Late-Night Headlines
Bloomberg:
- Leaders of the most powerful nations meet today amid signs that the world economy is stabilizing after months of freefall. The Group of 20 summit convenes in London as some reports suggest the pace of decline is easing. U.S. durable-goods orders and home sales rose in February, Chinese urban investment surged 26.5 percent in the first two months of the year, and German investor confidence in March reached its highest level since July 2007. The Standard & Poor’s 500 Index last month rallied the most in seven years.
- News media comparisons of the current recession to the Great Depression may stoke fear among consumers while misleading them about the depth of the downturn, according to a study by Charles Gascon, research associate with the St. Louis Federal Reserve Bank. “Fortunately,” there is a “vast” difference between saying the current downturn is the worst since the 1930s and saying it’s as bad as the Depression, Gascon wrote in the St. Louis Fed’s “Regional Economist” publication. Indicators such as declines in employment, income, spending and stock prices match or exceed those reached in the last six recessions, although they are nowhere near the lows of the 43- month Depression that began in 1929, he wrote.
- Leaders of the Group of 20 nations may agree to regulate large hedge funds and ``avoid competitive devaluations,'' Reuters reported, citing a draft communique. Leaders also may set up a supervisory body to oversee the global financial system and work together to revive economic growth, the news service reported yesterday from London.
- K+S AG, Europe’s largest salt producer, confirmed a report by the Financial Times Deutschland that it is bidding for Dow Chemical Co.’s Morton Salt unit. “We definitely have an interest in the deal, but at this time we have no more information we can provide,” Oliver Morgenthal, spokesman for K+S, said in a telephone interview. “But we can confirm that what Financial Times Deutschland said earlier is correct and that we have come to a certain agreement with Rohm & Haas.”
- Borrowers who were minorities didn’t pay higher interest rates for subprime mortgages and often paid lower ones, according to a New York Federal Reserve Bank study of more than 75,000 adjustable-rate subprime loans. The findings published today appear to contradict earlier private and government research showing minority borrowers and neighborhoods might have been targeted for expensive credit from 2004 to 2006, the peak period for subprime lending. The study merges data on the race, ethnicity and gender of borrowers as reported by lenders under the Home Mortgage Disclosure Act with data on mortgage pricing and risk variables such as credit scores as reported by the mortgage research firm First American LoanPerformance. The results “provide no evidence of adverse pricing by race, ethnicity or sex of the borrower” for either the initial interest rate or the rate to which the loan subsequently adjusted, the study said. “If any pricing differential exists, minority borrowers appear to pay slightly lower rates.” The study was conducted by Joseph Tracy, director of research at the New York Fed, Andrew Haughwout, head of microeconomics and regional studies at the New York Fed, and Christopher Mayer, a professor of real estate finance and economics and vice dean of the Columbia University Business School.
- Steel prices this year will be 19 percent lower than its prior estimate because of falling demand from construction companies and carmakers, Morgan Stanley said. Global steel prices will average $502 a metric ton, down from a previous forecast of $619 and below last year’s $854 a ton, the bank said today in a report. Morgan Stanley lowered its forecast for next year by 32 percent to $485 a ton and cut the 2011 prediction by 30 percent to $526 a ton. “Steel markets are starting to look oversupplied as inventories in China, the largest consumer of steel globally, have reached record highs,” the bank said. Prices of hot-rolled coil, an industry benchmark, have more than halved since June to $490 a ton, according to industry publication Metal Bulletin. Global steel demand will shrink by 11 percent this year, double its previous estimate for a 5.5 percent contraction, Morgan Stanley said. Demand in China will decline 5.5 percent, the “first contraction in a decade,” returning usage of the metal to 2005 levels, the bank said.
- Bristol-Myers Squibb Co. and AstraZeneca Plc’s proposed new diabetes pill is safe enough for the heart to be allowed on the market, a U.S. panel recommended.
- Junk bonds offered the biggest returns since 2003 as investors bet that yields on the debt will offset defaults amid the deepest global slowdown since the Great Depression. High-yield, high-risk, or junk, bonds returned 5.02 percent in the first quarter, the best performance since the fourth quarter of 2003, according to Merrill Lynch’s U.S. High Yield Master II index.
