Wednesday, April 1, 2009
7:30am March Challenger Job Cuts y/y (last 158.4%)
8:15am March ADP Employment Change (last -697K)
10:00am March ISM Manufacturing (last 35.8),
-March ISM Prices Paid (last 29),
-Feb Pending Home Sales m/m (last -7.7%),
-March Construction Spending m/m (last -3.3%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Fed's Pianalto speaks at banking event in Columbus, OH
Todays Headlines
6:41:35 AM
Fitch Report: Issues latest global economic forecast, World GDP to decline by 2.7% in 2009
- 2009 US GDP -3.4% y/y, unemployment 10%
- 2009 German GDP -3.7% y/y
- 2009 Japan GDP -6.7% y/y
- 2009 BRIC GDP +3.2% y/y
- Fitch is forecasting double-digit declines in business investment in most advanced economies in 2009, along with sharp rises in unemployment; this is significantly amplifying the impact of adjustments in consumer spending and housing investment.
- 2009 GDP has been revised downwards very sharply, reflecting the abrupt fall in activity and trade at the end of last year, evidence of much more rapid deleveraging by the US household sector, and precipitous declines in business investment.
- This is not only the widest but now also the deepest global recession experienced since WWII
- The global recession is proving much deeper than anticipated. Economic activity and trade declined very abruptly in the last three months of 2008 with the scale and synchronicity of the downturn in industrial production in the advanced economies unmatched by anything seen since the first oil shock in the early 1970s.
- A widespread collapse in consumer and business confidence in the wake of the intensification of the global banking crisis likely played an important role, alongside a dislocation in the process of trade finance
- The forecast global recovery in 2010 is to a rate well below trend, implying a further rise in unemployment, and for some economies including the UK and Spain deleveraging is expected to keep growth particularly low in 2010.
8:30:35 AM
(US) USDA Prospective Plantings Report: Corn -1.2% y/y, Soybeans flat y/y, Wheat -7.1% y/y, Cotton -7.0% y/y
- Corn Plantings (acres): 84.9M v 84.0Me, v 86.0M y/y
- Soybean Plantings (acres): 76.0M v 76.1Me, v 75.7M y/y
- Wheat Plantings (acres): 58.6M v 59.3Me v 63.2M y/y
- Cotton Plantings (acres): 8.81M v 8.07Me, v 9.47M y/y
*JAN CASE SHILLER HOME PRICE INDEX: 146.4 V 147.2E; COMPOSITE 20 INDEX: -18.97% V -18.8%E
- Prior home price revised from 150.66 to 150.56
- Prior Composite 20 Index revised from -18.55% to -18.60%
9:45:01 AM
*MARCH CHICAGO PURCHASING MANAGERS INDEX: 31.4 V 34.3E
**sub-indices:
- Prices Paid: 34.1 v 37.8 last
- New Orders: 30.9 v 30.6 last
- Employment: 28.1 v 25.2 last
- Inventories: 34.9 v 33.0 last
- Supplier Deliveries: 48.4 v 51.0 last
- Production: 32.7 v 34.7 last
- Order Backlogs: 21.3 v 29.3 last
9:52:50 AM
(FR) French Fin Min Lagarde echoes President Sarkozy: France may walk out of G20 if demands are not met
- Note: France has been particularly vocal on the need for a global regulator, while the US and UK want cooperation but say that regulation must be handled in each country separately.
10:00 AM
*MAR CONSUMER CONFIDENCE: 26 V 28.0E- prior revised from 25.0 to 25.3
10:14:33 AM
General Motors Corp New CEO Henderson: States that support from Obama admin was 'unequivocal;' could file for bankruptcy within 60 days if agreement cannot be reached - press conf
- Restructuring plans include the need for a 'clean balance sheet'.
- Continue to examine improving current cash flow structures.
- In continued talks with bondholders and the UAW.
- Any future plans would include further spending for continued R&D operations.
- Sees decision on Hummer unit within weeks; several interested parties.
- Note: 60 day period ends June 1.
10:45:10 AM
OCC's Dugan: Some information from bank stress tests to be made public; unclear what will be disclosed and the method of disclosure
- Remarks that some banks may need to take short term losses in efforts to attract capital
- Reminder on 2/25 a US Treasury official remarked that the Results of the stress tests would not be made public
1:51:36 PM
Fed's Plosser: 'Somewhat encouraged' but recent econ data, may see growth in 2H09, still supports mark-to-market accounting - Q&A
- Notes that does not favor the regulation of hedge funds
- The avoidance of 'too big to fail' issues may involve tax policies
- says economy could rebound before unemployment peaks
4:00:52 PM
(US) Treasury extends money market fund guarantees through Sept 18, 2009
- The Treasury extended the program to support ongoing stability in financial markets.
- This is the second time that the program has been extended.
- The original end date for the program was Dec 19, 2008.
4:30 PM
*API PETROLEUM INVENTORIES: CRUDE: +3.28M V +2.8ME; GASOLINE: -451K V -1.5ME; DISTILLATE: +1.78M V -1ME; CAPACITY UTILIZATION: 81.8% V 82.3%E
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Stock traders jumped right back into in the water this morning, lending strength to the leading US indices as uncertainty over the General Motors/Chrysler bailout takes a back seat to optimism ahead of G20.
The fresh record lows in the S&P/CS January indicates house prices have yet to find a bottom. March consumer confidence edged up ever so slightly from February's record low, but less than expected. After making a run for $50 earlier in the session,
NYMEX crude is trading around $48 mid morning with weakness see in the entire complex. US Treasuries are edging higher pushing the benchmark yield back below 2.70%.
- Financial stocks are bouncing back from yesterday's selloff today, although they generally remain below Friday's closing levels, with BAC and Citi both up around 8%.
On a conference last night call Morgan Stanley CEO John Mack made comments that contrasted sharply with the bullish banking CEO comments which sparked the rally a little more than two weeks ago. Mack told brokers that 2009 would be difficult and that profitability is not in line with the bank's long-term plans. Mack said that even though business has been good so far, "it's nowhere near what we need on a long-term basis." Shares of MS are around even mid morning.
Bank of America got a nod from a Friedman Billings analyst, who raises its Q1 operating EPS estimate into the black from a loss prior. "Heard on the Street" discussed growing investor appetite for banks' preferred stock, noting that the Financials Preferred ETF (PGF) is outpacing the common-stock index 66% to 44% since the March 9th lows.
- Shares of GM remain around yesterday's lows as new CEO Fritz Henderson made his initial debut.
This morning Henderson called support from the Obama Administration unequivocal but warned GM could file for bankruptcy within 60 days if it can't get the deals it needs from unions and bondholders.
Both GM and Ford are following in the footsteps of Hyundai, rolling out plans to cover car payments for customers that have lost their jobs. The chairman of Fiat said he hopes to close a deal with Chrysler in the next few weeks, calling the situation an "extraordinary opportunity" for Fiat. Note that the big three have discontinued purchases of Noble International's key product, laser welding devices, sending shares of NOBL-20% today.
- In currencies, rising risk appetite softened up USD and JPY from opening levels in Asia, consolidating near the lower end of their respective ranges during the New York morning.
EUR/USD was probing above the 1.3000 level where Chinese offers were earlier said to lurk. Month- and quarter-end flows were the primary focus, complemented by the end of the Japanese fiscal year. Note that as the week progresses, the G20 summit will remain in focus along with the looming series of US jobless data.
ECB interest rate decision is on Thursday. The ECB is moving toward quantitative ease, with commentators noting that the bank may buy corporate bonds. A 50bps Rate cut expected later this week.
More Headlines
6:41:35 AM
Fitch Report: Issues latest global economic forecast, World GDP to decline by 2.7% in 2009
- 2009 US GDP -3.4% y/y, unemployment 10%
- 2009 German GDP -3.7% y/y
- 2009 Japan GDP -6.7% y/y
- 2009 BRIC GDP +3.2% y/y
- Fitch is forecasting double-digit declines in business investment in most advanced economies in 2009, along with sharp rises in unemployment; this is significantly amplifying the impact of adjustments in consumer spending and housing investment.
- 2009 GDP has been revised downwards very sharply, reflecting the abrupt fall in activity and trade at the end of last year, evidence of much more rapid deleveraging by the US household sector, and precipitous declines in business investment.
- This is not only the widest but now also the deepest global recession experienced since WWII
- The global recession is proving much deeper than anticipated. Economic activity and trade declined very abruptly in the last three months of 2008 with the scale and synchronicity of the downturn in industrial production in the advanced economies unmatched by anything seen since the first oil shock in the early 1970s.
- A widespread collapse in consumer and business confidence in the wake of the intensification of the global banking crisis likely played an important role, alongside a dislocation in the process of trade finance
- The forecast global recovery in 2010 is to a rate well below trend, implying a further rise in unemployment, and for some economies including the UK and Spain deleveraging is expected to keep growth particularly low in 2010.
8:30:35 AM
(US) USDA Prospective Plantings Report: Corn -1.2% y/y, Soybeans flat y/y, Wheat -7.1% y/y, Cotton -7.0% y/y
- Corn Plantings (acres): 84.9M v 84.0Me, v 86.0M y/y
- Soybean Plantings (acres): 76.0M v 76.1Me, v 75.7M y/y
- Wheat Plantings (acres): 58.6M v 59.3Me v 63.2M y/y
- Cotton Plantings (acres): 8.81M v 8.07Me, v 9.47M y/y
*JAN CASE SHILLER HOME PRICE INDEX: 146.4 V 147.2E; COMPOSITE 20 INDEX: -18.97% V -18.8%E
- Prior home price revised from 150.66 to 150.56
- Prior Composite 20 Index revised from -18.55% to -18.60%
9:45:01 AM
*MARCH CHICAGO PURCHASING MANAGERS INDEX: 31.4 V 34.3E
**sub-indices:
- Prices Paid: 34.1 v 37.8 last
- New Orders: 30.9 v 30.6 last
- Employment: 28.1 v 25.2 last
- Inventories: 34.9 v 33.0 last
- Supplier Deliveries: 48.4 v 51.0 last
- Production: 32.7 v 34.7 last
- Order Backlogs: 21.3 v 29.3 last
9:52:50 AM
(FR) French Fin Min Lagarde echoes President Sarkozy: France may walk out of G20 if demands are not met
- Note: France has been particularly vocal on the need for a global regulator, while the US and UK want cooperation but say that regulation must be handled in each country separately.
10:00 AM
*MAR CONSUMER CONFIDENCE: 26 V 28.0E- prior revised from 25.0 to 25.3
10:14:33 AM
General Motors Corp New CEO Henderson: States that support from Obama admin was 'unequivocal;' could file for bankruptcy within 60 days if agreement cannot be reached - press conf
- Restructuring plans include the need for a 'clean balance sheet'.
- Continue to examine improving current cash flow structures.
- In continued talks with bondholders and the UAW.
- Any future plans would include further spending for continued R&D operations.
- Sees decision on Hummer unit within weeks; several interested parties.
- Note: 60 day period ends June 1.
10:45:10 AM
OCC's Dugan: Some information from bank stress tests to be made public; unclear what will be disclosed and the method of disclosure
- Remarks that some banks may need to take short term losses in efforts to attract capital
- Reminder on 2/25 a US Treasury official remarked that the Results of the stress tests would not be made public
9:00am Fed's Stern speaks on too big to fail in Washington.
9:00am Jan S&P/CS Home Price Index (last 150.66), Jan S&P/CS Composite-20 y/y (last -18.55%)
9:45am March Chicago Purchasing Manager Index (last 34.2)
10:00am MarchConsumer Confidence (last 25), March NAPM-Milwaukee (last 29)
1:00pm Fed's Plosser speaks on financial regulation reform in Chicago
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
4:30:05 AM
*(UK) FEB NET CONSUMER CREDIT: -£0.2B V £0.4BE; NET LENDING: £1.5B V £0.9BE; CONSUMER CREDIT AT LOWEST LEVEL SINCE SERIES BEGAN IN 1993
- Prior Net Consumer Credit revised from £0.4B to £0.2B
- Prior Net Lending revised from £0.7B to £1.1B
5:00:03 AM
*(EU) MARCH BUSINESS CLIMATE INDICATOR: -3.58 V -3.48E; CONSUMER CONFIDENCE: -34 V-34E
- Economic Confidence: 64.6 v 65.4e
- Industrial Confidence: -38 v -36e
- Services Confidence: -25 v -24e
- Prior Bus Climate revised from -3.51 to -3.40
- Prior Economic Confidence revised from 65.4 to 65.3
- Prior Services Confidence revised from -23 to -24
6:17 AM
(US) WSJ reports that 7.46% of FHA loans are "seriously delinquent" at end of Feb v 6.16% prior
7:38:45 AM
(UK) BOE's Jenkinson: BOE faces problem of unwinding stimulus at a later date
- Faces problem of how much stimulus to enact
***Note: Jenkinson is the Executive Director, Financial Stability at the BOE
9:43:29 AM
(GE) Germany's BaFin financial regulator extends naked short-selling ban for 11 companies to end of May (31st)
- Notes the reasons for instituting the ban in the first place remain.
- Short sell ban list:
AAREAL BANK AG
ALLIANZ SE
AMB GENERALI HOLDING AG
COMMERZBANK AG
DEUTSCHE BANK AG
DEUTSCHE BÖRSE AG
DEUTSCHE POSTBANK AG
HANNOVER RÜCKVERSICHERUNG AG
HYPO REAL ESTATE HOLDING AG
MLP AG
MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AG
- States: The undesirable developments existing at the time the Decrees of 19 and 21 September 2008 were issued which jeopardize the proper execution of securities trading and the stability of the financial system continue to exist.
It is therefore necessary to keep the aforementioned provisions of the Decrees in full force and effect for a further three months. In particular, an unusual volatility continues to be observed in the shares of credit institutions, operators of stock exchanges, insurance companies and other companies from the financial sector which well exceeds that of the respective indices.
By influencing the prices of the stocks specified, transactions resulting in a short position or in the increase of a short position (referred to as short selling transactions) in shares within the meaning of no. 1 of the Decree dated 19 September 2008 would, by reason of the importance of the companies for the aggregate economy, reinforce this development and would therefore result in further excessive price movements which might jeopardize the stability of the financial system and thus entail serious disadvantages for the financial market as a whole.
In particular, such transactions also carry the risk of exacerbating liquidity shortages by putting pressure on the share prices, thus making it more difficult for the companies to raise capital.
10:39:03 AM
(EU) ECB's Trichet: Outlook has continued to deteriorate since Jan; Sees interest rates staying below 2% level for some time (2009 and 2010)
- Demand to be very weak in 2009; Reiterates that a gradual recovery should take place in 2010; Reiterates that risks to outlook are now more balanced.
- Liquidity frameworks within the ECB have been adjusted to fit the current money market environment; banks will continue to have access to this liquidity function for as long as needed.
- Housing financing must be made more resilient to macro shocks.
- Some states in the region have been less affected by crisis, some in the East have been hit very hard; Domestic and internal imbalances are more clear in CEE states; ECB monetary policies could be inappropriate for some states if the Euro is adopted too early; imbalances must be remedied before adopting the euro.
- Should be focusing on implementing policy decisions on economic crisis not seeking new avenues of solutions; reiterates it is important to consider exit strategies for stimulus programs.
- Notes with 'great interest' Geithner's comments regards the strong USD policy.
12:21:26 PM
Chrysler has reached alliance deal with Fiat
- Chrysler, Fiat and Cerberus have reached agreement on a global alliance, supported by the US Treasury. Chrysler has consistently said that the alliance with Fiat enhances its business model that expands its global competitiveness.
- By providing Chrysler with product and platforms, technology cooperation and global distribution, Fiat strengthens Chrysler's ability to create and preserve US jobs, gives US consumers more choices for environmentally advanced vehicles, gives dealers more products they need to be successful, helps stabilize the supplier base and allows Chrysler to pay back government loans sooner.
- CEO Nardelli: "I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate ''business as usual'' over the next 30 days. While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders."
7:01 PM
*(UK) UK MAR GFK CONSUMER CONFIDENCE: -30 V -35E (-35 PRIOR); Second consecutive monthly increase
7:50:27 PM
*(AU) RBA'S Deputy Gov Battellino: AUSTRALIAN RATE CUTS HAVE BEEN SUBSTANTIAL; RBA has more scope to cut rates, Australian GDP likely to contract in 2009 (prior forecast was for 0.5% GDP growth)
- China's economic stimulus is working.
- China's economic low point may already have passed.
- Australian home loan demand has picked up.
- Rate cuts have sparked a "quick" house loan pickup.
- Australian banks in better position to lend.
- Australia's economy will perform better than most, but sees substantial decline in economic activity
- Likely to be further declines in GDP in coming quarters, with recovery coming toward the end of the year
- Tentative signs of US recovery in some data.
- Property developers are finding it harder to borrow.
8:04:10 PM
(EU) According to CEPR, Euro-zone has been in recession for more than 12 months, after it entered recession in Jan 2008
- The CEPR discloser means that the euro-zone entered recession just one month after the US.
- The article notes that for much of the early part of 2008, euro-zone policy makers insisted the currency area was unlikely to suffer the same fate as
the US economy.
- The ECB left its key interest rate unchanged during the first 5 months of 2008 and raised it in July, 6 months after the recession began.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equities across the board are stumbling this morning led by profit taking in the financials and fresh headlines for the auto sector.
Over the weekend the Obama administration forced a CEO change at GM and, has given both GM and Chrysler one last chance to announce a plan that meets the government's requirements for continued federal monies. Many see the government's latest move as an indication that some form of bankruptcy for the lion's share of the US car industry is closer than ever. The major US indices have lost more than 3.5% by mid morning, and remain at or near their worst levels. NYMEX crude is hovering around $50, down nearly $2.20.
- Risk adverse trades are sending money into government bonds.
Prices have moved off their best levels following the results of the Feds reverse auction at the long end of the curve. The Fed bought close to $2.5B in longer dated maturities as opposed to the nearly $4B that some analysts had forecasted. The long bond yield is holding close to 3.6% up about 5 basis points from pre-auction result levels.
- The Obama Administration gave failing marks to the restructuring plans from General Motors and Chrysler on Sunday; shares of GM fell as much as 34% just after the open before perking up a bit.
Shares of Ford are off 7% or so in sympathy. The White House has pledged to provide GM with aid for 60 days while it tries to come up with a better plan, while giving financial aid to Chrysler for 30 days so it can wrap up a partnership deal with Fiat. GM CEO Rick Wagoner will resign as a condition for receiving further aid, replaced on an interim basis by COO Fritz Henderson. In his statement to the WSJ, Wagoner said “On Friday I was in Washington for a meeting with administration officials. In the course of that meeting, they requested that I step aside as CEO of GM, and so I have.” GM has made no further comment to the media on the issue, although Wagoner said he fully supports Henderson, calling the move an “ideal choice.” An S&P analyst said the risk of bankruptcy for GM, Ford and Chrysler remains as high as ever. Shares of auto parts suppliers were lower this morning across the board, with American Axle down 18% in the early going.
- Leading financial stocks are down significantly this morning, with Citi and Bank of America down around 11% each in the early going.
Note that yesterday morning Treasury Sec Geithner told "Meet the Press" that there was $135B of funding left in the TARP program, also saying that it would be a mistake to think that banks will earn their way out of the crisis. Earlier in the session, China Construction Bank President Zhang said that selling the bank's BoA stake down to 10% (from around 17%) would be appropriate.
- In other equity news, Manitowoc withdrew its previous FY09 guidance and said it would not issue a forecast for the year, and guided Q1 earnings 50% below current estimates of $0.21e (implying less than $0.10/shr).
MTW is around its worst levels at -35%. Arena Pharma's Phase III Lorcaserin obesity trial met their primary efficacy and safety endpoints, but overall weight loss was much less than had been expected. Shares of ARNA were down more than 30% early on, recovering to around -20% mid morning.
- In currencies risk aversion continued into the New York morning as renewed concerns over Eastern Europe magnified the shockwaves from the US auto situation.
Note that S&P cut Hungary's sovereign long-term rating one notch from BBB to BBB- (the lowest level of investment grade) with a negative outlook, citing the ongoing deterioration in economic and fiscal indicators in the country. The EUR/USD has moved lower, probing the 1.3130 area, which was where the pair was dealing prior to the Fed's big quantitative easing move nearly two weeks ago. Further compounding euro weakness is Spain's announcement over the weekend of the country's first major bank rescue in 16 years. Dealers noted that the bank nationalized today is one 45 state banks, begging the question “how many others are out there waiting?”. Dealer chatter is circulating that Spanish banks have €500B in outstanding MBS, with roughly 60% owned by foreigners and Germany's share comprising around 20%.
- The ECB's Trichet discussed the European economic outlook this morning, noting that it has continued to deteriorate since January and that he expects interest rates to remain below 2% for some time (2009 and 2010).
Trichet also noted that demand would be very weak in 2009 but reiterated his view that a gradual recovery should take place in 2010. A French official commented that the upcoming G20 summit in London would not address reserve currency issues. The official added that he USD should not weaken "too much" and called the Chinese SDR proposal for replacement of USD as reserve currency a possibly good long-term strategy.
More Headlines
4:30:05 AM
*(UK) FEB NET CONSUMER CREDIT: -£0.2B V £0.4BE; NET LENDING: £1.5B V £0.9BE; CONSUMER CREDIT AT LOWEST LEVEL SINCE SERIES BEGAN IN 1993
- Prior Net Consumer Credit revised from £0.4B to £0.2B
- Prior Net Lending revised from £0.7B to £1.1B
5:00:03 AM
*(EU) MARCH BUSINESS CLIMATE INDICATOR: -3.58 V -3.48E; CONSUMER CONFIDENCE: -34 V-34E
- Economic Confidence: 64.6 v 65.4e
- Industrial Confidence: -38 v -36e
- Services Confidence: -25 v -24e
- Prior Bus Climate revised from -3.51 to -3.40
- Prior Economic Confidence revised from 65.4 to 65.3
- Prior Services Confidence revised from -23 to -24
6:17 AM
(US) WSJ reports that 7.46% of FHA loans are "seriously delinquent" at end of Feb v 6.16% prior
7:38:45 AM
(UK) BOE's Jenkinson: BOE faces problem of unwinding stimulus at a later date
- Faces problem of how much stimulus to enact
***Note: Jenkinson is the Executive Director, Financial Stability at the BOE
9:43:29 AM
(GE) Germany's BaFin financial regulator extends naked short-selling ban for 11 companies to end of May (31st)
- Notes the reasons for instituting the ban in the first place remain.
- Short sell ban list:
AAREAL BANK AG
ALLIANZ SE
AMB GENERALI HOLDING AG
COMMERZBANK AG
DEUTSCHE BANK AG
DEUTSCHE BÖRSE AG
DEUTSCHE POSTBANK AG
HANNOVER RÜCKVERSICHERUNG AG
HYPO REAL ESTATE HOLDING AG
MLP AG
MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AG
- States: The undesirable developments existing at the time the Decrees of 19 and 21 September 2008 were issued which jeopardize the proper execution of securities trading and the stability of the financial system continue to exist.
It is therefore necessary to keep the aforementioned provisions of the Decrees in full force and effect for a further three months. In particular, an unusual volatility continues to be observed in the shares of credit institutions, operators of stock exchanges, insurance companies and other companies from the financial sector which well exceeds that of the respective indices.
By influencing the prices of the stocks specified, transactions resulting in a short position or in the increase of a short position (referred to as short selling transactions) in shares within the meaning of no. 1 of the Decree dated 19 September 2008 would, by reason of the importance of the companies for the aggregate economy, reinforce this development and would therefore result in further excessive price movements which might jeopardize the stability of the financial system and thus entail serious disadvantages for the financial market as a whole.
In particular, such transactions also carry the risk of exacerbating liquidity shortages by putting pressure on the share prices, thus making it more difficult for the companies to raise capital.
10:39:03 AM
(EU) ECB's Trichet: Outlook has continued to deteriorate since Jan; Sees interest rates staying below 2% level for some time (2009 and 2010)
- Demand to be very weak in 2009; Reiterates that a gradual recovery should take place in 2010; Reiterates that risks to outlook are now more balanced.
- Liquidity frameworks within the ECB have been adjusted to fit the current money market environment; banks will continue to have access to this liquidity function for as long as needed.
- Housing financing must be made more resilient to macro shocks.
- Some states in the region have been less affected by crisis, some in the East have been hit very hard; Domestic and internal imbalances are more clear in CEE states; ECB monetary policies could be inappropriate for some states if the Euro is adopted too early; imbalances must be remedied before adopting the euro.
- Should be focusing on implementing policy decisions on economic crisis not seeking new avenues of solutions; reiterates it is important to consider exit strategies for stimulus programs.
- Notes with 'great interest' Geithner's comments regards the strong USD policy.
12:21:26 PM
Chrysler has reached alliance deal with Fiat
- Chrysler, Fiat and Cerberus have reached agreement on a global alliance, supported by the US Treasury. Chrysler has consistently said that the alliance with Fiat enhances its business model that expands its global competitiveness.
- By providing Chrysler with product and platforms, technology cooperation and global distribution, Fiat strengthens Chrysler's ability to create and preserve US jobs, gives US consumers more choices for environmentally advanced vehicles, gives dealers more products they need to be successful, helps stabilize the supplier base and allows Chrysler to pay back government loans sooner.
- CEO Nardelli: "I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate ''business as usual'' over the next 30 days. While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders."
"You may be disappointed if you fail, but you are doomed if you don't try."
-US equity indices sustained their upward march this week, sharpening speculation about whether the gains of the last three weeks are a bear market rally or the beginning of the end of the crisis.
Monday saw the DJIA jump nearly 5% after Treasury Secretary Geithner finally got around to outlining a concrete framework for the public/private toxic asset plan on Sunday. Indices gyrated throughout the rest of the week, ending Friday near the closing level achieved on Monday.
Financial and automotive sector news continued to dominate the headlines, highlighted by a conclave of bank CEO's powwowing the President Obama on Friday and the clock ticking down on the GM viability plan.
Front-month crude spent the entire week above the $50 level, while dust ups in bonds (the failed UK Gilt auction) and currencies (the Geithner world currency gaff) kept things interesting.
For the week the DJIA rose 6.8%, the Nasdaq Composite was up 6.1%, and the S&P500 advanced 6.2%.
Monday, March 30, 2009
10:30am March Dallas Fed Manufacturing Activity (last -57.3%)
Obama administration to announce auto industry viability plan.
Tuesday, March 31, 2009
9:00am Fed's Stern speaks on too big to fail in Washington
9:00am Jan S&P/CS Home Price Index (last 150.66), Jan S&P/CS Composite-20 y/y (last -18.55%)
9:45am March Chicago Purchasing Manager Index (last 34.2)
10:00am March Consumer Confidence (last 25), March NAPM-Milwaukee (last 29)
1:00pm Fed's Plosser speaks on financial regulation reform in Chicago
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Wednesday, April 01, 2009
7:30am March Challenger Job Cuts y/y (last 158.4%)
8:15am March ADP Employment Change (last -697K)
10:00am March ISM Manufacturing (last 35.8), March ISM Prices Paid (last 29), Feb Pending Home Sales m/m (last -7.7%), March Construction Spending m/m (last -3.3%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Fed's Pianalto speaks at banking event in Columbus, OH
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Investors are stepping back away from stocks this morning ahead of the end of the first quarter of 2009, with the leading US equity indices erasing much of yesterday's gains early on.
The data has been mixed, with personal spending up a hair in February, as expected and personal income down ever so slightly.
The final March U of Michigan confidence survey was a bit ahead of expectations. Front-month crude has taken a big hit, losing more than $2 this morning after Petro logistics reported that OPEC members produced 1M bpd over quota in March.
Treasury prices are benefiting from the weaker equity market pushing the long bond yield back towards 3.6%.
- The financials are down moderately in early trading, with Citi down 8% and headed lower.
The US ADR of Barclays is one big exception, trading up more than 10% on reports circulating that the bank has successfully passed the FSA stress test, although there is no official confirmation of this as of yet. Other reports are noting that Barclays will wrap up the sale of its iShares unit as early as next Monday.
Goldman Sachs and Bain Capital are leading suitors for the unit, with reports earlier in the week stating Goldman may have bid around $6B.
Note that both Goldman and Morgan Stanley were initiated at Friedman Billings overnight, ahead of their upcoming quarterly earnings reports.
- Shares of GM are up 12% in early trading after the FT reported the automaker will not ask for additional aid in its viability plan next week, according to people familiar with the plan.
Note that this flatly contradicts statements by Presidential auto advisor Steve Rattner, who said last Friday that both GM and Chrysler will require need "considerably more" Federal aid. "Like all management teams, GM and Chrylser tend to take more optimistic view on their businesses," said Rattner last week.
Labor negotiations between the Detroit three and the UAW are continuing. There have been reports for a while that bondholders are holding up the process by refusing the government's terms on their share of losses, while the UAW has said its retirees should not make any more sacrifices.
Last night the WSJ wrote that GM is unlikely to get concessions from the UAW by the March 31st deadline. It cited people close to the process as saying GM had negotiated “another agreement” that would let it cut as many as 10,000 workers by October.
- In other equity news, there has been more sunny news out of the semi sector.
The chairman of Taiwan Semi said the industry is in better shape than it was a month ago, noting chip industry revenues would fall less than 30% in 2009.
In addition, a Samsung executive said the market will begin seeing spot shortages of memory chips as inventory is inadequate already. Shares of MGM are down around 15% after the company hired bankruptcy council for its troubled Las Vegas City Center project.
The company will likely miss a debt payment later today, violating loan covenants and adding to its considerable debt problems. KB Homes is up 5% after reporting a smaller-than-expected Q1 loss. Selected metrics quoted by the homebuilder showed some improvement, with net orders up and cancellations down on both a q/q and y/y basis, while its margins have improved considerably.
- In currencies, the greenback surged against the European currencies during the early New York morning, aided by numerous factors.
On the data front, the European Industrial Orders plunged 34%, the largest decline on record. In an address to the German parliament, German Finance Minister Peer Steinbrueck said the euro was at risk if the EU's Stability and Growth Pact, which governs the continent's rules on budget deficits, was not taken seriously.
The Swedish finance minister commented that over 20 out of 27 EU states could break 3% limit under the pact in 2010.
Finally negative German state inflation data triggered a huge batch of pre-placed euro sell orders as technical factors came into play below the 1.3480 and 1.3400 levels. Note that the 1.3000 one-month option out positions that were placed with size earlier in the week.
