Friday, May 28, 2010

Today’s Top Stories; Fund Flows; Greece; European equity strategy $SPX

· Fund Flows - US equity funds (including ETFs) saw sharp outflows again this week of -$13.7b, the second consecutive week of large outflows.  The large outflows over the past two weeks totaling -$21.2b have wiped out most of the inflows over the prior 13 weeks; Excluding the impact of ETFs, the outflows were still significant at -$4.2b (JPMorgan’s T Lee). 
· Washington considering bailout of faltering pensions jointly run by companies and unions (so called “multi-employer plans”) – some Dems are pushing a plan that would provide assistance to faltering pensions (WSJ) 
· GS – articles in the WSJ and FT discussing how Goldman is seeking a settlement w/the SEC on a lesser offence than fraud; Goldman would neither admit or deny wrongdoing; WSJ says no agreement is imminent; Goldman is trying to reach a settlement on the less serious charge of omitting or misstating material facts to investors; the company could wind up paying a fine worth hundreds of millions of dollars.  Its not clear how receptive the SEC has been to Goldman’s request. 

· AAPL – iPad goes on sale in Asia; Reuters says “buyers flocked” to buy the new device; Bloomberg said “iPad draws 40hr lines from Sydney to Tokyo”; keep in mind WWDC launches June 7 and Apple widely expected to unveil new iPhone. 
· Semi Equipment – NVLS first tech mid-Q update – they raise guidance and have bullish tone; says biz strengthened from Apr Q1 earnings call; separately, reports indicate that Hynix could raise its capital spending budget. 
· Daimler raises Mercedes profits outlook for second time in 6 weeks (Bloomberg)
· Greece - Greek labor unions will strike in June and are trying to mobilize workers across Europe to take joint action (Reuters) 
· Bond sales plunge in month of May to decade low; Borrowers issued $61.1 billion of debt in currencies from dollars to yen in the month of May; this is just 33% of the amount sold in Apr; this is the lowest monthly sales total since Dec ’00; at least 13 companies withdrew offerings – Bloomberg 
· Gulf crude – BP resumed its “top kill” strategy Thurs night after halting the process as initial indications signaled that the effort wasn’t working; Federal officials now think crude is pouring into the Gulf at a pace of 12-19K BPD, more than 2x initial forecasts; this spill has now surpassed the Exxon Valdex spill and is the largest in US history (Washington Post) 
· European equity strategy - JPMorgan making a bullish call on mining stocks; upgrading mining to OW - Mining is the only Cyclical sector underperforming the market this year, (where IT, Industrials and Discretionary are the best 3 performers, all OW), but we believe one should start re-entering Mining.  Chineses inflaton to peak in Q3, which will allow policymakers there to slow tightening.  The Mining sector is trading at a 7.7x forward P/E multiple, relative to a 10.3x average during the ’04-’06 early upcycle.  Our analysts prefer RIO (has fallen 25% over the last 5 weeks), XTA (down 26%) and AngloAmerican (down 14%).  Mislav Matejka 
· Mining Tax - South Australia state's Mineral Resources Development Minister Paul Holloway said he was optimistic that the central government would change its proposed Super Profits Tax (DJ)
· Korea – U.S. and South Korean forces elevated their five-step alert level on North Korea by one to the second-highest level and the US says that American and SK forces are well prepared to deter aggressionSouth Korea says no chance of war w/North; however, SK is deeply concerned that NK may pursue terror attacks against the South (Reuters) 
· On the eco front, datapoints largely disappointing overnight with the UK May consumer confidence survey falling two points to -18 (the lowest reading since December), CEPR’s EuroCoin indicator of Eurozone economic growth fell 0.55% m/m in May for the 2nd straight month of declines, Japan’s two major monthly indicators of private consumption in April moved in the different direction with core real household spending surprisingly weak (although retail sales were firm), Japan’s Apr. unemployment rate came in higher than expected and Japan’s CPI showed deflationary pressures are intensifying (although JPM’s Nakamura notes that the details reveal consumer deflation easing). In China, industrial profits rose 91.5% yoy in the first four months of 2010 according to the National Bureau of Statistics (NBS).

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