China’s Preliminary PMI Contracts More Than Expected

“China’s manufacturing is expanding at a slower pace this month on weakness in global and domestic demand, fueling concern that the world’s second-biggest economy is faltering.

The preliminary reading of 50.5 for a Purchasing Managers’ Index (EC11CHPM) released by HSBC Holdings Plc and Markit Economics compared with a final 51.6 for March. The number was also below the median 51.5 estimate in a Bloomberg News survey of 11 analysts. A reading above 50 indicates expansion.

China’s stocks slumped as the data provided further evidence of an economic slowdown after weaker-than-estimated numbers for gross domestic product last week prompted banks including Goldman Sachs Group Inc. to cut full-year forecasts. In Washington, central bank Governor Zhou Xiaochuan said April 20 that a 7.7 percent first-quarter expansion was reasonable and “normal,” highlighting reduced expectations after 10 percent- plus rates during the past decade.

“This paints a picture of a continued painfully slow recovery for China’s manufacturing sector,” said Yao Wei, a Societe Generale SA economist based in Hong Kong. “The government needs to help translate the easy liquidity conditions into real growth.”

President Xi Jinping’s officials are grappling with constraints on export demand, property-market overheating, the risks associated with a surge in so-called shadow banking, and weakness in consumption because of a campaign to rein in official perks such as spending on banquets.

The Shanghai Composite Index fell 2.6 percent, the biggest decline in three weeks.

European Contraction…”

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“Japanese shares dropped, with the Nikkei 225 (NKY) Stock Average falling from its highest since July 2008, as the yen gained against the dollar and investors await major earnings reports this week.

Sony Corp. (6758), which gets nearly 20 percent of its sales from the U.S., fell 0.6 percent. Yamada Denki Co. dropped 4.8 percent after the electronics retailer missed its profit forecast by 35 percent. Oki Electric Industry Co. surged 21 percent after the Nikkei newspaper said operating profit doubled at the maker of ATMs. Komatsu Ltd., a machinery maker that gets 17 percent of its sales in China, reversed gains after Chinese manufacturing data fell short of estimates.

The Nikkei 225 lost 0.3 percent to 13,529.65 at the close in Tokyo. The Topix Index lost 0.2 percent to 1,143.78, with about three stocks gaining for every two that fell on the 1,698- member index.

“The yen is weakening at a slower pace, and there’s no catalyst for the Bank of Japan to ease further, which is what it would take to send the yen down,” said Ayako Sera, a market strategist in Tokyo at Sumitomo Mitsui Trust Bank Ltd., which manages about $163 billion. “Investors now need to see how the yen’s slide impacts earnings.”

The Topix has climbed 58 percent since mid-November through as Prime Minister Shinzo Abe and central bank Governor Haruhiko Kuroda pledged to defeat 15 years of deflation. The gauge trades at 1.3 times book value compared with 2.3 for the Standard & Poor’s 500 Index and 1.6 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China Manufacturing…”

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World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

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“Small business is the incubator of employment. As it declines, so too do opportunities for first jobs, second chances and economic independence.

Self-employment and small business are two sides of a single economic coin: financial independence. The Bureau of Labor Statistics (BLS) counts two types of self-employed, the unincorporated and the incorporated. The unincorporated may have employees, but typically do not, i.e. they are sole proprietors. The incorporated have employees, starting with the owner, as the BLS counts the incorporated self-employed as employees of their own corporation.

I know that’s confusing, but it’s important to separate the sole proprietors from those “self-employed” incorporated businesses that have employees: law firms, doctors’ offices, accountants, etc.

When we speak of “small business,” we’re referring in large part to the incorporated self-employed: people who establish corporations as the legal structure for their enterprise.

Nothing is simple when it comes to parsing all the data, of course, but the BLS has a paper that explains the basic categories: Self-employment in the United States(Bureau of Labor Statistics).

The BLS attributes the decline in unincorporated self-employment from 1950 to 1970 to the consolidation of agriculture. As agriculture became more mechanized, small farms were no longer viable and farming required less labor. As a result, many self-employed farmers and laborers became employees or moved to other sectors.

