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Monthly Archives: April 2012

European Central Bank Rejects Geithner-IMF Push for More Crisis-Fighting

“European Central Bank officials led by President Mario Draghi resisted calls from the International Monetary Fund and U.S. Treasury to do more to stem the debt crisis roiling the euro-area economy.

As talks of global finance chiefs ended yesterday in Washington, euro-area central bankers from Draghi to Bundesbank President Jens Weidmann argued they have done enough by cutting interest rates and issuing more long-term bank loans.

“None of the advice that the IMF is offering has been discussed by the Governing Council, in recent times at least,” Draghi said on April 20 while attending IMF meetings in Washington. Weidmann said in an interview that “the problems in Europe can’t be solved by monetary policy measures.”

Officials in Europe and around the world are bickering about additional crisis-calming steps, as turmoil returns to the continent’s bond market amid concern that Spain may need a bailout. While Draghi says Spain and Italy need to agree further action, Prime Minister Mariano Rajoy’s government wants the ECB to reactivate its bond-buying program.

Spain and Italy have made “remarkable” progress on structural changes, Draghi said. Even so, the process is far from complete for both countries, he said.

“The ECB is drawing a line to keep pressure on governments to make the necessary adjustments,” said Megan Greene, head of European economics at Roubini Global Economics LLC, who was in Washington. “If push came to shove the ECB would step in, but they’ll hold the line for now.”

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Gapping Up and Down This Morning

Gapping up

RDEA +51.2%, AMLN +12.4%, PHG +4.6%, DHI +3.4% HAR +1.0%,

Gapping down

The entire universe…… 

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U.S. Equity Preview: $WMT, $TLAB, $PJC, $OTT, $K, $DB, $RDEA, $BMY, $AMLN, & $AMZN

Source

Amazon.com Inc. (AMZN) fell 1.4 percent to $187.29. The largest Internet retailer has started shipping the Kindle Touch 3G to customers in 175 countries and territories around the world, the company said in a statement.

Amylin Pharmaceuticals Inc. (AMLN) climbed 10 percent to $25.30. The maker of diabetes drugs Bydureon and Byetta is seeking a buyer after rejecting an unsolicited bid from Bristol- Myers Squibb Co. (BMY) , two people with knowledge of the matter said.

Ardea Biosciences Inc. (RDEA) surged 51 percent to $31.53. The company will be bought byAstraZeneca Plc (AZN) for $1.26 billion, or $32 a share, to add experimental gout and cancer treatment in an effort to replenish AstraZeneca’s drug pipeline.

Deutsche Bank AG (DB) declined 4.1 percent to $43.52. Germany’s largest bank was said to probably book an additional charge of as much as 400 million euros ($528 million) tied to the sale of Actavis Group hf.

Kellogg Co. (K) fell 5.1 percent to $51.26. The maker of Corn Flakes cereal and Keebler cookies said it expects to have 2012 profit of $3.18 to $3.30 per share, reducing its outlook for the year after a first quarter in which sales fell 1.3 percent.

Otelco Inc. (OTT) : Time Warner Cable Inc. (TWC US) said it won’t renew a wholesale network connections contract that accounted for 12 percent of the provider of wireless telephone services to rural communities’ 2011 revenue.

Piper Jaffray Cos. (PJC) : The investment bank and asset manager will cut 2 percent to 3 percent of its workforce as part of an effort to reduce costs. The measures will result in a pretax charge of as much as $5 million in the second quarter, the company said in a statement.

Tellabs Inc. (TLAB) : Rob Pullen, chief executive officer of the voice and data systems company, said in a statement that he has been diagnosed with colon cancer and began chemotherapy “a few” weeks ago.

Wal-Mart Stores Inc. (WMT) dropped 3.1 percent to $60.53. Mexican Finance Minister Jose Antonio Meade said authorities don’t have enough information to open an investigation into alleged bribery at the retailer’s local subsidiary. The New York Times reported that the company curtailed an internal investigation into allegations of bribery by executives in Mexico.”

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Upgrades and Downgrades This Morning

Source

“ARM Holdings PLC (NASDAQ: ARMH) Raised to Neutral at JPMorgan.

