Friday, April 08, 2011

Friday Watch

Evening Headlines

  • Japan Hit by 7.1 Quake; Workers Evacuated From Fukushima. Japan suffered the biggest aftershock since the day of the March 11 earthquake, prompting the operator of the stricken Fukushima nuclear plant to evacuate workers while they were cooling radioactive fuel. The magnitude-7.1 temblor struck at 11:32 p.m. local time yesterday near the site of last month’s record quake in Japan, the U.S. Geological Survey reported on its website. No unusual conditions were observed at the Fukushima plant, according to statements from Tokyo Electric Power Co. and Japan’s Nuclear and Industrial Safety Agency. “Indications of new leakage or a change in radiation levels will be the only way they’ll tell if there’s further damage,” Murray Jennix, a nuclear engineer who specialized in radioactive containment leaks and teaches at San Diego State University, said in a telephone interview. “You’ve got cracks that could have been made bigger.” Two people died and 93 were injured from yesterday’s quake, the Fire and Disaster Management Agency said, as more than 3.6 million households lost power.
  • Besieged Libyan City Gets Aid as U.S. General Sees Stalemate. An aid ship reached besieged Misrata, a city under fire for weeks from Muammar Qaddafi’s forces, as a U.S. general said the overall conflict is settling into a stalemate between regime forces and rebel fighters. Former Libyan Energy Minister Omar Fathi bin Shatwan, who fled to Malta on a fishing boat April 1, described the situation in Misrata as dire. The aid ship arrived amid fighting near the port, according to Al Arabiya television. “I came from Misrata, a city that has been under siege for 48 days,” Shatwan, who also had served as Qaddafi’s industry minister, said in an interview yesterday. “People are being killed every day, they have been surrounded” by the loyalist troops who are “attacking all the time.” “They have destroyed the city, cut off all water and electricity supplies,” he said. “There is no food or medicines, there is nothing but fear and dead bodies all over the place.”
  • Oil Heads for Third Weekly Gain in New York on Libya, Middle East Conflict. Oil headed for a third week of gains in New York after climbing above $110 a barrel as a fire burned at Libya’s Sarir field, heightening concern that the conflict in North Africa and the Middle East may spread. Futures advanced to a 30-month high yesterday after NATO said forces loyal to Muammar Qaddafi caused a fire at Sarir, Al Arabiya television reported. The conflict in Libya is in a stalemate, said Army General Carter Ham, the U.S. commander for Africa. Crude for May delivery rose as much as 63 cents, or 0.6 percent, to $110.93 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $110.91 at 10:36 a.m. Singapore time.
  • Zynga, Facebook Spark 51% Jump in Value of Top Web Startups. Zynga Inc. and Facebook Inc. led a 51 percent surge in the private market valuations of top Web companies in the first quarter, according to Nyppex LLC. Zynga, maker of the “CityVille” and “FarmVille” online games, rose 81 percent in value from the fourth quarter to about $8 billion, Nyppex said today in an e-mail. Facebook, the world’s largest social network, climbed 57 percent to about $65 billion. The valuations are based on transactions among institutional investors.
  • Clean-Energy Investment Is Placed at Risk as UN Climate Negotiations Stall. Clean energy investment that totaled $243 billion last year is at risk of slowing as talks on curbing greenhouse gas emissions bog down, said the United Nations official in charge of promoting industrial development. Kandeh Yumkella, director general of the UN Industrial Development Organization, said $40 billion a year is needed through 2030 to bring basic energy to 3 billion people, and part of those funds are linked to the outcome of 192-nation negotiations on global warming that hit a roadblock in Bangkok this week.
  • Dimon's 51% Raise to $23 Million Includes First Bonus Since 2007. JPMorgan Chase & Co. (JPM) gave Chief Executive Officer Jamie Dimon a 51 percent raise in 2010 as the bank resumed paying cash bonuses following two years of pressure from regulators and lawmakers to curb compensation. Dimon’s $23 million compensation package included a $5 million cash bonus, his first since 2007, the New York-based company said today in a regulatory filing. His base salary remained at $1 million and his restricted stock payout increased 20 percent to $17 million. That helped boost total compensation by more than half from $15.2 million in 2009, according to the bank’s calculations.