The trajectory of self-employment from 1970 to the mid-2000s tracked general economic growth, which was weak in the 1970s but began a 30-year boom in the early 1980s. Things changed in the recession, as the self-employed ranks have lost 1.6 million from the peak in 2007. The number of self-employed has fallen to early 1980s levels: (All FRED charts courtesy of frequent contributor B.C.)

This chart displays the self-employed as a share of total non-farm employment. The first chart showed a strong rise in self-employment from 1970, but this chart shows that employment rose even faster: the self-employed share of all those employed has been declining for 30 years:

We can attribute this trend to the rise of global Corporate America and government employment. The workforce expanded, and relatively more people became employees of corporations or the government than became self-employed.

It’s important to note here that the BLS does not break down the income of unincorporated self-employed: if millions of self-employed saw their net incomes slashed in the recession, the BLS still counts them as self-employed. So a consultant who earned $100,000 prior to the recession and now scrambles to net $10,000 is still self-employed.

This is the statistical equivalent of 6 million people losing full-time jobs and then 4 million of those people getting part-time jobs. Did employment truly recover most of the losses?….”

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“In what could to grow into a class action in US courts, a Chinese woman is suing the Federal Reserve after discovering that the real value of the USD250 she put in an account in 2006 had shrunk by 30%. She claims it was the result of the Fed issuing too much money, and as The South China Morning Post reports, her son Li Zhen, the lawyer, called the lawsuit “litigation for the public good”. Alleging “abuse of monopoly in issuing currency,” the People’s Court of Kunming has yet to rule on the litigants’ demand that the Fed cease-and-desist from its quantitative easing policy. While this may seem frivolous, there are some interesting points being made that bear watching, as Li notes, since “the Fed is private institution which enjoys monopoly over the issuing of currency, US Dollar holders can sue it for printing too much money.”…”

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“Through Friday, 104 companies (33% of the market cap) of the S&P 500 have announced there Q1 2013 financial results.

While it’s still very early into the earnings announcement season, the early tally is not very encouraging.

The analysts at Goldman Sachs have compared the earnings announcement surprises to the surprises seen in the last 40 quarters (10 years).

“Positive earnings surprises are tracking below average this quarter (36% vs. 47%),” said Goldman’s David Kostin. “The percentage of firms missing earnings estimates by one standard deviation or more is also below the 40 quarter average (13% vs. 15%) implying more firms have reported results in- line with consensus expectations.” …”

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“As @ParagonCap points out on Twitter, the S&P 500 is now outpacing inflation expectations even more than it did at the market tops of either 2000 or 2007.

The chart below shows that this divergence has been a couple years in the making at this point. However, in recent weeks, a lot of talk about disinflation and deflation has resurfaced.

After taking the prize as one of the worst performing asset classes in the first quarter, the commodity complex has become completely unglued in April. At the same time, there has been a big rally in Treasuries as investors position for a slowdown in global growth….”

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“Activist hedge fund ValueAct Capital took a $2 billion stake in Microsoft, its CEO Jeffery Ubben announced at an investment a conference in New York, today.

He explained the investment by saying, “In three to five years, which is our time horizon, we’ll stop talking about PC cycles and instead talk about Microsoft as the largest cloud-computing company in the world.”

For his sake, let’s hope so. The PC business is imploding, so Microsoft’s traditionally lucrative Windows business is flattening, and could start shrinking soon.

Microsoft has two other businesses that are doing well — Servers and Tools and the Business Division, which is home to Office. Those businesses are strong enough to offset Windows, for now.

Microsoft’s stock has been flat for the longest time. A lot of investors have been tempted by it, believing there is value to be unlocked. So far, they’ve been wrong.

Microsoft is up 12% year to date, and rose 4% on today’s news. It closed at $30.83….”

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“Different markets sending different signals.

That’s the gist of BofA Merrill Lynch rates guru David Woo’s latest report – titled “The impossible trinity: A tale of three cities” – which begins like this (emphasis added):

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“Netflix (NFLX) investors gave the streaming video service rave reviews for its first-quarter results late Monday, driving shares up 24% in after-hours trading.