- The Swiss Franc was softer throughout the European morning on chatter the Switzerland’s KOF leading indicators would be weaker than the consensus forecast.
Dealers were eyeing the 1.5180 level in EUR/CH, a level that was not breached in the wake of the SNB currency intervention back on March 12th.
The softer European currencies were also seen in yen related-pairs, with the EUR/JPY cross dropping below the 130 handle to test 129.30, the GBP/JPY dipping to 139 before consolidating session losses.
The JPY was off its best level as dealer sought to place bets ahead of the Japanese fiscal year-end that a softer JPY would emerge after the required repatriation process expires.
More Headlines
6:57 AM
*(UK) UK FEB HOUSE PRICES: M/M:- 2.0% v -0.8% PRIOR, Y/Y: -16.5% V -15.1% PRIOR
7:00 AM
*(GE) GERMAN MARCH CPI- BAVARIA M/M: -0.2% V 0.6% PRIOR; Y/Y: 0.8% V 1.4% PRIOR- No revisions
8:30:02 AM
*FEB PERSONAL INCOME: -0.2% V -0.1%E; PERSONAL SPENDING: 0.2% V 0.2%E
- Prior Personal Income revised from 0.4% to 0.2%
- Prior Personal Spending revised from 0.6% to 1.0%
8:30:04 AM
*FEB PCE M/M: 0.2% V 0.2%E; PCE CORE Y/Y: 1.8% V 1.6%E; PCE DEFLATOR Y/Y: 1.0% V 0.8%E
- Prior PCE Core MoM revised from 0.1% to 0.2%
- Prior PCE Core YoY revised from 1.6% to1.7%
- Prior PCE Deflator YoY revised from 0.7% to 0.8%
9:15 AM
*(GE) GERMAN MARCH PRELIMINARY CPI M/M: -0.1% V 0.1%E; Y/Y; 0.5% V 0.7%E- No revisions
9:55:04 AM
*MARCH FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 57.3 V 56.8E
- 1 yr median inflation expectations at 2.0% v 1.9% Feb final
- 5 yr median inflation expectations at 2.6% v 3.1% Feb final
11:03 AM
NY Fed: Purchased $7.54B in treasuries in second round of $300B purchase program;
Dealers submitted $23.36B for consideration (3.09 bid to cover)
- Heaviest purchase was $5.625B in March 2012 maturity
11:12:52 AM
IMF's Strauss Kahn: Role of USD 'not under any threat today'; forecasts ECB conducting similar actions of BoE and the Fed
- Notes that the role of USD as a reserve currency will not change rapidly, understandable that China raised prospect of new reserve currency.
- Comments that Chinese economic policy will ultimately lead to a Yuan revaluation
- Remarks that the crisis is now reaching emerging economies.
- 2009 will most likely be a bad year for Global GDP; focus must be on fixing financial sector.
- Calls for more fiscal stimulus next year; will see the impact of the first wave of fiscal stimulus in the next few months.
8:30am Feb Personal Income (last 0.4%), Feb Personal Spending (last 0.6%), Feb PCE Deflator y/y (last 0.7%), Feb PCE Core (last m/m 0.1%, y/y 1.6%)
9:55am March Final U. of Michigan Confidence (last 56.6)
Todays Headlines
5:30 AM
*(UK) FEB RETAIL SALES M/M: -1.9% V -0.4%E; Y/Y: 0.4% V 2.5%E- Prior M/M revised from 0.7% to 0.9% - Prior Y/Y revised from 3.6% to 3.8%
8:00:14 AM
(EU) ECB's Wellink: ECB could use unconventional tools; increase liquidity via commercial paper, asset backed securities markets
- Hedge funds should be directly supervised.
- Reiterates that rates closer to 0% are less effective.
- Euro-zone not out of ZERO rate limit yet
- Does not rule out months of negative inflation
- Situation in Central and Eastern Europe is very worrying, calls EU support for Eastern Europe crucial.
- Assumptions in US budget plan are extremely "optimistic."
- Subprime problems stemmed from too-large US debt
- Does not see any bottom in US housing market at this time
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 652K V 650KE; CONTINUING CLAIMS: 5.560M V 5.475ME
- Prior jobless claims revised from 646K to 644K
- Prior Continuing Claims revised from 5.473M to 5.438M
8:30 AM
*Q4 FINAL GDP ANNUALIZED: -6.3% V -6.6%E; PERSONAL CONSUMPTION: -4.3% V -4.4%E
8:30 AM
*Q4 FINAL GDP PRICE INDEX: 0.5% V 0.5%E; CORE PCE Q/Q: 0.9% V 0.8%E
10:22 AM
Freddie Mac US Fixed mortgage rate has dropped to 4.85%; lowest levels on Freddie Mac record- records go back to 1971
10:30 AM
*EIA NATURAL GAS INVENTORIES:
+3 BCF VS. -10 TO -15 BCF ESTIMATE RANGE
10:30 AM
*(GE) GERMAN MAR CPI
- NORTH RHINE WEST : M/M: -0.1.% V 0.6% PRIOR; Y/Y: 0.3% V 0.9% PRIOR
12:40:30 PM
(US) Fed's Lacker: The bulk of the bad housing news is now behind us, stimulus will have only a marginal effect on economic recovery; cannot wait too long to reverse extraordinary policy actions
- Confident that outright deflation can be avoided. Not too soon to worry about inflation when recession is over.
- There are hopeful signs, expects economy to bottom later in 2009 and gradually recover; housing and auto sectors are likely near a bottom.
- The extraordinary policy response to the crisis is appropriate.
1:50:17 PM
Fed's Stern: Repeal of Glass-Steagall Act is not responsible for current crisis; unclear whether some banks have become too large to manage - Q&A
- Remarks that he sees no 'serious' flaws in mark to market accounting
- Supports move of CDS to exchanges
- Govt moved too slowly with regards to financial institutions, FNM and FRE were "poster children" of action taken too late.
2:06 PM
Nasdaq Composite Index now positive year-to-date- Nasdaq was down as much as 18.4% in the first ten weeks of 2009.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US Equity markets are extending the gains made late in yesterday's session but the trading remains highly volatile.
Final Q4 GDP was not quite as poor as expected but the number of people claiming unemployment continues to rise in the US. Stock markets are likely to remain keyed on what is transpiring in the bond markets. Indices made a run at unchanged when the yield on the 1-month T-bill dipped into negative territory for the first time since Dec. Traders are likely to closely monitor the 7-year Note auction results from the Treasury due out at 1PM. A disappointing 5-year auction yesterday sent stocks lower before the last hour rebound. NYMEX crude made a quick run over $54 following reassuring commentary from the PBoC indicating the Chinese economy may have already bottomed. Copper traded towards fresh multi-month highs as well. Front month natural gas slide back to $4 after weekly inventory data was released.
- Financial names are dipping into the red this morning as investors shrink from another day of testimony from Treasury Secretary Geithner before Congress.
Last night the WSJ reported on Geithner's proposals to cap leverage and reign in hedge funds and private equity, and his plans for reckoning with firms that pose systemic risk. Note that PIMCO said it still likes debt from the big banks, even after Moody's trimmed its ratings on Wells Fargo and Bank of America yesterday afternoon on fears the banks will need more government aid. In other financials news, Mitsubishi UFJ confirmed overnight that it has signed a formal MOU on establishing a securities JV with Morgan Stanley in Japan, helping shares of MS stay ahead of the pack this morning. MUFG confirmed it will own a 60% stake in the JV while Morgan Stanley will hold a 40% stake.
- Various consumer oriented names are having a good morning on strong earnings reports. Best Buy blew out earnings estimates and guided well above par in its Q4 report.
While same-store sales remained pretty bad in the quarter, the company noted they may even out to flat y/y in the coming fiscal year. Gamestop beat estimates, and achieved nearly 10% y/y same-store sales growth in the quarter. Doctor Pepper Snapple is juiced up after exceeding estimates by a bit and guiding in line. Shares of all three firms are making gains in early trading, with BBY+14%, GME+2% and DPS +9%.
- Nasdaq is outperforming the other indices thanks to some good news from chip makers.
Major component Intel told the WSJ that it would formally unveil its new chip for server systems on Monday, noting that it would be almost an order of magnitude faster than prior model. The new product will power forthcoming products from several big tech firms, including Dell's new server line and Cisco's push into the server space. IBM, HP and Sun Micro could also announce plans for the new chip early next week.
Late last night the CEO of South Korean chip maker Hynix said that the chip industry bottomed in Q4, noting that he sees a significant reduction in chip supply in 2009. There were notes of caution as well, with Michael Dell saying his company may cut more workers overall (and add some employees in strategic growth areas), while Agilent Technologies suspended its share buyback for 2009, cut 2,700 jobs (about 14.2% of workforce).
- The greenback softened somewhat during the New York session thanks to the firmer commodity prices as comments from China helped increase risk appetite.
But risk aversion set in by mid-morning as New York dealers digested the overall developments from the last 24 hours, including the inadvertent Geithner currency debacle and the Moody's downgrades of BAC and Wells Fargo yesterday. Dealers are also noting that USD gained on the risk aversion theme on the back of the negative rates on the US 1M T-bill (recall this happened back in December as well).
The SNB made some cautious economic comments regarding the Swiss economy, the Euro Zone and the US, noting that the economic downturn in the Euro Zone was becoming increasingly pronounced while the US downturn would likely continue for the next few quarters. However the SNB also suggested that US monetary policy measures appear to be having a positive effect. Overall the EUR/USD has maintained its recent range of 1.3490-1.3650 over the past 24
More Headlines
5:30 AM
*(UK) FEB RETAIL SALES M/M: -1.9% V -0.4%E; Y/Y: 0.4% V 2.5%E- Prior M/M revised from 0.7% to 0.9% - Prior Y/Y revised from 3.6% to 3.8%
8:00:14 AM
(EU) ECB's Wellink: ECB could use unconventional tools; increase liquidity via commercial paper, asset backed securities markets
- Hedge funds should be directly supervised.
- Reiterates that rates closer to 0% are less effective.
- Euro-zone not out of ZERO rate limit yet
- Does not rule out months of negative inflation
- Situation in Central and Eastern Europe is very worrying, calls EU support for Eastern Europe crucial.
- Assumptions in US budget plan are extremely "optimistic."
- Subprime problems stemmed from too-large US debt
- Does not see any bottom in US housing market at this time
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 652K V 650KE; CONTINUING CLAIMS: 5.560M V 5.475ME
- Prior jobless claims revised from 646K to 644K
- Prior Continuing Claims revised from 5.473M to 5.438M
8:30 AM
*Q4 FINAL GDP ANNUALIZED: -6.3% V -6.6%E; PERSONAL CONSUMPTION: -4.3% V -4.4%E
8:30 AM
*Q4 FINAL GDP PRICE INDEX: 0.5% V 0.5%E; CORE PCE Q/Q: 0.9% V 0.8%E
10:22 AM
Freddie Mac US Fixed mortgage rate has dropped to 4.85%; lowest levels on Freddie Mac record- records go back to 1971
10:30 AM
*EIA NATURAL GAS INVENTORIES:
+3 BCF VS. -10 TO -15 BCF ESTIMATE RANGE
10:30 AM
*(GE) GERMAN MAR CPI
- NORTH RHINE WEST : M/M: -0.1.% V 0.6% PRIOR; Y/Y: 0.3% V 0.9% PRIOR
12:30am Fed's Lacker speaks on US economic outlook in Charleston, SC
1:00pm Fed's Stern speaks on “too big to fail” in Minneapolis
Todays Headlines
5:00:11 AM
*(GE) GERMAN MARCH IFO - BUSINESS CLIMATE: 82.1 V 82.2E; CURRENT ASSESSMENT: 82.7 V 82.5 E
- Expectations 81.6 v 81.5E
- No revisions
***Lowest reading on record for the Business Climate Index
5:01 AM
(GE) IFO's Nerb: Expects ECB to cut rates by 50 bps, should cut by 100 bps
7:06:15 AM
(GE) German Fin Min Steinbrueck: Warns against crowding out effect in the debt markets
- Adds that capital markets cannot be loaded with government and corporate debt forever
- Uncertain about when interbank market will be working again
7:49 AM
(IR) Irish Fin Min Lenihan: Ireland is in a "grave" national crisis; borrowing limit is restricting budget
9:56:12 AM
(US) Treasury Sec Geithner: "Open" to idea of SDR (Special Drawing Right) linked currency system suggested by China; USD will be linked to good US policy
- Comments that China is playing a very constructive role.
- Note: An SDR is potential claims on the freely usable currencies of International Monetary Fund members. SDRs are defined in terms of a basket of major currencies used in international trade and finance.
At present, the currencies in the basket are, by weight, the United States dollar, the euro, the Japanese yen, and the pound sterling. The amounts of each currency making up one SDR are chosen in accordance with the relative importance of the currency in international trade and finance.
The determination of the currencies in the SDR basket and their amounts is made by the IMF Executive Board every five years. SDRs are used as a unit of account by the IMF and several other international organizations.
A few countries peg their currencies against SDRs, and it is also used to denominate some private international financial instruments.
10:00:01 AM
*FEB NEW HOME SALES: 337K V 300KE (+4.7% M/M)
- Median sales price: $200,900 v $206,800 m/m (-3%); $245,300 y/y (-18.1% y/y)
- New Home months of supply: 12.2 v 12.9 months m/m
- Prior New Home Sales revised from 322K to 309K
10:14:56 AM
(US) Treasury Sec Geithner: Sees no change in the USD as the reserve currency, sees USD as dominant world reserve currency for "a long time"
- US will act to keep the USD as a key reserve currency
- Note that these statements echo comments from President Obama in address last night.
- follow up: CNBC notes the original report of Geithner saying he is "quite open" to a global currency was misreported by a wire service. Geithner actually said that he respects the Chinese central bank governor, Zhou Xiaochuan, which proposed an SDR based currency and is open to expanding the IMF's Special Drawing Rights for less developed countries.
10:30 AM
*DOE CRUDE:
+3.3M V +1.1ME; GASOLINE: -1.14M V -500KE; DISTILLATE: -1.58M V UNCHANGED EST.; CAPACITY UTILIZATION: 82% V 82.1%E- Distillate demand +207K bpd to 3.92M bpd - Gasoline demand +145K bpd to 9.1M bpd
12:15:38 PM
(US) Treasury Sec Geithner: Strong USD in America's best interest; no indication foreign buyers are losing interest in purchases of Treasuries - CNBC interview
- Financial institutions must have stronger quality of disclosure than we have now.
- The pace of economic deterioration has slowed in some areas.
1:00:18 PM
Fed's Yellen: US must use all tools in crisis, stimulus may assist economy next quarter; unemployment to peak next year
- Deflation larger risk than inflation at the moment
- Remarks that housing may have reached a bottom yet uncertainty remains in economic outlook
- Core inflation to be below 1% for next couple years
- TALF may be extended to CMBS and RMBS
1:48:13 PM
Fed's Yellen: No urgent need for more stimulus, cannot rule it out; Disinflation cannot be underestimated; will be surprised if Treasury auction does not succeed - Q&A
- Notes that low interest rates hurt the profitability of banks; Fed may sell treasuries when they need
- Understands concerns from China over the USD; China's proposal on reserve currency is 'interesting' but far from practical at this point.
- Fed would have the exit strategies it needs but would be happier with the power to issue its own debt.
- Calls the Treasury's toxic asset buy up plan a "creative, constructive" approach.
- Concerned about the outlook for commercial real estate.
- Remains a challenging environment for banks, does not believe all of the banks' loan losses are behind them.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
-US equity indices have regained some upward momentum while volatility in currency and government bond markets come to the forefront in early US trade.
An underwhelming long GILT auction in the UK sent government bond yields higher in Europe as well as the US ahead of the NY open. The 10-year GILT briefly traded above 3.5%. Yields have since moved lower following decent results from reverse auctions both here and across the pond. The 10-year GILT yield has slipped back below 3.3% while the US benchmark stays close to 3.7% ahead of this afternoons 5-year results. The Greenback went for a wild wide after Treasury Sec. Geithner's comments surrounding the idea of a world currency were botched on several fronts. Energy markets are trading a little lower after weekly DOE inventory data.
- The major banks are solidly back in the saddle, building on gains from earlier in the week.
Bank of America's Ken Lewis told the LA Times overnight that his bank would begin repaying its TARP funds in April, further refining his timetable for returning government funding after pledging earlier this month that BoA would return the money this year or next. Goldman Sachs responded to press speculation yesterday that it would return its own TARP funds ASAP, with Goldman's President noting that no final decision has been made on when to return the government's money. Goldman also squelched talk that it would sell any of its 80% stake in ICBC Bank to raise money to pay back TARP funding, concluding a new share lock up agreement with ICBC that prevents it from selling its stake prior to April 2010. The Japanese press reported that Mitsubishi UFJ said it was delaying its plan to buy Citi's trust bank in Japan. In addition, Mitsubishi UFJ denied other press reports that it would take a 60% stake in the brokerage it plans to create with Morgan Stanley.
- In other equity news, DryShips missed earnings estimates, sending shares of DRYS down 14% in early trading.
Electronics manufacturer Jabil Circuit reported largely in line with analysts' estimates but guided below par. Investors are snapping up shares of JBL in the early going, sending the name up more than 30%. Commercial real estate firm CB Richard Ellis is up around 60% after reaching a significant amendment of its credit arrangements with lenders. Ailing movie rental giant Blockbuster is doing its best to shake up the online rental arena, signing a JV deal with Tivo to make its films available right on Televisions over Tivo hardware. Shares of BBI+15% and TIVO+4% are up on the news, although rival NFLX have been largely unaffected.
- In currencies, misquoted comments from Treasury Secretary Geithner caused a bit of a ruckus in the USD this morning.
A wire service reported that Geithner said he was “open" to the idea of a SDR (Special Drawing Right) linked currency system suggested by China, quickly sending the dollar into a tailspin. Dealers immediately pointed out that "damage control" would arrive shortly in the aftermath of the remarks since the US needs to remain the reserve currency to fund its huge deficits. EUR/USD surged almost 200 pips to 1.3650 before a strongly-worded clarification and media reviews of video of the actual statements from Geithner made it clear he believes nothing of the sort. Geithner said the USD would remain the dominant world reserve currency for "a long time" and that the US would act to preserve the dollar as a key reserve currency, helping USD recover to test back below the 1.35 level before ending New York session around 1.3535. So far as the SDR goes, Geithner actually said he did had not seen the actual Chinese proposal but thought that it likely deserves consideration.
- Sterling was in focus following the UK's dismal Gilt auction, where the bid-to-cover of 0.93 on the 2049 issue turned out to be the lowest in recent memory.
The UK DMO commented that the risk of an uncovered auction was a normal part of the gilt sale process and that the 2049 issue was riskiest part of Gilt curve. Gilts broke below support at 120.44 following the auction results, with momentum pushing the contract below the psychologically important 120.00 handle. The contract bounced off support at 119.51, which corresponded to a 61.8 Fib retracement of the 115.77-125.58 range. The spread between the UK and German 10-year bonds widened to +32bps. Separately, BoE purchased £85.5M bonds (below the £124M target) in its corporate bond auction.
- In other currency news, the Norwegian Central bank cuts its deposit rate by 50bps to 2.00%, as expected.
It saw a gradual reduction in rates and noted that it had seen a substantial decline in Norwegian exports. The NOK traded broadly lower against the USD and Euro following the rate decision. The Polish Central bank cut its base rate by 25bps to 3.75%, as expected.
More Headlines
5:00:11 AM
*(GE) GERMAN MARCH IFO - BUSINESS CLIMATE: 82.1 V 82.2E; CURRENT ASSESSMENT: 82.7 V 82.5 E
- Expectations 81.6 v 81.5E
- No revisions
***Lowest reading on record for the Business Climate Index
5:01 AM
(GE) IFO's Nerb: Expects ECB to cut rates by 50 bps, should cut by 100 bps
7:06:15 AM
(GE) German Fin Min Steinbrueck: Warns against crowding out effect in the debt markets
- Adds that capital markets cannot be loaded with government and corporate debt forever
- Uncertain about when interbank market will be working again
7:49 AM
(IR) Irish Fin Min Lenihan: Ireland is in a "grave" national crisis; borrowing limit is restricting budget
9:56:12 AM
(US) Treasury Sec Geithner: "Open" to idea of SDR (Special Drawing Right) linked currency system suggested by China; USD will be linked to good US policy
- Comments that China is playing a very constructive role.
- Note: An SDR is potential claims on the freely usable currencies of International Monetary Fund members. SDRs are defined in terms of a basket of major currencies used in international trade and finance.
At present, the currencies in the basket are, by weight, the United States dollar, the euro, the Japanese yen, and the pound sterling. The amounts of each currency making up one SDR are chosen in accordance with the relative importance of the currency in international trade and finance.
The determination of the currencies in the SDR basket and their amounts is made by the IMF Executive Board every five years. SDRs are used as a unit of account by the IMF and several other international organizations.
A few countries peg their currencies against SDRs, and it is also used to denominate some private international financial instruments.
10:00:01 AM
*FEB NEW HOME SALES: 337K V 300KE (+4.7% M/M)
- Median sales price: $200,900 v $206,800 m/m (-3%); $245,300 y/y (-18.1% y/y)
- New Home months of supply: 12.2 v 12.9 months m/m
- Prior New Home Sales revised from 322K to 309K
10:14:56 AM
(US) Treasury Sec Geithner: Sees no change in the USD as the reserve currency, sees USD as dominant world reserve currency for "a long time"
- US will act to keep the USD as a key reserve currency
- Note that these statements echo comments from President Obama in address last night.
- follow up: CNBC notes the original report of Geithner saying he is "quite open" to a global currency was misreported by a wire service. Geithner actually said that he respects the Chinese central bank governor, Zhou Xiaochuan, which proposed an SDR based currency and is open to expanding the IMF's Special Drawing Rights for less developed countries.
10:30 AM
*DOE CRUDE:
+3.3M V +1.1ME; GASOLINE: -1.14M V -500KE; DISTILLATE: -1.58M V UNCHANGED EST.; CAPACITY UTILIZATION: 82% V 82.1%E- Distillate demand +207K bpd to 3.92M bpd - Gasoline demand +145K bpd to 9.1M bpd
8:30am Feb Durable Goods Orders (last -4.5%, ex-transport -3.0%)
10:00am Feb New Home Sales (last 309K, m/m -10.2%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
12:20pm Fed's Pianalto speaks on economic recovery in Ohio.
1:00pm Treasury's 5-year note auction
1:00pm Fed's Yellen speaks on US economic policy in New York
Todays Headlines
5:30 AM
*(UK) FEB CPI M/M: 0.9% V 0.3%E; Y/Y: 3.2% V 2.6%E; CPI CORE Y/Y: 1.6% V 1.3%E- No revisions
5:31:40 AM
(UK) BOE comments on CPI: Sharp inflation drop likely to resume; CPI to go below 2% target over next year
- Inflation fall might reflect GBP depreciation
- GBP fall has dampened commodity price decline, energy prices to reduce inflation
- Energy tariff cut will lower CPI by 1.0%
- Growth rates in money and nominal demand slowed 'sharply'
- GDP contraction has created substantial spare capacity; global activity to constrain demand
- Q4 contraction was 'substantially larger' than expected
- MPC will want to consider CPI risks at next policy meeting
- Uk must raise both public and private savings rates
6:09:40 AM
(UK) BOE King: Might not have to reverse injection of broad money; Exit strategy would be to raise interest rates
- Timing of exit strategy is very important
- Has no doubt BOE purchases of Gilts will be of a sufficient size, that GILT buying will boost nominal spending
- GBP depreciation will not put inflation over target
- Oil prices still remain overly sensitive to supply and immediate demand balances
7:14:49 AM
(UK) BOE's King: Feb inflation rise seems fairly broad based; MPC job is to respond to GBP fall on inflation
- Germany more impacted by global economy than UK
- Surplus countries are being more severely affected
- Uncertain how large GBP decline should have been; reiterates that drop in GBP value was not enginereed
- Sees no reason why GBP should fall lower
7:44:48 AM
(US) Fed's Evans: Q1 GDP growth looks set for severe contraction; to resume growth by year-end
- Quantitative easing to make up for loss of demand
- Overwhelming monetary accommodation is needed
- Inflation expectations are well maintained; disinflation of greater concern
- Fed would have been better off tightening policy rates at a quicker pace in late 2001
9:11:10 AM
(US) Treasury Sec Geithner: Fixing markets will take time, govt needs resolution authority to protect markets, large firms need constraints on risk taking - testimony
- says Treasury would only exercise emergency authority upon the recommendation of the Fed and other regulators.
- Excessive compensation extends beyond AIG
- Operations at AIG Financial Products division operated in an 'unregulated' market
9:59 AM
*MARCH RICHMOND FED MANUFACTURING INDEX: -20 V -51E- no revision
10:00 AM
*JAN HOUSE PRICE INDEX (M/M): +1.7% V -0.9%E- prior revised from +0.1% to -0.2%
11:05:17 AM
Treasury's Geithner: Treasury has not made judgment on request for additional TARP capital - Q&A
- Says will 'move quickly' with regards to Legacy Asset plan and establish broad standards for financial market compensation.
- says burden of financial regulation should not be placed entirely on the Fed; echoing comments from US Senator Dodd earlier
11:41:01 AM
(UK) BOE's King: Require new tools to assist in prevention of credit bubbles, inflation target change does not make sense
- Notes that an inflation target is necessary but it is not enough; remarks that monetary base is expanding, could need to raise rates if required; timing is important
- Bank of England to make its own decisions on Quantitative easing due to independence
12:46 PM
Dept of Energy: announces plans to release $400M in stimulus funds for geothermal power
2:30:42 PM
Fed's Bullard: Sees disinflation risks; must address too big to fail issues
- Increasing money supply will help avoid deflation; Fed can still increase balance sheet and avoid real interest rate increases
- Fed should create a specific inflation target
4:30 PM
*API PETROLEUM INVENTORIES: CRUDE: +4.58M V +1.1ME; GASOLINE: -805K V -500KE; DISTILLATE: -1.57M V UNCHANGED EST.; CAPACITY UTILIZATION: 82.1% V 82.1%E
5:12:48 PM
(US) Pres. Obama expected to meet with top banking CEOs on Friday to discuss new bailout plan - WSJ
- Citi, JP Morgan, and Goldman CEO's are among the bank chiefs expected to be at the meeting.
- Follow up 6:45pmET: White House confirms the meeting, notes the President will tell bank chiefs to look beyond short-term interests
5:39:43 PM
(US) Pres. Obama sees economic progress, but urges patience to see sustainable signs of recovery - WSJ excerpts from this evening's news conference
- Note, Pres. Obama is expected to hold a press conference about his economic plans, financial sector bailout, and bonuses at 8pmET this evening
- "Comprehensive strategy in place to create jobs, help responsible homeowners, restart lending, and grow economy over long term"
- Submitted budget focused on investment in renewable energy, business growth, and education
7:28:45 PM
WSJ "Heard on the Street": The goal of Treasury's "private-public" plan is for investors to buy toxic assets from banks, but agreement on price will be difficult
- The banks will be reluctant to part with assets at prices that could potentially produce - according to cited HSBC forecasat - a 50% return
- Despite the complexity of pricing "legacy assets", attracting a number of bids would force the banks to come up with more realistic valuations. Authorities will also be able to intervene in bidding process by confirming bidders' valuations based on the currently performed balance sheet stress tests
- Much lower asset values could threaten insolvency for certain banks, and the Treasury will have to decide which banks will be seized and which will be bailed out.
- In the longer term, the Treasury's plan will still be beneficial by mobilizing private sector to bid for banks' assets
8:09:40 PM
(US) Pres Obama: AIG situation was magnified by lack of regulator; Expects to see broad support for big financial firm wind-down authority
- Does not want to be in situation deciding between letting a giant ensurer of pension funds like AIG fail and allowing the company to take taxpayer money without regulation;
- Budget is focused on health care, energy, and education for sustainable economic growth
- Have not seen provisions in budget from Congress; will work with lawmakers on addressing budget policy focus (when asked if he will sign budget not containing middle class tax, cap and trade provisions)
- Biggest drivers of deficits are health care costs
- Reducing non-defense discretionary spending to lowest level since the 60's, will eliminate programs in education and health care that are not working
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity Indices take a much needed breather led by profit taking in the financials. Yesterday's surge into the NY close led to early gains overseas markets.
But a hotter than expected CPI reading out of the UK put an early cap on stock gains in Europe and added to selling in the US premarket. Government bond prices have moved lower in tandem led by overnight weakness in the UK GILT market. The 10-year GILT yield has risen above 3.3% while the US benchmark has regained 2.7%.
- Goldman Sachs is outperforming the vast majority of financial names as speculation continues to pick up that the Co. could repay their TARP funds sometime in the near future.
It is worth noting the President of GS said they have yet to decide when they will repay TARP and it is not likely to happen before the results of the stress tests are released. The XLF has given back a very modest 1.5% after gained more than 10% yesterday.
- Focus Media Holding, FMCN is rallying 10% post earnings results despite a pre-market downgrade at Needham.
WSM is up close to 4% after reporting Q4 results and providing guidance indicating the challenging environment is likely to remain through the end of the year.
- Precious metals stocks are lower across the board pressured by weakness in the commodities.
Spot gold has given back $15 to trade at $925 while front month silver is off 3.5%. The XAU has given back roughly 2%. The energy complex is also giving back some gains with the OIH down 3.3% as the second day of presentations at the widely followed Howard Weil Energy Conference commences. Apache is down better than 4% after presenting and noting service costs are still too high and they are actively looking at potential acquisitions.
- In currencies, dealers noted the theme of interest rates seem to be coming back into focus.
The BOE was vocal following the sharp spike in it inflation data earlier in the session. BOE's King noted that its Feb inflation increase seemed fairly broad based and that it was the MPC job to respond on inflation. King commented that it might not have to reverse its injection of broad money and that a possible exit strategy would be to raise interest rates. EUR/GBP cross was extremely volatile in the session as the BOE noted that Germany was more impacted by global economy than UK. Dealers noting that long EUR/GBP views were blindsided with King "talking up GBP" and impacting those with a long EUR/USD view.
Overall dealers viewed that the BOE must see further GBP weakness as inflationary and was drawing a line in the sand. However, in these economic times there are some doubts that the UK seeks a stronger currency thus central banking duties will remain a' balancing act'. EUR/USD also weighed down by ECB comments and chatter circulating of a large EUR/USD 1.30 strike put option going through the market.
