk-out to allow a political rival
to form a government and ease gridlock. Grillo’s Five Star Movement is seeking to influence the program of Italy’s next government and would require policy
concessions in exchange for a walk-out, said two senators-elect
who declined to be identified because no deal has been made.
Five Star won’t vote to support any government, they said.
- Trichet Says Policies Aimed at Weaker Currencies Detrimental. Former European Central Bank
president Jean-Claude Trichet said policies targeted at
weakening a country’s exchange rate can trigger competitive
devaluations without having any benefit. “We know that these kind of policies are not positive for all participants,” Trichet said in an interview in Tokyo today. “If all currencies are going down it doesn’t change anything.”
- Euro Approaches Three-Month Low Versus Dollar on Italy Concern. The euro approached the lowest level
in almost three months against the dollar as Italy moved toward
a new election and before data this week economists said will
show the region’s economy shrank in the fourth quarter of 2012.
- China Property Shares Drag CSI 300 Down Most in 2 Years on Curbs.
China’s stocks plunged, dragging down the CSI 300 (SHSZ300) Index by
the most in two years, after the government ordered more measures to
cool property prices and growth in the nation’s services industries
slowed. The CSI 300, representing the nation’s biggest companies in
the Shanghai and Shenzhen stock exchanges, fell 4.6 percent to 2,545.72
at the close, the most since November 2010, while the Shanghai
Composite Index (SHCOMP) slid 3.7 percent to 2,273.40, the most since
August 2011. China Vanke Co., the nation’s largest
property developer, led a gauge of real-estate companies to the
steepest tumble since June 2008. Anhui Conch Cement Co. and Sany
Heavy Industry Co. dropped by more than 8 percent.
- Crude Drops Below $90 on Signs of Slowing Chinese Growth. West Texas Intermediate crude fell
below $90 a barrel for the first time in 2013 as service
industries in China expanded at the weakest pace in five months, adding to speculation that demand growth is slowing. Prices declined for the seventh time in nine days as the
expansion of the non-manufacturing industry in China, the
world’s largest oil-consuming country after the U.S., was the
slowest since September. Measures released March 1 pointed to
manufacturing growth cooling. Money managers cut bets on rising
oil prices in the week ended Feb. 26, according to data from the
Commodity Futures Trading Commission.
Wall Street Journal:
MarketWatch:
- Fed’s Yellen: Full steam ahead on QE3. While there are some potential costs to the purchases, “at this stage, I
do not see any that would cause me to advocate a curtailment of our
purchase program,” she said.
Yellen is seen as a possible replacement for Fed Chairman Ben Bernanke
if he steps aside when his second term ends in January 2014.
- China’s top real-estate CEO sees housing bubble, hopes leaders can fix it: report.
When asked whether homes in China were too expensive, Wang simply
answered yes. He told CBS that the average resident trying to buy an
apartment in Shanghai would have to pay more than 45 times his or her
annual salary. And when asked if there was currently a bubble in the Chinese property market, he said: “yes of course.”
Fox News:
CNBC:
Zero Hedge:
Business Insider:
CNN:
- World's Biggest Mall a China 'Ghost Town'. New
South China Mall in Guangdong Province opened in 2005. With 5 million
square feet of shopping area, the mall can accommodate 2,350 stores,
making it the largest shopping center in the world in terms of leasable
space -- more than twice the size of Mall of America, the biggest
shopping center in the United States. At the outdoor plaza,
hundreds of palm-trees blend with a replica Arc de Triomphe, a giant
Egyptian sphinx, fountains and long-stretching canals with gondolas.
Only problem is, the mall is virtually deserted.
New York Times:
- China’s Push to Cool Down Housing Raises Questions. Chinese shares fell the most in two years on Monday as the Shanghai stock exchange’s property index tumbled 9.25 percent. Late on Friday, China’s State Council had announced a new set of policies designed to cool down the housing market.
Reuters:
Financial Times:
- Warning signs for US corporate bonds. Could the bond boom be turning? Warning signs are flashing as investors
demand higher yields even on US bonds issued by the world’s largest and
safest corporate borrowers.
Telegraph:
Handelsblatt:
- Some ECB policy makers think it should exit Troika because involvement risks central bank's independence.
