Friday, July 20, 2012

Friday Watch

Posted by Gary .....at 12:24 AM

Evening Headlines
Bloomberg:
  • Syria’s Collapse Would Reverberate Throughout the Mideast. The assassination of three Syrian military leaders loyal to President Bashar al-Assad may hasten the end of his family’s four-decade rule, an upheaval that would affect the security and influence of Israel, Iran, Saudi Arabia, Jordan, Lebanon and other neighboring states. Nabil el-Arabi, secretary-general of the Arab League, expressed anxiety among Syria’s neighbors over the regional fallout from the crisis when he warned July 18 of “a collapse in the situation not only in Syria, but for the whole region.” If Assad’s regime is toppled, the ensuing power struggle might bring with it revenge killings by or against his minority Shiite Alawite sect, which controls the military and the economy, said Aaron David Miller, a fellow at the Woodrow Wilson International Center for Scholars in Washington. Instability and sectarian violence could bleed into neighboring states such as Jordan, Lebanon, and Iraq. Already, 125,000 Syrian refugees have fled the violence to neighboring states, with the greatest number to camps in Turkey, the U.S. State Department said yesterday. No one knows whether the bombing July 18 inside a heavily guarded military compound in the capital of Damascus is the beginning of the end for the Assad family’s authoritarian regime, or what new government or chaos might follow it.
  • Yields Below Zero No Bar to Buyers Craving Safety: Euro Credit. Negative yields on European government securities, paced by a record of minus .074 percent on German two-year notes, aren't deterring investors seeking the safety of debt with the best perceived creditworthiness. "It's not return on capital, it's return of capital," said Peter Allwright, who helps manage about $4 billion as the head of absolute rates and currency at RWC Partners Ltd. in London. "We are in a horrible deflationary and deleveraging world. In euros, we only want to hold Germany as it's the best and the most liquid."
  • Euro Falls Versus Most Major Peers Before Confidence Data. The euro slid versus most of its major peers before data that economists say will show consumer confidence remained weak and manufacturing continued to shrink in the 17-nation region. Europe’s common currency was 0.2 percent from the lowest level in more than three years versus the British pound after Spain’s borrowing costs surged at an auction yesterday, rekindling concern the region’s debt crisis is deepening. The dollar maintained a five-day slide against the Australian currency after stocks rose globally, sapping demand for lower- yielding assets. “There are a number of issues with the European economy. It is pretty clearly in quite an acute contraction,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “The euro is going to remain a weak currency.”
  • China Stocks Fall, Extending Slump to 5th Week on Property Curbs. China’s stocks fell, sending the benchmark index towards a fifth week of declines, after the government said it won’t relax property controls and the nation’s two largest-listed brokerages posted profit declines. China Vanke Co. slid to a two-week low, leading developers lower, after the government said it will seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices. Citic Securities Co. and Haitong Securities Co. retreated after estimating falling profits in the first half of this year. Hisense Electric Co., China’s biggest manufacturer of flat-panel televisions, slumped 4.1 percent after Citic Securities reduced its earnings forecast. The Shanghai Composite Index (SHCOMP) slid 0.4 percent to 2,175.75 at the 11:30 a.m. local-time break, adding to a 0.5 percent drop this week. The Shanghai Composite has fallen 12 percent from this year’s high recorded on March 2 amid concern an economic slowdown is deepening.
  • China Profits Sinking May Pressure Wen to Reduce Taxes: Economy. Profit declines for hundreds of Chinese companies in the first half may increase pressure on the government to reduce corporate taxes as part of efforts to stem the economy’s slowdown. Net income declined from a year earlier for more than half of 760 listed companies to report results, worse than in the first six months of 2009, Societe Generale SA said yesterday. Credit Agricole CIB sees tax cuts as a likely policy tool.
  • New York City Jobless Rate Climbs to 10%. New York City’s seasonally adjusted unemployment rate jumped to 10 percent in June, matching a post- recession peak reached in the six months through February 2010, the state Labor Department said. The rate climbed from 9.7 percent in May.
  • Crop Traders Extend Bullish Streak on U.S. Drought: Commodities. Corn and soybean traders are bullish for a 13th consecutive week on mounting concern that yields will keep dropping amid the worst U.S. drought in a half century. Twenty analysts surveyed by Bloomberg expect soybeans to climb next week, after reaching a record yesterday. A further five were bearish and three neutral. Nineteen predicted gains in corn, five saw a decline and three anticipated little change. Hedge funds are holding the biggest bet on rising soybeans since the beginning of May and the largest wager on corn since April, U.S. Commodity Futures Trading Commission data show.
  • Weakest Monsoon Since 2009 to Shrink India Rice Harvest. The rice harvest in India, the world’s second-biggest producer, is set to drop from an all-time high as the weakest monsoon in three years slows planting, potentially boosting global prices. “It will be difficult to match last year’s record rice production,” said Samarendu Mohanty, a senior economist at the International Rice Research Institute in Manila. Output was 104.3 million tons in the year ended June 30. A 22 percent shortfall in monsoon rains delayed sowing of crops from rice to cotton, stoking a rally in commodity prices and threatening to accelerate India’s inflation that exceeded 7 percent for a fifth straight month in June. Dry weather from the U.S. to Australia has parched fields, pushing up corn, wheat and soybean prices on concern global supplies will be curbed. Costly rice, staple for half the world, may increase global food prices forecast by the United Nations to advance this month. “The whole grains complex of wheat, corns, soybeans are forcing rice prices higher as well,” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity- markets newsletter in Sydney. “Indian production is very important for the market.”
  • Palo Alto Raises $260.4 Million, Pricing IPO Above Range. Palo Alto Networks Inc. and Kayak Software Corp. (KYAK) raised a combined $351.4 million, pricing their initial public offerings above the proposed ranges and tapping renewed investor demand for technology shares. Palo Alto, a maker of Internet firewalls, raised $260.4 million selling 6.2 million shares at $42 apiece, it said in a statement today, after offering the shares for $38 to $40. Kayak, an online travel company, raised $91 million selling 3.5 million shares at $26 apiece, a dollar more than the top end of the marketed range, according to a company statement.
  • Carson Block Targets New Oriental(EDU). (video) New Oriental Education & Technology Group is trying to downplay its franchise operations, Carson Block, the founder of research company Muddy Waters LLC, said in an interview with Bloomberg TV today.
  • Congratulations, Canada, On Your Ongoing Housing Bubble, (graph)
  • Investors Whipsawed by Hourly Price Swings in IBM(IBM), Coca-Cola(KO). Investors in three of the biggest Dow Jones Industrial Average (INDU) stocks were whipsawed by price swings that repeated every hour yesterday, fueling speculation the moves were a consequence of computerized trading. Shares of International Business Machines Corp. (IBM), McDonald’s Corp. (MCD) and Coca-Cola Co. (KO) swung between successive lows and highs in intervals that began near the top and bottom of each hour, data compiled by Bloomberg show. While only IBM finished more than 1 percent higher, the intraday patterns weren’t accompanied by any breaking news in the three companies where $3.42 billion worth of shares changed hands.
  • Google(GOOG) Surges on Motorola Deal, Ad Growth. Google Inc. owner of the world’s most popular search engine, said second-quarter revenue surged 35 percent, helped by its acquisition of Motorola Mobility Holdings and as more users clicked on advertisements.

Wall Street Journal:

  • Greeks Brace for More Pain on Wages.
  • Syrians Flee Capital as Regime Hits Back. Battles With Rebels Intensify; Russia, China Veto U.N. Effort. Syrian soldiers unleashed an attack in Damascus that drove thousands of refugees from the city, while state media showed President Bashar al-Assad swearing in a new defense minister, in a show of force a day after a rebel bomb struck the regime's core. On the fifth day of fighting in the Syrian capital, witnesses reported government artillery and mortar attacks on several neighborhoods, suggesting the government intended to use significant force to silence the rebellion there, even as rebels claimed important gains elsewhere in the country.
  • Religious Tensions Erupt in Russian Republic. The top Muslim cleric in Russia's Tatarstan republic was wounded by a car bomb and another senior cleric there was shot and killed in separate attacks that investigators called possible reprisals for their clampdown on radical Islamists. Thursday's violence, which shook a largely Muslim region often touted as a showcase of religious tolerance, followed more than a year of friction between its moderate Islamic clerical leadership and increasingly assertive groups practicing a puritanical version of Islam known as Salafism. "It is a serious signal," President Vladimir Putin declared.
  • Bulgaria Blames Suicide Bomber. Suspect in Attackon Israeli Tourists Seen on Video, Officials Say; Israel Reiterates Iran Link, as Tehran Denies Involvement. A deadly attack targeting Israeli tourists in a Bulgarian resort city was the work of a suicide bomber dressed as a vacationer, authorities said Thursday. Bulgarian investigators released images of the man they believe triggered the blast that were recorded by security cameras before the attack. The footage showed a man in a blue T-shirt, plaid shorts and sneakers, wearing a large back pack and carrying what appears to be another, smaller bag.
  • Euro Crisis Hits Emerging-Markets. Lending conditions in emerging economies deteriorated in recent months as the deepening crisis in the euro zone weighed on banks around the world, according to an industry survey to be released Friday. The Institute of International Finance, a global association of big banks, found that credit standards grew tighter in emerging-market banks around the world, while bad loans increased in the second quarter from the previous quarter. The results suggest trouble ahead for emerging economies that had been a bright spot in the global recovery, with banks in Asia and Latin America showing deeper caution.
  • U.S. Says Iran Plans to Disrupt Oil Trade. Officials Cite New Intelligence Pointing to Potential Attacks on Platforms, Tankers in Region; Tehran Is 'Very Unpredictable'

Business Insider:

Zero Hedge:

CNBC:

IBD:

Rasmussen Reports:
Reuters:
  • Sheila Bair urges prompt reforms for money market funds. If the Securities and Exchange Commission does not beef up its oversight of money market funds, a council of regulators should take the reins, former U.S. bank regulator Sheila Bair said on Thursday.
  • Exclusive: Ex-Goldman(GS) mortgage chief plans foreclosed home fund. Former Goldman Sachs Group Inc. executive Donald Mullen, one of the architects of the subprime mortgage trade, is trying to raise at least $500 million for a fund that will buy foreclosed homes with an eye toward renting them out. Several sources said Goldman Sachs is serving as the placement agent for the fund and will market it to wealthy investors, including some of its own clients.
  • Exclusive: Banks in Libor probe consider group settlement-sources. A group of banks being investigated in an interest-rate rigging scandal are looking to pursue a group settlement with regulators rather than face a Barclays-style backlash by going it alone, people familiar with the banks' thinking said. Such discussions are preliminary, and it is unclear if regulators will enter these talks, aimed at resolving allegations that banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins hundreds of trillions of dollars in contracts.
  • SEC extends review period on JPM's copper ETF plan. The U.S. Securities and Exchange Commission has extended the consultation period on JP Morgan Chase & Co's controversial plan for an exchanged-traded fund (ETF) physically backed by copper amid mounting opposition from U.S. consumers of the metal.
  • U.S. banks haunted by mortgage demons that won't go away. Lenders like Bank of America Corp and Wells Fargo & Co say they are facing mounting pressure to buy back bad mortgages they sold to investors, signaling that banks' home-loan headaches could continue for years.
  • Intuitive(ISRG) profit tops estimates; Europe declines seen. Intuitive Surgical Inc on Thursday cautioned that challenging economic conditions in Europe and declines in U.S. prostate surgeries were likely to persist, and its shares fell more than 5 percent.
  • Chipotle(CMG) restaurant sales miss estimate, shares tumble. Chipotle Mexican Grill Inc on Thursday said the sluggish U.S. economy slowed growth in sales at established restaurants during the second quarter, sending its shares down more than 6 percent.
  • Microsoft(MSFT) posts quarterly loss but beats Wall Street. Microsoft Corp reported its first quarterly loss as a public company on Thursday as it took a previously announced hit for writing down the value of its ailing online unit, but held up better than expected in the face of stagnant computer sales.
Telegraph:
  • Worst drought since 1956 threatens world food crisis. America's worst drought in more than half a century is threatening the world with a fresh food crisis.
  • Spanish debt crisis returns as Germany nears bailout fatigue. Spanish borrowing costs have surged to euro-era highs despite draconian fiscal cuts and backing from the German parliament for the country’s €100bn (£78bn) bank rescue package. Yields on five-year bonds jumped to a fresh crisis peak of 6.46pc at a closely-watched auction as hopes fade for fresh stimulus from the European Central Bank and direct recapitalisation of Spanish banks by the EU bailout find, the European Stability Mechanism (ESM). “Demand for Spanish paper is collapsing, even for shorter-dated debt which is very worrying and raises the spectre of Spain losing market access,” said Nicholas Spiro from Spiro Sovereign Strategy. Marchel Alexandrovich from Jefferies Fixed Income said the markets are already bracing for second bigger rescue of around €400bn. “A few more weeks like this and Madrid is going to decide to it has nothing more to lose and call for a full sovereign bail-out,” he said. “Then we will find out if there really is any money in the EU kitty. “If the ECB goes on holiday without doing anything more, this is going to snowball. We’re way past point where any country can deliver fiscal measures on its own. People are not going to buy Spanish and Italian debt right now whatever ever they do. There has to be a circuit breaker.”

Capital.gr:
  • Union Says Greece to Slash Benefits to Retired Workers. Greece's public sector umbrella union Adedy said Thursday the government plans to slash lump sums paid to retired civil servants by more than 20% in a bid to reduce the state funding needs of pension funds. After meeting with Greek Labor and Social Security Minister Yiannis Vroutsis, Adedy cited the minister as telling them that Greece's coalition government plans to slash the payments by 22.7% after having already reduced the amount by 20%. "The government's decision to move ahead with a new drastic reduction to the social security and pension rights of those working in the state is a cause of war," Adedy said in a statement.
Chosun Ilbo:
  • N.Korean Army Chief 'Refused to Go Quietly'. A gunbattle broke out when the North Korean regime removed army chief Ri Yong-ho from office, leaving 20 to 30 soldiers dead, according to unconfirmed intelligence reports. Some intelligence analysts believe Ri, who has not been seen since his abrupt sacking earlier this week, was injured or killed in the confrontation.
China Daily:
  • China will not relax property control policies. China will continue to maintain a firm grip of its real estate market and consolidate previous achievements in bringing down home prices so as to prevent them from rebounding, according to an urgent government notice released Thursday. "Local authorities must strictly implement the nation's property control policies. They should not relax the control and relevant requirements unauthorized," according to the notice. "Those that have loosened up controls must set straight the policies," said the notice, which was jointly released by the Ministry of Land Resources (MLR) and the Ministry of Housing and Urban-Rural Development. It also ordered local authorities to step up efforts in monitoring land pieces left idle even though they were sold.
China Securities Journal:
  • China may tighten approvals for local solar photovoltaic projects to curb blind installations, citing a person familiar with the matter.
Shanghai Securities News:
  • China's central bank offering a larger amount of reverse repurchase agreements may mean that the PBOC may cut lenders' reserve requirement ratio at a later date, citing people familiar with the situation.
  • China is wasting the large amount of capital accumulated from the nation's high savings rate by not allocating them at the most suitable places, citing Guo Shuqing, China Securities Regulatory Commission's chairman.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -1.0% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 161.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 133.25 -1.75 basis points.
  • FTSE-100 futures -.12%.
  • S&P 500 futures -.27%.
  • NASDAQ 100 futures -.03%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (AEP)/.71
  • (BHI)/.78
  • (GE)/.37
  • (IR)/.91
  • (MAN)/.72
  • (SLB)/1.00
  • (STI)/.45
  • (VOD)/.04
  • (IDXX)/.90
Economic Releases
  • None of note

Upcoming Splits

  • (CME) 5-for-1

Other Potential Market Movers

  • The EU Finance Ministers Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and real estate shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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