Tuesday, March 9, 2010

Today’s Top Stories 03/09/10 $SPY

Today’s Top Stories
· Trading relatively quiet overnight with none of the major indices making large moves in
either direction (market generally +/- 0.5%).
· More attention in the Eurozone being given to a new European Monetary Fund with the
European Commission saying it will seek fundamental reform of the management of
economic policy in the Eurozone but Germany’s Merkel cautioned that such a plan would
need a new treaty and the agreement of all EU member states
· China expresses caution on further gold purchases - "Gold is not a bad asset, but currently
a few factors limit our ability to increase foreign-exchange investment in gold," said Yi
Gang, director of China's State Administration of Foreign Exchange. He said gold doesn't
offer good long-term returns due to price swings. Gold is “unlikely” to be China’s primary
investment to diversify its reserve holdings. WSJ/Bloomberg
· China & US Treasuries – “China says it will keep buying US debt” – Chinese official
says US Treasuries are a key market for it - Yi Gang, head of the State Administration of
Foreign Exchange, said that China buys and sells U.S. government debt every day and
that he hoped China's holdings of Treasuries did not become politicized. Gang reiterated
that China will be a "responsible investor" in Treasurys. Reuters/WSJ/FT
· TXN - mid-Q about as expected; stock traded off small in the after hours Mon night; next
semi events: NVLS mid-Q, SMTC earnings Wed night; ADI analyst meeting Thurs morning;
NSM earnings Thurs night. Commentary around lead times getting most attention on the
TXN call – TI says has been able to cut back on lead times for some products (not for all
products though). TXN is careful to note though that reduced lead times is b/c of increased
capacity and not b/c of softening demand. TXN says demand remains strong (and has
remained strong even as TXN has made efforts to cut back on lead times).
· Handsets/wireless demand - Three major Taiwan-based handset component makers – Merry
Electronics, Ichia Technologies and Silitech Technology – have all turned more
conservative over their revenue outlooks for the first quarter of 2010, predicting the firstquarter
revenues to drop at a rate faster than originally expected. All three companies cited
the labor shortage in China as the culprit for the expanded declines, particularly in February
Digitimes (separately, TXN on its call Mon night said all of its end markets would show
sequential growth w/the exception of wireless; all this said though, keep in mind that RFMD
and SWKS have both raised their outlooks for Q1 already).
· C – Citi shares – “no longer toxic?” - Bruce Berkowitz argues the worst is over. In an
interview with Fortune, Berkowitz said Citi's balance sheet is slowly improving. He
calculates that even its bad assets now return more than 5%."People are so focused on the
liabilities," he says, "that they've potentially forgotten about some of the assets."
Fortune/CNN (Citi shares continue to garner attention ahead of Mar 16, after which the
Treasury can start to sell some of its 7.7B Citi common shares).
· Europe cracks down on Wall St – according to The Guardian, European countries are
blocking Wall Street banks from lucrative deals to sell government debt worth hundreds of
billions of euros. Separately, Mario Draghi, chairman of the Basel-based Financial Stability
Board, insisted there would be a shakeup in the market for sovereign CDS; “Whenever
something has systemic implications, you can bet it is going to get systemic regulation . . .
It’s very unlikely that these markets will be left in the same state as they were before the
crisis,” (FT). Finally, according to the WSJ, Greece Prime Minister George Papandreou
said he is seeking to recruit the Obama administration for a global initiative to rein in the
type of global speculators he blames for driving up Greece’s borrowing costs.
· Health Care - A handful of House committee chairmen are either undecided about or plan to
reject the healthcare reform bill that is expected to be voted on as early as next week. A
survey conducted by The Hill of more than 100 possible Democratic defectors shows
that President Barack Obama and House Democrats have a lot of persuading to do over
the next week and a half. The White House wants the House to clear the bill by March
18 and then have the upper chamber amend the measure through reconciliation. The
· Student lending - Senate Democratic leaders have decided to pair an overhaul of federal
student lending with healthcare reform, according to a Democratic official familiar with
negotiations. “It’s going in,” said the Democratic source, in reference to the student lending
measure. However, several of the Democrats who are expected to oppose the student loan
legislation are centrists who could reconsider their support for healthcare reform if the two
issues are joined. The Hill.com

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