Le Figaro:
- French Transaction Tax Will Miss 2013 Target. The tax will bring
in EU600m to EU800m in 2013, compared with the target of EU1.6b. On the
NYSE-Euronext, trading in shares subject to the tax fell 21% between
August and November 2012, compared with a 10% drop for shares that are
exempt.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -3.40% 2) Steel -2.13% 3) Oil Service -2.03%
Stocks Falling on Unusual Volume:
- PANW, SCSS, NSH, NS, HURN, FWLT, SFUN, CAF, TVL, SPLK, PER, VCRA, RIO, APEI, CKEC, LUK, VCLT, QGEN CHN, TECD, TFM, MFRM, MAA, OVTI, YY, MDR, DRC, OVTI, CAF and TECD
Stocks With Unusual Put Option Activity:
- 1) CME 2) JRCC 3) TSO 4) CNX 5) HES
Stocks With Most Negative News Mentions:
- 1) MDR 2) MTZ 3) BRK/A 4) TRB 5) DRC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +2.09% 2) Homebuilders +.78% 3) Retail +.65%
Stocks Rising on Unusual Volume:
- SBGI, YPF, FOR, SSYS, THRX, BKS, MBI, SGMO and SWHC
Stocks With Unusual Call Option Activity:
- 1) MTG 2) CWH 3) NS 4) SSYS 5) MCO
Stocks With Most Positive News Mentions:
- 1) STLD 2) SCHW 3) TRB 4) CME 5) T
Charts:
Weekend Headlines
Bloomberg:
- Euro Leaders Demand Austerity as Italy Nears Vote. European leaders demanded that euro
members press on with budget cuts to end the debt crisis as
Italy edged closer to a new election after an anti-austerity
vote last week resulted in political deadlock. Finance ministers from the 17-member single-currency bloc
meet in Brussels today to discuss issues including a bailout for
Cyprus. In Rome, a top aide to Democratic Party leader Pier Luigi Bersani said the country may need to hold another election
this year after passing new electoral laws. “Now in Europe, after the Italian election, it seems to be
a case of either austerity and savings programs or growth, but
that’s a completely false premise,” German Chancellor Angela Merkel said at March 1 event. EU Economic and Monetary Affairs
Commissioner Olli Rehn echoed those comments this weekend,
telling Der Spiegel magazine that there’s no scope for the bloc
to let up on budget discipline.
- Bersani Insists He’ll Form New Government Without Rivals. Democratic
Party leader Pier Luigi Bersani, whose coalition won the most votes in
Italy’s inconclusive elections, insisted he would form a government on
his own without seeking an alliance with his main rivals --
Silvio Berlusconi and comic-turned-politician Beppe Grillo. “We have 460 parliamentarians, double what the right got
and triple what Grillo won,” he said in an interview last night
on state-owned RAI3 television’s “Che Tempo Che Fa” program.
“So we will have the first word.”
- ECB’s Coeure Says Europe Needs to Rebalance Its Social Contract.
European Central Bank Executive
Board member Benoit Coeure said Europe must rebalance its social
contract because the economic crisis “disproportionately affected the
more vulnerable social groups.” Workers who could “lose their
employability” if they remain jobless for too long may threaten economic
growth in the 17-nation euro region, Coeure said in a speech today
at Harvard University’s Kennedy School of Government in Cambridge,
Massachusetts. He did not discuss monetary policy. “There are signs of a growing mismatch between worker attributes and job requirements across a number of euro-area countries,”
Coeure, 43, said today at the Kennedy School’s “Europe 2.0” conference.
“Future growth depends on human capital being cultivated and expanded.”
The area’s unemployment rate climbed to a record 11.9 percent in
January as the bloc
remained mired in recession.
- Grillo Says His Party Won't Vote Confidence in Any Government.
Beppe Grillo, whose party won about 25% of Italy's popular vote, said.
His party would support specific legislation on a case-by-case basis. PD
lawmaker Francesco Boccia said in an e-mail that Grillo's party should
go to parliament to say it doesn't support Bersani's proposal. Grillo
has called for the renegotiation of Italy's debt.
- Devil Is in the Details as Swiss Vote to Curb CEO Pay. The Swiss government must figure out
how to translate some of the world’s toughest rules on executive
pay into national law and risk an exodus of big corporations
after voters overwhelmingly backed new curbs in a referendum.
- Russell Indexes to Reclassify Greece as Emerging Market. Russell Investments, which advises
funds with $2.4 trillion in assets, will reclassify Greece to an
emerging from a developed market, an unprecedented step taken
after a recession reduced the nation’s economy by 20 percent.