The Los Gatos, Calif.-based company earned 31 cents a share excluding items, vs. analyst expectations for 19 cents. In Q1 2012, Netflix lost 8 cents a share.

Revenue rose 18% to $1.024 billion, edging past the Street’s forecast for $1.017 billion.

Netflix added over 3 million streaming subscribers in Q1, bringing its total to more than 36 million worldwide. U.S. streaming customers rose by 2.03 million to 27.91 million paid members. In international markets, Netflix added 1.02 million subscribers to 6.33 million.

Netflix shares rose 24% in late trading to 216.46, which would be their best level since late 2011. During the regular session, the stock rose nearly 7%….”

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“DALLAS (AP) — Chipmaker Texas Instruments Inc. said Monday that its net income rose 37 percent in the first quarter as lower costs offset a revenue decline.

Profit grew to $362 million, or 32 cents per share, from $265 million, or 22 cents per share. Revenue slid 8 percent, to $2.89 billion from $3.12 billion.

Analysts were expecting net income of 31 cents per share and $2.85 billion in revenue, according to FactSet.

The company’s costs to make chips fell 5 percent to $1.51 billion, research and development spending slid 18 percent to $419 million and acquisition expenses fell 44 percent to $86 million….”

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[youtube://http://www.youtube.com/watch?v=nGeXdv-uPaw 350 400]

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[youtube://http://www.youtube.com/watch?v=sDiPjPG5ArY 450 300]

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SOURCE
NYSE

NASDAQ

AMEX

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Upgrades   – ABBV, BHP, BZH, EQIX, HES, MDC, NFLX, RIO, USG, WETF

Downgrades – ALKS, BHI, ABX, CCL, ERIC, GE, KMB, KGC, MCD, NEM, VZ

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In Play ,

On the Wires 

 

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“The U.S. economy and the stock market are not the same thing.

The stock market is currently sitting near all-time highs. Meanwhile, the U.S. economy remains anemic with the unemployment rate painfully high.

Generally speaking, the stock market represents large corporations who can borrow cheaply from the bond markets and take advantage of low overseas tax rates.

Yet small business can do neither of those things. They are also America’s most important job creators.

The lead economists of the National Federation of Independent Business (NFIB), which produces the widely-followed small business optimism report, recently gave a presentation at the Richmond Fed’s Credit Market Symposium titled “One Country, Two Economies.”

In it, they lay out the state of small business, which is much weaker than what is being seen in the stock market.

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While it sounds crazy there actually was a study done about front page covers and what ever the cover said to do turned out to be the wrong move over 60% of the time.

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“ZURICH (Reuters) – Swiss industrial group ABB is to buy U.S. solar energy company Power-One Incfor about $1 billion, betting that growth in emerging markets will revive a sector ravaged by overcapacity and weakening demand in recession-hit Europe.

The world’s biggest supplier of industrial motors and power grids said on Monday it had agreed to pay $6.35 per share in cash for Power-One, the second-largest maker of solar inverters that allow solar power to be fed into grids.

The offer price is 57 percent above Power-One’s closing price on Friday, boosted by $266 million in net cash held by debt-free Power-One. Stripping out its cash pile, Power-One’s enterprise value stands at $762 million, valuing the bid at a more modest 6.4 times 2012 core earnings.

As solar power gets closer to competing with conventional forms of energy such as gas and coal, demand for solar panels that harness the sun’s energy is rising.

The same goes for solar inverters, which are needed to feed that power into large electricity grids from commercial solar panel installations and smaller units on factories and homes.

“We consider the acquisition of Power-One as a smart strategic move for ABB to broaden its solar product portfolio at the right time,” Vontobel analysts said.

The solar inverters business is one of the last profitable parts of the solar value chain – mainly due to its relatively complex technology – while makers of cells and panels have suffered massively from the fact that their products are easy to replicate.

Peers like Germany’s Siemens and Bosch recently ended ventures in the solar industry after oversupply, weak economies and a cut in government subsidies triggered a collapse in demand for solar panels and prices slumped, leading to a wave of insolvencies in the industry.

Even makers of the solar inverters have suffered….”

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