Wednesday, April 10, 2013

Wednesday Watch

Evening Headlines 
  • EFSF Sells 8 Billion Euros of Bonds on Strong Demand in Asia. The European Financial Stability Facility issued 8 billion euros ($10.5 billion) of bonds amid strong investor demand in Asia, helping boost the euro to its highest levels in more than three weeks. The European rescue fund sold 0.875 percent, five-year securities yesterday, according to data compiled by Bloomberg. Investors in Asia made up 29 percent of the buyer base, up from 5 percent on EFSF’s 4 billion euros of March 2016 bonds issued in February, according to a person familiar with the transaction, who asked not to be identified citing lack of authorization to speak publicly.
  • Cyprus Can Save Itself by Fleeing the Euro. 
  • BHP(BHP) CFO Says China Growth May Slow Toward 6% After Two Years. BHP Billiton Ltd. (BHP), the world’s biggest mining company, expects annual economic growth in China to moderate toward 6 percent, saying prospects in its largest customer present its main business risk.
  • China Export Gains Miss Forecasts for First Time in Four Months. China’s exports rose less than forecast for the first time in four months, leaving the world’s second-largest economy with weaker global demand to support a recovery than previous figures indicated. Shipments abroad increased 10 percent from a year earlier, the customs administration said today in Beijing. That compares with 21.8 percent growth in February and the 11.7 percent median estimate in a Bloomberg News survey of 36 economists. Imports rose by an above-forecast 14.1 percent in March, leaving an unexpected trade deficit of $880 million.
  • Bird Flu Outbreak Tied to Viruses That Hit Humans Hard. China’s deadly avian flu outbreak is being driven by at least two closely-related viruses, a situation that may make it more difficult to contain in humans and birds, researchers said. The H7N9 flu has shown signs of genetic diversity since the first three patients were diagnosed, said Richard Webby, director of a World Health Organization collaborating center for the virus at St. Jude Children’s Research Hospital in Memphis. It already appears more infectious than the H5N1 strain of bird flu that has been circulating since 2003, infecting 600 people and killing 60 percent of them, he said. Scientists from around the world are working together to understand the virus because of the potential devastation caused by novel infections. The pandemics of the past century include the 1918 Spanish flu that killed as many as 50 million people and the 2003 SARS outbreak that killed 774. 
  • Chinese Stocks Fall After March Trade Data; Drugmakers Drop. China’s stocks fell for the fifth time in six days, dragged down by health-care companies, after exports rose less than forecast.
    Shijiazhuang Yiling Pharmaceutical Co., whose products are included in a government list of drugs to combat bird flu, tumbled 6.8 percent as a measure of drugmakers dropped the most among industry groups.
  • Bill Gross Raises Holdings of Treasuries to Highest Since July. Bill Gross raised the holdings of Treasuries held in his $289 billion flagship fund at Pacific Investment Management Co. to 33 percent of assets last month, the highest level since July. Gross boosted the proportion of U.S. government securities in Pimco’s Total Return Fund from 28 percent in February, according to a report on the company’s website. Gross has been advising investors to buy government debt, including inflation- linked securities and nominal Treasuries as the Bank of Japan (8301) last week became the latest central bank to announce unprecedented stimulus measures.
Wall Street Journal: 
  • Lenders Used Aid to Repay TARP. A number of small banks used $2.1 billion in government cash intended to boost small-business lending to repay bailout funds from the financial crisis, a government watchdog said Tuesday in a report that also concluded the banks lent less money than firms that didn't take bailout aid. Among the 332 banks participating in a small-business lending program run by the U.S. Treasury, 137 used more than half of about $4 billion disbursed by the program to help fund their exits from the Troubled Asset Relief Program, according to a new report by the special inspector general for TARP. The TARP program was set up to bail out financial firms during the 2008 crisis.
Zero Hedge: 
Business Insider: 
ABC News:
  • Insolvent Union Pension Plans May Double By 2017. A new government report warned that the number of insolvent multiemployer private-sector pension plans could more than double by 2017. The report, issued by the Government Accountability Office, included the survey results of 107 multiemployer plans, 25 percent of which were delaying eventual insolvency. Under the Employee Retirement Income Security Act of 1974, the benefits of multiemployer plans are insured by the Pension Benefit Guaranty Corp., a U.S. government agency that works to protect private-sector defined benefit pension plans. There are about 1,500 multiemployer plans covering more than 10 million workers and retirees, the GAO said.
  • George Soros repeats call for Germany to leave euro. George Soros, the billionaire investor, has urged Germany to reverse its position on eurobonds or consider leaving the single currency, as he suggested that the euro's prospects would be improved if its most powerful member were to quit.
  • Japan to Maintain Economic Assessment in April. Japanese government plans to keep its monthly economic assessment for the first time in four months. Japan raised economic assessment in March for the third month.
China Securities Journal: 
  • China Risks Collapse on Outflow, Yu Yongding Says. Unexpected outflows without capital account control will lead to massive capital flights, currency depreciation, inflation, asset-bubble bursts, bankruptcy, debt default and finally the collapse of China's financial system, Yu Yongding, a former academic adviser to the People's Bank of China, wrote in a commentary.
Evening Recommendations 
Piper Jaffray:
  • Raised (AEO) to Overweight, target $24.
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 116.75 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 94.25 -2.25 basis points.
  • FTSE-100 futures -.02%.
  • S&P 500 futures -.08%.
  • NASDAQ 100 futures -.02%.
Morning Preview Links

Earnings of Note

  • (STZ)/.45
  • (FDO)/1.22
  • (FAST)/.37
  • (KMX)/.45
  • (BBBY)/1.68
  • (RT)/.10
  • (ADTN)/.10
  • (PGR)/.44 
Economic Releases
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +2,707,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,500,000 barrels versus a -572,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,500,000 barrels versus a -2,266,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.2% versus a +.6% gain the prior week.
2:00 pm EST
  • The Monthly Budget Deficit for March is estimated at -$107.0B versus -$198.2B in February.
  • FOMC Minutes from March 19/20 Meeting
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Fisher speaking, Fed's Kocherlakota speaking, Fed's Lockhart speaking, Eurozone industrial production data, China Trade data, White House budget release, 10Y T-Note auction, weekly MBA mortgage applications report, USDA report, Bloomberg April Economic Survey, (AAP) investor day and the (IHS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology 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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