Thursday, November 15, 2012

Thursday Watch

Evening Headlines 
Bloomberg: 
  • Moody’s to Assess U.K.’s Aaa Rating in 2013 Amid Slowing Economy. The U.K.’s top Aaa rating will be assessed at the beginning of next year as the nation’s economy slows amid government efforts to reduce deficits and Europe’s debt crisis, according to Moody’s Investors Service. The economic recovery in the U.K. is likely to be slower than forecast as the private and public sectors reduce their debt loads, Moody’s said yesterday in a report. The government’s Autumn Statement, scheduled to be released in December, may reveal “the likely speed of fiscal consolidation, the growth outlook and, most importantly, the assurances offered that the debt trajectory will stabilize and start to decline within the rating horizon,” Moody’s said. Moody’s negative outlook “is driven by in part concern that the government’s efforts to achieve fiscal consolidation and reduce debt are being hampered by weaker than expected economic prospects,” Sarah Carlson, a London-based analyst at Moody’s, said in a telephone interview. The outlook also considers “the risks posed by the ongoing euro-area sovereign debt crisis,” she said. 
  • Container-Rate Plunge Shows Mediterranean Cast Adrift. Europe’s sovereign-debt crisis has led to a collapse in the rates container lines charge on routes from China to the Mediterranean, creating a two-tier price structure as they boost fees for destinations further north. The cost of a container shipment from Shanghai to Spain or Italy has tumbled 46 percent to $955 in five months, according to ICAP Plc, with the spread between south- and north-European rates widening to $436 as of Nov. 2 from $42 a week earlier.
  • French Transaction Tax Misses Mark as Speculators Find Loopholes. As France begins collecting its financial-transactions tax this month, it is becoming evident that President Francois Hollande’s levy is hitting all but the people it was aimed at: speculators. Hollande, who called finance his “main adversary” during his election campaign, pushed through in August a 0.2 percent transaction tax on share purchases, making France the first and only country so far in Europe to have such a levy. Many investors have been escaping the tax using so-called contracts for difference, or CFDs, offered by prime brokers that let them bet on a stock’s gain or loss without owning the shares. “The target was supposed to be finance with a capital F, which is sort of a black box,” said Jacques Porta, who helps manage $627 million at Ofi Patrimoine in Paris. “Instead, we are punishing small investors who aren’t to blame and already are frightened off by losses in the market.
  • Xi Jinping Replaces Hu Jintao as China Communist Party Leader. Xi Jinping replaced Hu Jintao as head of the Chinese Communist Party, ushering in the fifth generation of leaders set to run the world’s second-biggest economy over the next decade. He was also named chairman of the party’s Central Military Commission. Xi, 59, succeeds Hu as general secretary of the 82 million- member party that has run China since 1949, the official Xinhua News Agency announced. He’s joined on the elite Politburo Standing Committee by Li Keqiang, 57, whose new party rank indicates he will replace Premier Wen Jiabao at a March meeting. Xi and Li are both young enough to serve two full five-year terms, stretching their tenures to 2022. Xinhua named seven members to the Standing Committee. The new leadership inherits an economy set to expand this year at the slowest pace since 1999, stymied by lagging growth in the U.S. and European Union, its two biggest export markets.
  • China’s Stocks Slump to Seven-Week Low as New Leaders Announced. China’s stocks fell, dragging down the benchmark index to a seven-week low, as the ruling party announced the nation’s new leaders. China Construction Bank Corp. (939) led declines among lenders after a report showed the industry’s bad loans rose for a fourth quarter. Jiangxi Copper Co., the biggest Chinese copper producer, dropped 1.3 percent as Citigroup Inc. cut its rating on the stock. Citic Securities Co. slid to the lowest in more than two months after it received a warning from its regulator. The Shanghai Composite Index (SHCOMP) retreated 0.6 percent to 2,043.50 at the 11:30 a.m. local-time break, heading for the lowest close since Sept. 26.
  • Panasonic Plans 8,000 Job Cuts Amid Second Straight Loss. Panasonic Corp. (6752) plans to cut 8,000 jobs in the second half of this fiscal year as the Japanese TV maker restructures amid falling demand and a rising yen.
  • Ranks of Poor Americans at Record High Even With Aid. The ranks of poor Americans remained at a record high number last year, even after government-aid programs such as food stamps, housing vouchers and heating subsidies were included, the U.S. Census Bureau said today. The bureau said 49.7 million Americans, or 16.1 percent, are in poverty, up from 49.1 million, or 16 percent, in 2010, according to a new measure the government is using to supplement the official figures released in September. The new method, designed to offer a more comprehensive measure of poverty, includes government aid as income, while subtracting child-care costs, work-related expenses and medical out-of-pocket fees. The official measure, which includes only pretax cash income and is used to determine eligibility for aid programs, put the poverty rate at 15.1 percent, the bureau said.
