Evening Headlines
Bloomberg:- Draghi Buying Risks Backfiring on Debt Profile: Chart of the Day. European Central Bank President Mario Draghi's pledge to buy unlimited quantities of short-dated government bonds risks tying him to an increasing debt burden. Italy and Spain have 846 billion euros of securities due between 2013 and 2015, about 37% of the nations' outstanding debt, according to data compiled by Bloomberg. With Draghi saying yesterday that the ECB will target bonds with maturities of one to three years, the percentage may increase, said Mohit Kumar, the head of European fixed-income strategy at Deutsche Bank AG in London. "There is a risk of shortening the maturity profile for Italy and Spain," he said. "The redemptions will come round more quickly. Investors will be more than happy to buy at the shorter-end because they know they can sell to the ECB if yields start rising."
- Economist Sinn Rattles Merkel Laboring to Save Euro. Dressed in his customary gray three- piece suit at a conference in Frankfurt on June 15, Hans-Werner Sinn folds his hands and listens without expression as a series of speakers criticize his economic theories. Willem Buiter, chief economist at Citigroup Inc., goes so far as to decry them as “nonsense.” Taking his turn at the microphone shortly afterward, the 64-year-old president of the Munich-based Ifo Institute for Economic Research says he regrets it when investment bankers such as Buiter “lose their composure.” He then lays out once more his argument that Germany is paying more than it thinks for Greece’s fiscal recklessness and that the struggling southern European nation should long ago have left the euro zone, Bloomberg Markets magazine reports in its October special issue on the 50 Most Influential people in global finance.
- Obama Exaggerates Deficit Savings in Budget Plan: Reality Check. President Barack Obama and Vice President Joe Biden made a number of factual assertions in their acceptance speeches last night at the Democratic National Convention in Charlotte, North Carolina. How did they square with reality?
- Fitch May Lower Ratings on 15% of U.S. Prime Mortgage Securities. Fitch Ratings said that it may lower about 15 percent of its credit grades on securities backed by U.S. prime mortgages, typically those too large for government- tied programs when they were issued. More than 90 percent of the bonds under review were created in 2005 or earlier, the New York-based ratings firm said today in a statement. In a report earlier today, Fitch said that such debt is being made riskier by “adverse selection” after better-quality borrowers refinanced their portion of the underlying loans.
- China Gets Worst Ranking in Global Poll Since 2010. Global investors are losing faith in China, giving the country’s markets their worst rating in more than two years in the latest Bloomberg poll. About a quarter of those surveyed say they expect Chinese markets to be among the worst performers over the next year. That’s the highest negative reading that the country has received in the quarterly Bloomberg Global Poll since January 2010 and was second only to the 45 percent rating that the European Union received in the Sept. 4 survey. China “will suffer disproportionately from a global slowdown in growth,” said Benjamin Dunn, a poll participant and chief operating officer in Crested Butte, Colorado, for portfolio management company Alpha Theory, in an e-mail. It “will be unable to prevent a hard landing” of its economy.
- China Price War Draining Jobs in Germany’s Solar Valley: Energy. When Thomas Behling returned to his home state of Saxony-Anhalt in 2006, he was drawn by a job in the solar industry and the chance to participate in Germany’s renewable energy boom. He was fired in July. Behling’s employer, Sovello GmbH, produced its last solar panel on Aug. 26, sending 1,000 workers home after attempts to find an investor to save the seven-year-old company failed. Next door, Q-Cells SE (QCE), once the world’s largest solar-cell maker, is being acquired by Hanwha Group of South Korea as soaring debt brought it to the brink of bankruptcy. At least 12 German solar companies filed for protection from creditors in the past year.
- Eighty Percent of U.S. Asia Policy Is Just Showing Up. With China throwing its weight around the South China Sea, and snapping at Japan for its plans to buy disputed islands, the waters of the Pacific are looking a little choppy these days. Time for a little high-level diplomacy, you might think -- something that not only eases tensions but also refocuses the nations of the Asia-Pacific on the enormous economic stakes they have in regional peace and stability. If the administration of President Barack Obama is taking seriously this week’s meetings of the Asia-Pacific Economic Cooperation bloc, however, it has a funny way of showing it. Granted, President Obama has a good excuse for not attending the APEC leaders meeting in Vladivostok, Russia. But why did Treasury Secretary Timothy Geithner not attend the earlier meeting of his fellow finance ministers in Moscow? More egregiously, why did U.S. Trade Representative Ron Kirk, the ostensible point person for the administration’s lofty goal of doubling U.S. exports by 2015, skip both the APEC meeting and the latest Trans-Pacific Partnership trade talks to attend the Democratic National Convention in his “personal capacity.” His choice fails the crucial Woody Allen test for effective job performance -- the one that says “80 percent of life is just showing up.”
- Canada's Harper Seeks More Gains From China in Exchange for Oil. Canadian Prime Minister Stephen Harper said his government will seek to correct trade imbalances with China as he manages a wave of takeover spending from the Asian country. Harper, speaking at the Bloomberg Canada-Asia Conference in Vancouver, said Canada needs to diversify trade to Asia because of sluggish growth in much of the rest of the world, adding that the relationship also needs to become reciprocal.
Wall Street Journal:- Obama Presses Plan for U.S. Resurgence. Goals Are Scaled Back From Sweeping Proposals in 2008. President Barack Obama portrayed himself as a stout defender of the middle class and a leader with a plan to create jobs across the U.S. economy in a speech accepting the Democratic nomination for re-election. In an attempt to show he is offering more specifics about how he would govern than is his Republican foe, he laid out a set of goals for a second term designed to show that he has started rebuilding a ravaged economy and has a strategy for going further. The goals, most of which echo those previously set by Mr. Obama, provided a message aimed to ease the economic anxieties of Americans during the last stretch of the campaign.
- Democrats Party on Corporations' Tab. Obama Won't Take Lobbyists' Donations, but Business Underwrites Good Times in Charlotte; Oil Sponsors Night at a Pub. Democrats went to great lengths to make their convention appear free of corporate influence. And then came the parties. The 2,500-person "Light Up The Night" welcoming concert Monday with singer John Legend was paid for by Duke Energy Corp. and the Washington lobbying arms of the nuclear, natural gas and electricity industries. On Tuesday, hip-hop artist Common rocked the house at an invitation-only event sponsored by a handful of corporate lobbies, including those representing the recording industry, drug companies and News Corp., owner of The Wall Street Journal.
- Maverick Capital Partner to Leave.
- Report Cites $750 Billion in Annual Health-Care Waste.
- Transformers 2. Obama was honest when he said he wanted to remake America.
MarketWatch:
- Videogame sales fall in August as consoles slump. Videogame sales saw another month of declines in August, with sales of game software in the U.S. falling 9% from the same month last year, according to data from NPD Group released Thursday afternoon. Sales of game hardware sunk by 39% for the month, as demand fell for all major home consoles including the Xbox 360 from Microsoft (MSFT) , the PlaySation 3 from Sony (SNE) and the Wii from Nintendo.
Business Insider:
Zero Hedge:
CNBC:
Kentucky.com:- Joy Global(JOY) Laying Off 45 More. Joy Global, a mining equipment manufacturer, plans to lay off 45 more employees at its Lebanon plant. The Milwaukee-based company disclosed the actions, which are expected to be taken by Oct. 26, in a filing that government officials require before large layoffs. In July, the company announced it would lay off 37 of its 176 employees at the time later that month. In its most recent filing, the company noted it now has 137 employees before the layoff of 45 more. In the filing, Joy Global human resources manager Mary Cambron noted the company is "experiencing a temporary decrease in customer orders." "Joy is unclear as to the length of this down market, but we will continue working to bring as many products into our plant as possible to negate the effect this will have on our workforce and the community," she wrote.
Read more here: http://www.kentucky.com/2012/09/06/2325633/lebanon-mining-equipment-maker.html#storylink=cpy
Read more here: http://www.kentucky.com/2012/09/06/2325633/lebanon-mining-equipment-maker.html#storylink=cpy
Rasmussen Reports:- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows Mitt Romney attracting support from 47% of voters nationwide, while President Obama earns 44% of the vote. Four percent (4%) prefer some other candidate, and six percent (6%) are undecided.
Reuters:- FERC takes aim at Deutsche Bank(DB) over power market manipulation. Federal energy regulators have asked Deutsche Bank Energy Trading LLC to provide proof that it did not manipulate California energy markets or face a $1.5 million fine, the regulator said in an order issued on Wednesday.
- U.S. congressman confirms high-level U.S.-Israel spat over Iran. Israeli Prime Minister Benjamin Netanyahu blew up at the U.S. ambassador last month because he was "at wits' end" over what he sees as the Obama administration's lack of clarity on Iran's nuclear program, a U.S. congressman who was at the meeting said. "Right now the Israelis don't believe that this administration is serious when they say all options are on the table, and more importantly neither do the Iranians. That's why the program is progressing," Rogers said.
- Canada's Harper urges U.S. to take fiscal situation in hand. Concerns about a so-called "fiscal cliff" in the United States are warranted but they should not overshadow the need for America to "get a grip" on its longer-term fiscal situation, Canadian Prime Minister Stephen Harper said on Thursday. "The United States fiscal situation is very bad, the trajectory is very bad," Harper said at a Bloomberg conference in Vancouver when asked about the fiscal woes of Canada's biggest trading partner. "And regardless of what happens in the next three or four months, in the next few years that trajectory still has to be resolved," he said.
- Toys R Us second quarter net loss widens, sales decline. Toys R Us Inc, the world's largest specialty toy retailer, reported a wider loss for its second quarter and a decline in net sales of 3.6 percent. The company said on Thursday that it had a net loss in the quarter that ended July 28 of $36 million compared with a net loss of $34 million in the prior year. Net sales fell to $2.6 billion, while sales at stores open at least a year were down 3.4 percent domestically and 4.4 percent internationally. Within the international segment, the largest decline was in Europe, which is reeling from an economic crisis. The company also blamed lackluster demand for electronics, video game hardware and software for lower sales.
- Ulta Beauty(ULTA) profit lifted by pricier brands, new stores. Beauty retailer Ulta Beauty reported a higher-than-expected profit for the ninth straight quarter and forecast strong earnings for the current quarter as it benefits from opening new stores and selling more high-priced products. The company's shares were up 9 percent at $104.30 after the bell.
Financial Times:- Investment banks eye Europe job cuts. Big investment banks in Europe, including Nomura, Credit Suisse and UBS, are stepping up plans to cut jobs as they seek to adapt to a drastic slowdown in revenues and tighter regulation. Bank executives, headhunters and analysts say that the cuts are shaping up as the deepest since the start of the financial crisis after a disappointing summer dashed hopes of a business revival.
- NYSE and CME plan futures ‘kill switches’. Two of the world’s largest derivatives exchanges have signed on to a service with a “kill switch” to limit damage from errant trading by algorithms, as futures bourses look to bolster investor confidence in their markets. CME, operator of the world’s biggest futures exchange, and NYSE Liffe, one of the Europe’s dominant futures and options markets, will use a service that allows futures commissions merchants to halt or limit trading activity at high speed if a computer begins to malfunction or a customer breaches risk limits.
Telegraph:
Evening Recommendations
CSFB:- Upgraded (CAB) to Outperform, target $58.
- Rated (FL) Outperform, target $43.
- Downgraded (BGFV) to Underperform, target $7.50.
Night Trading- Asian equity indices are +.75% to +2.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 141.50 -7.5 basis points.
- Asia Pacific Sovereign CDS Index 121.0 -1.0 basis piont.
- FTSE-100 futures +.09%.
- S&P 500 futures +.06%.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of NoteCompany/Estimate- (LULU)/.31
- (KR)/.49
- (CMVT)/.08
- (BRC)/.52
Economic Releases
8:30 am EST- The Change in Non-farm Payrolls for August is estimated to fall to 130K versus 163K in July.
- The Unemployment Rate for August is estimated at 8.3% versus 8.3% in July.
- Average Hourly Earnings for August is estimated to rise +.2% versus a +.1% gain in July.
Upcoming Splits
Other Potential Market Movers
- The Germany Industrial Production report, Eurozone trade data, UK Inflation data, Basel Committee Meeting, (KFT) investor day and the (MFC) investor day could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