The size of the option was rumored to be €1B. Various ECB members reiterated that the 1.505 was not the current floor and non-standard measure could be used. A Goldman Sachs report on the upcoming ECB meeting on April 2nd forecasts that the ECB would cut interest rates by 50bps to 1.0%. Goldman also expected ECB to provide unlimited funds for the next year
- European bourses remained near the lower quarter portion of their session range.
As noted in the European market Update, equities traders were a 'bit surprised' by the Deutsche bank annual report, which contained higher than expected amount of non-investment grade, and central European debt the bank is carrying, thus implying that the road to recovery was a long way off.
- In fixed income: BOE's King indicated that the Quantitative Easing (QE) buying would stop short of the £75B if data improved followed the CPI surprise.
Dealers noted that a large degree of the pre-positioning noted into the QE program was reversed and 2s/10s steepened out towards the 150 bps area.
More Headlines
5:30 AM
*(UK) FEB CPI M/M: 0.9% V 0.3%E; Y/Y: 3.2% V 2.6%E; CPI CORE Y/Y: 1.6% V 1.3%E- No revisions
5:31:40 AM
(UK) BOE comments on CPI: Sharp inflation drop likely to resume; CPI to go below 2% target over next year
- Inflation fall might reflect GBP depreciation
- GBP fall has dampened commodity price decline, energy prices to reduce inflation
- Energy tariff cut will lower CPI by 1.0%
- Growth rates in money and nominal demand slowed 'sharply'
- GDP contraction has created substantial spare capacity; global activity to constrain demand
- Q4 contraction was 'substantially larger' than expected
- MPC will want to consider CPI risks at next policy meeting
- Uk must raise both public and private savings rates
6:09:40 AM
(UK) BOE King: Might not have to reverse injection of broad money; Exit strategy would be to raise interest rates
- Timing of exit strategy is very important
- Has no doubt BOE purchases of Gilts will be of a sufficient size, that GILT buying will boost nominal spending
- GBP depreciation will not put inflation over target
- Oil prices still remain overly sensitive to supply and immediate demand balances
7:14:49 AM
(UK) BOE's King: Feb inflation rise seems fairly broad based; MPC job is to respond to GBP fall on inflation
- Germany more impacted by global economy than UK
- Surplus countries are being more severely affected
- Uncertain how large GBP decline should have been; reiterates that drop in GBP value was not enginereed
- Sees no reason why GBP should fall lower
7:44:48 AM
(US) Fed's Evans: Q1 GDP growth looks set for severe contraction; to resume growth by year-end
- Quantitative easing to make up for loss of demand
- Overwhelming monetary accommodation is needed
- Inflation expectations are well maintained; disinflation of greater concern
- Fed would have been better off tightening policy rates at a quicker pace in late 2001
9:11:10 AM
(US) Treasury Sec Geithner: Fixing markets will take time, govt needs resolution authority to protect markets, large firms need constraints on risk taking - testimony
- says Treasury would only exercise emergency authority upon the recommendation of the Fed and other regulators.
- Excessive compensation extends beyond AIG
- Operations at AIG Financial Products division operated in an 'unregulated' market
9:59 AM
*MARCH RICHMOND FED MANUFACTURING INDEX: -20 V -51E- no revision
10:00 AM
*JAN HOUSE PRICE INDEX (M/M): +1.7% V -0.9%E- prior revised from +0.1% to -0.2%
11:05:17 AM
Treasury's Geithner: Treasury has not made judgment on request for additional TARP capital - Q&A
- Says will 'move quickly' with regards to Legacy Asset plan and establish broad standards for financial market compensation.
- says burden of financial regulation should not be placed entirely on the Fed; echoing comments from US Senator Dodd earlier
6:00am Fed's Evans speaks to Czech National Bank on economic outlook.
10:00am TAF results. Jan House Price Index m/m (last -0.1%), March Richmond Fed Manufacturing Index (last -51)
10:00am Fed Chairman Bernanke & Treasury Sec Geithner testify before Congress on AIG.
2:35pm Fed's Bullard speaks in London.
3:00pm TSLF announcement
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:00:36 AM
(US) Treasury Dept releases details of toxic asset plan: To use $75B to $100B from TARP to finance public-private partnership
- Program aims to generate $500B in purchasing power to buy legacy assets with the potential to expand to $1T over time
- Program revolves around three principles: Maximizing the Impact of Each Taxpayer Dollar, Shared Risk and Profits With Private Sector Participants and Private Sector Price Discovery (private sector may lose entire investment in downside scenario, and taxpayer sharing in profitable returns)
- Legacy loans program aims to attract private capital to purchase eligible legacy loans from participating banks through the provision of FDIC debt guarantees and Treasury equity co-investment
- Under "legacy loans" program banks will decide which assets usually a pool of loans they would like to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio.
- The FDIC will conduct an auction for these pools of loans. The highest bidder will have access to the Public-Private Investment Program to fund 50% of the equity requirement of their purchase.
- If the seller accepts the purchase price, the buyer would receive financing by issuing debt guaranteed by the FDIC. The FDIC-guaranteed debt would be collateralized by the purchased assets and the FDIC would receive a fee in return for its guarantee.
- Under "Legacy Securities Program" non-recourse loans will be made available to investors to fund purchases of legacy securitization assets. Eligible assets are expected to include certain non-agency residential mortgage backed securities (RMBS) that were originally rated AAA and outstanding commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) that are rated AAA.
- Asset managers will have the ability, if their investment fund structures meet certain guidelines, to subscribe for senior debt for the Public-Private Investment Fund from the Treasury Department in the amount of 50% of total equity capital of the fund. The Treasury Department will consider requests for senior debt for the fund in the amount of 100% of its total equity capital subject to further restrictions.
- To initially approve 5 asset managers to purchase securities and borrow from TALF, Tsy sees a broad array of investors participating
- Exec pay limits will not apply to private investors
- Note: Official release confirms certain details provided overnight in Tsy Sec Geithner's op-ed piece in the WSJ
8:50:16 AM
(EU) ECB's Weber: Reiterates ECB still has room to move on rates, will need to reverse policy at first signs of recovery
- Notes expansive policy creates breeding ground for price risks
- Substantial amount of uncertainty remains about CPI, GDP outlook
- Risks to Euro Zone economic outlook should be more balanced from now on
- Euro Area economic downturn could be more servere than ECB staff projections
8:59:54 AM
US Treasury Sec Geithner: Danger at the moment is that financial system will not take enough risk; plan will reduce chances of deeper recession; no doubt the plan takes a risk, but confident the plan provides balanced incentives - press briefing
- Notes plans will assist in clearing balance sheets for banks and improve lending; Govt could not purchase assets on its own
- Aims to reduce additional asset price declines; may see large deleveraging without the plan
- Believes govt can move and react 'quite quickly'
- Not willing to make decision at current time regarding additional funding needed for Treasury
9:20:34 AM
Treasury Sec Geithner: Can't judge at this time if more funding will be needed to stabilize the financial system
- Not asking for more money at the current time; plan has enough details for a quick start up.
- Will continue to work with Congress to ensure that enough funds are allocated.
- Have established enough plans for asset purchase program as to get the program moving quickly.
- Will work with Congress to find balance on executive compensation
- Other countries will follow US example and provide direct support for credit markets.
- Will not judge success by participation levels.
10:00:03 AM
*FEB EXISTING HOME SALES: 4.72M V 4.45ME (+5.1% m/m)
- No revisions
- Total Months of supply months 9.7 v 9.7 months prior
- Median Existing Home Price: $165,400 v $164,800 prior (+0.3% m/m, -15.5% y/y)
- NAR President: "Strong sales gains in the West are led by California, where the median listing price is beginning to rise for the first time in three years. Given the downward distortion in price comparisons due to distressed sales, it's important for owners to keep in mind that this doesn't equate to a similar loss of value for traditional homes in good condition,"
2:45:57 PM
FDIC's Bair: Some banks may be 'beyond help' by US Govt; credit quality of asset pools will determine the leverage in toxic asset program - Q&A with reporters
- says credit risk of the program is "quite acceptable;" in her opinion risk to FDIC from the plan is "pretty minimal," good chance the plan will be profitable. The toxic asset program does not put FDIC insurance fund at risk, insurance program and FDIC debt backing will be separate.
- Estimates they can initially remove about $500B of legacy assets from bank balance sheets; estimates there are about $1T in high risk toxic assets. Initial focus will be on residential and commercial loans.
- says structure of Geithner plan has a better chance than any to succeed.
- Remarks that there is the expectation that Banks will sell assets at a discount from current levels
7:37:54 PM
(US) US Treasury Sec Geithner: "One day does not make the plan", administration moving as fast as possible; Announced plan reduces risk of deeper recession
- Crisis will not end until more risk is seen in market, sees hopeful signs in corporate finance
- Plans to work with Congress if any additional funds are needed; has enough capital to start the process
- US undergoing difficult financial crisis, understands extent of public outrage
- Calls for better oversight of leverage in financial markets
- If delay taking on financial system it will hurt efforts to rebuild confidence.
- Says he did not ask to resign, feels privileged to serve.
7:47:43 PM
(EU) ECB's President Trichet: Policy rate not at its lowest level; Bank doing what is needed to avoid being too far above or below inflation target
- ECB actions in past months were "very bold"
- ECB committed to price stability
- Reiterates that main interest policy rates could diminish further
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
March 23, 2009
Stock markets surge following details of the government's bailout plan and an uptick in Feb existing home sales.
- Stock markets surge following details of the government's bailout plan and an uptick in Feb existing home sales.
The US Treasury confirmed leaked reports regarding the framework for the toxic asset plan. Broadly the program works to generated more than $500B in purchasing power by leveraging $75-100B from TARP to finance a public-private partnership. Banks will decide which legacy loan assets they want to sell and the FDIC will analyze these pools and come up with a level of financing it is comfortable guaranteeing. Leverage will not exceed 6:1 debt-to-equity ratio. The FDIC will subsequently auction off the loan pools in a complex process involving the FDIC issuing guaranteed debt. Executive pay limits will not apply to private investors. Complexity and pricing are still major hurdles for the program but in general markets and participants are greeting the clarity provided by the details favorably. Feb existing home sales increased by more than 5% from Jan while the median home price actually rose on sequential basis providing some additional fuel to the equity rally.
- Crude prices have rallied another 2.5% with the May WTI contract back above $53.
Oil is getting some support from headlines out of Brazil indicating a striking union is having some effect on production out of the Amazon region. Gold is retesting $950 down more than $7 in the April contract.
- No surprise financial stocks are the big winners as they recover from Friday's drubbing. The XLF is up close to 10% with all the major US banks trading up better than 10%. Homebuilding names have rallied post home sales figures adding 5% to the XHB.
- Before the open retailers TIF +9% and WAG +9.5% reported results. Walgreens beat estimates on both the top and bottom line, while not surprisingly Tiffany's report was ugly especially their guidance for the remainder of the year.
- Petro Canada has spiked nearly 30% after Suncor made an all share offer for the company valued at nearly $17B. Daimler is higher after Abu Dhabi's Aabar Investments announced plans to invest €1.95B ($2.65B) in the company. Central Euro Media, CETV is popped some 30% after Time Warner announced it was acquiring a 31% interest in the Co.
- The USD moved off its session lows against the European pairs and probed into positive territory as currency markets begin to express a bit of skepticism to the U.S. Treasury Department's plan to clean up toxic assets. Dealers are noting little new substance of the plan from the details already on FT and WSJ this morning. Comments from ECB members Weber and Orphanides echoed that the prior staff projections could be worse than the
-3.2% GDP expected. Orphanides also reiterated that any ECB easing could take either conventional or non conventional form.
- The GBP/USD retraced from 1.4650 seen during the European morning to retest the 1.4500 level. BoE Blanchflower commented that the decline in Sterling exchange rate had not aided manufacturing and that he saw unemployment rising substantially. Blanchflower noted that the jobless rate would be the biggest issue in UK for the next 6-month period. Cable is retesting overnight lows nearing 1.4450 in late NY morning trade.
- The JPY was broadly softer against the major pairs and commodity-related pairs but its price action was mixed during the NY morning. USD/JPY above the 97 handle near its session highs Dealers noting that better US existing home sales data. Both GBP/JPY and EUR/JPY pairs were firmer but off their best levels.
- The CAD was steady during the NY morning despite a worse-than-expected leading indicator data for Feb. USD/CAD up 45 pips at the 1.2330 area.
More Headlines
8:00:36 AM
(US) Treasury Dept releases details of toxic asset plan: To use $75B to $100B from TARP to finance public-private partnership
- Program aims to generate $500B in purchasing power to buy legacy assets with the potential to expand to $1T over time
- Program revolves around three principles: Maximizing the Impact of Each Taxpayer Dollar, Shared Risk and Profits With Private Sector Participants and Private Sector Price Discovery (private sector may lose entire investment in downside scenario, and taxpayer sharing in profitable returns)
- Legacy loans program aims to attract private capital to purchase eligible legacy loans from participating banks through the provision of FDIC debt guarantees and Treasury equity co-investment
- Under "legacy loans" program banks will decide which assets usually a pool of loans they would like to sell. The FDIC will conduct an analysis to determine the amount of funding it is willing to guarantee. Leverage will not exceed a 6-to-1 debt-to-equity ratio.
- The FDIC will conduct an auction for these pools of loans. The highest bidder will have access to the Public-Private Investment Program to fund 50% of the equity requirement of their purchase.
- If the seller accepts the purchase price, the buyer would receive financing by issuing debt guaranteed by the FDIC. The FDIC-guaranteed debt would be collateralized by the purchased assets and the FDIC would receive a fee in return for its guarantee.
- Under "Legacy Securities Program" non-recourse loans will be made available to investors to fund purchases of legacy securitization assets. Eligible assets are expected to include certain non-agency residential mortgage backed securities (RMBS) that were originally rated AAA and outstanding commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) that are rated AAA.
- Asset managers will have the ability, if their investment fund structures meet certain guidelines, to subscribe for senior debt for the Public-Private Investment Fund from the Treasury Department in the amount of 50% of total equity capital of the fund. The Treasury Department will consider requests for senior debt for the fund in the amount of 100% of its total equity capital subject to further restrictions.
- To initially approve 5 asset managers to purchase securities and borrow from TALF, Tsy sees a broad array of investors participating
- Exec pay limits will not apply to private investors
- Note: Official release confirms certain details provided overnight in Tsy Sec Geithner's op-ed piece in the WSJ
8:50:16 AM
(EU) ECB's Weber: Reiterates ECB still has room to move on rates, will need to reverse policy at first signs of recovery
- Notes expansive policy creates breeding ground for price risks
- Substantial amount of uncertainty remains about CPI, GDP outlook
- Risks to Euro Zone economic outlook should be more balanced from now on
- Euro Area economic downturn could be more servere than ECB staff projections
8:59:54 AM
US Treasury Sec Geithner: Danger at the moment is that financial system will not take enough risk; plan will reduce chances of deeper recession; no doubt the plan takes a risk, but confident the plan provides balanced incentives - press briefing
- Notes plans will assist in clearing balance sheets for banks and improve lending; Govt could not purchase assets on its own
- Aims to reduce additional asset price declines; may see large deleveraging without the plan
- Believes govt can move and react 'quite quickly'
- Not willing to make decision at current time regarding additional funding needed for Treasury
9:20:34 AM
Treasury Sec Geithner: Can't judge at this time if more funding will be needed to stabilize the financial system
- Not asking for more money at the current time; plan has enough details for a quick start up.
- Will continue to work with Congress to ensure that enough funds are allocated.
- Have established enough plans for asset purchase program as to get the program moving quickly.
- Will work with Congress to find balance on executive compensation
- Other countries will follow US example and provide direct support for credit markets.
- Will not judge success by participation levels.
10:00:03 AM
*FEB EXISTING HOME SALES: 4.72M V 4.45ME (+5.1% m/m)
- No revisions
- Total Months of supply months 9.7 v 9.7 months prior
- Median Existing Home Price: $165,400 v $164,800 prior (+0.3% m/m, -15.5% y/y)
- NAR President: "Strong sales gains in the West are led by California, where the median listing price is beginning to rise for the first time in three years. Given the downward distortion in price comparisons due to distressed sales, it's important for owners to keep in mind that this doesn't equate to a similar loss of value for traditional homes in good condition,"
-The equity rally started last week reached a plateau in the latter half of this week as investors lost their taste for the big US banks and the Fed rolled out yet another gargantuan effort to spend our way out of recession.
With the Fed Funds target rate pinned close to zero, the Fed launched an effort to buy up to $300B worth of Treasuries as well as increasing purchases of MBS and GSE debt, expanding its balance sheet to an unprecedented $3T (with more to come when the bank bailout plan is finalized).
The dollar rapidly weakened on the Fed news, sending NYMEX crude back above the $50/barrel level and gold halfway back to $1,000/oz after it retested $900 earlier in the day Wednesday.
Meanwhile, the noise surrounding executive bonuses at AIG and other crippled financial institutions rose from a background hum to an unavoidable roar that could actually damage the institutions and sap the political will to provide any further bailouts.
Despite losing steam later in the week, equity markets posted their first back-to-back weekly advance in 11 months. For the week the DJIA rose 0.7%, the Nasdaq Composite was up 1.8%, and the S&P500 advanced 1.6%.
Week of 3/23/2009 thru 3/27/2009
Monday, March 23, 2009
10:00am TAF auction. Feb Existing Home Sales (last 4.49M, m/m -5.3%)
10:00am Fed's Rosengren testifies before Congress.
6:00pm Treasury Sec Geithner and Fed's Rudd address WSJ conference.
Tuesday, March 24, 2009
6:00am Fed's Evans speaks to Czech National Bank on economic outlook.
10:00am Fed Chairman Bernanke & Treasury Sec Geithner testify before Congress on AIG.
10:00am TAF results. Jan House Price Index m/m (last -0.1%), March Richmond Fed Manufacturing Index (last -51)
3:00pm TSLF announcement
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Wednesday, March 25, 2009
8:30am Feb Durable Goods Orders (last -4.5%, ex-transport -3.0%)
10:00am Feb New Home Sales (last 309K, m/m -10.2%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
12:20pm Fed's Pianalto speaks on economic recovery in Ohio.
1:00pm Treasury's 5-year note auction
1:00pm Fed's Yellen speaks on US economic policy in New York.
Thursday, March 26, 2009
5:00am Fed's Lockhart speaks at Banque de France. 8:30am Final Q4 Annualized GDP q/q (prelim -6.2%), Q4 GDP Price Index (prelim 0.5%), Q4 Personal Consumption (prelim -4.3%), Q4 Core PCE q/q (prelim 0.8%), Initial Jobless Claims (last 646K), Continuing Claims (last 5.473M)
9:25am Fed's Lacker speaks in Charleston, SC.
10:00am Treasury Sec Geithner testifies before Congress. 10:30am Natural Gas Inventories
12:00pm Fed's Fisher speaks on economic crisis.
12:30pm Fed's Lacker speaks on US economic outlook in Charleston, SC.
1:00pm Fed's Stern speaks on “too big to fail” in Minneapolis.
1:00pm Treasury's 7-year note auction
Friday, March 27, 2009
8:30am Feb Personal Income (last 0.4%), Feb Personal Spending (last 0.6%), Feb PCE Deflator y/y (last 0.7%), Feb PCE Core (last m/m 0.1%, y/y 1.6%)
9:55am March Final U. of Michigan Confidence (last 56.6)
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
March 20, 2009
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- Equity futures rallied ahead of the NYSE open but have been trending lower ever since. Stock markets feel eerily quiet despite triple witching and the S&P rebalance on the close.
Markets are still digesting and debating the Fed's decision to undertake quantitative easing. Pundits and traders alike seem to be concerned about inflationary implications down the road. Equities have most certainly encountered some resistance while Treasury yields have stabilized and have begun backing up. The 10-year yield has held 2.5% and retraced some 10 basis points. The Greenback is bouncing as foreign currency profit takers emerge following the roughly 5% declines in the Dollar post FOMC. Commodity markets are seeing very small profit taking following large moves up as well. May crude remains above $50 near $52 while Gold is holding $955.
The financial sector bonus brouhaha shows little signs of abating. The media reported yesterday evening that the Senate bill for taxing bonuses at certain firms that have received TARP funds would take back 70%, versus the 90% proposed by the House yesterday afternoon, while other reports indicated that the House is now working on legislation to ban bonuses outright at firms accepting TARP funds. The anti-bonus drum beat has picked up in Europe too, where UK PM Brown, French President Sarkozy and German Chancellor Merkel have all made noises about enacting similar measures against finance industry bonuses as those being considered in the US. CNBC reported last night that the Obama Administration is moving quickly to draft legislation that would allow the government to take more control over major financial institutions such as AIG or Citigroup. Note that overnight the FT reported that Bank of America executives were directly involved in the markdowns that led to Merrill's gigantic Q4 loss. BoA officials were scheduled to hand over the details related to bonuses paid by Merrill tonight after a judge denied its request to have the information kept confidential.
- Citi is the only major bank stock in the black in early trading, up 4% after Mexico confirmed that it would not force the company to sell its Banamex unit due to the big US government stake.
Most of the other leading financials are down 2-6%, with BAC headed for -10%. The ratings agencies may be getting a substantial windfall from TALF, according to the Wall Street Journal. Given the agencies' pricing structures, the initial $200B portion of bonds issued under the TALF could translate into $80-240M in profits for the agencies, a figure that could rise to $400M to $1B if the TALF funding fills out to $1T.
- Smartphone underdog PALM+7% is ripping in the early going despite reporting a worse-than-expected losses in Q3 yesterday.
The CFO said Q4 would also be tough, but expressed hope regarding the upcoming Pre phone - which investors expect to be something of a blockbuster. Troubled TKTM-6% is not so lucky, missing its earnings targets by a wide margin. In auto industry news, Fiat responded to comments out of Chrysler on Wednesday, flatly denying the US automaker's assertion that Fiat would assume around one third of its debt to the US government as part of their alliance deal. A Daimler executive discussed the overall industry this morning, noting that the US might spearhead a market recovery among major truck markets, thanks to its economic stimulus programs. And UBS analysts upgraded Ford to a buy with a $5 price target, noting that it should gain market share from its distressed competitors; Ford's stock is up 9% in early trading.
- In currencies, the greenback recovered from its soft tone in early European trading.
The yen was broadly softer as the New York session commenced. Trader chatter indicated that BIS has been an aggressive buyer of USD against JPY today, with USD/JPY holding above its historical pivot point of 95.00 after testing its 100-day moving average of 93.50 on Thursday, while EUR/JPY moved back above the 130 handle. Dealers are noting that some key moving averages are about to cross over, which could add to USD/JPY's upside momentum. Dealers warn that there is lingering risk of JPY repatriation ahead of the end of the Japanese fiscal year on March 31.
- European officials offered a full morning of confusing and somewhat contradictory comments about a potential ECB bailout fund all morning long.
Everything got started when an unnamed German lawmaker insisted that the ECB had a rescue fund that could be deployed in 24 hours to aid any member that was at risk of going bankrupt. Multiple Euro Zone political leaders denied they had ever heard of any such fund, while the EU's Juncker commented that it was a bad idea for the ECB to create bailout funds, since there are no rules for bailout in the EU treaty. The ECB's Weber reiterated the view that the ECB would make use of room to move on rates and could offer longer-term loans in refi operations. He also took the opportunity to warn that recent data does not indicate a recovery in the short term.
More Headlines
10:40 AM
Fed's Bullard: Deflation is a 'real possibility’; large shock could trigger a deflationary spiral and an important near term goal is to avoid deflation- says global coordination is not critical in responding to the financial crisis
*FOMC LEAVES RATE UNCHANGED AT 0.25%; AS EXPECTED
; To purchase $300B of longer term treasuries
- Discount Rate unchanged at 0.50%
- Fed to purchase of $300B in longer term treasuries over next six months designed to improve conditions in private credit markets
- Likely to expand TALF collateral to other assets
- Vote was 10-0 (Lacker previously dissented, in favor of purchasing treasuries)
- To purchase $100B of GSE debt and bring total to $200B
- To Purchase additional $750B more of agency MBS and bring total purchased this year to $1.25T in efforts to give support to mortgage lending ad housing markets
- Notes job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending; anticipates policy actions to stabilize financial markets and institutions; inflation to remain subdued
- Reiterates the economy continues to contract, Fed Funds Rate to remain at exceptionally low level "for some time"
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 646K V 655KE; CONTINUING CLAIMS: 5.473M V 5.323ME
- Prior jobless claims revised from 654K to 658K
- Prior Continuing Claims revised from 5.317M to 5.288M
***Highest continuing claims on record
8:56:41 AM
General Electric Co Reiterates that GE Capital should be profitable in Q1 and FY09, reiterates that GE does not need outside capital - slides ahead of investor presentation
- Guides Q1 leverage ratio 6.1% v 7.1% y/y
- Guides Q1 Capital Finance credit loss $9.7B
- Guides FY09 Eastern Europe credit losses $656M to $1.27B
- Difficult market with many macro-economic indicators still deteriorating
- Pockets of increased liquidity for consumers and midmarket businesses
- Industry losses continuing
- Delinquencies and non-earning assets pressured in both Consumer and Commercial
- Very difficult to execute asset sales in today’s market, believes TALF may help
- Notes that under Fed adverse stress tests GE Capital is breakeven and should not need to inject additional capital
- Reminder: On 3/05 GE's CFO told CNBC that GE Capital would be profitable in Q1, GE would be able to fund itself through 2010, if necessary.
9:01:56 AM
Fedex Corp CEO: "we probably have hit bottom," expect to see sequential q/q improvement moving forward - conf call
- We do not anticipate futher severe declines in US GDP in 2009, although things will remain weak in 2009. Inventories are at very, very low levels and restocking will simply have to take place.
9:30:35 AM
IMF lowers global growth forecast, sees world 2009 GDP contracting 0.5% to 1.0% from positive 0.5-2.2% prior, calls on nations to extend stimulus plans into 2010
- Emerging markets growth to slow to 1.5-2.5% in 2009, should return to 3.5% in 2010
- Risk that emerging markets will find it increasingly difficult to find credit
- States that their are serious risks to deflation in developed markets
- Global monetary policy should be eased further if possible, had previously sought a doubling in global lending facilities
- Italian 2009 deficit to GDP forecast raised to 4.8% v 3.9%
- Sees US GDP -2.6% in 2009 v -1.6% prior
- Sees EU GDP -3.2% in 2009 v -2% prior
- Sees Japan GDP -5.8% in 2009 v --2.6% prior
- Note: Global GDP cut to negative number from prior positive was widely expected
- Note: Calls for additional and continued stimulus packages into 2010 are in confliction with comments from German, Dutch and Swedish positions that no further stimulus packages are currently needed
10:00 AM
*FEB LEADING INDICATORS: -0.4% V -0.6%E- prior revised from 0.4% to 0.1%
10:00:04 AM
*MAR PHILADELPHIA FED INDEX: -35 V -39E
**sub-index readings:
- Prices Paid: -31.3 v -13.7 prior
- New Orders: -40.7 v -30.3 prior
- Employment: -52.0 v -45.8 prior (third straight record low since survey started in 1958)
- Inventories: -55.6 v -24.3 prior
- Six-month business conditions outlook: 14.5 v 15.9 prior
10:15:01 AM
US to announce $5B aid to Auto Suppliers -Detroit Free Press
- Article notes that Obama administration is expected to announce aide plan for suppliers
- Details may be announced as soon as this morning
11:15:22 AM
US Treasury confirms $5B auto suppliers support program
- Suppliers to pay a fee for right to participate.
- The program will be run through American auto companies that agree to participate in the program.
1:23:19 PM
US Fed sets TALF rates for ABS over 3 year terms
- Auto Fixed rates at 2.73%, Floating rates at 1.523%
- Credit card Fixed rates at 2.733%, Floating rates at 1.523%
- Student Loan (private) Fixed (NA), Floating rates at 1.523%
- Student Loan (Govt guaranteed) Fixed (NA), Floating rates at 1.023%
- Small Business (SBA loans 7(a) loans) Fixed (NA), Floating rates at 1.0%
- Small Business (SBA loans 504 loans) Fixed rates at 2.233%, Floating rates at (NA)
2:41 PM
AIG American International Group, Inc US House approves 90% tax on certain corporate bonuses
; could tax bonuses on those who earn more than $250K- Bill applies to companies that have received more than $5B in funds from TARP
5:16:01 PM
(US) WSJ reports that the banking industry and various congressmen are stalling the mortgage "cramdown" proposal
- The opposition to the measure is coming from moderate Senate Republicans and Democrats.
- Senate negotiators have been unable to lure a handful of moderate votes needed to pass the bill in the Senate.
- Some financial institutions want the bill to be limited to sub-prime mortgages only.
- Note: The cramdown provision would allow bankruptcy judges to make changes to primary residence mortgages and the measure was approved on 3/5 by the House.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
-Fallout from the Fed's leap of faith into quantitative easing continues to reverberate throughout the markets.
The immediate effect of Ben Bernanke's plan to directly intervene by buying up to $300B in treasuries has been to force down the dollar, sending front-month crude over $50 and spot gold over $950. Adding to the volatility, the IMF cut its global growth forecast to -0.5% to -1.0% from +0.5-2.2% prior, and called on nations to extend stimulus plans into 2010. The Benchmark 10-year yield seems is steadying around the 2.5% level for the time being. Stock prices have been volatile as well with early gains generally giving way led by selling in the financials.
- Citigroup has outlined its strategy for converting the Federal government's big stake in the bank to common equity from preferred stock.
The bank has registered 4.38B common shares for the conversion, which is about 80% of its 5.5B shares of outstanding common stock, and plans to ask its shareholders to authorize an expansion of its share authorization to as much as 60B shares, as it needs up to 16B shares to fulfill the entire preferred stock conversion. Some noted that Citi will also be doling out common shares to employees in lieu of cash bonus payments, given the continuing financial bonus brouhaha. In addition, Citi said it intends to undertake a reverse stock split at a ratio of somewhere between 1-2 to 1-30 at a date before June 2010, to eventually mop up the big pool of shares that will result from the conversion. Finally, the bank said it would sell $3B in credit card bonds under the TALF program. Note the WSJ reported overnight that some hedge funds have gotten crushed thanks to their moves to ride the government's coattails and buy preferred shares in Citi, only to see the spread between the common and preferred stock narrow rapidly and considerably over the last few weeks. Shares of Citi rose 25% before the open, only to cut those gains in half by mid morning.
