Airlines Warn Over The Crash and Burn Effect of Higher Energy Prices

“(AP) GENEVA – The global aviation industry could run up losses of over $5 billion this year if oil prices spike by more than anticipated in light of the tensions building up over Iran’s nuclear program, the industry’s trade group said Tuesday.

The International Air Transport Association, or IATA, says it now expects earnings will likely decline to $3 billion in 2012. That’s down from December’s forecast of $3.5 billion, based on an expectation that oil prices will average $115 a barrel. At present, the benchmark New York rate is trading at nine-month highs around $107 a barrel.

Tony Tyler, IATA’s chief executive, said the industry’s diminished profit forecast for 2012 could turn to losses of more than $5 billion if oil prices spike to $150 a barrel due to Western tensions with Iran.

“I must emphasize that the industry is fragile,” he said, pointing to global growth forecasts of 2 percent for this year. “Historically, if GDP falls below 2 percent, the industry returns a collective loss. So it would not take much of a shock to turn our very modest profit projection to a net loss.”

“Indeed, that shock could be oil,” he added. “Such a shock would link to a fall in GDP growth to 1.7 percent and we could see losses in excess of $5 billion.”…

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“Martin Feldstein, former chief economic adviser to Ronald Reagan, says the most important cloud on the economic recovery horizon is the large tax increase that will occur next year unless legislation is passed to block it.

“The Congressional Budget Office predicts that, under current law, the revenue of the federal government will rise from $2.4 trillion in the current fiscal year, which ends in September, to $2.9 trillion in the following fiscal year,” Feldstein writes in the Financial Times.

That increase of $512 billion is equivalent to 2.9 percent of GDP, bringing federal revenue as a share of GDP from 15.8 percent this year to 18.7 percent next year, notes Feldman, a professor of economics at Harvard University. …”

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Q4 profits were not so great, but the company is giving guidance that Wall st likes….

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Adobe Systems Inc. (ADBE) fell 4.2 percent to $33.05. The largest maker of graphic design software forecast lower profit than some analysts had projected, signaling that the new version of Creative Suite may not bring as much of a boost as anticipated.

Amazon.com Inc. (AMZN) decreased 0.9 percent to $183.88. The largest Internet retailer will buy Kiva Systems Inc., a material handling technology company, for $775 million in cash.

Michael Kors Holdings Ltd. (KORS) (KORS US) increased 2.7 percent to $46.55. The luxury-goods maker and retailer raised its forecast of fourth-quarter earnings excluding some items to a range of 14 cents to 16 cents a share, up from 10 cents to 12 cents.

Stifel Financial Corp. (SF) : The St. Louis-based financial-services company paid $13 million to settle a lawsuit with five Wisconsin school districts.

Targacept Inc. (TRGT) decreased 11 percent to $6.59. AstraZeneca Plc (AZN US) said it won’t seek regulatory approval of an experimental antidepressant licensed from Targacept after the compound failed in its last two late-stage studies.

Tiffany & Co. (TIF) gained 2.2 percent to $70.20. The world’s second-largest luxury jewelry retailer forecast 2012 earnings per share of at least $3.95, exceeding the average analyst estimate of $3.92. The company also estimated 2012 sales of $4 billion, beating the average analyst estimate of $3.9 billion.

Walt Disney Co. (DIS) dropped 1 percent to $43.01. The largest U.S. entertainment company said the box-office flop “John Carter” will lead to a quarterly operating loss of $80 million to $120 million for its film division. The film itself is forecast to lose about $200 million, Disney said in an e- mailed statement.

Williams Partners LP (WPZ) : The U.S. pipeline operator agreed to acquire a unit of Caiman Energy for about $2.5 billion to establish a “major footprint” in the natural-gas rich area of the Marcellus Shale.

Gapping up

PSTI +7%,  BPAX +13.7%, GMAN +11.1%, KORS +4.6%, FMCN +4.5%, LGF +1.8%, WMB +1.1%,  TAT +6.3%,  VOD +1.9%,  ANF +0.9%,

BAC+1% ,  AGU +0.6%, HOG +0.6%,

Gapping down

FRO -7%, AIXG -4.2%, RGP -4.1%, ADBE -4%, MT -3.1%, ARGN -2.8%, BBL -2.8%, BHP -2.7%, ASTM -2%, DB -1.4%, DIS -1%, HBC -2.3%, ING -2.3%,

BCS -1.8%, HMY -2.1%, CLF -2%, SLV -1.8%, GOLD -1.6%, GLD -1%, GDX -0.8%, SDRL -2.4%, E -2.1%, STO -1.8%, TOT -1.8%, CHK -1.4%, BP -1.2%,

FRO -4.6%, CA -1.4% ,  DPZ -1.9%, AMZN -0.9%, ASTM -2%

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Adobe Systems Inc. (NASDAQ: ADBE) Raised to Sector Perform at RBC.

Airgas Inc. (NYSE: ARG) Started as Overweight at Morgan Stanley.

Air Products and Chemicals, Inc (NYSE: APD) Started as Underweight at Morgan Stanley.

Apple Inc. (NASDAQ: AAPL) Reiterated at Buy and raised target to $740 at Stern Agee; Reiterated Buy and raised target to $700 at Credit Suisse.

ARM Holdings PLC (NASDAQ: ARMH) Raised to Overweight at Barclays.

CA Inc. (NASDAQ: CA) Cut to Sector Perform at RBC.

Digital River Inc. (NASDAQ: DRIV) Cut to Sector Perform at RBC.

Domino’s Pizza Inc. (NYSE: DPZ) Cut to Underperform at BofA/ML.

Guess? Inc. (NYSE: GES) named as Bear of the Day at Zacks.

Harley-Davidson, Inc. (NYSE: HOG) Raised to Outperform at BMO.

