Late-Night Headlines
Bloomberg:
- The cost to protect against defaults on U.S. corporate bonds fell to the lowest in two weeks, tracking a rally in stocks, before data this week that may bolster speculation the recession has bottomed. Swaps on the Markit CDX North America Investment-Grade Index Series 12, which is used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, fell 5 basis points to 135 basis points as of 4:30 p.m. in New York, according to CMA DataVision. “The improved economic outlook, favorable relative value versus other asset classes and a propitious technical backdrop will unite to keep performance positive through year-end,” Barclays Capital credit strategists led by Ashish Shah in New York wrote in a June 26 note to clients. Credit-default swaps on Black & Decker Corp.(BDK), the largest U.S. power-tool maker, dropped the most in four weeks, signaling an improvement in investor confidence. The contracts fell 10 basis points to 163 basis points, according to CMA. Swaps on American Express Co.(AXP), the biggest credit-card company in the U.S. by purchases, fell 9 basis points to 231 basis points, the most since June 2, CMA data show.
- Admiral Timothy Keating, the U.S. commander in the Pacific region, said the military is ready to handle any orders it might receive in response to North Korea’s threatened missile launches and potential illicit shipments. “North Korea’s activities are very disturbing and unsettling to all of us,” said Keating, head of the U.S. Pacific Command, to an audience at the Atlantic Council policy analysis group in Washington late today in response to a question. The military is prepared to protect “American property, American citizens and American territory,” Keating said. “We don’t want to tip our hand too much.” The U.S. has been tracking a North Korean vessel on grounds that it may be carrying nuclear or missile technology barred from transfer under two United Nations Security Council resolutions.
- Venezuelan President Hugo Chavez said Honduran military leaders supporting the ouster of President Manuel Zelaya should “take great care” because any assault on his country’s embassy would be a “cause for war.” “If anything happens to the Venezuelan ambassador or if the embassy is raided, that’s cause for war. Cause for war.” Chavez said on state television.
- China, the world’s second-biggest energy consumer, will increase fuel prices by as much as 11 percent today, allowing the nation’s refiners to pass on climbing crude oil costs. Prices for gasoline and diesel will rise by 600 yuan ($87.80) a metric ton, the National Development and Reform Commission said yesterday, the third increase this year. Jet fuel costs will rise by 620 yuan a ton.
Wall Street Journal:
- The securities firms still standing on Wall Street are about to close the most lucrative quarter since the credit crisis erupted. And instead of relying on risk and leverage to drive profits, companies such as J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. are getting back to basics, with a strong performance from trading and underwriting. Investor confidence in the debt markets fueled issuance of $1.5 trillion globally from the start of the second quarter through Monday, according to Dealogic. That was slightly lower than in the first quarter, but the latest results showed a rebound in high-yield issuance. Equity offerings reached nearly $260 billion during the second quarter, which ends Tuesday. That is almost four times the amount recorded during the first quarter, and the highest since 2008's second quarter, Dealogic said. In trading, the gap between bid and offer prices on fixed-income assets remained wide through most of the quarter, boosting profits from buying and selling these securities. Fixed-income trading is one of the main earnings drivers for big Wall Street firms. "The banks are making money the old-fashioned way, by making markets," said Douglas Sipkin, an analyst with Pali Capital in New York.
- The beleaguered auto industry could see signs of strengthening demand when auto makers report U.S. sales for June on Wednesday, according to auto makers and analysts. Buoyed by fewer jobless claims and improved consumer confidence, annualized U.S. sales could hit 10 million this month for the first time in 2009, Ford Motor Co. analyst George Pipas said on Monday. The deep discounts that General Motors Corp. and Chrysler Group LLC have offered to boost sales are also likely to bolster June sales. Those factors suggest "the worst is behind us," Mr. Pipas said.
