Tuesday, March 26, 2013

Tuesday Watch

Posted by Gary .....at 12:27 AM
Evening Headlines 
Bloomberg: 
  • Dijsselbloem Says Euro Troubled Lenders Must Fend for Themselves. Dutch Finance Minister Jeroen Dijsselbloem, who committed taxpayer funds to take over SNS Reaal NV (SR) last month, said troubled lenders in the euro area must now fend for themselves as part of future regional rescues. Dijsselbloem, who leads the group of 17 euro finance ministers, said imposing losses on depositors and bondholders can be part of the bailout toolkit after such measures were taken to avoid default in Cyprus. “We are looking for a way to place risks where they are taken,” Dijsselbloem said on Dutch television program “Pauw & Witteman” late yesterday. “Banks should strengthen their balances -- they have to ensure they can be unwound when they get in trouble. Next, it should be possible to make shareholders and bond holders contribute to a rescue. That’s how we move along. And then eventually you may get to a government contribution. That order was reversed in the last years.” Dijsselbloem said earlier yesterday that if ailing banks can’t raise funds, “then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders.” Those comments, to Reuters and the Financial Times, were confirmed yesterday by Dijsselbloem’s spokeswoman, Simone Boitelle. 
  • Bersani Meets Berlusconi Deputy to Staunch Years of Conflict. Pier Luigi Bersani will meet Silvio Berlusconi’s deputies today, seeking to ease years of conflict in his bid to assume the Italian premiership. Bersani, 61, has two days to overcome a shortfall of support in parliament and may need help from Berlusconi, a billionaire and three-time prime minister, to get there. The appointment, set for 4:15 p.m. in Rome, is between Bersani and a delegation led by Angelino Alfano, head of Berlusconi’s People of Liberty party. Bersani and Berlusconi have room for common ground since both want to maintain influence after losing voters to the upstart Five Star Movement of ex-comic Beppe Grillo. Still, years of bad blood make a partnership hard to come by. Berlusconi relishes mocking Bersani for his previous adherence to communism, while the ex-premier has been criticized for his criminal trials. “Even if it starts, it will not last long,” Nicola Marinelli, who oversees $180 million at Glendevon King Asset Management in London, said of the chances for an alliance. “They’ve been fighting for so long and the people behind them really hate each other.”
  • Monte Paschi Bailout Won’t Spur Recovery as Loan Losses Surge. Banca Monte dei Paschi di Siena’s 4.07 billion-euro ($5.2 billion) state rescue won’t resolve the troubles of Italy’s third-largest bank, which is poised to report a second straight loss on soaring bad-loan provisions. The world’s oldest bank may post a 2012 net loss of 2.33 billion euros ($3.03 billion) when it publishes results on Thursday, based on the mean estimate of 10 analysts surveyed by Bloomberg. The Siena-based lender had a 4.69 billion-euro loss in 2011, and will probably be unprofitable in 2013 as well, analysts’ estimates show. Italy’s economy remains mired in its longest recession in two decades and a month-old political impasse threatens to increase sovereign-debt yields and bank funding costs. The bank’s outlook is further complicated by probes into the actions of former managers after derivatives were used to hide losses. While the bailout will replenish capital, “concerns on low profitability, poor credit quality and high exposure to the country’s sovereign debt remain,” said Wolfram Mrowetz, the chairman of Alisei Sim, a Milan-based brokerage. “There are too many structural issues still to address.”
  • Kuroda Wants to Achieve BOJ’s 2% Price Target in Two Years. Haruhiko Kuroda said he wants 2 percent inflation in two years and pledged to buy more government bonds, underscoring the new Bank of Japan (8301) chief’s efforts to accelerate an end to falling prices. “Achieving the 2 percent inflation target in two years is something that I have in my mind,” Kuroda said today in Parliament. He said the BOJ may scrap a rule limiting the scale of asset buying and consider purchasing more bonds with longer maturities. 
  • Ford(F) CEO Mulally Says He’s Concerned About Japanese Yen. Ford Motor Co. (F) Chief Executive Officer Alan Mulally said he’s concerned about the depreciation of the yen that’s bolstering the competitiveness of Japanese carmakers. “The most important thing that most countries around the world believe in is letting the markets determine the currency,” Mulally said today from Bangkok in reference to the Japanese currency, during an interview on Bloomberg TV’s First Up with Susan Li. “That’s just so important to all of us in the international trading system.”
  • China’s Stocks Fall Most in a Week as Brokerages, Miners Drop. Chinese stocks fell for a second day, as declines by brokerages and material producers dragged the Shanghai Composite Index (SHCOMP) down the most in a week. Haitong Securities Co. sank 3.8 percent, the second-biggest decline in the CSI 300 Index. (SHSZ300) Jiangxi Copper Co. (600362) dropped 1.8 percent before reporting profit. Dongfeng Automobile Co. and Cosco Shipping Co. fell at least 0.7 percent after 2012 net income fell from a year earlier. The Shanghai Composite Index lost 1.6 percent to 2,288.49 as of 10:19 a.m. local time. The CSI 300 Index retreated 1.9 percent to 2,563.73.
