Tuesday, June 21, 2011

Today's Headlines


  • European Stocks Advance Most in Two Months Before Greek Vote. European stocks climbed the most in two months amid speculation that Greek Prime Minister George Papandreou will win a confidence vote that moves the nation a step closer to avoiding a default. The Stoxx Europe 600 Index rose 1.4 percent to 269.59 at the 4:30 p.m. close in London, the biggest gain since April 20. Since its peak on Feb. 17, the gauge has still tumbled 7.4 percent as U.S. economic data trailed forecasts, adding to concern about Europe’s debt crisis. The measure’s valuation fell to 12.6 times its companies’ reported earnings yesterday, the cheapest since 2008, according to Bloomberg data. “There is optimism that the moves Papandreou has made will be sufficient enough to get the vote passed,” said Andrea Williams, who helps manage about 600 million pounds ($970 million) at Royal London Asset Management. “It’s one hurdle at a time for Greece. Spain’s bond issuance also seems to have gone ok which is also helping the market.”
  • Sovereign Credit Swaps Decline Ahead of Greece Confidence Vote. The cost of insuring European sovereign and corporate debt fell on speculation the Greek government will pass a confidence vote tonight that will help it avert an imminent default. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 9 basis points to 215 at 12:06 p.m. in London. Swaps on Greece dropped 119 basis points to 1,883, according to CMA. Default swaps on Ireland declined 26 basis points to 735, Portugal fell 14 to 754 and Spain dropped 10 to 277, while Italy narrowed 6.5 to 169.5 and Belgium was 5.5 lower at 146.5. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 5 basis points to 406, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 2 basis points to 109.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 2 basis points to 159 and the subordinated index declined 3.5 to 284.5.
  • Economic Slump Sends U.S. Stock 'Buy' Signal: Chart of the Day. U.S. economic reports are poised to stop disappointing investors so often and start sending stocks higher, according to Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist. The CHART OF THE DAY displays the Citigroup Economic Surprise Index, which Levkovich used to reach his conclusion in a June 17 report. The index is based on the relationship between the past three months of economic data and the average estimates of economists surveyed by Bloomberg. This month, Citigroup’s index dropped to minus 117.2, its lowest level since January 2009. The reading followed a three- month, 215-point plunge. The gauge fell more than two standard deviations below its historical average, which showed just how far away it was from the norm, the report said. “When the surprise index is that low, the stock market does have a tendency to generate strong returns” during the next six to 12 months, Levkovich wrote. Since 1998, the Standard & Poor’s 500 Index averaged a six- month gain of 4.4 percent when the economic gauge was below the two-standard-deviation threshold, according to the report. For 12 months, the average increase was 15 percent. Stocks rose in 79 percent and 87 percent of the periods studied, respectively. Technology and raw-material stocks rose most consistently along with automakers, retailers and other companies dependent on consumers’ discretionary income.
  • U.S. Existing Home Sales Hit Six-Month Low. Sales of existing U.S. homes decreased in May to the lowest level in six months, a sign that the housing market is lagging other parts of the economy. Purchases of existing homes fell 3.8 percent to a 4.81 million annual pace last month, in line with the 4.8 million median estimate in a Bloomberg News survey of economists, data from the National Association of Realtors showed today in Washington. Preliminary figures showing a jump in contract signings suggest May will prove to be the weakest sales month of the year, according to the group’s chief economist.
  • Crude Oil Fluctuates in N.Y. on Brent, Fuels Drop, Greek Confidence Vote. Oil fluctuated in New York as Brent crude and products tumbled and on speculation that Greek Prime Minister George Papandreou will win a confidence vote today. Futures climbed as much as 1.6 percent before erasing their gains as heating oil and gasoline dropped for a third day amid speculation that diesel fuel demand fell as supplies rose.Oil for July delivery fell 37 cents, or 0.4 percent, to $92.89 a barrel at 12:51 p.m. on the New York Mercantile Exchange. Futures have advanced 19 percent in the past year.
  • JPMorgan(JPM) to Pay $153.6M to Settle CDO Probe. JPMorgan Chase & Co. (JPM), the only Wall Street bank to remain profitable throughout the financial crisis, agreed to pay $153.6 million to resolve U.S. regulatory claims over its role in designing and selling a product linked to risky mortgages as the housing market unraveled in 2007. “Harmed investors will receive all of their money back,” the U.S. Securities and Exchange Commission said today in a statement. In settling the SEC’s fraud claims against the New York-based firm, JPMorgan also agreed to improve the way it reviews and approves mortgage securities transactions.
  • Brazilians Buy Miami Condos at Bargain Prices. Frederico Azevedo went to Florida looking for a second home. He left with three, paying $300,000 and $500,000 for condos in two Miami towers, and $1 million for a unit at the Trump International resort in nearby Sunny Isles. “I bought one to use as a vacation home and the other two as investments,” Azevedo, 39, president of Construtora Altana Ltda, a housing-development company, said in a telephone interview from his office in Sao Paulo. “It’s actually very cheap in Miami compared to here.” Surging real estate prices in Brazil and the currency’s 45 percent gain against the U.S. dollar since 2008 are sending Brazilians to South Florida in search of bargain vacation homes and property investments.
