· Stocks traded higher worldwide amid a fairly quiet morning, although China was very weak. China said they plan to enact additional tightening measures, such as a real estate tax, to cool their property market. Economic headlines were quiet (the highlight was better-than-expected Australian labor numbers).
· In Europe stocks are up slightly and near their highs after comments that Norway is buying debt of Greek, Irish, Italian, and Spanish bonds offset comments that German banks are undercapitalized. Europe is also being helped a bit on talk that final capital rules could be less restrictive than originally thought. The BoE is holding a meeting today, although they aren’t expected to make any major changes. In a surprise move, the Bank of Korea left rates unchanged.
· Basel Capital Rules – more evidence the final capital rules to be less onerous than feared - Central bank governors and senior regulators are to rule that banks must have a minimum core tier one capital ratio, including a new so-called "buffer" to protect against extreme economic conditions, of 7%. This is considerably lower than was wanted by the "hawks", the US, UK and Switzerland. They wanted a core tier one capital ratio of 8 to 9% including buffer. However, opposition from some countries, esp. Germany, forced the number to be lower. BBC
· China housing – more tightening measures to come – an official said Thursday that China will likely expand an existing real-estate tax as part of reform of the country's real-estate tax system. The comment was the first clear signal China will expand an annual tax on commercial property to include residential property to help curb runaway housing prices. Reuters
· China + commodities – commodity prices fell in China on reports that officials were conducting an investigation into the rubber market. Several analysts are reporting that the China Securities Regulatory Commission was investigating a dealer who built a long position of 60K rubber contracts – the officials forced this dealer to liquidate the position. Chinese regulators have repeatedly tried to crack down on trading practices that could lift prices for raw materials. Reuters
· Health care spending to rise at a faster rate - The nation's health care costs are expected to increase at a slightly higher rate over the next decade because of the health care reform law, the CMS Office of the Actuary says in a report released overnight. National health spending is expected to reach nearly $4.6 trillion by 2019, increasing by an annual average of 6.3 percent, or .2 percentage points faster than expected before the health care reform law was passed (Politico)
· Private Equity Taxes – in a surprise switch, Senate Finance Committee Chairman Max Baucus will back the so-called “Enterprise Value Tax” which would more than double the tax hit to PE firm investors. NY Post.
· TXN - mid-Q update preview from Danely - Today after the close, TI is scheduled to provide an update on business conditions for 3Q10. We expect slightly lower guidance due to downside from its consumer, PC, and wireless businesses (combined estimated 55% of 2Q10 revenue).
· Mortgages - a CNBC article says that the new FHA "Short Refi" plan, which was launched on Tues, may be expanded to include the GSEs.
· Credit Update (from JPMorgan’s E Beinstein) - Over the past few weeks markets have learned several things which are quite bullish for credit spreads: 1) there is no yield floor, or we have not found it yet. Rather than profit taking there was an increase in inflows into HG credit, 2) Demand is so strong that markets can absorb $100bn of new supply over 6 weeks (Aug through Sept MTD) and spreads still tighten and investors still look to buy from dealers in the secondary market, 3) peripheral European sovereign concerns are not an automatic negative for markets globally; 4) US economic growth is slow, but a double dip seems very unlikely. Employment and ISM reports for August were consistent with our 1.5% 3Q growth forecast.
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