Wednesday, April 14, 2010

Today's Headlines


Bloomberg:

  • Bernanke Sees 'Moderate' Growth Amid 'Restraints'. Federal Reserve Chairman Ben S. Bernanke said the U.S. expansion will remain moderate as the economy contends with weak construction spending and high unemployment.“On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters,” Bernanke said in testimony to Congress today. “Significant restraints on the pace of the recovery remain, including weakness in both residential and nonresidential construction and the poor fiscal condition of many state and local governments.” Bernanke, in response to a question, said the Federal Open Market Committee has “stated clearly” its pledge to keep the main interest rate low for an “extended period” contingent on conditions including high unemployment and low inflation. The 56-year-old former Princeton University economist said “further economic expansion will depend on continued growth in private final demand,” now that inventories are better aligned with sales and as fiscal stimulus is set to taper off. “Consumer spending should be aided by a gradual pickup in jobs and earnings, the recovery in household wealth from recent lows, and some improvement in credit availability,” the Fed chairman said in prepared testimony to the Joint Economic Committee of Congress. Even so, “a significant amount of time will be required to restore the 8-1/2 million jobs that were lost during the past two years.” The Fed chairman said the “subdued” rate of increase in consumer prices and said “moderation in inflation has been broadly based.” “A credible plan for fiscal sustainability could yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence,” he said. “Addressing the country’s fiscal problems will require difficult choices, but postponing them will only make them more difficult.”
  • Retail Sales Climb, Inflation Remains Contained. Americans heartened by an improving job market flocked to shopping malls and auto showrooms in March, raising the odds of a durable economic recovery. Retail sales increased 1.6 percent last month, more than anticipated and the biggest gain in four months, according to figures from the Commerce Department issued today in Washington. Another report showed consumer prices rose 0.1 percent.
  • JPMorgan(JPM) Net Rises 55% on Fixed Income, Provision Cut. JPMorgan Chase & Co., the second- biggest U.S. bank by assets, beat analysts’ estimates as first- quarter earnings rose 55 percent on record fixed-income trading revenue and a reduction in provisions for credit losses. Net income climbed to $3.33 billion, or 74 cents a share, from $2.14 billion, or 40 cents, in the same period a year earlier and from $3.28 billion in the fourth quarter, the New York-based bank said today in a statement. The per-share earnings compared with a 64-cent average estimate of 21 analysts surveyed by Bloomberg. “It’s an embarrassment of riches,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York and owns JPMorgan shares. “These are results that you expect from maybe Goldman in a very good environment for trading,” Holland said in a Bloomberg Television interview.“There is clear and broad-based improvement in the economic factors in the United States and around the world,” Dimon, 54, told reporters on a conference call. “It appears to be strengthening, not weakening. It is possible that they will strengthen enough to end up with a strong recovery.” JPMorgan rose $1.28, or 2.8 percent, to $47.15 in composite trading on the New York Stock Exchange at 9:33 a.m. Chief Financial Officer Mike Cavanagh said on the call that there is “fundamental real improvement” in consumer mortgage and credit-card delinquencies. That didn’t translate into lower credit costs for the quarter, though he said it “augurs well for future quarters if those trends sustain themselves.”
  • Truckers' Credit-Card Swipes Point to Broader Rebound. The amount of diesel fuel bought using credit cards at U.S. truck stops increased in March to the highest level in more than a year, indicating the recovery is broadening beyond manufacturing. The Ceridian-UCLA Pulse of Commerce Index, which measures fuel consumption, rose 1 percent last month to reach the highest level since September 2008, a report yesterday showed. The gauge has increased every month since November with the exception of February, when East Coast blizzards hampered travel. Truck tonnage, which accounts for 68 percent of freight transported in the U.S., increased on a year-over-year basis in February for a third straight month, a separate report from the American Trucking Associations showed. “It appears to be across both retail” and manufacturing, Stotlar said. “We are seeing multiple touch points that are verifying to us that the economy is definitely recovering.”