- Euro Falls in Longest Stretch Since June on Record Unemployment. Europe’s 17-nation common currency
posted its longest stretch of weekly losses since June as demand
slumped after Italy’s election produced a hung parliament and
euro-area unemployment climbed to a record. The Dollar Index (DXY) rose to the highest level since August as investors weighed the U.S. government’s failure to avoid
automatic budget cuts. The euro fell below $1.30 for the first
time in two months as the region’s inflation rate was below the
European Central Bank’s 2 percent ceiling before a policy
meeting March 7. The Labor Department may report on March 8 that
U.S. employers added 160,000 workers last month, a Bloomberg
survey shows. “It’s a combination of Italy’s election and generally soft
economic data out of the euro zone,” Dan Dorrow, the head of
research at Faros Trading LLC in Stamford, Connecticut, said of
the euro’s decline. “We saw unemployment grinding higher.” The euro fell 1.3 percent this week to $1.3022 in New York
after dropping 3.8 percent in February, snapping a six-month
rally.
- China’s Stocks Slump as Developers Tumble Most Since June 2008. China’s
stocks fell, led by the biggest slump among developers since 2008,
after the Cabinet ordered more measures to cool property prices and
after growth in the nation’s services industries slowed. The Shanghai
Composite Index (SHCOMP) slid 2.9 percent, the most since Feb. 21, to
2,292.14 as of the city's 11:30 a.m. break. The CSI 300 Index
(SHSZ300) lost 3.8 percent to 2,568.21. China Vanke Co. led a gauge of
developers to the biggest tumble since June 2008 after the State Council
urged higher down-payments and interest rates for second-home
mortgages. China Minsheng Banking Corp. (600016) sank 4.8 percent,
pacing declines among lenders. “When there are new rules like these, it
extends far beyond property shares,” Zhang Yanbin, an analyst with
Zheshang Securities Co. in Shanghai, said by phone today. “There have
been talks of property measures in the past few weeks, leading to
declines in the market. The news over the weekend was evidence of a
detailed measure, hence the loss is much bigger.” A purchasing managers’
index released yesterday showed the
nation’s services industries expanded at the slowest pace in
five months.
- PBOC’s Yi Says China Prepared for Currency War, Xinhua Reports. China is “fully prepared” for a currency war should one happen, central bank Deputy Governor Yi Gang said in Beijing yesterday, the official Xinhua News Agency reported. “China is prepared,” Yi was quoted as saying by the
agency, which gave no further details about where he spoke. “In
terms of both monetary policies and other mechanism, China will
take into full account the quantitative easing policies
implemented by central banks of foreign countries.” China’s
foreign-exchange regulator, which is headed by Yi,
warned in a report this week that quantitative easing in developed
nations will lead to capital inflows into emerging markets and that
policy easing can’t solve all of a country’s economic problems.
- Rebar Falls to Six-Week Low Amid Rising Inventories in China.
Steel reinforcement-bar futures fell
for a second day, to the lowest level in more than six weeks as
inventories in China climbed for a ninth week, adding to concern that
the market is oversupplied. Rebar for delivery in October on the
Shanghai Futures Exchange dropped as much as 2.6 percent to 3,916 yuan ($629) a metric ton, the lowest level since Jan. 17 for a most-active
contract, and was at 3,929 at 9:41 a.m. local time. Futures fell
1.8 percent last month, the first drop since November.
Inventory jumped 79 percent this year through March 1,
according to Shanghai Steelhome Information.
- Short Sales Fall 53% With U.S. Bull Market Starting Fifth Year. Investors
reduced bearish stock bets to the lowest level since at least 2007 as
the bull market in American equities begins its fifth year. Short sales
in the Standard & Poor’s Composite 1,500 Index fell to 5.6 percent
of shares available for trading in February, down from a record 12
percent during the credit crisis and the lowest ever in data compiled by
Bespoke Investment Group and Bloomberg starting six years ago. The
last time the number of shares borrowed and sold short approached this
level, the equity gauge lost 3.3 percent in the next three months. Bulls
say the capitulation by market bears shows the rally remains intact and
that more money will flow into stocks after individuals sent $37.9
billion to mutual funds in January, the most since 2004. It also means a
source of demand is diminishing, a traditional signal for caution in an
aging bull market. “When you look at short interest, and it’s low
like right now, it means people are very, very bullish about the
market,” Uri Landesman, president of New York-based hedge fund Platinum
Partners, which manages $1.15 billion, said in a Feb. 28 phone
interview. “When that happens, it’s a bearish sign, because if
all minds change, there’s downside, not upside.”
