Today’s Top Stories; #GREECE #IMF $EWG $SPY $AA

Today's Top Stories

·         Greece continues to receive a lot of attention in the press with the country planning to push ahead w/a planned US$-denominated debt sale later this month despite a recent spike in yields according to officials and Reuters is reporting that Greek's central bank is taking actions to limit short sales of its gov't debt.  Greece's Finance Minister says the country isn't asking for an activation of the aid mechanism (although there is rampant speculation that activation could come soon) but EU president Herman Van Rompuy said aid to Greece must be made operational and talks are currently under way on the technicalities of implementing the plan (Bloomberg)

·         Greece – update from JPMorgan's D Mackie - With government bond yields having risen sharply over the past week, and concerns about market liquidity and deposit outflows from the banks mounting, we are likely getting close to the point when the Greek government will ask for the EU/IMF support mechanism outlined two weeks ago to be activated. 

·         A few stories out on the China front – 1) the chief economist at China's State Information Centre think-tank said China might increase interest rates as early as this month, but Beijing will probably not resume yuan appreciation as soon as that (China reports its March Trade Accounts tomorrow and St. is looking for a $0.4B deficit which could weaken arguments that the nation is keeping its currency undervalued to gain an advantage), 2) China's finance ministry failed to draw enough demand at sales of 273-day and 91-day treasury bills today
(ministry sold 15.8B yuan of 273-day bills vs. plan for 20B and issued 14.3B yuan 91-day bills vs. plan 15B) amid worries China is removing excess liquidity from the market, and 3) China has initially passed a plan to impose a property tax on home purchases and may start a trial in the cities of Beijing, Shanghai, Chongqing and Shenzhen, Sina.com reported on its Web site.

·         AA – JPMorgan's Michael Gambardella is downgrading AA from OW to N (note that AA kicks off earnings season this Mon after the close) – we are downgrading, cutting ests, cutting PT, and taking off JPMorgan Focus List - we believe likely weak 1Q results and relatively poor fundamentals for the aluminum market as compared to other metals will encourage investors to gravitate towards companies that have more earnings leverage to their respective metal prices.  lowering our 1Q10E EPS to $0.04 from $0.18 and 2010E EPS to $0.74 from $1.10. 

·         Earnings - Earnings for Standard & Poor's 500 Index members probably rose 30 percent in the three months through March after more than doubling in last year's final quarter.  Would mark the first back-to-back quarterly profit gains among U.S. companies since 2007 (Bloomberg)

·         WMT cutting prices on thousands of products (mostly food and staples) in an effort to reinforce its rep as a discount leader; WMT combating months of slowing sales (WSJ); JPMorgan's C Grom wrote a note on WMT's pricing this Mon: It was somewhat difficult for us to discern what was a "new rollback" versus what was already on sale and simply received updated signage. Moreover, our basket study of 31 items surprisingly revealed that Wal-Mart's basket increased 2.3% sequentially to $95.10 versus $92.92 last month."

·         Banks lowered their risk levels over the last 5 qtrs by temporarily lowering their debt levels just before reporting earnings.  The practice is legal.  SEC is said to be looking into the issue.  WSJ. 

·         Fed's Kohn comments echo tone from recent minutes in speech after close Thurs…"I last spoke on the economic outlook in October, and my views since then remain largely unchanged"…..Says core inflation rates have shown a substantial deceleration.  That said, he isn't calling for deflation – "I anticipate that inflation will remain low for a while, with core PCE inflation not likely to fall much further….repeats "extended period"….However, he also says the Fed can't leave policy at current levels forever…."that means we will not be able to wait until the unemployment rate is down close to its long-term level" 

·         Iron ore – Rio Tinto on Fri joined peers BHP and Vale in stating that ore contracts were now being negotiated on a qtrly basis rather annually (FT) 

·         Regional bank earnings preview – from JPMorgan's Steven Alexopoulos – "With the majority of stocks now trading at nearly 11x normalized EPS, we believe improved credit trends are now baked into the valuations and that "credit only" stories appear fairly priced"

·         Fund flows – update from E Beinstein - last night shows investors are becoming more comfortable with risk as inflows into equity funds are on an uptrend, flows into credit funds are on a slow down trend, and flows out of money market funds remain strong.  Equities had $3.1B of inflows this week, vs $1.3B the prior week. 

·         Credit Weekly from E Beinstein - renewed uncertainty in Greece has had minimal impact on credit spreads this time around given supportive US economic data and positive market technicals, perhaps setting the market up for a sell off if the situation there continues to deteriorate.