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					Global Macro Research | US

3/18/10                                                                       MF Global Daily Report

Morning Financial Notes

Macro Events:
Random U.S.
• Talk that Democrats are nearing votes on healthcare. Still don’t have the votes, but are closer. CBO
   score expected Thursday. Hoyer says the bill will be posted shortly and will likely vote Sunday.
• Idaho has signed a bill to prevent mandated insurance
• There is a story in the WSJ talking about growing passage of Internet retail taxes.
• New York’s tax revenues beat expectation in February.

CPI is unchanged total and rises 0.1% core. Headline was expected up 0.1%, and core was expected up
0.1%. Year over year core rate is 1.3% -- calm inflation.
• Food and beverage was flat
• Housing was flat with furnishings down 0.2% and shelter was unchanged
• Apparel rose 1.7%
• Medical care rose 0.8% and has been very strong the past two months -- in the New Year
• Energy fell 1.8%

Mildly bullish stocks and bonds. It is a shade bearish for the dollar.

Claims rose 2,000 to 457,000. 455,000 expected
Continuing claims were 4.579 mln. 4.522 mln expected.

• Chinese cotton imports may rise 30% this year due to smaller crops. 2 mmts up from 1.53 mmts last
  year – Chinese Academy of Agricultural Sciences.
• World Gold Council sees a recovery in demand – better jewelry demand.
• LME canceled warrants for copper fell 150 tons
• LME copper inventories fell 1400 tons to 524,400 tons

BB runs a story talking about high BRICs valuation

•   FDX reported EPS of $.76. $.73 expected. Revenues were $8.70 bln compared to expectations of
    $8.40 bln. Guidance is $3.60 to $3.80 for FY 2010. The estimate is $3.64. FY Q4 is expected at
    $1.17 to $1.37. Stock is trading lower.
           o Capital spending forecast for FY 2010 is at $2.9 bln up from $2.6 bln. Additional investment
               in Boeing 777 plans wsa expected.
           o Reinstating various employee compensation programs which will dampen earnings growth
               in Q4 and FY 2011.
           o Less than truckload average daily shipments rose 26% and yield declined 8% due to
               discounted prices.
Global Macro Research | US

• China is talking about a yuan stress test. The test will include 1,000 companies and 12 industries.
• Chinese State Owned Business revenue rose 42.4% y/y -- strong acceleration.
• Luxury home prices in Hong Kong prices have risen 8.2% this year – Centaline
• China’s property prices won’t drop this year – New World Development and Kerry Properties.
• Hong Kong’s unemployment rate was 4.6% in the three month end February.
• S&P said that China’s banks are financially strong enough to withstand pressure by non-performing
    loans. A rise in nonperforming loans will be the biggest challenge.
• China reportedly put new lending restrictions in place – developers cannot hoard land or hold back
    sale for higher prices – I thought this was out a few weeks ago.
• March Japan’s economy is picking up due to various policy measures taken at home and abroad,
    although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private
    demand. Unchanged from February.
• MOF BSI Large All Industry Index fell 0.5 to -2.4. Outlook is expected to improve slightly in Q2 and
    then pick up in Q3. Manufacturing is relatively stronger. Large manufacturing fell 7.9 to 4.3
• Japanese foreign buying of bonds fell Y300 mln
• March Primary Articles WPI rose 14.16% -- trend is cresting.

