Thursday, May 20, 2010

Todays Top Stories

· The euro is off (dwn ~0.7%) following a large (1.75%) advance on Wed as there has been no official “verbal intervention” made by officials (recall this was the speculation on Wed); in fact, Eurogroup chairman Juncker said he doesn’t see the need to take immediate action to halt the euro’s decline (Juncker actually acknowledges that a weaker euro is helpful for the region’s exports).  Sentiment around the euro is growing increasingly negative in the press (a large WSJ article today talking about how the world’s largest money managers and central banks are walking from the euro), which could be a contrary indicator.
· On the data front, things were light.  Japan GDP headline was pretty much as expected although our analysts think the details weren’t as strong. In the UK, retail sales came in a bit ahead of expectations
· Spain and French debt auctions both saw decent demand this morning. 
· German short sale ban backlash grows – leaders “scrambled” to restore unity following the unilateral German move; other leaders did little to hide their frustration w/Germany (FT)

· Europe debt crisis could be as bad or worse than what happened 18 months ago says BoA’s head of global credit strategy research.  Bloomberg 
· In China, there wasn’t a ton of major news out, although its becoming increasingly likely that there won’t be action taken on the yuan during next week’s Washington-Beijing strategic talks.  Also in China – China Construction Bank gave an interview to Reuters in which it lowered its loan growth forecast for the year and said it may delay a planned capital raise due to market conditions. 
· On the geopolitics front, Greece is prepping for another general strike today (people will be watching to see if planned marches turn violent) while North Korea is threatening “all out war” after S Korea officially accused it of sinking one of its ships w/a torpedo a few weeks back. The situation in Thailand remains unsettled as well. 
· Software M&A remains a theme – last week saw SAP/SY and had comments from IBM that it was going to be ramping up its software buys; overnight, SYMC confirmed it was going to buy VRSN’s security business while the WSJ says bids are due this week for NOVL. 
· Credit cards achieve victory – the Whitehouse amendment was voted on Wed night - the Whitehouse amendment attracted only 35 votes, well short of the 60 votes needed for passage.  This is a mild pos. for the credit-sensitive card companies (COF, AXP, etc) and not such  a big deal for the network operators (V, etc).  The Whitehouse amendment would have allowed individual states to cap interest rates vs. the current practice of a card company’s home state setting such maximums. 
· Mining tax contagion to spread from Australia – Bloomberg article – other resource rich countries, like Canada or S Africa, could consider moves similar to what was introduced in Australia; separately, China plans to impose a resource tax on oil and gas profits in Xinjiang on a trial basis, PetroChina Co. Chairman Jiang Jiemin said in Beijing today.  Bloomberg
· Hedge funds – some prominent hedge fund managers tell CNBC they are de-risking given the current environment (CNBC) 
· Bank investing – one large HF says it’s now too risky to invest in large financial institutions for anything other than the short-term (FT Alphaville) 
· Industrial demand update – from JPMorgan’s S Tusa  - We recently traveled for a week in China, where we met with several European and Chinese locals as well as GE and WABCO. On our return we attended EPG and heard from 18 US and 3 European companies.  We see increased risks of a greater than expected slowing in China in 2H, with a more cautious tone from management teams about growth in 2011 adding to nearterm macro uncertainties, an incremental negative for the EE/MI sector.
· Semi update from JPMorgan’s C Danely following the JPMorgan TMT Conf this week (Mon-Wed) - Overall Commentary Good, But Signs of a Slowdown Starting to Appear; Our checks indicate there have been some signs of a slowdown in Taiwan – with notebook ODM order rates below plan for the second consecutive month and some increased availability of components. 
· Bank capital raising – UK fund managers push back against high fees associated w/bank rights issues - The Institutional Shareholders Committee (ISC) has established a new council whose first task will be to set up an inquiry into banks' charges for running rights issues.  London Telegraph

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