Thursday, April 11, 2013

Thursday Watch

Evening Headlines 
  • Italy Sells Bonds With Debt Level Approaching Postwar Record. One day after Prime Minister Mario Monti announced Italy’s debt will reach a postwar record this year, the Treasury is tapping investors with the sale of as much as 7.5 billion euros ($9.8 billion) of bonds. The Rome-based Treasury will offer as much as 4 billion euros of a new three-year bond, 2 billion euros of 15-year debt and 1.5 billion euros of floating-rate notes. The auction should get “strong support” from 16.7 billion euros in redemptions due April 15 that will leave investors with funds to reinvest, UniCredit analysts including Chiara Cremonesi wrote in a note yesterday. Italy’s bond yields declined yesterday even after the government announced that its debt will rise to 130.4 percent of gross domestic product from 127 percent last year as the third- biggest economy borrows to contribute to bailouts and pay arrears to government suppliers.
  • Merkel’s No-Nuke Stumble May Erode Re-Election Support: Energy. Chancellor Angela Merkel’s sweeping plan to transform Germany into a green-energy giant almost destroyed Nordseewerke GmbH, one of the country’s leading makers of wind-turbine foundations. Nordseewerke, which produces Statue of Liberty-sized foundations, ramped up its manufacturing capacity and head count in 2011 after Merkel declared that Germany would begin a massive project to install 25,000 megawatts of offshore wind power by 2030.
  • Hagel Calls on North Korea to Tone Down Rhetoric. U.S. Defense Secretary Chuck Hagel said North Korea has “been skating very close to a dangerous line” and should tone down its “bellicose rhetoric” to ease mounting tensions in the region. “Their actions and their words have not helped defuse a combustible situation,” Hagel said yesterday at a Pentagon news conference. He said the U.S. is “fully prepared to deal with any contingency.
  • Australia’s Unemployment Rate Jumps to Three-Year High: EconomyAustralia’s unemployment rate climbed in March to the highest level in more than three years, sending the local dollar and bond yields lower as traders added to bets the central bank will resume interest rate cuts. The jobless rate rose to 5.6 percent from 5.4 percent, the statistics bureau said in Sydney today, the highest since November 2009.
  • Bank of Korea Resists Rate-Cut Pressure as North Threatens War. The Bank of Korea held borrowing costs unchanged for a sixth month, resisting pressure from the government for a reduction even as North Korean threats of war threaten to undermine confidence. Governor Kim Choong Soo and his board kept the benchmark seven-day repurchase rate at 2.75 percent, the central bank said in a statement in Seoul today. Nine of 20 economists surveyed by Bloomberg News predicted the move while the remainder forecast a 25-basis-point cut.
  • Fed’s Fisher Says Benefits and Costs of Asset Purchases Unclear. Federal Reserve Bank of Dallas President Richard Fisher said that both the ultimate benefits and costs of the central bank’s asset purchases are unclear. “Companies are starting to use the copious cheap money they have access to for investing in capital projects and employing increasing amounts of workers,” Fisher said in the text of prepared remarks given today in El Paso, Texas. “But it is not yet clear that we will achieve a justifiable bang for the trillions of bucks the Fed has flooded the economy with.” “The Federal Reserve has provided plenty of, if not too much, high-octane fuel in the form of cheap and abundant money to propel the economy forward,” Fisher said at the University of Texas at El Paso.
  • Microsoft(MSFT) Windows Weak Demand Drives Worst PC Drop on Record. Personal-computer shipments plummeted in every region of the world in the first quarter as buyers opted for smartphones and tablet computers and Microsoft Corp. (MSFT)’s newest operating system met with weak demand. Global PC unit shipments fell 14 percent in the first quarter -- the worst such decline on record -- to 76.3 million, a bigger drop than the 7.7 percent decline IDC had forecast, the market researcher said in a statement. The slump was the steepest since IDC began tracking shipments in 1994. Every PC maker except China’s Lenovo Group Ltd. (992) experienced declines as businesses chose to install Microsoft’s Windows 7 operating system on employees’ computers instead of the newer Windows 8, Jay Chou, an analyst at Framingham, Massachusetts- based IDC, said in an interview. Consumers also shunned Windows 8 in favor of smartphones and tablets, which can handle many of the same tasks, he said. “We don’t have a lot of reason to be optimistic that the market will remain in more than replacement-cycle mode,” Chou said. Consumers have found Windows 8’s redesigned user interface disorienting, and prices for touch-screen enabled computers that run the software are still too high, he said. The last time worldwide PC shipments experienced a double- digit percentage decline was in the third quarter of 2001, when the market was roiled by the Sept. 11 terrorist attacks and the impact of a decline in technology stocks, Chou said. 