- In other finance sector news, GE is holding an investor day event today. In a filing ahead of its investor presentations, GE reiterated that GE Capital should be profitable in Q1 and FY09, and that GE does not need outside capital, echoing comments from the CFO on CNBC two weeks ago.
It also said it is very difficult to execute asset sales in today's market, but believes TALF may help, noting that many macroeconomic indicators are still deteriorating. Credit card Company Discover Financial managed to stomp the analysts’ earnings estimates thanks to a big payment from its successful antitrust suit against Visa and Mastercard. But the company's metrics are still deteriorating, with rising delinquency rates and charge-offs indicating that there's still trouble ahead for the firm. Adding to the pressure on the credit card industry, in a speech last night President Obama said he supports a credit-card bill of rights, insisting that banks have pushed credit cards in "damaging way." Shares of DFS-4% were in the red mid morning, along with those of competitors AXP, COF, V and MA.
- Oracle is a big winner this morning, with shares up 13% in the early going. Yesterday afternoon the tech firm modestly beat estimates and declared it’s first-ever dividend, of $0.05/shr.
FedEx reported weak Q3 earnings, missing analyst estimates by more than 25 and guiding next quarter way below par. FedEx cited continued deterioration in global economic conditions leading to lower volumes at FedEx Express and FedEx Freight as the reason for the declines. But on an up note, the CEO said "we probably have hit bottom," noting he expects to see sequential q/q improvement moving forward. Shares of FDX+6% have sustained solid gains in early trading. Multiple retailers reported Q4 results that were either in line or a bit ahead of (already diminished) expectations this morning. PLCE, ROST and BKS made respectable gains ahead of the open, most of which evaporated with the overall declines in major indices.
- In currencies, the greenback remained on the defensive into the New York session thanks to pressure from the latest round of Fed quantitative easing. Dealers were noting that the Fed's dive into buying Treasuries would expand its balance sheet and could stroke inflationary concerns, hurting USD sentiment.
Chatter also focused on the implications for the United States' AAA rating. EUR/USD finally broke above the initial post-Fed quantitative easing resistance of 1.3536, moving towards the 1.37 level for fresh seven-week highs. A few currency analysts are calling for a EUR/USD target toward the 1.40 handle. The yen was firmer compared to opening levels from the Asian session, with USD/JPY was probing below the critical 95 neighborhood throughout the NY morning. Note that this has been a pivot level over the last decade for setting trends. GBP/USD was back above the 1.45 level for the first time in three weeks. USD/CHF was weaker as well, testing 1.1220 during the session. With front month NYMEX crude futures at level week highs and back above the $50 handle, the CAD and AUD were firmer. Spot gold also aiding their cause as it held the pivotal $880/oz level in cash on Wednesday and looks poised to retest the $1,000 level.
- In other cross action, EUR/JPY was unable to sustain a move above the 130 level during the Asian morning. EUR/CHF held the 1.5350 level in the New York session amid fresh rumors that the SNB was again buying euros for Swiss Francs.
Note that the EU's Solana said the Ukraine situation could have implications for the Euro Zone earlier today. Germany's IFO's Sinn commented that without a joint euro bond issue the euro could "go bust" and noted that it would be difficult to bail out a large EU country such as Italy.
More Headlines
2:17:03 PM
*FOMC LEAVES RATE UNCHANGED AT 0.25%; AS EXPECTED
; To purchase $300B of longer term treasuries
- Discount Rate unchanged at 0.50%
- Fed to purchase of $300B in longer term treasuries over next six months designed to improve conditions in private credit markets
- Likely to expand TALF collateral to other assets
- Vote was 10-0 (Lacker previously dissented, in favor of purchasing treasuries)
- To purchase $100B of GSE debt and bring total to $200B
- To Purchase additional $750B more of agency MBS and bring total purchased this year to $1.25T in efforts to give support to mortgage lending ad housing markets
- Notes job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending; anticipates policy actions to stabilize financial markets and institutions; inflation to remain subdued
- Reiterates the economy continues to contract, Fed Funds Rate to remain at exceptionally low level "for some time"
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 646K V 655KE; CONTINUING CLAIMS: 5.473M V 5.323ME
- Prior jobless claims revised from 654K to 658K
- Prior Continuing Claims revised from 5.317M to 5.288M
***Highest continuing claims on record
8:56:41 AM
General Electric Co Reiterates that GE Capital should be profitable in Q1 and FY09, reiterates that GE does not need outside capital - slides ahead of investor presentation
- Guides Q1 leverage ratio 6.1% v 7.1% y/y
- Guides Q1 Capital Finance credit loss $9.7B
- Guides FY09 Eastern Europe credit losses $656M to $1.27B
- Difficult market with many macro-economic indicators still deteriorating
- Pockets of increased liquidity for consumers and midmarket businesses
- Industry losses continuing
- Delinquencies and non-earning assets pressured in both Consumer and Commercial
- Very difficult to execute asset sales in today’s market, believes TALF may help
- Notes that under Fed adverse stress tests GE Capital is breakeven and should not need to inject additional capital
- Reminder: On 3/05 GE's CFO told CNBC that GE Capital would be profitable in Q1, GE would be able to fund itself through 2010, if necessary.
9:01:56 AM
Fedex Corp CEO: "we probably have hit bottom," expect to see sequential q/q improvement moving forward - conf call
- We do not anticipate futher severe declines in US GDP in 2009, although things will remain weak in 2009. Inventories are at very, very low levels and restocking will simply have to take place.
9:30:35 AM
IMF lowers global growth forecast, sees world 2009 GDP contracting 0.5% to 1.0% from positive 0.5-2.2% prior, calls on nations to extend stimulus plans into 2010
- Emerging markets growth to slow to 1.5-2.5% in 2009, should return to 3.5% in 2010
- Risk that emerging markets will find it increasingly difficult to find credit
- States that their are serious risks to deflation in developed markets
- Global monetary policy should be eased further if possible, had previously sought a doubling in global lending facilities
- Italian 2009 deficit to GDP forecast raised to 4.8% v 3.9%
- Sees US GDP -2.6% in 2009 v -1.6% prior
- Sees EU GDP -3.2% in 2009 v -2% prior
- Sees Japan GDP -5.8% in 2009 v --2.6% prior
- Note: Global GDP cut to negative number from prior positive was widely expected
- Note: Calls for additional and continued stimulus packages into 2010 are in confliction with comments from German, Dutch and Swedish positions that no further stimulus packages are currently needed
10:00 AM
*FEB LEADING INDICATORS: -0.4% V -0.6%E- prior revised from 0.4% to 0.1%
10:00:04 AM
*MAR PHILADELPHIA FED INDEX: -35 V -39E
**sub-index readings:
- Prices Paid: -31.3 v -13.7 prior
- New Orders: -40.7 v -30.3 prior
- Employment: -52.0 v -45.8 prior (third straight record low since survey started in 1958)
- Inventories: -55.6 v -24.3 prior
- Six-month business conditions outlook: 14.5 v 15.9 prior
10:15:01 AM
US to announce $5B aid to Auto Suppliers -Detroit Free Press
- Article notes that Obama administration is expected to announce aide plan for suppliers
- Details may be announced as soon as this morning
11:15:22 AM
US Treasury confirms $5B auto suppliers support program
- Suppliers to pay a fee for right to participate.
- The program will be run through American auto companies that agree to participate in the program.
10:00am March Philadelphia Fed (last -41.3), Feb Leading Indicators (last 0.4%)
10:30am Fed's Tarullo testifies before the Senate on modernizing bank regulation
10:30am Natural Gas Inventories
11:00am Treasury note announcement
2:00pm TSLF auction
Todays Headlines
5:30:04 AM
*(UK) FEB JOBLESS CLAIMS CHANGE: 138.4K V 84.8KE (Claims Change is Record High); CLAIMANT COUNT RATE: 4.3% V 4.0%E
- Prior Claimant Count Rate revised from 3.8% to 3.9%
- Prior Jobless Claims Change revised from 73.8K to 93.5K
5:30:04 AM
*(UK) BOE MINUTES: MPC VOTED 9-0 TO CUT RATES BY 50 BPS TO 0.5% AND TO PURCHASE ASSETS ON MAR 5TH
- Substantial risk remained of inflation undershoot
- Housing activity subdued
- Agreed UK needs new money in range of £50B to £100B; small injection might show tool is ineffective
- Some signs that UK recession is on track to ease in 2009
- Rising money supply will cause spending to rise
- Overnight rate likely to trade in 0.0% to 0.5% range
- Sustained low interest rates might cause future difficulties
- Focus on longer maturities targets on non-bank institutions
- Will review appropriate scale of purchases each month
7:00 AM
*(US) MBA MORTGAGE APPLICATIONS W/E MARCH 13TH: 21.2% V 11.3% PRIOR- Refi's: 29.6% v 13.3% prior - Avg Rate on 30y Mortgage: 4.89% v 4.96% prior - No revisions
8:30 AM
*FEB CONSUMER PRICE INDEX M/M: 0.4% V 0.3%E; CPI EX FOOD&ENERGY M/M: 0.2% V 0.1%E; CPI NSA: 212.193 V 212.020E- CPI Y/Y: 0.2% v 0.0%e - Core CPI Y/Y: 1.8% v 1.7%e - No Revisions
10:30 AM
*DOE CRUDE: +1.94M V +1ME; GASOLINE: +3.2M V -1.5ME; DISTILLATE: +112K V +600KE; CAPACITY UTILIZATION: 82.1% V 82.7%E- Distillate demand -63K bpd to 3.72M bpd
- Gasoline demand -17K bpd to 8.95M bpd
10:44:23 AM
(SA) Saudi Oil Min Naimi: Sees 2009 demand falling more than 1M bbl/d; their is the possibility of strong demand crunch sooner, not later
- Market trends in low price environment to focus on survival, not expansion
- Markets could be asking for disaster is too much emphasis placed on alternative energies
- Political calls for lower oil dependence complicates investment environment
- Saudi Arabia to maintain current investment scheme
12:37:31 PM
(US) President Obama: Working on plan for a "resolution authority" with authority over all financial institutions similar to the FDIC authority over banks to protect creditors, depositors and consumers to "prevent another AIG"; have "complete confidence in Tim Geithner and my entire economic team"
- Reiterates bubble and bust economic model can not continue; business model of creating paper wealth can not be the model going forward; must seek to create long term growth.
- Remarks that the decision to bailout AIG was correct at the time
2:17:03 PM
*FOMC LEAVES RATE UNCHANGED AT 0.25%; AS EXPECTED
; To purchase $300B of longer term treasuries
- Discount Rate unchanged at 0.50%
- Fed to purchase of $300B in longer term treasuries over next six months designed to improve conditions in private credit markets
- Likely to expand TALF collateral to other assets
- Vote was 10-0 (Lacker previously dissented, in favor of purchasing treasuries)
- To purchase $100B of GSE debt and bring total to $200B
- To Purchase additional $750B more of agency MBS and bring total purchased this year to $1.25T in efforts to give support to mortgage lending ad housing markets
- Notes job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending; anticipates policy actions to stabilize financial markets and institutions; inflation to remain subdued
- Reiterates the economy continues to contract, Fed Funds Rate to remain at exceptionally low level "for some time"
2:20:08 PM
PIMCO's Bill Gross: The expansion of Fed's Treasury purchases is a "very significant move"
- Notes not yet concerned over potential 'Treasury Bubble', will wait for inflation to return before those concerns can resurface
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
March 18, 2009
MARKET UPDATE 11:35am EST
2:17:03 PM
*FOMC LEAVES RATE UNCHANGED AT 0.25%; AS EXPECTEDTo purchase $300B of longer term treasuries
- Discount Rate unchanged at 0.50%
- Fed to purchase of $300B in longer term treasuries over next six months designed to improve conditions in private credit markets
- Likely to expand TALF collateral to other assets
- Vote was 10-0 (Lacker previously dissented, in favor of purchasing treasuries)
- To purchase $100B of GSE debt and bring total to $200B
- To Purchase additional $750B more of agency MBS and bring total purchased this year to $1.25T in efforts to give support to mortgage lending ad housing markets
- Notes job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending; anticipates policy actions to stabilize financial markets and institutions; inflation to remain subdued
- Reiterates the economy continues to contract, Fed Funds Rate to remain at exceptionally low level "for some time"
- Traders seem to have put aside Feb CPI data while Congress continues working itself into a frenzy over AIG bonuses.
Investors are selling off equities and commodities and purchasing some USTs to position themselves ahead of this afternoon's FOMC statement. Indices are seeing some profit taking despite continued aggressive buying in some of the most beaten down Banks. Front-month crude has slide some 4% following weekly DOE inventory builds across all products. April natural gas has made another 6-year low trading below $3.70 while Gold has made a fresh 1-month low briefly trading below $885.
- The Wall Street bonus soap opera has shifted into overdrive as AIG's CEO testifies before the Senate and legislators launch various proposals to heavily tax bonuses (recall that AIG said over the weekend that it would still be doling out $165M in bonuses that the firm was contractually bound to pay).
After suggesting that AIG executives should apologize to the nation or commit suicide, Senator Charles Grassley (R) and colleague Senator Max Baucus (D) introduced sweeping legislation yesterday that would impose a 70% tax hike on "excessive executive compensation" - comprising a 35% excise tax on bonuses of workers who are employed by firms who received government funds and a 35% tax on the firm that paid the bonus, applying to all bonuses over $50K. The Congressional leadership has promised to fast-track some kind of legislation to tax the AIG bonuses out of existence, if not all bonuses from Wall Street firms. Note that yesterday afternoon a House committee chairman asked Bank of America to turn over info related to Merrill's $3.6B in bonuses. Note that shares of AIG are up more than 25% today.
- Back in the real world, the Treasury said it would work with AIG to wind down the company in an orderly way.
The Fed's financial vehicle, Maiden Lane III, and AIG said yesterday that they would pay $62B to settle derivative transactions with 16 investment banks. BoA CEO Ken Lewis said his bank could pay back its $45B in TARP funds in 2009 or at the start of 2010, accelerating the expected payback from the three or so years Lewis had talked about recently. With quarterly reports expected soon from Goldman Sachs and Morgan Stanley, the analyst community is positioning their calls on the banks. Sandler O'Neill cut Morgan to a Sell from Hold this morning, while JP Morgan assumed Goldman at Overweight with a $120 price target. Shares of C+10% and BAC+6% are up substantially after pausing for a day or so, while the other major financials are in the red.
- In other equity news, China's Ministry of Commerce rejected Coca-Cola's bid for Huiyuan Juice, noting that the deal will “hurt competition.”
Commentators are discussing the protectionist implications of the move. The Wall Street Journal reported that IBM is holding negotiations to buy Sun Microsystems for around $6.5B. That sum would translate into a premium of more than 100% over Sun's closing price on Tuesday of $4.97/shr. No confirmations of the story have been forthcoming. Shares of JAVA+65% are doing well in early trading, while IBM is down 4% or so. MGM is down more than 10% after missing earnings and revenue targets. MGM's CEO was downbeat on the conference call, noting the firm has hired outside advisors and is mulling "all options.” Adobe is up 8% after meeting estimates and guiding in line, noting that business has stabilized and that a modicum of normality may return over the next two quarters.
- In currencies, the greenback saw most of its initial strength from the European morning erode ahead of the FOMC interest rate decision, which comes later this afternoon.
EUR/USD easily plowed through reported Far East offers rumored at the 1.3070 area to test 1.3145 for fresh seven-week highs in the pair in the wake of the US CPI data. Some chatter circulated that the overall euro strength might be fix related. Dealers were trying to test the SNB's resolve in the CHF-related pairs. EUR/CHF briefly tested below the 1.5290 level before rebounding above the 1.5330.
Swiss names have denied any intervention during the session thus far and dealers are noting the price action appears to be stop-related in EUR/USD thanks to a short squeeze in the cross. USD/CHF remains heavy as the pair tested below 1.1660.
Sterling has recovered from its worst levels for the session against its major pairs after the terrible jobs data. The BoE's Blanchflower expressed concern that the UK's situation was getting worse. GBP/USD was nearing the 1.40 area after testing the 1.3850 after the data.
More Headlines
5:30:04 AM
*(UK) FEB JOBLESS CLAIMS CHANGE: 138.4K V 84.8KE (Claims Change is Record High); CLAIMANT COUNT RATE: 4.3% V 4.0%E
- Prior Claimant Count Rate revised from 3.8% to 3.9%
- Prior Jobless Claims Change revised from 73.8K to 93.5K
5:30:04 AM
*(UK) BOE MINUTES: MPC VOTED 9-0 TO CUT RATES BY 50 BPS TO 0.5% AND TO PURCHASE ASSETS ON MAR 5TH
- Substantial risk remained of inflation undershoot
- Housing activity subdued
- Agreed UK needs new money in range of £50B to £100B; small injection might show tool is ineffective
- Some signs that UK recession is on track to ease in 2009
- Rising money supply will cause spending to rise
- Overnight rate likely to trade in 0.0% to 0.5% range
- Sustained low interest rates might cause future difficulties
- Focus on longer maturities targets on non-bank institutions
- Will review appropriate scale of purchases each month
7:00 AM
*(US) MBA MORTGAGE APPLICATIONS W/E MARCH 13TH: 21.2% V 11.3% PRIOR- Refi's: 29.6% v 13.3% prior - Avg Rate on 30y Mortgage: 4.89% v 4.96% prior - No revisions
8:30 AM
*FEB CONSUMER PRICE INDEX M/M: 0.4% V 0.3%E; CPI EX FOOD&ENERGY M/M: 0.2% V 0.1%E; CPI NSA: 212.193 V 212.020E- CPI Y/Y: 0.2% v 0.0%e - Core CPI Y/Y: 1.8% v 1.7%e - No Revisions
10:30 AM
*DOE CRUDE: +1.94M V +1ME; GASOLINE: +3.2M V -1.5ME; DISTILLATE: +112K V +600KE; CAPACITY UTILIZATION: 82.1% V 82.7%E- Distillate demand -63K bpd to 3.72M bpd
- Gasoline demand -17K bpd to 8.95M bpd
10:44:23 AM
(SA) Saudi Oil Min Naimi: Sees 2009 demand falling more than 1M bbl/d; their is the possibility of strong demand crunch sooner, not later
- Market trends in low price environment to focus on survival, not expansion
- Markets could be asking for disaster is too much emphasis placed on alternative energies
- Political calls for lower oil dependence complicates investment environment
- Saudi Arabia to maintain current investment scheme
8:30am Feb CPI (last m/m 0.3%, y/y 0.0%; ex food & energy last m/m 0.2%, y/y 1.7%), Q4 Current Account Balance
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
2:00pm TSLF auction
2:15pm FOMC rate decision
3:00pm TSLF announcement
Todays Headlines
6:00 AM
*(GE) GERMAN MARCH ZEW SURVEY ECON SENTIMENT: -3.5 V -8.0E;
CURRENT SITUATION: -89.4 V -90.0E- No revisions
***Fifth straight month that the Economic Sentiment index increase M/M basis
6:00 AM
*(EU) EURO ZONE MARCH ZEW SURVEY ECON SENTIMENT: -6.5 V -12.0E- No revisions
8:05:04 AM
Meredith Whitney: Reiterates Mark to market doesn't really matter at this point, reiterates that banks will cut credit lines by around $2.7T - CNBC
- Consumer credit shrinking faster than estimates.
- Subprime loan deterioration will re-accelerate.
- 2009 will not look any better than 2008 for banks.
- Some bank stocks do not yet reflect potential losses.
- States that CitiGroups comments regarding profitability in Q1 will 'come back to haunt them'
- Note that back on 3/9 Whitney told the WSJ that credit cards are the next credit crunch, she sees lines cut materially. She said that six months ago, she estimated that at least $2T of available credit-card lines would be expunged from the system by the end of 2010, but said on 3/9 that estimate now looks optimistic, with the revised estimates are over $2T of credit-card lines will be cut inside of 2009 and $2.7T by the end of 2010.
8:30 AM
*FEB PRODUCER PRICE INDEX M/M: 0.1% V 0.4%E;
PPI EX FOOD & ENERGY M/M: 0.2% V 0.1%E- PPI YoY
8:30 AM
*(CA) JAN MANUFACTURING SHIPMENTS M/M: -5.4% V -5.8%E-
Prior MoM revised from -8.0% to -8.2%
8:30 AM
*(CA) JAN MANUFACTURING SHIPMENTS M/M: -5.4% V -5.8%E-
Prior MoM revised from -8.0% to -8.2%
9:30:32 AM
Fed Announces 2-year delay of new bank capital requirements until Mar 31st, 2011
- Capital requirements on preferred stock, and minority interests in tier one capital would have gone into effect later this month
- The amendments to the Federal Reserve Board''s capital adequacy guidelines would have limited bank holding companies from including trust preferred securities and other capital elements in Tier 1 capital
- The Fed said the delay should give financial firms - which need to boost overall capital levels during this challenging period in financial markets - more flexibility to meet federal capital requirements.
- In more technical terms, the delay means all bank holding companies can include cumulative perpetual preferred stock and trust preferred securities in Tier 1 capital up to 25% of total core capital elements
- The Fed added that economic conditions over the past 18 months "have created a situation in which requiring adherence to the new limits by the March 31, 2009, effective date creates a substantial burden for many BHCs (bank holding companies) in a way that was not anticipated when the final rule was adopted in 2005
- The Fed said the new limits would apply only to regulatory capital calculations and don''t affect the liability of restricted core capital instruments to absorb losses
10:01:10 AM
FDIC Staff: Recommending surcharge on bank debt guarantees to lower other banking fees - Staff recommendations come as the FDIC Board is meeting today over possible amendments to Temporary Liquidity Guarantee Program.
3:46 PM
US Rep Sutton (D) proposing to offer $5K for consumers to purchase new vehicle
4:30 PM
*API PETROLEUM INVENTORIES: CRUDE
: +4.65M V +1ME; GASOLINE: +383K V -1.5ME; DISTILLATE: +327K V +600KE; CAPACITY UTILIZATION: 82.3% V 82.7%E
5:18 PM
(EU) ECB's Trichet: Risks of deflation in Eurozone is not substantiated
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(GE) GERMAN MARCH ZEW SURVEY ECON SENTIMENT: -3.5 V -8.0E;
CURRENT SITUATION: -89.4 V -90.0E- No revisions
***Fifth straight month that the Economic Sentiment index increase M/M basis
6:00 AM
*(EU) EURO ZONE MARCH ZEW SURVEY ECON SENTIMENT: -6.5 V -12.0E- No revisions
8:05:04 AM
Meredith Whitney: Reiterates Mark to market doesn't really matter at this point, reiterates that banks will cut credit lines by around $2.7T - CNBC
- Consumer credit shrinking faster than estimates.
- Subprime loan deterioration will re-accelerate.
- 2009 will not look any better than 2008 for banks.
- Some bank stocks do not yet reflect potential losses.
- States that CitiGroups comments regarding profitability in Q1 will 'come back to haunt them'
- Note that back on 3/9 Whitney told the WSJ that credit cards are the next credit crunch, she sees lines cut materially. She said that six months ago, she estimated that at least $2T of available credit-card lines would be expunged from the system by the end of 2010, but said on 3/9 that estimate now looks optimistic, with the revised estimates are over $2T of credit-card lines will be cut inside of 2009 and $2.7T by the end of 2010.
8:30 AM
*FEB PRODUCER PRICE INDEX M/M: 0.1% V 0.4%E;
PPI EX FOOD & ENERGY M/M: 0.2% V 0.1%E- PPI YoY
8:30 AM
*(CA) JAN MANUFACTURING SHIPMENTS M/M: -5.4% V -5.8%E-
Prior MoM revised from -8.0% to -8.2%
8:30 AM
*(CA) JAN MANUFACTURING SHIPMENTS M/M: -5.4% V -5.8%E-
Prior MoM revised from -8.0% to -8.2%
9:30:32 AM
Fed Announces 2-year delay of new bank capital requirements until Mar 31st, 2011
- Capital requirements on preferred stock, and minority interests in tier one capital would have gone into effect later this month
- The amendments to the Federal Reserve Board''s capital adequacy guidelines would have limited bank holding companies from including trust preferred securities and other capital elements in Tier 1 capital
- The Fed said the delay should give financial firms - which need to boost overall capital levels during this challenging period in financial markets - more flexibility to meet federal capital requirements.
- In more technical terms, the delay means all bank holding companies can include cumulative perpetual preferred stock and trust preferred securities in Tier 1 capital up to 25% of total core capital elements
- The Fed added that economic conditions over the past 18 months "have created a situation in which requiring adherence to the new limits by the March 31, 2009, effective date creates a substantial burden for many BHCs (bank holding companies) in a way that was not anticipated when the final rule was adopted in 2005
- The Fed said the new limits would apply only to regulatory capital calculations and don''t affect the liability of restricted core capital instruments to absorb losses
10:01:10 AM
FDIC Staff: Recommending surcharge on bank debt guarantees to lower other banking fees - Staff recommendations come as the FDIC Board is meeting today over possible amendments to Temporary Liquidity Guarantee Program.
More Headlines
- US equity indices are holding their ground after yesterday's late session decline.
An uptick seen in the Feb building permits and housing starts data has provided some hope housing could be nearing a bottom.
Following three consecutive months of record low readings, housing starts handily beat analysts' estimates at 583K v 450Ke. Some commentators saw the big gains in multi-unit starts versus an almost flat single-unit starts as evidence that builders are positioning around growth in rentals units, while others cautioned that builders are simply desperate, given the record level of new home supply already waiting for buyers.
Others claim the data shows some kind of bottom is approaching in housing. The XHB is up 4% or so in the early going. Front-month crude has swung back to strength, popping above $48 after OPEC officials suggest they would reach 95% compliance of the already announced output cuts by the May meeting.
- The week of gains in shares of the leading US banks seems to have moderated this morning as investors pause to reassess.
The analyst community has passed some conflicting judgments on the rally: Keefe Bruyette cuts Godlman to Market Perform and BofA/Merrill Lynch cut Morgan Stanley to sell, while Oppenheimer initiated the two names at outperform. Analysts at Oppenheimer see the recovery in credit spreads as benefiting major integrated investment banks.
Some commentators seem to be saying that the rally was at based on the argument that it can't get any worse. Investor Jim Rogers weighed in, saying that the US is repeating mistakes made by Japan in bailing out banks and warning that it takes several years for a bubble to deflate. On CNBC Meredith Whitney said things at the banks are as bad as ever, reiterated that banks will cut consumer credit lines by around $2.7T and said mark to market doesn't really matter at this point.
Addressing Citi's rally-sparking comments about profitability in Q1, Whitney said Citi CEO Pandit's comments will come back to haunt the bank. Also note that Fed delayed new bank capital requirements this morning for two years, until Mar 31st, 2011 , to give financial firms - which need to boost overall capital levels during this challenging period in financial markets - more flexibility to meet federal capital requirements.
- Steel maker Nucor told investors to prepare for a big Q1 loss, guiding -$0.65 to -$0.55 versus a consensus view of $0.43.
Nucor cited the unprecedented speed and magnitude of global economic decline, warning that customer demand has continued to weaken with resulting downward pressure on orders, production rates and steel pricing in all product lines. Shares of NUE-12% have been hit hard on the news, with shares of other major steel companies down 6-8% in sympathy.
- Pfizer is in the process of launching what the Wall Street Journal is calling the biggest USD corporate bond issue ever, to finance its acquisition of Wyeth.
There had been speculation that the bond issue would be around $20B, although this morning Pfizer priced around $13B in notes of various maturities. Note that the WSJ wrote that drug makers have ready access to funding today but in a few years time will "fall off a patent cliff" and are scrambling to diversify via big acquisitions. The Journal warned that these types of transactions have a spotty record.
- In currencies, the USD and JPY price action seems to be inversely correlated to moves in equity markets.
The USD has remained in its recent 24-hour range of 1.2930 to 1.3030 as market sentiment shifted between risk aversion and risk appetite throughout the European and NY sessions. Dealers are noting that the increase in US New Housing Starts data is a mixed bag for the dollar as single-unit starts climbed by 1.1% but multi-unit starts increased by over 80%. Sterling was under some pressure during the New York morning, with GBP/USD back below the 1.40 level and GBP/JPY probing minor support at 138.00 ahead of BoE Governor King's speech after the New York equity close on Tuesday. An IMF official commented that the fund's new economic forecast would predict a global contraction of 0.6% in 2009, compared to a +0.5% prior view. This fulfills earlier warnings from the IMF.
"Computers are magnificent tools for the realization of our dreams, but no machine can replace the human spark of spirit, compassion, love, and understanding."
8:30am Feb PPI (last m/m 0.8%, y/y -1.0%, ex food & energy last m/m 0.4%, y/y 4.2%),
Feb Housing Starts (last 466K),
Feb Building Permits (last 531K)
3:00pm TSLF announcement
4:30pm API Crude Oil/Gasoline/Distillate Inventories
BOJ interest rate decision.
Todays Headlines
6:00 AM
*(EU) EURO-ZONE FEB CPI M/M: 0.4% V 0.4%E; Y/Y: 1.2% V 1.2%E- Euro Zone CPI Core Y/Y: 1.7% v 1.6%e - No revisions
8:20:43 AM
General Motors Corp North America President Troy Clarke: Expects March US sales to be"similar" with levels seen in both Jan and Feb
- Expects US auto sales to begin recovering sometime in 2009
--Notes that 14K consumers have made deposits for new Camaro model
8:30:03 AM
*MAR EMPIRE MANUFACTURING: -38.23 V -30.80E (lowest on record since data series began in 2001)
- No revision
Components:
- Prices Paid: -26.7 v -13.79 prior (record low)
- New Orders: -44.8 v -30.51 prior (record low)
- Employment: -38.20 v -39.08 prior
9:00:03 AM
*JAN NET LONG TERM TIC FLOWS: -$43B V $45BE; TOTAL NET TIC FLOWS -$148.9B V $86.2B PRIOR (PRIOR TOTAL REVISED FROM $74B)
- prior Net Long Term TIC Flows revised from $34.8B to $34.7B
- China holding of US Treasuries rose by $12.2B to $739.6B
- Japan Holdings rose by $8.8B to $634.8B
9:15:02 AM
*FEB INDUSTRIAL PRODUCTION: -1.4% V -1.3%E; CAPACITY UTILIZATION: 70.9% V 71.0%E
- prior Industrial Production revised from -1.8% to -1.9%
- prior Capacity Utilization revised from 72.0% to 71.9%
9:16:04 AM
CNBC's Liesman: US Treasury plans to release more details public/private partnership for buying toxic bank assets this week or early next week
- Note that there were widespread reports on Saturday that the Treasury would offer details on the public/private toxic asset purchase program this week. Very few details on this proposed project have been disclosed by the US Treasury to date.
