Thursday, June 30, 2011

Thursday Watch

Posted by Gary .....at 12:48 AM

Evening Headlines

Bloomberg:
  • Papandreou Seeks to Turn Budget Enforcer. Greek Prime Minister George Papandreou may struggle to persuade investors he can implement a $112 billion austerity plan as it reaches a final vote in Parliament in the teeth of violent street protests. Having clinched victory on a bill setting out his strategy for budget cuts, Papandreou must today win a second ballot to execute measures ranging from tax increases to asset sales. That may be easier than inflicting the plan on an economy mired in recession whose population is already enduring an income squeeze to curb the nation’s record budget deficit. A general strike and protests of more than 20,000 people have paralyzed central Athens for the past two days in a standoff focused on Parliament as lawmakers deliberate on Papandreou’s proposals. While approval today would pave the way for Greece to secure a fifth tranche of money from the European Union to prevent a default, the yield on the country’s two-year bond is still above 27 percent. “There is a real risk that, given the political problems, given the process, that at some stage it’s the Greeks who give up on the program,” Andrew Balls, Pacific Investment Management Co.’s head of European portfolio management, said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “The EU partners are spectators when it comes to the Greek political dynamics.”
  • German Banks Near Greek Plan. German financial companies pushed toward an agreement to roll over their Greek debt holdings as Deutsche Bank AG (DBK) Chief Executive Officer Josef Ackermann predicted banks would contribute to help avert a “meltdown.” Representatives of German banks and insurers hammered out a draft proposal to present at a meeting today with Finance Minister Wolfgang Schaeuble and top industry executives, including Ackermann. The German firms, which are using a French proposal as a blueprint for discussions, are likely to commit to contributing to the Greek rescue, while calling for a Europe- wide solution, said people familiar with the plan.
  • Dealmaking Hits Bump as Market Slump Prompts Lowest Takeovers in 8 Months. Concerns about a declining global stock market and slowing economic growth are taking a toll on dealmaking, with takeovers in June tumbling to the lowest level in eight months. The total value of takeovers announced so far this month fell 22 percent from May to about $178 billion, leaving second- quarter volume little changed from the previous three months, according to data compiled by Bloomberg.
  • Visa(V), MasterCard(MA) Surge as Fed Lifts Caps. Visa Inc. (V) and MasterCard Inc. (MA), the world’s biggest consumer-payment networks, surged more than 10 percent after the Federal Reserve relaxed restrictions on debit- card transaction fees. Visa advanced $11.29, or 15 percent, to $86.57 at 4 p.m. in New York Stock Exchange composite trading, the most since March 2008. MasterCard rose 11 percent to $309.70, the biggest gain since February 2009. The Fed voted today to cap debit-card swipe fees, also called interchange, at 21 cents a transaction, lifting the limit from an earlier proposal of 12 cents. The caps are mandated by the Dodd-Frank Act. San Francisco-based Visa and MasterCard, based in Purchase, New York, set interchange fees that are paid by merchants and pass the money to card issuers including Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC).
  • Institutional Investors Pull Most From Prime Money Funds Since March 2010. Institutions pulled out of U.S. prime money-market funds at the fastest pace in 15 months, shifting to funds that invest only in U.S. government-backed securities out of concern the European debt crisis would worsen. Institutional funds eligible to buy corporate debt lost $39 billion to net withdrawals in the week ended June 28 and $75 billion in the past two weeks, falling to $1.04 trillion, according to data from research firm iMoneyNet in Westborough, Massachusetts. Institutional money funds that buy only U.S. government-backed securities gathered $27 billion in net deposits, rising to $599 billion. “No doubt there was some shifting over European concerns,” said Peter Crane, president of Crane Data LLC, also in Westborough. Investors pulled $15 billion from institutional prime funds on June 24, his data showed.
  • South Korea Raises Inflation Forecast to 4% While Cutting Growth Estimate. South Korea’s inflation will exceed President Lee Myung Bak’s target this year and growth will be slower than previously forecast after global demand weakened and energy costs climbed, Finance Ministry forecasts showed today. Consumer prices are expected to rise 4 percent, the ministry said in a statement, exceeding its initial 3 percent projection. The government also lowered its estimate of economic growth to 4.5 percent from the 5 percent it projected last December.
  • Why China's Heading for a Hard Landing, Part 4: A. Gary Shilling.
  • Samsung Sues Apple(AAPL) Over iPhone, iPad, iPod.
  • RBA's McKibbin Sees Greece in Fiscal 'Train Wreck'. Greece is one of several nations that will need to cut spending and boost taxes, slowing global growth even as low interest rates raise the risk of inflation, Australian central bank board member Warwick McKibbin said. The fiscal outlook “is what I call the slow motion train wreck -- the first carriage to break is going to be the Greek economy, but we have a series of economies facing very serious fiscal adjustment,” McKibbin, a professor at Australian National University whose board term ends July 30, said in a speech in Melbourne.
  • Rice Supplies Tightening in China May Increase Imports, Bolster Inflation. Rice supply in China, the world’s biggest grower and consumer, may decline after drought and floods damaged crops, potentially boosting inflation and increasing imports. The harvest of the early indica crop may drop in some areas, said eight of 12 officials, traders and farmers surveyed by Bloomberg News in Hunan and Jiangxi provinces, the top producers of the variety which represents 17 percent of annual output. The crop may increase or be about the same as last year, said four of those surveyed from June 21 to June 25. Output of this type already dropped last year to the lowest level since 2003, according to statistics bureau. Lower production may bolster rice futures in China that jumped 29 percent in the past year and increase imports that doubled in the first five months. Surging food costs because of drought and floods helped lift inflation to 5.5 percent last month, the fastest pace in almost three years. The rate may quicken to more than 6 percent in June, adding pressure on the central bank to increase interest rates, some economists said.
  • China's inflation rate may jump to 6.5% this month, exceeding a near three-year high and spurring the central bank to raise interest rates for the first time since April, according to Shenyin & Wanguo Securities Co. Consumer prices may accelerate in June because of the rising cost for pork, Li Huiyong and Meng Xiangjuan, analysts at the brokerage, wrote today. The People's Bank of China may increase borrowing costs around the time of the release of the economic data, scheduled for July 15, they wrote. "Higher pork prices will boost the possibility of seeing higher-than-expected inflation for the third quarter and full year," said the analysts at Shenyin & Wanguo, ranked China's most influential research provider by New Fortune magazine last year. "Investors should pay attention." The nation's pork prices surged 40% in May from year-ago levels and may have jumped 55% this month, Bank of America-Merrill Lynch said in a report to clients yesterday.
