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Comments »Monthly Archives: June 2011
Special Dividend Carrot Dangled to Move Forward With a NYSE/Euronext Deustche Boerse Merger
“FRANKFURT/NEW YORK (Reuters) – Deutsche Boerse AG (DB1Gn.DE) and NYSE Euronext (NYX.N) unveiled a special dividend on Tuesday, flexing their financial muscle a month before shareholders decide whether to approve a merger that would create the world’s largest exchange operator.
Shareholders in a combined company are being offered a one-time dividend of 2 euros per share after the deal closes, the companies said in a joint statement. The total payout is about 620 million euros ($910 million).
The dividend, which had been discussed with shareholders in the last few months, was offered despite the fact that rivals Nasdaq OMX Group (NDAQ.O) and IntercontinentalExchange (ICE.N) dropped a competing offer for the New York Stock Exchange parent last month.
Now, the main hurdle for the two exchanges is winning antitrust approval for their $10.2 billion deal in Europe, where the combined company will have a lock on exchange-based derivatives trading.
“I’m not sure whether that dividend was necessary to get the shareholder approval at this stage of the game because you didn’t have a competing bid, and I think the risk is more on the competition (antitrust) side,” said Chris Allen, exchanges analyst at Evercore Partners.”
Comments »China: U.S. Default Talk is Playing With Fire
“SINGAPORE (Reuters) – Republican lawmakers are “playing with fire” by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China’s central bank said on Wednesday.
The idea of a technical default — essentially delaying interest payments for a few days — has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday.
But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn.
Li Daokui, an adviser to the People’s Bank of China, said a default could undermine the U.S. dollar, and Beijing needed to dissuade Washington from pursuing this course of action.
“I think there is a risk that the U.S. debt default may happen,” Li told reporters on the sidelines of a forum in Beijing. “The result will be very serious and I really hope that they would stop playing with fire.”
China is the largest foreign creditor to the United States, holding more than $1 trillion in Treasury debt as of March, U.S. data shows, so its concerns carry considerable weight in Washington.
“I really worry about the risks of a U.S. debt default, which I think may lead to a decline in the dollar’s value,” Li said.”
Comments »Crack Spreads Rally 1.63%
OPEC Fails to Agree on Production Upside Quotas….Several Ministers Leave the Table Without Comment…Oil Reverses to Upside
“VIENNA (Reuters) – OPEC talks broke down on Wednesday without an agreement to raise output after Saudi Arabia failed to convince the cartel to lift production.
Secretary General Abdullah El-Badri said the effective decision was no change in policy and that OPEC hoped to meet again in three months time. No date has been set for another meeting.
“Unfortunately we are unable to reach a consensus to reduce or raise production,” El-Badri told reporters.
Gulf Arab delegates said Iran, Venezuela and Algeria refused to consider an output increase. Non Gulf delegates said Saudi Arabia had proposed an increase on top of April supplies that was too high for them to contemplate.”
Comments »U.S. cancer medication in short supply
Comments »CHICAGO – Cancer medicines desperately needed by sick children and adults are in short supply, undermining the ability of U.S. doctors to administer treatments, top oncologists warned this week.
Many drugs are scarce because there is no incentive for drugmakers to manufacture low-cost generics, which have slim profit margins for pharmaceutical companies. Doctors do not expect that equation to change any time soon, making them scramble to find acceptable alternatives, or to ration or delay treatment when they cannot.
Generic chemotherapy drugs are in particularly tight supply at the nation’s hospitals, including mainstay cancer treatments such as cisplatin, doxorubicin, cytarabine and leucovorin.