Banco Santander (NYSE: STD) Added to Conviction Buy List at Goldman Sachs; Raised to Overweight at JPMorgan.

Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) maintained Buy but removed from Conviction Buy List at Goldman Sachs.

CafePress Inc. (NASDAQ: PRSS) Started as Buy at Janney

CBS Corporation (NYSE: CBS) named Bull of the Day at Zacks.

Dril-Quip, Inc. (NYSE: DRQ) named Bear of the Day at Zacks.

F5 Networks, Inc. (NASDAQ: FFIV) Started as Overweight at Morgan Stanley.

General Electric Co. (NYSE: GE) Reiterated Outperform with $22 target at Credit Suisse.

Groupon, Inc. (NASDAQ: GRPN) Raised to Overweight at Evercore.

Microsoft Corporation (NASDAQ: MSFT) Reiterated Buy with $39 target at Argus.

Nationstar Mortgage Holdings Inc. (NYSE: NSM) Started as Outperform with $20 target at Credit Suisse; Started as Outperform at Wells Fargo; Started as Buy with $18 target at BofA/ML.

priceline.com Incorporated (NASDAQ: PCLN) Reiterated Outperform and raised target to $811 at Credit Suisse.

Progressive Corp. (NYSE: PGR) Cut to Neutral at Citigroup.

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) Reiterated Buy and raised target to $146 at BofA/ML.”

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The Feds and Scientists Argue Over the Severity of Solar Flares and Their Ramifications on society

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“WASHINGTON – As scientists warn of an impending solar storm between now and 2014 that could collapse the national power grid, thrusting millions into darkness instantly, a debate has flared up between utilities and the federal government on the severity of such an event.

NASA and the National Academy of Sciences previously confirmed to G2Bulletin that an electromagnetic pulse event from an intense solar storm could occur any time between now and 2014.

They say it could have the effect of frying electronics and knocking out transformers in the national electric grid system.

Already, there are separate published reports of massive solar storms of plasma – some as large as the Earth itself – flaring off of the sun’s surface and shooting out into space, with some recently having come close enough to Earth to affect worldwide communications and alter the flights of commercial aircraft near the North Pole.

But in February, the North American Electric Reliability Corporation, which represents the power industry, issued a stunning report asserting that a worst-case geomagnetic “super storm” like the 1859 Carrington Event likely wouldn’t damage most power grid transformers. Instead, it would cause voltage instability and possibly result in blackouts lasting only a few hours or days, but not months and years.

NERC’s assertion, however, is at serious variance with the 2008 congressional EMP Commission, the 2008 National Academy of Sciences report; a 2010 Federal Energy Regulatory Commission report; the 2012 report by the Defense Committee of the British Parliament, and others.

Even the British scientists who contributed to the parliament report came to their own independent assessment that a great geomagnetic storm would cause widespread damage to power grid transformers and result in a protracted blackout lasting months, or even years, with catastrophic consequences for society.

Despite NERC’s assertion that there wouldn’t be widespread damage to the nation’s power grid transformers in the event of an intense solar storm, the FERC, which regulates interstate electricity and other energy sales but has no authority now over local utilities to harden their grid sites, says that as many as 130 million Americans could have problems for years.

NERC asserts that any blackout would last hours or days, at most.

“The FERC report relied on a four-part quantitative model of geomagnetic disturbance effects on the U.S. power grid to develop conclusions and recommendations, while the NERC report relied on meetings of industry employees in lieu of data collection or event investigation,” according to Peter Vincent Pry, who heads the congressional quasi-legislative Task Force on National and Homeland Security. Pry also was staff director to the EMP Commission.

Pry said that the Task Force had issued its own report comparing the scientific methodology used in the industry-sponsored NERC report with that used in 2010 FERC report.

He pointed out that the NERC report was the product of a so-called Geomagnetic Disturbance Task Force with membership consisting only of representatives from electricity generation and transmission companies….”