Wall Street Journal:
  • German Banks Have Up To 20B Exposure in Greek Debt-Bank Association Chief. The exposure of German banks to Greek debt is estimated at between EUR10 billion and EUR20 billion, Michael Kemmer, the managing director of German banking association BdB, told German radio station Deutschlandfunk Tuesday. However, this figure doesn't include bonds held by German "bad banks" that hold toxic and non-core assets. Hypo Real Estate for instance holds around EUR7.4 billion in Greek bonds, while lender WestLB's bad bank EAA holds about EUR1.1 billion. With an estimated exposure of EUR2.9 billion, Commerzbank AG (CBK.XE) is considered a big Greece creditor among other German banks. Rival Deutsche Bank AG (DBK.XE) has an exposure of EUR1.6 billion, according to most recent information. The estimated total exposure of up to EUR20 billion also includes EUR8 billion from Germany's state-owned KfW bank - a sum that was part of a first rescue package for Greece and should actually not be attributed to the German banking sector, Kemmer said. BIZ, the Bank for International Settlements, on Monday estimated the exposure of German banks at $34 billion, or EUR23 billion, while French banks's exposure was estimated at around $57 billion.
  • New Rule Proposed on Employers' Use of Union Consultants. The Obama administration Monday said employers should disclose more information about the consultants they hire to respond to union bargaining or organizing campaigns, a move long sought by organized labor and opposed by employers. The Labor Department's proposal hinges on the interpretation of "advice" stemming from the 1959 Labor-Management Reporting and Disclosure Act.
  • Is Apple(AAPL) Becoming a Value Stock?
  • Caterpillar's(CAT) Three-Month Sales Ending in May Up 52% > CAT. Worldwide retail sales of Caterpillar Inc.'s (CAT) construction machinery rose 52% in the three months to the end of May, as sales growth weakened against tougher year-ago comparison figures, according to dealer sales data released Monday. May was the 13th straight rolling three-month period of sales expansion for the world's largest seller of bulldozers, excavators and wheel loaders, as it rebounds from a steep decline in sales in 2009. During the April period, overall machinery sales increased 66% from a year earlier, and for the March period rose 61%. Dealer sales in North America climbed 54% during the May period, falling from a 65% increase reported in April and a 57% increase in March. U.S. construction activity, particularly new housing, remains doggedly sluggish, but the Peoria, Ill., company attributes the recent sales growth in the U.S. to the replacement of older machinery. Caterpillar dealers also have been updating their fleets of rental equipment.
Business Insider:
cnet News:
Boy Genius Report:
  • Apple(AAPL) iPhone 5 to be Major Update After All; Announcement and Availability in August? While Apple has indeed been giving some developers access to a device known as the iPhone 4S — an iPhone 4 with upgraded internals — BGR has independently confirmed that the next-generation iPhone will not merely be an upgraded iPhone 4 as had been previously rumored. We have been told by a reliable source to expect a radical new case design for the upcoming iPhone.
All Facebook:
  • Daimler CEO Warns of Rising Emerging Market Risks. Germany's Daimler (DAIGn.DE) warned of increasing economic risks in emerging markets such as China that could cause the auto industry's growth engine to sputter.
  • Exclusive: Exchanges Want Delay in SEC's Naked Access Ban. The four main U.S. exchanges asked their regulator to delay new rules that would ban so-called "naked access" to markets, where brokers rent their IDs to unlicensed high-speed trading firms, according to a letter obtained by Reuters. NYSE Euronext, Nasdaq OMX Group, BATS Global Market and Direct Edge asked the Securities and Exchange Commission to delay the ban until November 30, according to the letter. The ban, agreed to shortly after last year's "flash crash," is to begin July 14.
USA Today:
Financial Times:
  • Hedge Fund Managers Braced for a Rough Ride. Hedge fund managers are preparing to enter the second half of the year with plenty to be bearish about – and not much, it seems, to make money from. A welter of macroeconomic shocks since the beginning of 2011 have dented portfolios for the big-name fund managers that trade the world’s economic balances. The month of May saw the average hedge fund lose 1.18 per cent, according to Hedge Fund Research. But the average global macro hedge fund – which tend to be the biggest and most celebrated in the industry – lost more than double that with a 2.38 per cent reverse. This year is shaping up to be the third in a row that global macro funds, specialising in bets on interest rates, sovereign bonds and currencies, have underperformed. And the list of those in negative territory is a roll-call of star names.
Sueddeutsche Zeitung:
  • IMF acting head John Lipsky urged euro-area governments to stop bickering and agree on further aid for debt-strapped Greece, citing comments after a finance ministers' meeting in Luxembourg. Lipsky said yesterday it's essential to end the debate about restructuring quickly.
The Local:
  • Big German/French Businesses Make Plea to 'Save the Euro'. Dozens of Germany's leading business executives have made an impassioned defence of Europe's common currency in a newspaper ad campaign urging angry taxpayers to look beyond the cost of bailouts to the benefits the euro. Bosses from 50 of Germany and France’s top companies, among them. Siemens, BMW, Deutsche Bank, ThyssenKrupp, EON and Daimler, joined the plea to stand firm with the embattled euro in advertisements carried in major newspapers on Tuesday under the headline, “The euro is necessary.”

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