Style Underperformer:
Sector Underperformers:
- 1) Coal -3.75% 2) Oil Service -3.13% 3) Steel -2.65%
Stocks Falling on Unusual Volume:
- CLF, LRE, CMLP, HEP, LRE, HPT, WAC, DSW, CAH, LULU, PIKE, CHL, GRFS, EA, TRLA, MCK, FF, ROSE, CBF, NSM, FDS, RNF, RIO, OCN, TCK, CLF, ASPS, SHOO, PCRX, SDT and JNPR
Stocks With Unusual Put Option Activity:
- 1) CAH 2) DKS 3) HOV 4) OXY 5) SMH
Stocks With Most Negative News Mentions:
- 1) RIG 2) C 3) JNPR 4) DE 5) CAH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +1.17% 2) Homebuilders +.65% 3) Drugs +.63%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) EA 2) WAG 3) RSX 4) DG 5) MON
Stocks With Most Positive News Mentions:
- 1) TOL 2) HAIN 3) LSCC 4) MINI 5) RFIL
Charts:
Evening Headlines
Bloomberg:
- EU Keeps 5.8 Bln-Euro Revenue Goal for Cyprus Bank Tax. Euro-area finance ministers told Cyprus to raise 5.8 billion euros
($7.5 billion) from bank depositors to unlock emergency loans,
maintaining the revenue target while suggesting sparing small-scale
savers. The finance chiefs from the 17 euro countries kept the
pressure on Cyprus as they signaled flexibility in applying the tax
announced three days ago. The levy sparked outrage in the island nation
and concern among investors about setting a precedent by breaking the
taboo against raiding bank accounts. “Cypriot authorities will introduce more progressivity in the one-off
levy compared to what was agreed on March 16, provided that it continues
yielding the targeted reduction of the financing envelope and, hence,
not impact the overall amount of financial assistance,” the ministers
said in a statement following a teleconference late yesterday.
- Deauville Zombie Strikes as Cyprus Tax Inflames Crisis.
The Deauville zombie is back. Europe’s aid package for Cyprus brought
back memories of the German-French deal at the English Channel resort of
Deauville in October 2010 that made bond writedowns part of the
debt-crisis management toolkit. Investors responded then by pushing Ireland and Portugal to follow Greece into bailouts.
Only 14 months later did European leaders decide that
imposing losses on creditors wasn’t such a good idea after all. Now
Germany has broken another taboo, forcing Cyprus to siphon money
out of bank accounts to earn its 10 billion-euro ($13 billion) rescue.
The markets’ snap reaction was the same, turning the Mediterranean
island into the latest threat to the stability of the euro area. “It
looks like a botched and improvised job, and unprofessional -- groping
in the dark without much consideration of what sort of signal it sends,”
said Alessandro Leipold, a former International Monetary Fund official
who is now chief economist at the Lisbon Council research group in
Brussels. “That’s no way to really run a crisis.”
- Cyprus Deposit Raid Stokes Senior Bond Concerns: Credit Markets.
Europe's unprecedented tax on Cyprus bank deposits is raising concern
among holders of senior bank bonds that they will be made to take losses
should another country need rescuing. The Markit iTraxx Financial Index
of credit-default swaps insuring senior debt of 25 banks and insurers
rose as much as 19 basis points to 162 basis points after Cyprus's
announcement. That's the biggest jump since Aug. 2. "This sets a
precedent," said Robert Kendrick, an analyst in London at Legal
& General Investment Management, which oversees about $585
billion. "If the authorities are prepared to impose losses on
depositors, then presumably they wouldn't think twice about impairing
senior bondholders."
- RBA’s Lowe Calls Cyprus Tax on Deposits a ‘Step Back’ for Europe. Reserve Bank of Australia Deputy
Governor Philip Lowe said the European Union’s decision to force
Cypriot savers into a bailout was a “step back” for the region
and could increase instability in the financial system. “The fact that this approach of haircutting depositors has
been sanctioned could lead the public to think it could happen
again,” Lowe said in response to audience questions following a
speech in Sydney. “It could make the system more susceptible to
bank runs and that’s something that the authorities in Europe
will have to watch very, very carefully.”