  • Goldman Sachs(GS), Citigroup(C), Carlyle Received Fed Minutes Early. Banks including Citigroup Inc. and Goldman Sachs Group Inc., along with congressional staff members and trade groups, received potentially market-moving Federal Reserve information 19 hours before the public in a release the central bank called accidental. Brian Gross, a member of the Fed’s congressional liaison staff, distributed the March 19-20 minutes of the Federal Open Market Committee meeting at 2 p.m. yesterday Washington time, according to an e-mail obtained by Bloomberg News. Gross referred questions to Fed spokeswoman Michelle Smith.
  • Iron Ore’s $250 Billion Glut Pressures Rio to Vale: Commodities. The world’s biggest iron-ore producers are planning $250 billion of new mines, threatening to deepen a price slump for the commodity already forecast to drop for at least the next three years. Mining companies are facing growing investor pressure to defer or cancel projects to stem price declines. Rio Tinto Group (RIO), the second-largest iron ore exporter, will decide on one of the biggest industry expansions in Western Australia in the second half. A decision to delay would boost its earnings in 2015 by $3.7 billion, according to Liberum Capital Ltd.
Wall Street Journal:
Fox News:
  • Obama budget proposes more than $1 trillion in taxes, fees. President Obama's budget proposal includes new tax increases that hit everything from deductions for top earners to packs of cigarettes. Though the president's newly released plan claims to include $580 billion in new revenue over the next decade, when all taxes and fees are counted the real number is slightly higher than $1 trillion
  • N. Korea positions missile launchers on coast, Hagel says regime close to 'dangerous line'. North Korea has positioned two mobile missile launchers on the country's east coast, senior Pentagon officials tell Fox News -- movement that comes as Defense Secretary Chuck Hagel warned Wednesday that North Korea is "skating very close to a dangerous line." The senior Pentagon officials told Fox News that a test of the Musudan missiles could occur "at any time." If the North Koreans proceed, it would be the first mobile test of this specific intermediate-range missile, which has a range of 2,500 miles. The fact that this would be their first test is giving military leaders an added layer of uncertainty about the potential for an unintended mistake
Zero Hedge:
Business Insider:
  • Yum(YUM) says bird flu hits China April sales; March down. KFC parent Yum Brands Inc warned that a new bird flu outbreak in China badly hit restaurant sales there this month, even as the company also reported a sharper-than-expected slide in March sales in the country caused by the lingering impact of a separate food safety scare. "Within the past week, publicity associated with Avian flu in China has had a significant, negative impact on KFC sales," the company said in a regulatory filing on Wednesday.
  • Christine Lagarde: crisis has created 'three-speed economy'. The global financial crisis has created a "three-speed economy" with the eurozone at the bottom and a too-big-to-fail banking model that is "more dangerous than ever", the managing director of the International Monetary Fund has said.  
  • Japan stays alert for potentially more than one missile launch by North Korean, citing Defense Minister Itsunori Onodera.
South China Morning Post:
  • Chinese North Korea Scholar Says 70%-80% Chance of War. Zhang Liangui, professor of intl. strategic research at the Chinese Communist Party's Central Party School, says North Korean leader Kim Jong Un may want to use crisis as an opportunity to force reunification of Korean Peninsula.
China Securities Journal:
  • China Small Firms "Not Optimistic" on Economy. Chinese small and medium-sized companies are "not optimistic" about the economy this year because of weak domestic and overseas demand, China Securities Journal reports after a tour in Shandong and Zhejiang  provinces and Shenzhen city. Coal and cotton stockpiles in Qingdao's bonded zone remain high. Some small companies report falling profit because of rising labor, land leasing and other operating costs, the report said.
  • China's southern city of Guangzhou will raise the minimum down payment requirement for second home purchases to 70% if its home prices rise by more than 2% in April on month, citing a person familiar with the matter.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 116.0 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 92.5 -1.75 basis points.
  • FTSE-100 futures -.11%.
  • S&P 500 futures -.08%.
  • NASDAQ 100 futures -.20%.
Morning Preview Links

Earnings of Note

  • (PIR)/.60
  • (OZRK)/.56
  • (JBHT)/.64
Economic Releases
8:30 am EST
  • The Import Price Index for March is estimated to fall -.5% versus a +1.1% gain in February. 
  • Initial Jobless Claims are estimated to fall to 360K versus 385K the prior week.
  • Continuing Claims are estimated to rise to 3067K versus 3063K.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Plosser speaking, Fed's Bullard speaking, Italian 10Y bond auction, German CPI, Australia Unemployment data, 30Y T-Bond auction, weekly Bloomberg Consumer Comfort Index and the (NVDA) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly lower and rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

No comments: