In Play and On the Wires

In Play ,

On the Wires 

“Stocks may be due for a pullback, but it is unlikely they are headed into bear territory, says veteran stock watcher Sam Stovall.

Stovall, chief equity strategist at S&P Capital IQ, told Yahoo the key financial signposts he watches — those related to earnings, economic, monetary and sentiment factors — suggest only a modest decline ahead for now.

“We are a bit too complacent. We’re likely to see a shakeup. But I don’t think it’s going to turn into a bear market,” he predicted.

By Stovall’s reckoning, most historic market indicators are near their all-time averages, not tops. He said he watched data compiled over decades.

“We have had either a pullback or a correction on average every year since World War II,” Stovall told Yahoo, but he noted that in that time span, it has taken the stock market an average of only four months to get back to break even.

In Wall Street parlance, a pullback is generally regarded as a decline of 5 to 10 percent, a correction is a fall of 10 to 20 percent and a bear market occurs when stocks fall 20 percent or more.

Stovall suggested investors look for an attractive entry point with a pullback. “I often say it’s better to buy than it is to bail.”

He predicted that, sometime in 2013, the market may exceed the all-time high on the Standard & Poor’s 500 of 1,565 that was attained in 2007, but there may be several attempts first.

“Resistance levels on old highs are like rusty doors — they take several attempt before they finally break open,” Stovall said….”

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“Fannie Mae and Freddie Mac will build a new joint company for securitizing home loans as a stepping stone toward shrinking the government’s role in the mortgage market, the regulator of the U.S. government-controlled firms said on Monday.

“The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future,” Edward DeMarco, acting director of the Federal Housing Finance Agency, told the National Association for Business Economics.

Fannie Mae and Freddie Mac, which were bailed out by the government in 2008, help finance about two-thirds of new U.S. home loans. DeMarco is seeking to shrink their footprint and reduce risks to the taxpayers that support the mortgage giants.

Since they were seized by the government, the companies have drawn nearly $190 billion from the U.S. Treasury to stay afloat.

By creating a new securitization company, FHFA intends to pave the way for a single securitization platform and force Fannie Mae and Freddie Mac to abandon their separate systems…”

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“NEW YORK (MarketWatch) — Qualcomm Inc.QCOM +2.12% said Tuesday it raised its quarterly cash dividend by 40% to 35 cents a share from 25 cents a share, effective for dividends payable after March 27. The San Diego-based chip maker also announced a new $5 billion share buyback program with no expiration date that will replace the existing $4 billion program. Shares rose 1.8% in premarket trading. “

“KKR & Co. is nearing a deal to buy industrial pumps manufacturer Gardner Denver Inc. for more than $75 a share, said a person familiar with the matter.

The deal values Gardner Denver, which employs roughly 6,400 people, at more than $3.68 billion and could be announced in coming days, the person said. Gardner Denver closed at $73.62 on the New York Stock Exchange on Monday, giving it a market capitalization of about $3.61 billion.

KKR had bid $75 a share for the Wayne, Pa.-based company in February and increased the offer after Gardner Denver’s board sought a higher price, the person said.

KKR, the New York private-equity firm, appeared to be the only suitor as the hot-and-cold sales process dragged on in recent months….”

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“The euro zone appears to be heading for a fourth consecutive quarter of economic contraction, as surveys of purchasing managers indicate business activity shrank at a faster pace in February.

That will likely feed calls for a reconsideration of the euro zone’s strategy for tackling its fiscal and banking crises, which has relied heavily on austerity programs that have had a larger negative impact on growth than policy makers had expected.

In the wake of Italian elections in which voters largely rejected parties that favored austerity, euro-zone policy makers have said more emphasis should be given to boosting growth and jobs, although they have yet to say how that can be accomplished….”

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“As a deadlock continues over automatic spending cuts in the United States, analysts told CNBC that the country is living in a “fantasy world” and will need to implement trillions more in budget cuts.

U.S. markets seemed to have shaken off worries over the $85 billion of automatic spending cuts known as the “sequester” that went into effect over the weekend, with theS&P 500 finishing in positive territory for the first Monday in 2013 and the Dowclose to hitting its record closing high on Monday.

Despite the sanguine reaction of markets, analysts told CNBC that sequestration, which constrains the country to make $1.2 trillion in budget cuts over ten years – with $85 billion in 2013 alone – would have a negative impact on the economy and more would need to be done.

Stephen King, chief global economist at HSBC, said that the U.S. was living in a“fantasy world” over its growth forecasts.

“If you look at the projections from the Congressional Budget Office (CBO) they assume that growth goes back to between 4 to 5 percent in real terms between 2014 and 2018. Their numbers suggest that the U.S. will post the fastest rate of productivity growth of any decade in the last 50 or 60 years,” King told CNBC’s “European Closing Bell.”

“Even allowing for the fact that there’s some [debt] reduction coming through the sequester, there’s still a degree of wishful thinking with regard to the economy which probably isn’t going to come true,” he said…..”

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“While a trader known as the “London whale” has come to represent a multibillion-dollar blowup at JPMorgan Chase, Congressional investigators have discovered that the problems involved more senior levels of the nation’s largest bank.

A report by the Senate Permanent Subcommittee on Investigations highlights flaws in the bank’s public disclosures and takes aim at several executives, including Douglas Braunstein, who was chief financial officer at the time of the losses, according to people briefed on the inquiry. The report’s findings — scheduled to be released on March 15 — are expected to fault the executives for allowingJPMorgan to build the bets without fully warning regulators and investors, these people said.

The subcommittee, led by Senator Carl Levin, could ask Mr. Braunstein and other senior executives to testify at a hearing this month, according to the people. The subcommittee does not currently intend to call the bank’s chief executive, Jamie Dimon, but Congressional investigators interviewed Mr. Dimon last year.

JPMorgan, which has been cooperating with the investigation and discussed the findings with the subcommittee, declined to comment. Mr. Braunstein and other bank executives have not been accused of any wrongdoing, and he is not the focus of a separate law enforcement investigation into the trading loss.

Congressional officials have yet to set the final details of the hearing and plans may change, the people cautioned. Politico earlier reported the scheduled date for the release of the report.

The Congressional investigation could revive questions about the role of senior executives in the $6 billion trading loss at a time when the bank has started to put the blunder behind it.

Mr. Dimon declared last year that the “Whale has been harpooned.” The bank reported record earnings in January and has forced out the architects of the bet.

The Senate report, however, shifts the focus from lower-level traders in London who placed the bet to senior executives and regulators who failed to stop it. Expanding on a sweeping report the bank released in January, the Congressional inquiry is expected to open a window into how executives ignored warning signs and failed to alert investors about changes to its method for detecting risk….”

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“Analysts at French bank Societe Generale have a big report out titled The Return Of Yield: Preparing For Rising Long Term Rates.

The theme is very great rotation-y in that they argue that the economy is turning the corner, and interest rates are about to rise.

Their language is strong and dramatic. A watershed moment for the US economy is at hand, and the risk are that it will happen sooner rather than later.

We believe that 2013 will be a breakout year for the US economy. As this realisation sets in and markets begin to price the end of asset purchases and focus on the exit sequence, Treasury yields are likely to bottom out. There is a significant gap between current yield levels and fair values, and we believe that the end of the QE programme will have compressed the 10-year term premiums by perhaps as much as 140bp. The question is how quickly this compression will be unwound. Our central scenario assumes a 2.75% year-end target, but here we evaluate the possibility and implications of a more rapid correction to 3.50%.

It has been our longstanding view that 2013 will see an inflection point on growth. After sequential deleveraging of households, small businesses, state and local governments and now the federal government, the structural headwinds to growth are beginning to fade. (Admittedly, fiscal deleveraging is only beginning, but we believe that the modest drag will be offset by improving private sector fundamentals). Whereas we doubted previous growth spurts in US data, we believe that this time the improvement is Ifor real. We expect this to be a breakout year for the US economy, with growth firmly above trend levels by the end of the year. Ironically, the Fed’s harsh lessons from the previous false starts have led them to adopt a far more accommodative approach with the goal of dampening the bond market’s reaction to any data improvements….”

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“(Reuters) – Royal Dutch Shell said it would build two small-scale gas liquefaction units in Louisiana and Ontario as part of an investment plan to unlock value in the use of liquefied natural gas as a transport fuel.

“These two units will form the basis of two new LNG transport corridors in the Great Lakes and Gulf Coast regions,” Shell said in a statement on Tuesday.

Shell said it was also working to use natural gas as a fuel in its own operations, which follows an investment decision in 2011 on a similar corridor in Alberta, Canada.

Shell, which has bet the most heavily of all the top oil firms on a future for cleaner-burning natural gas, said it is using its expertise to make LNG a viable fuel option for the commercial market.

In the Gulf Coast corridor, Shell plans to install the liquefaction unit at its Geismar Chemicals facility to supply LNG along the Mississippi river and intra-coastal waterway and to exploration areas offshore Gulf of Mexico and onshore Texas and Louisiana….”

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“Oil rebounded from the lowest level in 10 weeks as traders speculated recent declines may have been excessive, while a North Sea pipeline system remained shut after a platform leak.

West Texas Intermediate advanced as much as 0.6 percent, and Brent futures as much as 0.9 percent. The Brent pipeline system was closed for a fourth day after an oil leak was discovered March 2 on the Cormorant Alpha platform, according to Abu Dhabi National Energy Co. (TAQA)PJSC, the operator known as Taqa. U.S. crude stockpiles probably increased for a seventh week, the longest stretch since May, a Bloomberg News survey showed before Energy Department data tomorrow.

“It’s worth keeping an eye on developments at Cormorant Alpha since any prolonged disruption in the North Sea would support Brent,” said Andrey Kryuchenkov, an analyst at VTB Capital inLondon who predicts that Brent will trade in a range of $109 to $112 a barrel this month.

WTI for April delivery rose as much as 58 cents to $90.70 a barrel in electronic trading on theNew York Mercantile Exchange and was at $90.37 at 12:21 p.m. London time. The volume of all futures traded was 24 percent below the 100-day average. The contract fell 56 cents to $90.12 yesterday, the lowest close since Dec. 24.

Brent for April settlement on the London-based ICE Futures Europe exchange gained as much as 97 cents, or 0.9 percent, to $111.06 a barrel. The volume of all futures traded was 49 percent above the 100-day average. The European benchmark grade was at a $20.27 premium to WTI, widening for a fourth day.

Brent Pipeline…”

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“……Gold for immediate delivery rose 0.6 percent to $1,582.55 an ounce by 11:19 a.m. in London, after falling 2.5 percent the past four days. Futures for April delivery gained 0.6 percent to $1,581.50 on the Comex in New York. Futures trading volume was 16 percent above the average in the past 100 days for this time of day.

Bullion rallied the past 12 years as nations from the U.S. to China pledged to do more to support economies. The metal is down 5.5 percent this year and fell for a fifth month in February, the longest run of declines since 1997. Investors sold the most gold ever from exchange-traded products last month, and the 2,500 metric tons now held is 5 percent below the Dec. 20 record, data compiled by Bloomberg show.

Silver for immediate delivery rose 1.2 percent to $28.8988 an ounce in London. Palladium was up 1 percent at $724.35 an ounce. Platinum gained 1.2 percent to $1,587.10 an ounce. It fell as low as $1,563.60 yesterday, the lowest since Jan. 8.”

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The Euro move around on every headline overnight currently trading at 1.3036 up 0.1%

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“Standard Chartered Plc (STAN), Britain’s second-largest lender by market value, cut bonuses by 7 percent and boosted its dividend after it was fined $667 million for U.S. sanctions violations. The shares rose.

The bank will pay a final dividend of 56.77 cents a share, bringing the total for the year to 84 cents, 11 percent more than in 2011, the London-based lender said in a statement today. Pretax profit rose to $6.88 billion from $6.78 billion in 2011, beating the $6.84 billion estimate of 23analysts surveyed by Bloomberg and marking the firm’s 10th consecutive year of record results. Revenue advanced 8 percent to $19.1 billion.

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“European finance ministers left open the possibility of saddling bank depositors and bondholders with some of the costs of an aid package for Cyprus, potentially unsettling markets as the bailout negotiations drag on.

Dutch Finance Minister Jeroen Dijsselbloem declined to rule out a “bail in” of Cypriot depositors, even after concern over the treatment of bank account holders prompted the first signs of capital flight from the island.

“All the questions on the elements” will be dealt with by late March, Dijsselbloem told reporters after chairing a meeting of euro-area finance ministers in Brussels yesterday. “That is my answer to all these questions, I’m afraid.”

By leaving the treatment of bank depositors in doubt, European governments risked replaying earlier clashes over imposing losses on bondholders. Creditors used that tactic for Greece and then pledged never to do so again because it shattered market confidence.

A week after Nicos Anastasiades took over as Cypriot president, finance ministers said the pieces of an aid package have yet to fall into place and probably won’t do so until late March.

Deposits Drop…”

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“Italy’s bonds advanced for the first time in three days after European Union finance ministers opened the way for looser budget policies that may support growth.

German 10-year bunds fell as euro-area retail sales increased in January more than economists predicted, sapping demand for the safest assets. Portugal’s 10-year yields dropped to the least in more than a month after EU Economic and Monetary Affairs Commissioner Olli Rehn, in Brussels for a meeting of the bloc’s finance ministers, said the country and Ireland may get more time to repay bailout loans. Global stocks and commodities rallied on bets central banks will continue stimulus measures.

“There’s a more general risk-on sentiment today” driving Italian yields lower, said Chiara Cremonesi, a fixed-income strategist at UniCredit SpA (UCG) in London. “Bunds are weak as well. It could be that this meeting is also having some impact,” she said of the finance ministers’ gathering.

Italy’s 10-year yields fell 11 basis points, or 0.11 percentage point, to 4.77 percent at noon London time after sliding 16 basis points, the steepest decline since Feb. 25. The 5.5 percent security maturing in November 2022 gained 0.885, or 8.85 euros per 1,000-euro ($1,304) face amount, to 106.055.