Upgrades and Downgrades This Morning
Upgrades
MIND – Mitcham Ind target raised to $22 from $18 at Global Hunter Securities
RJF – Raymond James upgraded to Buy at Goldman
GIII – G-III Apparel upgraded to Buy from Hold at Keybanc
MRVL – Marvell resumed with a Buy at Auriga
HUM – Humana target raised to $90 from $79 at Stifel Nicolaus
EBAY – eBay upgraded to Outperform at Pacific Crest
CAVM – Cavium Networks initiated with a Buy at Lazard
G – Genpact upgraded to Neutral from Underweight at JP Morgan
VZ – Verizon upgraded to Outperform at Oppenheimer
FWLT – Foster Wheeler upgraded to Buy from Hold at BB&T
COG – Cabot Oil & Gas upgraded to Buy from Hold at Canaccord Genuity
VC – Visteon initiated with Overweight at JPMorgan
Downgrades
TBS – Talbots downgraded to Neutral from Buy at UBS
TMK – Torchmark initiated with Neutral at SunTrust
LDK – LDK Solar target lowered to $12 at Brean Murray
SF – Stifel Financial downgraded to Neutral from Buy at Goldman
CBOE – CBOE Holdings downgraded to Sell at Goldman
FST -Forest Oil downgraded to Neutral from Positive at Susquehanna
AIG – American Intl initiated with a Neutral at Goldman
NETL – NetLogic initiated with a Neutral at Lazard
SPWRA – Sunpower downgraded to Hold from Buy at Jefferies
QNST – QuinStreet downgraded to Hold from Buy at Stifel Nicolaus
Comments »Gapping Up and Down This Morning
Gapping up
ULTA +13.7%, SPWRA +0.5%, BJ +2.1%, NANO +5.5%, RXII +8.2%, CLF +0.5%, ALOG +3.3%, OXM +5.6%,
Gapping down
CIEN -13%, HOV -5.6%, GPS -4%, FNSR -3.8%, GOLD -0.7%, GLD -0.7%., MCP -2.9%, SDRL -2.5%, BHP -2.4%, RIO -2.2%, CMTL -2.2%, NOK -2.1%, OCLR -1.2%, OMEX -3.6%, SLV -2.1%,DB -1.8%, BBL -1.6%, SAP -1.6%, MT -1.4%, BCS -1%RCL -3.1%, JDSU -5.4%, BCS -1%, CS -0.8%, PAAS -2.4%, RIO -2.2%, STO -1.6%, BP -1.5%, RDS.A -0.6%, TOT -0.5%, SLV -2.1%, SLW -2.1%, FCX -1.9%, AU -1.8%, BBL -1.6%, MT -1.4%, AUY -1.2%,
Comments »In Play and On the Wires
Meredith Whitney Continues to Pound the Table Giving Joe Kernen a Headache
“Meredith Whitney is on CNBC talking — of course — muni doom.
Her general message: She’s not real concerned by the fact that munis haven’t defaulted en masse, and she’s not concerned that munis have been on a big rally, because the economics of munis are still getting even worse.
“On a timing perspective, if the market moves against me for a month or two months… I know I’m right.”
We’ll add more details as warranted.
Update: Some unintentional hilarity. When asked whether states have reached out to her, she says “Governors agree with me, it’s the bond market that doesn’t”
Another more complete version of statements
Comments »McDonald’s May Sales Rise 3.1 % Overall, But Miss Estimates by 0.5%+
“NEW YORK (MarketWatch) — Fast-food chain McDonald’s Corp. MCD -1.86% said Wednesday that its global comparable sales at all restaurants in operation at least 13 months rose 3.1% in May. Sales rose 2.4% in the U.S., up 2.3% in Europe and gained 4.3% in Asia, Middle East and Africa. Systemwide sales for the month increased 12%, or 4.7% excluding the currency impact. The company also said currency translation is now expected to benefit second-quarter per-share profit by 9 cents to 10 cents a share as a result of recent strengthening of foreign currencies. McDonald’s shares fell 1.8% in premarket trading.”
Comments »Dow Chartists Point to 11,600 as a Downside Target
“Traders love chart patterns because they point the way to high probability situations. These are situations where one type of outcome is much more probable that other outcomes. Knowing the market has a high probability of rise, or falling, or changing direction of the current trend provides an opportunity to make money or protect profits.”
Comments »Mortgage Applications Fall by 0.4%
“Applications for U.S. home mortgages eased last week, although demand for refinancing improved as interest rates edged down, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, slipped 0.4 percent in the week ended June 3.
The MBA’s seasonally adjusted index of refinancing applications rose 1.3 percent, while the gauge of loan requests for home purchases dropped 4.4 percent.”
Comments »Bernanke: Uneven Recovery Still Needs Stimulus
“Federal Reserve Chairman Ben S. Bernanke said the “frustratingly slow” U.S. recovery warrants sustained monetary stimulus while predicting that growth will gain speed in the second half of the year.