• Greek/German 2 year spread is up 28 bps. A German lawmaker said that Greece should turn to the
   IMF for aid. This is one statement, which suggests there is limited support for an EU bailout.
• Greek PM urged a firmer rescue plan saying it would warn off speculators (this statement is troubling
   as it is not necessarily speculators who sell the debt. The problem is that investors don’t trust the
   country’s finances. In fact, to buy the debt one might need to be a speculator – betting the issues will
• Dow Story that Greece will turn to the IMF for aid over Easter. A second Bloomberg story has
   Papandreou saying Greece may have to go to the IMF, but does not need IMF aid.
• The Greek FM has denied a report that Greece will go to the IMF.
• Fitch said that large Greek banks won’t have trouble raising funds. Notes slow loan growth.
• The IFO head Sinn said that Greece should leave the euro to solve the crisis. He went on to say
   Greece should devalue its currency and a debt moratorium should be put in place.
• Portugal is planning to sell $1 bln in 5 year notes.
• Spain sold nearly E5 bln in 10 and 31 year bonds.
• Netherland February Unemployment Rate rose 0.1% to 5.7%. As expected. Monthly change in
   unemployment is up 5,000. A slight slowing in the trend.
• Netherland’s March consumer confidence rose 1 to -12 – in line
• Slovakia’s Unemployment Rate rose 0.1% to 13.0%. 13.1% expected.
• EZ trade balance balance shows a mild pick up on exports and imports on a year over year basis.
   Import growth is weak (+1.04%), export growth is more healthy (4.5%).
• February Major Bank Mortgage Approvals fell 1,000 to 48,000. 54,000 was expected. Pace is slowing.
   The peak in November was 62,000.
• March CBI Industry Total Orders fell 1 to -37. Improvement is stalling. Export orders rose 5 to -18 and
   volume of output fell 2 to 5. Average prices were expected at 17 up from 8 – rising trend.
            o Domestic demand continued to be weak
Global Macro Research | US

             o    Exports helping the sector
             o    PPI likely to pick up in the coming months
             o    Inventories are low - lowest since June 2007.


DRAMeXchange Index rose 72.54 – surging higher. Flash was mixed to higher.

•   TSM’s CEO said that the chip market may see slower growth in H2. Growth may be between 4% and
    5% between 201 and 2014.

•   The Chinese government may allow bundling of telephone, Internet, and TV

» FDX solid earnings, but not enough to rally
» PLCM downgraded
» TQNT guides higher
» CSCO guides higher
» RIMM favorable broker comments
» LSI upgraded by a broker
» GOOG will keep some services alive
» KEY downgraded by a broker
» Banks downgraded by a broker
» HIG selling shares

» NBR removed from a buy list
» CHK downgrade by a broker
» APC downgraded by a broker
» COG downgraded by a broke r
» AET guides down blamed political environment
» BIIB few negative headlines on Tysabri
» TEVA acquires ratiopharm
» ATU reports healthy numbers
» GR downgraded by a broker
» CMI upgrade by a broker
» TSCO downgraded by a broker

» NKE had solid results. See targets going up
» ROST reported in line EPS and better revenues
» GME beat and provides upside EPS guidance on revenues and EPS

Global Macro Research | US

» GES reported solid numbers
» GMCR target raised at Piper

Equity Fair Value

                         SPM                                                           NDM                                                           DJM

                         -4.67                                                         -2.34                                                        -62.16

Stocks are about flat. The market has seen sold earnings in retail (NKE and GES), but the FDX numbers are not
strong enough to excite buyers. TSM is cooling toward the second half of the year, but DRAM is on fire hinting at
strong IT demand. Regional banks get a downgrade. The market is rethinking Greece and China – to the bearish
side. There does not appear to have strong banking from the EU and may have to go to the IMF. China is prepping
for a higher yuan and tighter monetary policy. The healthcare legislation is moving forward – AET guides down. Best
guess for today’s range in SPM: 1147 to 1165 – downside risks have increased. Expiration could ad some

Treasuries are mixed. CPI and claims are supportive, and the news out of Greece is friendly. However, the market
also faces on going signs of better growth. FDX may be trading down, but it sees solid GDP growth in the near term.
TYM has support 117-07/01 and resistance at 117-22 and 118-01. Philly Fed on deck. Hoyer says that
the healthcare bill will save money, but I don’t believe it for a minute – entitlements are bankrupting the
country and government linked healthcare will be no different. The growth and fiscal impact of healthcare
is confused and may leave the trade off balance, holding other factors constant.

Copyright by MF Global Inc. (2010) 440 S LaSalle Street. The information contained in this report has been taken from trade and statistical services and other sources which we
believe are reliable. MF Global Inc. does not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect
judgments at this date and are subject to change without notice. The principals of MF Global and others associated or affiliated with it may recommend or have positions which may not
be consistent with the recommendations made. Each of these persons exercises independent judgment in trading, and readers are urged to exercise their own judgment in trading.


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