  • Iran Again Arming Iraqi Groups Attacking U.S. Troops, Gates Says. Iran is furnishing new, more deadly weapons to Shiite militia groups targeting U.S. troops in Iraq as part of a pattern of renewed attempts to exert influence in the region, Defense Secretary Robert Gates said. About 40 percent of the deaths of American soldiers since the official end of U.S. combat operations almost 10 months ago have occurred in the past few weeks as a result of the attacks, Gates said yesterday in a Bloomberg News interview at the Pentagon that also touched on Iran’s nuclear program.
Wall Street Journal:
  • Vote Calms Markets - For Now. Financial markets breathed a sigh of relief Wednesday after the Greek Parliament approved a five-year austerity plan demanded by international creditors, but investors remain wary that the fix fails to resolve problems facing Greece—and Europe—in the long run. The measures, which were demanded by international creditors as a condition of a new bailout, eased fears of an imminent default, but market reaction was muted by gains over the past two days, partly on expectations the budget-cutting package would pass.
  • Obama's Real Revenue Problem. Tax receipts are low because of the mediocre economic recovery.
  • ObamaCare Doesn't Add Up. A new CBO report finds that the costs of Medicare and Medicaid will drive federal spending to all-time highs in coming decades. Remember the much ballyhooed ObamaCare promise to "bend the health care cost curve down"? Well, a new Congressional Budget Office report on the long-term trend in the federal budget finds that the costs of Medicare and Medicaid will drive federal spending and debt to all-time highs in coming decades. In one scenario, federal health-care spending doubles over the next 25 years, to 11% of GDP in 2035 from 5.6% this year. In another scenario, the debt eclipses 100% of GDP by 2021 and 190% of GDP by 2035. That's higher than where Greece is right now, and we see what the bond vigilantes are doing there.
  • IMF Said to Raise Flags Over Two Afghan Banks. The International Monetary Fund has expressed concerns to Afghanistan that the government isn't thoroughly investigating widespread alleged graft at Kabul Bank, the country's largest lender, according to people familiar with the matter. The IMF also said the Afghan government hasn't conducted a proper forensic audit into a second, possibly unhealthy Afghan bank, these people say.
MarketWatch:
  • FDA Panel Votes Down Avastin Breast Cancer Use. A Food and Drug Administration advisory panel voted decisively on Wednesday to withdraw approval for Avastin to treat breast cancer over concerns about side effects and a lack of effectiveness.
CNBC:
  • Solar Industry Facing Supply Bubble: Analyst. The world is facing a massive over-supply of solar panel capacity, and one analyst says that’s likely to lead to big declines in solar panel prices and the stocks of solar companies this year. Gordon Johnson, Managing Director and senior equity research analyst at Axiom Capital says global solar capacity will jump from roughly 40 gigawatts in 2010 to about 61 gigawatts by the end of 2011. According to him, even by the most bullish of estimates, demand is only going to be 20 gigawatts this year. As a result, he’s predicting big declines in earnings for the sector and recommends selling solar stocks.
  • US Enters Next Round of Public Pensions Fight.
  • Bad Old Habits Plague Economic Forecasting. Three years after the Great Recession ought to have challenged even the most basic assumptions made by economists, they have instead settled back into the costly habits of old.
Business Insider:
Zero Hedge:
IBD:
AppleInsider:
Rasmussen Reports:
  • 24% Says U.S. Heading in Right Direction. Sixty-eight percent (68%) of voters say the country is heading down the wrong track, up three points from last week and the highest level of pessimism since mid-April.
Reuters:
Financial Times:
  • Pakistan Shuts US Out of Drone Base. Pakistan has called a stop to US drone flights from a base that has launched strikes against Taliban and al-Qaeda militants on its border with Afghanistan. In the latest sign of US-Pakistan tensions, Chaudhary Ahmed Mukhtar, defence minister, said on Wednesday that Islamabad had ended US operations at the Shamsi airbase in Baluchistan.
Xinhua:
  • China should raise taxes on imported luxury goods because imposing taxes on wealthy people is beneficial for "social fairness", Liu Shangxi, a deputy director of the Ministry of Finance's research institute for fiscal science said. Domestic companies' competitiveness will be harmed if China expands consumption demand for imported products, Liu said.
Global Times:
  • Second-Child Policy to Stay in Place. The latest proposal advocating for a loosening on the Chinese mainland's second-child policy has been rejected by local authorities, who say that allowing married adults – who are not themselves only children – to have more than one child is not in the best interests of Shanghai, nor its aging population. The Shanghai Municipal Population and Family Planning Commission said on Wednesday that allowing married adults, who both have at least one sibling, to have more than one child of their own, would put added strains on the system, which is already struggling to solve the problem of the city's rapidly increasing aging population. "More children would mean fewer resources for seniors, and that would not bode well for the city's aging population," Wu Xiangbing, a press officer for the commission, told the Global Times on Wednesday, declining to disclose the number of married only-children adults, who have had two children since the option was allowed in 2004.
Evening Recommendations
Citigroup:
  • Upgraded (EBAY) to Buy, target $38.
  • Reiterated Buy on (PCLN), target $650.
Susquehanna:
  • Rated (QCOM) Positive, target $70.
Night Trading
  • Asian equity indices are +.25% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 114.0 -2.5 basis points.
  • Asia Pacific Sovereign CDS Index 122.0 -2.0 basis points.
  • S&P 500 futures +.21%.
  • NASDAQ 100 futures +.12%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (SCHN)/1.20
  • (STZ)/.37
  • (AZZ)/.63
  • (DRI)/1.00
  • (APOL)/1.30
  • (MKC)/.54
  • (WOR)/.55
Economic Releases
8:30 am EST
  • Initial Jobless Claims for last week are estimated to fall to 420K versus 429K the prior week.
  • Continuing Claims are estimated to fall to 3690K versus 3697K prior.
9:45 am EST
  • The Chicago Purchasing Manager Index for June is estimated to fall to 54.0 versus a reading of 56.6 in May.
Upcoming Splits
  • (MMS) 2-for-1
  • (AMX) 2-for-1
Other Potential Market Movers
  • The Greece vote on austerity implementation, Fed's Bullard speaking, NAPM-Milwaukee report, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index and the (NTAP) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
0 comments