  • China Money Rate Snaps 3-Day Drop on Possible Property Measures. China’s money-market rate rose, snapping a three-day decline, on speculation the central bank will take measures to rein in home-price increases. Many lenders have started to control the scale of loans for real estate development, the China Securities Journal reported today, without saying where it got the information. The China Banking Regulatory Commission is drafting guidelines on property lending including mortgages, the newspaper cited an unidentified person close to the regulator. “In China, a media report on banks preparing to tighten mortgage-lending practices are likely to weigh on sentiment,” Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong, wrote in a research report today. “We expect the People’s Bank of China to drain liquidity.” The seven-day repurchase rate, which measures funding availability in the interbank market, climbed eight basis points to 3 percent at 9:18 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.
  • BRICS Nations Plan New Bank to Bypass World Bank, IMF. The biggest emerging markets are uniting to tackle under-development and currency volatility with plans to set up institutions that encroach on the roles of the World Bank and International Monetary Fund. The leaders of the so-called BRICS nations -- Brazil, Russia, India, China and South Africa -- are set to approve the establishment of a new development bank during an annual summit that starts today in the eastern South African city of Durban, officials from all five nations say. They will also discuss pooling foreign-currency reserves to ward off balance of payments or currency crises.
  • RBNZ Wants Banks to Hold More Capital Against Risky Home Loans. New Zealand’s central bank plans to require banks to hold more capital to strengthen their balance sheets against the risk from high loan-to-value ratio lending. “The aim of the current review is to ensure that banks’ baseline capital requirements for housing loans properly reflect risk in the housing sector,” Deputy Governor Grant Spencer said in an e-mailed statement. “The bank is proposing higher capital requirements for high LVR loans.” Raising the capital adequacy requirements could prompt banks to seek more capital, which may push up interest rates and slow New Zealand’s housing market, in which prices last month rose at the fastest pace since early 2008.
  • Rebar Falls in Shanghai as Chinese Banks Begin Property Curbs. Steel reinforcement-bar futures fell for the second time in three days in China as banks began implementing measures to prevent a housing bubble, which may cut demand for the material used in construction. The contract for October delivery fell as much as 1.1 percent to 3,868 yuan ($623) a metric ton on the Shanghai Futures Exchange and was at 3,879 yuan at 10:07 a.m. local time.
  • Rubber Declines as Yen’s Rebound Cuts Appeal Amid Cyprus Concern. Rubber fell as Japan’s currency gained, cutting the appeal of yen-denominated contracts, amid concern Cyprus’s bank-restructuring plan will be a template for other European nations, imperiling bondholders and depositors. The contract for delivery in August lost as much as 1.4 percent to 275.6 yen a kilogram ($2,920 a metric ton) and was at 277.7 yen on the Tokyo Commodity Exchange at 10:17 a.m. Futures extended this year’s retreat to 8.3 percent. “The market retreated as concerns grew that the Cyprus bailout agreement would impact on other European nations,” Hideshi Matsunaga, an analyst at broker ACE Koeki Co. in Tokyo, said today by phone.
  • Copper Futures Fall in New York as China Adds to Growth Concerns. Copper fell the most in four sessions in New York, on speculation that metals demand will slow as China’s government will take steps to tame inflation and global growth weakens. China’s swap market is signaling interest-rate increases for the first time since 2011, after inflation accelerated to a 10-month high and the government measures failed to slow the rise in housing prices. “China’s growth story remains intact, but there are serious concerns about the short-term outlook given the property bubble and the ratcheting up of the government response,” Edward Meir, an analyst at INTL FCStone in New York, said in a report. “The global outlook remains patchy at best.” Supplies that are outstripping demand are also weighing on prices, Meir said. Stockpiles of copper in warehouses monitored by the London Metal Exchange expanded 0.5 percent to 565,350 metric tons, the highest since October 2003, LME data today showed. Inventories have jumped 77 percent this year. 
  • Oil Supplies Jump to Nine-Month High in Survey: Energy Markets. U.S. oil inventories probably rose to a nine-month high last week as domestic production stayed near the most in 21 years and imports rebounded, a Bloomberg survey showed. Stockpiles grew by 1.4 million barrels, or .4%, to 384.1 million in the seven days ended March 22, the highest level since June 22, according to the median of seven analyst estimates before an EIA report tomorrow.
  • Intel(INTC) Said to Make Progress in Talks With Networks for TV Rights. Intel Corp. is making progress in talks with Time Warner Inc., NBC Universal and Viacom Inc. to obtain TV show and films for a first-of-its kind online multichannel pay-TV service, according to people with knowledge of the situation. Intel, the world’s largest chipmaker, is negotiating financial terms with the companies, according to the people, who sought anonymity because the talks are private. The media companies have signed off on the broad outlines of the proposed service, said the people, with some aspects still to be settled. Other network owners aren’t as far along, they said.
Wall Street Journal: 
  • Bailout Strains European Ties. Cyprus Deal Preserves Euro but Sows Mistrust Between Continent's Haves, Have-Nots. A deal reached Monday in Brussels may have saved Cyprus from becoming the first country to crash out of the euro, but it came at the cost of widening the political mistrust between the strong economies of Europe's north and the weaklings of the south. Several officials familiar with talks in Nicosia and Brussels over the €10 billion ($13 billion) rescue for the island described more than a week of chaotic negotiations. European officials cited Cypriot foot-dragging, reversals and dropped communications, a situation one European Union official called "terrifying." Cypriot officials described their European opposites as demanding and inflexible. The fresh bitterness over the Cyprus mess—which appears deeper than at similar points during Greece's extended financial turmoil—could hamper future attempts to fix the bloc's flaws. Germany, the euro zone's biggest economy, prevailed as it typically has in the negotiations, but at the price of growing resentment over what some Europeans saw as its bullying of a tiny nation.
  • U.S. Cracks Down on 'Forced' Insurance. A U.S. housing regulator is cracking down on a little-known practice that has hit millions of struggling borrowers with high-price homeowners' insurance policies arranged by banks that benefit from the costly coverage. The Federal Housing Finance Agency, which regulates mortgage giants Fannie Mae and Freddie Mac, plans to file a notice Tuesday to ban lucrative fees and commissions paid by insurers to banks on so-called force-placed insurance. Such "forced" policies are imposed on homeowners whose standard property coverage lapses, typically because the borrower stops making payments. Critics say the fee system has given banks a financial incentive to arrange more expensive homeowners' policies than necessary.
  • Chinese College Graduates Play It Safe and Lose Out. Although Mr. Xie's parents are entrepreneurs who have built companies that make glasses, shoes and now water pumps, he has no interest in working at a private startup. Chinese students "have been told since we were children to focus on stability instead of risk," the 24-year-old engineering student says.
  • Mortimer Zuckerman: The Great Recession Has Been Followed by the Grand Illusion. Don't be fooled by the latest jobs numbers. The unemployment situation in the U.S. is still dire. The Great Recession is an apt name for America's current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify. The country isn't really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II. And last year's anemic growth looks likely to continue.
Fox News:
  • What to Cut: As Congress treats crises with new programs, government grows. "The government is far larger than it ever has been. The debt is growing at record rates," Thomas Schatz, president of  Citizens Against Government Waste, said. Adjusted for inflation, federal spending has gone up from an average of $882 billion every year in the 1980s to $1.48 trillion a year in the '90s to $2.44 trillion a year in the first decade of the 21st century. It's estimated that the government will have spent as much in the first four years of the new decade as it did in all of the 1990s.
CNBC: 
  • Farmland Prices: Is the Bubble About to Burst? Record-high prices for corn, soybeans, wheat and other commodities have left growers flush with cash to purchase more land. And what the farmers don't pay for out of their own pockets, historically low interest rates provide them with easy and cheap access to money to close the deal. The favorable mix of both cash and credit has provided fuel to drive up land values across the Midwest, stoking fears of a bubble ready to burst.
  • Cyprus Orders All Banks to Remain Closed Until Thursday. Cyprus has extended the closure of its banks for two more days — until Thursday — a sudden postponement that comes after the country's leaders spent days struggling to come up with a plan to raise the money needed to secure an international bailout.
Zero Hedge: 
Business Insider:
eFinancialCareers:
  • Healthy Executive Pay Made Citi(C) Profitable, Say Citi Executives. With a shareholder vote on 2012 executive pay for Citigroup’s top brass approaching, the bank is putting on the forward press, rationalizing the gaudy pay packages that investors have condemned over the last few years. The plan, which began paying out this year, will disperse nearly $580 million to top execs like Corbat. The money goes on top of previously announced annual salaries and bonuses, and is designed to retain “key” employees.
Reuters: 
  • CBS(CBS) apologizes to U.S. veterans for 'Amazing Race' episode. U.S. TV network CBS has apologized after its Emmy-winning reality series "The Amazing Race" angered veterans with an episode featuring Vietnamese communist propaganda. The show's host, Phil Keoghan, apologized before the start of Sunday's show for the March 17 episode in which participants in Hanoi were required to memorize a pro-communist song and use a downed U.S. B-52 bomber aircraft in the city as a prop. 
Financial Times:
  • Darling fears subprime ‘housing bubble’. Alistair Darling, former Labour chancellor, has warned that the package of mortgage guarantees announced last week could create “a housing bubble” and risked repeating mistakes of the US subprime crisis. Speaking in a Commons debate on the Budget, Mr Darling claimed that George Osborne had largely “given up on doing anything” and that his housing package could – if anything – create more problems. He claimed a chronic housing shortage meant that extra state support for mortgages could pump up prices.
  • Cyprus bailout leaves investors queasy. Fears that the Cyprus rescue, which includes a “haircut” for large depositors, would set a precedent for similar action in other troubled eurozone countries had been one of investors’ main concerns. Little wonder, then, that markets retreated when Jeroen Dijsselbloem, head of the eurogroup of finance ministers, said the Cypriot rescue marked a watershed in how the region deals with failing banks. Investors are worried, too, that capital controls in Cyprus will taint the banking system in other struggling eurozone countries. “Capital controls are a major step backwards for Europe,” says Andrew Milligan, head of global strategy at Standard Life Investments. “It is very difficult for markets to understand the processes and procedures when a country needs assistance, which adds to the level of uncertainty and risk – even if it is manageable for now.” Bob Savage at currency hedge fund FX Concepts says: “If deposits over €100,000 are not guaranteed in any eurozone nation, and if you’re in Spain or Italy, this is not a great outcome.”
  • Role of Cyprus in a German Europe. The eurozone crisis is far from being over and it is not clear what new EU structures will emerge at the end of it – or whether they would dilute or strengthen German power. That leaves Germany holding the ring: writing the cheques, enforcing the rules and increasingly making them up, as well. That is a dangerous situation for Europe – and ultimately for Germany itself.
Telegraph:
  • Eurozone’s bully boys will come to regret penalising tiny Cyprus. Europe’s monetary union was meant to be about solidarity among the many and prosperity for all. It was not excessive Russian deposits which finished off the Cypriot banking system but last year’s eurozone-imposed haircut of Greek sovereign debt. As big holders of Greek bonds, Cypriot banks have suffered losses approaching €5bn. Thus does each successive botched crisis lead directly to the next one. Narrow political self-interest has been put above that of the common good. No monetary union can expect long to survive this sort of self-inflicted political battering. If Europe can make such a horlicks out of tiny Cyprus, just think what might happen when the crisis once again laps at the doors of larger economies such as Italy, Spain and Portugal. 
ZDF:
  • Schaeuble Says 'Germans Are Not the Bad Guys'. The German government's policies are "sensible and responsible", Finance Minister Wolfgang Schaeuble said in an interview. Cyprus is in a difficult situation from which there is no easy way out. People in Cyprus will have a hard time ahead.
Yonhap News Agency:
  • U.S. seeks more missile defense drills with S. Korea, Japan. The United States is pushing to hold trilateral missile defense exercises with South Korea and Japan on a regular basis, an informed source said Monday. The move is part of the Pentagon's efforts to hone regional capabilities to counter North Korea's evolving missile threats. "The U.S. considers boosting trilateral cooperation with the regional allies as an option," the source said, requesting anonymity.
Xinhua:
  • China found more than 1,000 dead ducks in the Nanhe River in the southern province of Sichuan, citing Liang Weidong, a local government publicity office official.
China Securities Journal:
  • May banks in China have started to control the scale of loans for real estate development to coordinate with new property curbs. China Banking Regulatory Commission is drafting guidelines on property loans including development loans and mortgages, citing a person close to the regulator. The regulator also asked rural financial institutions to lower the proportion of property development loans from the previous year.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.0% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 120.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 91.25 -1.25 basis points.
  • FTSE-100 futures -.01%.
  • S&P 500 futures +.16%.
  • NASDAQ 100 futures +.15%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (PLCE)/1.04
  • (MFRM)/.32
Economic Releases
8:30 am EST
  • Durables Goods Orders for February are estimated to rise +3.9% versus a -5.2% decline in January.
  • Durables Ex Transports for February are estimated to rise +.6% versus a +1.9 gain in January.
  • Cap Goods Orders Non-defense Ex Air for February are estimated to fall -1.1% versus a +6.3% gain in January.
9:00 am EST
  •  The S&P/Case Shiller 20 City Home Price Index MoM% SA for January is estimated to rise +.8% versus a +.88% gain in December.
10:00 am EST
  • The Richmond Fed Manufacturing Index for March is estimated at 6.0 versus 6.0 in February.
  • Consumer Confidence for March is estimated to fall to 67.5 versus 69.6 in February.
  • New Home Sales for February are estimated to fall to 420K versus 437K in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The 2Y T-Note auction, weekly retail sales reports and the (BGC) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
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Monday, March 25, 2013

Stocks Falling into Final Hour on Surging Eurozone Debt Angst, Global Growth Fears, Technical Selling, Homebuilding/Transport Sector Weakness

Posted by Gary .....at 4:09 PM
Today's Market Take:

Broad Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 14.15 +4.27%
  • ISE Sentiment Index 99.0 +5.32%
  • Total Put/Call .89 -4.38%
  • NYSE Arms 1.59 +85.30%
Credit Investor Angst:
  • North American Investment Grade CDS Index 91.11 +.80%
  • European Financial Sector CDS Index 189.24 +7.3%
  • Western Europe Sovereign Debt CDS Index 100.67 -.27%
  • Emerging Market CDS Index 256.12 +.09%
  • 2-Year Swap Spread 17.75 unch.
  • TED Spread 22.25 +.5 bp
  • 3-Month EUR/USD Cross-Currency Basis Swap -20.75 -.25 bp
Economic Gauges:
  • 3-Month T-Bill Yield .06% -1 bp
  • Yield Curve 167.0 +1 bp
  • China Import Iron Ore Spot $136.0/Metric Tonne +.52%
  • Citi US Economic Surprise Index 30.20 +1.1 points
  • 10-Year TIPS Spread 2.54 unch.
Overseas Futures:
  • Nikkei Futures: Indicating -120 open in Japan
  • DAX Futures: Indicating +7 open in Germany
Portfolio: 
  • Slightly Lower: On losses in my tech, biotech sector longs and emerging markets shorts
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 25% Net Long
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Today's Headlines

Posted by Gary .....at 3:45 PM
Bloomberg:  
  • Saving Cyprus Means Nobody Safe as Europe Breaks More Taboos. The devil lies in the detail of Cyprus’s salvation. The island nation’s rescue sets precedents for the euro zone that may stick in the memory of depositors and bondholders alike as investors debate who will next fall victim to the debt crisis. Under the terms of the agreement struck early this morning in Brussels, senior Cypriot bank bond holders will take losses and uninsured depositors will be largely wiped out. The message that stakeholders of all stripes can be coerced into helping a cash-strapped nation may make investors more skittish they’ll be targeted should Slovenia, Italy, Spain or even Greece again be next in line to need help. The risk is that bank runs and bond market selloffs become more likely the moment a country applies for a new rescue, said economists and academics from Nicosia to New York. “We now have a new type of rule and everyone within the euro zone has to sit down and see what that implies for their own finances,” Nobel laureate Christopher Pissarides, an adviser to the Cypriot government, told “The Pulse” on Bloomberg Television. The Stoxx Europe 600 Index (SXXP) erased an earlier gain of as much as 1 percent after Jeroen Dijsselbloem, who chaired last night’s meeting of euro region finance ministers, indicated the model used for recapitalizing Cypriot banks could be replicated elsewhere.
  • Cyprus Bailout Fueling Bank Funding Concern on Bond Losses. The European Union’s decision to recapitalize Cypriot banks by inflicting losses on depositors and senior bondholders is triggering investor concern that bank funding across the region will be hurt. Cyprus qualified for its 10 billion-euro ($13 billion) bailout by agreeing to close Cyprus Popular Bank Pcl, also known as Laiki Bank, the island’s second largest lender, the EU said in a statement. Uninsured depositors and senior bondholders will be “bailed in,” staying in a so-called bad bank. “This has implications for any weaker banks that get into trouble,” said Chris Bowie, the London-based head of credit portfolio management at Ignis Asset Management Ltd., which oversees about $110 billion. “We’d expect to see some deposit flight and a shift in funding towards a combination of covered bonds, real equity and quasi-equity.”
  • Cyprus Shows Trust in ECB Is Misplaced. Ever since European Central Bank President Mario Draghi said last July that the bank will do whatever it takes to preserve the euro, complacency has pervaded Europe’s single-currency area. Markets have weathered potential crises in Italy and Spain with surprising calm, secure in the knowledge that the ECB will save the day if needed. This was always a false assumption, as events in Cyprus have made clear. There are significant limitations to the support the ECB is willing or able to offer, even to such a tiny island economy whose needs are easily affordable.
  • Mundell Says ECB Tolerating Euro Gains Worsened Debt Crisis. The European Central Bank worsened the crisis in the region’s most indebted nations by tolerating the euro’s appreciation against the dollar, according to Nobel- prize winning economist Robert Mundell. Europe’s policy makers “missed a big opportunity” to do a deal with the Federal Reserve that would have enabled them to stop the currency from strengthening as the U.S. central bank bought debt to boost the economy, Mundell said in a Bloomberg Television interview with Sara Eisen. The euro’s advance was a “devastating thing to happen” for the region’s weaker economies and Europe should consider its own form of asset purchases, which tend to weaken the exchange rate, he said. 
  • Euro Weakens to 4-Month Low on Cypriot Fallout; Yen Rises. The euro fell to a four-month low versus the dollar after a European leader said the Cyprus bailout may be a precedent, spurring doubts about the safety of other bond holdings and deposits. The 17-nation currency fell against all 16 of its most- traded peers as Dutch Finance Minister Jeroen Dijsselbloem said Europe is “going down the bail-in track.”
  • Debt Flagged by Fed Bought by Funds Copying 2007: Credit Markets. Money managers from Ares Management LLC to Onex Corp. (OCX) are borrowing at the fastest pace in six years to buy the type of speculative-grade loans that federal bank regulators warned last week is becoming riskier. Ares, which oversees $59 billion, and Onex’s credit unit are among firms that have raised $22.9 billion of collateralized-loan obligations this quarter, approaching the all-time high of $26.4 billion in the three months ended June 30, 2007, according to Royal Bank of Scotland Group Plc. Leveraged-loan mutual funds have received their two biggest weekly inflows since January. At the same time the Federal Reserve’s zero interest-rate policy is encouraging investors to seek ever-riskier debt assets to generate returns, some members of the central bank are also saying the market may be overheating.
Wall Street Journal: 
MarketWatch:
Fox News:
  • Eurogroup's Dijsselbloem: forcing losses on bank owners, large depositors new rescue template. A top European official says the move in Cyprus to inflict losses on banks' shareholders, bondholders and even owners of large deposits should become the bloc's default approach for dealing with ailing lenders. Jeroen Dijsselbloem, who chairs the Eurogroup gatherings of the 17 eurozone finance ministers, said in an interview Monday banks' owners and investors must be held responsible "before looking at public money or any other instrument coming from the public side."
Zero Hedge: 
Business Insider: 
Washington Post:
  • Why the new Cyprus deal sows the seeds of the next European crisis. If you are a depositor in a European bank, you now have every incentive in the world to move your money somewhere safer, or even to keep it in cash, the minute you detect any hint that your nation could end up in the same place Cyprus did. The next time there is a banking panic in Europe, it will move much faster, and be much harder to control, than those of the recent past, as depositors try to get ahead of future losses and capital controls. And that’s a scary proposition indeed.
Reuters: 
Financial Times:
  • Dudley gives first hints of slowing QE3. One of the Federal Reserve’s biggest backers of easy monetary policy said he supported the slow down of the central bank’s asset purchases once the US economy had enough momentum.
Telegraph:
  • Cyprus: they make a desert and call it peace. By punishing those who put their faith in the solidity of the euro as a single currency, the eurozone has crossed a line and in the process poisoned Europe beyond redemption. Not since the second world war has anti-Germany feeling been so acute. Where’s the solidarity in a bailout which imposes such “solutions” on its member states?
  • Cyprus bail-out leaves 'bitter taste' for residents. Cypriots are outraged by the consequences of the last ditch bail-out deal hammered out between their government and its EU-IMF troika of lenders early Monday morning. 
Repubblica:
  • OECD's Padoan Says Underrating Cyprus Biggest Risk. OECD Chief Economist Pier Carlo Padoan comments in interview. Padoan says European solution to Cyprus crisis must be adequate, unlike first Greek rescue. Padoan says bank-sovereign debt ties too tight in many euro-area countries.
0 comments

Bear Radar

Posted by Gary .....at 1:14 PM
Style Underperformer:
  • Large-Cap Value -.85%
Sector Underperformers:
  • 1) Airlines -2.10% 2) Software -1.53% 3) Steel -1.34%
Stocks Falling on Unusual Volume:
  • BCS, RNF, DB, VHS, UTHR, VHC, SNY, RHT, MGLN, USG, PTR, ASH, VRTU, , EE, TIBX, CHKP, ARIA, SLCA, ORCL, EBAY, AGU, SIAL, CYNO, EXP and BUD
Stocks With Unusual Put Option Activity:
  • 1) EMR 2) WHR 3) AEO 4) OXY 5) EBAY
Stocks With Most Negative News Mentions:
  • 1) WFM 2) CHKP 3) FINL 4) RHT 5) EXP
Charts:
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Bull Radar

Posted by Gary .....at 11:26 AM
Style Outperformer:
  • Small-Cap Value -.34%
Sector Outperformers:
  • 1) Hospitals +.74% 2) Gaming +.66% 3) Tobacco +.24%
Stocks Rising on Unusual Volume:
  • APOL and VECO
Stocks With Unusual Call Option Activity:
  • 1) APOL 2) SYY 3) DG 4) HTZ 5) MDLZ
Stocks With Most Positive News Mentions:
  • 1) RBCN 2) VECO 3) MHP 4) CMG 5) GG
Charts:
1 comments

Monday Watch

Posted by Gary .....at 12:16 AM

Weekend Headlines 
Bloomberg:  
  • Cyprus Said to Reach Tentative Deal to Avert Default. (video) Cyprus agreed to the outlines of an international bailout, paving the way for 10 billion euros ($13 billion) of emergency loans and eliminating the threat of default. The accord between Cyprus and the “troika” representing international lenders was reached in overnight talks in Brussels and ratified by finance ministers from the 17-nation euro area. “It’s in best interest of the Cyprus people and the European Union,” Cyprus President Nicos Anastasiades told reporters.
  • Bank of Italy Says Recovery Threatened by Political Uncertainty. Moderate recovery in country expected for end of year threatened by unpredictability in domestic politics, Bank of Italy Deputy Director General Fabio Panetta said today. 
  • Spain’s Swelling Debt Seen Impeding Rajoy Deficit Battle. Prime Minister Mariano Rajoy’s progress in curbing a deficit worsened by the cost of servicing Spain’s swelling debt load will be revealed this week with the release of data on the country’s finances. The Budget Ministry will tomorrow publish figures for February showing the central government’s budget shortfall, which accounted for more than half of the nation’s deficit in 2012. Data in the following days on mortgage loans, inflation and retail sales will also highlight the plight of the taxpayers financing those outlays. “The increase in government debt is causing the interest rate burden to take a bigger toll on tax revenues,” said Ricardo Santos, an economist at BNP Paribas in London. “Spain needs to do more in terms of structural tightening, not only this year, but also in 2014 and this will imply a significant drag on growth.” 
  • Most Chinese Stocks Fall as ZTE Slumps. Most Chinese stocks fell as declines by phone stocks overshadowed higher-than-estimated profit from China Construction Bank Corp. (601939) ZTE Corp. (000063) led telecommunications stocks lower for a second day on concern a rally in the stock was overdone.
  • South Korea Escalates Concern With Japan Policies on Yen. South Korea’s newly appointed finance minister, Hyun Oh Seok, revived his nation’s concerns over weakness in the yen and said that the Group of 20 nations should revisit the issue. “Japan’s expansionary policies are having various ripple effects on many countries,” Hyun, 62, told reporters on March 23 in Bundang, on his second day as finance chief. “The yen is depreciating while the won is gaining and this is flashing a red light for Korea’s exports.” 
  • Risk Unrewarded as Emerging Stocks Lose in Worst Start Since ’08. The link between risk and reward in stocks is breaking down as emerging markets post the worst first quarter since 2008 and lag behind shares of developed economies by the most in 15 years. The MSCI Emerging Markets Index (MXEF)’s 3.8 percent drop this year trimmed its rebound from an October 2011 low to 22 percent. That compares with a 33 percent advance for the MSCI World (MXWO) Index and marks the first time since 1998 that developing-country shares have underperformed during a global rally. When adjusted for price swings, emerging market returns are 37 percent smaller than in advanced nations, data compiled by Bloomberg show. 
  • Hedge Funds Most Bearish Ever on Copper, Favor Gold: Commodities. Hedge funds are making the biggest bet against copper on record as global inventories expand to a nine-year high, while concern that Europe’s debt crisis will spread spurred the biggest gain in gold bets since 2008. Speculators raised net-short positions in U.S. copper futures and options by 53 percent to 25,719 contracts in the week ended March 19, according to Commodity Futures Trading Commission data that begins in 2006. A jump in bullish bets on corn, gold and natural gas boosted overall holdings across 18 raw materials for a second consecutive week. 
  • Corn, Soybeans Decline as Feed Use Slows, Farmers Boost Sowing. Corn and soybeans dropped for a second session on speculation that domestic feed use may slow just as U.S. farmers prepare to boost plantings. Corn for delivery in May lost as much as 0.5 percent to $7.23 a bushel on the Chicago Board of Trade, after decreasing 0.9 percent on March 22. Futures were at $7.2525 by 9:56 a.m. Singapore time. Soybeans for delivery in the same month fell 0.2 percent to $14.38 a bushel on a volume that was 46 percent below the 100-day average for that time of day.
  • Chemical Weapons Probably Used in Syria, Rogers Says. U.S. Representative Mike Rogers said it is “probable” that the regime of Syria’s Bashar al- Assad has used chemical weapons in that country’s civil war. “When you look at the whole body of information” that “over the last two years there is mounting evidence that it is probable that the Assad regime has used at least a small quantity of chemical weapons,” Rogers, a Michigan Republican and chairman of the House Intelligence Committee, said today on CBS’s “Face the Nation” program.
  • Debt Flagged by Fed Bought by Funds Copying 2007: Credit Markets. Money managers from Ares Management LLC to Onex Corp. are borrowing at the fastest pace in six years to buy the type of speculative-grade loans that federal bank regulators warned last week is becoming riskier. Ares, which oversees $59 billion, and Onex's credit unit are among firms that have raised $22.9 billion of collaterialized-loan obligations this quarter, approaching the all-time high of $26.4 billion in the three months ended June 30, 2007, according to Royal Bank of Scotland Group Plc. Leveraged-loan mutual funds have received their two biggest weekly inflows since January. At the same time the Federal Reserve' zero interest-rate policy is encouraging investors to seek ever-riskier debt assets to generate returns, some members of the central bank are also saying the market my be overheating.
Wall Street Journal:

  • Cyprus's Bank Crisis Feeds Recession Risk. Cyprus's race to avert a collapse of its banking system has put another issue on the back burner for now: The country faces a recession so deep that it may soon need even more money to survive inside the euro.
  • Spain Brings the Pain to Bank Investors. Government to Impose Heavy Losses on Shareholders and Bondholders, Hire Advisers to Help Manage Lenders' Assets. The Spanish government will impose heavy losses on investors at nationalized banks and hire external advisers to help it manage these banks' assets, its latest efforts to overhaul a financial sector battered by the collapse of a decadelong housing boom.
  • Mortgage Securitizers Didn’t Know Housing Was Going Bust. A popular explanation for why the housing bubble happened says that unbalanced incentives within the financial system were to blame. Financial-sector workers reaped huge bonuses for gambling on home prices continuing to climb, but knew that they bore little personal risk if things went awry.
  • Government Payrolls Are Facing New Pressures. Governments bled hundreds of thousands of jobs after the U.S. economic recovery started. Now they're preparing to pass the knife around again as the federal budget comes under pressure. The cuts in the public-sector workforce—at the federal, state and local levels—marked the deepest retrenchment in government employment of civilians since just after World War II. About 21.8 million civilians were directly employed by a government in the U.S. in February, accounting for roughly one out of every six nonfarm payroll jobs, according to the Labor Department.
  • Trading Clamps Spur Lobby Effort. High-speed trading firms and exchanges are being forced into the lobbying game by taxes on trades in Europe, proposals for similar levies in the U.S. and beefed-up regulatory scrutiny. While still far less conspicuous than big banks and their legions of arm-twisters, executives and lobbyists for trading firms and exchanges have stepped up their behind-the-scenes efforts to avert specific rules and legislation, say staff members in Congress and agencies.
Marketwatch.com: 
  • The last chance of survival in China: Andy Xie. China facing array of problems, including a looming banking crisis. The 20% capital gains tax is the latest half-measure in the government’s attempt to stabilize, rather than burst, the property bubble. If the measure deflates the bubble, new measures may appear to revive speculation, as occurred in 2008 and 2012. Managing rather than rooting out speculation is a dangerous game. The prolonged bubble will eventually bring a bill large enough to sink the banking system.
Fox News: 
  • Israeli military in Golan Heights responds to fire from Syria. Israel's army said it fired a guided missile into Syria on Sunday, destroying a military post after gunfire flew across the border and struck an Israeli vehicle. The shooting along the frontier in the Israeli-occupied Golan Heights was one of the most serious incidents between the countries since Syria's civil war erupted two years ago.
CNBC: 
  • JPMorgan(JPM) 'Whale' Traders Probe Advances. (video) The U.S. Department of Justice is in the advanced stages of an investigation into whether former traders in JPMorgan Chase's chief investment office in London engaged in criminal misconduct in the marking of credit positions last year, according to someone familiar with the matter. The Justice Department probe centers on whether a handful of individual traders deliberately mis marked certain complex credit positions in an effort to mask the growing losses in a key CIO portfolio during the spring of 2012, according to this person.  
  • No Matter Outcome, Cyprus Crisis Is Blow to Business. It is not just about rich Russians and Cypriot retirees. Also vitally at stake in this island country's banking crisis is Cyprus's credibility as a place for international companies to continue doing business.
Business Insider: 
IBD: 
Reuters:
  • Delaying savings will only make problem worse - ECB's Praet. Savings required to bring euro zone budgets under control cannot be put off for long, European Central Bank Executive Board member Peter Praet said in an interview in two Belgian newspapers. "You can have a little delay. But you will not solve the problem that way. Quite the contrary, a delay will only make your debt mountain bigger. And it needs to stay manageable," Praet said. "I hear far too much policymakers saying: wait a little, give me more time. That can affect the credibility of a country. The debts will not miraculously disappear," he said. Praet said he expected the euro zone to have contracted in the first quarter of 2013. The recession overall was not deep, although the difference between countries was sharp. Praet also said he was pre-occupied with two chief concerns. Consumers were concerned that their income over the long term would fall and were cutting spending, which was making the problem worse. His second concern was that banks were receiving cheap money, such as from the European Central Bank, but were not passing this on as credit to companies.
  • Dell's(DELL) board evaluates rival bids: source. A special committee of Dell Inc's board is evaluating separate takeover proposals from Blackstone Group and billionaire investor Carl Icahn to decide whether either or both are likely to trump an existing $24.4 billion take-private deal, a source familiar with the discussions said on Sunday. Icahn and Blackstone put in preliminary bids late last week, potentially upsetting the plans of the No. 3 PC maker's founder, Michael Dell, and private equity firm Silver Lake to take Dell private.  
  • Last-minute Cyprus deal to close bank, force losses. Cyprus clinched a last-ditch deal with international lenders to shut down its second largest bank and inflict heavy losses on uninsured depositors, including wealthy Russians, in return for a 10 billion euro ($13 billion) bailout. The agreement came hours before a deadline to avert a collapse of the banking system in fraught negotiations between President Nicos Anastasiades and heads of the European Union, the European Central Bank and the International Monetary Fund.
  • Europe may not solve debt woes in 10 years-China FinMin. China's new finance minister said on Sunday it was unclear whether the Euro zone would solve its debt problems over the next decade and suggested further turmoil would complicate efforts to reduce Beijing's fiscal deficits. Lou Jiwei said external difficulties might oblige China to run deficits for longer than anticipated as government expenditure was rising quickly and revenue growing only at a single-digit pace. "I am really very worried about Europe. I am worried about whether it can get out of trouble in the next 10 years," Lou said in an address to an economic forum. "Our fiscal expenditure is growing very quickly while I estimate fiscal revenue will only post single-digit growth rates in future ... we are facing substantive domestic pressures."
  • IMF draft cuts 2013 U.S. growth forecast - report. The International Monetary Fund (IMF) is planning to cut its U.S. growth forecast for this year due to higher taxes and spending cuts, Italian news agency ANSA said, citing a draft of the IMF's next World Economic Outlook report. The U.S. economy, the world's biggest, will expand 1.7 percent this year, down from the 2.0 percent predicted in January, ANSA reported late on Saturday. The next round of IMF forecasts is scheduled to be published in mid-April.
Financial Times:
  • Cyprus Ex-Central Bankers Sees 'European Project' Failing. "The European project is crashing to earth," Athanasios Orphanides, head of Cyprus central bank 2007-2012, said in an interview. "We have seen a cavalier attitude towards the expropriation of property and the bullying of a people," Orphanides said. "This is a fundamental change in the dynamics of Europe towards disintegration, and I don't see how this can be reversed," he said. "Shattering of trust" caused by Cyrpus hasn't been fully seen, will increase funding costs in "perisphery" nations, Orphanides said.
Telegraph: 
Der Spiegel: 
  • Depart store chain Karstadt sales for February at EU133m were 12% below target and 15% below level from a year earlier, citing internal documents.
Eleftherotipia:
  • Four in 10 Greeks say Europe's problems best solved by a break-up of EU, up from 26% in January, according to a Metron Analysis poll. 38% says Europe needs further integration, down from 46% in a January poll. 45% say they are now against the euro. 72% say Greece's economic situation is worse than a year ago. 96% say Germany more motivated by national interest than European solidarity. If Greek elections were held now, main opposition Syriza party would get 25.8%, PM Antonis Samaras's New Democracy party 25.2%. The nationalist Golden Dawn party would be third with 11.7%.
La Vanguardia:
  •  Economic Minister Luis de Guindos discusses proposal with EU to increase 2013 budget deficit to as much as 5.8% of GDP instead of agreed 4.5%. Spain seeks to extend deadline for deficit target of 3% by 2 yrs to 2016, citing people familiar with the situation. Proposed deficit target of 5.8% this yr would mean EU12b fewer spending cuts.
Xinhua:
  • China's GDP growth will moderate to a rate of 6% to 7%, after growing at above 10% for mush of the past 30 years, citing Liu Shijin, deputy director of the Development Research Center of the State Council.
China Securities Journal:
  • China Banking Regulatory Commission asked big banks recently to pay special attention to risks in the real estate, steel, construction machinery, wind power equipment and solar equipment industries, citing a person familiar with the situation. Loans to property sector, industries with overcapacity and company clusters may be a high as 40 trillion yuan, the person said.
China National Radio:
  • A property tax on the ownership of three or more homes is a policy tool "most worthy of consideration," citing Hu Cunzhi, vice minister at the Ministry of Land and Resources.
Weekend Recommendations
Barron's:
  • Bullish commentary on (DRI), (KSS), (CKH), (GOOG), (INTC), (EMC), (GILD), (FRX) and (SRPT).
  • Bearish commentary on (BHP), (RIO), (VALE) and (CLF).
Night Trading
  • Asian indices are unch. to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 118.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 92.5 +1.75 basis points.
  • FTSE-100 futures +.55%.
  • S&P 500 futures +.41%.
  • NASDAQ 100 futures +.52%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (DG)/.90
  • (APOL)/.19
  • (KYAK)/.20
Economic Releases
10:30 am EST
  • Dallas Fed Manufacturing Activity for March is estimated to rise to 3.7 versus 2.2 in February.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Dudley speaking, German Consumer Confidence/Retail Sales/Import&Export data, Chicago Fed Nat activity Index and the Morgan Stanley Tech/Media/Telecom Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixsed. The Portfolio is 50% net long heading into the week.
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