Thursday, February 25, 2010

Today’s Top Stories 02.25.10

Today’s Top Stories

· Eco numbers on the whole of Europe disappointing overnight with European Confidence, German labor #s, French Confidence and Markit Economic’s European Retail sales index all worse while the lone bright spot was Italian Business Confidence.

· European earnings – a bunch of earnings out overnight; BASF shares are up >4% post its results (best performing stock in the DJ Euro Stoxx). Financials are trading well after earnings – Credit Agricole, Allianz, and RBS are all up post results. Telecoms are weak – Telecom Italia is off after postponing the release of its earnings and DT inches lower after its results disappoint.

· Greece - The euro slumped to a one-year low against the yen overnight and the cost to protect against a default of Greek government bonds climbed on concern that the country may need the EU's assistance to avoid missing debt payments. Moody’s said that any changes to its ratings for Greece would depend on whether the country was smoothly enacting its fiscal consolidation plans and that a downgrade may come by the end of March (Reuters /Bloomberg) which followed S&P’s comments from yesterday morning (namely that "In our view, a further downgrade of one to two notches is possible within a month").

· Greece – plans to issue a 10yr bond next week according to sources cited by DJ; the bond sale will come after the govt announces a new austerity package worth EU2-2.5B. The country had planned on issuing a bond issue this week but that was put on hold following Wed’s strike. The government hopes to raise EUR3 billion - EUR5 billion from the bond issuance. DJ

· In Asia, China is getting a lift after China released a statement yesterday following a meeting chaired by Premier Wen Jiabao which said that the government will continue to expand domestic demand, consolidate the recovery in key industries and encourage companies to find new export markets. Also helping in Asia are expectations that authorities at the National People’s Congress commencing on March 5 will emphasize that policy on the whole will remain accommodative.

· Tech Update - Another neg. sounding article overnight from Asia re tech – on Mon night recall Samsung made neg. comments in the Korean Times re the possibility of an H2 memory bubble; Thurs morning in the Economic Times there was a report that Taiwanese chip company Mediatek cut orders ~10-20% to its major foundries. Also this morning – Digitimes is reporting that chip foundries are starting to worry about double ordering (per the article: “customers' double ordering has raised concerns among foundry chipmakers who fear that demand may slow down in the third and fourth quarters”). A separate Digitimes article says panel demand in Q2 may be flat or fall Q/Q b/c inventory levels in China remain a few weeks higher than normal. Investors in tech remain very jittery and are quick to sell the group on signs of bad news (see the reaction in WDC and the other hard drive stocks late in the session on Wed – speaking at the Goldman conf, WDC said normal seasonal trends would prob. return in ’10 and that the co was heading into a seasonally soft period; despite signaling that the Q was on track, that comment on seasonality was enough to hit the drives hard). Tone on the whole coming out of the Goldman conf remains sanguine on demand trends (similar to what we heard from companies back in Jan during the Q1 calls), although there remain lingering worries about H2. CRM was the big earnings report overnight – top line trends (revs, bookings, def revs, etc) were very strong although op margins came in a bit light and mgmt said operating spending levels will remain elevated going forward.

· Health Care – Bernanke working on a plan B – if the president’s new plan (outlined this Mon) fails to receive enough bipartisan support, the WH is working on a more modest proposal. His leading alternate approach would provide health insurance to perhaps 15 million Americans, about half what the comprehensive bill would cover. WSJ

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