Wednesday, June 29, 2011

Stocks Rising into Final Hour on Less Financial Sector Pessimism, Falling Eurozone Debt Angst, Short-Covering, Window Dressing

Posted by Gary .....at 4:09 PM

Broad Market Tone:
  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Most Rising
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 17.64 -7.98%
  • ISE Sentiment Index 109.0 unch.
  • Total Put/Call .96 +5.49%
  • NYSE Arms .47 -28.75%
Credit Investor Angst:
  • North American Investment Grade CDS Index 98.49 -2.26%
  • European Financial Sector CDS Index 119.0 -6.54%
  • Western Europe Sovereign Debt CDS Index 234.16 -2.23%
  • Emerging Market CDS Index 218.81 -2.64%
  • 2-Year Swap Spread 24.0 +1 bp
  • TED Spread 23.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .01% -1 bp
  • Yield Curve 265.0 +10 bps
  • China Import Iron Ore Spot $166.80/Metric Tonne -.95%
  • Citi US Economic Surprise Index -100.20 -.8 point
  • 10-Year TIPS Spread 2.38% +9 bps
Overseas Futures:
  • Nikkei Futures: Indicating +48 open in Japan
  • DAX Futures: Indicating +19 open in Germany
Portfolio:
  • Higher: On gains in my Retail, Biotech, Medical and Tech longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 builds on recent gains despite global growth concerns, emerging market inflation fears, rising food/energy prices and US debt ceiling worries. On the positive side, Ag, Steel, Bank, I-Banking, Oil Service, Energy and Oil Tanker shares are especially strong, rising more than +1.5%. (XLF) has traded well throughout the day. The 10-year yield is rising +9 bps to 3.12%. Copper is rising +2.87% and Lumber is jumping +4.06%. The Italy sovereign cds is falling -5.59% to 183.17 bps, the Belgium sovereign cds is falling -3.26% to 159.0 bps and the UK sovereign cds is falling -4.43% to 63.55 bps. Moreover, the European Investment Grade CDS Index is falling -4.08% to 82.88. On the negative side, Airline, Gaming, Education, Homebuilding, Hospital, Medical, Semi, and Disk Drive shares are lower on the day. Small-caps are underperforming. (XHB) has been heavy throughout the day. Oil is rising +2.2%, gold is gaining +.7% and the UBS-Bloomberg Ag Spot Index is rising +.2%. The US price for a gallon of gas is -.01/gallon today to $3.54/gallon. It is up .40/gallon in less than 5 months. The Greece sovereign cds is rising +.91% to 2,055.05 bps. The Shanghai Composite fell -1.11% overnight and is now down -2.8% ytd. As well, despite the jump in commodities and global equity rally, Brazil's Bovespa was flat today and is down -10.0% ytd. Breadth and volume remain lackluster on the US exchanges. The S&P 500 will likely test its 50-day moving average over the coming days. The euro currency has bounced up to a technical level of resistance. I will closely monitor the situation in Europe for signs that the contagion is subsiding in a meaningful way. I expect US stocks to trade mixed-to-higher from current levels into the close on short-covering, quarter-end window dressing, less eurozone debt angst, less financial sector pessimism and technical buying.
0 comments