“The economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed,” Bernanke said yesterday in a speech in Atlanta. At the same time, the Fed “will take whatever actions are necessary to keep inflation well controlled,” he said.
Bernanke said consumer spending is being held back by anunemployment rate that rose to 9.1 percent last month, a drop in home values and tight credit. He said growth is likely to pick up as fuel prices moderate and disruptions of parts supplies ease as factories in Japanrecover from an earthquake and tsunami.
“Overall, the economic recovery appears to be continuing at a moderate pace, albeit at a rate that is both uneven across sectors and frustratingly slow from the perspective of millions of unemployed and underemployed workers,” Bernanke said.
Treasury two-year note yields dropped two basis points, or 0.02 percentage point, to 0.4 percent yesterday in New York, the lowest level this year. The Standard & Poor’s 500 Index fell 0.1 percent to 1,284.94 after rallying as much as 0.8 percent.
“He’s saying monetary policy is on course and right on, and there’s no need to change at this point,” said Sung Won Sohn, an economics professor at California State University- Channel Islands and former chief economist at Wells Fargo & Co. “The implication is not only will there be no change, but a third round of quantitative easing is not likely to come.”
Balance Sheet”
Comments »European Markets Decline on Bernanke Comments
“European stocks dropped for a sixth day, for the longest losing streak since March, after Ben S. Bernanke gave no hint that the central bank will unveil a new round of stimulus. U.S. futures and Asian shares retreated.
U.K. stocks extended their loses as Moody’s Investors Service said the country’s Aaa debt rating will be at risk if the government misses its debt reduction targets. BP Plc (BP/) declined with oil as investors speculated that OPEC will increase its members’ oil production quotas. Kabel Deutschland Holding AG (KD8), Germany’s largest cable operator, slumped 6.4 percent after reporting a full-year loss.
The Stoxx Europe 600 Index slid 1.2 percent to 268.52 at 11:50 a.m. in London. Europe’s benchmark measure has fallen 7.8 percent since this year’s high on Feb. 17 and is trading at about 12.8 times its companies’ reported earnings, near its cheapest valuation since April 2009, according to data compiled by Bloomberg. Futures on the Standard & Poor’s 500 Index expiring in June slipped 0.6 percent today. The MSCI Asia Pacific Index also declined 0.4 percent.
“It looks like this correction will continue for some time until we have better macro news out of the U.S. and more certainty on Europe’s debt problems,” said Matthias Fankhauser, a fund manager at Clariden Leu AG in Zurich, which oversees $120 billion. “What Bernanke said was quite a disappointment, and reports that Moody’s may change its view on the U.K. may put pressure on prices as some investors may trade on this information.”
Monetary Stimulus “
Comments »Asian Markets Decline on Slow Growth Prospects
“Asian stocks dropped, dragging the regional benchmark index to its lowest level in two weeks, as U.S. Federal Reserve officials fueled concern about the sustainability of the global recovery.
Honda Motor Co., the Japanese carmaker that gets 44 percent of sales from North America dropped 1.3 percent in Tokyo. Hyundai Motor Co. (005380), South Korea’s biggest automaker, fell 2.7 percent in Seoul. Tokyo Electric Power Co., owner of the crippled Fukushima Dai-Ichi nuclear power station, slumped 7.4 percent after the Nikkei newspaper reported all of Japan’s nuclear reactors may be idled.
Federal Reserve chairman Ben S. “Bernanke’s somber outlook combined with no hint of further quantitative easing being used as a policy response near-term have led to a negative tone in markets,” saidTim Schroeders, who helps manage about $1 billion in global equities at Pengana Capital Ltd. in Melbourne. “In a glass-half-empty environment, investors globally are adopting a much more cautious stance.”
The MSCI Asia Pacific Index fell 0.4 percent to 133.16 as of 7:39 p.m. in Tokyo, erasing gains of as much as 0.2 percent and heading for its lowest close since May 25. Almost two stocks dropped for each that rose in the gauge. Some $309 billion has been erased from the market value of the measure since the year’s peak on May 2, amid disappointing economic data, capped by last week’s U.S. jobs report that showed American companies hired fewer workers than economists forecast.
