Tuesday, May 18, 2010

Today’s Top Stories;Helping in Europe; Europe - not all of the newsflow in Europe was positive overnight

Today’s Top Stories

· Helping in Europe – 1) European finance ministers are meeting w/the intention of rapidly ironing out details of the bailout, are playing down any German-French rift over the plan and importantly calmed market fears by noting that there won’t be a continent-wide austerity drive w/the potential to tip the economy back into recession (BBG/Reuters); 2) Greece will received Eur14.5B in aid today from the EU and will pay back the Eur8.5B bond normally on May 19th; 3) Portugal maintained its eco growth forecast for the year and 4) Spain sold over Eur6B of 12 & 18m treasury bills.

· Europe - not all of the newsflow in Europe was positive overnight with eco data coming in weaker nearly across the board (i.e. Smaller than expected Eurozone trade surplus, weaker May German ZEW and higher UK inflation) and the ECB saying it purchased just EU16.5B worth of sov debt, the low end of analyst forecasts and a level some think wasn’t “aggressive” enough (WSJ/FT).

· In China, Bloomberg is reporting that Beijing may launch an expanded property tax nationwide, rather than in just a number of cities, as early as this week to curb speculation and China’s NDRC said inflation would prob. come in around 3% in May/June, a level that could prompt rate increases.

· Japan’s eco data was mixed with the tertiary sector activity index coming in much weaker than expected in March while the ESRI's consumer sentiment index rose further in April and the Reuters Tankan large firm sentiment index remained solid in May.

· Financial Regulatory Update - update following events Mon night - Reid filed for cloture Mon night as expected; a bunch of relatively minor amendments were voted on; still a few important amendment votes to come – see full update section below 

· M&A – deal breaks down – WSJ says FIS takeover talks have fallen apart – WSJ 

· BA – two items out on the stock – 1) the co acknowledged that a design flaw had led to a 5-week delay in shipments of fuselage parts for the 787 (the delay was previously announced but the reason was not); 2) BA said it would increase production of its 737 to 34/month in early ’12 due to strong demand (WSJ)

· BP – said it was now collecting 40% of the crude flowing into the Gulf, nearly double its prior forecast (DJ); per the London Telegraph, BP could face an investigation by the DOJ after 8 senior US politicians called for an investigation into BP’s “civil and criminal transgressions”

· Retail – HD Reports Q110 Earnings, Q beats w/stronger topline; Raising FY guidance.

· US asset purchases (note that this data was out Mon morning in the TIC flows but is receiving a lot of attention overnight) – “Demand for Dollars Exceeds Estimate With China Among Big Buyers” is the Bloomberg headline; “Global investors flock to US debt at record speed” is the London Telegraph headline.  China purchased Treasuries for the first time in 6 months. 

· JPMorgan Tech Conf - some takeaways from day 1 - Some broad trends so far - 1) Inventory – companies don’t seem worried about inventory levels, similar to the tone from the Mar conf calls in Apr; FLEX in particular addressed the CSCO inventory purchase commitment (FLEX said they have received a ton of questions about the CSCO inventory purchase commitment but that it wasn’t a big deal); 2) Demand trends – not too many explicit mid-Q updates, but it seems like the demand trends articulated on the Mar-Q conf calls remains constant so far in the June Q (MU nudged up its DRAM pricing and bit growth guidance); 3) Europe – bunch of companies were asked about Europe and if demand trends have weakened since the sov debt crisis – on the whole companies sound sanguine re Europe.  Also - keep in mind we get earnings from HPQ and ADI after the bell today

· World Cup - new quant report from JPMorgan predicts England to win - our Model indicates Brazil as being the strongest team taking part in the tournament. However, due to the fixture schedule our Model predicts the following final outcome: 3rd: Netherlands; 2nd: Spain; Winner: England.  Burgess  

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