The EU is considering easier repayment terms for rescue loans to Ireland and Portugal in a bid to ease their exit from aid programs, Rehn said. The nations say they deserve concessions similar to those granted to Greece last year.

Economic Strains….”

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“European finance ministers opened the way for looser budget policies after a backlash against austerity thrust Italy into political limbo and shattered months of relative stability in European markets.

Italy’s deadlocked election, France’s refusal to make deeper budget cuts and protests against the shrinking of the welfare state across southern Europe escalated the rebellion against the German-led prescription for fighting the debt crisis.

Economic strains “may also justify in a certain number of cases reviewing deadlines for the correction of excessive deficits,” European Union Economic and Monetary Commissioner Olli Rehn told reporters late yesterday after a meeting of euro- area finance ministers in Brussels.

The euro-zone economy will shrink 0.3 percent in 2013, making for the first annual back-to-back contraction since the currency’s birth in 1999, the European Commission forecast last month. The currency-bloc prediction masked a widening north- south divide, with growth in countries like Germany,Finland, Belgium and Luxembourg set against dwindling output in Italy, Greece, Spain and Portugal.

France is straddling the middle, set to eke out a 0.1 percent expansion after the economy stagnated in 2012, according to the commission. Deeper budget cuts are out of the question, French Finance Minister Pierre Moscovici said.

‘Right Rhythm’…”

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“Even after the biggest drop of any major currency in the first two months of the year, the pound is still overvalued as both Pacific Investment Management Co. and hedge fund FX Concepts LLC bet it will fall further.

Sterling tumbled 6.7 percent versus the dollar through February, touching the weakest level in almost three years, yet remains 2.3 percent overvalued, based on an Organization for Economic Cooperation and Development measure of purchasing power parity. Options traders have raised bets to the most in almost two years that it will depreciate against the euro, and strategists are cutting their forecasts at the fastest pace after the yen.

The slide reflects growing speculation the Bank of England will boost stimulus while also debasing the currency as the U.K. risks an unprecedented triple-dip recession. Current GovernorMervyn King, who gives way to Bank of Canada Governor Mark Carney in July, has said a weaker pound would help rebalance the economy.

“You ain’t seen nothing yet,” said Neil Williams, chief economist in London at Hermes Fund Managers Ltd., which oversees about $42 billion. “If the world believes there will be significantly more stimulus coming, which I expect, the pound is likely to be under further pressure.”

Sterling Tumbles

The U.K. currency slid to $1.4986 on March 1, the lowest level since July 2010, and down from this year’s high of $1.6381 on Jan. 2. It rose 0.3 percent to $1.5166 at 10:31 a.m. London time today. That’s still a 6.7 percent drop from the start of the year, the third-worst performance among 32 major currencies tracked by Bloomberg after the yen and the rand…..”

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“China will boost defense spending 10.7 percent this year as the government modernizes its military arsenal and adopts a more assertive stance in territorial disputes with its neighbors.

Military spending is set to rise this year to 740.6 billion yuan ($119 billion) from 669.1 billion yuan, the Ministry of Finance said in a report. China has the second-biggest military budget in the world after the U.S., which spent nearly six times more on defense than China last year and is now cutting those outlays.

Defense spending as a percentage of gross domestic product remained unchanged in 2012 from a year earlier at 1.3 percent as the country upgrades its fleet of fighter jets, ships and missiles. The Communist Party says its modernization doesn’t pose a threat, while Japan and other nations in the region argue China has become more hostile in disputes over territory in the resource-rich waters of the East and South China seas.

“The increase is consistent with their long-term modernization plans,” said Taylor Fravel, a professor at the Massachusetts Institute of Technology who studies China’s relations with its neighbors. “Any time you see a double-digit increase in defense spending, especially when nobody else in the region is growing their budget at those rates, it generates anxiety and concern.”

U.S. Cuts…”

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“General Motors Co. (GM)’s China sales rose during the first two months of the year, extending the U.S. carmaker’s lead over Toyota Motor Corp. (7203) in the world’s biggest auto market, as demand for Japanese brands shrank.

Combined sales in the country during January and February climbed 7.9 percent to 525,835 vehicles, Detroit-based GM said on its website today. In the past week, Japan’s Toyota, Nissan Motor (7201) Co. and Honda Motor Co. have reported declines in January- to-February deliveries in China.

The results show GM is gaining market share in both of the world’s two biggest automobile markets. Based on data released last week, U.S. sales at the maker of Chevrolet and Buick cars have risen 11 percent this year, outpacing the growth in total light-vehicle deliveries in the country.

Automakers in China commonly release two-month data when the week-long Lunar New Year holiday falls on a different month from a year earlier, as was the case this year….”

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