Tuesday, March 2, 2010

Todays News 03.02.10

·         Greece & sovereign CDS – the WSJ says that some investors are starting to exit their bearish positions against Greece, worried that a bailout deal is in the works and also concerned about potential regulatory actions taken by European officials concerning the use of sovereign CDS.  "You've already had a scramble to close out the short positions,".  Reports signal that Germany has moved to identify speculators in Greek debt to try to prevent them from profiting from any bailout of the euro zone country's ailing economy.  European political leaders, as they consider how best to help Greece, are keen to deter hedge funds and other speculators from exacerbating Greek's problems by betting on the cost of insuring or buying the country's debt.  Michel Barnier, the European Union’s financial services commissioner, said the European Commission will investigate trades in sovereign credit default swaps.  DJ/WSJ/Bloomberg     

·         The UK pound’s slump continues with worries about a “hung” parliament, the country’s fiscal state and BOE’s King comments last week about potentially resuming QE all pressuring the sterling. 

·         A few tightening stories re China, namely that the country may raise the bank reserve ratio again in Mar. and that loans from China's four-biggest banks in February were down ~39% vs. Jan. 

·         India was the strongest market overnight, led by Steelmakers after the Press Trust of India reported makers of the material may raise prices by 600 rupees ($13) a metric ton in the year from April 1 after the government proposed an increase in excise taxes and the Business Standard reported that Tata Steel has ruled out raising equity to meet covenants.

·         Australia - In Australia, the RBA lifted the cash rate another quarter point to 4.0%, the fourth hike since last October. 

·         Airlines/freight.  The latest IATA #s were published - International air cargo traffic rose 30% on the year in January; passenger load factors rose 6.4% and also showed signs of improvement.  Also – CAL reported its Feb stats.  Separetely, Data from the Bureau for Economic Policy Analysis said that the volume of goods trade worldwide rose at 4.8 per cent in December.  There are two notes out today from JPMorgan’s T Wadewitz: 1) Transport Demand Data: Cass Freight Index for February Shows Continued Improvement Despite Difficult Comps and Weather  2) FedEx Corp: Upside 3Q Appears Likely; Earnings Preview Thoughts.  

·         Semi update – the SOX was one of the best performing market groups during Mon’s session, breaking up above its 50day MA.  Upside preannouncements from SWKS/SNDK and SIA’s strong Jan sales update helped.  Some items this morning: 1) Semi wafer update - Major blank wafer suppliers including Shin-Etsu Handotai (SEH), Sumitomo Mitsubishi Silicon Corporation (Sumco) and MEMC Electronic Materials have all raised their quotes for the second quarter of 2010 due to surging demand; also - Sino-American Silicon Products (SAS) has seen supply of small- and medium-size semiconductor-use silicon wafers exceed demand by over 30% and has raised prices as a result (both on Digitimes); 2) MediaTek has denied local media reports indicating the company was planning to reduce wafer starts at foundry partners (recall this weighed on the semis during trading last week).  Note that JPMorgan’s C Danely is raising ests on ALTR/XLNX this morning. 

·         Cash for caulkers to be highlighted today - Obama will be traveling to Savannah, GA; Obama’s four-hour visit to Savannah, Ga., will focus on a roughly $6 billion, short-term program designed to get consumers to invest in energy-saving home repairs and upgrades – and in turn, help create tens of thousands of jobs.  Politico.   

·         SPLS - Reports Q409 Earnings, Q misses and guidance on light side (St. at high-end for Q1 and above FY range). Miss follows better than expected earnings reports from OMX/ODP in recent weeks.

·         Credit Update - The YTD peak for bond yields was almost 2 weeks ago on Feb 18 when the JULI index reached a yield of 5.26%. On that day 10yr UST yields were at 3.80% and bond spreads were at 162bp. Yields are now down at 5.07% thanks to a 20bp decline in Treasury yields and 5bp lower spreads as well. The Treasury curve flattened over that period, explaining the difference between the 10yr move and the overall JULI spread move. The HG bond spreads are now 10bp above their YTD lows as is the spread of CDX.IG, and yields are 5bp above their YTD tights. We don’t believe we are likely to set for another short-term spread selloff as we expected in mid-Jan, however. The differences between then and now is a lower pace of new issuance, higher bond spreads and lower UST yields than in mid-Jan (by about 10bp each) and a better understanding about the way Europe is going to address the situation in Greece.  From E Beinstein. 


Catalysts to Watch

·         Central Banks - The ECB holds a meeting on Thurs and China’s National People’s Congress starts Mar 5.  There will also be meetings from the RBA and BOE. 

·         Health Care – Obama will make an announcement this week (on Wed) about the "way forward" on health care following the bipartisan meeting last week; new revised HC outline to be released

·         HMO exec meeting on Wed - top health-insurance executives are expected to appear before the Obama administration's top health official to discuss health-care premiums.  WSJ  

·         There are a couple mid-Q updates (ALTR) and important Feb sales releases (auto companies release throughout the day on Tues and people will be looking for share shifts given the Toyota recall headlines; retailers will hit Thurs morning). 

·         There have been reports that Greece could launch a bond sale in the coming week and unveil additional budget reduction initiatives (Greece’s PM will be traveling to Germany on Fri 3/5).  Greek Prime Minister George Papandreou has called a cabinet meeting for Wednesday to "take decisions about the economy" (Reuters).  The WSJ reported that Germany and France were working on a EU20-30B bond sale deal w/Greece whereby state-backed German and French banks would take down half the issue w/the private markets taking the other half. 

·         Obama will be traveling to Savannah, GA; Obama’s four-hour visit to Savannah, Ga., will focus on a roughly $6 billion, short-term program designed to get consumers to invest in energy-saving home repairs and upgrades – and in turn, help create tens of thousands of jobs.  Politico.  http://www.politico.com/news/stories/0310/33729.html    

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