  • Sotheby's(BID) $337 Million Marathon Falters as Buyers Hold Back in Hong Kong. Sotheby’s total for its Hong Kong marathon crept up to $337 million last night in an auction marked by the absence of mainland Chinese buyers for the most expensive items, dealers said.
  • European Stress Tests to Examine Banks' Readiness for Basel III. European regulators were criticized by German banks for a plan to incorporate into this year’s stress tests global capital standards that aren’t scheduled to be implemented for eight years. The European Banking Authority will review the amount of “higher quality and most loss-absorbing” capital on banks’ balance sheets, Andrea Enria, the group’s chairman, said in Vienna this week. The move was criticized by regional German banks including Norddeutsche Landesbank and Landesbank Hessen- Thueringen because the tests may exclude a form of non-voting capital, known as silent participation, which that country’s regulators allow to be counted toward a bank’s reserves.
  • Disney's(DIS) ESPN Starts Offering Live TV to Subscribers on Apple(AAPL) iPad, iPhone. Walt Disney Co. (DIS)’s ESPN is allowing owners of Apple Inc. (AAPL)’s iPad and iPhone who subscribe to pay- television service to watch its channels live on their devices. “WatchESPN,” available today at Apple’s App Store, will stream ESPN, ESPN2, ESPNU and ESPN3 to Time Warner Cable, Bright House Networks and Verizon FiOS TV subscribers, the Bristol, Connecticut-based sports network said in an e-mailed statement.
  • Australia's Swan Says 'No Brainer' to Reject Singapore ASX Bid. Australian Treasurer Wayne Swan rejected Singapore Exchange Ltd. (SGX)’s bid for ASX Ltd. (ASX), saying the deal was not in his nation’s interest and would have left the local bourse operator as a junior partner. “It was a no brainer that this deal was not in Australia’s national interest,” Swan told reporters today in Canberra, three days after the nation’s Foreign Investment Review Board advised the government to reject it. “At the end of the day this takeover was more about growing Singapore’s financial sector than Australia’s. I am open to the right deal for Australia if it comes along.”
Wall Street Journal:
  • Dickering on Budget Goes Down to the Wire. The federal government moved within a day of shutting down for the first time in 15 years Thursday, though House and Senate leaders said after a nighttime meeting with President Barack Obama that they had moved closer to a deal ahead of a deadline of Friday at midnight.
  • Friendly Fire Raises Tensions in Libya. Fighter jets bombed a rebel tank column readying for an attack on Libyan leader Moammar Gadhafi's forces near the oil town of Brega on Thursday morning, in what appeared to be the second friendly fire strike by NATO aircraft in less than a week.
  • U.S. Halted Record Aid Deal as Yemen Rose Up. The U.S. was on the verge of launching a record assistance package to Yemen when an outbreak of protests against its president led Washington to freeze the deal, officials say, marking a sharper turn in U.S. policy there than the administration has previously acknowledged. The first installment of the aid package, worth a potential $1 billion or more over several years, was set to be rolled out in February, marking the White House's largest bid at securing President Ali Abdullah Saleh's allegiance in its battle against al Qaeda in the Arabian Peninsula.
  • NYSE(NYX) Board Cool to Nasdaq Split Proposal. NYSE Euronext's board of directors is unlikely to embrace a plan to break up the Big Board parent because it runs counter to the company's established strategy, according to people involved in the discussions. The unsolicited joint buyout offer from Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. values NYSE at more than $1 billion more than that of its agreed combination with Deutsche Börse AG, and would divide up the company's equities-related and futures businesses.
  • Lenovo: Quake-Related Supply Chain Concerns Have Eased For Now. China's Lenovo Group Ltd. (LNVGY, 0992.HK) said initial concerns about disruptions to its supply chain caused by the earthquake in Japan last month have been eased for now. The world's fourth-biggest computer maker by unit shipments has closed holes in its supply chain that it was projecting to occur in mid-May through June, said Rory Read, Lenovo's president and chief operating officer in an interview.
  • Muni-Tax Break Under Siege. The tax break for municipal bond investors, a cornerstone of the $2.9 trillion market for bonds sold by cities and states, is under fire in Washington. The latest assault came Tuesday in the Senate when Ron Wyden (D., Ore) and Dan Coats (R., Ind.) proposed a bill preventing municipal borrowers from issuing tax-exempt bonds. Municipal-bond buyers would instead receive a tax credit that analysts say likely would be less attractive to investors.
  • Roy Niederhoffer Hedge Fund Lost 10% In March. Roy Niederhoffer's largest hedge lost 10% last month because of market volatility after the March 11 earthquake in Japan. The $368 million Diversified Program run by his firm, R.G. Niederhoffer Capital Management, was down 9.8% in March, following a 1.4% loss in February, according to an April 5 letter to investors that was obtained by MarketWatch on Thursday.
  • Nation's Capital Bets Online Poker Is Lawful. Washington, D.C.'s Budget Lets Lottery Operate Gambling Website in Challenge to the Federal Government's Effective Ban.
  • U.S. Eyes New Stock Rules. Federal securities regulators are moving toward easing decades-old constraints on share issues by private companies, in a sweeping review that could remake the way American start-ups raise capital.
  • Europe's Rate Rise Signals End of Cheap-Money Era. The European Central Bank on Thursday became the first monetary authority in a major developed economy to raise interest rates since the global financial crisis struck—a sign that the long period of extraordinarily easy credit is beginning to come to a close.
Business Insider:
Zero Hedge:
CME Group:
Rasmussen Reports:
USA Today:
  • U.N. Counting on Strong U.S. Funding, Ban Says. The United Nations is counting on continued strong financial support from the United States, Secretary-General Ban Ki-moon said on Thursday, even as President Barack Obama and Congress negotiate federal budget cuts to try to avoid a government shutdown. Ban came from U.N. headquarters in New York to tell U.S. lawmakers in Washington that while he was fully aware of the new age of austerity around the globe, "We need to have robust financial support from the United States." The U.S. envoy to the United Nations, Susan Rice, took on U.N. critics in Congress who charge that the organization's budget is opaque, its bureaucracy is bloated and that it uses Israel as a "punching bag". "The U.N., we all agree, is far from perfect. But it delivers real results for every American by advancing U.S. security through burden-sharing," Rice told the House of Representatives Foreign Affairs Committee. Some Republicans, who have the majority in the House, said they are tired of giving billions of dollars every year under an arrangement that makes the United States responsible more than a fifth of the U.N. budget. "The fact that right now we are in such an economic crisis and we are expected to pay 22 percent of the budget of the United Nations with no strings attached is an incredible demand on the people of the United States," Representative Dana Rohrbacher, a Republican, said during the hearing with Rice. Obama has requested $3.5 billion for U.N. support and peacekeeping missions in fiscal 2012. Washington pays 22 percent of the core U.N. budget and 25 percent of its peacekeeping costs. "We're talking about a lot of money for an organization that uses Israel as a punching bag," Rohrbacher said, referring to frequent criticism of the key U.S. ally at U.N. bodies such as the Human Rights Council.
  • US Equity Funds Net $7.7 Billion in Latest Week - Lipper.
  • Brazil Hikes Personal Credit Tax to Slow Inflation. Brazil will raise a tax on personal credit in a bid to brake inflation that has edged dangerously close to a government ceiling, the finance minister said on Thursday. The government will double the so-called IOF tax on personal credit to 3 percent as of Friday to stem a steep increase in demand, Finance Minister Guido Mantega said. Already 12-month inflation sped to 6.3 percent through March, according to data released on Thursday by the government's statistics agency IBGE.
  • Spain's Tough Stance Makes It Different From The Rest. Once Portugal admitted the inevitable, the spotlight was always going to turn to Spain. Since Ireland sought aid in November, the Mediterranean neighbours have been talked of in the same breath as the euro economies next at risk of collapse.
Times Online:
  • U.K. Chancellor of the Exchequer George Osborne will today rule out offering a bilateral loan to Portugal as part of the rescue deal for the country. The U.K. will still face liabilities of up to $7.34 billion becuase of its participation in a EU emergency facility and as a shareholder in the IMF.
Financial Times Deutschland:
  • BHP Billiton Ltd.(BHP) wants customers to accept monthly, instead of quarterly, contracts for coking coal delivery, citing Salzgitter AG CEO Heinz Joerg Fuhrmann. The change will likely mean higher costs for steelmakers, Fuhrmann said.
  • Short selling of Commerzbank AG shares topped $1.43 Billion in recent weeks, citing financial data service Dataexplorers Ltd. About 17% of all issued Commerzbank shares have been sold short recently, four times more than in early February, at a value of about 1.2 billion euros, Dataexplorers said.
Kyodo News:
  • The Japanese government proposed an energy-saving plan requiring corporations to reduce power use. The proposal also urges households to make efforts to cut electricity use by as much as 20%.
The Standard:
  • China Railway Braces for Sales Fall. China Railway Group (0390) expects contract sales to fall in the first quarter, as projects are postponed amid central government attempts to tame inflation. "The estimated decline is also due to delays on railway projects that are not up to standard," chairman and executive director Li Changjin said yesterday.
Economic Information Daily:
  • China's monetary policy may focus more on price tools such as interest rates in the future, Zhang Monan, a researcher with the State Information Center, wrote in a commentary today. The country's monetary policy may gradually take fluctuations in asset prices into account, Zhang wrote.
Shanghai Securities News:
  • A unified central bank for the world should be established in the long term as part of efforts to reform the international monetary system, Wang Yong, a professor at the People's Bank of China's training school in the city of Zhengzhou, wrote in a commentary. This proposed bank would oversee global monetary and financial regulation and also be responsible for issuing a sing international currency, Wang wrote.
China Wine News:
  • China urged breweries including China Resources Enterprise Ltd., Tsingtao Brewery Company Ltd., Kingway Brewery Holdings Ltd. and Yanjing Beer Co. Ltd. not to raise prices beyond a "reasonable level," citing Liu Yuan, vp of the China National Assoc. for Liquor and Spirits Circulation.
China Securities Journal:
  • China will tighten the approval process for wind-power projects to slow the rapid growth of the industry.
  • China is studying measures to stabilize rice prices, citing Peng Sen, a vice chairman of the National Development and Reform Commission.
South China Morning Post:
  • Beijing Pursues Probe into Railway Mess. The central government has discovered irregularities in some railway tenders and is investigating further, Li Changjin, chairman of China Railway Group, one of the country's two dominant state-owned rail construction firms, said.
National Business Daily:
  • Baoshan Iron & Steel Co. will cut prices for hot-rolled and cold-rolled products for May delivery, citing the company. The company will reduce prices for hot-rolled products by 200 yuan a ton and cut prices for cold-rolled products by 300 yuan a ton.
China National Radio:
  • China will introduce tax measures to ensure the production and supply of gasoline and diesel if the international price of oil exceeds $130 a barrel, citing an official with the National Development and Reform Commission. The nation won't allow imported inflation to spur increases in domestic consumer prices, citing Peng Sen, a vice chairman of the commission.
Evening Recommendations
  • Reiterated Buy on (EXPE), target $29.
Raymond James:
  • Raised (MDSO) to Strong Buy, target $35.
Night Trading
  • Asian equity indices are -.50% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 104.5 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 109.50 -.5 basis point.
  • S&P 500 futures +.16%.
  • NASDAQ 100 futures +.16%.
Morning Preview Links

Earnings of Note
  • (BTH)/2.06
Economic Releases
10:00 am EST
  • Wholesale Inventories for February are estimated to rise +1.0% versus a +1.1% gain in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Lockhart speaking, the (AER) investor meeting and the (PAAS) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.

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