Wednesday, July 14, 2010

Today’s Top Stories; Asia rate hikes - Thailand's rate hike, its first in 2yrs;Basel Rules under consideration at meeting this week

Today’s Top Stories

· INTC – v strong earnings for June Q + Sept outlook; key takeaways: 1) inventories up both on absolute basis and days; however, mgmt says very comfortable w/inventory overall and that channel inventories saw a marked decline; 2) mgmt says China + Europe started Q slow but finished strong; 3) mgmt was upbeat on enterprise and SMB (while consumer was seasonal) – corporations now buying in addition to consumers; 4) v bullish comments on new Sandybridge. 

· Semi Equipment – newsflow v pos. from slew of companies; NVLS kicked things off Mon night w/Q2 beat + strong guidance; mgmt tone was bullish also; on Tues during trading, we saw robust guidance updates/commentary from KLAC, LRCX, and AMAT @ SEMICON; Wed morning in Europe ASML posted strong earnings and gave better guidance (also ASML is seeing the first signs of capacity expansion).  Keep in mind that INTC raised its capital spending guidance Tues night. 

· Telecom equip – v strong ADTN earnings Tues night; group was one of the best performing groups on Tues on back of the ADCT/TEL deal. 

· Banks – neg. news from WTNY – cites BP spill as one of the reasons for poor credit performance – the co preannounces neg. earnings; says provisions to be up 58% Q/Q and for NCOs to be up 47% Q/Q; they cite ongoing issues in the Florida resi/CRE market as well as new problems related to the BP spill in the Gulf.

· Basel Rules under consideration at meeting this week; Bloomberg says banks poised to win reprieve on rules - The Basel Committee of banking supervisors and central bankers meets in Switzerland on Wednesday and Thursday to start finalizing its tough new bank capital and liquidity rules.  Bloomberg/RTRS 

· EXPD - transports - co preannounces to the upside.  Sees EPS 0.38-0.40 (vs. the St 0.30).  "We've experienced very significant year-over-year volume increases in both our airfreight and ocean freight business,"   EXPD’s upside preannouncement follows pos. news out of other transports cos (in Europe, Maersk and Hapag Lloyd both had pos. earnings revisions in recent days).

· Fed event on Wed – FOMC minutes @ 2pmET – see below for JPMorgan’s preview – watch for the Fed staff to have lowered its eco growth outlook and minutes could reveal that additional monetary accommodation measures were discussed (see WSJ article Wed morning – says “internal debate heats up at Fed” as officials discuss what to do in event of faltering growth and/or deflation) 

· New mortgage initiative being considered in Washington?  The federal government is giving serious thought tocharging money (to home buyers) for the backstops it will provide for future Fannie Mae- and Freddie Mac-purchased loans.  Such  a move could lead to higher mortgage costs.  NY Post. 

· BP – testing on the new well cap was delayed late on Tues as gov’t and BP officials said further analysis needed to be conducted; Even if the integrity test ultimately fails, U.S. officials said the company could use the same cap to capture all of the oil flowing from the well by the end of the month. (WSJ) 

· YUM – Reports Q210 Earnings, Shares trading off 3.5% after the close as Q beats but China SSS fall short of elevated expectations and FY guidance was raised (+12% eps growth vs. prev. at least 10%) but falls shy of the St.'s +14% expectation.

· Rio Tinto reports Q2 production - overall was mixed; Rio up ~1% in London and miners generally in the green (although peers up less than 1%); While CEO Tom Albanese acknowledged that 2010 "...continues to shape up well for Rio Tinto..." it was noted that recent concerns about a double-dip recession and a slowing of growth in China “have led to some weakening in sentiment. We believe this pattern of volatility in the global economy is set to continue”.  Iron ore reported production was inline; copper production performance was soft. 

· Hedge fund industry seeing rush of start-ups as trading teams formally part of large commercial banks are spun out as independent companies (FT)  

· Asia rate hikes - Thailand's rate hike, its first in 2yrs, is being interpreted positively by the market as a sign of stronger eco growth as has been case from the other countries in the region who have recently raised benchmark rates (i.e. Malaysia, India,Vietnam, Taiwan, New Zealand, South Korea, and Australia).

· Weighing on Europe were a) weaker eco reading inc. Eurozone June IP & UK June Consumer Confidence, b) continued cautious/negative datapoints re Spain as borrowing from the ECB by Spanish banks rose again in June, the Telegraph was negative on the outlook for Spain and comments from Spain’s government that it will tighten rules on the quantity of capital banks must hold and impose limits on their real estate investments and c) BoE's Sentence continues to call for higher rates.

· Australia's treasurer said that the country's budget would return to a surplus within 3 yrs (recall there was speculation on Bloomberg yesterday that this would be announced today).

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