- China’s Stocks Rise on Valuation After Biggest Drop in Two Weeks. “It’s a rebound for stocks and the market is still on a
downward trend amid uncertainty of the economy,” said Wei Wei,
an analyst at West China Securities Co. in Shanghai. “Today’s
data don’t say much about the general picture of the economy and are
distorted by the Chinese new year factor.” The Shanghai Composite Index
(SHCOMP) added 0.2 percent to 2,244.79 as of 10:20 a.m. local time. It
dropped 1.7 percent yesterday.
Wall Street Journal:
- Syria Strife Spills Over Into Lebanon.
Syria fired rockets into Lebanon in what Washington called a
"significant escalation" of the war, as Syria's main opposition group
picked a naturalized U.S. citizen as its first prime minister to lead an
interim government that aims to rule over rebel-held territory. Also on Monday, Secretary of State John Kerry offered a green light
for other Western powers, including Britain and France, to provide arms
to rebels fighting Syrian President Bashar al-Assad, as the two nations
push the European Union to permit shipments of such lethal aid.
- Fisker Sales Talks Fall Apart. Chinese Bidders for Luxury Hybrid Car Maker Disagree Over Government Loan. Chinese auto makers have pulled back from talks to buy Fisker
Automotive Inc. over a disagreement on whether to revive a loan
agreement with the U.S., leaving the Anaheim, Calif., company's future
uncertain ahead of an April loan payment. Fisker management had
proposed to the Chinese that as part of any
sale it tap the remaining portion of a $529 million U.S. loan, a move
that would commit a new owner to building Fisker cars at a former
General Motors Co. auto factory in Delaware, a person familiar with the
situation said on Monday.
- Gleacher Notes 'Serious Decline'. Gleacher & Co. disclosed in a securities filing Monday that it had recently experienced "several adverse events" that resulted in a "serious
decline" in its financial results. In its annual filing with the
Securities and Exchange Commission, the advisory and trading firm said,
"We have experienced a significant decline in revenue in the first
quarter of 2013, and we cannot predict when or if we will be able to
reduce or reverse this decline and associated losses."
Fox News:
- Senate Dems' budget accused of double-counting spending cuts. Senate Democrats' budget plan is coming under increasing criticism from
Republicans, who say it effectively pats itself on the back twice for
savings that were only achieved once -- and even then, promises another
$7.3 trillion in debt over the next decade.
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Cyprus bank deposit tax sets "dangerous precedent": IIF chief. A
proposal to impose a tax on bank deposits in Cyprus sets an "incredibly
dangerous precedent" and undermines confidence built up in recent
months over Europe's handling of its debt crisis, the head of a global
banking association said on Monday. Tim Adams, managing director of
the Institute of International Finance, said a weekend announcement that
Cyprus would impose a one-off tax on bank accounts as part of a 10
billion euro bailout by the European Union had reignited concerns over
the euro zone crisis. Adams told Reuters the announcement broke with
practices that depositors' savings were guaranteed. Cyprus will vote on
the decision on Tuesday. "Crossing the Rubicon of addressing insured deposits and undermining the explicit guarantee - you can call
it a tax or whatever you want - but essentially the broken guarantee
opens up lots of different possibilities for destabilizing effects in
the short term, medium term and long term," Adams said in an interview. "The next time there is a crisis in any one of these countries,
depositors are going to ask themselves, why am I going to stick around
to see if the same set of rules are applied or not? I do think it is
an
incredibly dangerous precedent, without question," he added. The IIF is
the world's largest international lobbying group for financial firms,
with more than 450 members. He warned that savers in other larger
European countries could become nervous and start withdrawing their
money. "It is the medium term that is concerning. What happens if
we're back at Spain, Portugal or Italy at some point six months from
now, and the same set of issues arise?" he said. "There is less
confidence and greater probability of instability because of this," added Adams.
- We're no populist scaremongers, says German anti-euro party. Leaders
of Germany's new
anti-euro party took their nascent campaign to Berlin on Monday,
keen to reassure potential voters that they are neither populist nor
extremist and have come up with a considered plan to bring back the
Deutschmark. The "Alternative for Germany" has been denounced by the
country's mainstream parties as an irrational group of scaremongers,
keen to profit from anxiety over the growing cost of euro zone bailouts
in Europe's paymaster. But the leaders of the new movement, headed by
economist Bernd Lucke who until 2011 was a member of Chancellor Angela
Merkel's Christian Democrats (CDU), tried to present a more
sober face and distance themselves from other parties in Europe
that mix their euroscepticism with unabashed populism and
anti-immigration platforms.
Financial Times:
- Levy plan ‘bleak day for banking union’. The
weekend decision to strip €5.8bn from the savings accounts of Cypriot
banking customers has blown a hole in the EU’s ambitious reforms billed
as the route out of the eurozone crisis, while potentially undermining a
growing reliance at banks around the world on
funding their operations with customer deposits. “This is a totally crazy decision,” said one European bank chief.
“This is the biggest policy mistake that the [European Central Bank] has
subscribed to.”
Telegraph:
- Cyprus: investors slam 'crazy' bailout. The botched bail-out of Cyprus has been labelled as “crazy” by investors after
the apparent tearing up of Europe’s deposit guarantees plunged markets into
uncertainty.
China Securities Journal:
- Beijing May Issue Detailed Property Curbs End-March. The city of
Beijing may issue detailed property curbs around end-March, citing a
person familiar with the situation. The city may lift the floor for tax
calculations on existing home transactions, the person said. The policy
will raise transaction costs and curb the overheated market, according
to the report.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.50 -4.5 basis points.
- Asia Pacific Sovereign CDS Index 83.5 +3.0 basis points.
- NASDAQ 100 futures +.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for February are estimated to rise to 915K versus 890K in January.
- Building Permits for February are estimated at 925K versus 925K in January.
Upcoming Splits
Other Potential Market Movers
- The German ZEW Index, UK CPI, weekly retail sales reports, Morgan
Stanely European Financials Conference and the (KLIC) investor day could
also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology 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: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 80.0 -37.98%
- Total Put/Call .87 +2.35%
Credit Investor Angst:
- North American Investment Grade CDS Index 80.27 +1.98%
- European Financial Sector CDS Index 152.38 +6.65%
- Western Europe Sovereign Debt CDS Index 100.61 +3.24%
- Emerging Market CDS Index 242.09 +1.0%
- 2-Year Swap Spread 15.0 +1.5 bps
- TED Spread 21.0 +1.25 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -19.0 -2.5 bps
Economic Gauges:
- 3-Month T-Bill Yield .07% -1 bp
- China Import Iron Ore Spot $134.60/Metric Tonne unch.
- Citi US Economic Surprise Index 21.0 -6.0 points
- 10-Year TIPS Spread 2.56 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating +155 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail sector longs, index hedges and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 50% Net Long
Bloomberg:
- European Banks Slide as Cyprus Levy May Threaten Ratings. European banks declined on concern
an unprecedented tax on savings in Cyprus will have negative
implications for the ratings of the continent’s lenders. The Stoxx 600 Banks Index (SX7P) dropped as much as 2.4 percent,
led by banks in crisis-hit Italy and Spain. UniCredit SpA (UCG),
Italy’s biggest bank, slumped 5.2 percent to 3.63 euros at 1:20
p.m., the lowest level in three months. Societe Generale SA (GLE) lost
5.3 percent to 28.40 euros in Paris. “The psychological crux is that savers can now be called
on to contribute to bailouts and it might have been smarter to
let deposit insurance do its job,” Ingo Frommen, a banking
analyst with Landesbank Baden-Wuerttemberg in Stuttgart, said by
telephone. Goldman Sachs Group Inc. said the steps may unnerve
deposit-holders in the nations most impacted by the European
debt crisis. “It is reasonable to expect that the deposit volatility in
stressed sovereigns could rise,” Goldman Sachs analysts
including Jernej Omahen wrote in a report to investors. UniCredit also led the credit default swaps of European
banks higher, with contracts on senior debt rising 21 basis
points to 344. The plan has “broken trust in a way that is similar to the
taboo that was originally broached in Greece and risks pushing
citizens further away from Europe,” Frommen said. “Stocks
could improve depending on how the vote goes, but if we see runs
on banks or violence then Europe could shiver.”