Today's Headlines

Posted by Gary .....at 2:57 PM

Bloomberg:
  • Papandreou Wins Budget Vote. Greek Prime Minister George Papandreou clinched enough votes to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for his debt-laden nation. Papandreou won by 155 votes to 138, a wider margin than last week’s confidence ballot, as some opposition lawmakers abstained rather than oppose a package that is the condition for further rescue funds. The vote was overshadowed by a 48-hour strike and scuffles outside Parliament that saw police fire tear gas at demonstrators protesting budget cuts and asset sales. Greek bonds rose as approval of the 78 billion-euro ($112 billion) plan sparked optimism Papandreou can keep the country’s coffers intact for now. Attention now shifts to a second bill tomorrow that authorizes implementation of the measures. “Markets will calm down a little bit and the situation will improve a little,” said Christoph Weil, an economist at Commerzbank AG in Frankfurt. “It’s of course only a matter of time until this starts all over again. Greece needs to continue to implement its reforms, and we can tell how difficult that is.”
  • Sovereign, Bank Debt Risk Falls on Greece Vote, Rollover Bets. The cost of insuring against default on European sovereign and bank debt fell on speculation Greece’s government will approve austerity measures needed for a second bailout and investors will agree to rollover their bond holdings. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 6 basis points to 227 at 10 a.m. in London. “A positive vote in Greece today, and these proposals, would remove a significant risk in the near term,” London-based Frieser wrote in a note. “But the Greek issue will be a chronic one, so we wouldn’t get overly carried away on the news.” Swaps on Greece tumbled 60 basis points to 1,992 basis points, according to CMA. That’s down from a record 2,421 basis points June 27, and still implies an 82 percent chance of default within five years. Contracts on Ireland dropped 23 basis points to 756, Portugal declined 22 to 772 and Italy fell 11 to 180, while Spain was 11 lower at 277 and Belgium was down 9 at 151. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 6.5 basis points to 165.5 and the subordinated index dropped 10 to 288, according to JPMorgan Chase & Co. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 8 basis points to 417. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined 1.75 basis points to 111.5 basis points.
  • Greek Debt Restructuring is 'Unavoidable,' Nielsen Tells FTD. A Greek debt restructuring is “unavoidable,” Guillermo Nielsen, a former Argentinian finance secretary who oversaw the country’s defaulted debt exchange in 2005, told Financial Times Deutschland. “Politicians in the euro zone consider a restructuring as one of many options and seem to believe that they can ride out the problem,” the German newspaper cited Nielsen as saying. “But lawmakers only have the option between an orderly restructuring and a disorderly sovereign default. A haircut on debt is unavoidable.” Greece would need a haircut of at least 64 percent on its bonds to stabilize its debt and another aid package of 150 billion euros ($216 billion), of which two thirds should be used to support the banking sector and one third to stimulate the economy, Nielsen told the newspaper.
  • Lagarde Must Shield IMF Balance Sheet, El-Erian Writes in FT. Christine Lagarde, newly installed as managing director of the International Monetary Fund, should prepare the fund’s balance sheet for the risk of future impairment resulting from loans made in the past year, Mohamed El-Erian, the chief executive officer of Pacific Investment Management Co., wrote in the Financial Times. This is necessary so the fund doesn’t follow the European Central Bank in obscuring a solvency problem by shifting a member-country’s debt to its own balance sheet, thus becoming part of the problem rather than part of the solution, the Pimco chief said. Lagarde should also restore an appropriate separation between the IMF job and the political ambitions of the holder, a separation that’s been damaged by the widely held view that Dominique Strauss-Kahn, who resigned as IMF chief last month, was using the post as a springboard to the presidency of France, El-Erian said.
  • China Inflation is 10-Year Problem: PBOC Adviser. China’s inflation, already at a three-year high, is “most likely chronic” and will remain a problem over the next decade, Li Daokui, an academic adviser to the People’s Bank of China said today. The central bank, which has raised borrowing costs four times since October, needs to increase interest rates further to combat price gains, Li, a professor at Tsinghua University, said at a conference in Beijing. Li, 47, said he was giving his view as an academic. “High inflation pressure will be a long-term structural issue for China, mainly driven by cost-push factors such as rising wages, energy and resources prices,” said Chang Jian, a Hong Kong-based economist with Barclays Capital, who previously worked at the World Bank and Hong Kong Monetary Authority. Inflation accelerated to 5.5 percent last month and may top 6 percent in June, banks including China International Capital Corp and Mizuho Securities Asia Ltd. say. “China needs to correct the situation of negative real interest rates so another three to four rate increases are needed by the end of 2012 to change that,” Chang said. The benchmark one-year deposit rate has lagged behind consumer-price gains for more than a year. Inflation will be a long-term problem in China due to changes in the structure of the economy, Li told reporters today. Wages of “blue collar” workers have kept rising, pushing up manufacturing costs, while prices of agricultural products are climbing as farm workers don’t want to “feed pigs in the countryside” and are migrating to the cities, he said. There is widespread discontent in Chinese society with market reforms, Li said today, citing income inequality as one factor. Pressure to speed up political reform is “visibly increasing” to improve transparency and accountability, and fight corruption, Li said. Reform will be increasingly driven by “grass roots” with public opinion having more of an impact on policies than before, he said.
  • Crude Oil Extends Gain After Larger-Than-Expected Decline in Inventories. Oil rose the most in six weeks in New York after the U.S. government reported that supplies dropped almost three times as much as expected. Crude recouped all of its declines since the International Energy Agency’s June 23 announcement that its members will release 60 million barrels of oil from strategic reserves, including 30 million barrels from the U.S. The Energy Department said inventories fell for a fourth week, the longest stretch of drops this year, as imports decreased. “They show that we’re losing a lot of imports already, and we could see more of a decline in expected deliveries to the U.S. because of the IEA release.” Crude for August delivery rose $2.57, or 2.8 percent, to $95.46 a barrel at 12:43 p.m. on the New York Mercantile Exchange. Earlier, prices advanced as much as 3.2 percent and were poised for their biggest one-day increase since May 18. Futures have risen 26 percent in the past year. Imports fell 271,000 barrels a day, or 3 percent, to 8.88 million, the first drop in three weeks. Crude also rose amid speculation OPEC may reduce output in response to IEA’s release of oil from reserves. “There are concerns Saudi Arabia will cut production” in response to the IEA move, said Roland Stenzel, an oil trader at E&T Energie Handelsgesellschaft mbH, said from Vienna.
  • Soggy Corn Fields Curb U.S. Planting as Demand for Ethanol, Feed Increase. U.S. corn farmers were unable to plant on soggy or flooded fields from Arkansas to North Dakota this year, signaling tighter grain stockpiles even after rising demand for livestock feed and ethanol sent prices surging. The U.S. Department of Agriculture may cut its planting forecast on June 30 to 90.629 million acres, according to a Bloomberg News survey of 31 analysts. That’s less than the 92.178 million that farmers predicted in a government survey three months ago and would be the USDA’s biggest such reduction from the March forecast since 1995. Higher grain prices mean consumers are paying more for everything from Hormel Foods Corp. (HRL)’s Jennie-O turkey to Del Monte Foods Co. (DLM)’s Kibbles ‘n Bits dog food. Global food prices are up 37 percent in the past year, reaching a record in February, according to the United Nations.
  • India Bonds Drop a Second Day on Concern Inflation Will Quicken. India’s 10-year bonds declined a second day on concern inflation will accelerate after fuel prices were raised. Refiners including Indian Oil Corp., the nation’s biggest, increased diesel prices by 3 rupees (7 cents) a liter, kerosene by 2 rupees a liter and cooking gas by 50 rupees for every 14.2 kilogram bottle on June 24. “The fuel price increase will definitely push up inflation and that’s damping appetite for debt,” said Paresh Nayar, the Mumbai-based head of money markets and currency at FirstRand Ltd. “The bill sale is also a temporary negative from the point of view of liquidity.” The yield on the 7.8 percent bond due April 2021 rose two basis points, or 0.02 percentage point, to 8.28 percent as of the 5 p.m. close in Mumbai, according to the central bank’s trading system. The wholesale-price index, the main inflation gauge, rose 9.06 percent in May from a year earlier, compared with 8.66 percent in April, according to data published June 14. Wholesale prices will increase by more than 10 percent in July from a year earlier due to the fuel-price rise, Nomura Holdings Inc. Mumbai- based economists Sonal Varma and Aman Mohunta wrote in a note to clients yesterday.
  • China Swaps Jump as Rate Speculation Revives. China’s interest-rate swaps jumped by the most in one week on speculation policy makers will boost interest rates after the central bank lifted the yield on one- year bills for a second sale. Inflation is likely to average 5.3 percent this year, topping the government’s 4 percent target, the Economic Information Daily reported today, citing Li Jianwei, director of the macro economy research institute under the State Council’s Development Research Center. “You have a lot of funding stresses” said Matthew Huang, Asian currency and rates strategist at Macquarie Group Ltd. in Singapore. “Most of the banks are still expecting another rate hike.” The one-year interest rate swap, the fixed cost needed to receive the floating seven-day repurchase rate, increased six basis points to 3.82 percent as of 5:12 p.m. in Shanghai, according to data compiled by Bloomberg. Consumer-price increases may stabilize in the third quarter before accelerating in the fourth, driven by rising wages and imported inflation, the newspaper cited Li as saying. Inflation may reach 7.1 percent in the third quarter of next year, partly due to higher commodity prices, he said.
  • Monsanto(MON) Raises Forecast as Net Gains 77%. Monsanto Co. (MON), the world’s largest seed company, raised its full-year profit forecast and posted third-quarter earnings that topped analysts’ estimates on higher sales of Roundup weed killer and genetically modified seeds.
  • Stop The Fiscal War Against Our Children Now: Laurence Kotlikoff. Our war in Afghanistan may be ending, but our war against our children continues in full force. The Congressional Budget Office just released its annual long-term fiscal forecast. It shows, after some simple calculations, that our government’s fiscal gap -- the bill presumably being left to our children -- has grown enormously over the past year. How big is the fiscal gap? By my own calculations using the CBO data, it now stands at $211 trillion -- a huge sum equaling 14 times the country’s economic output. To arrive at that figure, I assumed that annual noninterest spending, as well as taxes, would grow indefinitely by 2 percent a year beyond 2075, the point at which the CBO’s estimates end.
Wall Street Journal:
  • Greece Secures Austerity Vote. Greece's Parliament approved a five-year austerity plan demanded by its international creditors as a condition for a new bailout that promises short-term relief, but fails to resolve deeper questions about the country's ability to pay back its debts.
  • Geithner Rejects GOP Debt-Ceiling Plan. Treasury Secretary Timothy Geithner pushed back against calls from a group of Republican lawmakers to prioritize paying interest on debt and cut spending instead of raising the debt ceiling.
  • OPEC Calls on IEA to Avoid Oil Releases. OPEC's top official said Wednesday he wants to mend fences with the International Energy Agency and avoid a repeat of a release of oil from stockpiles that has strained consumer-producer relations. Abdalla Salem El-Badri, secretary general of the Organization of Petroleum Exporting Countries, said he hoped to set up a sit-down meeting with IEA Executive Director Nobuo Tanaka to discuss better coordination between consumers and producers. "We don't want this to be repeated," Mr. El-Badri said of the IEA's controversial release. Mr. El-Badri said he would tell Tanaka, "Let us not disturb the market."
CNBC.com:
Business Insider:
Zero Hedge:
 New York Times:
  • Speculation Behind High Gas Prices, Report Says. Speculative commodities trading on Wall Street is significantly inflating prices at the gas pump, according to a new report by researchers at the University of Massachusetts, Amherst. The report criticizes regulators for not restraining speculative energy trading and calls upon the Commodity Futures Trading Commission to finally put trading limits in place. Turmoil in oil-producing countries across the Middle East and growing demand for oil elsewhere was responsible for some of the run-up in gasoline prices. But, the report contended, oil speculators drove much of this year’s surge in prices. The speculation, according to the report, cost the average consumer an extra 83 cents a gallon in May, amounting to a more than $1 billion premium across the country. Exxon Mobil’s chief executive, Rex W. Tillerson, recently told Congress that absent speculative trading, oil should cost only $60 to $70 a barrel, compared with the $90-to-$100 mark where it has hovered for several months. “A big chunk of what all of us are paying at the pump for gasoline today is going straight into the pockets of Wall Street speculators,” said the report’s co-author, Robert Pollin, a director of the Political Economy Research Institute and an economics professor at the University of Massachusetts, Amherst. Dr. Pollin, teaming up with a group of consumer advocates who favor strict financial regulation, is lobbying regulators to rein in speculative trading. Under the Dodd-Frank regulatory law enacted last year, the Commodity Futures Trading Commission is supposed to “diminish, eliminate or prevent excessive speculation.” Congress instructed the agency to start enforcing trading limits in January. But the commission has so far delayed a plan to enact so-called position limits on 28 commodities — oil, wheat, corn and the like. Existing position limits apply to only nine items. “There’s no reason that you can’t make position limits work,” Dr. Pollin said. “This is something that Congress passed, and it is the obligation of the C.F.T.C. to represent the interests of the American people and that means establishing serious position limits without hordes of exemptions.”
  • China Opens Oil Field in Iraq. China’s largest oil company has begun operations at Al-Ahdab oil field in Iraq, making the field the first major new area to start production in Iraq in 20 years, according to an official news report on Tuesday.
Politico:
  • Obama May Be Losing the Faith of Jewish Democrats. David Ainsman really began to get worried about President Barack Obama’s standing with his fellow Jewish Democrats when a recent dinner with his wife and two other couples — all Obama voters in 2008 — nearly turned into a screaming match.
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Thirty-eight percent (38%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -16 (see trends).
  • 75% Say U.S. Not Doing Enough to Develop Its Gas and Oil Resources. Just 19% believe the United States does enough to develop its own gas and oil resources.
Reuters:
  • Exclusive: S&P to Deeply Cut U.S. Ratings If Debt Payment Missed. The United States would immediately have its top-notch credit rating slashed to "selective default" if it misses a debt payment on August 4, Standard & Poor's managing director John Chambers told Reuters. Chambers, who is also the chairman of S&P's sovereign ratings committee, told Reuters on Tuesday that U.S. Treasury bills maturing on August 4 would be rated 'D' if the government fails to honor them. Unaffected Treasuries would be downgraded as well, but not as sharply, he said.
  • Three Week Outflow Streak for Equity Funds - ICI.
Qilu Evening News:
  • China is studying control measures on property markets in smaller cities including Shandong province's Yantai city as prices rose sharply after the government limited purchases in major cities.
China National Radio:
  • Banks in southern Chinese province of Guangdong are able to withstand a 50% price decline in home prices in the province, citing a stress test.
0 comments