- Commodity Fund Outflows Reach Weekly Record of $4.23 Billion. Money managers removed a record
$4.23 billion from commodity funds in the week ended Feb. 27,
led by declines in precious-metal holdings, as raw materials
capped the biggest monthly loss since October. Investors pulled an
all-time high of $4.03 billion from gold and precious-metals funds, said
Cameron Brandt, the director of research for EPFR Global, which started
tracking the flows in 2000. The Cambridge, Massachusetts-based
researcher
said last week that total commodity outflows for the period
ended Feb. 20 reached $828 million.
The Standard & Poor’s GSCI Spot Index of 24 raw materials
fell 4 percent last month, the most since October.
- Environmentalists Step Up Opposition to Keystone Pipeline.
Opponents of TransCanada Corp. (TRP)’s Keystone XL pipeline intend to
make themselves heard by President Barack Obama after a March 1 report
helped clear a path for the White House to approve the project. The
pipeline drew a fresh wave of objections from groups including the
Sierra Club, Natural Resources Defense Council and 350.org, when the
U.S. State Department’s draft assessment said it won’t have a
significant impact on global warming. Members of 350.org will
confront Obama and Secretary of State John Kerry at all future public
events, said Daniel Kessler, a spokesman. “If they are doing something
in public, we will be
there,” Kessler said in an e-mail. “Thousands of people are
willing to get arrested to stop this project.”
- Karachi Mourns 42 Killed in Bombing as Attacks on Shiites Spread. Karachi shut schools and businesses
to mourn the 42 people killed in a car bombing that targeted the
city’s Shiite minority and extended a spree of deadly attacks on
the Islamic sect to Pakistan’s biggest city. Women and children were among the dead and more than 135 were wounded in the blast around 7:30 p.m. yesterday in a
Shiite-dominated neighborhood of the port city, Pakistan’s
financial capital.
- Celgene(CELG) Psoriasis Drug Helped Third of Patients in Study. Celgene
Corp. (CELG), the maker of the cancer drug Revlimid, said its
experimental psoriasis medicine helped quell the redness and
inflammation associated with the skin disorder in a study. The drug,
apremilast, helped one-third of patients achieve a 75 reduction of
symptoms, based on a standard Psoriasis Area and Severity Index
measurement. That compared with 5.3 percent of those on placebo with the
same score, called PASI-75, Celgene said in a statement as it presents
the data at the American Academy of Dermatology meeting in Miami Beach,
Florida, today.
Wall Street Journal:
- Student-Loan Securities Stay Hot. Investors' Hunger for Returns Is Driving Demand Even as More Borrowers Fall Behind on Their Payments. Student
loans are souring at a growing rate—and investors can't seem to get
enough. SLM Corp., the largest U.S. student lender, last week sold $1.1
billion of securities backed by private student loans. Demand for the
riskiest
bunch—those that will lose money first if the loans go bad—was 15 times
greater than the supply, people familiar with the deal said.
Marketwatch.com:
- How shipper China Cosco sailed into rough seas. One of the country’s most prominent liner shipping operators, China
COSCO Holdings Co. Ltd., is struggling to avoid being kicked out of the
Shanghai Stock Exchange five years after its debut.
Fox News:
- Kerry: U.S. releasing millions in aid to Egypt. Secretary of State John Kerry said Sunday the United States will give
Egypt $250 million more in aid, following President Mohammed Morsi's
pledges for political and economic reforms.
CNBC:
- Paris Seeks Alternative to 75% Tax. France's Socialist government is considering replacing its stricken 75
percent top income tax rate on earnings above 1 million euros, with a
65-66 percent rate on households earning more than 2 million euros.
Business Insider:
IBD:
Reuters:
- BOJ should not monetise public debt-governor nominee Kuroda. The Bank of Japan should not directly underwrite government bonds or take measures that would be interpreted by markets as public debt monetisation, Haruhiko
Kuroda, the government's nominee for next central bank governor, said on
Monday.