- Victims of Bernard Madoff’s $65 billion Ponzi scheme filed a petition to put the fraudster in personal bankruptcy to ensure that all his assets are used to pay them, the victims’ lawyer said. “It’s an important step to ensure that all Madoff assets are brought before the bankruptcy court to be used for victims of this massive fraud,” said Jonathan Landers, a lawyer with Milberg LLP, which represents more than 70 victims, in a phone interview.
- The U.S. Treasury injected $46 billion in emergency funds into government-controlled mortgage-finance companies Fannie Mae and Freddie Mac. The Treasury payout yesterday included a $15.2 billion investment in Fannie’s preferred stock and a $30.8 billion purchase of Freddie’s preferred shares, the companies said in separate filings to the Securities and Exchange Commission today. The companies must pay a minimum dividend of 10 percent.
- The European Central Bank may cut its key interest rate to a record low of 1 percent today, increasing pressure on policy makers to use new tools to fight the worst recession in more than 60 years. ECB officials meeting in Frankfurt will lower the benchmark rate by half a percentage point, according to 49 of 55 economists in a Bloomberg News survey. Such a reduction would probably mark the end of the ECB’s current round of rate reductions, a separate survey shows.
- French authorities rarely investigate or punish cases of police brutality, leading to “de facto impunity” for security forces in the country, Amnesty International said in a report. While victims of alleged police brutality in France come from all ages and groups, the majority are from ethnic minorities or are foreigners, the human rights group said.
- Patients who start antiviral drugs before their immune systems are damaged by the AIDS virus substantially cut their risk of death, according to a study published today in the New England Journal of Medicine.
- The yen fell against the euro as Asian stocks gained on optimism the worst of the global recession is ending, spurring investors to increase purchases of higher-yielding assets. The euro rose versus the dollar on speculation European Central Bank President Jean-Claude Trichet will signal the bank will refrain from cutting interest rates further after lowering them later today. New Zealand’s dollar may decline against the greenback after Finance Minister Bill English said a stronger currency would make it difficult for the nation to snap out of its worst slump in more than three decades. “Asian and Japanese stocks are rising, reflecting an improvement in risk appetite,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “This is leading to selling of the yen.”
Wall Street Journal:
- "Don't think we're not keeping score, brother." That's what President Barack Obama said to Rep. Peter DeFazio in a closed-door meeting of the House Democratic Caucus last week, according to the Associated Press. A few weeks ago, Mr. DeFazio voted against the administration's stimulus bill. The comment from Mr. Obama was a presidential rebuke and part of a new, hard-nosed push by the White House to pressure Congress to adopt the president's budget. He has mobilized outside groups and enlisted forces still in place from the Obama campaign.
- Navigation systems provider TomTom NV has signed a deal with TrafficCast International Inc. to provide real-time information about traffic, weather patterns and the cheapest nearby gasoline to TomTom's first wireless navigation device. TomTom, which is based in Amsterdam and already offers wireless devices in the European market, is seeking to expand its U.S. presence with the Go 740 Live device, its first traffic device connected to U.S. wireless networks. Because it has a two-way wireless connection, the device will also send anonymous information about the subscriber's location and speed to supplement other sources of road and weather information.
- Network Hard Disk by Western Digital(WDC) Offers Easy Backup.
- Here's the match-up. In the right corner we have Omar al-Bashir, for 20 years the Islamist dictator of Sudan and the man most responsible for the death of hundreds of thousands of Darfuris. In the left corner we have six former Bush Administration officials who were given the task after September 11 of formulating America's response to the atrocities. Who do you think is in the greatest legal jeopardy?
MarketWatch.com: The U.S. markets reversed sharply last month, spiking 25% from the March trough to peak. And following a run of this magnitude, a consolidation phase is in order. Yet as long as the pullbacks aren't too aggressive, the sector rotation underlying the March recovery was constructive, and very well may lay the groundwork for further gains.