‘Frustratingly Slow’”
Comments »AXA Unit Buys Citi Buyout Funds for $1.7 Billion
“Citigroup Inc. (C) agreed to sell $1.7 billion of leveraged buyout assets to Axa SA (CS)’s private equity unit as the third-biggest U.S. bankmoves to shrink its balance sheet.
Axa Private Equity is buying about 207 interests including stakes in buyout funds managed by KKR & Co. LP, Blackstone Group LP (BX)and Carlyle Group, and investments Citigroup made directly in some companies such as First Data Corp., Dominique Senequier, Axa Private Equity chief executive officer, said in a phone interview. The price at which the holdings have been acquired wasn’t disclosed in a joint statement today.
Citigroup has been selling assets following its $45 billion taxpayer bailout, and transferred those businesses, loans and securities targeted for disposal into its Citi Holdings division. Regulators are also requiring banks to reserve more capital for riskier assets, including stakes in buyout funds, making them less attractive for lenders to hold.”
Comments »Oil Declines on OPEC Statements of Raising Quotas
“Oil fell in New York on speculation OPEC will increase production quotas amid evidence gains in prices may be damping economic recovery.
Futures dropped as much as 1.1 percent after United Arab Emirates Oil Minister Mohamed al-Hamli said the Organization of Petroleum Exporting Countries will supply more oil if there is a need as delegates arrived at today’s meeting of ministers in Vienna. Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery was “frustratingly slow” yesterday in Atlanta, with households facing rising energy and food prices, declining house values and high unemployment.
“We take a bearish stand for the day” given the likelihood that OPEC will raise its output targets, Filip Petersson, Stockholm-based commodity strategist at SEB AB, said in a report. A 1.5-million-barrel increase in quotas “looks like the most likely outcome, which could hurt crude oil market sentiment today.”
Crude for July delivery dropped as much as $1.07 to $98.02 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.18 at 12:26 p.m. London time. Prices are 36 percent higher in the past year.
Brent crude for July delivery fell 62 cents, or 0.5 percent, to $116.16 a barrel on the London-based ICE Futures Europe exchange. The contract yesterday gained $2.30, or 2 percent, to $116.78. Prices are up 61 percent the past year.”
Comments »Gold Falls in Overnight Trade on Profit Taking
“Gold declined in London as some investors sold the metal after prices this week climbed to a one-month high and near a record.
Gold this week traded within 1.6 percent of a record. Prices were little changed yesterday after the European Central Bank signaled its approval of Greek bond rollovers. Federal Reserve Chairman Ben S. Bernanke yesterday said the “frustratingly slow” U.S. recovery warrants sustained monetary stimulus while predicting that growth will gain speed in the second half of the year.
“We’ve seen a bit of profit taking,” said Afshin Nabavi, a senior vice president at MKS Finance SA, a bullion refiner in Geneva. Still, “the situation in the U.S. and Europe continues to not be very promising. We’re heading for much higher prices in the medium term. We just need a trigger.”
Immediate-delivery gold declined $7.15, or 0.5 percent, to $1,537 an ounce by 11:18 a.m. in London. The metal reached $1,553.65 on June 6, the highest price since May 2. Gold for August delivery was down 0.4 percent at $1,537.70 an ounce on the Comex in New York.
Bullion fell to $1,535.50 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,545 at yesterday’s afternoon fixing.”
Comments »Aussie and Kiwi Dollars Fall on Euro Debt Concerns and Lower Demand for Currencies
“The Australian and New Zealand dollars fell as lingering concern over Europe’s debt crisis and the U.S. economy damped demand for growth-sensitive currencies.
The so-called Aussie and kiwi dollars declined against most of their 16 major counterparts after the International Monetary Fund said its 26 billion-euro ($38 billion) loan to Portugal “entails important risks.” The two currencies also fell as stock losses sapped demand for higher-yielding assets.
“Europe’s situation is grave even though people have been rather optimistic,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Commodity currencies are losing momentum with the U.S. economy slowing.”
Australia’s dollar fell to $1.0677 as of 4:03 p.m. in Sydney from $1.0721 in New York yesterday. The so-called Aussie dropped to 85.46 yen from 85.87.
New Zealand’s dollar declined to 81.80 U.S. cents from 82.05. It touched a record 82.64 U.S. cents on May 31. The so- called kiwi fell 0.4 percent to 65.44 yen.”
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