Radiation Danger Rises as Japan Nuclear Plant Crisis Worsens. Japan’s Prime Minister said the danger of further radiation leaks from a crippled nuclear power station is rising after three explosions and a fire at the site 135 miles north of Tokyo. Naoto Kan appealed for calm in a televised address, saying his government was doing its utmost to contain the radioactive leakage at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant following last week’s earthquake and tsunami. Blasts have occurred at three of the station’s six reactors since March 12 and a fire was discovered in a fourth unit’s building today. Citizens living within a 30-kilometer (19 miles) radius of the plant should stay indoors, Kan said.
Japanese Stocks Head for Record Two-Day Loss as Radiation Risk Increases.Japan’s shares tumbled, with the Topix index suffering its worst two day decline since records began in 1949, as concern grew about the safety of nuclear plants damaged by the country’s worst earthquake on record. Tokyo Electric Power Co., Asia’s biggest power generator, was set to retreat by the daily limit of 25 percent after the company confirmed an explosion at a third reactor and a fire at a fourth today at its nuclear plant in Fukushima, north of Tokyo. Hitachi Ltd., which provides nuclear power generation systems, plunged by the daily limit of 19 percent. Sony Corp., Japan’s biggest exporter of consumer electronics, declined 13 percent after the company yesterday said it halted production at some factories. The Nikkei 225 Stock Average fell 14 percent to 8,313.73 as of 1:02 p.m. in Tokyo, the lowest since April 2009 and its worst two-day decline since at least 1970, according to data compiled by Bloomberg. The broader Topix index declined 13 percent to 735.72, set for the lowest close since March 2009 and its biggest intraday decline since October 1987.
US Treasuries Jump in 'Violent' Rally as Kan Warns of Further Radiation Leaks. Treasuries surged to become the world’s best-performing bonds over the past week after Japanese Prime Minister Naoto Kan said the danger of further leaks from a damaged nuclear power station is increasing. “The market is moving aggressively,” said Colin Embree, Singapore-based head of fixed-income trading and sales at Bank of Nova Scotia Asia Ltd., a unit of Canada’s third-largest lender. “This isn’t a flight to quality. It’s a flight from disaster. The moves tend to be quite violent.”
Saudi Arabia, GCC Troops Enter Bahrain as Protests Threaten Gulf. Saudi Arabian troops moved into Bahrain yesterday as part of a regional force from the Gulf Cooperation Council, the first outside intervention since a wave of popular uprisings swept through parts of the Arab world. Security forces from the United Arab Emirates will also take part, the state-run Emirates News Agency said yesterday. The UAE contingent is part of the GCC’s Joint Peninsula Shield, a military coalition established to protect the six member states from outside attack. More than 100 military vehicles have crossed into Bahrain, al-Jazeera television reported. The deployment signals that the Bahraini regime has lost confidence it can deal with the protests and underscores Saudi Arabian concerns about uprisings at home, according to Christopher Davidson, a scholar in Middle East politics at Durham University and author of “Power and Politics in the Gulf Monarchies,” “Clearly, this is not an UAE force, this is a Saudi force with a few UAE policemen,” Davidson said in a telephone interview late yesterday. “It is in Saudi’s interest that nothing serious happens in Bahrain, because it would embolden similar protests in its eastern provinces.”
Qaddafi's Advance Puts Forces 100 Miles From Rebel's Capital. Muammar Qaddafi’s warplanes attacked rebels in the town of Ajdabiya, as opposition officials asked Secretary of State Hillary Clinton for airstrikes on Qaddafi’s airfields and military equipment. Ajdabiya, about 100 miles (160 kilometers) from Benghazi, the rebel capital, came under bombardment yesterday as insurgents prepared to defend it, a resident said. Rebel troops fled Brega, an oil port to the southwest, though fighting continued around the town, the Associated Press reported. Libyan state television showed footage of what it said was Brega “purged of armed terrorist gangs.”
Shipping Rates Poised to Decline 34% After Two-Week Rally: Freight Markets. The rebound that more than doubled commodity freight costs in two weeks is peaking as idled ships haul anchor and compete for cargoes of iron ore and coal. There were 282 capesizes anchored worldwide March 14, down from 300 Feb. 26, data compiled by Bloomberg show. The glut will mean second-quarter costs of $10,000 a day, 34 percent less than prices in the forwards market, said Sverre Bjorn Svenning, the analyst at Fearnley Consultants A/S who correctly predicted the industry’s crash in 2008. Forward freight agreements, traded by brokers and used to hedge or bet on future shipping rates, were at $15,175 by 6:50 p.m. in London yesterday.
Commodity futures require tighter trading rules to curb speculation and check gains in food prices that have reached all-time highs, the head of the UN's Food and Agriculture Organization said. While natural disasters have driven up food prices, "speculation is exacerbating price volatility by giving the impression that there is additional demand when there is no additional demand," FAO Dirctor General Jacques Diouf said. "We should return to the regulation that existed before 1999" in U.S. commodities markets, Diouf said.
HP(HPQ) to Start Cloud Service, App Stores; Raises Dividend. Hewlett-Packard Co. (HPQ) plans to introduce a cloud-computing service and will increase its quarterly dividend, early efforts by Chief Executive Officer Leo Apotheker to boost sales and reverse a share-price decline. HP will also put its WebOS mobile-operating system onto a broader range of devices for consumers and businesses, in a bid to make the company’s various products work better together, Apotheker said today at an event in San Francisco.
Texas Instruments(TXN) Says Japan Plant Damage to Hurt Sales. Texas Instruments Inc. (TXN), the second- largest U.S. chipmaker, said “substantial” damage to one of its plants in Japan from last week’s earthquake will hurt sales in the first and second quarters. The plant in Miho, Japan, produced about 10 percent of Texas Instruments’ output by revenue and won’t be able to return to full shipment capacity until September, the Dallas-based company said in a statement today. The company is working to shift production to its other facilities and has identified alternatives for about 60 percent of that lost production.
Microsoft(MSFT) Said to Stop Releasing Zune as Demands Ebbs. Microsoft Corp. (MSFT) will stop introducing new versions of the Zune music and video player because of tepid demand, letting the company shift its focus to other devices, according to a person familiar with the decision.
The Markit iTraxx Japan Index jumped 35 basis points to 145.5 basis points, set for its biggest one-day increase since Feb. 17,2009, according to prices from Deutsche Bank AG and CMA in NY. Contracts to protect Japanese government debt for five years climbed 5 basis points to 100.5, Deutsche Bank prices show. That's the highest since March 2009.
Wall Street Journal:
Nuclear Risk Rising in Japan. Crisis Spreads to Third Reactor as Operators Struggle to Prevent Large-Scale Radiation Leaks; New Explosion Reported. Japan's nuclear crisis showed signs of spinning out of control Tuesday, after officials reported a third explosion and warned of possible damage to a critical part of the cooling system at the troubled Fukushima Daiichi nuclear-power complex. Tuesday's explosion at the No. 2 reactor in the Fukushima complex, 150 miles north of Tokyo, for the first time raised the possibility that the key containment structure of the unit, which protects the reactor vessel and keeps dangerous radioactive materials from leaking out, had been damaged. The telltale sign, Tokyo Electric Power Co. officials said, was that pressure had dropped in the "suppression pool"—the part of the reactor that converts steam to water at the bottom of the container. Meanwhile, radiation levels outside the reactor building rose sharply. Tepco evacuated some of the workers from the unit as a precaution. Prime Minister Naoto Kan gave a brief address to the nation saying, "We will do our utmost to prevent further spreading of radiation leaks. I sincerely urge everyone in the nation to act calmly."
Nasdaq Nears Competing Bid for NYSE. Nasdaq Stock Market owner Nasdaq OMX Group Inc., in the latest salvo in the global exchange consolidation race, moved closer to making a competing bid for the New York Stock Exchange.
Euro-Zone Ministers Stall on Bailout Details. Euro-zone finance ministers reached no agreement Monday on precisely how the bloc's 17 members will share the burden of enlarging bailout funds, and put off discussions until next week. But despite the unresolved details, markets reacted warmly to Saturday morning's announcement of a pact to expand the euro zone's current bailout capacity. In trading Monday, the prices of Spanish, Portuguese and Greek bonds jumped, bringing down their interest rates and reflecting improved investor confidence.
More Mortgage Mischief. Elizabeth Warren revs up her Consumer Financial Protection Bureau.
CNBC:
Top Hedgies Scaling Back on Stock Exposure. He says all the uncertainty introduced by the tragic events in Japan is a key factor influencing their decision. But it's not the only factor. There are two others. Another is the sharp increase in the price of oil “A 10-dollar increase per barrel in oil is something like a 3/10 of a percent move lower in GDP,” he says. Also Scaramucci says the smart money is worried about a slowdown in Europe.
Greenberg: Another Chinese Stock Blow-Up. It’s getting hard to keep the Chinese reverse mergers straight, let alone those that are the focus of alleged accounting problems.
MarketWatch:
GE(GE) Shares Drop on Japanese Nuclear Fears. Shares of General Electric Co. fell as much as 4.5% Monday on fears that a nuclear emergency in Japan could leave the global conglomerate vulnerable to liability.
President Obama Staying in Background on Deficits. When President Barack Obama opened the first meeting of his fiscal commission last April, he promised to be “standing with them” as they produced recommendations for curbing the nation’s escalating debt. Republicans and Democrats say they are still waiting.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 23% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20. That matches the president’s lowest ratings of 2011 (see trends).
Financial Times:
Super-Catastrophe and Super-Banking Risk. We thought we’d present the Australian hedge fund manager’s latest thoughts on the financial fallout (no pun intended) from Japan’s devastating earthquake:
Sky News:
Much of the unrest in north Africa is motivated by a desire for a better standard of life, and not in pursuit of democracy, Mohamed Ali Alabbar, chairman of Emaar Properties PJSC, said in an interview.
Yomiuri:
The levels of radiation detected in Tokyo aren't high enough to affect health. The levels are about 20 times normal, or .809 microsieverts, citing city officials.
Kyodo News:
Radiation levels in Saitama, north of Tokyo, rose to 1,222 nanosieverts, or almost 40 times normal levels as of 11 a.m. local time, citing the prefectural government.
About 140,000 people within a radius of 20 to 30 kilometers from Tokyo Electric Power Co.'s Fukushima Dai-Ichi nuclear power plant were newly ordered to stay indoors, citing the prefectural government.
Radiation levels exceeded the legal limit in Tokai-mura, in Japan's eastern Ibaraki prefecture. The location is 110 kilometers south of Tokyo Electric Power Co.'s Fukushima Daiichi nuclear power plant.
China Business News:
Some Chinese banks may face "relatively large" pressure from a loan-loss reserve ratio rule based on tests by China's banking regulator, citing Yan Qingmin, an assistant chairman with the China Banking Regulatory Commission.
Evening Recommendations Citigroup:
Rated (HBI) Buy, target $33.
Rated (MFB) Buy, target $33.
Night Trading
Asian equity indices are -4.0% to -1.5% on average.
Asia Ex-Japan Investment Grade CDS Index 116.0 +4.5 basis points.
Empire Manufacturing for March is estimated to rise to 16.1 versus a reading of 15.43 in February.
The Import Price Index for February is estimated to rise +.9% versus a +1.5% gain in January.
9:00 am EST
Net Long-term TIC Flows for January are estimated to fall to $55.0B versus $65.9B in December.
10:00 am EST
The NAHB Housing Market Index for March is estimated to rise to 17.0 versus 16.0 in February.
2:15 pm EST
The FOMC is expected to leave the benchmark fed funds rate at .25%.
Upcoming Splits
(LEA) 2-for-1
Other Potential Market Movers
The weekly retail sales reports, William Blair Tech Symposium, Barclays Healthcare Conference, (IFF) investor day, (KKR) investor day, (PETD) analyst day and the (SIGM) investors day could also impact trading today.
BOTTOM LINE: Asian indices are sharply lower, weighed down by technology and commodity shares in the region. I expect US stocks to open sharply lower and to rally into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
North American Investment Grade CDS Index 86.57 -.21%
European Financial Sector CDS Index 119.0 -1.62%
Western Europe Sovereign Debt CDS Index 179.50 bps -1.55%
Emerging Market CDS Index 215.70 +1.03%
2-Year Swap Spread 20.0 unch.
TED Spread 23.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .07% unch.
Yield Curve 275.0 -2 bps
China Import Iron Ore Spot $166.30/Metric Tonne -.66%
Citi US Economic Surprise Index +63.50 -4.8 points
10-Year TIPS Spread 2.44% -3 bps
Overseas Futures:
Nikkei Futures: Indicating -280 open in Japan
DAX Futures: Indicating +21 open in Germany
Portfolio:
Slighltly Lower: On losses in my Tech and Medical longs
Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and then covered some of them
Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 cut losses into the afternoon, despite the Japan disaster, growing Mideast unrest, rising energy prices, recent technical damage and emerging market inflation fears. On the positive side, Steel, Oil Service, Energy, Alt Energy and Coal shares are higher on the day. Small-caps are outperforming. The UBS-Bloomberg Ag Spot Index is down -1.1%. The 10-year yield is declining -5 bps to 3.35%. The Spain sovereign cds is dropping -6.26% to 240.83 bps, the Italy sovereign cds is falling -9.79% to 161.57 bps, the Portugal sovereign cds is declining -4.47% to 492.39 bps, the Greece sovereign cds is declining -5.46% to 995.31 bps, the Belgium sovereign cds is dropping -5.47% to 155.79 and the UK sovereign cds is falling -5.9% to 55.52 bps. Moreover, the US Muni CDS Index is down -3.76% to 151.19 bps. On the negative side, Airline, Gaming, Restaurant, Homebuilding, HMO, Hospital, I-Banking, Telecom, Disk Drive, Computer Hardware and Utility shares are under meaningful pressure, falling more than 1.0%. (XLF) has been weak throughout the day. Tech is also underperforming again. Lumber is falling -1.13%. China Iron Ore Spot has declined -13.3% in less than 1 month. The Ireland sovereign sovereign cds is rising +1.36% to 605.04 bps. Moreover, the Japan sovereign cds is soaring +14.05% to 95.08 bps. The avg. US price for a gallon of gas is up +.02/gallon today to $3.56/gallon. It is up .44/gallon in 27 days. For the second day in a row, the major US averages are displaying exceptional resilience in the face of several potentially damaging catalysts, which is a major positive. Several key market leaders, such as (AAPL), continue to trade well. However, breadth and volume remain poor. The market trades like it wants to bottom, but it needs a positive catalyst. I expect US stocks to trade mixed-to-higher into the close from current levels on fund inflows, short-covering, bargain-hunting, buyout speculation and a bounce in the euro.
Japan Appeals for International Aid in Fight Against Meltdown. Prime Minister Naoto Kan appealed for international help and workers battled to prevent a nuclear meltdown after a second blast rocked an atomic plant north of Tokyo. Millions remained without electricity or water following Japan’s strongest earthquake, which may have killed 10,000.
Japanese Sovereign, Corporate Bond Risk Surges After Earthquake. The cost of protecting Japanese sovereign and corporate bonds from default surged after the nation’s most powerful earthquake on record, credit-default swap prices show. Swaps on Japanese government debt rose 7.5 basis points to 86 basis points as of 8:26 a.m. in Tokyo, according to Citigroup Inc. That’s the biggest increase since Nov. 30 and the highest level since Jan. 18, prices from data provider CMA show. The Markit iTraxx Japan index soared 21.5 basis points to 119 basis points as of 8:54 a.m. in Tokyo, the biggest rise since May 25 and the highest level since Aug. 16, according to Deutsche Bank AG and CMA in New York.
Gulf Council Troops Enter Bahrain to Help Restore Security Amid Protests. Saudi Arabian troops moved into Bahrain as part of a regional force, the first cross-border intervention since a wave of popular uprisings swept through parts of the Arab world. The Bahraini army “urges citizens and residents to cooperate completely and welcome their brothers,” the official Bahrain News Agency said. More than 100 military vehicles crossed into Bahrain, Al Jazeera television said. The United Arab Emirates will also participate in the Gulf Cooperation Council force, the state-run Emirates News Agency reported. Mainly Shiite protesters in Bahrain have been demonstrating since Feb. 14, demanding democracy through free elections from their Sunni monarch, inspired by movements that have swept the region in the past two months and unseated longtime rulers in Tunisia and Egypt. Shiites comprise as much as 70 percent of the population. Khalil al-Marzooq, a member of al-Wefaq, the largest Shiite opposition party, said GCC intervention would “destroy the economy and cause a financial crisis.”
Crude Falls to Two-Week Low as Japan Quake May Reduce Demand. Crude oil fell in New York to the lowest level in two weeks on speculation demand from Japan may decline after the 8.9-magnitude earthquake devastated the world’s third-largest economy. Prices tumbled 4.9 percent in five days of losses, the longest losing streak in a month, as the quake that hit the country on March 11 shut 29 percent of domestic refining capacity, according to Bloomberg calculations based on Petroleum Association of Japan data. “You are taking demand from the third-largest economy out of the market and oil is responding negatively,” said Tom Bentz, a broker with BNP Paribas Commodity Futures in New York. “The short-term trend still looks to be lower. The next support area is somewhere around $96.” Oil for April delivery fell 86 cents, or 0.9 percent, to $100.30 a barrel at 12:17 p.m. on the New York Mercantile Exchange. Futures touched $98.47, the lowest intraday price since March 1. Crude is up 23 percent from a year ago.
Greece Leads Drop in Sovereign Bond Risk on Agreement of Bailout Expansion. Europe’s peripheral governments led a decline in the cost of insuring the region’s debt, after leaders agreed to expand the rescue fund for indebted nations. Credit-default swaps on Greece tumbled 94 basis points to 949, while contracts on Italy fell 19 to 161, Portugal dropped 39 to 484 and Spain declined 23 to 234, according to CMA. The Markit iTraxx SovX Western Europe Index of 15 governments was 11 basis points lower at 177.5, the biggest drop in five weeks.
China to Build $2 Billion Iran Dam, Power Plant, Press TV Says. Iranian and Chinese officials will sign a $2 billion agreement for the construction of a dam and a power plant in Iran’s western province of Lorestan, Press TV reported. The agreement will be signed between Sinohydro Corp., China’s largest water projects developer, and Iran’s Farab, the state-run news channel said, citing Mohammad Reza Rezazadeh, the managing director of Iran’s Water and Power Resources Development Co. The contract will be completed this week and operations are to start in the next Iranian calendar year, which starts on March 21, according to the report, published on Press TV’s website today. The dam, to be built on the Bakhtiari river in the Zagros mountains, will hold Iran’s largest reservoir, with a capacity of 4.8 billion cubic meters of water, and support a 1,500- megawatt hydroelectric power station, it said.
Buffett Commits $9 Billion for Lubrizol(LZ) After Auto, Train Bets. Warren Buffett’s $9 billion deal to buy Lubrizol Corp. (LZ), the Wickliffe, Ohio-based maker of engine lubricants, follows bets by his Berkshire Hathaway Inc. (BRK/A) on cars, trucks, freight railroads and luxury jets. Berkshire will pay $135 a share in cash, 28 percent more than Lubrizol’s closing price on March 11, Buffett’s firm, based in Omaha, Nebraska, said in a statement today.
Brazil's Debt May Be Under Pressure as Japanese Repatriate Funds on Quake. Debt linked to Brazil’s real may fall as Japanese investors, the largest holders of the bonds, bring funds home to pay for reconstruction following the nation’s earthquake, according to Guggenheim Capital Markets. Japanese investors hold at least $50 billion worth of real- linked debts issued by the World Bank, European Bank for Reconstruction & Development and Goldman Sachs Group Inc., according to Andrew Brenner, managing director at Guggenheim, a New-York based brokerage for institutional investors. “Japanese mutual funds bought a huge amount of the papers,” Brenner said in a telephone interview. “Those bonds will be under pressure. Japanese will look at what they’ve got and put more money in their own country for infrastructure.”
Wall Street Journal:
Japan Nuclear Plan Troubles Deepen. Japan's unfolding nuclear crisis deepened Monday at a stricken power plant, after overheating in one reactor may have led to a dangerous melting of nuclear fuels and an explosion that hindered efforts to cool two others. Japanese officials said late Monday there is a high possibility that all three of the stricken reactors at the Fukushima Daiichi nuclear complex in northeastern Japan are now experiencing some degree of melting of their reactor cores that contain fuels—a condition that, if it worsens, could lead to dangerous radiation leaks. This suggests that despite various attempts to cool the reactors since Friday's massive earthquake and tsunami, the temperatures inside them remained precariously high.
Japan Headwind to Hit Asian Economies. Disruptions to Japan's economy in the aftermath of last week's earthquake and tsunami are expected to ripple across Asia in the coming weeks, further muddling the region's economic picture at a time when countries are already struggling with higher oil and food prices.
Nasdaq(NDAQ) is in talks with lenders on financing an NYSE(NYX) bid, citing two industry sources.
Forbes:
Pfizer(PFE) Could Split Off 40% of Company, Analyst Says. Bernstein Pharmaceuticals analyst Tim Anderson has a note out this morning suggesting that Pfizer could sell, spin off, or otherwise divest divisions accounting for $32 billion of its $67 billion in sales, reinventing itself as a pure pharmaceutical research firm like Eli Lilly, Bristol-Myers Squibb, or AstraZeneca.
Chinese Premier Talks of Inflation 'Tiger'. At a press conference in Beijing, China, Premier Wen Jiabao spoke about global inflation as a “tiger” and is becoming more problematic nowadays.
Rasmussen Reports:
62% Favor Repeal of Health Care Law. Support for repeal of the national health care law has reached its highest level since May of last year. The number of voters who believe the plan will increase the cost of care has tied its highest level since the law’s passage last March. The latest Rasmussen Reports national telephone survey of Likely Voters shows that 62% favor repeal of the health care law, including 51% who Strongly Favor it. Only 33% of voters oppose repeal, with 24% who are Strongly Opposed.
Reuters:
Online Readership and Ad Revenue Overtake Newspapers.For the first time, online readership and advertising revenue has surpassed that of print newspapers. Online advertising revenue in the United States is projected to overtake print newspaper ad revenue in 2010, according to the latest report, the State of the News Media, from the Pew Research Center's Project for Excellence in Journalism. The study also found that more people -- 46 percent of Americans surveyed -- said they get news online at least three times a week, versus 40 percent who said they get their news from newspapers and their companion websites. "The migration to the Web is accelerating," said Tom Rosenstiel, director of the Project for Excellence in Journalism. "The quick adoption of the tablet (computer) and the spread of the smartphone is only adding to that."
Ireland's Noonan Seek EU Help to Ease Cost of Bank Bailouts. MINISTER FOR Finance Michael Noonan will ask the European authorities today to examine radical new measures to ease the cost of the bank bailouts on the State. Mr Noonan will meet European Central Bank (ECB) chief Jean-Claude Trichet and EU economics commissioner Olli Rehn in Brussels ahead of his first encounter tonight with EU finance ministers. Only two days after a dispute over corporate tax led euro zone leaders to refuse an interest rate cut on Irish bailout loans, he will press the case for a working group to be set up to examine how they might take on a further burden from Ireland’s bank bailout.