- Emerging Europe will suffer its biggest fall in real gross domestic product since the collapse of communism in the early 1990s, underlining the severity of the trade and financial shocks that have hit the region, Fitch Ratings said in a new report on Wednesday. GDP growth is likely to contract by 3.1% this year in Emerging Europe, according to the ratings agency. That would be a severe recession after growth of 4% in 2008 and an average of 6.8% in the five years to 2007. Fitch expects only a modest recovery of 1.4% in 2010, which would be "insufficient to prevent further rises in unemployment and pressure on public finances. "
- Following on the furor over multimillion-dollar bonuses paid to traders at American International Group, the House approved legislation Wednesday that would limit compensation for executives and employees at financial institutions receiving money from the government's $700 billion financial bailout package.
CNBC.com: Gartman thinks that we’re building so few houses right now (400,000 new units in a year) that “we’re going to have a shortage of housing in the not too distance future and I want to own the things that go into building.” You read it here. Dennis Gartman foresees a housing shortage!
- U.S. Marshals on Wednesday seized a $9.4 million mansion in Florida belonging to disgraced Wall Street financier Bernard Madoff and his wife after earlier confiscating two of the couple's leisure boats.
NY Times:
- Chinese leaders have adopted a plan aimed at turning the country into one of the leading producers of hybrid and all-electric vehicles within three years, and making it the world leader in electric cars and buses after that.
Politico:
- For the second time in less than a week, a Democratic leader is calling on liberal groups to back off in their efforts to target moderate Democrats who have been skeptical of President Barack Obama's ambitious budget. Democratic Congressional Campaign Committee Chairman Chris Van Hollen, in a Wednesday afternoon news conference, said that a wide range of attack ads by groups like MoveOn.org could hurt potentially vulnerable Democrats in their 2010 races. “What I’ve been warning people very clearly is, beware of forming a circular firing squad,” Van Hollen said. “We believe people should be focusing their efforts on expanding the Democratic majority, and that should be their singular focus." In recent weeks, MoveOn.org and labor-backed Americans United for Change have launched ad campaigns targeting moderate Democrats like Sen. Evan Bayh of Indiana to back Obama’s budget.
Chicago Tribune:
- Sending text messages, downloading ring tones and surfing the Web while driving would be banned under legislation the House approved today as lawmakers decried what they said was a growing epidemic of fatal accidents caused by distracted driving. "I don't want to go to another funeral and have a mother, a brother, a father, a sister, a grandmother or a child look at me and tell about one of their loved ones has died because they thought they could get away with texting a message," said Rep. Tom Holbrook (D-Belleville).
Forbes.com:
- 10 Most Heavily Taxed Stares
Reuters:
- U.S. Treasury Secretary Timothy Geithner said on Wednesday he would consider forcing out chief executives of banks that receive government bailouts if they were not managing their businesses properly. In an interview with CBS, Geithner said economic recovery depends on a financial system that effectively provides credit, and the government would hold companies receiving public aid accountable. When asked whether he left open the option to pressure a bank CEO to resign, Geithner responded, "Of course. Of course."
- AT&T Inc (T) is looking into offering a new range of more flexible data service fees to encourage more consumers to use its wireless network to connect electronics devices to the Internet, according to a top executive for the service provider.
- The U.S. audit watchdog will evaluate final mark-to-market rule changes to determine if it also needs to issue new guidance to auditors, a Public Company Accounting Oversight Board spokeswoman said Wednesday. The Financial Accounting Standards Board, which sets U.S. accounting rules, is meeting on Thursday to fine tune proposals that will give banks more flexibility in valuing toxic assets in the current illiquid markets.
- The U.S. economy is showing the first signs in months that it could be getting ready to crawl out of a long recession, the top economist at Goldman Sachs GS.N said on Wednesday. Jim O'Neill, Goldman's head of global economic research, said among key leading indicators, the measure of "new orders less inventories," derived from the Institute for Supply Management March factory report was a bright light. That data point is included in Goldman's monthly "Global Leading Indicators" index. At +9 in March, against -0.7 in February, it was "the best sign for a few months that the severity of the U.S. recession might be easing," O'Neill said while giving a presentation to the Chicago Council on Global Affairs. China last month proposed a sweeping overhaul in the global monetary system, suggesting the U.S. dollar could eventually be replaced as the world's main reserve currency by the IMF's Special Drawing Right. O'Neill, acknowledged as one of the world's top currency analysts, said such a "radical shift in the role of the dollar" was not "close." China's idea will be most interesting if it is paired with more flexibility in the rate of its currency, the renminbi, O'Neill said. "If it isn't, it's not of much use at all."
