Wednesday, February 24, 2010

Today’s Top Stories 02.24.10

Today’s Top Stories

· Greece – headlines today - 1) reports signal that the country could attempt to launch a bond issue sometime this week but timing is still uncertain and could slip to next week, 2) Greek Workers Stage 24-Hr Strike Over Austerity Plan, 3) a lawmaker with the German Christian Social Union said it is legally impossible to give state aid to Greece, and 4) U.S. bond investors are showing little interest in purchasing new Greek government debt

· Eurozone eco data comes in better today with Eurozone Industrial New Orders and Italian Dec. retail sales both beating

· ECB update - The European Central Bank is likely to extend banks' access to unlimited funds at fixed interest rates into the start of the third quarter at its March 4 meeting, as worries about Greece and sluggish growth weigh on financial markets. Some policymakers would prefer longer-term loans to return to a normal auction procedure as early as the second quarter, although the ECB is aware of the need to smooth the repayment of close to half a trillion euros in 12-month funds on July 1. – Reuters

· Europe at risk of a double dip recession according to a report in the London Telegraph – “A blizzard of bad data from France, Germany, and Italy have raised concerns that Europe's fragile recovery is stalling already, with mounting risks of a double-dip recession this year” – London Telegraph

· In Asia, China rallies for the first time since re-opening post-New Year’s Holiday while the rest of the region declined. Market generally ignoring China tightening headlines with shares up 1.3% despite news out this morning that China will resolutely control production capacity in industries, China told banks to limit lending to local governments and China will scrap some home- purchase incentives after property prices surged.

· Tech – one of the biggest events Tues in tech was the article in the Korean Times (out Mon night) discussing how a Samsung exec was becoming worried about a bubble in memory – the article weighed on semis and tech for most of the session. However, at the Goldman tech conf, a bunch of companies refuted the article (inc. KLAC and MU). KLAC last night said its orders for the Mar Q were tracking towards the upper end of its guidance range and could exceed the top end. Elsewhere in tech, ADSK earnings came in better while STEC was a big disappointment (the guidance was very weak); JPMorgan is downgrading STEC this morning. A report on Silicon Alley Insider: “Info Tech Hedge funds are underweight Information Technology for the first time since 2005”

· Homebuilders – TOL earnings come in better w/orders ahead of the high-end of St expectations; per mgmt: "A year ago at this time we feared for the stability of the nation's economic system. That worry seems to be behind us. The housing market took several years to recover following the downturn of the late 1980's and early 1990's. We expect this recovery to follow a similar pattern. We believe the housing market is still in choppy waters but the seas are getting calmer.” TOL conf call @ 2pmET.

· HRB – the co issued an update on the tax season so far and cut its guidance as demand has fallen short of expectations.

· Health Care – Dems more confident to pass via reconciliation - Party lawmakers, energized by President Obama's blueprint and summit plans, are getting behind the strategy of passing the Senate's bill and using budget reconciliation to prevent a GOP filibuster according to the LA Times. Senate Dems warm to reconciliation….the idea gaining acceptance among moderate Democrats who have resisted the strategy but now say GOP opposition may force their hands (according to Politico). However, according to the WSJ, the Obama HC proposal faces challenges in the House the planned, as outlined Mon by the president, is encountering resistance in the House. "We may not be able to do all. I hope we can do all," said House Majority Leader Steny Hoyer.

· “Volcker Rules” to be watered down in the Senate – WSJ article Wed morning (recall the same article was in the NY Post; the White House said mid-day on Tues that it remained committed to Volcker’s proposal, but it appears like the plan doesn’t have momentum in the Senate). The Journal sounds similar to the Post’s story. Sen Banking Committee Chairman Dodd will unveil a plan that would grant regulators the ability to limit and potentially bad prop trading at banks although will stop short of imposing an outright ban.

· Short selling – majority of the SEC’s 5 commissioners will vote today to temporarily restrict short sales of a co’s stock once it falls 10%. When the 10 percent threshold is triggered, traders could only execute short sales for the stock at a price above the market’s best bid – Bloomberg

· Credit mkt update - With 3 days to go in February there has been just $39B of un-guaranteed debt issued. Coupons plus maturities in HG credit average about $60B/month this year, so investors are likely building cash. Earnings coming in this week from retailers show continued improvement in credit trends. These two themes – strong and improving credit metrics and the positive technical environment should lead to lower spreads over time, even as HG credit reacts to the events outside the market driving daily volatility. E Beinstein

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