10:27:05 AM
Chrysler's Nardelli notes in letter to employees that the technology Fiat would share as part of proposed partnership would be valued at $8B-$10B
- CNBC notes that this estimate is up from a prior estimate of about $3B.
- In the letter Nardelli also reiterated the belief that Chrysler can be viable with or without the Fiat partnership as long as it has govt support in place.
11:15 AM
(US) US Treasury will seek quarterly reports on small business lending from all banks, reports from 21 largest banks on a monthly basis- Asking US banks to make an extra effort to lend to small businesses that are creditworthy.
11:30 AM
(US) Treasury: Will purchase up to $15B in securities backed by business loans; to raise guarantee for SBA loans temporarily from 85% of loan quantity to 90%
1:00:01 PM
*MARCH NAHB HOUSING MARKET INDEX: 9 V 9E
- no revisions
- Chman "It’s still too soon to tell how much of an impact that will be, especially as builders find potential buyers are reluctant because of uncertainty about their future job security and the overall economic outlook,"
2:46:47 PM
(EU) ECB's Stark: There is some room to cut rates, but floor on rates is not far from current level - ECB report
- Calls on banks to pass along rate cuts more effectively.
- Discussion on quantitative easing is at an early stage not currently at point in which it should be pursued, credit easing may distort competition within industries
5:30 PM
(US) US Treasury: According to monthly survey, January consumer and commercial-industrial loans have declined- credit card lending in January was flat at various TARP banks
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(EU) EURO-ZONE FEB CPI M/M: 0.4% V 0.4%E; Y/Y: 1.2% V 1.2%E- Euro Zone CPI Core Y/Y: 1.7% v 1.6%e - No revisions
8:20:43 AM
General Motors Corp North America President Troy Clarke: Expects March US sales to be"similar" with levels seen in both Jan and Feb
- Expects US auto sales to begin recovering sometime in 2009
--Notes that 14K consumers have made deposits for new Camaro model
8:30:03 AM
*MAR EMPIRE MANUFACTURING: -38.23 V -30.80E (lowest on record since data series began in 2001)
- No revision
Components:
- Prices Paid: -26.7 v -13.79 prior (record low)
- New Orders: -44.8 v -30.51 prior (record low)
- Employment: -38.20 v -39.08 prior
9:00:03 AM
*JAN NET LONG TERM TIC FLOWS: -$43B V $45BE; TOTAL NET TIC FLOWS -$148.9B V $86.2B PRIOR (PRIOR TOTAL REVISED FROM $74B)
- prior Net Long Term TIC Flows revised from $34.8B to $34.7B
- China holding of US Treasuries rose by $12.2B to $739.6B
- Japan Holdings rose by $8.8B to $634.8B
9:15:02 AM
*FEB INDUSTRIAL PRODUCTION: -1.4% V -1.3%E; CAPACITY UTILIZATION: 70.9% V 71.0%E
- prior Industrial Production revised from -1.8% to -1.9%
- prior Capacity Utilization revised from 72.0% to 71.9%
9:16:04 AM
CNBC's Liesman: US Treasury plans to release more details public/private partnership for buying toxic bank assets this week or early next week
- Note that there were widespread reports on Saturday that the Treasury would offer details on the public/private toxic asset purchase program this week. Very few details on this proposed project have been disclosed by the US Treasury to date.
10:27:05 AM
Chrysler's Nardelli notes in letter to employees that the technology Fiat would share as part of proposed partnership would be valued at $8B-$10B
- CNBC notes that this estimate is up from a prior estimate of about $3B.
- In the letter Nardelli also reiterated the belief that Chrysler can be viable with or without the Fiat partnership as long as it has govt support in place.
11:15 AM
(US) US Treasury will seek quarterly reports on small business lending from all banks, reports from 21 largest banks on a monthly basis- Asking US banks to make an extra effort to lend to small businesses that are creditworthy.
11:30 AM
(US) Treasury: Will purchase up to $15B in securities backed by business loans; to raise guarantee for SBA loans temporarily from 85% of loan quantity to 90%
1:00:01 PM
*MARCH NAHB HOUSING MARKET INDEX: 9 V 9E
- no revisions
- Chman "It’s still too soon to tell how much of an impact that will be, especially as builders find potential buyers are reluctant because of uncertainty about their future job security and the overall economic outlook,"
More Headlines
- The DIA and S&P500 are picking up right where they left off last week, with the two indices gaining for the sixth straight session.
The NASDAQ is experiencing some relative weakness spending much of the morning in the red. Traders are ignoring the dismal Empire Manufacturing data, which came in at its lowest level since series began back in 2001. GE is catalyst, taking a leg up after UBS pulled its short-term sell rating on the stock. Barclays has sustained the momentum for the major financials after management indicated business continues to perform well. Front-month crude is dissipating some of the gains made in anticipation of this past weekend's OPEC meeting in Vienna (the group announced no further cuts). Fed Chairman Ben Bernanke was interviewed by CBS's 60 Minutes on Sunday night, in an unusual move that he said was prompted by the extraordinary economic circumstances. Bernanke said the recession will most likely end in 2009 with recovery following in 2010, insisting that he believes the US has averted a depression.
- US Treasury prices are moving lower pushing the long bond yield to its highest levels In more than 2-months.
UK government bond yields have also ticked higher after the latest reverse auction results from the Bank of England. The 10-year GILT is back towards 3%.
- The banking stocks are continuing to fuel overall equity gains, with Citi and Bank of America again paving the way, with shares of both companies up more than 10% in early trading.
Shares of other major US banks are up by more modest amounts, with WFC+4%, JPM+3% and MS+1%. The Fed's Bernanke has helped sustain last week's strong upside momentum after telling CBS's 60 Minutes that all the large US banks are solvent and insisting that none of them will fail. Bernanke also said that he has seen improvement in banks thanks to the efforts made by the Fed, and said the first sign of recovery would be the ability of big banks to raise private equity. The FASB is also helping financial stocks; this morning it proposed to let companies exercise more judgment in applying mark-to-market accounting rules. The board will vote on the proposals on April 2, with the objective to finalize the rules for Q1 financial reports. In other finance news, Discover Financial Services received a sizable $1.2B capital injection from the US Treasury's capital program on Friday. Shares of DFS were up 4% in early trading but are back around even mid morning. Also note that last night AIG disclosed counterparties to its CDS, GIA and securities lending transactions.
- Leading tech names are weighing on the Nasdaq this morning as the problems of the real economy continue to frighten tech investors.
Overnight BofA/Merrill Lynch cut the firm's 2009 PC unit growth forecast to -10% from -6.0% prior. Shares of Microsoft, Apple, Intel and HP fell around 1% in early trading, although most of these are well off their worst levels. Cisco is outlining its strategy for making a strategic move out of nuts and bolts router hardware and putting more emphasis on its blade server line, in a shot across the bow of server leader HP.
- In currencies, traders are continuing to focus on the price action in equities. The USD and JPY were on the defensive for early part of the New York session.
EUR/USD tested 1.3070 before retracing while GBP/USD tested 1.4229. Dealers were noting that profit taking was a major factor as the London closed approached.
The weaker US industrial production data was seen as a catalyst to remove some of the risk appetite exhibited during the European morning. Net foreign purchases of US assets declined $148.9B in January but both China and Japan added to their US Treasury holdings. China's holding of US Treasuries rose by $12.2B to $739.6B while Japan holdings rose by $8.8B to $634.8B.
-The fever of economic crisis seemed to lift somewhat this week, as bullish comments from banking CEOs gave equity indices a big jolt of enthusiasm.
With few data releases to get in the way, the DJIA sustained four days of solid gains led by sustained upside in shares of the nation's largest banks. What data there was not necessarily positive, but seemed to be more or less ignored by investors.
The February advanced retail sales data turned almost positive (and +0.7% ex autos), although the employment numbers were as horrible ever.
The enthusiasm even spread to moribund GM, where CEO Wagner said the company wouldn't need a $2B aid injection to survive the month of March.
But the storm clouds remain, with the World Bank predicting the global economy would contract for first time since World War II, the IMF hinting at negative global growth for the year and US weekly jobless claims above 600 thousand for the sixth week in a row.
Week of 3/16/2009 thru 3/20/2009
Monday, March 16, 2009
8:30am March Empire Manufacturing (last -34.65)
9:00am Jan Net Long-Term TIC Flows (last $34.8B), Jan Total Net TIC Flows (last $74B)
9:15am Feb Industrial Production (last -1.8%), Feb Capacity Utilization (last 72%
1:00pm March NAHB Housing Market Index (last 9)
Tuesday, March 17, 2009
8:30am Feb PPI (last m/m 0.8%, y/y -1.0%, ex food & energy last m/m 0.4%, y/y 4.2%), Feb Housing Starts (last 466K), Feb Building Permits (last 531K)
3:00pm TSLF announcement
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Events
BOJ interest rate decision.
Wednesday, March 18, 2009
4:30am BoE minutes
8:30am Feb CPI (last m/m 0.3%, y/y 0.0%; ex food & energy last m/m 0.2%, y/y 1.7%), Q4 Current Account Balance
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
2:00pm TSLF auction
2:15pm FOMC rate decision
3:00pm TSLF announcement
Events
BoJ releases monthly report. 2:30pm Fed's Cole testifies before the Senate on risk management oversight.
Thursday, March 19, 2009
8:00am NY Fed sets TALF rates
8:30am Initial Jobless Claims (last 654K), Continuing Claims (last 5.317M)
10:00am March Philadelphia Fed (last -41.3), Feb Leading Indicators (last 0.4%)
10:30am Natural Gas Inventories
11:00am Treasury note announcement
2:00pm TSLF auction
Events
10:30am Fed's Tarullo testifies before the Senate on modernizing bank regulation.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
(SZ) Swiss Govt: To offer tax information in individual cases on request of foreign govts; will comply with OECD standards on tax cooperation
- Notes it will uphold bank secrecy
- Plans to appoint US lawyers to fight civil case against UBS
- Fin Min: to give account holders in Switzerland guarantee against retroactive application of new rules
7:00 AM
*(CA) CANADA FEB NET CHANGE IN EMPLOYMENT
: -82.6K V -55.0KE; UNEMPLOYMENT RATE: 7.7% V 7.4%E (HIGHEST SINCE SEPT 2003)- No revisions Breakdown of data: - Full-Time Jobs -110,900; Part-Time +28,300
7:46:10 AM
OPEC March Report: Members exceeded Feb quotas by 870K bpd; world oil demand revised down 400K bpd v 580K bpd prior
- OPEC Feb output (ex Iraq) 25.72M bpd v 26.33M bpd in Jan
- OPEC Feb compliance with cuts at 79% v 65% in Jan
- Note in early Feb OPEC Sec Gen El-Badri said OPEC has reached an 80% compliance with the prior production cuts.
Also note that in mid Jan El-Badri noted that there was almost 100% compliance with prior round of cuts of 500K and 1.5M bpd.
- Non-OPEC Feb supply +370K bpd y/y v +550K bpd y/y in Jan
- Non-OPEC Feb output 50.7M bpd
- Sees 2009 demand for OPEC oil -1.8M bpd y/y v -1.7M bpd y/y in Jan.
- Sees total demand for OPEC oil averaging 29.1M bpd in 2009.
- Sees 2009 total world oil demand -1.01M bpd y/y v -580K bpd y/y in Jan.
- Sees total world oil demand averaging 84.6M bpd in 2009.
- Insists production cuts and government action helped stabilize oil market.
- Deterioration in the world economy is weighing on demand.
8:30 AM
*FEB IMPORT PRICE INDEX M/M: -0.2% V -0.7%E; Y/Y: -12.8% V -13.5%E;
Seventh straight month of declines- Prior MoM revised from -1.1% to -1.2% - No revision to prior YoY at -12.5%
8:30:03 AM
*JAN TRADE BALANCE: -$36.0B V -$38.0BE (Sixth consecutive decline in imports and exports, a record)
- No revisions
Components
- Imports: $160.9 v $173.7B prior
- Exports: $124.9 v $133.8B prior
- China: -$20.6B v -$19.8B prior
- Japan: -$4.3B v -$5.27B prior
- Canada: -$2.5B v -$2.8B prior
- OPEC: -$3.93B v -$4.6B prior
- Mexico: -$2.7B v -$4.08B prior
- Euro Area: -$4.0B v -$6.9B prior
9:55:04 AM
*MARCH PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 56.6 V 55.0E
- 1 yr median inflation expectations at 2.2% v 1.9% Feb final
- 5 yr median inflation expectations at 2.8% v 3.1% Feb final
11:28:43 AM
White House economic advisor Summers: US may need to borrow more if GDP declines more and deflation arrives; If no Govt action taken on crisis; foreign confidence in Treasuries would be worse
- Q&A
- Notes that some foreign countries have room for 'significant' fiscal stimulus
- A stronger regulation of derivatives is required
More Headlines
- Equity markets are attempting to digest 3 straight days of gains and a much needed 10% move off of 12 year lows.
Early in the session stocks looked to build on the recent gains, but they drifted back towards the unchanged mark after the NY Fed said they would need to extend the TALF subscription period by 2 days.
The morning's data provided ammunition for both optimists and pessimists. The preliminary U of Michigan reading came in a little better than expected, although the US January trade numbers showed both imports and exports falling, for sixth consecutive monthly decline. Front-month crude continues to strengthen ahead of this weekend's OPEC meeting.
Note that this morning's OPEC monthly report showed members improving their compliance with quotas in February to levels that have been generally anticipated.
Treasury markets have rallied from a lower open as stock prices have come in. Futures are shrugging of comments from China's PM Wen who noted he is worried about his countries holdings in US government debt.
- The financials fueled early gains once again.
Last night President Obama weighed in on the banks in a speech to the Business Roundtable, noting that even in worst case scenario, the vast majority of banks will be profitable and the banking system will be fine.
Bank of America's CEO Lewis joined his colleagues Vikram Pandit and Jamie Dimon, both of whom have talked up the profitability of Citi and JP Morgan in early 2009.
Yesterday afternoon BoA's Lewis said the bank was also profitable in January and February. Citi Chairman Parsons said Citigroup does not need more capital injections, insisting that it is "one of the better capitalized banks in the world." Note that JPM was initiated at outperform at Baird overnight.
Citi and BoA are both up 8% in early trading, while JPM, MS and WFC are up 4%. Selected insurance names are also catching up with the banks, with HIG up 16% and PRU up 10%.
- In currencies, the Swiss Franc has remained a primary focus as the SNB was again reported to be bidding up the EUR/CHF cross.
The pair retested its Asian session highs of 1.5400 before consolidating, while USD/CHF was unable to break above Thursday's high of 1.1967.
Chatter has been circulating that the SNB action on Thursday was sanctioned by the EU in order to weaken the CHF and benefit Central and Eastern Europe, which has significant exposure to CHF-denominated mortgages. USD/CAD saw choppy price action, with the pair testing above the 1.2840 level in the aftermath of weaker-than-expected February Canadian employment data. However, initial strength in commodities helped CAD to reign in its bearish momentum to test below 1.2700.
Note that traders will be keeping a close eye on this weekend's G20 finance minister summit in the UK.
8:30am Feb Trade Balance (last -$39.9B), Import Price Index (last m/m -1.1%, y/y -12.5%)
9:55am March prelim Univ of Michigan confidence (last 56.3)
Todays Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 654K V 644KE; CONTINUING CLAIMS: 5.317M V 5.140ME
(Highest Initial Claims since 1982; Continuing Claims at all-time highs)
- Prior jobless claims revised from 639K to 645K
- Prior Continuing Claims revised from 5.106M to 5.124M
8:30:03 AM
*FEB ADVANCE RETAIL SALES: -0.1% V -0.5%E; LESS AUTOS: 0.7% V -0.1%E
- Prior Advance Retail Sales revised from 1.0% to 1.8%
- Prior Less Autos revised from 0.9% to 1.6%
9:15:27 AM
(EU) ECB Trichet: Reiterates not in favor of EU common bond, current interest rates are at a very low level
- EU stability remains priority, notes most economists believe Euro Zone economy will have a weak recovery in 2010.
- Inflation risks are minimal at this time.
9:51:34 AM
Wal-Mart Stores Inc
Largest price reduction in past year have been in groceries and entertainment items, company intends to remain price leader in current environment -slide presentation
- Remains cautiously optimistic on Japanese stores, with store traffic up and positive SSS
- Too early to tell what type of rev boost firm will get from gov stimulus package
10:00 AM
*JAN BUSINESS INVENTORIES: -1.1% V -1.0%E- prior revised from -1.3% to -1.6%
10:30 AM
*EIA NATURAL GAS INVENTORIES: -112 BCF VS. -100 TO -105 BCF ESTIMATE RANGE
11:00:20 AM
(US) Treasury Sec Geithner: Would 'love' to see banks paying back TARP capital in favor of private capital
- Believes that many banks will repay Govt investments.
- AIG is a 'systemic' firm, cheapest way to deal with issue is for restructuring.
- notes mark-to-market rules are under the purview of the SEC; sees risk of eroding confidence in some plans to modify or suspend mark-to-market.
- SEC is looking seriously at all proposals on mark-to-market rules.
11:15:01 AM
General Motors Corp CFO: GM does not need $2B in new funds to survive through March, company-wide cost cuts have proven helpful
- Cites acceleration of its cost cutting plans.
- Told US task force that previously requested funds were not needed.
11:19:04 AM
FASB's Herz: Will have proposal on mark-to-market accounting within 3 weeks
- SEC: Regulators may move on mark-to-market and fair value accounting within weeks
- Plans to release additional guidance on mark-to-market issues in early April for public comment.
- Plans to speak with other board members about speeding up the process of releasing guidance.
1:00:34 PM
Bank of America Corp CEO
: Nationalizing banks would 'undermine system, fallout would be a 'nightmare'; do not believe BoA will need more govt capital
- Sees current profitability of BoA allowing to avoid need for additional capital from US Govt.; notes its possible that the govt will compel the bank to take more capital pending the results of the govt stress test.
1:01:46 PM
*TREASURY'S $11B 30-YEAR BOND REOPENING BID-TO-COVER RATIO: 2.40 V 2.07 PRIOR AND 2.30 AVE OVER THE LAST 5 REOPENING
- Indirect bidders take 46.2% of competitive bids
- bonds draw 3.64% with 22.68% allotted at the high
8:04:59 PM
(JP) Japan's Finance Min Yosano confirms that PM Aso will request added stimulus today; thinks new stimulus will be ready by April 2nd, in time for G20 meeting
- Supports US govt urging more liquidity in global economies
- World leaders must focus on stabilizing financial situation, fighting deflation threat
- Prepared to discuss capital adequacy regulations
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Feb Trade Balance (last -$39.9B), Import Price Index (last m/m -1.1%, y/y -12.5%)
9:55am March prelim Univ of Michigan confidence (last 56.3)
Todays Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 654K V 644KE; CONTINUING CLAIMS: 5.317M V 5.140ME
(Highest Initial Claims since 1982; Continuing Claims at all-time highs)
- Prior jobless claims revised from 639K to 645K
- Prior Continuing Claims revised from 5.106M to 5.124M
8:30:03 AM
*FEB ADVANCE RETAIL SALES: -0.1% V -0.5%E; LESS AUTOS: 0.7% V -0.1%E
- Prior Advance Retail Sales revised from 1.0% to 1.8%
- Prior Less Autos revised from 0.9% to 1.6%
9:15:27 AM
(EU) ECB Trichet: Reiterates not in favor of EU common bond, current interest rates are at a very low level
- EU stability remains priority, notes most economists believe Euro Zone economy will have a weak recovery in 2010.
- Inflation risks are minimal at this time.
9:51:34 AM
Wal-Mart Stores Inc
Largest price reduction in past year have been in groceries and entertainment items, company intends to remain price leader in current environment -slide presentation
- Remains cautiously optimistic on Japanese stores, with store traffic up and positive SSS
- Too early to tell what type of rev boost firm will get from gov stimulus package
10:00 AM
*JAN BUSINESS INVENTORIES: -1.1% V -1.0%E- prior revised from -1.3% to -1.6%
10:30 AM
*EIA NATURAL GAS INVENTORIES: -112 BCF VS. -100 TO -105 BCF ESTIMATE RANGE
11:00:20 AM
(US) Treasury Sec Geithner: Would 'love' to see banks paying back TARP capital in favor of private capital
- Believes that many banks will repay Govt investments.
- AIG is a 'systemic' firm, cheapest way to deal with issue is for restructuring.
- notes mark-to-market rules are under the purview of the SEC; sees risk of eroding confidence in some plans to modify or suspend mark-to-market.
- SEC is looking seriously at all proposals on mark-to-market rules.
11:15:01 AM
General Motors Corp CFO: GM does not need $2B in new funds to survive through March, company-wide cost cuts have proven helpful
- Cites acceleration of its cost cutting plans.
- Told US task force that previously requested funds were not needed.
11:19:04 AM
FASB's Herz: Will have proposal on mark-to-market accounting within 3 weeks
- SEC: Regulators may move on mark-to-market and fair value accounting within weeks
- Plans to release additional guidance on mark-to-market issues in early April for public comment.
- Plans to speak with other board members about speeding up the process of releasing guidance.
1:00:34 PM
Bank of America Corp CEO
: Nationalizing banks would 'undermine system, fallout would be a 'nightmare'; do not believe BoA will need more govt capital
- Sees current profitability of BoA allowing to avoid need for additional capital from US Govt.; notes its possible that the govt will compel the bank to take more capital pending the results of the govt stress test.
1:01:46 PM
*TREASURY'S $11B 30-YEAR BOND REOPENING BID-TO-COVER RATIO: 2.40 V 2.07 PRIOR AND 2.30 AVE OVER THE LAST 5 REOPENING
- Indirect bidders take 46.2% of competitive bids
- bonds draw 3.64% with 22.68% allotted at the high
8:04:59 PM
(JP) Japan's Finance Min Yosano confirms that PM Aso will request added stimulus today; thinks new stimulus will be ready by April 2nd, in time for G20 meeting
- Supports US govt urging more liquidity in global economies
- World leaders must focus on stabilizing financial situation, fighting deflation threat
- Prepared to discuss capital adequacy regulations
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*INITIAL JOBLESS CLAIMS: 654K V 644KE; CONTINUING CLAIMS: 5.317M V 5.140ME
(Highest Initial Claims since 1982; Continuing Claims at all-time highs)
- Prior jobless claims revised from 639K to 645K
- Prior Continuing Claims revised from 5.106M to 5.124M
8:30:03 AM
*FEB ADVANCE RETAIL SALES: -0.1% V -0.5%E; LESS AUTOS: 0.7% V -0.1%E
- Prior Advance Retail Sales revised from 1.0% to 1.8%
- Prior Less Autos revised from 0.9% to 1.6%
9:15:27 AM
(EU) ECB Trichet: Reiterates not in favor of EU common bond, current interest rates are at a very low level
- EU stability remains priority, notes most economists believe Euro Zone economy will have a weak recovery in 2010.
- Inflation risks are minimal at this time.
9:51:34 AM
Wal-Mart Stores Inc
Largest price reduction in past year have been in groceries and entertainment items, company intends to remain price leader in current environment -slide presentation
- Remains cautiously optimistic on Japanese stores, with store traffic up and positive SSS
- Too early to tell what type of rev boost firm will get from gov stimulus package
10:00 AM
*JAN BUSINESS INVENTORIES: -1.1% V -1.0%E- prior revised from -1.3% to -1.6%
10:30 AM
*EIA NATURAL GAS INVENTORIES: -112 BCF VS. -100 TO -105 BCF ESTIMATE RANGE
11:00:20 AM
(US) Treasury Sec Geithner: Would 'love' to see banks paying back TARP capital in favor of private capital
- Believes that many banks will repay Govt investments.
- AIG is a 'systemic' firm, cheapest way to deal with issue is for restructuring.
- notes mark-to-market rules are under the purview of the SEC; sees risk of eroding confidence in some plans to modify or suspend mark-to-market.
- SEC is looking seriously at all proposals on mark-to-market rules.
11:15:01 AM
General Motors Corp CFO: GM does not need $2B in new funds to survive through March, company-wide cost cuts have proven helpful
- Cites acceleration of its cost cutting plans.
- Told US task force that previously requested funds were not needed.
11:19:04 AM
FASB's Herz: Will have proposal on mark-to-market accounting within 3 weeks
- SEC: Regulators may move on mark-to-market and fair value accounting within weeks
- Plans to release additional guidance on mark-to-market issues in early April for public comment.
- Plans to speak with other board members about speeding up the process of releasing guidance.
More Headlines
- US equity indices have managed another modest gain this morning looking for what feels like it would be an unprecedented 3-day winning streak.
General Electric may be AA+ after S&P cut its rating, but the development has already been priced in, and this morning's heartening February advanced retail sales number is lifting spirits. The latter data was notably better than expected, while the ex autos figure was even positive, while the prior figures were revised higher in a big way. Many traders are using the data as an initial piece of evidence to provide hope the bottom is near. All eyes remain on Washington as well as testimony regarding mark to market rules is getting much scrutiny. Front-month crude is making gains on the overnight doldrums, trading around $45 while natural gas bounced some 15 cents on weekly inventory data albeit from multi-year lows.
- Surprising nobody in particular, S&P cut General Electric's credit ratings from AAA (to AA+) this morning thanks to trouble at GE Capital.
After months of insisting would defend its AAA-rating and would never cut its dividend, CEO Immelt changed his tune in February, cutting the dividend and conceding that a ratings downgrade “would not change the way the company was run.” S&P noted that it believes GE's industrial business is fundamentally strong. GE reiterated today that it doesn't anticipate any significant operational or funding impacts from the change - the market seems to agree, sending shares of GE up 8%.
- Leading banks stocks are strong in early trading, with the exception of Citi, which remains in negative territory.
Keep in mind that JP Morgan's CEO Dimon reprised Citi CEO Pandit's act yesterday afternoon, saying that the bank has been solidly profitable in January and February. Also note that shares of Bank of America are off their mid-morning highs. In other equity news, the pharmaceutical merger waltz continues, with DNA reaching a final merger deal with Roche at $95/share for a total deal value of nearly $47B. Meanwhile, CV Therapeutics signed a deal to sell itself to Gilead Sciences for $20/shr in cash, for a total of $1.4B. CVTX's board has approved the transaction, in which the company will become a wholly-owned subsidiary of Gilead. In other news, Wal-Mart declined to renew its deal with Aflac for providing employees with benefit plans, sending AFL down 7%. Shares of AFL are back to around even after Aflac noted the deal comprised less than 1% of its annual premiums.
- Currency trading has been dominated by the carry-related pairs.
Overnight the focus was on yen repatriation ahead of the end of the Japanese fiscal year, while the Swiss National Bank's (SNB) interest rate decision quickly overtook Japan as the main catalyst. The Swiss cut their target rate by 25 bps to 0.25%, as expected, but the real bomb was the bank's announcement that it would purchase foreign currencies and bonds to stem the appreciation of the Swiss Franc and dampen risks from economy and the financial crisis. EUR/CHF immediately surged from 1.4850 to briefly test the 1.5300 level twenty-two minutes later, for its biggest intraday move since the launch of the euro in 1999. The SNB was seen intervening in the currency markets in a historic effort to buying the cross on dealing platforms, a move that was later officially confirmed by an SNB spokesperson. Dealers are estimating that at least CHF3B was moved during the operation, also noting that the move was most likely an effort to support Eastern Europe carry-related plays and calm banking sector concerns. Dealers also pointed out that the BoJ should be very attentive to SNB actions, given that both central banks have expressed a desire to see their currencies weaken.
- Eastern and Central European currencies also firmed up in the aftermath of the Swiss action, with PLN, CZK, HUF and TRY all rebounding from session lows against the euro.
Russian Central Bank Governor Ignatiev said the ruble has stabilized in recent weeks with a tendency toward strength. He reiterated that bank would do "whatever is necessary" to maintain the RUB41 ceiling in the basket. JPY retreated from its best levels to move lower against the major pairs. USD/JPY is back above 98 after testing the upper 95 handle during the European morning. Also note that ahead of the G20 finance minister meeting this weekend, ECB's Trichet reiterated his position that he is not in favor of an EU common bond issue.
*INITIAL JOBLESS CLAIMS: 654K V 644KE; CONTINUING CLAIMS: 5.317M V 5.140ME
(Highest Initial Claims since 1982; Continuing Claims at all-time highs)
- Prior jobless claims revised from 639K to 645K
- Prior Continuing Claims revised from 5.106M to 5.124M
8:30:03 AM
*FEB ADVANCE RETAIL SALES: -0.1% V -0.5%E; LESS AUTOS: 0.7% V -0.1%E
- Prior Advance Retail Sales revised from 1.0% to 1.8%
- Prior Less Autos revised from 0.9% to 1.6%
9:15:27 AM
(EU) ECB Trichet: Reiterates not in favor of EU common bond, current interest rates are at a very low level
- EU stability remains priority, notes most economists believe Euro Zone economy will have a weak recovery in 2010.
- Inflation risks are minimal at this time.
9:51:34 AM
Wal-Mart Stores Inc
Largest price reduction in past year have been in groceries and entertainment items, company intends to remain price leader in current environment -slide presentation
- Remains cautiously optimistic on Japanese stores, with store traffic up and positive SSS
- Too early to tell what type of rev boost firm will get from gov stimulus package
10:00 AM
*JAN BUSINESS INVENTORIES: -1.1% V -1.0%E- prior revised from -1.3% to -1.6%
10:30 AM
*EIA NATURAL GAS INVENTORIES: -112 BCF VS. -100 TO -105 BCF ESTIMATE RANGE
11:00:20 AM
(US) Treasury Sec Geithner: Would 'love' to see banks paying back TARP capital in favor of private capital
- Believes that many banks will repay Govt investments.
- AIG is a 'systemic' firm, cheapest way to deal with issue is for restructuring.
- notes mark-to-market rules are under the purview of the SEC; sees risk of eroding confidence in some plans to modify or suspend mark-to-market.
- SEC is looking seriously at all proposals on mark-to-market rules.
11:15:01 AM
General Motors Corp CFO: GM does not need $2B in new funds to survive through March, company-wide cost cuts have proven helpful
- Cites acceleration of its cost cutting plans.