  • Oil Jumps Most in Eight Weeks on Unexpected Drop in U.S. Supply. Oil surged the most in eight weeks after the U.S. government reported an unexpected decline in inventories and gasoline demand jumped the most in five years. Stockpiles lost 2.2 million barrels last week to 354 million, the Energy Department said today. Supplies were forecast to rise 1.3 million barrels, based on the median of 17 analyst estimates in a Bloomberg News survey. Gasoline use rose 1.3 percent in the four weeks ended April 9, the biggest gain since August 2004. Crude oil for May delivery rose $2, or 2.4 percent, to $86.05 a barrel at 12:17 p.m. on the New York Mercantile Exchange, ending a five-day decline. Oil supplies dropped as refinery utilization climbed 1.1 percentage points to 85.6 percent of capacity in the week ended April 9, the Energy Department said. Imports of oil fell 7.1 percent to 8.88 million barrels a day.
  • Fed Shouldn't Reveal Crisis Loans, Banks Vow to Tell High Court. The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said. Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs.
  • China Metal Quotas Limit U.S. Smart-Bomb Output, Lawmakers Told. The U.S. military depends on China for the metals required to build smart bombs, night-vision goggles and spy radar, according to a report to Congress obtained by Bloomberg News. China controls 97 percent of production of materials known as rare earth oxides, giving it “market power” against the U.S., the Government Accountability Office said in the report. The materials -- found in General Dynamics Corp.’s M1A2 Abrams tank and Aegis SPY-1 radar made by Lockheed Martin Corp. -- are so irreplaceable that suppliers to military equipment makers could be buying from China for years to come, the GAO said. The U.S. needs to rebuild a domestic industry for the metals after mining in the U.S. lapsed and production migrated to Chinese suppliers, according to members of Congress including U.S. Representative Mike Coffman, a Colorado Republican. “The People’s Republic of China is not an ally of the United States,” Coffman, who asked for the GAO report, said in an interview in February. “They feel increasing leverage. This gives them another tool.”
  • Apple(AAPL) Postpones iPad's Debut Outside U.S. to Late May. Apple Inc. said demand for its iPad tablet computer is “far higher” than it expected, prompting the company to delay the device’s introduction outside the U.S. by a month. The company shipped more than 500,000 iPads during the first week and expects demand to exceed its supply for the next several weeks, according to a statement today. Apple postponed the device’s international debut until the end of May. “There’s nothing on the market like it, and there won’t be for months,” Wolf said. “People are not going to go out and buy a competing product because there’s no competing product.”
  • Intel's(INTC) Forecast Shows Rebound in Technology Spending.
  • New York Still Under Consideration for Terror Trial. The Obama administration is still considering New York City as a site for a terror trial for suspects in the Sept. 11 attacks, said Attorney General Eric Holder. “New York is not off the table,” Holder told members of the Senate Judiciary Committee today. The Obama administration is facing criticism from Republican lawmakers who want the case sent to a military commission.

Wall Street Journal:
  • Levi Aims for High-End Halo. In the wake of a recession that caused consumers to question the value of $198 jeans, Levi Strauss & Co. is reintroducing consumers to its $198 jeans. The 157-year-old company is trying to reinvent itself as not just a purveyor of basics but as an edgier brand suitable for the fashion cognoscenti.
  • Crony Contracts. Want federal business? Better be a union shop. There's almost a direct correlation these days between the Obama Administration's complaints about "special interests" and its own fealty to such interests. Consider its latest decree that federal contractors must be union shops. The federal rule, which went live yesterday, implements an executive order President Obama signed within weeks of taking office. It encourages federal agencies to require "project labor agreements" for all construction projects larger than $25 million. This means that only contractors that agree to union representation are eligible for work financed by the U.S. taxpayer. Only 15% of the nation's construction workers are unionized, so from now on the other 85% will have to forgo federal work for having exercised their right to not join a union. This is a raw display of political favoritism, and at the expense of an industry experiencing 27% unemployment. "This is nothing but a sop to the White House's big donors," says Brett McMahon, vice president at Miller & Long Concrete Construction, a nonunion contractor.
CNBC:
  • Economy Picked Up in Most Regions in March: Beige Book. The economic recovery is spreading to most parts of the country. Merchants are seeing better sales and factories are boosting production, but many companies are still wary of ramping up hiring, the Federal Reserve reported Wednesday.
  • Oversized Banks Must Be Dismantled: Fed's Fisher. Global authorities should dismantle banks that are so large their failure could destabilize the international financial system, Dallas Federal Reserve President Richard Fisher said Wednesday. While it's unclear exactly how big is too big, he said, links among the largest banks mean that the foundering of a few can lead to a downward spiral that destroys jobs and companies and creates "enormous social costs". Creating a resolution authority to wind down large financial institutions that do fail could give false comfort to creditors who may see it as government backing, he said. "The point is there are limits to size and to scope beyond which global authorities should muster the courage to draw a very bright, red line," Fisher told a Levy Economics Institute conference in New York, adding that if the U.S. must act alone in order to break up too-big-to-fail banks, it should. "The risk posed by coddling TBTF banks is simply too great."