- A House committee is investigating the recent resignation of Amtrak's inspector general, citing concerns about oversight at the publicly funded corporation at a time when it is set to spend more than $1 billion in federal stimulus funds. Reps. Edolphus Towns (D., N.Y.) and Darrell Issa (R., Calif.), the chairman and ranking member of the House Oversight and Government Reform Committee, launched an investigation Monday following the resignation this month of Fred Weiderhold, Amtrak's longtime inspector general.
CNBC.com: The U.S. Treasury is planning to roll out its long-awaited Public-Private Investment Program (PPIP) plan, aiming to unveil it on Wednesday. The program should include as many as nine participants. CNBC has confirmed that two firms will be Wilbur Ross's Distressed Real Estate/debt fund and a joint venture between GE Capital and private investor Angelo Gordon & Co . As many as seven other firms will likely participate. Other firms widely expect to be named include PIMCO and Blackrock.
Business Week: A European Central Bank report predicts that euro-zone banks could record as much as $398 billion in new writedowns by 2010.
Forbes:
- Bernie’s Gang: Who’s Next To Go Down? Bankruptcy trustee Irving Picard says some friends of Bernie got excessive phantom profits from Bernie's fund. There are many questions unanswered in the wake of the sentence to jail of Bernie Madoff for 150 years, an appropriate eternity for such a scoundrel. For justice to be properly served, we must find out and prosecute those persons who played a role, any role, in the destruction of ordinary people's lives and wherewithal.
Washington Post:
- If a new General Motors emerges from bankruptcy as planned, U.S. financial aid for the company will expand to nearly $50 billion, but neither the government nor the company is forecasting how much of the public money will be repaid. It's sure to be a stretch. For the United States to fully recover its investment, the value of General Motors stock will have to reach levels it has never before attained. "I don't know how much we're going to recover," a senior Obama administration official said as the company headed into bankruptcy last month. The stake will be worth enough to fully cover the government's direct investment only if GM's stock rises above $68 billion. Even at its recent 2000 peak, GM's stock was worth only $56 billion. "It's very unlikely" that the government will recover its money, said David Whiston, auto equities analyst at Morningstar. "GM will be a smaller company after the bankruptcy and there are going to be more foreign automakers entering the market that will make GM's efforts more difficult."
Cnet news:
- E-mails indicate EPA suppressed report skeptical of global warming.
Reuters:
- Ford Motor Co (F) said on Monday it expects to gain U.S. market share in June as its sales would hold up much better than the rest of the industry and signaled its increasing confidence by raising production. Ford said it would increase North American production in the third quarter by about 5.4 percent from a plan disclosed in early June amid signs that demand has begun to stabilize. That plan had set Ford's first year-over-year quarterly production increase in North American in two years. "The underlying economic indicators, meaning fewer jobless claims, another month of somewhat higher levels of consumer confidence, suggest to us that the worst is behind us in terms of not only the economy ... but also that we may have seen the low point of auto sales," Ford U.S. sales analyst George Pipas told reporters in a discussion at Ford headquarters.
- Growing confidence that the U.S. economy is putting the worst recession in decades behind it has pushed the index known as Wall Street's fear gauge to its lowest level since just before Lehman Brothers collapsed last September. The CBOE Volatility Index .VIX, known as the VIX, provides investors with portfolio insurance against fluctuations in the S&P 500 index .SPX. It soared to historic highs in the weeks after Lehman's rapid failure pushed financial markets to the brink and left an already crippled economy in tatters. But amid numerous signs the economy is on the edge of a recovery, coupled with the best quarter for stocks in more than 10 years, the VIX has begun to look like its old self again. "Investors see a lesser need for protection going forward; it looks like they don't see a revisit to the March lows," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.
Electronic Times:
- LG Display may invest $1.6 billion in a new liquid-crystal-display production line. The world’s second-largest maker of LCDs said last week the company isn’t fully meeting customer orders for the screens because of higher-than-expected demand.
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9:45 am EST
- The Chicago Purchasing Manager for June is estimated to rise to 39.0 versus 34.9 in May.
10:00 am EST
- Consumer Confidence for June is estimated to rise to 55.3 versus 54.9 in May.
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BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US equities to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
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