  • I’m Uncle Sam, and I’m a Debt-aholic by Caroline Baum.
  • Texas Instruments(TXN) Eliminating 1,700 Jobs to Cut Expenses. Texas Instruments Inc. (TXN) is cutting 1,700 jobs to reduce expenses by about $450 million a year, part of a shift away from chips that run mobile electronics to focus on components for cars, industrial equipment and other devices. The measures will result in costs of $325 million, incurred mostly in the current quarter, Texas Instruments said today in a statement. 
Wall Street Journal: 
  • In Final Days, Petraeus Hurt by Libya Clash, Then Affair. In David Petraeus's final days at the helm of the Central Intelligence Agency, his relations with chiefs of other U.S. agencies, including his boss, National Intelligence Director James Clapper, took a contentious turn. At issue was whether the CIA should break its silence about its role in Benghazi, Libya, to counter criticism that increasingly was being leveled at the agency and Mr. Petraeus, said senior officials involved in the discussions. Mr. Petraeus wanted his aides to push back hard and release their own timeline of the Sept. 11 attacks on the U.S. diplomatic compound in Benghazi.
  • Impending  China Bad Debt Headache Likely Bigger Than Expected. China’s incoming generation of new leaders aren’t likely to get much of a honeymoon, with a long list of social and economic issues already clogging up the to-do list. One of those is China’s bad loan problem – and it’s probably already worse than the numbers suggest. That was one finding of a recent report by China Orient Asset Management Corp. – one of the four ‘bad banks’ that were set up over a decade ago to help the major banks deal with their mountainous piles of nonperforming loans – after surveying the players involved in working out, disposing of, buying and sitting on the country’s bad loans. According to the report, 65.39% of bankers said that the real level of nonperforming loans, or NPLs, is higher than the level reported on banks’ books. The survey said that no respondents thought NPLs were lower than their stated book value
  • FHA Set to Ask for Taxpayer Funds.
  • Barack Obama's Persuasion Army. The president has finally made the permanent campaign a reality. The job of the Obama persuasion army was to make sure that those targets never stopped having their heads filled via emails, phone calls, meetings and such with what Barack Obama was saying as president. USA Today reported, for example, that when Mr. Obama delivered his State of the Union speech last January—a half-year before Mitt Romney was the official GOP nominee—the campaign's persuasion army held 2,700 house parties. These field operations were the reason the nation's 44th president had to do 153 fundraisers this year. This wasn't just a presidency. It was a political corporation producing political product.
CNBC: 
Zero Hedge: 
Business Insider: 
Insider Monkey: 
The Blaze: 
Reuters: 
  • Analysis: U.S. credit rating could again take hit in 2013. In 2011, the United States emerged from a damaging budget battle with a downgrade of its pristine triple-A rating for the first time in history. In 2013, it could be dealt even a bigger blow. The battle over avoiding the so-called fiscal cliff is the first of a likely series of partisan confrontations in Washington in the coming year that, if not resolved, could cause more downgrades of the U.S. credit rating.
  • BP(BP) expected to admit to criminal misconduct in 2010 spill. BP Plc is expected to plead guilty to criminal misconduct in the 2010 Deepwater Horizon disaster through a plea agreement it has reached with the U.S. Department of Justice that may be announced as soon as Thursday, according to two sources familiar with discussions. The sources, who spoke to Reuters on condition of anonymity, said that BP would plead guilty in exchange for a waiver of future prosecution on the charges.
  • Chuck Schwab says "fiscal cliff" resolution not likely by Dec 31. Investors should brace for volatility over the next few months as U.S. politicians are unlikely to agree on a budget deal by year end, though that could lead to some good buying opportunities, Charles "Chuck" Schwab, founder and chairman of his namesake firm, said on Wednesday. There is a high probability the United States will go over the "fiscal cliff" - a $600 billion mix of tax increases and spending cuts set to kick in on Jan. 1 that threatens to derail the economic recovery - though a resolution is likely by the spring, he said at the Schwab IMPACT conference in Chicago. "Certainly our president for the next four years has presented his position pretty clearly, I think, through the election process, and I think we have a very difficult time seeing a reasonable resolution by December 31," Schwab said.