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Alcatel Lucent, $ALU, CDS Yields Rise; Ratings Cut Anticipated

Alcatel-Lucent (ALU) investors drove down the cost of insuring the phone-equipment maker’s debt by more than any other European technology company this year as its bonds imply a two-level credit-rating boost.

Credit-default swaps protecting the Paris-based company’s debt from default for five years have fallen 646 basis points, or 36 percent, compared with the 31 percent decline for second- best performer Cap Gemini SA (CAP), according to CMA in New York. The contracts imply a Ba2 rating, according to Moody’s Analytics, higher than its current B1 grade….”

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Preliminary Numbers Show China Manufacturing May Shrink Further Into Recessionary Territory

 

China’s manufacturing may shrink for a sixth month in April, maintaining pressure on officials to adopt more policies to stimulate economic growth, a survey of companies showed.

 

The 49.1 preliminary reading of the purchasing managers’ index from HSBC Holdings Plc and Markit Economics today compares with a final 48.3 in March. A number below 50 points to a contraction.

The contraction, if confirmed in the final reading due May 2, would be the longest since the global financial crisis and may spur the government to lower banks’ reserve requirements a third time since November. A $430 billion expansion of the International Monetary Fund’s lending power in Washington talks ending yesterday may help contain Europe’s debt turmoil and shore up demand in China’s biggest export market.

“The numbers in recent months have never been that good but don’t show signs of falling off a cliff either,” Paul Cavey, a Hong Kong-based economist with Macquarie Securities Ltd., said of the HSBC PMI. “Today’s number would suggest continuation of the government’s current policy of slow, cautious loosening.”


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Asian Markets Fall on Shrinking European Manufacturing Data

Stocks (MXAP) and industrial metals fell as manufacturing shrank in Europe and China. The euro weakened and the cost of insuring the region’s debt rose after the Dutch government split and French President Nicolas Sarkozy lost ground in elections.

The MSCI All-Country World Index (MXWD) slid 0.8 percent at 12:50 a.m. in London as an index of Dutch stocks sank to a four-month low. Standard & Poor’s 500 Index futures dropped 1 percent. Copper, zinc and lead declined at least 1.4 percent. The euro weakened 0.6 percent versus the dollar and the yen strengthened against all 16 of its most-traded peers. The cost of insuring European sovereign debt jumped to the highest in more than a month. The extra yieldinvestors demand to hold Dutch 10-year bonds over German bunds rose to a three-year high.

Euro-area services and manufacturing declined more than estimated in April, while data indicated China’s production will contract for a sixth month, according to a Markit Economicsand HSBC Holdings Plc. Sarkozy’s hopes of a second term rest on winning voters from the anti-euro National Front before the final round of elections. Dutch Prime Minister Mark Ruttefailed to reach a deal with a coalition party over austerity measures.

“Politics will undoubtedly provide the pepper in this week’s financial melting pot,” said Bill Blain, co-head of the special situations group at Newedge Group Ltd. in London. “A turnover in the Dutch government, and the inevitable swing toward more skeptical anti-Europe politics could well generate increased uncertainty.”

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The Euro and the Aussie Dollar Fall on Disappointing Economic Data

“The euro fell for the first time in five days against the yen amid concern French presidential elections and Dutch government turmoil will disrupt efforts to stem the region’s debt crisis.

Australia’s dollar slid after a report showed the nation’s producer prices fell last quarter, adding to speculation the Reserve Bank will cut interest rates. The yen rose at least 0.5 percent against all of its major peers as France’s Socialist challenger Francois Hollande won more of the first-round ballot than incumbent Nicolas Sarkozy, boosting demand for haven assets. The anti-euro National Front, led by Marine Le Pen, came third, winning a record number of votes for the far-right party.

“The results of the French election point to a narrow lead by Hollande, but an increase in support for the far-right political party suggests that negative-Europe sentiment may intensify,” said Michael Sneyd, a currency strategist for BNP Paribas SA in London. “This is likely to weigh heavily on the euro over the weeks ahead.”

The euro weakened 1.3 percent to 106.44 yen at 7:40 a.m. New York time. It dropped 0.7 percent to $1.3129. The yen strengthened 0.5 percent to 81.08 per dollar….”

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