  • And Now It's Time for Retailers to Start Spending. The latest batch of economic reports is providing fresh evidence that consumers are starting to spend again, and the buzz is "a lot better" at an annual retail investors conference in New York, said Dana Telsey, CEO and Chief Research Officer of Telsey Advisory Group, which runs the conference. "The consumer is coming back," Telsey told CNBC. "Every company still maintains a cautious optimism. They are planning cautiously, but they are a bit more on the offense given that now they are increasing their marketing investments, they are doing online, and they are going overseas."
MarketWatch:
NY Times:
  • Citi Sells Fund of Funds Unit to SkyBridge. Citigroup agreed on Wednesday to sell a $4.2 billion hedge fund unit, including its fund of funds business, to SkyBridge Capital. Terms weren’t disclosed. Skybridge, an alternative asset manager, expects the acquisition to greatly bolster its assets under management, to $5.6 billion from $1.4 billion.
NY Post:
  • SEC Storms the 'Castle'. The castle appears to be just the tip of the iceberg. According to sources familiar with the matter, the Securities and Exchange Commission, along with other Wall Street enforcers, are probing whether Lehman Brothers funded investment vehicles for the sole purpose of using them to hold toxic assets and improve its debt-laden balance sheet. The revelation of the particulars of the SEC's probe comes amid reports that Lehman shunted billions to a seemingly independent small company called Hudson Castle in order to pretty up its books. Lehman never disclosed the practice, nor did it mention that Hudson Castle was in part owned by the now-defunct investment bank.
Business Insider:
L.A. Times:
HFMWeek:
  • Hedge Fund Allocations Back to 'Pre-Crisis' Level. Pension fund allocations to hedge funds “have returned to pre-crisis levels”, according to Mercer, one of world’s largest investment consultants. The renewed confidence has been won by a series of industry reforms, aimed at creating better levels of oversight. “Most hedge funds have now tightened up their operations, they have multiple prime brokers and there is much less reliance on leverage,” said Howie.
Financial News:
  • Chanos Calls for Probe into Banks' Crisis Trades. The hedge fund manager who made his name betting on the collapse of energy giant Enron, has urged regulators to investigate the proprietary trading records of large banks during in 2008. He has argued that they, and not hedge funds, were the biggest contributers to falling share prices on Wall Street during the worst of the crisis. Rather than hedge funds, Chanos said it was banks that were the largest purchasers of credit default swaps in the banking industry in 2008, because they were all inter-related as counterparties.
AppleInsider:
  • Strong Interest in Apple(AAPL) iPad Expected to Produce 7 Million First-Year Sales. A new survey of 2,500 consumers found that a large number -- 21 percent -- are interested in purchasing an iPad, which has led one prominent analyst to project 7 million sales of Apple's new device in its first 12 months on the market. The AlphaWise study released Wednesday by Morgan Stanley found that 4.6 percent of respondents indicated "extreme interest" in the iPad. Another 16.4 percent said they are "somewhat interested" in purchasing Apple's multi-touch device. Based on these numbers, analyst Katy Huberty has forecast sales of 6 million units in 2010, and 7 million over the device's first 12 months of availability. She argued in a note to investors that the consensus forecast on Wall Street of 4 million to 5 million units is too conservative.
Politico:
  • Pence Pushes Health Care Repeal. On Tuesday, House Majority Leader Steny Hoyer (D-Md.) said he saw the public further embrace the health care overhaul legislation as he visited five states over the recess. House Republican Conference Chairman Mike Pence (Ind.) said Republicans heard something different. “The American people aren’t happy,” Pence said. “They are not happy with all of the big government spending and the borrowing and House Republicans returned for this seven-week stretch firmly on the side of the American people.” Pence, speaking to reporters after a closed-door GOP conference meeting, promised Republicans will push to repeal health-care overhaul legislation immediately. “House Republicans will not rest until we repeal Obama care lock, stock and barrel and replace it with health care reform that will lower the cost of health insurance without growing the size of government,” Pence said.
  • Dems: Ignore GOP in Court Choice. Democratic senators are urging President Barack Obama to abandon any hope of winning broad Republican support for his upcoming Supreme Court pick — and to nominate, instead, a dominant liberal voice.
Reuters:
  • EXCLUSIVE - China's Top Oil Firms Sell Gasoline to Iran. State-run Chinaoil has sold two gasoline cargoes for April delivery to Iran, industry sources said on Wednesday, stepping into a void left by fuel suppliers halting shipments under threat of U.S. sanctions. Beijing, which has close economic ties with Tehran, has resisted sanctions proposed by Western powers on Iran's energy sector that aim to press the Islamic Republic to curb its nuclear programme. Chinaoil has sold a total of about 600,000 barrels worth around $55 million to the Islamic Republic. The cargoes were Chinaoil's first direct sales to Iran since at least January 2009, according to Reuters data. Chinese firms have previously sold through intermediaries, traders said. "Prior to this there was some third-party trades going on, but this was a direct sell," a trader said. Chinaoil is the trading unit for China's top energy group China National Petroleum Corp (CNPC), which is the parent of U.S. and Hong Kong-listed PetroChina. Another Chinese company, Sinopec Corp, was also poised to resume gasoline sales to Tehran following a hiatus of nearly six years, trade sources said. Sinopec is Asia's largest refiner. Despite tough talk from the United States and the West and a number of suppliers halting shipments, Iran has maintained robust imports of gasoline from the international market, also buying from Malaysia's state oil firm Petronas and France's Total. "As long as there is money to be made, and economic benefits to be taken advantage off, Iran will always find ready sellers of gasoline from the international market," a trader said. "The politicians don't understand markets...sanctions are cosmetic."
  • U.S. SEC Plans IDs for Fast Traders, Option Fee Caps.
Financial Times:
  • EU Tries to Break Logjam on Hedge Funds. A fresh effort to unblock the logjam over new EU rules to regulate hedge funds and private equity funds and allay US fears of regulatory protectionism is being spearheaded in the European parliament. Jean-Paul Gauzes, the French MEP responsible for steering the AIFM directive through the EU’s parliamentary process, has proposed a “two-tier” approach to the registration of non-EU funds – in an effort to resolve disagreements over one of the directive’s most controversial proposals. Under Mr Gauzes’ plan, non-EU managers looking to market in the EU would be able to obtain a “passport” to do so throughout the bloc if they agreed to comply with the EU’s new rules on registration, leverage and so on. This would have to be backed by an agreement with their home country market regulator to oversee that compliance. Mr Gauzes’ revisions would also allow funds based outside the EU to gain passport rights if the jurisdiction in which they were housed met four conditions: concerning fiscal standards, rules on information exchange between supervisors, reciprocity and anti-money laundering rules. If a jurisdiction fell short of some of those four standards, the funds might still be able to seek country-by-country marketing approval. But if a jurisdiction fell short of all of them, the funds would be barred from marketing in the EU.It was unclear on Tuesday whether Mr Gauzes’ latest suggestion would win support.
Handelsblatt:
  • Europe's rescue package for Greece may turn out to be three times as large as originally announced, citing people in the European Commission. The package might amount to as much as $123 billion. Handelsblatt also cited a German government official as saying it could be "at least twice as high" as communicated so far. European finance ministers agreed that the program will cover a three-year period.
Rheinishe Post:
  • A group of professors will file a lawsuit with Germany's Constitutional Court aimed at blocking any European Union loans to Greece, citing Joachim Starbatty, one of the academics. The loans would violate the EU's Maastricht Treaty on monetary union and would also constitute an illegal subsidy, citing Starbatty. Greece should voluntarily leave the 16-nation euro region, Starbatty said.
DigiTimes:
  • Prices of Semiconductor Components to be Raised Again in 2Q10, Says IC Channels. The tight supply of most semiconductor components in the channels, including power management (PWM) ICs, MOSFETs and DRAM, will continue with no relief in sight since foundries are already running at full capacity, according to sources at IC distribution channels. Prices for semiconductor components could climb up more than 10% in the second quarter of 2010 after having been raised by 5-10% on average in the first quarter, the sources indicated. Prices of MCP (multi-chip package) products were raised by the highest percentage points in the first quarter due to a shortage in the supply of NOR flash chips, said the sources, noting that MCP supplies are likely to remain tight through the rest of 2010. MCU (microcontroller unit) suppliers who did not raise their quotes in the first quarter are expected to hike prices in the second quarter, added the sources.

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