Bear Radar

Posted by Gary .....at 2:04 PM

Style Underperformer:
  • Small-Cap Growth (+.58%)
Sector Underperformers:
  • 1) Homebuilders -1.31% 2) Airlines -.57% 3) Medical Equipment -.18%
Stocks Falling on Unusual Volume:
  • PVA, WBMD, MERU, CBOU, CREE, VRA, AHT, CBD, KBH, AYI, SIGA, TQNT, GBX and SHAW
Stocks With Unusual Put Option Activity:
  • 1) KBH 2) PXP 3) SHAW 4) COG 5) MMR
Stocks With Most Negative News Mentions:
  • 1) KR 2) MEE 3) GS 4) XOM 5) RIMM
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:20 AM

Style Outperformer:
  • Large-Cap Value (+1.01%)
Sector Outperformers:
  • 1) Gold & Silver +2.77% 2) Oil Service +2.56% 3) Ag +2.43%
Stocks Rising on Unusual Volume:
  • MMR, SM, IVN, FCX, TI, BAC, C, MRVL, SPRD, EXXI, SAIA, LOGI, ROSE, ZAGG, ABMD, ALGT, AIXG, SFSF, NUVA, STLD, USAP, SCHN, LSTZA, GOLD, IPXL, ASEI, ERTS, CRZO, BJ, CBD, LNN, MMR, X, BK, MON, AKS, UCO, MOS, MDR, TAOM, IDT and HAL
Stocks With Unusual Call Option Activity:
  • 1) ATML 2) CSTR 3) SHAW 4) MON 5) ATI
Stocks With Most Positive News Mentions:
  • 1) JEC 2) NKE 3) MON 4) KFT 5) WPI
Charts:
0 comments