- Told US task force that previously requested funds were not needed.
11:19:04 AM
FASB's Herz: Will have proposal on mark-to-market accounting within 3 weeks
- SEC: Regulators may move on mark-to-market and fair value accounting within weeks
- Plans to release additional guidance on mark-to-market issues in early April for public comment.
- Plans to speak with other board members about speeding up the process of releasing guidance.
More Headlines
- US equity indices have managed another modest gain this morning looking for what feels like it would be an unprecedented 3-day winning streak.
General Electric may be AA+ after S&P cut its rating, but the development has already been priced in, and this morning's heartening February advanced retail sales number is lifting spirits. The latter data was notably better than expected, while the ex autos figure was even positive, while the prior figures were revised higher in a big way. Many traders are using the data as an initial piece of evidence to provide hope the bottom is near. All eyes remain on Washington as well as testimony regarding mark to market rules is getting much scrutiny. Front-month crude is making gains on the overnight doldrums, trading around $45 while natural gas bounced some 15 cents on weekly inventory data albeit from multi-year lows.
- Surprising nobody in particular, S&P cut General Electric's credit ratings from AAA (to AA+) this morning thanks to trouble at GE Capital.
After months of insisting would defend its AAA-rating and would never cut its dividend, CEO Immelt changed his tune in February, cutting the dividend and conceding that a ratings downgrade “would not change the way the company was run.” S&P noted that it believes GE's industrial business is fundamentally strong. GE reiterated today that it doesn't anticipate any significant operational or funding impacts from the change - the market seems to agree, sending shares of GE up 8%.
- Leading banks stocks are strong in early trading, with the exception of Citi, which remains in negative territory.
Keep in mind that JP Morgan's CEO Dimon reprised Citi CEO Pandit's act yesterday afternoon, saying that the bank has been solidly profitable in January and February. Also note that shares of Bank of America are off their mid-morning highs. In other equity news, the pharmaceutical merger waltz continues, with DNA reaching a final merger deal with Roche at $95/share for a total deal value of nearly $47B. Meanwhile, CV Therapeutics signed a deal to sell itself to Gilead Sciences for $20/shr in cash, for a total of $1.4B. CVTX's board has approved the transaction, in which the company will become a wholly-owned subsidiary of Gilead. In other news, Wal-Mart declined to renew its deal with Aflac for providing employees with benefit plans, sending AFL down 7%. Shares of AFL are back to around even after Aflac noted the deal comprised less than 1% of its annual premiums.
- Currency trading has been dominated by the carry-related pairs.
Overnight the focus was on yen repatriation ahead of the end of the Japanese fiscal year, while the Swiss National Bank's (SNB) interest rate decision quickly overtook Japan as the main catalyst. The Swiss cut their target rate by 25 bps to 0.25%, as expected, but the real bomb was the bank's announcement that it would purchase foreign currencies and bonds to stem the appreciation of the Swiss Franc and dampen risks from economy and the financial crisis. EUR/CHF immediately surged from 1.4850 to briefly test the 1.5300 level twenty-two minutes later, for its biggest intraday move since the launch of the euro in 1999. The SNB was seen intervening in the currency markets in a historic effort to buying the cross on dealing platforms, a move that was later officially confirmed by an SNB spokesperson. Dealers are estimating that at least CHF3B was moved during the operation, also noting that the move was most likely an effort to support Eastern Europe carry-related plays and calm banking sector concerns. Dealers also pointed out that the BoJ should be very attentive to SNB actions, given that both central banks have expressed a desire to see their currencies weaken.
- Eastern and Central European currencies also firmed up in the aftermath of the Swiss action, with PLN, CZK, HUF and TRY all rebounding from session lows against the euro.
Russian Central Bank Governor Ignatiev said the ruble has stabilized in recent weeks with a tendency toward strength. He reiterated that bank would do "whatever is necessary" to maintain the RUB41 ceiling in the basket. JPY retreated from its best levels to move lower against the major pairs. USD/JPY is back above 98 after testing the upper 95 handle during the European morning. Also note that ahead of the G20 finance minister meeting this weekend, ECB's Trichet reiterated his position that he is not in favor of an EU common bond issue.
8:30am Feb Advance retail sales (last 1.0%, ex autos last 0.9%),
- Initial Jobless Claims (last 639K),
- Continuing Claims (last 5.106M)
10:00am Jan Business Inventories (last -1.3%)
10:30am Natural Gas Inventories
1:00pm Treasury's 30-year bond auction
ROLLOVER ALERT!
Please note that Equity Indices products; TF, ES, NQ, EMD and YM roll on Thursday the 12th at 8:30 am Chicago time from the March 09 contract to the June 09 contract.
The month code for June is 'M'.
Last trade for March Currencies is Monday the 16th
Please contact your broker with questions regarding rollover
Todays Headlines
7:00:02 AM
*(GE) GERMAN JAN FACTORY ORDERS M/M: -8.0% V -2.0%E; Y/Y: -37.9% V -28.3%E
- Prior M/M revised from -6.9% to -7.6%
- Prior Y/Y revised from -25.1% to -28.2%
- Note: Largest annual decline since re-unification of Germany in 1991
7:00 AM
*(US) MBA MORTGAGE APPLICATIONS W/E MARCH 6TH: 11.3% V -12.6% PRIOR- Refi's: +13.3% v -15.3% prior - Avg Rate on 30y Mortgage: 4.96% v 5.14% prior
7:22 AM
White House Chief Economist Romer: "Too early" to consider second stimulus package- Consumption is beginning to "turn around" - Notes unemployment figure remains 'terrible'
9:16:55 AM
Ford Motor Co Exec: would not be able to place stock in the VEBA (retirement healthcare obligations) program if stock price falls below $1, or if company gets 'going concern' warning from auditor
- Plans to offer employee buyouts between April 11 and May 22.
- Agreement with UAW brings average hourly wage rate to $55/hour in total, making them roughly competitive with foreign automakers with operations in the US.
Expects to reach parity with foreign US manufacturers, at $48-$49/hr, in about two years.
9:44 AM
US Chamber of Commerce CEO: Mark to market accounting was not responsible for the financial crisis but has exacerbated the situation
10:01:45 AM
SEC's Shapiro: Will consider steps to restrict volatility in markets and improve rating agency processes
- 2009 agenda needs funding; will focus on money market regulation, international cooperation on regulation
- Notes that looking for a rational approach wiht regards to fair value and that the SEC is not looking for fire sale values on assets
10:30 AM
*DOE CRUDE: +750K V -500KE;
GASOLINE: -2.99M V -1ME; DISTILLATE: +2.11M V +200KE; CAPACITY UTILIZATION: 82.7% V 83.1%E- Distillate demand +20K bpd to 3.78M bpd - Gasoline demand -230K bpd to 8.97M bpd
10:58:11 AM
SEC's Shapiro: There is 'clear interest' for restoration of uptick rule; FASB will provide mark-to-market accounting guidance in Q2; and SEC does not support suspension of mark-to-market rules - Q&A
- Notes that it was not the SEC's intention to have hard to value assets marked to fire sale levels.
- Says that she hopes to get the uptick rule out in April.
- SEC will write the rules for TARP's executive compensation limits, rules to address disclosure and say on pay issues.
- Says SEC may need more authority over the ratings agencies; review whether more regulation is needed for ratings agencies.
- Sees some logic to the idea of merging the SEC and CFTC.
11:11:31 AM
(US) Senator Dodd (D): Uptick rule may be helpful in current environment; Congress may take measures in financial sector to make sure that regulatory adjustments will not hamper innovation
- Does not expect to work out international rules on regulating banks, but plans to shoot for "compatible rules."
- Systemic risk regulator is needed, but US systemic risk scheme will not be ready for G20 summit in early April.
- Believes that bad assets need a market with buyers and sellers other than the government.
- Public/private partnership for buying toxic bank assets "can't come soon enough," note he does not know any details of the public/private arrangement yet.
1:01 PM
*TREASURY'S $18B 10-YEAR NOTE REOPENING BID-TO-COVER RATIO
: 2.14 V 2.59 PRIOR AND 2.44 OVER THE LAST 5 REOPENING- indirect bidders took 23.9% of competitive bids - notes draw 3.043% with 19.88% allotted at high
8:30:13 PM
* (AU) AUSTRALIA FEB EMPLOYMENT CHANGE
: +1.8K V -20.0Ke (PRIOR REVISED to +0.3K from +1.2K); UNEMPLOYMENT RATE: 5.2% v 5.0%e (PRIOR 4.8%)
- Unemployment rate is highest since March 2005
- Participation Rate: 65.5% v 65.0%e (prior 65.1%)
- Full-time employment: -53.8K
- Part-time employment: +55.6K
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(GE) GERMAN JAN FACTORY ORDERS M/M: -8.0% V -2.0%E; Y/Y: -37.9% V -28.3%E
- Prior M/M revised from -6.9% to -7.6%
- Prior Y/Y revised from -25.1% to -28.2%
- Note: Largest annual decline since re-unification of Germany in 1991
7:00 AM
*(US) MBA MORTGAGE APPLICATIONS W/E MARCH 6TH: 11.3% V -12.6% PRIOR- Refi's: +13.3% v -15.3% prior - Avg Rate on 30y Mortgage: 4.96% v 5.14% prior
7:22 AM
White House Chief Economist Romer: "Too early" to consider second stimulus package- Consumption is beginning to "turn around" - Notes unemployment figure remains 'terrible'
9:16:55 AM
Ford Motor Co Exec: would not be able to place stock in the VEBA (retirement healthcare obligations) program if stock price falls below $1, or if company gets 'going concern' warning from auditor
- Plans to offer employee buyouts between April 11 and May 22.
- Agreement with UAW brings average hourly wage rate to $55/hour in total, making them roughly competitive with foreign automakers with operations in the US.
Expects to reach parity with foreign US manufacturers, at $48-$49/hr, in about two years.
9:44 AM
US Chamber of Commerce CEO: Mark to market accounting was not responsible for the financial crisis but has exacerbated the situation
10:01:45 AM
SEC's Shapiro: Will consider steps to restrict volatility in markets and improve rating agency processes
- 2009 agenda needs funding; will focus on money market regulation, international cooperation on regulation
- Notes that looking for a rational approach wiht regards to fair value and that the SEC is not looking for fire sale values on assets
10:30 AM
*DOE CRUDE: +750K V -500KE;
GASOLINE: -2.99M V -1ME; DISTILLATE: +2.11M V +200KE; CAPACITY UTILIZATION: 82.7% V 83.1%E- Distillate demand +20K bpd to 3.78M bpd - Gasoline demand -230K bpd to 8.97M bpd
10:58:11 AM
SEC's Shapiro: There is 'clear interest' for restoration of uptick rule; FASB will provide mark-to-market accounting guidance in Q2; and SEC does not support suspension of mark-to-market rules - Q&A
- Notes that it was not the SEC's intention to have hard to value assets marked to fire sale levels.
- Says that she hopes to get the uptick rule out in April.
- SEC will write the rules for TARP's executive compensation limits, rules to address disclosure and say on pay issues.
- Says SEC may need more authority over the ratings agencies; review whether more regulation is needed for ratings agencies.
- Sees some logic to the idea of merging the SEC and CFTC.
11:11:31 AM
(US) Senator Dodd (D): Uptick rule may be helpful in current environment; Congress may take measures in financial sector to make sure that regulatory adjustments will not hamper innovation
- Does not expect to work out international rules on regulating banks, but plans to shoot for "compatible rules."
- Systemic risk regulator is needed, but US systemic risk scheme will not be ready for G20 summit in early April.
- Believes that bad assets need a market with buyers and sellers other than the government.
- Public/private partnership for buying toxic bank assets "can't come soon enough," note he does not know any details of the public/private arrangement yet.
More Headlines
- Traders seem to be cautiously optimistic this morning, with the US indices extending yesterday's big rally with modest gains.
Market participants continue to wonder how long a bear market rally can last, given the horrible underlying economic situation. Data out off Europe and Asia overnight reminded everyone of the severe situation the global economy is in. Front-month crude is back around $45 as OPEC officials continue their back-and-forth in the press over whether to cut or not to cut this weekend. Government bond prices remain lower as markets digest a historic reverse auction of GILTS in the UK and a 10-year reopening later this afternoon. The US benchmark yield is gaining some traction above 3% heading into the auction results.
- Financial stocks are reprising their big gains yesterday, with Citi up 14%, BoA up 10%, and other major bank stocks up 4-6%.
Credit card names are under pressure after Goldman Sachs cut American Express to Sell from Neutral. Shares of AXP are down 5%, while competitors Visa and Mastercard are down 2-3% in sympathy. Goldman analysts also released a report overnight noting that JP Morgan, Bank of New York and Morgan Stanley will likely be able to repay TARP funds over the course of 2009. Note that the IMF's Strauss Kahn said overnight that the US needs to clearly state exactly how it plans to help clean up bank balance sheets, as slow action on banks could jeopardize expected recovery in 2010. Shares of Ford are up 7% in early trading.
- Ford announced that it has reached a wage deal with the UAW, noting that the new arrangement is a key move in making the business competitive with foreign “transplant automakers.”
Ford and the UAW have agreed to suspend COLA and various performance payments, overtime and bonuses, among other initiatives. According to Ford, the deal brings its average hourly wage rate to $55/hour in total, making them roughly competitive with foreign automakers with operations in the US. It expects to reach parity with foreign US manufacturers, at $48-$49/hr, in about two years.
- In other equity news, Staples missed earnings targets due to charges stemming from the Corporate Express takeover, and missed on the top line.
On the conference call, a Staples executive warned that the company sees soft sales trends for all of 2009. Semi manufacturer National Semiconductor surprised with solid positive earnings in Q3, although the company also said it would cut 12% of its workforce. NSM fell 5% after the open before recovering somewhat. Solar manufacturer LDK reported a bigger than expected Q4 loss and guided below par. LDK was down 7% and headed lower mid morning. Consumer-oriented resort operator Vail blew out estimates and offered bullish guidance for the year, noting a big improvement in bookings over levels seen at the end of last year. Shares of MTN were up 10%, although off their best levels. Note also that OWW and PCLN are off 8% a piece after Expedia launched a special flight promotion that waives selected booking fees though 5/31.
- In currencies, the greenback saw its earlier gains erode during the New York session as risk appetite bubbled up in European equities and at the major US bourses.
Dealers are noting that Moody's comments that Russia was “not yet on brink” of a ratings given the fact that it has the funds to pay existing debt obligations for up to 18 months helped offset the initial impact of the Chinese trade numbers.
In addition, the IMF said it reached an understanding with Ukraine regarding its budget and is continuing discussions on releasing second tranche of loans. The EUR/USD briefly tested above the 1.28 area before corporate orders stemmed upside momentum and placed the pair back into its 1.2550-1.2800 consolidation range. CHF was mixed ahead of tomorrow's Swiss National Bank interest rate decision.
The market is expecting another 25bps cut and remains on guard for any potential quantitative easing measures. Sterling recovered from earlier lows against the USD but remained on soft footing against both the JPY and EUR pairs. CAD was choppy throughout the session as it balanced its relationship between global recession concerns on commodity demand and the upcoming OPEC meeting in Vienna
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Treasury's 10-year auction
2:00pm Feb Monthly Budget Statement (last -$175.6B), TSLF auction
Todays Headlines
6:55:11 AM
(EU) ECB's Weber: ECB policy is already expansive, will not cut deposit rate to zero; not at point where rates can no longer be cut
- Not against expanding eligible collateral, but any asset program cannot go against EU Commission rules
- Current attempts to stabilize oil prices may not last.
- M3 money supply will undershoot in coming months.
- Interest rates will have to rise quickly once the crisis is over.
- Reiterates that 1% is the lower limit for ECB rates. Back on Feb 24, Weber stated that 1% refi rate is "the lowest limit for me."
- Earlier this morning, ECB's Bini Smaghi said the ECB could lower interest rates to zero, if warranted.
- Note: ECB's Weber is considered one of the more hawkish members of the ECB governing council.
8:30:10 AM
(US) Fed Chairman Bernanke: U.S. will ensure banks have sufficient capital, calls for overhaul of rules for biggest financial firms, calls for review of loss provisioning accounting
- Must address issue of institutions too big to fail, to keep an open mind on Fed's role as systemic risk regulator
- Capital reserves should be forward looking, need to gather enough capital in boom periods to perprare for busts
- US, other major economies are responsible for global woes, US failure resembles emerging market crisis
- We cannot end crises, but can make them less frequent and less powerful
- Fragility in money market mutual funds deserves attention, need to boost resilience of money market mutual funds susceptible to redemptions
- Urges clearing house for tri party repos
9:02:59 AM
Fed's Bernanke: Believes we are taking the "best and most effective" measures to help the economy
- Q&A
- Fed is beginning to strengthen systemically important firms, Fed will be seeking legislation to help it regulate financial firms
- Monetary policy has to be supportive during a crisis.
- The downturn has surprised the Fed with its severity.
- Other central banks are "following our lead" in cutting rates.
9:10:24 AM
Fed's Bernanke: "If all goes well" the recession could end in late 2009; strongly endorses the "principle" of mark-to-market accounting but believes current conditions may distort marking to market
- Q&A
- Believes mark-to-market accounting numbers can be misleading, must identify the weak points of mark to market.
- Stimulus will not restore full employment all by itself, insists that must remember the trade-offs between stimulus and long-term deficits.
- Notes he is not anticipating deflation in US, mostly concerned by broad economic trends rather than inflation or deflation.
- Asking too much for G20 to develop detailed proposals for solving crisis, meeting should rather focus on international aspect of the crisis.
- Reforming the financial system requires coordination at a global level.
- Stress tests are using consensus projections as well as more severe assumptions, conceeds that for the purposes of stress testing, unemployment over 10% is within the realm of possibility.
10:00 AM
*JAN WHOLESALE SALES: -0.7% V -1.0%E- prior revised from -1.4% to -1.5%
11:56:32 AM
US Rep Frank: sees uptick rule restoration in a month's time; Mark-to-market rules must be improved and made more flexible
- Reminder on 3/5 Frank noted that Congress should not legislate accounting rules, but that the hearing on March 12 should examine making mark-to-market accounting rules more flexible
- note: the SEC is ultimately in charge of whether or not to reinstate the uptick rule.
1:25 PM
(US) Senator Dodd (D): Supports a rapid reinstatement of uptick rule by SEC
2:35:09 PM
S&P cuts State of Illinois general obligation bonds to AA- from AA
- "The downgrade reflects our assessment of the state''s limited action to date to address what we view as a sizable budget gap for fiscal 2009,"
- Cites potential record deficit in fiscal 2010 that believe could be in the area of 30% of the budget
2:48:21 PM
(US) US Treasury Sec Geithner: It will take a while to work through the crisis, but it is our obligation to fix it; private investors should return provided they have financing - TV interview
- TALF will be maintained for a long period of time.
- Fixing crisis requires sustained action; Govt should not pay too high a price for 'bad assets.'
- Notes that some banks could require 'significant' capital.
- Looking to get cooperation from the World on market rules.
3:20:34 PM
(EU) ECB's Mersch: Skeptical about "excessively low" rates, which could provide banks with little incentive to lend to each other
- Sees negative inflation taking place in several months, but inflation will be positive by the end of 2009
- If ECB looks into alternative measures, such measures should be used through the banks.
- "Other tools" besides short-term interest rates could cause uncertainty.
4:42:37 PM
General Motors Corp On March 4, the company entered into its first amendment to an existing term loan agreement - filing
- To amend a loan agreement with JP Morgan.
- The amendment will modify the provision which required GM to provide annual consolidated financial statements accompanied by a report that does not include a "going concern" or similar qualification.
- The amendment also increases the ratio of the value of the collateral to total exposure from 2.50 to 1.00 to a new ratio of 3.25 to 1.00.
- Furthermore, the amendment provides that any event of default under GM's loan agreement with the US Treasury that continues for 20 business days would be a additional event of default under the loan agreement with JP Morgan.
7:10 PM
(US) US Senate approves $408B govt operations funding bill for FY09 through Sept 30th; spending bill proceeds to the White House
7:30 PM
* (AU) AUSTRALIA MAR WESTPAC CONSUMER CONFIDENCE: -0.2% V -4.6% PRIOR (Best level in 3 months)
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
March 10, 2009
Learn to trade E-Mini & DAX Futures with James Wave & SchoolOfTrade.com
(EU) ECB's Weber: ECB policy is already expansive, will not cut deposit rate to zero; not at point where rates can no longer be cut
- Not against expanding eligible collateral, but any asset program cannot go against EU Commission rules
- Current attempts to stabilize oil prices may not last.
- M3 money supply will undershoot in coming months.
- Interest rates will have to rise quickly once the crisis is over.
- Reiterates that 1% is the lower limit for ECB rates. Back on Feb 24, Weber stated that 1% refi rate is "the lowest limit for me."
- Earlier this morning, ECB's Bini Smaghi said the ECB could lower interest rates to zero, if warranted.
- Note: ECB's Weber is considered one of the more hawkish members of the ECB governing council.
8:30:10 AM
(US) Fed Chairman Bernanke: U.S. will ensure banks have sufficient capital, calls for overhaul of rules for biggest financial firms, calls for review of loss provisioning accounting
- Must address issue of institutions too big to fail, to keep an open mind on Fed's role as systemic risk regulator
- Capital reserves should be forward looking, need to gather enough capital in boom periods to perprare for busts
- US, other major economies are responsible for global woes, US failure resembles emerging market crisis
- We cannot end crises, but can make them less frequent and less powerful
- Fragility in money market mutual funds deserves attention, need to boost resilience of money market mutual funds susceptible to redemptions
- Urges clearing house for tri party repos
9:02:59 AM
Fed's Bernanke: Believes we are taking the "best and most effective" measures to help the economy
- Q&A
- Fed is beginning to strengthen systemically important firms, Fed will be seeking legislation to help it regulate financial firms
- Monetary policy has to be supportive during a crisis.
- The downturn has surprised the Fed with its severity.
- Other central banks are "following our lead" in cutting rates.
9:10:24 AM
Fed's Bernanke: "If all goes well" the recession could end in late 2009; strongly endorses the "principle" of mark-to-market accounting but believes current conditions may distort marking to market
- Q&A
- Believes mark-to-market accounting numbers can be misleading, must identify the weak points of mark to market.
- Stimulus will not restore full employment all by itself, insists that must remember the trade-offs between stimulus and long-term deficits.
- Notes he is not anticipating deflation in US, mostly concerned by broad economic trends rather than inflation or deflation.
- Asking too much for G20 to develop detailed proposals for solving crisis, meeting should rather focus on international aspect of the crisis.
- Reforming the financial system requires coordination at a global level.
- Stress tests are using consensus projections as well as more severe assumptions, conceeds that for the purposes of stress testing, unemployment over 10% is within the realm of possibility.
10:00 AM
*JAN WHOLESALE SALES: -0.7% V -1.0%E- prior revised from -1.4% to -1.5%
More Headlines
- US equity indices are enjoying the strongest rally since late January, driven by positive comments from Citigroup and a general rebound in financial stocks around the globe.
Front-month crude continues to strengthen towards $50 ahead of this weekend's OPEC meeting, where another output cut potentially remains on the table. Spot gold dipped below $900 for the first time in nearly a month. The better risk appetite has taken a bite out of Treasury prices. The 2-year yield has climbed back above 1% ahead of this afternoons $34B 3-year note auction results.
- Financials are rocking this morning after weeks and in some cases months without much inspiring news.
All the enthusiasm was touched off by Citi CEO Vikram Pandit, who told the bank's employees in an internal memo that Citi was profitable in the first two months of 2009. Later a filing from Citi disclosed that January and February revenues were $19B, making the bank profitable and representing its best quarter since Q3 2007. Unsurprisingly, Pandit “remains disappointed with the movements in share price.” Note that yesterday the WSJ reported that Bank of America CEO Lewis has been talking up BoA to differentiate the bank from Citi. Lewis has repeatedly insisted that Bank of America needs no more government money, while suggesting that Citi probably will. Shares of both Citi and BoA were up 25% in early trading, while other major banks were up 10-15%.
- But today's rally aside, multiple other headlines bode ill for the financials.
Earlier today reports circulated that the SEC will not suspend mark-to-market accounting (note that on 3/12 the House Financial Services subcommittee will hold hearings with the SEC and FASB on mark-to-market accounting). In his speech this morning, Ben Bernanke strongly endorsed the principle of mark-to-market accounting while also noting he believes current conditions may distort marking to market. Meanwhile the newly-independent analyst Meredith Whitney warned that credit cards will be the next credit crunch, insisting that credit card lines will be cut materially, reducing consumer outlook and spending. Whitney boosted her prior estimates of the amount credit-card lines will be cut in 2009 to more than $2T and $2.7T by the end of 2010. Also note that overnight the FDIC's Bair said emerging plans to remove troubled assets from banks could force some firms to record large losses.
- Just a few days after President Obama said the defense sector is #1 on his wasteful spending to-do list, Morgan Stanley took a swipe at the industry, cutting the US defense and aerospace sector to cautious from in-line.
Meanwhile defense giant and Dow component United Technologies cut its 2009 forecast and announced plans to lay off 4% of its workforce. UTX's CEO said the move would protect profitability and “position the company for resumed earnings growth in 2010.” These developments aren't dampening the rally for UTX, which is up 6% in early trading, while other defense names are underperforming markets. In other earnings news, Avnet cut its Q3 forecast, Kroger reported Q4 in line with all expectations and JA Solar missed Q4 earnings estimates by a country mile.
- In currencies, EUR/USD has rallied above the 1.28 level and above last Friday's post-US payrolls high.
The cross has managed to shrug off dovish interest rate comments from ultra-hawk ECB member Weber, who noted that the Euro Zone economy could still shrink in early 2010 and rates could move below the current level of 1.50%. Note that Weber also insisted that 1% was about the lower limit for ECB rates, although this barrier was not set in stone. Some potential central bank action on the Eastern European front added to the risk environment. Ukraine reportedly warned numerous banks against selling Hryvnia below the official bank rate. Dealers were also noting that the Hungarian Central Bank said it would sell Euros from EU funds to stem further losses on the Forint.
- In other currency news, Canadian Finance Minister Flaherty noted the upcoming jobs data set for release on Friday was not likely to be good number.
However, the CAD was firmer throughout most of the morning, helped by energy and basic commodity momentum. There were some signs of stabilization in China after it noted its Feb auto sales encountered their first advance in four months.
9:00am Fed Chairman Bernanke discusses bank regulation in Washington, DC.
10:00am Jan Wholesale Inventories (last -1.4%), TAF results
3:00pm TSLF announcement
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
4:58:10 AM
(EU) ECB's Stark: Unable to predict when the crisis will end, negative growth is likely in all quarters of 2009
- Europe is experiencing its deepest downturn since the end of World War II.
- Size and pace of rate cuts unprecedented. The crisis cannot be resolved by central banks alone.
- ECB took into account economic slump into its policy action, risks to growth forecast are higly balanced
- Unemployment may rise further in Europe, 2009 will be difficult, massive contraction will continue.
- Inflation should fall further in coming months, warns not to confuse disinflation with deflation.
- Slower inflation could boost consumption.
- ECB's price stability mandate includes doing what is needed to avert deflationary risks.
***Note: Back on Feb 18th: Stark commented that the Economic stimulus package would likely take effect by year-end and expected economic trend to stabilize
7:45 AM
*TED SPREAD OPENS AT 111 BPS V 109 BPS PRIOR; LIBOR-OIS SPREAD OPENS AT 106BPS V 103 BPS PRIOR- Widest level in libor-ois spread since 9 Jan
8:09:48 AM
Warren Buffett: Toxic assets held by banks have very good potential for rich returns if their current valuation is based on mark to market - CNBC
- Does not believe that the banks' problems come from toxic assets.
- "I'd rather buy a bank's toxic assets than their good assets, if they are marked to market, since they're so cheap."
- Notes he still favors mark-to-market accounting, doesnt agree with it in all cases
- Feels that the 'uptick rule' is a good idea
8:15 AM
*(CA) CANADA FEB HOUSING STARTS: 134.6K V 145.0KE- No Revisions
8:45:19 AM
(EU) ECB's Trichet: Economic positives not fully priced in, uncertainty remains high; Global economy still slowing but approaching a time when the economy may start to rebound
- Notes corporate bond markets have seen improvements.
- Emerging markets are weaker but resilient.
- there has been an under assesment of the growth impact of lower oil prices.
- re-iterates there is a low probability of deflation.
- notes there is a consensus for 2010 recovery.
11:24 AM
Saudi Arabia OPEC Official notes OPEC should focus on compliance with existing cuts, no need to discuss new cuts at March 15th meeting - Al Hayat citing sources
8:34:30 PM
(US) Meredith Whitney writes that credit cards are the next credit crunch - WSJ
- Says currently there are about $5T in credit-card lines outstanding in the US and a little more than $800B are currently drawn upon.
- Says 6 months ago, she estimated that at least $2T of available credit-card lines would be expunged from the system by the end of 2010.
- However, today that estimate now looks optimistic.
- The revised estimates are that over $2T of credit-card lines will be cut inside of 2009 and $2.7T by the end of 2010.
- Velocity of present and ongoing credit line reduction will result in unintended consequences for consumer confidence, spending and the overall economy.
- Says reliance on FICO scores and overly optimistic underwriting standards make borrowers appear more creditworthy
- Notes consumer reliance on unused credit portion as a source of liquidity and a liquidity management tool
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
(EU) ECB's Stark: Unable to predict when the crisis will end, negative growth is likely in all quarters of 2009
- Europe is experiencing its deepest downturn since the end of World War II.
- Size and pace of rate cuts unprecedented. The crisis cannot be resolved by central banks alone.
- ECB took into account economic slump into its policy action, risks to growth forecast are higly balanced
- Unemployment may rise further in Europe, 2009 will be difficult, massive contraction will continue.
- Inflation should fall further in coming months, warns not to confuse disinflation with deflation.
- Slower inflation could boost consumption.
- ECB's price stability mandate includes doing what is needed to avert deflationary risks.
***Note: Back on Feb 18th: Stark commented that the Economic stimulus package would likely take effect by year-end and expected economic trend to stabilize
7:45 AM
*TED SPREAD OPENS AT 111 BPS V 109 BPS PRIOR; LIBOR-OIS SPREAD OPENS AT 106BPS V 103 BPS PRIOR- Widest level in libor-ois spread since 9 Jan
8:09:48 AM
Warren Buffett: Toxic assets held by banks have very good potential for rich returns if their current valuation is based on mark to market - CNBC
- Does not believe that the banks' problems come from toxic assets.