  • U.S. regulators cut JPMorgan's(JPM) ability to trade power. U.S. federal energy regulators voted on Wednesday to ban JPMorgan Chase from trading in a segment of the electricity market for six months, marking a hefty penalty for the Wall Street bank. 
  • US regulators report possible link between caffeine shot, deaths. The U.S. Food and Drug Administration confirmed on Wednesday the receipt of reports that another caffeine drink, 5-hour Energy, may have been involved in a number of deaths - in this case 13 over the past four years. 
  • Petraeus to testify before closed House hearing on Benghazi. General David Petraeus, who stepped down from his post as CIA director after the revelation of an extramarital affair, is scheduled to testify on Friday at a closed-door congressional hearing about the attack on the U.S. consulate in Benghazi. The House Permanent Select Committee on Intelligence said in a statement on Wednesday that Petraeus will testify on Friday morning.
  • Japan manuf outlook down 4th mth in row -Reuters Tankan. Sentiment among Japanese manufacturers fell for a fourth straight month, a Reuters poll showed, providing more evidence that the world's third-biggest economy is slipping into recession amid a global slowdown and tensions with China.
  • U.S. growth potential shifts to lower gear-CBO. The U.S. economy is recovering at an agonizingly slow pace largely because its potential growth rate has been stunted by structural shifts to its workforce and a dearth of investment, the non-partisan Congressional Budget Office said on Wednesday. In a new report that offered a gloomy outlook for U.S. growth prospects, the CBO said the cumulative rate of growth in U.S. output since the end of the recession in 2009 was running nearly nine percentage points below the average for previous recoveries.
  • Euro zone seen sinking into recession as Germany struggles. The euro zone likely slipped into its second recession since 2009 in the July-September period, as the three-year debt crisis slowed economic growth in Germany to a crawl. Economists expect EU statistics office Eurostat to say on Thursday that the bloc's output shrank 0.2 percent in the third quarter, as it did in the second quarter. That would put the 9.4 trillion euro ($12 trillion) economy, which generates a fifth of global output, officially in recession, although Italy and Spain have been contracting for months and Greece is suffering an outright depression. "The distress in more vulnerable member states has progressively started to affect the remainder of the (European) Union," senior European Commission official Marco Buti said in a report this month forecasting a 0.4 percent contraction for the euro zone in all of 2012. Hopes for a recovery next year are also fading, with the European Commission saying the economy will flatline in 2013
Munhwa Ilbo:
  • North Korea has been placing more soldiers, artillery pieces, bunkers and attack helicopters near the western sea border with South Korea since the regime's leader Kim Jong Un visited the area in August, citing South Korean military officials.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.0% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 126.25 -.25 basis point.
  • Asia Pacific Sovereign CDS Index 90.75 -.5 basis point.
  • FTSE-100 futures -1.01%.
  • S&P 500 futures +.20%.
  • NASDAQ 100 futures +.16%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (PERY)/.23
  • (DLTR)/.49
  • (HP)/1.24
  • (SSI)/-.30
  • (PLCE)/1.60
  • (WMT)/1.07
  • (VIAB)/1.17
  • (TGT)/.96
  • (GME)/.32
  • (ROST)/.72
  • (GPS)/.63
  • (INTU)/-.06
  • (DELL)/.40
  • (AMAT)/.03
  • (SHLD)/-2.13
  • (ADSK)/.43
Economic Releases
8:30 am EST
  • The Consumer Price Index for October is estimated to rise +.1% versus a +.6% gain in September.
  • The CPI Ex Food & Energy for October is estimated to rise +.1% versus a +.1% gain in September.
  • Empire Manufacturing for November is estimated to fall to -8.0 versus -6.16 in October.
  • Initial Jobless Claims are estimated to rise to 375K versus 355K the prior week.
  • Continuing Claims are estimated to rise to 3181K versus 3127K prior.
10:00 am EST
  • The Philly Fed for November is estimated to fall to 2.0 versus 5.7 in October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Bernanke speaking, Fed's Plosser speaking, Fed's Dudley speaking, Fed's Fisher speaking, Fed's Evans speaking, Fed's Lacker speaking, Eurozone GDP reports, Eurozone CPI, US bank stress tests, weekly EIA natural gas inventory report, Bloomberg November US Economic Survey, weekly Bloomberg Consumer Comfort Index, 3Q Mortgage Delinquencies, 3Q MBA Mortgage Foreclosures, UBS Building/Building Products Conference, (FFIV) analyst day, (PG) analyst meeting and the (QCOM) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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