Wednesday Watch

Posted by Gary .....at 12:26 AM

Evening Headlines

Bloomberg:
  • Papandreou Bids to Avert Greek Default. Greek Prime Minister George Papandreou’s bid to avert the euro region’s first sovereign default will culminate today with a budget vote in a Parliament besieged by protesters amid a wave of national strikes. Papandreou may scrape through approval by quelling dissent from the 155 votes he commands in the 300-seat Parliament and recruiting opposition allies to deliver a 78 billion-euro ($112 billion) austerity package that will determine if his indebted nation can receive further rescue funds. Rallying lawmakers might be easier than enacting the plan as Greek discontent deepens on higher taxes and so-called “crisis wage levies.” “The odds favor the government and a parliamentary approval,” said Wolfango Piccoli, an analyst at Eurasia Group in London. “But this will be a Pyrrhic victory and an early election later this year or early 2012 is almost certain. It is difficult to see how the current government can implement the required measures to meet the bailout conditionalities.”
  • Greek 'Indignants' Face Down Politicians. His face covered in white powder to stop the tear gas from stinging, George Styliatis is into his second month of trying to topple Greece’s leadership. “We need this government to fall, we need a new constitution, a new Greece,” Styliatis, 41, an unemployed former ambulance driver, said as he mingled in central Athens during a general strike yesterday. “They wanted us divided, but at this time, as you see around us, all the people are here.” Nowhere in Europe are politicians facing the wrath of the people who put them in power more than in Greece. As Prime Minister George Papandreou tries to unite his party behind a package of cuts, increased taxes and asset sales, protesters are galvanizing their opposition to the politicians they blame for needing it in the first place.
  • Morgan Stanley(MS) Said to Suffer Trading Loss. Morgan Stanley (MS), the firm targeting a 2 percent market-share gain in fixed-income trading this year, was burned by a wager on U.S. inflation expectations in the second quarter, three people informed of the dealings said. The bank’s interest-rates trading group lost at least tens of millions of dollars on the trade, which the firm has been unwinding, two of the people said, declining to be identified because the transaction isn’t public.
  • Emerging Markets Will Press Lagarde. Christine Lagarde won the support of emerging-market nations for her successful bid to become managing director of the International Monetary Fund by promising them greater influence at the global lender. Now she’ll be under pressure to deliver.
  • Basel Regulators Said to Scrutinize Banks' 'Flawed' Risk-Weighting Methods. Global banking regulators are moving their attention to disparities in the way firms measure the riskiness of their assets on concern lenders may be using their internal models to mitigate rules aimed at making them boost capital. The Basel Committee on Banking Supervision agreed on June 25 to make systemically important financial institutions hold core Tier 1 capital of as much as 9.5 percent of total risk- weighted assets. Now regulators are preparing to assess how banks set risk weightings amid criticism firms’ calculations are inconsistent, said a person with direct knowledge of the matter who declined to be identified because the talks are private. “There is no question that the weightings can be manipulated,” said Charles Goodhart, a former Bank of England policy maker and professor at the London School of Economics. “They are light years away from being scientific. The idea that risk can be captured and then not adjusted to reflect dynamic markets is absolutely flawed.”
  • Shilling: China Heading for a Hard Landing, Pt. 3. China is hoping to cool its white- hot economy without precipitating a recession. Doing so will be extremely difficult: Inflation fears are growing, the government’s ability to respond is quite limited, and China’s economic model, which leaves bureaucrats guessing about the market effects of their directives, is ultimately untenable.
Wall Street Journal:
  • NATO Copter Ends Kabul Hotel Siege. A helicopter from the coalition led by the North Atlantic Treaty Organization fired on and killed three militants on the roof of Kabul's InterContinental Hotel, ending the nearly six-hour siege by gunmen and suicide bombers that demonstrated the Taliban's ability to stage dramatic attacks in Afghanistan's capital.
  • Wall Street Wielding the Ax. The trading slump on Wall Street has battered profits and is about to cost some people their jobs.
  • BofA(BAC) Nears Huge Settlement. Bank of America Corp. is close to an agreement to pay $8.5 billion to settle claims by a group of high-profile investors who lost money on mortgage-backed securities purchased before the U.S. housing collapse, said people familiar with the matter. The payment would be the largest such settlement by a financial-services firm to date, exceeding the total profits of the Charlotte, N.C., bank since the onset of the financial crisis in 2008.
  • UAW, Car Makers Gear Up for Talks. The United Auto Workers union plans to kick off contract negotiations next month with Detroit auto makers, the industry's first labor talks since the U.S. bailout gave union trusts stakes in General Motors Co. and Chrysler LLC.
  • Fed Extends Lending Program for Central Banks. The Federal Reserve, amid persistent worries about Europe's sovereign debt crisis, last week quietly approved the extension of a crisis-lending program that allows the European Central Bank to tap the U.S. for dollars, Federal Reserve Bank of St. Louis President James Bullard said. The Fed's dollar-lending agreements with the ECB—as well as the central banks of England, Canada, Japan and Switzerland—were scheduled to expire Aug. 1. The Fed and other central banks haven't yet disclosed renewal of the agreements, known as swap lines.
  • A Stealth Tax Hike. The White House wants Republicans to agree to tax increases that no one wants to call tax increases, and for an insight into this political method let's focus on one proposal in particular—the phase-out of itemized deductions for upper-income taxpayers. We hope the tea party is paying attention, because this kind of maneuver is why people hate Washington.
MarketWatch:
CNBC:
  • IEA Move Sees Spread Bets Turn Sour for Oil Traders. Many traders and hedge funds are nursing losses after a whiplash reversal in one of the biggest commodity trading trends of the year – a bet on a widening spread between different types of crude oil. Traders say the unexpected release of the Western countries’ petroleum strategic stocks last week left many in the oil market wrong-footed, particularly those that had traded on the relative price differential of Brent crude and Dubai crude. The price difference has narrowed sharply between the lower quality, heavy sour Dubai crude, the benchmark for Middle East supplies, and the premium quality, light sweet Brent, the North Sea’s benchmark. The spread has plunged to a six-month low, dropping nearly 50 per cent in just four days, traders said. So far companies have not disclosed any losses but given how widespread the bet on widening spreads had been, the move would have hit many traders hard.
  • Top States For Business - 2011 Overall Rankings.
  • BYD Says Quarterly Profit Falls 84% On Year. BYD, the Chinese automaker backed by U.S. billionaire Warren Buffett, said its net profit for the first quarter of 2011 fell 84.4 percent year-on-year.
Business Insider:
Zero Hedge:
  • 1 Sievert Water Leaking From Fukushima As Full Body Radiation Checks Begin Across Prefecture.
  • Greek Debt Rollover - Who Is Getting Rolled Over? The analysis clearly demonstrates that the Troika is put into more risk sooner, and with less control than it would be without the rollover. Greece will be paying a higher coupon over the next 3 years by offering the SPV rates in line with its existing long bonds. The banks get immediate risk relief from a combination of cashing out 20% of their short dated Greek bonds and structuring the SPV to ensure maximum recovery. The banks have also made a proposal that ensures they will be receiving a good rate of interest in spite of the relatively low headline coupon mentioned. It is no wonder why the banks are falling all over themselves to agree to the plan. It sounds like they are being kind, but they are much better off with the plan by shifting near term risk to the Troika and longer term rate risk to Greece.
IBD:
Forbes:
Seeking Alpha:
The New York Review of Books:
USA Today:
  • Future of Federal Solar Programs in Doubt. The solar power industry is facing a double threat from a Congress that may turn off the flow of federal subsidies and take a pass on mandating renewable-energy standards that would increase demand.
Reuters:
  • SEC On Lookout for Bubble-Era IPO Practices. Some recent red-hot initial public offerings have the Securities and Exchange Commission concerned that Wall Street's underwriters may be tempted to revive some troubling tech bubble practices. "You can't help but be concerned by IPO valuations," Robert Khuzami, the SEC's enforcement chief, told an audience of Wall Street lawyers and compliance officers in New York on Tuesday.
  • Gas, Oil Abundant in Alaska's Cook Inlet - Report. Alaska's Cook Inlet basin still has potential for abundant natural gas and oil discoveries even after five decades of production, according to a federal report issued on Tuesday, signaling potential revenue for the state and more interest from developers. In the first resource assessment issued since 1995, the U.S. Geological Survey said the inlet area likely holds 19 trillion cubic feet of recoverable natural gas -- nearly nine times the last estimate -- and 600 million barrels of recoverable crude oil. The new report is much more optimistic about remaining natural gas in the inlet than the assessment issued 16 years ago, a difference the USGS attributed to improved data, new geologic information and better technology for recovering the oil and gas.
  • Nearly Half US States Close Budget Gaps With Cuts - CBPP. A majority of U.S. states have passed their budgets for the fiscal year starting July 1, according to the Center on Budget and Policy Priorities. As of Monday, 32 states had enacted their budgets, with at least 24 slashing spending on public services, as they are still gripped by the effects of the recession, the think-tank that tracks states' fiscal conditions said on Tuesday.
  • Shaw Group(SHAW) Forecast Weak Q4 Earnings, Shares Down. Shaw Group Inc, which provides engineering, construction and technology services, posted quarterly results that missed market estimates, partly hurt by accounting impairments, and forecast a weak fourth-quarter profit. Shares of the company fell more than 13 percent in after-market trade.
Financial Times:
  • Greece's Asset Sale May Fall Short, Milan Study Says. Greece's planned sale of state assets, which is intended to raise $72 billion for the country by 2015, may not bring in more than a quarter of that amount, unless more prime land and cultural heritage are added to the sales list, citing a report by Privatisation Barometer, a Milan-based institute backed by Frondazione Eni Enrico Mattei and KPMG.
Sueddeutsche Zeitung:
  • Germany's Bundesbank placed conditions on involving German banks in a Greek rescue, citing the institute's board member Joachim Nagel. In no way must "the participation of private creditors lead to a higher burden for public budgets," citing Nagel. The banks' involvement must be completely voluntary and shouldn't be viewed as a payment shortfall by the ratings agencies.