- "I'd rather buy a bank's toxic assets than their good assets, if they are marked to market, since they're so cheap."
- Notes he still favors mark-to-market accounting, doesnt agree with it in all cases
- Feels that the 'uptick rule' is a good idea
8:15 AM
*(CA) CANADA FEB HOUSING STARTS: 134.6K V 145.0KE- No Revisions
8:45:19 AM
(EU) ECB's Trichet: Economic positives not fully priced in, uncertainty remains high; Global economy still slowing but approaching a time when the economy may start to rebound
- Notes corporate bond markets have seen improvements.
- Emerging markets are weaker but resilient.
- there has been an under assesment of the growth impact of lower oil prices.
- re-iterates there is a low probability of deflation.
- notes there is a consensus for 2010 recovery.
11:24 AM
Saudi Arabia OPEC Official notes OPEC should focus on compliance with existing cuts, no need to discuss new cuts at March 15th meeting - Al Hayat citing sources
More Headlines
- After selling off quite aggressively before the bell, US equity indices made a run into positive territory.
Equities seemed to have stabilized and risk aversion diminished after Merck announced a $41B merger with Schering-Plough, hopes are high that a deal can be reached in the down-to-the wire negotiations continuing between Dow and Rohm and Haas. Front-month crude has pushed through its 50-day EMA for the first time since last July to trade as high as $48. Natural gas continues to head the other way making a fresh 6-year low below $3.85. Various OPEC officials discussed more output cuts early today (note OPEC meets March 15th), with Secretary General El Badri mentioning a 800K bpd cut, OPEC President Vasconcelos conceding that cuts may be needed (he had previously been opposed to more cuts) and the Kuwaiti Oil Minister talking about a potential 1M bpd cut. Treasury prices and gold sold off after the open of floor trade aided by the early rebound in equity prices.
- Schering-Plough said it has agreed to the reverse merger with Merck at $23.61/shr in cash and stock.
The companies will combine under the name Merck, and will be led by Merck CEO Richard T. Clark. Upon closing, Merck shareholders will own 68% of the combined organization, with SGP shareholders holding the balance. Merck anticipates that the transaction will be modestly accretive in the year following the deal and significantly accretive thereafter. Merck also took the opportunity to reaffirms its 2009 guidance. S&P put SGP's A- credit rating on watch positive after the deal was announced and affirmed Merck's AA- ratings.
- In other M&A news, Dow Chemical and Rohm and Haas are holding last-minute negotiations to hammer out a merger deal in an attempt to head off the mother of all breach of contract suits.
Before the open CNBC's David Faber reported that his sources were saying a deal is near. Last night Dow said the talks were going quite well, admitting that its $78/share all-cash offer is not the right deal. This morning Dow and Rohn jointly delayed initiation legal action until this afternoon in anticipation of reaching a final deal.
- Warren Buffett's appearance on CNBC has not been all doom and gloom.
Buffett seemed cautiously optimistic about toxic assets held by banks, which he said have very good potential for rich returns if their current valuation is based on mark to market. "I'd rather buy a bank's toxic assets than their good assets, if they are marked to market, since they're so cheap," he said. Buffett also noted that he still favors mark-to-market accounting, even if he doesn't agree with it in all cases, and feels that restoring the uptick rule is a good idea.
- In currencies, the greenback saw pre-New York safe-haven gains erode, although there was also a positive undercurrent against the European pairs throughout the morning.
The USD's upward momentum was whittled away as front-month oil futures rose. The ECB's Trichet shared his thoughts this morning, noting that economic positives have not been fully priced in while also conceding that uncertainty remained high. Trichet noted that although the global economy is still slowing, he believes it is approaching a time when the economy might start to rebound, citing improving corporate bond markets have. Sterling exhibited broad-based weakness as concerned lingered about its banking sector. GBP/USD tested the 1.3750 level while EUR/GBP moved back above 0.9150. USD/CAD rose to 1.3064, its highest level since Aug 2004 following the weaker-than-expected February Canadian housing starts.
"Somewhere in the world someone is training when you are not. When you race him, he will win."
-US equity indices continued to take out big psychological levels this week, with the DJIA opening on Monday below 7,000 for the first time since October 1997.
By Friday afternoon the DJIA breached the 6,500, prompting CNBC's Jim Cramer to call 5,320 his "worst-case scenario."
More stress among the UK's banks, including a big quarterly loss and a sizable capital raise at HSBC, and Europe's failure to aid Eastern Europe started things off on the wrong foot Monday morning.
Markets recovered mid week as traders vainly placed their hopes on rumors of a new Chinese stimulus package. Chinese Premier Wen announced no additional spending, prompting traders to wax pessimistic about Friday's employment data, sending markets down once again.
On Friday the unemployment rate came in at 8.1%, higher than any time since December 1983.
In the meantime, GM continued to be harried by bankruptcy worries and shares of US financials got even worse.
Front-month crude has strengthened on a report that the Chinese may plan to shift some of its reserves from US Treasuries into oil.
Despite a modest rally Friday afternoon, equity markets had their worst week of the year to date, with the DJIA down 6.1%, the Nasdaq Composite off 6%, and the S&P500 lower by 7%.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Feb Nonfarm Payrolls (last -598K), Feb Unemployment (last 7.6%),
8:30am Feb Manufacturing Payrolls (last -207K), Feb Average Hourly Earnings (last m/m 0.3%, y/y 3.9%)
3:00pm Jan Consumer Credit (last -$6.6B)
Todays Headlines
7:00:04 AM
*(UK) BOE CUTS INTEREST RATES BY 50BPS TO 0.50%; AS EXPECTED, BOE ANNOUNCES £75B IN ASSET PURCHASES INCLUDING GILTS
- Likely that majority of assets to be purchased will be Gilts
- Will purchase medium and long term gilts in secondary market as well as corporate bonds
- To finance purchases by issuing central bank reserves
- Operation to last for 3 months
- Still sees substantial risk of undershooting CPI target, with Sterling appreciation adding to import cost pressures
- Notes quantitative easing should not alter government issuance strategy
- Notes Reversing QE strategy will require asset sales
- UK Chancellor approves £150B in Asset purchases, stating that £50B in assets to be private sector assets, mix of assets will be BoE's decision, to remain under review
7:45 AM
*(EU) ECB CUTS INTEREST RATES BY 50BPS TO 1.50%; AS EXPECTED
- Lowers deposit rate by 50bps to 0.5%
8:30 AM
*Q4 FINAL NONFARM PRODUCTIVITY: -0.4% V 1.0%E; UNIT LABOR COST: 5.7% V 3.8%E
- No revisions
8:30:03 AM
*INITIAL JOBLESS CLAIMS: 639K V 650KE; CONTINUING CLAIMS: 5.106M V 5.155ME
- Prior jobless claims revised from 667K to 670K
- Prior Continuing Claims revised from 5.112M to 5.12M
8:35:34 AM
(EU) ECB's Trichet: Inflation has fallen significantly, to remain well below 2% target this year and in 2010
- Global and Euro Zone demand should remain weak in 2009. Lower inflation reflects weak global economy.
- Reiterates once again that the ECB will continue to keep inflation anchored.
- The weaker global economy has affected emerging markets, trade volume has contracted sharply.
- Outlook remains uncertain, there could be unanticipated positive effects on confidence.
- 2010 revisions in staff projections reflect change in growth outlook, further data is needed to asses credit outlook
- Reiterates concerns on global imbalances and protectionism.
- Sees recovery in 2010
8:50:30 AM
(EU) ECB's Trichet: Today's decision was "made by consensus," involved "in-depth conversations," did not decide that 1.50% rate is the lowest rate - Q&A
- Decided to maintain width of corridor between deposit rate and refi rate (deposit rate also lowered by 50bps to 0.50%)
- To continue liquidity operations for as long as necessary
- ECB is studying use of "non-standard tools", has already conducted 'non standard' measures, will only discuss such tools further once a decision on use has been made.
- Reiterates that there are drawback with zero rate policy
- If the facts justify a decision, could lower rates further. Emphasizes ECB "already has very low rates."
- There is no surprise in the ECB extending more aid to commercial banks, as they play a greater role in Europe than the US.
- Looking carefully at potential deflation risks, notes this risk is "meager" for now.
- Does not exclude ex ante measures in money markets.
- Notes 5 counterparties defaulted in repo marketsin 2008
10:00 AM
*JAN FACTORY ORDERS: -1.9% V -3.5%E- prior revised from -3.9% to -4.9% ***Note: sixth straight monthly decline
10:00:04 AM
*US Q4 MORTGAGE DELINQUENCIES: 7.88% V 6.99% PRIOR (record high)
- Prime mortgage delinquency rate 5.06% v 4.34% q/q
- Mortgages in foreclosure at 3.3% v 2.9% q/q (3.3% is a record high)
- Mortgage Bankers Association (MBA): A record 11.18% of loans on one-to-four unit residences were at least one payment past due or in the foreclosure process in 200
- One in every eight U.S. households, a record share, ended 2008 behind on their mortgage payments or in the foreclosure process as job losses intensified a housing crisis spawned by lax lending practices
10:00 AM
*(CA) FEB IVET PURCHASING MANAGES INDEX: 45.2 V 37.8E-
No revisions
10:00:28 AM
Fed's Kohn: AIG still has a large amount of derivatives, Fed & Treasury agree the risks of not helping AIG are "unacceptably large," US cannot allow a disorderly failure of AIG right now
- Extreme conditions have complicated plans to sell off parts of AIG so it can repay loans.
- Failure of systemically critical firms would deepen the recession.
10:30 AM
*EIA NATURAL GAS INVENTORIES: -102 BCF VS. -95 TO -100 BCF ESTIMATE RANGE
11:01 AM
*US TREASURY TO SELL TOTAL $63B IN NOTES AND BONDS IN MINI-REFUNDING
- 3-year notes: $ 34B -10-year notes: $18B - 30-year bonds: $11B
11:14 AM
AIG American International Group, Inc Senator Bunning (R): AIG is a "lost cause"
1:37:19 PM
Fed's Lacker: Expects positive growth by year end, sees 'dismal' economic data for couple months including tommorow; economy is affecting credit markets more than vice versa - CNBC interview
- Notes that needs to correct the moral hazard issues.
- Says may be "pleasantly surprised" by results of the stress tests of banks.
- Asset backed market is not a drag upon the economy; reiterates rates will remain at these levels for a while.
- Remarks that the economy will recover without stimulus, but stimulus will help 'at the margin.'
3:41:18 PM
FDIC plans to cut emergency assessment fee to 10 bps from the 20 bps announced on 2/27 - ABA
- Reminder: Back on 2/27 the FDIC raised its regular fee for banks to 12-16 basis points starting in April (previously 12-14 basis points) and added a 20bps special assessment, which equates to about $15B.
6:00:58 PM
(US) Fed Balance sheet liabilities fall to $1.884T v $1.899T prior (first drop in 3 weeks); Discount Window borrowing avg $140.95B/day v $139.5B prior
- Primary credit borrowings avg $65.96B/day v $64.4B prior
- Primary dealer borowings $23.6B v $25.2B prior
- Credit extended to AIG $42B v $38.2B prior
- Fed holdings of agency mortgage-backed securites $68.9B v $68.8B prior.
- Commercial paper funding facility net portfolio holdings $241.3B v $242.5B prior
- Foreign central bank holdings of US Treasuries +$15.8B v +$5.5B prior, agency debt +$3.4B v +$1.73B prior
- Fed currency swaps with central banks fell by $59.7B.
6:16 PM
*(US) HOUSE VOTES TO APPROVE MEASURE ALLOWING BANKRUPTCY JUDGES TO MAKE CHANGES TO PRIMARY RESIDENCE MORTGAGES-
The measure also permanently approved the increase in FDIC insurance to $250K
6:29 PM
Morgan Stanley The firm is offering FDIC insurance on bank deposits ranging from $1M to $100M - WSJ
- The article adds that the company is paying the FDIC an added fee for the extra insurance
9:09:00 PM
(US) Senate Banking Committee Chairman Dodd is moving to allow the FDIC to temporarily borrow as much as $500B from the Treasury Dept - WSJ
- The move came in response to urging from FDIC Chairman Bair, Fed Chairman Bernanke nd Treasury Sec Geithner.
- Last week the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which was just $19B at the end of 2008.
- That idea provoked protests from banks.
- The FDIC would be able to borrow as much as $500B until the end of 2010 if the FDIC, Fed, Treasury Sec and White House agree such money is warranted.
- The bill would allow the FDIC to borrow $100B absent the approval.
- The FDIC's current line of credit with the Treasury is $30B.
- WSJ notes that the FDIC has not borrowed funds from the Treasury in more than a decade.
11:07:39 PM
General Motors Corp WS reports that the company's top executives are more open to a speedy bankruptcy reorganization financed by the government
- The report cites a person familiar with the matter.
- Note: Earlier today GM disclosed that its auditor saw significant doubt about the company's going-concern ability.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(UK) BOE CUTS INTEREST RATES BY 50BPS TO 0.50%; AS EXPECTED, BOE ANNOUNCES £75B IN ASSET PURCHASES INCLUDING GILTS
- Likely that majority of assets to be purchased will be Gilts
- Will purchase medium and long term gilts in secondary market as well as corporate bonds
- To finance purchases by issuing central bank reserves
- Operation to last for 3 months
- Still sees substantial risk of undershooting CPI target, with Sterling appreciation adding to import cost pressures
- Notes quantitative easing should not alter government issuance strategy
- Notes Reversing QE strategy will require asset sales
- UK Chancellor approves £150B in Asset purchases, stating that £50B in assets to be private sector assets, mix of assets will be BoE's decision, to remain under review
7:45 AM
*(EU) ECB CUTS INTEREST RATES BY 50BPS TO 1.50%; AS EXPECTED
- Lowers deposit rate by 50bps to 0.5%
8:30 AM
*Q4 FINAL NONFARM PRODUCTIVITY: -0.4% V 1.0%E; UNIT LABOR COST: 5.7% V 3.8%E
- No revisions
8:30:03 AM
*INITIAL JOBLESS CLAIMS: 639K V 650KE; CONTINUING CLAIMS: 5.106M V 5.155ME
- Prior jobless claims revised from 667K to 670K
- Prior Continuing Claims revised from 5.112M to 5.12M
8:35:34 AM
(EU) ECB's Trichet: Inflation has fallen significantly, to remain well below 2% target this year and in 2010
- Global and Euro Zone demand should remain weak in 2009. Lower inflation reflects weak global economy.
- Reiterates once again that the ECB will continue to keep inflation anchored.
- The weaker global economy has affected emerging markets, trade volume has contracted sharply.
- Outlook remains uncertain, there could be unanticipated positive effects on confidence.
- 2010 revisions in staff projections reflect change in growth outlook, further data is needed to asses credit outlook
- Reiterates concerns on global imbalances and protectionism.
- Sees recovery in 2010
8:50:30 AM
(EU) ECB's Trichet: Today's decision was "made by consensus," involved "in-depth conversations," did not decide that 1.50% rate is the lowest rate - Q&A
- Decided to maintain width of corridor between deposit rate and refi rate (deposit rate also lowered by 50bps to 0.50%)
- To continue liquidity operations for as long as necessary
- ECB is studying use of "non-standard tools", has already conducted 'non standard' measures, will only discuss such tools further once a decision on use has been made.
- Reiterates that there are drawback with zero rate policy
- If the facts justify a decision, could lower rates further. Emphasizes ECB "already has very low rates."
- There is no surprise in the ECB extending more aid to commercial banks, as they play a greater role in Europe than the US.
- Looking carefully at potential deflation risks, notes this risk is "meager" for now.
- Does not exclude ex ante measures in money markets.
- Notes 5 counterparties defaulted in repo marketsin 2008
10:00 AM
*JAN FACTORY ORDERS: -1.9% V -3.5%E- prior revised from -3.9% to -4.9% ***Note: sixth straight monthly decline
10:00:04 AM
*US Q4 MORTGAGE DELINQUENCIES: 7.88% V 6.99% PRIOR (record high)
- Prime mortgage delinquency rate 5.06% v 4.34% q/q
- Mortgages in foreclosure at 3.3% v 2.9% q/q (3.3% is a record high)
- Mortgage Bankers Association (MBA): A record 11.18% of loans on one-to-four unit residences were at least one payment past due or in the foreclosure process in 200
- One in every eight U.S. households, a record share, ended 2008 behind on their mortgage payments or in the foreclosure process as job losses intensified a housing crisis spawned by lax lending practices
10:00 AM
*(CA) FEB IVET PURCHASING MANAGES INDEX: 45.2 V 37.8E-
No revisions
10:00:28 AM
Fed's Kohn: AIG still has a large amount of derivatives, Fed & Treasury agree the risks of not helping AIG are "unacceptably large," US cannot allow a disorderly failure of AIG right now
- Extreme conditions have complicated plans to sell off parts of AIG so it can repay loans.
- Failure of systemically critical firms would deepen the recession.
10:30 AM
*EIA NATURAL GAS INVENTORIES: -102 BCF VS. -95 TO -100 BCF ESTIMATE RANGE
11:01 AM
*US TREASURY TO SELL TOTAL $63B IN NOTES AND BONDS IN MINI-REFUNDING
- 3-year notes: $ 34B -10-year notes: $18B - 30-year bonds: $11B
11:14 AM
AIG American International Group, Inc Senator Bunning (R): AIG is a "lost cause"
More Headlines
US equity indices extended yesterday's late selloff in the pre-market this morning, with all three major indices opening down around 1.5% a piece.
A heavy load of news is buffeting markets, with China's lack of confirmation of a new fresh stimulus package (expectations of more Chinese stimulus jolted markets upward yesterday), marginal same-store sales numbers, employment data, ratings warnings on BoA and Wells Fargo from overnight, and big rate cuts in Europe presenting a very complicated picture this morning. Note that the weekly initial and continuing employment claims were a hair better than expected, yet revisions were slightly worse.
- Shares of GE have steadily declined over the course of 2009, a trend that has greatly accelerated in the wake of the company's dividend cut.
Rumors and speculation that the ratings agencies will cut GE's coveted AAA rating have been rife since late February; yesterday PIMCO's Bill Gross went as far as to say that the big decline in GE shares show the market has already priced in a downgrade, noting that any ratings cut would force certain institutional holders to limit their exposure to the company. Yesterday fresh rumors that GE needs to raise capital to shore up GE Capital made the rounds. This was promptly refuted by the company itself, yet overnight the WSJ reported that investors fear that the company could face large losses on GE Capital's $637B balance sheet, particularly on assets such as commercial real estate and loans in Eastern Europe. This morning GE's CFO gave a long, candid interview on CNBC, insisting that the speculation about GE Capital is overdone and affirming rather adamantly that the unit needs no additional capital. Shares of GE were up 5% in early trading.
- Ford launched a significant debt restructuring plan yesterday afternoon, in which it hopes to retire more than $10B of outstanding debt, including debt-to-equity swaps.
Moody's responded by lowering Ford's probability of default rating and also cutting the rating on its secured revolving credit facility. Fitch said the offers do not affect Ford's issuer default rating at CCC. GM officially disclosed in its annual report filing that its auditor sees significant doubt regarding the company's ability to continue as a going concern. GM also disclosed it expects to receive additional loans of up to $7.7B or more from the DOE, as had also been discussed in prior months. GM responded in the mid morning by stating the auditor's claims were 'not a big deal'. Bondholders at GM are due to speak with the Obama administration later totday. Shares of Ford lost up to 5% in the early going, before popping back into the black. GM is down 15%.
- Moody's put various ratings for Bank of America and Wells Fargo on review for possible downgrade yesterday afternoon.
For WFC-12%, Moody's noted that the pressures on the bank's capital position make a multi-notch downgrade likely for its financial strength rating. For BAC-6%, Moody's said the review was prompted by concern that capital ratios could deteriorate in 2009 from their already low levels due to the need to take high loan loss provisions and absorb additional charges for its capital market exposure. Note that speculation is circulating that Citi will be removed from the Dow Jones Industrial average.
- Wal-Mart is doing quite well this morning, with shares up 4% in the wake of February same-store sales and a dividend hike.
BJ's just managed to keep same-store sales positive, while Costco and Target reported declines. Department store names disclosed yet another month of steep y/y monthly sales declines, with high-end names Saks and Nordstrom falling 15% and 26%, respectively. Apparel sales were dismal as well, although youth-oriented names Aeropostale and Hot Topic showed even bigger y/y sales increases than in January. By far the biggest same-store sales decline (-30%), was at Abercrombie; shares of ANF are down more than 12%.
- In currencies, three events are driving the price action in the European and US sessions, including China and the two European rate decisions.
The greenback was initially bid up following Chinese Premier Wen's opening address to a nine-day legislative conference. Wen failed to disclose any additional stimulus spending, although he reaffirmed that China can hit its ambitious 2009 GDP target at 8%. Across the pond, the Bank of England continued its easing cycle, cutting its key rate to its lowest level ever at 0.50%. The BoE also took the unprecedented step of printing money to purchase £75B in assets, Including Gilts. European fixed-income futures surged on the news, led by June Gilts, probing the 123 handle after opening around 118.85. The UK yield curve flattened significantly in the aftermath of the quantitative easing announcement.
- The ECB cut rates by 50bps to 1.50% as expected but Trichet noted that the decision was reached by consensus and not unanimous.
Currency dealers noted that perhaps there was dissent on both sides of the 50bps move. The ECB hinted it still has to room lower its key interest rates, depending on future ECB staff projections lowering GDP and inflation projections for 2009 and 2010. The ECB staff now forecasts 2009 GDP growth in a range of -3.2% to -2.2%, compared to their prior view of -1.0% to 0.0%, with 2010 revised to -0.7% to +0.7% from a 0.5% to 1.5% prior. Staff revised 2009 inflation lower by a full percentage point, to 0.1 to 0.7% and 2010 inflation to a range of +0.6% to +1.4%. These inflation expectations are well below the 2.0% mandated ceiling for the ECB.
- The USD came off its best level during the mid-NY morning after US Q4 delinquencies surged to its highest level on record to 7.88% from 6.99% prior.
EUR/USD failed to take out the low made earlier this week. Interbank FX liquidity was impaired due to some issues with its electronic pricing mechanism. USD/JPY encountered some turbulence with spreads between banks widening to over 30 pips from its customary 1 to 2 pips as a result of the technical issue and saw USD/JPY pair slip to 98.25 from 99.20 as a result. The Japanese exporters continue to offer USD on approach of the 100 level during the European morning.
10:00am Treasury's Geithner's testifies before House Committee.
10:00am Jan Factory Orders (last -3.9%)
10:30am Natural Gas Inventories
12:45pm Fed's Lockhart speaks on US economy.
- GM to meet with bondholders and Obama Administration auto task force.
Todays Headlines
7:00 AM
*(US) MBA MORTGAGE APPLICATIONS W/E FEB 27TH: -12.6% V -15.1% PRIOR- Refi's: -15.3% v -19.1% prior
- Avg rate on 30y Mortgage: 5.14% v 5.07% prior
7:30 AM
*FEB CHALLENGER JOB CUTS: 186.4K V 242K PRIOR- Figure is 158.4% y/y - Offers hope that Jan was the peak
8:15:11 AM
*FEB ADP EMPLOYMENT CHANGE: -697K V -630KE (lowest reading on record) - Prior month revised Lower from -522K to -614K
- Small businesses -262K v -175k m/m
- Medium businesses -314K v -255k m/m
- Large businesses -121K v -92k m/m
- Goods-producing sector: -338K v -243k m/m
- Service-providing sector: -359K v -279k m/m
- Manufacturing industry: -219K v -160k m/m
8:17 AM
Fed's Hoening: Fed must reverse loose monetary policy in a timely fashion to avoid inflation, inflation should be the focus of Fed policy and not deflation
- Notes that the Fed must tighten its monetary policy 'well before' the economy has recovered
8:24:04 AM
(IN) INDIAN CENTRAL BANK CUTS REPO RATE BY 50 BPS TO 5.00%, REVERSE REPO RATE BY 50 BPS TO 3.50%
(UNEXPECTED)
- Hopes rate cuts will encourage banks to lend for productive purposes at viable rates
- Pledges to maintain ample liquidity, markets are continuing to function in an orderly manner
- Impact of global crisis on growth has been deeper and wider than earlier anticipated
***Note this rate cut ahead of the planned Apr 21st policy meeting and the fifth interest rate cut since Oct 2008 and follows the release of the Feb 27th Q4 GDP data of 5.3%, which was the lowest reading since Dec 2002
9:13:22 AM
Fed's Fisher: Economic data recently has been 'disturbing', Economy may contract more severely in Q1 2009 - Are still willing to increase size of balance sheet
- Still have the option to buy longer term treasury products
- Fed programs are helping markets
- Warns against any shift toward protectionism
- Global central banks must continue to work in a coordinated fashion
- Is equally important for FED to find appropriate time to unwind stimulus that have been added to the system -aware of risks to inflation
9:15:33 AM
(US) US Treasury releases guidelines on Loan Modifications program - Eligible mortgages must have been originated on or before Jan 1, 2009
- Servicers can begin modifying mortgages immediately, program lasts through end of 2012
- Borrowers must demonstrate financial hardship to be eligible for modifications, must fully document income and prove occupancy.
- Overall loan modification program has no limit on loan-to-value ratio
-Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus pay for success fees on still-performing loans of $1,000 per year.
- Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.
- The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.
- Offering incentives to get rid of second liens
- Interest rate floor as low as 2% on modified loans
10:00:04 AM
*FEB ISM NON-MANUFACTURING COMPOSITE: 41.6 V 41.0E - No Revisions
**sub-indices:
- Non-Mfg Prices Paid Index: 48.1 v 42.5 prior
- Employment: 37.3 v 34.4 prior
- New Orders Index: 40.7 v 41.6 prior
10:30 AM
*DOE CRUDE: -755K V +1ME; GASOLINE: +168K V -750KE; DISTILLATE: +1.66M V -1.3ME; CAPACITY UTILIZATION: 83.1% V 81.8%E-
Distillate demand -224K bpd to 3.76M bpd - Gasoline demand +194K bpd to 9.2M bpd
2:00:23 PM
*FED'S BEIGE BOOK: ECONOMIC CONDITIONS WORSENED, US ECONOMY ERODED FURTHER THROUGH LATE FEBRUARY; NEAR TERM PROSPECTS POOR
- Auto sales exceptionally sluggish, Housing in the 'doldrums', mortgage demand was depressed yet there are very tentative signs of stabilization
- Demand for commercial and industrial loans lower in most districts
- Notes that unemployment up broadly
- No pickup expected until late 2009 or early 2010
- Spending remains low, with price pressures continuing to ease through a broad range of products
- Philadelphia and Chicago note economic conditions have not deteriorated significantly, yet econmies remains weak
5:18:30 PM
General Electric Co Confirms that claims GE will have to raise new capital in the near term are "pure speculation"; Well positioned to weather downturn
- Has about $70B remaining capacity under TLGP, has about $98B of access to CPFF if needed
- Cutting dividend in H2 will result in $4.4B incremental cash.
- Currently has no plans to raise added equity.
6:08:11 PM
(CH) China's Premier Wen: Substantial govt investment required to address financial crisis; Country must be prepared for greater hardships
- Says substantial govt intervention is necessary
- Economy needs private investment
- Measures to stimulate the economy have taken affect
- Says country needs private investment
- China will maintain the nation's preferential tax policies for real estate and securities transactions.
- China is capable of meeting 8% GDP growth target.
7:03:13 PM
(CH) China's Premier: 2009 CPI expected to rise around 4%; Sees continued improvement in balance of payments
- Global crisis has not ended; domestic spending remains weak
- Says country must expand domestic demand, will boost individual consumption; govt spending is best to boost domestic production
- Plans to increase auto consumption
- Local govts to issue CNY200B in bonds
- Will use fiscal and tax policies to support exports; Will improve credit structure
- Monetary policy to stay "moderately easy"; To continue market based reforms of interest rates; Sees global deflation pressures
- Trade protectionism is resurging
- Will strengthen oversight of cross-border capital flows
- Ready to talk with Taiwan on political and military issues
- To allocate CNY716B to support agriculture, rural areas, and farmers
- Will promote healthy, steady real estate market development; To stabilize stock market
- Will significantly up min grain purchase prices
- To promote development of futures markets
- Will actively prevent and handle any social unrest
- Support private capital deployment to state companies and infrastructure
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(US) MBA MORTGAGE APPLICATIONS W/E FEB 27TH: -12.6% V -15.1% PRIOR- Refi's: -15.3% v -19.1% prior
- Avg rate on 30y Mortgage: 5.14% v 5.07% prior
7:30 AM
*FEB CHALLENGER JOB CUTS: 186.4K V 242K PRIOR- Figure is 158.4% y/y - Offers hope that Jan was the peak
8:15:11 AM
*FEB ADP EMPLOYMENT CHANGE: -697K V -630KE (lowest reading on record) - Prior month revised Lower from -522K to -614K
- Small businesses -262K v -175k m/m
- Medium businesses -314K v -255k m/m
- Large businesses -121K v -92k m/m
- Goods-producing sector: -338K v -243k m/m
- Service-providing sector: -359K v -279k m/m
- Manufacturing industry: -219K v -160k m/m
8:17 AM
Fed's Hoening: Fed must reverse loose monetary policy in a timely fashion to avoid inflation, inflation should be the focus of Fed policy and not deflation
- Notes that the Fed must tighten its monetary policy 'well before' the economy has recovered
8:24:04 AM
(IN) INDIAN CENTRAL BANK CUTS REPO RATE BY 50 BPS TO 5.00%, REVERSE REPO RATE BY 50 BPS TO 3.50%
(UNEXPECTED)
- Hopes rate cuts will encourage banks to lend for productive purposes at viable rates
- Pledges to maintain ample liquidity, markets are continuing to function in an orderly manner
- Impact of global crisis on growth has been deeper and wider than earlier anticipated
***Note this rate cut ahead of the planned Apr 21st policy meeting and the fifth interest rate cut since Oct 2008 and follows the release of the Feb 27th Q4 GDP data of 5.3%, which was the lowest reading since Dec 2002
9:13:22 AM
Fed's Fisher: Economic data recently has been 'disturbing', Economy may contract more severely in Q1 2009 - Are still willing to increase size of balance sheet
- Still have the option to buy longer term treasury products
- Fed programs are helping markets
- Warns against any shift toward protectionism
- Global central banks must continue to work in a coordinated fashion
- Is equally important for FED to find appropriate time to unwind stimulus that have been added to the system -aware of risks to inflation
9:15:33 AM
(US) US Treasury releases guidelines on Loan Modifications program - Eligible mortgages must have been originated on or before Jan 1, 2009
- Servicers can begin modifying mortgages immediately, program lasts through end of 2012
- Borrowers must demonstrate financial hardship to be eligible for modifications, must fully document income and prove occupancy.
