Friday, May 21, 2010

Today’s Top Stories; Japan fell 2.5% **Prime brokers on Thurs anticipated larger margin calls;**

Today’s Top Stories
· Europe update this morning; all eyes on German vote (lower House just passed as expected) and Eurozone Fin Min meeting - more peaceful than expected protests in Greece on Thurs.  Spain late in trading yesterday lowered its eco growth forecast due to budget reductions however market focusing more on drop in projected 2011 budget deficit (to 6% of GDP from 11.2%) more than cut to GDP forecast (to +1.3% in ’11 from prior +1.8%). Eurozone eco date was mixed with the UK’s Apr. Budget deficit coming in lower than expected being offset by weaker readings from the German Apr. IFO and Eurozone May composite PMI. 
· Euro strength – was up to 1.265 overnight but now flattish at 1.25.  Euro strength earlier this morning due to anticipation that progress will be made at today's European finance ministers meeting to help support the Euro, and concern of intervention in FX markets from Japan (Japanese Finance Minister Naoto Kan said excessive strengthening of the Japanese currency isn't desirable), Australia (per Reuters, AUD jumped amid talk the RBA could intervene) and SNB (see Telegraph yesterday). 
· In Asia, Japan fell 2.5% despite the BoJ upgrading its assessment of the economy and unveiling a broad outline of bank lending support plan (BoJ did warn that the European debt crisis was a risk). China however rallied over 1% mainly on optimism that the gov’t will hold off on a rate hike/yuan move given the European crisis (per Bloomberg).

· Siemens – one of Europe’s largest industrial firms - said on Friday business developments in April were in line with expectations and it remains on track to meet its targets for this fiscal year.  The co noted that a weaker euro is a positive for it – Reuters
· Corporate commentary on the euro – for the moment, the few companies that have commented on business trends given the European debt crisis haven’t sounded too worried; the only risk most are citing relates to exchange rates; it doesn’t seem like demand trends have weakened much. 
· Prime brokers on Thurs anticipated larger margin calls; managers selling out of profitable crowded trades, like gold, to raise cash – execs at major PBs said margin calls on Thurs would prob. be higher than normal, although they still aren’t at the peak crisis levels of 13 months ago.   WSJ 
· Hedge Fund Managers: Drowning in 'Liquidity' – CNBC    "We learned from the last crash that our investors favor liquidity,"   However, some starting to think the "liquidity trade" has become too crowded. Hedge funds are paying a premium for liquidity, leaving lots of less liquid assets undervalued.   CNBC   
· Bill Gross said that hedge funds were starting to liquidate their positions in a bid to preserve their capital – a worrying "mini relapse" towards 2008 territory (London Telegraph) 
· Pharma/biotech - Abstracts for the annual meeting of the American Society for Clinical Oncology (ASCO, June 4-8, Chicago) were posted to the ASCO website last night. 
· Tech Update - MRVL earnings last night - Apr Q OK but v strong Jul-Q rev guidance; a lot of rev guidance strength from wireless, which is seen up 25% Q/Q (maybe seen as pos. for RIMM); inventories fell Q/Q; they see storage dwn Q/Q in Jul (HDD is big end mrkt).  On DELL, #s OK; they are still seeing component shortage issues, which is hurting margins; the co remains bullish on enterprise spending.  BRCD earnings being taken as a disappointment – while the old FDRY biz rebounded, the core storage business was weaker.  CRM guidance looks weak, but ex out dilution from some recent acquisitions, and the outlook was actually raised.  Away from earnings, WSJ says AAPL’s ban on flash in the iPhone/iPad having an impact as web site developers moving towards more Apple-favored standards. 
· Credit Update – from JPMorgan’s E Beinstein - This morning we publish the 1Q10 High Grade Credit Fundamentals report. Credit fundamentals of companies in our investment grade index continued to improve at a moderate pace in 1Q10 

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