Evening Headlines
Bloomberg:
- Osborne Pledges Five More Years of U.K. Austerity.
U.K. Chancellor of the Exchequer George Osborne held firm to his
austerity plan as the economy continues to stagnate, saying government
spending cuts will carry on for three years after the 2015 election. As official growth forecasts were further downgraded, Osborne sought in his budget speech to Parliament yesterday to
regain voters’ support. He announced tax cuts for low earners
and companies and measures to boost home ownership, all financed
by a squeeze on departmental budgets and a renewed crackdown on
tax avoiders.
- Italy President Meeting Draws Grillo to Government Talks. Beppe Grillo, the ex-comic and
anti-austerity crusader, is being drawn into talks over the
formation of an Italian government after three weeks in which
the country’s political vacuum gave his influence room to grow. Leaders of Grillo’s Five Star Movement will meet President
Giorgio Napolitano today as the head of state seeks to build
consensus in a divided parliament. The grizzled entertainer, who
punctuated campaign speeches with jokes and profanity, has kept
his distance from rivals even as they adjust their programs to
win his backing. Grillo will be asked once more to submit to an
alliance during his meeting with Napolitano at the presidential
palace in Rome. “He will behave properly, but he will say no,” said
Giovanni Orsina, a history professor at Luiss Guido Carli
University.
- EU to Curb Banker Bonuses After Clinching Deal on Basel III Law. The European Union is to press
ahead with planned banker bonus curbs that were opposed by the
U.K. after Britain failed to water down a tentative agreement
from last month. European Parliament lawmakers and Ireland, which holds the
rotating presidency of the EU, kept bonus restrictions
unchanged, as they sealed a deal yesterday overhauling bank
capital and liquidity rules for the 27-nation EU.
- Japan Posts Longest Run of Trade Deficits in Three Decades.
Japan posted its longest run of trade deficits in three decades as
exports fell in February, underscoring challenges for Bank of Japan
(8301) Governor Haruhiko Kuroda in reviving the world’s third-biggest
economy. Shipments dropped 2.9 percent from a year earlier, the
Finance Ministry said in Tokyo today. The median estimate of 22
economists surveyed by Bloomberg News was for a 1.7 percent decrease. Imports rose 11.9 percent, leaving a trade shortfall of 777.5 billion yen ($8.1 billion). Exports
to China fell 15.8 percent as Asia’s largest economy celebrated the
week-long Lunar New Year holiday in February, while shipments to Asia
dropped 5.2 percent. Exports
to the U.S. rose 5.7 percent, while those to the European Union
fell 9.6 percent.
- FedEx(FDX) Pares Asia Flights Amid Shift to Cheaper Deliveries. FedEx Corp. plans to cut cargo
flights to Asia as customers accelerate their shift to the
company’s slower, less expensive international services. The shipping company is making the changes after missing
analysts’ estimates yesterday on both fiscal third-quarter
profit and its full-year forecast. An economic bellwether that
moves goods as varied as medical supplies and auto parts, FedEx
had already begun a $1.7 billion restructuring to make up for a
move away from its fastest, most expensive deliveries. “The trade lane between Asia and the U.S., in particular,
remains weak in terms of air freight,” said Logan Purk, a St.
Louis-based analyst at Edward Jones & Co. who has a buy rating
on the shares. “With FedEx leveraged more to a discretionary
air-freight model, they suffer.” The company, which operates a shipping hub at Guangzhou,
China, and plans to open one in Osaka, Japan, is also studying
grounding some planes.
- Gillard Faces Leadership-Contest Call as Australia’s Labor Lags. Senior Labor Party lawmakerSimon Crean called on Australian Prime MinisterJulia Gillard to hold
a leadership ballot, saying the government can’t win elections
due in six months from its current position in opinion polls. Crean said he doesn’t expect Gillard to agree and urged
Labor lawmakers in that instance to petition the prime minister
for a leadership ballot. Crean told reporters in Canberra he
would stand for the position of deputy and urged former leader
Kevin Rudd to put his name forward for the leadership.
- Tencent Falls as Analysts Cut Share Price Forecasts. Tencent
Holdings Ltd (700), China’s largest Internet company, fell the most in
17 months in Hong Kong trading after at least seven analysts cut share
price
forecasts on the stock.
The shares fell as much as 8.7 percent to HK$240, the most
since October 2011, before trading at HK$255.40 as of 9:47 a.m.
in Hong Kong.
- Bernanke Saying He’s Dispensable Suggests Tenure Ending. Federal Reserve Chairman Ben S. Bernanke said he’s “spoken to the president a bit” about his
future and that he feels no personal responsibility to stay at
the helm until the Fed winds down its unprecedented policies to
stimulate the economy. “I don’t think that I’m the only person in the world who
can manage the exit,” Bernanke said when asked at a news
conference in Washington if he’s discussed his plans with President Barack Obama. His term expires at the end of January.