- Bail-In Speculation Over Cyprus Sends Bank Default Risk Soaring. Traders are betting that Cyprus’s
unprecedented levy on bank savings makes it more likely European
authorities will force senior bank bondholders to share the
burden of national bailouts. The Markit iTraxx Financial Index of credit-default swaps
insuring the senior bonds of 25 lenders and insurers climbed 15
basis points to 158 as of 11:30 a.m. in London, the biggest jump
in cost since Italy’s inconclusive election three weeks ago. Southern European banks bore the brunt of the increase,
with swaps on Milan-based UniCredit SpA (UCG) rising 16 basis points to
340 and Banco Santander SA (SAN) of Spain adding 11 basis points to
267,
according to prices compiled by Bloomberg. “Senior bondholders would,
of course, be told to make a
contribution if this situation came up in a large country like
Spain or Italy,” said Gary Jenkins, founder of Buckinghamshire,
England-based research firm Swordfish Research Ltd. Moody’s Investors
Service said the move will limit support for bank creditors across
Europe and shows that policy makers
will risk financial-market disruptions to avoid sovereign
defaults. Barclays Plc analysts Laurent Fransolet and Antonio Garcia
Pascual said the levy “furthers the erosion of
bondholder protection at European banks.”
- Merkel’s Cyprus Gamble Explained as German Vote Nears. Germany’s role in imposing the euro bloc’s first levy on
bank deposits in Cyprus shows Chancellor Angela Merkel’s dilemma in
explaining to voters facing September elections why they should pick up
the tab for another bailout. “I have to go to my constituency and
explain to my people in my constituency why we are willing to lend more
than 3 billion euros ($3.9 billion) to Cyprus,” Michael Fuchs, deputy
parliamentary leader of Merkel’s Christian Democratic Union party, said
in an interview with BBC Radio 4 today. “Why should Germans bail out
these people and they are not willing to accept at least a minor bailing
out by themselves?”
- Russia Stocks Tumble Most in Developing World on Cyprus.The
Micex Index (INDEXCF) declined 2.2 percent to 1,462.82 by the close in
Moscow, the biggest one-day loss since Nov. 13 and the most among 21
emerging markets tracked by Bloomberg. The dollar- denominated RTS
Index (RTSI$) fell 2.8 percent to 1,494.30. VTB Group (VTBR), Russia’s
second-biggest lender, slumped 5.3 percent. OAO Sberbank (SBER), the
nation’s largest lender with a 14 percent weighting on the Micex,
retreated 3.8 percent.
- Euro Falls Most in 14 Months as Cyprus Turmoil Adds Debt Concern. The
euro slid the most in 14 months against the dollar after a proposed
levy on bank deposits in Cyprus threatened to worsen the European debt
crisis. “The biggest fear right now is that there could be a domino effect, which is pushing the euro down,”
Douglas Borthwick, a managing director and head of foreign exchange at
Chapdelaine & Co. in New York, said in a telephone interview.
- China Stocks Cut by JPMorgan as Banks Seen Falling on Inflation.
JPMorgan Chase & Co. advised
cutting Chinese stock holdings and betting against the nation’s biggest
banks as economic growth slows and inflation quickens. The largest U.S.
lender by assets downgraded China to underweight and recommended bearish
derivatives tied to the country’s four biggest banks, Adrian Mowat, JPMorgan’s chief
Asia and emerging-market strategist, wrote in a report today.
Mowat had a neutral position on China in a Feb. 20 note. “Growth momentum is now slowing with policy response
constrained; a nasty combination,” Mowat wrote.
- Moody’s Sees Defaults as PBOC Warns on Local Risks. Moody’s Investor Services said
China’s local-government financing vehicles face greater risk of
default, as regulators warn 20 percent of their loans are risky. A rally in LGFV bonds may reverse, particularly should
delinquencies emerge, Christine Kuo, a Moody’s analyst, wrote in
an e-mailed response to questions on March 8. The average yield
may rise to 7 percent by June from 6 percent now, according to
Shenyin & Wanguo Securities Co., the first brokerage
incorporated in China and ranked the nation’s most influential
research provider by New Fortune magazine in 2010. “I see increased risk of LGFV defaults because the
financial profiles of many remain weak and heavy refinancing is
needed,” Hong Kong-based Kuo said. “Regulators have asked
banks to control their LGFV exposures. Some of the projects
could default unless other sources of funds are found.”
- Saudi Arabia’s Naimi Says $100 Crude Oil Is Reasonable Price.
Oil at $100 a barrel is a “reasonable” price that won’t choke global
economic growth, Saudi Arabia’s Oil Minister Ali Al-Naimi said. “Prices
will stay at these current levels in the foreseeable future,” he said
today in a speech in Hong Kong, according to the text reported by the
official Saudi Press Agency. “Current price levels will not affect
economic growth
in Asia,” he said.
- Gold Futures Jump to Two-Week High on European Debt Woes.Gold futures for April delivery rose 0.8 percent to $1,605
at 10:40 a.m. on the Comex in New York. Earlier, the metal
reached $1,610.40, the highest for a most-active since Feb. 27.
Volume was 30 percent above the average in the past 100 days for
this time.
- Copper Touches Four-Month Low as Cyprus Fuels Europe Concerns.Copper
futures for delivery in May tumbled 2.2 percent to
$3.4415 a pound at 10:34 a.m. on the Comex in New York after touching
$3.4175, the lowest since Nov. 9. The euro slid the most in 14 months
against the dollar. A
stronger greenback saps demand for commodities as an alternative
investment.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- S&P warns of socially explosive situation in euro zone. Standard and Poor's sees a high risk that Spain, Italy, Portugal and
France will not be able to carry through necessary reforms as the
unemployed become less willing to put up with austerity, S&P's Germany head Torsten Hinrichs told a newspaper. "The high unemployment in Spain, Italy and France is socially explosive," Hinrichs was quoted as saying in Monday's Neue Osnabrücker Zeitung.
- Cyprus suggests small deposits be tax exempt -parliamentary official. The Cypriot government is
suggesting that deposits up to 20,000 euros be exempt from a
bank levy announced over the weekend that the island needs to
avert a default, a parliamentary official said on Monday. Remaining deposits up to 100,000 euros would be taxed at 6.7
percent and deposits exceeding that would be taxed at 9.9
percent, the official said on condition of anonymity.
- Global PC shipments falling more than expected -IDC.
- EURO GOVT-Cyprus deposit grab spooks investors, hurts Spanish, Italian debt. Spanish and Italian bond yields rose on Monday
after Cyprus caught investors off guard with a bailout deal partially
funded by a tax on banks' savers that some feared could set a euro zone precedent. The value of Cypriot bonds fell sharply while increased demand for German debt, seen as least risky in the euro zone,
pushed 10-year Bund yields to their lowest levels this year.
- Cyprus bailout set to thwart EFSF funding. It may be just a small island in the
Mediterranean ocean, but Cyprus' financial difficulties will have major
ramifications for the European Financial Stability Facility (EFSF) by
limiting the flexibility it has to finance eurozone rescue efforts.
Telegraph:
Passauer Neue Presse:
- Cyprus deal must be revised as it poses threat to entire euro zone, Peter Bofinger, an economic adviser to Merkel, said. Deal effectively amounts to expropriation, he said. Deal threatens the financial system in Cyprus as well as in Europe if people get upset and withdraw deposits from banks. Deal means savings deposits are not safe anymore, which Bofinger calls "breaking a taboo".
El Pais:
- IMF's Lagarde, Germany's Schaeuble wanted levy of 12% on Cyprus bank deposits to raise more than EU7b instead of EU5.8b agreed, citing people at the meeting. IMF, Germany's proposal was also supported by Austria, Finland and Netherlands.
Style Underperformer:
Sector Underperformers:
- 1) Oil Service -1.94% 2) Disk Drives -1.31% 3) Steel -1.23%
Stocks Falling on Unusual Volume:
- MCBC, WIBC, ING, ROSE, BCS, RBS, PUK, BKH, INCY, PCRX, AMBA, SAH, CUK, UVV, EC, NXPI, FGP, EIP, NVO, HP, AAXJ, CCL, CYNO, KAMN, MX, ABG, ADVS, SNY, RTN, CHN, EXAM and LFC
Stocks With Unusual Put Option Activity:
- 1) KRE 2) ADBE 3) JNPR 4) MAS 5) CMI
Stocks With Most Negative News Mentions:
- 1) CCL 2) ICE 3) RIG 4) WMT 5) SCHW
Charts:
