Bloomberg:
- Italy’s Debt to Rise to Record in 2013 as Recession Lingers. Italy’s debt will reach a postwar
record this year as the recession-hit country borrows to
contribute to bailouts and pay arrears to suppliers. The public debt will rise to 130.4 percent of gross
domestic product in 2013 from 127 percent last year, Prime
Minister Mario Monti’s office said in a statement after his
Cabinet reviewed its budget plan. The budget deficit will drop
to 2.9 percent of GDP this year, putting Italy within the
European Union’s 3 percent limit. “Many are suggesting we change strategy in the management
of public finance,” Monti said at a press conference in Rome.
“Discipline in public finances needs to be maintained in the
years to come. Only if Italy stays out of the procedure for
excessive deficit will it be able undertake actions needed for
the country, like the recent payment of public administration
debts.”
- Slovenia, Spain Warned of Excessive Economy Imbalances by EU. The European Commission warned of
“excessive” risks to the economic health of Slovenia and
Spain, calling on both governments to take urgent action to stem
the spread of the euro crisis. Slovenian banks are likely to need fresh capital injections
as over-indebted corporate borrowers struggle to pay back loans
amid a double-dip recession, the Brussels-based commission said.
It said Spain is encumbered by public and private debt.
- European Stocks Rally Most in Month as Bank Shares Rise. European
stocks gained the most in
a month, with the Stoxx Europe 600 Index posting its longest winning
streak since January, as banks advanced and a report showed Chinese
imports beat forecasts in March. BNP Paribas SA, Frances’s largest
lender, and Banco Santander SA, Spain’s biggest, led a gauge of European
banking shares to their largest advance in almost five months. SMA
Solar Technology AG (S92), Germany’s biggest solar-energy company, and
Wacker Chemie AG (WCH) added at least 5.8 percent. Gerresheimer AG
rose 2.5 percent after reporting first-quarter revenue that beat
analysts’ projections.
- Kuroda Says BOJ Has Taken All Possible Monetary Actions for Now. Haruhiko Kuroda said the
unprecedented stimulus announced by the Bank of Japan (8301) at his
first meeting as governor last week is enough to achieve a 2
percent inflation goal. The central bank has taken all “necessary” and
“possible” measures, Kuroda told reporters in Tokyo yesterday.
While officials will change policy as needed, he doesn’t expect
adjustments each month, he said. The BOJ chief reiterated a
pledge to do what’s needed to meet the target in two years.
- FOMC Minutes: Several Members Saw QE Ending by Year-End. Several Federal Reserve (FDTR) officials said the central
bank should begin tapering its quantitative easing program later this
year and stop it by year end, minutes of their March meeting showed. The
Federal Open Market Committee members “thought that if the outlook for
labor market conditions improved as anticipated, it would probably be
appropriate to slow purchases later in the year and to stop them by
year-end,” according to the record of the March 19-20 FOMC meeting
released today in Washington ahead of the regularly scheduled 2 p.m.
time.
- OPEC Trims Oil Demand Growth Forecast; March Output Drops. OPEC trimmed its estimate for
global oil demand growth after the group’s crude production
dropped last month. Worldwide oil consumption will rise this year by 800,000
barrels a day, or 0.9 percent, revised down from 840,000 last
month, the Organization of Petroleum Exporting Countries said in
its Monthly Oil Market Report today. Demand will rise to 89.66
million barrels a day in 2013 versus 88.87 million last year,
OPEC estimated. The group’s output fell in March as Nigeria,
Iran and Kuwait pumped less.
- Goldman(GS) Cuts Gold Price Forecast as Cycle Turns. The turn in the gold price cycle is accelerating after a
12-year rally as the recovery in the U.S. economy gains momentum,
according to Goldman Sachs Group Inc., which reduced forecasts for the
metal through 2014. The bank cut its three-month target to $1,530
an ounce from $1,615 and lowered the six- and 12-month predictions to
$1,490 and $1,390 from $1,600 and $1,550. Goldman recommended closing a
long Comex gold position initiated on Oct. 11, 2010 for a potential gain
of $219 an ounce, analysts Damien Courvalin and Jeffrey Currie wrote in
a report today.
- Obama Doubles Estimate to $4 Billion for Health Exchanges. The state health exchanges that are central to the U.S.
Affordable Care Act are costing the federal government more than twice
its initial budget to complete. The Obama administration expects
to have spent $4.4 billion in fiscal 2012 and 2013 on grants to states
that are building new marketplaces to sell subsidized health insurance,
according to budget proposals released today for 2014. A year ago, the
administration had anticipated spending about $2 billion.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
Handelsblatt:
- European banks face EU1.2t long-term funding gap as regulators
implement stricter liquidity rules, citing a study by consultants
McKinsey & Co. McKinsey says many banks can't fulfill
requirements as they can't increase deposits quickly enough and demand
for unsecured debt has fallen.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -3.17% 2) Hospitals -2.66% 3) Homebuilders -.47%
Stocks Falling on Unusual Volume:
- HMA, ANV, ABX, BRLI, PWE, TITN, RLGY, MSM, GRA, FSLR, INFI, CYH, FAST, THC, HCA, WMC, SLW and SPWR
Stocks With Unusual Put Option Activity:
- 1) ADT 2) KERX 3) LIFE 4) GIS 5) FSLR
Stocks With Most Negative News Mentions:
- 1) CCL 2) THC 3) ARO 4) CYH 5) PNC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +3.6% 2) I-Banking +2.31% 3) Biotech +2.14%
Stocks Rising on Unusual Volume:
- SBGI, CS, IBN, SM, NJ, ADTN, CIEN, JDSU, DB, BEAV, FNSR, RKUS, MU, ONXX, JNPR, BAH, SBRA, PMTC, TMO, EXAS and SCTY
Stocks With Unusual Call Option Activity:
- 1) JDSU 2) EXAS 3) HCA 4) TMO 5) PFE
Stocks With Most Positive News Mentions:
- 1) NOC 2) AEO 3) MHP 4) QCOM 5) BA
Charts:
Evening Headlines
Bloomberg:
- EFSF Sells 8 Billion Euros of Bonds on Strong Demand in Asia. The
European Financial Stability
Facility issued 8 billion euros ($10.5 billion) of bonds amid
strong investor demand in Asia, helping boost the euro to its highest
levels in more than three weeks. The European rescue fund sold 0.875
percent, five-year
securities yesterday, according to data compiled by Bloomberg.
Investors in Asia made up 29 percent of the buyer base, up from
5 percent on EFSF’s 4 billion euros of March 2016 bonds issued
in February, according to a person familiar with the
transaction, who asked not to be identified citing lack of
authorization to speak publicly.
- Cyprus Can Save Itself by Fleeing the Euro.
- BHP(BHP) CFO Says China Growth May Slow Toward 6% After Two Years. BHP
Billiton Ltd. (BHP), the world’s biggest mining company, expects annual
economic growth in China to moderate toward 6 percent, saying prospects
in its largest
customer present its main business risk.
- China Export Gains Miss Forecasts for First Time in Four Months.
China’s exports rose less than forecast for the first time in four
months, leaving the world’s second-largest economy with weaker global
demand to support a recovery than previous figures indicated. Shipments
abroad increased 10 percent from a year earlier, the customs
administration said today in Beijing. That compares with 21.8 percent
growth in February and the 11.7 percent median estimate in a Bloomberg
News survey of 36 economists. Imports
rose by an above-forecast 14.1 percent in March, leaving an
unexpected trade deficit of $880 million.
- Bird Flu Outbreak Tied to Viruses That Hit Humans Hard. China’s deadly avian flu outbreak is being driven by at
least two closely-related viruses, a situation that may make it more
difficult to contain in humans and birds, researchers said. The
H7N9 flu has shown signs of genetic diversity since the first three
patients were diagnosed, said Richard Webby, director of a World Health
Organization collaborating center for the virus at St. Jude Children’s
Research Hospital in Memphis. It already appears more infectious than
the H5N1 strain of bird flu that has been circulating since 2003,
infecting 600 people and killing 60 percent of them, he said. Scientists
from around the world are working together to understand the virus
because of the potential devastation caused by novel infections. The
pandemics of the past century include the 1918 Spanish flu that killed
as many as 50 million people and the 2003 SARS outbreak that killed 774.
- Chinese Stocks Fall After March Trade Data; Drugmakers Drop. China’s
stocks fell for the fifth time in six days, dragged down by health-care
companies, after exports rose less than forecast.
Shijiazhuang Yiling Pharmaceutical Co., whose products are
included in a government list of drugs to combat bird flu,
tumbled 6.8 percent as a measure of drugmakers dropped the most
among industry groups.
- Bill Gross Raises Holdings of Treasuries to Highest Since July. Bill Gross raised the holdings of
Treasuries held in his $289 billion flagship fund at Pacific
Investment Management Co. to 33 percent of assets last month,
the highest level since July. Gross boosted the proportion of U.S. government securities
in Pimco’s Total Return Fund from 28 percent in February,
according to a report on the company’s website. Gross has been
advising investors to buy government debt, including inflation-
linked securities and nominal Treasuries as the Bank of Japan (8301)
last week became the latest central bank to announce
unprecedented stimulus measures.
Wall Street Journal:
- Lenders Used Aid to Repay TARP. A number of small banks used $2.1 billion in government cash intended to
boost small-business lending to repay bailout funds from the financial
crisis, a government watchdog said Tuesday in a report that also
concluded the banks lent less money than firms that didn't take bailout
aid. Among the 332 banks participating in a small-business lending program
run by the U.S. Treasury, 137 used more than half of about $4 billion
disbursed by the program to help fund their exits from the Troubled
Asset Relief Program, according to a new report by the special inspector
general for TARP. The TARP program was set up to bail out financial
firms during the 2008 crisis.
Zero Hedge:
Business Insider:
ABC News:
- Insolvent Union Pension Plans May Double By 2017. A new government report warned that the number of insolvent multiemployer
private-sector pension plans could more than double by 2017. The report,
issued by the Government Accountability Office, included the survey
results of 107 multiemployer plans, 25 percent of which were delaying
eventual insolvency. Under the Employee Retirement Income Security Act
of 1974, the
benefits of multiemployer plans are insured by the Pension Benefit
Guaranty
Corp., a U.S. government agency that works to protect private-sector
defined
benefit pension plans. There are about 1,500 multiemployer plans covering more than 10 million
workers and retirees, the GAO said.
Telegraph:
- George Soros repeats call for Germany to leave euro. George Soros, the billionaire investor, has urged Germany to reverse its
position on eurobonds or consider leaving the single currency, as he
suggested that the euro's prospects would be improved if its most powerful
member were to quit.
Nikkei:
- Japan to Maintain Economic Assessment in April. Japanese government plans to keep its monthly economic assessment for the first time in four months. Japan raised economic assessment in March for the third month.
China Securities Journal:
- China
Risks Collapse on Outflow, Yu Yongding Says. Unexpected outflows
without capital account control will lead to massive capital flights,
currency depreciation, inflation, asset-bubble bursts, bankruptcy, debt
default and finally the collapse of China's financial system, Yu
Yongding, a former academic adviser to the People's Bank of China, wrote
in a commentary.
Evening Recommendations
Piper Jaffray:
- Raised (AEO) to Overweight, target $24.
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 116.75 -1.25 basis points.
- Asia Pacific Sovereign CDS Index 94.25 -2.25 basis points.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (STZ)/.45
- (FDO)/1.22
- (FAST)/.37
- (KMX)/.45
- (BBBY)/1.68
- (RT)/.10
- (ADTN)/.10
- (PGR)/.44
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +2,707,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,500,000 barrels versus a -572,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,500,000 barrels versus a -2,266,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.2% versus a +.6% gain the prior week.
2:00 pm EST
- The Monthly Budget Deficit for March is estimated at -$107.0B versus -$198.2B in February.
- FOMC Minutes from March 19/20 Meeting
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Fed's Kocherlakota speaking, Fed's Lockhart speaking, Eurozone industrial production data, China Trade data, White House budget release, 10Y T-Note auction, weekly MBA mortgage applications report, USDA report, Bloomberg April Economic Survey, (AAP) investor day and the (IHS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology 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.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 133.0 +11.76%
- Total Put/Call .86 -5.49%
Credit Investor Angst:
- North American Investment Grade CDS Index 84.74 -.88%
- European Financial Sector CDS Index 168.60 +.30%
- Western Europe Sovereign Debt CDS Index 102.33 -.98%
- Emerging Market CDS Index 236.85 -1.47%
- 2-Year Swap Spread 14.5 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -16.25 +.75 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $139.10/Metric Tonne +1.09%
- Citi US Economic Surprise Index 4.50 +1.6 points
- 10-Year TIPS Spread 2.45 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating +182 open in Japan
- DAX Futures: Indicating +32 open in Germany
Portfolio:
- Higher: On gains in my tech/medical/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- German Exports Fell in February Amid Euro-Area Recession. German exports fell more than
economists forecast in February as the euro area, the country’s
biggest trading partner, struggled to emerge from recession. Exports, adjusted for working days and seasonal changes,
dropped 1.5 percent from January, when they gained 1.3 percent,
the Federal Statistics Office in Wiesbaden said today.
Economists forecast a 0.3 percent decline, according to the
median of 15 estimates in a Bloomberg News survey. Imports fell
3.8 percent. Shipments from Germany to the euro area dropped 4.1 percent
in February from a year ago, while those to the European Union
decreased 3.4 percent. Exports to non-EU members fell 1.9
percent, today’s report showed.
- European Stocks Are Little Changed; Lagardere Falls. European (SXXP) stocks climbed as mining shares rallied and Alcoa Inc. began the U.S. earnings season
with profit that beat analysts’ estimates.
- Fitch Cuts China Yuan Debt Rating on Local Government Borrowing. Fitch
Ratings Ltd. cut China’s long- term local-currency debt rating, citing
increasing risks to the country’s financial stability given the lack of
transparency in
the increased borrowing of local governments. Fitch lowered the rating to “A+”, its fifth-highest
level, from “AA-,” the London-based company said in an e-
mailed statement today. The company estimates total credit in
China’s economy, including various forms of so-called shadow
banking, may have reached 198 percent of gross domestic product
at the end of 2012, up from 125 percent at end-2008. “Fitch believes Chinese LGs likely have significant
additional contingent liabilities arising from debts of LG-
linked corporates,” the company said, referring to local
governments in China. “The classification of lending between
corporate and LG sectors have been opaque. Lack of transparency
over the indebtedness of LGs is a shortcoming for China relative
to peers.”
- China Surging Wages Threaten Economy’s Competitiveness, ADB Says. China’s
surging wages and other
costs are showing signs of undermining the competitiveness of
the nation’s economy, threatening its growth potential, the Asian
Development Bank said. Average inflation-adjusted wages have more than
tripled in a decade and non-wage costs for procedures such as hiring and
firing have risen since the introduction of a 2008 labor law, the
ADB said in a report published today. The labor market is being squeezed
across the nation as the pool of working-age people shrank last year.
At stake is China’s position as the world’s biggest producer of low-cost
goods, while competitors from Vietnam to Mexico stand to gain as
investors seek to relocate to countries that have cheaper labor or are
closer to big markets in the U.S. and Europe. “Rapid aging of the
population is taking its toll on the labor market,” Hamid L. Sharif, the
ADB’s country director for China, said at a press briefing in Beijing.
“Unless compensated
by rising labor productivity, high wages would erode the
economy’s competitiveness and growth potential, hampering
government development plans.”