Kinder Morgan Inc. (NYSE: KMI) Cut to Underperform at BofA/ML.

Lions Gate Entertainment Corporation (NYSE: LGF) Started as Overweight at JPMorgan; Hunger Games looks larger than Twilight.

OmniVision Technologies, Inc. (NASDAQ: OVTI) Raised to Buy at Needham.

United Parcel Service (NYSE: UPS) Cut to Hold at Stifel Nicolaus.

United Technologies Corporation (NYSE: UTX) Reiterated near-term Hold and long-term Buy.

In Play

On the Wires 

Portugal looks a lot worse than Greece once you crunch the numbers….

“House Republicans, searching for an election-year message amid a muddled political and economic landscape, will introduce a 2013 budget Tuesday that cuts tax rates and provides for just two individual brackets of 10% and 25%.

The budget would end the Alternative Minimum Tax, which originally was aimed at the wealthy but ensnares a growing number of middle-class taxpayers each year. The plan would nearly eliminate U.S. taxes on American corporations’ earnings from overseas operations.

The proposal, to be offered by Rep. Paul Ryan (R., Wis.), who has become the Republicans’ leading figure on budget issues, has little chance of becoming law soon. It is likely to be welcomed by House and Senate Republicans, and rejected by the Democratic-controlled Senate.

But with Republicans struggling to agree on a presidential nominee and a campaign theme, party leaders hope the easy-to-understand tax-cut proposal will give Republican candidates a clear and popular message….”

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Housing starts down 1.1%

Permits up 5.1%

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“Oil dropped from the highest price in almost three weeks in New York on signs U.S. crude supply is rising and speculation that Saudi Arabia may boost output.

Futures fell as much as 0.9 percent, their first decline in three days. A government report tomorrow may show that U.S. stockpiles rose to the highest level in six months last week, according to a Bloomberg News survey. Saudi Arabia’s cabinet will work with crude consumers and producers to restore “fair” prices, according to the state news agency. Prices may be boosted as much as 30 percent by a European embargo on Iranian oil to take effect in July, saidChristine Lagarde, managing director of the International Monetary Fund.

“The market is currently well-supplied with oil but supply disruptions and looming supply shortage from Iran is keeping uncertainty high,” said Hannes Loacker, an analyst at Raiffeisen Bank International AG (RBI) in Vienna who predicts U.S. futures will average $104 this year. “Without an intensifying Iran conflict, further price gains aren’t justified.”

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“Subprime mortgages that helped fuel the U.K. housing boom are making a comeback in thebond market even with Prime Minister David Cameron cutting spending by the most since World War II and the jobless rate at a 16-year high.

Credit Suisse Group AG (CSGN) sold bonds backed by more than 340 million pounds ($540.8 million) of non-conforming home loans last week in the first deal of its type since May, according to data compiled by Bloomberg. Apollo Global Management LLC, which acquired the mortgages in 2010, is using its servicing business Lapithus Group to help collect on the loans and will keep the riskiest part of the transaction, meaning it’s in line for the highest possible returns, according to an investor presentation….”

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“U.K. inflation slowed less than economists forecast in February as higher alcohol and food costs helped keep consumer-price gains above the Bank of England’s upper limit.

Consumer prices rose 3.4 percent from a year earlier, the least since November 2010, compared with 3.6 percent in January, the Office for National Statistics said today in London. The median estimate of 36 economists was for a reading of 3.3 percent last month, according to a Bloomberg News survey…”

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“Australia passed legislation that will reap about $11 billion in taxes within three years from BHP Billiton Ltd. (BHP), Rio Tinto Group and other iron-ore and coal miners as the government seeks to turn its budget to surplus.

Prime Minister Julia Gillard’s Minerals Resource Rent Tax was passed in the upper house yesterday and will become law on July 1 after receiving backing from the ruling Labor party and the Greens, who hold the balance of power in the Senate….”

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“The dollar rose for the first time in four days against the euro after BHP Billiton Ltd. (BHP) saidChina’s steel production is slowing, boosting demand for the relative safety of the U.S. currency.

The greenback strengthened against all of its 16 major counterparts, with the biggest gains versus Asia-Pacific region currencies such as the New Zealand and Australian dollars. The U.S. currency also advanced as stocks declined around the world, spurring investor appetite for safer securities. The euro also weakened against the dollar as a report showed German producer prices rose at a slower pace last month.

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Ben S. Bernanke, chairman of the U.S. Federal Reserve. Photographer: Andrew Harrer/Bloomberg

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March 16 (Bloomberg) — Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA, talks about the dollar, yen and rising Treasury yields. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

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March 15 (Bloomberg) — Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., talks about currency strategy for the yen, dollar and Swiss franc. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

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The dollar was at $1.3242 per euro as of 9:16 a.m. in Singapore from $1.3238 in New York yesterday. Photographer: Ali Mohammadi/Bloomberg

“Worries about a slowdown in the Chinese economy, that’s affecting risk” and boosting the dollar, said Geoffrey Yu, a currency analyst at UBS AG in London. “Yes the U.S. may be recovering but with the rest of the world in a slowdown, how beneficial is that going to be?”

Asia

Europe

Futures

Currencies

Commodities

LIBOR, EURIBOR, 10 year yields for Italy, Spain, France, and Germany

Saudi Arabia is taking steps to cool the overheating global energy market, boosting its exports to the US and re-opening old oilfields to expand production, as the world’s largest oil producer tries to prevent damage to the global economic recovery.

The Saudi cabinet on Monday said the kingdom would work “individually” and with others for the “return [of] oil prices to fair levels”. Riyadh recently said it aimed to keep oil prices at $100.

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Will this year’s release from the SPR be any different from last year’s? Some charts and commentary attempt to answer this question…