Apple Daily:
  • Cheung Kong (Holdings) Ltd. expects "downward pressure" on Hong Kong home prices in the second half of this year because property values are beyond the reach of most residents, citing Justin Chiu, executive director of the developer.
Hong Kong Economic Journal:
  • Shanghai city government's investment vehicle for property and highway construction, may not be able to repay current loans from this month and has asked for an extension of its repayment period.
Dong-a Ilbo:
  • South Korea discovered deposits of rare-earth elements in two local regions, citing the Korea Institute of Geoscience and Mineral Resources. The deposits found in Chungju and Hongcheon may be enough to meet Korea's consumption for at least 30 years.
Yonhap News:
  • South Korea's finance ministry called for a meeting with officials from local banks and foreign bank branches today to express the government's concerns about rising short-term external debt, citing the finance ministry.
Economic Information Daily:
  • China's inflation is likely to average 5.3% this year, citing Li Jianwei, director of the macro economy research institute under the State Council's Development Research Center. Consumer-price gains may stabilize in the third quarter before accelerating in the fourth quarter, driven by rising wages and imported inflation, citing Li. Inflation may reach 7.1% in the third quarter of next year partly due to higher commodity prices, he said.
Xinhua:
  • China has "indisputable" rights to islands in the South China Sea and surrounding waters, citing Yang Li, a spokesman for the State Council's Taiwan Affairs Office.
gulfnews.com:
Evening Recommendations
Citigroup:
  • Reiterated Buy on (CLF), target $127.
Night Trading
  • Asian equity indices are -.50% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 116.50 -2.5 basis points.
  • Asia Pacific Sovereign CDS Index 124.0 -2.75 basis points.
  • S&P 500 futures -.21%.
  • NASDAQ 100 futures -.12%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (KBH)/-.33
  • (FDO)/.95
  • (GIS)/.52
  • (AYI)/.63
  • (MON)/1.10
  • (AM)/.80
Economic Releases
10:00 am EST
  • Pending Home Sales for May are estimated to rise +3.0% versus an -11.6% decline in April.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,500,000 barrels versus a -1,711,000 barrel decline the prior week. Distillate supplies are estimated to rise by +1,050,000 barrels versus a +1,173,000 barrel gain the prior week. Gasoline inventories are expected to rise by +775,000 barrels versus a -464,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a +3.1% gain the prior week.
Upcoming Splits
  • (MMS) 2-for-1
  • (AMX) 2-for-1
Other Potential Market Movers
  • The Greece austerity vote, Fed's Raskin speaking, 7-Year Treasury Notes Auction, weekly MBA mortgage applications report, (DELL) analyst meeting and the (TDG) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity 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 75% net long heading into the day.
0 comments
Subscribe to: Posts (Atom)