- Aluminum May Extend Losses on Bear Flag: Technical Analysis.
Aluminum prices, down 6.5 percent
this year, probably will extend the slump to the lowest since October on
the London Metal Exchange, according to technical analysis by Matt
McKinney at Zaner Group LLC. After touching a low of $1,934.85 a metric ton on March 11,
prices jumped two days later to $1,996.25, creating a so-called
bear flag pattern that signals a drop by the end of this month
to $1,887, the lowest since Oct. 29, McKinney said.
Wall Street Journal:
- Lenders Reject New Plans to Assist Cyprus. Tapping Pensions for Bailout Spurned; Moscow Cool to Gas-for-Cash Proposal. Cyprus on Wednesday was left with narrowing options to rescue its
outsize financial-services sector from collapse—something that could end
its membership in the euro zone—after international lenders rejected an
alternative government plan to secure a multibillion-euro bailout and
Russian officials remained cool to a Cypriot gas-for-cash deal.
- Stagnant Japan Rolls Dice on New Era of Easy Money. Japan's new central bank governor, Haruhiko Kuroda, begins work Thursday
on a feat no one before has managed: reversing nearly two decades of
falling prices to lift wages and profits in the world's third largest
economy.
- U.S. to Shift Drone Command. Mounting Criticism Sparks Push to Move Lethal Program to Military From CIA. The White House is working to shift control of the Central
Intelligence Agency's lethal drone program to the military, U.S.
officials say, a move that redefines the widely contested campaign that
targets suspected terrorists. The new directive is intended to shift the covert drone program to
one that is subject to international laws of war and undertaken with the
consent of host governments.
The draft document reflects a growing
consensus within the Obama administration that the long-term future of
the program lies with the military, where U.S. officials say it will be
on firmer legal footing and be more transparent. The drone program has
drawn fire from both Democrats and Republicans who say it is secretive
and unpredictable.
Fox News:
MarketWatch.com:
- Cyprus mulls plan to stem capital flight. Doubt over Cyprus’ financial future showed no sign of lifting Thursday,
with officials reportedly set to introduce new legislation to try to
prevent capital exiting the country, amid negotiations to shore up the
country’s finances.
CNBC:
- North Korea Military Threatens US Bases as 'Within Target'. North Korea's supreme military command said on Thursday its
"precision attack" weapons have U.S. navy bases in Guam and Okinawa in
their sights and will attack them if it is provoked. "The
United States is advised not to forget that our precision target tools
have within their range the Anderson Air Force base on Guam where the
B-52 takes off, as well as the Japanese mainland where nuclear powered
submarines are deployed and the navy bases on Okinawa," the North Korean
command spokesman was quoted by KCNA news agency. North Korea
earlier made a threat to stage a nuclear attack on the United States,
something that is well outside of its current military capacity,
although the U.S. Pacific bases are in range of its medium range
missiles.
- South Korea: Chinese Address Source of Cyberattack. A
Chinese Internet address was the source of a cyberattack on one of the
South Korean companies hit in a massive computer shutdown
that affected five other banks or media companies, initial findings
indicated Thursday.
- Guess(GES) profit falls, issues weak forecast. Guess Inc.'s fiscal fourth-quarter dropped 24 percent as the company
discounted more clothing due to economic pressures on European shoppers
and fewer customers in North America. It issued a disappointing forecast
and shares fell in after-hours trading.
Zero Hedge:
Business Insider:
- Why You Should Ignore The Strong China Flash PMI Report. Furthermore, he points to non-recurring items and the fact that the
report conflicts with the recent slew of disappointing data out of the
world's second largest economy. "That said, there are significant distortions on PMI readings around
the Lunar New Year (LNY) holiday, so investors should view those
volatilities in PMI with caution. Other leading indicators such as daily
power output suggest that March manufacturing activities remain
relatively weak and street economists will likely cut their 1Q13 GDP
growth forecasts."
Reuters:
- Exclusive: German union chief to VW Tennessee workers - Join UAW. The United Auto
Workers has won the backing of the head of an influential German union
in its effort to represent the hourly workers at Volkswagen AG's Chattanooga, Tennessee, assembly plant. "In Chattanooga, you need union
representation" to negotiate working conditions, IG Metall President
Berthold Huber said in a letter distributed in early March to the
plant's 2,350 hourly employees. A copy of the letter was obtained by
Reuters. "We
strongly recommend that the eligible employees at Volkswagen,
Chattanooga, decide that the UAW should represent them," he added.
- Cyprus scrambles to avert meltdown, EU threatens cutoff.
Cyprus considered
nationalizing pension funds and ordered banks to stay shut till next
week to avert financial chaos after it rejected the terms of a European
Union bailout and turned to Russia for aid. Crisis talks among the
political leadership in Nicosia are set to resume on Thursday after
late-night meetings to discuss a "Plan B" broke up on Wednesday without
result. EU officials voiced frustration but little sympathy for an
ambitious but now bust banking system that extended itself well beyond
the island; Russia, whose citizens have billions to lose in those
Cypriot banks, called the EU a "bull in a china shop".
- Moody's downgrades Brazil's BNDES, Caixa on eroding capital. Moody's Investors Service
lowered on Wednesday the long-term issuer ratings of Brazilian
state banks BNDES and Caixa Econômica Federal, citing their
eroding capital position after years of rapid credit expansion. Analysts led by Alexandre Albuquerque cut ratings on state
development bank BNDES and on Caixa, the
country's largest mortgage lender, to "Baa2" from "A3,"
according to a statement. Both rankings, which are within
investment-grade ratings, bear a positive outlook - meaning that
an upgrade would be likely to happen within 12 to 18 months.
- Oracle(ORCL) blames sales force for Q3 miss, stock drops. Oracle Corp
blamed its rapidly expanding salesforce for a severe miss in
third-quarter software sales and warned that its ailing hardware
business will lose more ground this quarter, driving its shares
8 percent lower on Wednesday.
- Brazil flat steel inventory rises, sales fall in February. Steel
distribution companies in Brazil sold 317,900 tonnes of flat products
in February, a drop of 13.8 percent from the prior month, industry group Sindisider said in a report
on Wednesday. February sales were 7.5 percent below the amount sold a year
earlier. Distributors bought 8.7 percent less steel in February
from the previous month. Inventory rose 2.4 percent from
September to the equivalent of 3.1 months of sales, or 970,400
tonnes, Sindisider said.
Telegraph:
Yomiuri:
- Japan plans to request the EU to keep arms embargo on China, citing a Japanese government official.
VOA:
- Japan and the U.S. will draft a plan to counter Chinese military
action to seize disputed island in East China Sea, citing a U.S. defense
official. Shigeru Iwasaki, Chief of Joint Staff of Japanese Self
Defense Forces, and Samuel Locklear, commander of the U.S. Pacific
Command, will meet in Hawaii this week.
Want China Times:
Evening Recommendations
Oppenheimer:
- Rated (GY) Outperform, target $20.
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 118.25 -3.25 basis points.
- Asia Pacific Sovereign CDS Index 82.5 unch.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 340K versus 332K the prior week.
- Continuing Claims are estimated to rise to 3050K versus 3024K prior.
8:58 am EST
- The Preliminary Markit US PMI for March is estimated to rise to 54.8 versus 54.3 in February.
9:00 am EST
- The House Price Index forJanuary is estimated to rise +.7% versus a +.6% gain in December.
10:00 am EST
- The Philly Fed for March is estimated to rise to -3.0 versus -12.5 in February.
- Existing Home Sales for February are estimated to rise to 5.0M versus 4.92M in January.
- Leading Indicators for February are estimated to rise +.4% versus a +.2% gain in January.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI, Bloomberg Economic Expectations Index for March,
weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas
inventory report, JP Morgan Insurance Conference, (AZN) investor day and the (PANW) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and consumer shares in the region. I expect US stocks to open mixed 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: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 119.0 -37.68%
- Total Put/Call .78 -19.59%
Credit Investor Angst:
- North American Investment Grade CDS Index 89.09 +8.8% (new series)
- European Financial Sector CDS Index 166.51 +2.69%
- Western Europe Sovereign Debt CDS Index 100.90 -.10%
- Emerging Market CDS Index 244.35 -.73%
- 2-Year Swap Spread 17.0 -1.0 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -19.25 +2.0 bps
Economic Gauges:
- 3-Month T-Bill Yield .07% +1 bp
- China Import Iron Ore Spot $134.10/Metric Tonne -.22%
- Citi US Economic Surprise Index 27.20 +.3 point
- 10-Year TIPS Spread 2.54 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +169 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail, tech, medical and biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- ECB Said Likely to Delay Vote on Emergency Cyprus Bank Lending.
The European Central Bank is likely to delay a decision on whether to
continue to supply Cypriot banks with emergency funds as it awaits
clarity on the nation’s
bailout, two people familiar with the deliberations said. The ECB assumes that a bank holiday in Cyprus will be
extended to the end of the week, and there is a public holiday
on the Mediterranean island on March 25, the people said on
condition of anonymity. That means policy makers don’t need to
vote on whether to extend or halt Emergency Liquidity Assistance
to Cypriot banks at their mid-month meeting in Frankfurt, which
starts today and ends tomorrow, the people said. The delay gives the Cypriot government and euro-area
finance ministers five more days to forge a deal to prevent the
implosion of the island’s banking sector.
- Europe Plays I-Didn’t-Do-It Blame Game on Cyprus Bank Tax.
To listen to the German and French
governments, the European Central Bank and European Commission, no one
was responsible for the Cypriot deposit tax that was unanimously
endorsed in the early hours of March 16 and fell apart yesterday.
German Finance Minister Wolfgang Schaeuble opened the blame game on
Sunday, telling ARD television that the commission, ECB and Cypriot
government engineered the swoop on ordinary bank accounts and “now they
have to explain it to the Cypriot people.” By then, the Cypriot people
were lining up at cash machines and painting “No” on the palms of their
hands to protest the levy that, even with a tax-free allowance built in
for the smallest savers, didn’t win a single “Yes” vote in the Cypriot
parliament. “The Cyprus fiasco has the hallmark of a classic whodunit,”
Sony Kapoor, head of the Re-Define think tank, said
in an e-mailed note. “Someone somewhere took a decision that
now no one nowhere appears to have made.”
- Osborne Says 2013 U.K. Growth Forecast Cut in Half. Chancellor of the Exchequer George Osborne said the forecast for U.K. economic growth this year was
cut by half as he lowered corporation tax and set out an updated
central-bank remit to aid Britain’s recovery. Gross domestic product will increase 0.6 percent this year,
compared with a previous forecast of 1.2 percent, Osborne told
Parliament in London as he delivered his annual budget statement
today, citing the Office for Budget Responsibility’s
predictions. The economy will grow 1.8 percent next year,
compared with a previous estimate of 2 percent, and it will
expand 2.3 percent in 2015, he added. “It is taking longer than anyone hoped, but we must hold
to the right track,” Osborne told lawmakers. “The problems in
Cyprus this week are further evidence that the crisis is not
over, and the situation remains very worrying,” he said,
referring to the uncertainty over a planned European Union
rescue package for the Mediterranean island.
- Hollande Woes Deepen With Resignation Before Confidence Vote. French President Francois Hollande’s government faces its first confidence vote over its
handling of the economy as Budget Minister Jerome Cahuzac’s
resigned amid an investigation into his finances. Cahuzac, 60, is the first minister to exit since Hollande
won power last May and is stepping down after a probe into
whether he had an undeclared Swiss bank account. Today’s
confidence vote, called by the opposition and unlikely to
prevail because of Hollande’s Socialist Party’s majority in the
National Assembly, will follow a speech by Prime Minister Jean- Marc Ayrault. “The French economy is paralyzed,” Jean-Francois Cope,
head of the opposition Union for a Popular Movement, said today
on I-tele television. “Our confidence motion is intended as a
wake-up call for the government.”
- European Stocks Advance as Leaders Weigh Cyprus Fate. European
stocks climbed, snapping a
three-day loss for the benchmark Stoxx Europe 600 Index, as the region’s
policy makers weighed options for keeping Cyprus in the euro area.
Deutsche Bank AG and BNP Paribas SA paced a rebound in
banks, both rising at least 1 percent. U.K. homebuilders rallied
as Chancellor of the Exchequer George Osborne announced a new
program to support British housing. Rheinmetall AG lost 6.9
percent after forecasting lower earnings in 2013. The Stoxx 600 advanced 0.3 percent to 296.5 at the close of
trading, after falling 1 percent in the past three days.
- Fed Officials Trim Forecasts for 2013, 2014 Jobless Rate. Federal
Reserve officials forecast
the nation’s unemployment rate will hit the central bank’s threshold for
raising interest rates sometime in 2015, while projecting faster
improvement in the labor market this year. U.S. central bankers estimate the jobless rate will average
6.7 percent to 7 percent in the final quarter of 2014 and 6
percent to 6.5 percent in 2015, according to their central
tendency estimates. Similarly, 13 of the 19 Federal Open Market
Committee participants estimated that the first increase in the
federal funds rate from its current range of zero to 0.25
percent will occur in 2015, the same as at the December meeting. Four estimated the first tightening in 2014, up from 3 in
December. Eleven estimated that the benchmark lending rate will
be 1 percent or lower by the end of 2015, compared with 12 in
December.
- Caterpillar(CAT) Machine Retail Sales Drop Accelerates, Led by Asia. Caterpillar Inc., the biggest maker
of construction and mining equipment, said global retail machine
sales fell 13 percent in the three months through February. Asia Pacific sales declined 26 percent from the same period
a year earlier, the Peoria, Illinois-based company said today in
a filing. North American sales were 12 percent lower and Europe,
Africa and the Middle East slid 9 percent. Latin America was up
3 percent. Caterpillar last month said global retail machine sales
fell 4 percent in the three months through January.
- Synthetic CDOs Making Comeback as Yields Juiced. Derivatives that pool credit-
default swaps to make magnified bets on corporate debt,
popularized in the last credit bubble, are making a comeback as
investors search farther afield for alternatives to bonds at
record-low yields. Citigroup Inc. is among banks that have sold as much as $1
billion of synthetic collateralized debt obligations this year,
following $2 billion in all of 2012, according to estimates from
the New York-based lender. Trading in so-called tranches of
indexes that use a similar strategy to juice yields rose 61
percent in the past month. Synthetic credit, which amplified the financial crisis five
years ago, is enticing investors after corporate-bond yields
dropped to less than half the 20-year average.
Wall Street Journal:
- Creditors Set to Reject Cyprus's Plan B.
International creditors were set to reject an alternative bailout plan
Cyprus cobbled together a day after the government's divisive tax on
bank deposits died a quick death, two officials with knowledge of the
situation said on Wednesday, leaving the island nation with narrowing
options to rescue its outsize financial-services sector from collapse.
MarketWatch:
CNBC:
- US Mortgage Applications Fell Again Last Week as Rates Rose: MBA. Applications for U.S. home mortgages tumbled for a second week in a
row last week as interest rates continued to climb to seven-month
highs, data from an industry group showed on Wednesday. The
Mortgage Bankers Association said its seasonally adjusted index of
mortgage application activity, which includes both refinancing and home
purchase demand, fell 7.1 percent in the week ended March 15. The index of refinancing applications dropped 8 percent, while the gauge
of loan requests for home purchases, a leading indicator of home sales,
slipped 3.9 percent.
- Caution: China Stocks May See Double-Digit Correction. After a positive start to the year, Chinese equities have fast fallen
out of favor with investors, down more than 6 percent in the past month
on worries over a bubble building in the property market and on the
overall growth outlook. According to technical analyst Ray Barros of Ray Barros Trading Group,
the worst is not over for the market, he expects a further correction of up to 15 percent for the benchmark Shanghai Composite in the next two months.
Zero Hedge:
Business Insider:
- Here's Where The Ugly Consequences Of Easy Monetary Policy Will First Appear. Some
have argued that this mis-pricing is actually a bubble in the junk bond
market. "More to the point, these are parts of the financial system
where
developed market central banks would likely be unwilling or unable to
‘do whatever it takes’ to prevent a serious setback. The question would
then be whether setback and stress in these sectors could be contained
in a world of high leverage." Keep an eye on the junk bond market.
Project Syndicate:
- China's Hidden Debt Risk. Now China is experiencing a fourth instance of elevated debt risk, this
time characterized by high levels of accumulated local-government and
corporate debt. To be sure, China’s national balance sheet, which boasts
positive net assets, has garnered significant attention in recent
years. But, in order to assess China’s financial risk accurately,
policymakers and economists must consider the risks that lie in the
country’s asset structure – and the liabilities that are not included on
its balance sheet.
NY Daily News:
benzinga:
- Agriculture Equipment Likely to Lose Demand in 2014, According To Wells Fargo Analyst.
Andrew Casey, an analyst at Wells Fargo, is growing more and more
bearish on agriculture equipment next year, based on a likely decrease
in cash flow among farmers. Casey went on to say that he believes commodity prices will come down
in price soon too, specifically citing that corn may be closer to
$4.25/bu, rather the current $7/bu that it is now. Because of the expected lower demand, Deere(DE)
has been slashed to underperform from market perform with a price
target of $72-75 from $90-93. AGCO Corp.(AGCO) was also cut to
underperform from market perform and had its price target lowered to
$40-43 from $51-54.
Reuters:
- FedEx(FDX) cuts forecast as air freight weakness hits profit. FedEx Corp cut its full-year forecast after a worse-than-expected
quarterly profit as customers shift from air express to slower but
cheaper modes of international shipping. Shares of the No. 2 U.S.
package-delivery company fell 5 percent in early trading on the New York
Stock Exchange. FedEx's express unit, its
biggest source of revenue, has also been hit by overcapacity in the
industry that has squeezed margins. Operating income in the express unit
fell 66 percent. FedEx said the express unit
underperformed due to weakness in Asia and other international markets,
where margin pressures arising from excess capacity more than offset
increased volumes. "We have a yield issue that
exaggerated itself this quarter over last quarter," Dave Bronczek, CEO
of FedEx Express, said on a conference call with analysts. FedEx plans to cut express capacity to and from Asia from April 1
and is looking at reducing its fleet by retiring more of its older,
less-efficient aircraft.
- Analysis: ECB prepared to let Cyprus go, protect others. The European Central
Bank is prepared to cut off funding to Cyprus and let the Mediterranean
island succumb to financial meltdown if it has to, confident it has
unlimited firepower to protect the rest of the euro zone.
- Europe transaction tax raises collateral crunch fears. A financial transaction tax (FTT) proposed
by the European Commission could unleash a collateral crunch as
much of the US$639trn over-the-counter derivatives market shifts
to central clearing. Plans to slap a 0.1% levy on stock and bond transactions and
0.01% on derivatives could raise as much as EUR35bn each year.
But the unintended consequences could pose a problem for
implementation of the swaps clearing mandate that forms the
backbone of the European Markets and Infrastructure Regulation
(EMIR).
Telegraph:
- Bank of England warns QE could hit sterling - minutes. Bank of England policymakers have warned that more quantitative easing could
lead to “an unwarranted depreciation of sterling” if markets interpreted the
move as evidence that the central bank was abandoning its commitment to low
inflation.
Die Zeit:
- Asmussen Says ECB Will Only Fund Solvent Banks. European Central
Bank Executive Board member Joerg Asmussen comments in interview. Says
ECB can "only provide emergency liquidity to solvent banks". Says
solvency of Cypriot banks "can't be considered a given unless an aid
package, which ensures a fast recapitalization of the banking sector, is
agreed soon". Says it's important that Cyprus's contribution is
sufficient to guarantee debt sustainability.
Cadena Ser:
- Spain to Deny Aid to Regions Breaching Deficit Limit. Budget
Ministry Montoro will deny subsidies for training medical professionals
to work on organ transplants, citing a written order from the ministry.
Luxembourg RTL:
- Dutch Finance Minister Jeroen Dijsselbloem, who leads the group
of euro-area finance ministers, is "tainted" by debates over rescue
plans in the Netherlands, Luxembourg Finance Minister Luc Frieden said
in an interviwew.
Style Underperformer:
Sector Underperformers:
- 1) Agriculture -.34% 2) HMOs -.31% 3) Road & Rail -.22%
Stocks Falling on Unusual Volume:
- MXWL, FDX, AGCO, CNW, DE, XEC, ANW, ECT, CHKR, ATOS, MXF, TEI, CTAS, RNF, IEP, FNV, PER, CNW, FDS, CYNO, ADUS, PTEN, CIG, ATU, CAT, SHG, CSL and NCT
Stocks With Unusual Put Option Activity:
- 1) FDX 2) CIE 3) DISH 4) CY 5) ORCL
Stocks With Most Negative News Mentions:
- 1) DE 2) AGCO 3) JPM 4) GM 5) DVN
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +1.56% 2) Homebuilders +1.49% 3) Airlines +1.23%
Stocks Rising on Unusual Volume:
- CIE, OMPI, WSM, FRAN, PLCM, SPRD, ADBE, TMH, TFM and HLS
Stocks With Unusual Call Option Activity:
- 1) WSM 2) FDX 3) SYMC 4) EVEP 5) GDXJ
Stocks With Most Positive News Mentions:
- 1) SYNT 2) ADSK 3) EDU 4) GIS 5) APA
Charts:
Evening Headlines
Bloomberg:
- Spanish Banks Cut Developers as Zombies Dying: Mortgages. Spain’s zombie developers are
finally about to die. Spanish banks are pulling the plug on thousands of builders
kept alive during the past five years even as they built almost
nothing, said Mikel Echavarren, chief executive officer of Irea,
a Madrid-based consulting firm that has advised on 22 billion
euros ($28.5 billion) of refinancing. The banks, forced by the
government last year to set aside provisions for the developers,
have no incentive to keep funding them. “Banks have taken the hit, so extend and pretend is
over,” said Echavarren. “There’s no motivation to refinance
companies that aren’t viable, have no liquidity or possibility
of future earnings so we’ll see a tsunami of developer
bankruptcies in the next two years.” The final collapse of an industry that accounted for as
much as 18 percent of Spain’s growth amid the country’s decade-
long real estate boom will add to unemployment, already at a
record 26 percent, depress consumer spending needed to turn
around the economy and push down the value of residential real
estate that’s already dropped more than 30 percent since 2007,
said Raj Badiani, an economist at IHS Global Insight in London. While job losses in the construction industry continued in
recent quarters, “they’ve been less severe than expected given
the scale of the real estate slump,” said Badiani. “With banks
cutting financial life support to many developers living on
borrowed time, we can expect an accelerated downward adjustment
in employment levels.” Badiani estimates the jobless rate could
climb to more than 27 percent this year and house prices will
fall at least 50 percent from the peak by 2015.
- Europe Weighs Cyprus’s Fate After Lawmakers Reject Bailout Deal. European policy makers must weigh
how far to push Cyprus after lawmakers in the Mediterranean
nation rejected an unprecedented levy on bank deposits, throwing into limbo a rescue package designed to keep it in the euro.
Luxembourg Finance Minister Luc Frieden called for the 17 euro-area
finance ministers to reconvene “as soon as possible” to cobble together a
new package. The European Central Bank, whose Governing Council meets
today in Frankfurt, will also have to decide whether to give Cyprus more
time or consider cutting off liquidity to the country’s banks. “This is not a good result -- neither for Cyprus, nor for
the euro zone, and we have to look together for alternatives to
the negotiated package,” Frieden said yesterday in a phone
interview from Frankfurt. He called the vote “very sad news,”
though said the decision by its parliament must be respected.
- Two-Year Swap Spread in U.S. Surges to Highest Since September. The U.S. two-year interest-rate
swap spread, a measure of debt market stress, surged to the
highest level in six months as European policy makers struggle
to forge a bailout plan for Cyprus. The gauge, which widens when investors seek the perceived
safety of government securities and narrows when they favor
assets such as company debentures, increased 2.9 basis points to
17.97 basis points as of 3:43 p.m. in New York. That’s the
highest level on an intra-day basis since Sept. 4. “You’ve got the beginnings of an indicator of bank
stress,” Jim Vogel, an interest-rate strategist at FTN
Financial in Memphis, Tennessee, said in a telephone interview.
Investors may “back away from risk commitments” given the
uncertain outcome of Cyprus’s potential bank-deposit levy, he
said.
- North Korea Vows Military Action Against More U.S. B-52 Flights. North Korea warned of “strong military counter-action” if the U.S.
again flies B-52 bombers over the Korean peninsula, with two flights
this month after the totalitarian regime threatened preemptive nuclear
strikes. The U.S. Pacific Air Forces Command successfully
carried out the latest training flight, 7th Air Force spokeswoman Maj.
Richelle Dowdell said in an e-mail yesterday without giving further
details. A B-52 can carry nuclear warheads and air-to- ground missiles
with a range of 3,000 kilometers (1,864 miles).
- Copper Seen Dropping as Stockpiles Increase. Copper is poised to decline 2
percent this year as supply outpaces demand and boosts
stockpiles, while aluminum may advance as demand gains, said Australia’s Bureau of Resources and Energy Economics. World inventories may surge 16 percent to 1.3 million tons in 2013, or three weeks of consumption, it said. That compares with a December forecast of 1.1 million tons.
Prices fell to a seven-month low yesterday on concerns that Europe’s
debt turmoil will damp the economy and property curbs will erode demand
in China, the biggest user. The country’s industrial output had the
weakest start to a year since 2009 and copper imports slid to the lowest
in 20 months in February, when there was a weeklong New Year holiday. Stockpiles are rising at
an “alarming” rate, Barclays Plc said March 18. “Copper consumption is forecast to grow, primarily in
emerging economies, but by a lower amount than the increase in
production,” today’s report said. “The increase in supply will
come from a number of large recently commissioned mines in
Indonesia, Peru and Mongolia ramping up to full production.”
Wall Street Journal:
- SEC Digging Into Fund Fees. Focus on Expenses Billed to Investors by Hedge Funds and Private-Equity Firms. The Securities and Exchange Commission is closely scrutinizing the
fees and expenses, including travel and entertainment, that hedge funds
and private-equity firms charge to their investors. Many managers of hedge funds and private-equity funds—collectively
called "private investment advisers"—had long been largely unregulated
and therefore had less oversight in how they billed their investors.
- Demonstration Against Sequestration Has Reasons, but Few Rhymes. Federal Worker Unions Face Hurdles in Staging Protest; Signs Fall Short of Poetry. For many workers, this turns out not to be the most rousing cause.
The cuts roll out slowly, in early April for some agencies and programs
but not until May for others. Most agencies aim to trim around the edges
to avoid layoffs. Workers in some departments aren't in line for
furloughs at all, and for others it might be just a few days.
"I'll be honest. People are saying
'you're giving me a day without pay? I'll take July 5,' " says Brent
Barron, president of AFGE Local 648.
- Visa(V) May Have to Buy Europe System. Visa
Inc. could be forced to pay billions of dollars to buy the Visa Europe
payments system, under a plan being discussed by the European banks that
own the business. The shift would significantly expand Visa's footprint as it battles for a bigger share of the international market.
- J.P. Morgan(JPM), Trustee for MF Global Reach Pact. J.P. Morgan Chase & Co. has reached a settlement that will return an estmated $546 million to MF Global Holdings Ltd. customers, likely bringing an end to a major chapter in customers' effort to recover money from the securities firm's 2011 collapse. J.P. Morgan, the trustee for the failed company's brokerage unit, and
lawyers representing customer plaintiffs in the case filed their
settlement agreement after finalizing terms in recent days, according to
a person familiar with the process.
MarketWatch.com:
Zero Hedge:
Business Insider:
NY Times:
- Nigeria: Death Toll in Kano Bombing Rises to 41. The death toll of a suicide bombing in a Christian neighborhood of Kano
on Monday has risen to at least 41, the police said Tuesday. At least 44
others were wounded, officials said. The Kano state police said that
two men rammed an explosives-laden blue VW Golf into a full passenger
bus in Kano, northern Nigeria’s busiest commercial center, the deadliest
attack in nine months attributed to Islamic extremists.
CNN:
benzinga:
- Cintas(CTAS) Trades Lower After Q3 Results; Lowers Full-Year Guidance Range. Uniform-maker Cintas released its fiscal third-quarter results after the closing bell on Tuesday. The company reported earnings per share which were below Wall Street
consensus, revenue which beat expectations and also lowered its
full-year earnings guidance range. In late trading, the stock was last
down a little more than two percent to $44.85.
Federal Computer Week:
- Sources: Amazon(AMZN) and CIA Ink Cloud Deal. In a move sure to send ripples through the federal IT community, FCW
has learned that the CIA has agreed to a cloud computing contract with
electronic commerce giant Amazon, worth up to $600 million over 10
years. Amazon Web Services will help the intelligence agency build a private
cloud infrastructure that helps the agency keep up with emerging
technologies like big data in a cost-effective manner not possible under
the CIA's previous cloud efforts, sources told FCW.
Reuters:
- Freddie Mac sues more than a dozen banks over Libor. U.S.
mortgage finance company Freddie Mac is suing more than a dozen banks
for losses from the alleged manipulation of the benchmark interest rate
known as Libor. Bank of America Corp, JPMorgan Chase & Co, UBS AG and Credit
Suisse Group AG are among the banks named as defendants in the
lawsuit.
- Adobe(ADBE) raises profit forecast as subscription model gains traction. Adobe Systems Inc, maker of
Photoshop and Acrobat software, raised its full-year adjusted
earnings forecast after reporting first-quarter results above
Wall Street estimates as more customers chose its
subscription-based model. The company raised its full-year adjusted earnings forecast
to about $1.45 per share from about $1.40 per share, above
analysts' estimates of $1.41 per share. Shares of the company, which said Chief Technology Officer
Kevin Lynch would be leaving, rose 7 percent in extended trade.
- Anadarko(APC) makes large oil find in Gulf of Mexico. "The successful Shenandoah-2 well marks one of Anadarko's
largest oil discoveries in the Gulf of Mexico," Bob Daniels,
Anadarko's head of exploration, said in a statement. Log and pressure data from the appraisal well indicate
excellent-quality reservoir and fluid properties and more
drilling will be done to advance this "potentially giant
project," Daniels said.
Telegraph:
- OECD cuts French growth forecast. The OECD trimmed its growth forecast for France and said it must do more to
boost competitiveness and create jobs, but recommended the government avoid
more spending cuts to meet it EU deficit reduction pledges.
BBC:
- Cyprus warned over parliament's bailout rejection. Germany's finance
minister has warned Cyprus that its crisis-stricken banks may never be
able to reopen if it rejects the terms of a bailout. Wolfgang Schaeuble said major Cypriot banks were "insolvent if there are no emergency funds".
China Securities Journal:
- China may lower threshold for short selling and margin trading, citing people from securities companies.
21st Century Business Herald:
- Beijing May Tighten Home Buying Restrictions for Singles. Beijing may allow single or divorced local residents to own only one home, citing people who participated in drafting the rules.
Want China Times:
- Local governments await Beijing's new rules on housing market. Local governments in China are still awaiting the implementation of
housing market curbs at ministerial level before they announce their own
policies, despite allegations that a leaked copy from the central
authorities has surfaced recently, the Guangzhou-based 21st Century
Business Herald reports.
Evening Recommendations
Raymond James:
- Rated (TFM) Strong Buy, target $50.
Night Trading
- Asian equity indices are -.50% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 121.50 new series.
- Asia Pacific Sovereign CDS Index 82.5 -1.0 basis point.
- NASDAQ 100 futures -.06%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory
build of +2,000,000 barrels versus a +2,624,000 barrel gain the prior
week. Gasoline inventories are estimated to fall by -2,000,000 barrels
versus a -3,571,000 barrel decline the prior week. Distillate supplies
are estimated to fall by -1,000,000 barrels versus a +83,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated unch. versus
a -1.2% decline the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bernanke speaking, China HSBC Manufacturing PMI, UK FY13
Budget, Germany PPI, weekly MBA mortgage applications report, BB&T
Industrial Conference, (TEX) analyst meeting, (FLS) analyst day, (JBLU)
analyst day and the (CRM) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and real estate 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.