- N. Korea Threats Boost Odds of First BOK Rate Cut Since October. North
Korea’s threats are raising the odds of the first interest-rate cut by
its southern neighbor since October as they threaten to damp business
and consumer sentiment in Asia’s fourth-largest economy.
- Egypt Pope Criticizes Mursi Over Sectarian Clashes Response. Egypt’s Coptic pope criticized the
Islamist president’s handling of the worst sectarian clashes in
months, and demanded stronger action against violence that has
deepened the nation’s rifts. Days of Muslim-Christian fighting outside a Coptic
cathedral in Cairo and in a nearby town have left at least eight
dead, most of them Christians. President Mohamed Mursi demanded
an investigation into the violence, vowed the perpetrators would
be brought to justice and ordered the revival of a little-known
body charged with tackling discrimination.
- Corn Boom Goes Bust With U.S. Sales in Record Drop: Commodities. The
record collapse in U.S. corn
exports and shrinking domestic demand are leaving more grain in
silos, spurring a bear market just eight months after drought
drove prices to an all-time high. Stockpiles will be 836 million bushels
(21.2 million metric tons) on Aug. 31, or 32 percent more than the U.S.
Department of Agriculture forecast last month, according to the
average of 35 analyst estimates compiled by Bloomberg. Export sales from
the world’s largest grower and shipper fell 54 percent in the year that
began Sept. 1, heading for the biggest annual drop in
government data that starts in 1960.
- Gold, Silver Gain on Bets Central Banks Will Add More Stimulus. Gold rallied to a one-week high on
speculation that central bankers in the world’s major economies
will take additional steps to spur growth, boosting demand for
the precious metal as a store of value. Silver jumped.
- Lacker Says Government Should Be Ready to Let Big Banks Fail. Federal Reserve Bank of Richmond
President Jeffrey Lacker said plans to limit the size or change
the structure of the largest financial institutions must be made
with the intent of allowing a failure without government aid. “It makes perfect sense to constrain the scale and scope
of financial firms in a way that ensures that they can be
resolved in an orderly manner, without government protection for
creditors,” Lacker told a conference at the University of
Richmond.
Fox News:
- 14 injured in knife attack on Lone Star College campus, suspect arrested. Over 12 people were stabbed Tuesday on the campus of Lone Star
Community College campus in Cypress, Texas, after a male suspect
reportedly used a small knife, ran from building to building and
randomly attacked individuals along the way. Harris Country Sheriff Adrian Garcia says the suspect, described as a
young white male, has been taken into custody. No further information
about the suspect or about the weapon has been released as the
investigation is still active and ongoing.
CNBC:
Zero Hedge:
Business Insider:
New York Times:
- Prosecutors Said to Be Investigating Tips at KPMG Involving Herbalife(HLF) and Skechers(SKX).
Federal prosecutors and securities regulators in Los Angeles are
investigating a former senior partner at KPMG for leaking secret
information to a stock trader, according to people with direct knowledge
of the inquiry. The case involves alleged tips about confidential data
related to Herbalife, the nutritional-supplement seller, and Skechers
USA, the footwear maker, according to these people. On Tuesday morning,
both Herbalife and Skechers announced that KPMG had resigned as their
auditor.
Reuters:
- ECB's Asmussen sees growing risks for H2 recovery. European
Central Bank Executive Board member Joerg Asmussen said on Tuesday
there were more downside risks to a recovery of the euro zone economy in
the second half of the year than one or two months ago. His comments
further fuelled expectations that the ECB is getting ready to cut
interest rates further, following last
week's comments by ECB President Mario Draghi that the bank
would "monitor very closely" all data and stands "ready to act". "There are more downside risks to a recovery in the second
half of the year than four or eight weeks ago," Asmussen said in
a speech in Nuertingen.
Telegraph:
Yonhap News:
- North Korea completed preparation for mid-range missile launch,
citing South Korean govt officials. North Korea is technically able to
launch missile as early as tomorrow.