USA Today:
- Tax bills for rich families approach 30-year high. With Washington gridlocked again over whether to raise their taxes,
it turns out wealthy families already are paying some of their biggest
federal tax bills in decades even as the rest of the population
continues to pay at historically low rates. President Obama and
Democratic leaders in Congress say the wealthy must pay their fair share
if the federal government is ever going to fix its finances and reduce
the budget deficit to a manageable level. A new analysis, however,
shows that average tax bills for high-income families rarely have been
higher since the Congressional Budget Office began tracking the data in
1979. It's middle- and low-income families who aren't paying as much as
they used to.
Financial Times:
- Free lunch will come to an untidy end. Investors fear asset bubbles created by Fed policies. Seth
Klarmen, founder of hedge fund Baupost, offered a searing indictment of
the Federal Reserve’s monetary policies in his year-end letter to
investors, currently circulating in the wider hedge fund community. In
the mid-January letter, Mr Klarman describes “the real downside scenario
which involves the end of the free lunch of large deficits, zero
interest rates and relentless quantitative easing”. Along with the
European Central Bank, Fed chairman Ben Bernanke “seems intent on buying
back bonds indefinitely, whether or not their actions deliver an
economic recovery and inspite of any unpleasant
side-effects. It is clear that after four years and counting, their
efforts have not delivered. Only a zealot would continue with a plan
that is not working and massively expand it,” Mr Klarman concludes.
Telegraph:
WirtschaftsWoche:
- Regling
Doubts ESM Will Directly Recapitalize Banks. A decision to recapitalize
banks directly from ESM funds would need to be unanimous, citing
European Stability Mechanism chief Klaus Regling. Such an instrument
would also limit the money the ESM could use for countries in need of
aid, Regling said. Direct recapitalization without a cap would hurt the
ESM's rating, he said.
Focus:
- Beppe Grillo Calls for Renegotiation of Italy's Debt. Italy is
being smothered by debt and not by the euro, Grillo said. Interest
amounting to EU100m a year is killing Italy, he said. Italy should leave
the common currency and take back the Lira if the terms don't change,
Grillo said. Italy's political system will collapse within six months
under the leadership of the old parties, Grillo said.
AutomobilWoche:
- Europe's
Car Suppliers May Cut 75,000 Jobs. One in 10 of the 750,000 jobs in
western Europe's car supplier industry might disappear in 3-4 years,
citing Marcus Berret of Roland Berger, which carried out a study. Jobs will be lost in production, R&D and administration.
Europa:
- Five Spanish
regions including Catalonia need further budget cuts after missing
targets to reduce their deficits in 2012, citing an interview with Budget Minister Cristobal Montoro. Valencia, Murcia, Balears and Andalusia failed to comply as well with budget cuts so need to propose new austerity measures, Montoro says.
ORF:
- Eurogroup's
Wieser Sees No Alternative to Deficit Reduction. The timing of budget
adjustments is the only thing that can be changed, not the direction of
paying down debts, Thomas Wieser, head of the Eurogroup Working Group,
told Austrian radio station ORF. The Italian election has added to
uncertainty, Wieser said. It's not correct to say that the crisis is
back after the election since it never went away, he said in an
interview.
Kyodo:
Shanghai Securities News:
- China Housing Minister Says Confident in Controlling Home Prices. Authorities should strictly implement the property curb measures issued by the State Council yesterday, citing Housing Minister Jiang Weixin. China
told its central bank to raise down-payment requirements and interest
rates for second-home mortgages in cities with "excessively fast" price
gains, according to the State Council. Cities facing "relatively large"
pressure from rising house prices must further tighten home-purchase
limits.
Beijing Times:
- The time is ripe for China to impose an inheritance tax and the threshold should be 5m yuan, citing a research paper issued by Beijing Normal University.
Weekend Recommendations
Barron's:
- Bullish commentary on (COF) and (FOR).
Night Trading
- Asian indices are -1.75% to -.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 85.25 +1.25 basis points.
- NASDAQ 100 futures -.54%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The Fed's Yellen speaking, Fed's Powell speaking, China HSBC PMI Services, Bank stress test results, Reserve Bank of Australia rate decision, Eurozone PPI, ISM New York, Deutsche Bank Media/Telecom Conference, Cowen Healthcare Conference, JPMorgan Aviation/Transport/Defense Conference and the (D) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by real estate and commodity shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the week.