- Overall loan modification program has no limit on loan-to-value ratio
-Servicers that modify loans according to the guidelines will receive an up-front fee of $1,000 for each modification, plus pay for success fees on still-performing loans of $1,000 per year.
- Homeowners who make their payments on time are eligible for up to $1,000 of principal reduction payments each year for up to five years.
- The program will provide one-time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments.
- Offering incentives to get rid of second liens
- Interest rate floor as low as 2% on modified loans
10:00:04 AM
*FEB ISM NON-MANUFACTURING COMPOSITE: 41.6 V 41.0E - No Revisions
**sub-indices:
- Non-Mfg Prices Paid Index: 48.1 v 42.5 prior
- Employment: 37.3 v 34.4 prior
- New Orders Index: 40.7 v 41.6 prior
10:30 AM
*DOE CRUDE: -755K V +1ME; GASOLINE: +168K V -750KE; DISTILLATE: +1.66M V -1.3ME; CAPACITY UTILIZATION: 83.1% V 81.8%E-
Distillate demand -224K bpd to 3.76M bpd - Gasoline demand +194K bpd to 9.2M bpd
More Headlines
- Traders are latching onto scraps of good news wherever they can find them this morning, be that of speculation for an additional Chinese stimulus plan, a unscheduled rate cut in India or glimmers of hope in what remains generally dismal economic data.
The three leading US equity indices opened above yesterday's wretched closing levels and have even managed rise a bit after a downward feint. The Treasury provided the markets with some much needed details regarding the mortgage modification plan and hopes remain high more details regarding TARP are on the way. The ADP Employment number came in much lower than expected at -697K, for its lowest reading on record, setting things up for very negative employment data on Friday. On the other hand, the February Challenger jobs number showed improvements over the January reading, while the ISM Non-Manufacturing data was in line, with the employment component better than the prior reading, offering optimists a few more slivers of hope. Front-month crude is rocketing after reports circulated that China may use its fiscal reserves to buy oil (diversifying away from US Treasuries). Note that Chinese PM Wen is scheduled to address China's legislative body on Thursday, with expectations running high that he will outline details for the stimulus plan - copper and other metals are hitting multi-month highs in anticipation of the latter.
- Shares in leading financial names made substantial gains before the open, with Bank of America gaining 10% and Citi rising 6% in the pre market.
Most of these stocks were giving up their gains in early trading, however. GE continues to drop like a stone, dipping below $6.00/shr mid morning briefly, hitting levels last seen in 1991. GE denied rumors that it was mulling a capital raise in the near term. PIMCO's Bill Gross told CNBC that he believes the sell-off involves the market pricing in a downgrade of GE's AAA ratings, a cut that would force institutional holder including sovereign wealth funds to limit their exposure to the firm - but Gross also insisted that GE is no AIG. US Bancorp sank from pre-market gains to -5% after slashing its dividend. Note that overnight the FDIC's Bair said its deposit insurance fund could be depleted if the agency does not impose additional fees on the banking industry, noting that a large number of bank failures may occur through 2010. Recall that in late February the FDIC raised is fees on banks and approved a one-time special assessment fee.
- Discount retail giants Costco and BJ's Wholesale reported before the open.
Costco missed earnings estimates for the first time in years and reported a 3% y/y decline in same-store sales. Results were hit by continued weakness in non-foods sales and related margins. BJ's beat earnings targets and kept quarterly same-store sales in positive territory. On the conference call, a BJ's executive warned that the company is observing deflation in pricing of certain food products. Fellow discounter Big Lots beat quarterly earnings estimates and beat the Street in its quarterly and annual earnings forecast. Shares of COST were around even mid morning, while BJ rose 8% and BIG was up 16%.
- The greenback was on the defensive through most of the New York morning thanks to the potential for China to start investing fiscal reserves in oil at the expense of US Treasuries as well as the ADP employment report.
The Indian Central Bank unexpectedly cut key rates ahead of the planned April 21st policy meeting, representing the bank's fifth interest rate cut since October 2008. The cut followed the release of India's Q4 GDP data on February 27; the 5.3% reading was the lowest since December 2002 and below market expectations. As the morning progressed some risk aversion crept back in as GE slumped. The JPY was broadly lower from the get go of Asian trading as the USD/JPY pair tested 99.50 before rumored Japanese exporters offers layered to 100.20 area and capped upside momentum.
"Someday your life will pass before your eyes. Make sure it's worth watching."
ES Summary
Previous
Current
02-Mar-2009
03-Mar-2009
OPEN
731.25
705.00
HIGH
733.75
715.25
LOW
698.75
688.75
CLOSE
705.50
734.25
RANGE
35.00
26.50
VOLUME
3,023,734
2,499,376
RED ZONE AREAS for Tomorrow
More info on the RED ZONE located here:
FDAX (DAX): 3666.00 / 3714.50
ES (E-MINI S&P): 704.50 / 681.50
YM (E-MINI DOW): 6781 / 6604
6E (EURO): 1.2597 / 1.2456
ZS (SOYBEANS): 854.00 / 866.50
GC (GOLD): 922.70 / 905.70
Economic News to Watch Tomorrow
7:30am Feb Challenger Job Cuts y/y (last 222.4%)
8:15am Feb ADP Employment Change (last -522K)
10:00am Feb ISM Non-Manufacturing (last 42.9)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
2:00pm Fed's Beige Book
Todays Headlines
4:30:34 AM
*(UK) FEB PMI CONSTRUCTION: 27.8 V 34.2E; lowest reading on record
- No revisions
Note: Residential housing was the worst performing sector of the construction industry, followed by commercial property
8:21:11 AM
Fed's Lockhart: Fed is mindful of its dual mandate of growth and inflation control, objectives can sometimes be in conflict
- US economy is exhibiting weakness "across the board," shrinking at a "dramatic rate."
- Still expects the US economic recovery to begin in second half of 2009.
- Sees US commercial real estate and the global economic weakness are "special risks" to outlook.
- The exposure of European banks is a problem.
- Expects house prices to bottom this year.
- Neither inflation or deflation are serious risks at this point.
8:23:01 AM
CNBC's Liseman reiterates $200B TALF to begin today, notes it could become the Fed's largest emergency loan program
- Note that according to the Fed's website, borrowers will be able to choose either a fixed or floating interest rate on TALF loans. The fixed interest rate will be 100 basis points over the 3-year Libor swap rate, and the floating interest rate will be 100 basis points over 1-month Libor. The New York Fed also will assess an administrative fee equal to 5 basis points of the loan amount on the settlement date of each loan transaction.
- According to the Fed's website, eligible collateral will include USD-denominated cash (that is, not synthetic) ABS that has a credit rating in the highest long-term or short-term investment-grade rating category from two or more major nationally recognized statistical rating organizations and do not have a credit rating below the highest investment-grade rating category.
9:00:01 AM
*(CA) BANK OF CANADA CUTS BY 50BPS TO 0.50%; AS EXPECTED, BEGINS STUDYING QUANTITATIVE EASING
- Will state what extraordinary measures it may take at the April meeting on April 21st
- Sees faster recovery rate in Canada than in other countries
- Sees rate staying at a low level until sings of growth emerge
- Notes world economy has deteriorated since January
- Notes output gap larger than Jan forecast
9:11:30 AM
Fed's Lockhart: Reiterates that rates should remain low for some time, until economy starts to recover - Q&A
- T-bill and note rates should remain low in the near term, with positive yield curve.
- T-bill yields will remain low if the Fed keeps inflation under control.
- There is plenty of demand for t-bills worldwide.
- Says he is confident that large and forceful policy efforts will help promote economic recovery in 2009.
9:15:13 AM
*US Fed and Treasury issue Joint statement on TALF: Program to commence on March 25th, certain interest rates and collateral haircuts reduced
- Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans.
- Program to run until Dec 2009
- Fed & Tsy will seek legislation to give the Federal Reserve the additional tools it will need to enable it to manage the level of reserves while providing the funding necessary for the TALF and for other key credit-easing programs.
- Fed & Tsy Analyzing conditions for accepting Commercial Mortgage Backed Securities ,and looking at additional types of AAA Asset Backed securities
- Fed & Tsy Reiterate program has the potential to generate up to $1T of lending for businesses and households
- Additional details of the TALF and the CBLI can be found at http://www.financialstability.gov/ (The site is coming soon)
10:00:02 AM
*JAN PENDING HOME SALES: -7.7% V -3.5%E
- Prior revised Lower from +6.3% to +4.8%
- NAR Chief economist: "Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales," he said.
"We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit."
10:00:20 AM
Fed's Bernanke: Businesses over-inventoried, labor markets became worse recently; Size of bank rescue depends on stress tests, US may need to expand bank rescue fund
- Economic data shows little sign of improvement, businesses are reducing investments.
- Sees contractions in foreign economies widening.
- Reiterates that rates should stay "very low" for "some time."
- Believes fiscal stimulus will raise both demand and production and reduce job losses over next two years.
- Must be ready to take actions to return stability.
- Large increase in US government debt is unwelcome, but a failure to act will be more costly in the end, alternative would be 'prolonged stagnation'
- The Treasury selling bank assets will eventually add revenue.
10:43:45 AM
Fed's Bernanke: TALF will create 'immediate' benefits for consumer, student, and business credit; banking has yet to stabilize banking - Q&A
- regrets the gaps in oversight of AIG; says NY Insurance regulator did not have the capacity to provide full oversight of AIG.
- says a good target for budget is a balanced "primary budget," that is budget excluding debt payments.
- Believes that all major US banks are 'viable', no major US banks are 'zombie' institutions.
11:18:01 AM
Fed's Bernanke: "Hopes" US debt to GDP ratio does not exceed 60%, White House forecasts are 'more optimistic' than the Federal Reserve's estimates - Q&A
- Believes that regulators should have a 'veto' over certain financial products, calls for coordination between international regulators
12:30:20 PM
Treasury Sec Geithner: Plan to stabilize financial system may cost more, $250B placeholder 'not specific request'
- Failure to cut future deficits will reduce US living standards and crowd out investment
- Remarks that more tightening in credit would create more foreclosures;
- Notes that credit contraction has caused job losses and business declines
4:30 PM
*API PETROLEUM INVENTORIES: *API CRUDE: -460K V +1ME; GASOLINE: -642K V -750KE; DISTILLATE:
+1.64M V -1.3ME; CAPACITY UTILIZATION: 83.5% V 81.8%E
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*(UK) FEB PMI CONSTRUCTION: 27.8 V 34.2E; lowest reading on record
- No revisions
Note: Residential housing was the worst performing sector of the construction industry, followed by commercial property
8:21:11 AM
Fed's Lockhart: Fed is mindful of its dual mandate of growth and inflation control, objectives can sometimes be in conflict
- US economy is exhibiting weakness "across the board," shrinking at a "dramatic rate."
- Still expects the US economic recovery to begin in second half of 2009.
- Sees US commercial real estate and the global economic weakness are "special risks" to outlook.
- The exposure of European banks is a problem.
- Expects house prices to bottom this year.
- Neither inflation or deflation are serious risks at this point.
8:23:01 AM
CNBC's Liseman reiterates $200B TALF to begin today, notes it could become the Fed's largest emergency loan program
- Note that according to the Fed's website, borrowers will be able to choose either a fixed or floating interest rate on TALF loans. The fixed interest rate will be 100 basis points over the 3-year Libor swap rate, and the floating interest rate will be 100 basis points over 1-month Libor. The New York Fed also will assess an administrative fee equal to 5 basis points of the loan amount on the settlement date of each loan transaction.
- According to the Fed's website, eligible collateral will include USD-denominated cash (that is, not synthetic) ABS that has a credit rating in the highest long-term or short-term investment-grade rating category from two or more major nationally recognized statistical rating organizations and do not have a credit rating below the highest investment-grade rating category.
9:00:01 AM
*(CA) BANK OF CANADA CUTS BY 50BPS TO 0.50%; AS EXPECTED, BEGINS STUDYING QUANTITATIVE EASING
- Will state what extraordinary measures it may take at the April meeting on April 21st
- Sees faster recovery rate in Canada than in other countries
- Sees rate staying at a low level until sings of growth emerge
- Notes world economy has deteriorated since January
- Notes output gap larger than Jan forecast
9:11:30 AM
Fed's Lockhart: Reiterates that rates should remain low for some time, until economy starts to recover - Q&A
- T-bill and note rates should remain low in the near term, with positive yield curve.
- T-bill yields will remain low if the Fed keeps inflation under control.
- There is plenty of demand for t-bills worldwide.
- Says he is confident that large and forceful policy efforts will help promote economic recovery in 2009.
9:15:13 AM
*US Fed and Treasury issue Joint statement on TALF: Program to commence on March 25th, certain interest rates and collateral haircuts reduced
- Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans.
- Program to run until Dec 2009
- Fed & Tsy will seek legislation to give the Federal Reserve the additional tools it will need to enable it to manage the level of reserves while providing the funding necessary for the TALF and for other key credit-easing programs.
- Fed & Tsy Analyzing conditions for accepting Commercial Mortgage Backed Securities ,and looking at additional types of AAA Asset Backed securities
- Fed & Tsy Reiterate program has the potential to generate up to $1T of lending for businesses and households
- Additional details of the TALF and the CBLI can be found at http://www.financialstability.gov/ (The site is coming soon)
10:00:02 AM
*JAN PENDING HOME SALES: -7.7% V -3.5%E
- Prior revised Lower from +6.3% to +4.8%
- NAR Chief economist: "Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales," he said.
"We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit."
10:00:20 AM
Fed's Bernanke: Businesses over-inventoried, labor markets became worse recently; Size of bank rescue depends on stress tests, US may need to expand bank rescue fund
- Economic data shows little sign of improvement, businesses are reducing investments.
- Sees contractions in foreign economies widening.
- Reiterates that rates should stay "very low" for "some time."
- Believes fiscal stimulus will raise both demand and production and reduce job losses over next two years.
- Must be ready to take actions to return stability.
- Large increase in US government debt is unwelcome, but a failure to act will be more costly in the end, alternative would be 'prolonged stagnation'
- The Treasury selling bank assets will eventually add revenue.
10:43:45 AM
Fed's Bernanke: TALF will create 'immediate' benefits for consumer, student, and business credit; banking has yet to stabilize banking - Q&A
- regrets the gaps in oversight of AIG; says NY Insurance regulator did not have the capacity to provide full oversight of AIG.
- says a good target for budget is a balanced "primary budget," that is budget excluding debt payments.
- Believes that all major US banks are 'viable', no major US banks are 'zombie' institutions.
11:18:01 AM
Fed's Bernanke: "Hopes" US debt to GDP ratio does not exceed 60%, White House forecasts are 'more optimistic' than the Federal Reserve's estimates - Q&A
- Believes that regulators should have a 'veto' over certain financial products, calls for coordination between international regulators
More Headlines
- Equity markets seem to be reprising their performance from yesterday, with all three major US indices relinquishing any early gains before the European close.
The January pending US home sales reading was -7.7%, twice the expected decline. Federal Reserve Chairman Bernanke continues to testify before Congress, already having said that any economic recovery depends on the government's ability to stabilize weak financial markets. The VIX volatility index remains over 50 while gold prices continue to retreat aggressively inducing speculation of forced liquidation. Treasury prices continue to rally on the back of weak stock markets erasing early losses. The 10-year yields is back below 3.9%.
- The Fed and the Obama administration provided more details on the TALF just before the open of trade. According to a joint Fed/Treasury statement, TALF lending will begin on March 25th and run through December 2009.
The New York Fed will lend up to $200B secured by certain AAA-rated securities back by newly and recently originated auto loans, credit card loans, student loans and SBA-guaranteed small business loans. Just before the announcement, CNBC's Liseman said the TALF could grow to become the Fed's largest emergency loan program. The Wall Street Journal reported overnight that the Obama administration is mulling the creation of multiple investment funds to buy toxic assets, including separate funds capitalized by both government and private funds and run by private investment managers. The private managers would run the funds and have the power to decide what assets to buy and what prices to pay. Other reports noted that the TALF may be expanded to buy up toxic loans.
- Leading financial stocks started off on the right foot, making considerable gains on all the qualitative easing news. But deteriorating equity indices and plenty of pessimism from Bernanke is helping erode these gains.
In addition, GE fell dramatically in early trading, with shares hitting levels last seen in the early 1990s. Yesterday the WSJ highlighted GE Capital's exposure to Eastern Europe, noting that could have much more than $26B (as disclosed in 2008) committed to the region. After the bell Stern Agee said it doesn't expect GE's dividend cut to help boost liquidity at the company. Elsewhere among the financials, Russia offered Bank of New York a $800M settlement deal in exchange for dropping its $22B suit against the bank over allegations of illegal imports from back in the 1990s.
- Another round of dreadful monthly sales results are expected from the automakers later today. But in contrast to all the industry pessimism, two auto retailing companies reported strikingly positive results before the open.
Car parts retailer AutoZone beat earnings and revenue targets by solid margins, and reported healthy +6% same-store sales results. Used car seller America's Car-Mart beat earnings estimates on an ex items basis and reported a big y/y increase in unit sales. Shares of both AZO and CRMT are up 10% in early trading. Shares of Trina Solar spiked up nearly 8% in early action before trading off a bit, after the company beat Q4 revenue targets. TravelCenters of America reported positive Q4 earnings compared to expectations for a big loss, but missed revenues in a big way. Trading in shares of TA has been volatile.
- Equity trading continues to drive the currency market in today's session. The greenback rebounded from earlier lows in European trading to move back toward opening levels from Asia. Risk aversion was heightened by the January pending US home sales reading.
In his testimony, the Fed's Bernanke said policy makers might need to expand aid to the banking system and take other aggressive measures even at the cost of rising fiscal deficits. The IMF commented that all major advance economies were in recession and that emerging and that developing countries were slowing abruptly. As noted earlier today, dealer chatter continues to circulate regarding a 1.2500 to 1.3000 option barrier with expiration set for next week. Dealers are noting that the inability of EUR/USD to break below the 1.25 on Sunday during the Wellington open cemented this option viewpoint.
- The CAD weakened considerably following the expected 50bps interest rate cut by the Bank of Canada. USD/CAD was moving back towards the 1.30 area for fresh 3-month highs.
The British Pound retested the 1.4000 level for a second straight session and again found some momentum to hold above the level.
'One day well look back on this and it will all seem funny.'
ES Summary
Previous
Current
27-Feb-2009
02-Mar-2009
OPEN
752.25
731.25
HIGH
756.00
733.75
LOW
729.50
698.75
CLOSE
734.25
705.50
RANGE
26.50
35.00
VOLUME
2,499,376
3,023,734
RED ZONE AREAS for Tomorrow
More info on the RED ZONE located here:
FDAX (DAX): 3720.50 / 3666.00
ES (E-MINI S&P): 717.00 / 698.75
YM (E-MINI DOW): 7086 / 6907
6E (EURO): 1.2583 / 1.2536
ZS (SOYBEANS): 875.50 / 843.00
GC (GOLD): 947.1 / 921.00
Economic News to Watch Tomorrow
9:00am BoC Rate Decision
10:00am JanPending Home Sales m/m (last 6.3%)
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
6:00:20 AM
American International Group, Inc US Govt to exchange $40B in cumulative preferred shares for new common shares, as had been speculated over the weekend
- In agreement with US government for $30B equity capital facility
- AIG to issue convertible preferred stock representing 77.9% of shares to US Treasury trust
- US Gov't ready to support AIG further if markets do not stabilize
- Fed to make new loans of up to $8.5B to AIG Life Subsidiaries
- Fed states AIG continues to face "significant challenges"
- The restructuring components of the government's assistance begin to separate the major non-core businesses of AIG, as well as strengthen the company's finances.
- The long-term solution for the company, its customers, the U.S. taxpayer, and the financial system is the orderly restructuring and refocusing of the firm.
- As required by the credit agreement governing the Revolving Credit Facility, AIG has agreed to issue on March 4, 2009, shares of convertible preferred stock representing an approximately 77.9% equity interest in AIG to an independent trust for the sole benefit of the United States Treasury.
6:15:35 AM
American International Group, Inc Reports Q4 -$14.17 (adj) v -$0.37e, Operating income -$47.7B v 24.82Be
- Q4 General Insurance Net premiums Written $9.21B v $11.0B y/y
- Q4 General Insurance Net Premiums Earned $11.0B v $11.7B y/y
- Q4 Life Insurance & Retirement Services Premiums and Other Considerations $9.04B v $8.73B y/y
- Q4 Financial Services -$17.6B v -$10.2B y/y
- Q4 Asset Management -$705M v $458M y/y
- AIGs results in the fourth quarter were negatively affected by continued severe credit market deterioration, particularly in commercial mortgage backed securities (CMBS), and charges related to ongoing restructuring-related activities.
- May need to write off continued sums of goodwill asset management unit if losses are continued to be realized into FY09
7:08:49 AM
IMF: Likely to cut its global GDP forecast from its +0.5% prior view to a negative reading
- Worse is yet to come in global downturn
- Says is needs to double its lending ability
- Note on 2/18 IMF's Strauss Kahn noted that IMF could revise Global growth forecast to near 0%, on 2/19 remarked that the global economic outlook was 'gloomier' than recent forecasts
- Reminder: Back on Jan 28th the IMF revised its 2009 global GDP to +0.5% from 2.2% prior
8:30 AM
*JAN PCE CORE M/M: 0.1% V 0.1%E; PCE CORE Y/Y: 1.6% 1.6%E; PCE DEFLATOR Y/Y: 0.7% V 0.55E- Prior PCE Deflator YoY revised from 0.6% to 0.8%
8:30:02 AM
*JAN PERSONAL INCOME: 0.4% V -0.2%E; PERSONAL SPENDING: 0.6% V 0.4%E
- No revisions
**First rise in spending in seven months
Jan personal saving rate rose by 5% largest increase since 1995; Annual rate of $545.5B, the highest level since monthly records began in 1959.
8:30 AM
*(CA) CANADA JAN GROSS DOMESTIC PRODUCT M/M: -1.0% V -0.7%E; Q3 GDP ANNUALIZED: -3.4% V -3.6%E- Q3 GDP Annualized revised from 1.3% to 0.9%
10:00 AM
*JAN CONSTRUCTION SPENDING M/M: -3.3% V -1.5%E- prior revised from -1.4% to -2.4%
10:21 AM
AIG American International Group, Inc CEO Liddy: Situation is dependent upon what occurs in capital markets in short term, whether equity can support debt, cannot say 100% whether will come back to US Govt again -
CNBC comments
1:18:50 PM
Fed's Lacker: can not say what conditions would prompt the Fed to buy long dated Treasuries - Q&A - Can continue to increase balance sheet if stimulus is necessary; blaming the ratings agencies for the entire credit crisis goes too far
8:30:40 PM
(US) Obama administration is mulling the creation of multiple investment funds to buy toxic assets - WSJ - One idea being floated is to create separate funds run by private investment managers.
- The managers would have to invest a certain amount of capital and added financing would be provided by the government.
- The profit or losses would be shared by the government and the investors.
- The report adds that private investment managers would run the funds and have the power to decide what assets to buy and what prices to pay.
- As part of the plan, the government could provide non-recourse loans to private investors
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
March 02, 2009
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American International Group, Inc US Govt to exchange $40B in cumulative preferred shares for new common shares, as had been speculated over the weekend
- In agreement with US government for $30B equity capital facility
- AIG to issue convertible preferred stock representing 77.9% of shares to US Treasury trust
- US Gov't ready to support AIG further if markets do not stabilize
- Fed to make new loans of up to $8.5B to AIG Life Subsidiaries
- Fed states AIG continues to face "significant challenges"
- The restructuring components of the government's assistance begin to separate the major non-core businesses of AIG, as well as strengthen the company's finances.
- The long-term solution for the company, its customers, the U.S. taxpayer, and the financial system is the orderly restructuring and refocusing of the firm.
- As required by the credit agreement governing the Revolving Credit Facility, AIG has agreed to issue on March 4, 2009, shares of convertible preferred stock representing an approximately 77.9% equity interest in AIG to an independent trust for the sole benefit of the United States Treasury.
6:15:35 AM
American International Group, Inc Reports Q4 -$14.17 (adj) v -$0.37e, Operating income -$47.7B v 24.82Be
- Q4 General Insurance Net premiums Written $9.21B v $11.0B y/y
- Q4 General Insurance Net Premiums Earned $11.0B v $11.7B y/y
- Q4 Life Insurance & Retirement Services Premiums and Other Considerations $9.04B v $8.73B y/y
- Q4 Financial Services -$17.6B v -$10.2B y/y
- Q4 Asset Management -$705M v $458M y/y
- AIGs results in the fourth quarter were negatively affected by continued severe credit market deterioration, particularly in commercial mortgage backed securities (CMBS), and charges related to ongoing restructuring-related activities.
- May need to write off continued sums of goodwill asset management unit if losses are continued to be realized into FY09
7:08:49 AM
IMF: Likely to cut its global GDP forecast from its +0.5% prior view to a negative reading
- Worse is yet to come in global downturn
- Says is needs to double its lending ability
- Note on 2/18 IMF's Strauss Kahn noted that IMF could revise Global growth forecast to near 0%, on 2/19 remarked that the global economic outlook was 'gloomier' than recent forecasts
- Reminder: Back on Jan 28th the IMF revised its 2009 global GDP to +0.5% from 2.2% prior
8:30 AM
*JAN PCE CORE M/M: 0.1% V 0.1%E; PCE CORE Y/Y: 1.6% 1.6%E; PCE DEFLATOR Y/Y: 0.7% V 0.55E- Prior PCE Deflator YoY revised from 0.6% to 0.8%
8:30:02 AM
*JAN PERSONAL INCOME: 0.4% V -0.2%E; PERSONAL SPENDING: 0.6% V 0.4%E
- No revisions
**First rise in spending in seven months
Jan personal saving rate rose by 5% largest increase since 1995; Annual rate of $545.5B, the highest level since monthly records began in 1959.
8:30 AM
*(CA) CANADA JAN GROSS DOMESTIC PRODUCT M/M: -1.0% V -0.7%E; Q3 GDP ANNUALIZED: -3.4% V -3.6%E- Q3 GDP Annualized revised from 1.3% to 0.9%
10:00 AM
*JAN CONSTRUCTION SPENDING M/M: -3.3% V -1.5%E- prior revised from -1.4% to -2.4%
10:21 AM
AIG American International Group, Inc CEO Liddy: Situation is dependent upon what occurs in capital markets in short term, whether equity can support debt, cannot say 100% whether will come back to US Govt again -
CNBC comments
More Headlines
- March trading roared in like an angry bear this morning, with the DJIA opening below 7,000 for the first time since October 1997.
Investors are focused on ailing banks as usual, after HSBC offered a grim Q4 report and AIG disclosed the biggest quarterly loss in US history and confirmed it once again returned to Uncle Sam with hat in hand.. Note that over the weekend, Warren Buffet told investors that Berkshire Hathaway had its worst year ever in 2008 and warned that the economy would be in shambles throughout 2009. There were hints of sunshine on the data front, with the February ISM Manufacturing reading a bit better than expected and the January Personal Spending data showing the first rise in spending in the last seven months. But there are problems with the latter, as the 5% rise in January personal savings (largest increase since 1995) and the record annual rate (highest since records began back in 1959) is looking bad for consumption. Front-month crude is getting slammed, with the contract off almost $4 just above $40, and despite the stock market weakness gold prices are losing ground as well.
- Government bond prices are bid up as money finds its way to Treasuries and the like.
The 10-year is up better than a half a point pushing the yield back below 3%. The yield on the ultra safe 3-month T-bill has slipped back to 0.25%, hovering right at its lowest levels in roughly a month.
- Fallen insurance giant AIG reported , stating that it lost $61.7B in the fourth quarter.
And confirming earlier reports, the government once again restructured its rescue package for AIG, handing it another $30B in taxpayer funds to be used on an "as needed" basis and converting an existing $40B stake in preferred shares to common shares.
This is the fourth revision of the government's bailout of the insurance company. AIG's CEO Liddy was at pains to insist that AIG does not need fresh cash right now and that its liquidity situation has stabilized. An unnamed US official said that the aid severs to continue stabilizing AIG and reducing the size of the company, which still poses a systemic risk. According to the official, taxpayers' exposure to AIG now amounts to $163B.
- Last night the New York Post reported that the Treasury is ready to accept warrants instead of common stock from banks in exchange for financial aid, presumably to keep banks from being nationalized.
The Post adds that the move to accept warrants will play out next week as Treasury gets results from the first round of stress tests. Note that well-known analyst Robert Prechter predicted today that the US may see more bank failures than the FDIC has funds to cover, responding to news that the FDIC would raise fees and levy as special assessment to beef up its warchest. Bank of America and Wells Fargo are down 13% or so in early trading, while Goldman, Morgan Stanley and JP Morgan are down around 5%.
- Satellite TV companies Dish and Echostar are having a tough morning, with shares of both down 9% in early trading.
Dish Network reported more or less in line with consensus estimates, but there were some disturbing developments in the company's earnings press release, including a 100K q/q loss in net subscribers and an ugly warning about its $5B worth of outstanding debt, namely that more debt may be needed that would have a dilutive effect on equity capital and future earnings. Echostar's huge quarterly loss includes big impairments and losses on investments and other assets.
- In currencies, the greenback managed to consolidate gains against the major European pairs during the New York session.
Traders concerns about Eastern Europe have only grown after the EU summit meeting this weekend failed to agree on any concerted support for the region. Dealers continue to wonder whether the pre Asian market lows in EUR/USD represent the sort of solid support that could last through the rest of the week and past US payroll data on Friday.
Dealer chatter is noting decent option support putting a floor in place and renewed talk of big 1.2500 barriers. Euro momentum apparently lacks the impetus to make a significant test of the downside. Sterling is broadly weaker against it major pairs as it probed back toward the 1.40 level against the USD and 0.90 versus the euro. CAD hit fresh 2009 lows as it tested the 1.2880 level against the USD. Canada's Dec GDP contracted more than expected and commodity prices slumped during the NY morning on deepening global recession concerns.
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