Financial Times:
The number of hedge funds managing more than $1bn fell by more than 40 per cent globally last year, according to a survey that reveals the extent of the damage inflicted on the world's largest funds by volatile markets and tight funding conditions. The annual hedge fund database survey from PerTrac Financial Solutions, to be published today, says about 200 funds held assets in excess of $1bn, down from 350 in the previous year's survey. The survey shows a 1.3 per cent drop since last year in the number of hedge funds and funds of hedge funds in the 11 databases that make up the survey's sample. It found a total of about 22,350 distinct investment vehicles among those databases at the end of last year. Total assets stood at $1,330bn, down more than a third from the year before. Approximately 15,150 single-manager hedge funds and 7,200 funds of hedge funds were identified. This compares with 15,250 single-manager hedge funds and 7,400 funds of hedge funds in the previous study. "While the total number of funds showed a perhaps surprisingly small decrease, reported assets among single-manager hedge funds declined a marked 36.1 per cent between year-end 2007 and 2008, down to $1,330bn."
- Foreign investors in Chinese banks will in future be forced to accept a lock-up period of at least five years, China’s top banking regulator said, after a series of share sales by US and European financial institutions. In recent months, companies such as Bank of America , UBS and Royal Bank of Scotland have sold down all or part of their stakes in China’s largest state-owned banks immediately after lock-up periods of three years expired. BofA, RBS, Goldman Sachs , Germany’s Allianz , Singapore’s Temasek and others bought shares in China Construction Bank , Bank of China and Industrial and Commercial Bank of China with promises they would help to improve the Chinese banks’ risk management and managerial capabilities. But apart from a few minor initiatives, the partnerships largely failed to produce tangible results and when three-year lock-up periods started to expire in recent months most of these “strategic” investors sold all or part of their holdings at a profit at a time when most global banking institutions were in dire need of fresh capital.
- Europe’s leaders are not doing enough to convince voters of the need to win the war in Afghanistan, Robert Gates, US defence secretary, has warned on the eve of Friday’s Nato summit. “I have not seen the kind of effort that I would have hoped for in terms of European governments trying to persuade their people that attacks such as those that took place in Madrid and London . . . emanated from the Afghan-Pakistani border area,” Mr Gates said in an interview with the Financial Times. “The British do a good job of making that case to their people, but on the Continent I have not seen that kind of effort,” he said. “This problem out there is as big a threat to the Europeans as it is to us.”
DNA:
- Rating downgrades, defaults soar in India as slowdown pinches
Livemint.com:
- Bangalore: In a telling indicator of slowing international trade, goods handled at India’s busiest container port fell as much as 11% in the fiscal year ended 31 March, compared with the preceding fiscal. The state-owned Jawaharlal Nehru Port at Nava Sheva near Mumbai, which accounts for almost 60% of the container cargo traffic in India, handled 3.95 million standard containers in fiscal 2009, a port official said on condition of anonymity because he is not authorized to speak to the media. The port handled 4.06 million standard containers in the year ended March 2008.
Late Buy/Sell Recommendations
CSFB:
- Rated (GS) and (BX) Outperform.
Night Trading
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Earnings of Note
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Economic Releases
8:30 am EST
- Initial Jobless Claims for last week are estimated to fall to 650K versus 652K the prior week.
- Continuing Claims are estimated to rise to 5590K versus 5560K prior.
10:00 am EST
- Factory Orders for February are estimated to rise 1.5% versus a 1.9% decline in January.
Upcoming Splits
Other Potential Market Movers
BOTTOM LINE: Asian indices are sharply higher, boosted by financial and technology stocks in the region. I expect US equities to open modestly higher and to build on gains into the afternoon, finishing higher. The Portfolio is 100% net long heading into the day.
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