Month: February 2014

A.M. Links: Harry Reid Claimed Obamacare “Horror Stories” Untrue, Union Workers in Pennsylvania Exempt From Anti-Harassment Laws, Google Street View Now Has Polar Bears

  • back to your iceberg!Harry Reid
    claimed     none of the “horror stories” about Obamacare were true,
    leading to well-deserved mockery. He’s now revised that to the
    “vast majority” being untrue.
  • A candidate for lieutenant governor in Texas
    mistakenly     sent out an anti-“activist judge” tweet that
    insisted marriage was between ONE MAN & ONE MAN.
  • Union workers in Pennsylvania are
    using     a law that immunizes them from charges of harassment and
    stalking during labor disputes to harass and stalk their
    opponents.
  • A car bomb today
    hit     a tea shop in Mogadishu known to be frequented by
    intelligence agents , killing at least 11.
  • Several European countries have
    begun     the process of cutting foreign aid to Uganda over its
    anti-homosexuality law.
  • Google Maps’ Street View has
    expanded     into the arctic with images, some including polar
    bears, taken from a trip through Churchill, Manitoba.

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Sheldon Richman: Keep the U.S. Out of Ukraine’s Mess


UkrainePresident Obama insists he does not regard the
conflict in Ukraine “as some Cold War chessboard in which we are in
competition with Russia.” He’d be more credible if he were not
following his predecessors in acting as though the Cold War still
exists. Although the Soviet empire, including its Warsaw Pact
alliance, disbanded beginning in 1989, Republican and Democratic
presidents have pursued aggressively anti-Russian policies up
to the present. One thing we can know for sure, writes Sheldon
Richman, is that the United States should steer clear of Ukraine.
It is none of the U.S. government’s business whether that country
is economically closer to Russia or the European Union.

View this article.

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’70s Rock Style Make You Shudder? Blame Swedish Tax Laws.

AbbaEver wonder just what in hell inspired ’70s pop
stars to adopt the transvestite trailer trash from Planet 10 (not
that there’s anything wrong with that) look when they went on
stage? Part of the blame lies, of course, with the interplanetary
cloud of LSD through which the Earth drifted during those years
(few people know that “Space Oddity” is
derived from actual NASA transcripts. Maybe). But now it can be
revealed that at least some of the blame for the ’70s pop look can
be placed on…Swedish tax laws. That’s the word from Abba member,
Björn Ulvaeus.

Reports
The Guardian:

According to Abba: The Official Photo Book, published to mark 40
years since they won Eurovision with Waterloo, the band’s style was
influenced in part by laws that allowed the cost of outfits to be
deducted against tax – so long as the costumes were so outrageous
they could not possibly be worn on the street.

Ulvaeus is quoted remarking, “In my honest opinion we looked
like nuts in those years. Nobody can have been as badly dressed on
stage as we were.”

As for why your dad wore bellbottoms and muttonchops…Some
mysteries are better left unexplored.

Since the 1970s, Sweden has moved in a more
market-oriented direction with
lower taxes. Swedes have even taken to
private health care. That’s a big change from the
state-dominated period that forced Ulvaeus into sequins. So modern
sartorial catastrophes wll have to be laid on somebody else’s
doorstep. Maybe France.

The video below is provided for information purposes only. Play
it at your own risk.

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Draghi’s Monetary Nightmare Refuses To End As European Private Lending Remains Stuck At Record Low Levels

With just released inflation figures out of Germany coming weaker than expected, Mario Draghi’s monetary nightmare – how to spur credit creation in Europe to the private sector – just got even worse. Incidentally the topic of Draghi’s “Monetary Nightmare” is well-known to regular readers and has been covered here extensively in the past, most recently here. So while we await to see how the ongoing deflation in Europe, soon hitting its core too, spreads through the system, the most recent data out of Europe is that lending to non-financial corporations declined once again in January, this time by €11.7billion, adjusted for securitizations and sales. On an annual basis, the decline in January was -2.0%, the same as December, and worse than the -1.8% in November as reported by the ECB.

The long-term chart is an absolute disaster.

Here is what SocGen has to say about it:

Money supply growth (M3) in the euro accelerated in January, from 1.0% to 1.2% yoy, still well below the ECB’s 4.5% reference target. The flow of credit to the private sector seems to have troughed, as it dropped by 2.0% yoy (adjusted for securitization and sales), unchanged from December. The release of today’s figures is not likely to affect the outcome of the March 6 ECB meeting, at which we do not expect fresh action. In fact, the latest soft and hard data published suggest that the ECB’s  scenario of a gradual recovery (1.1% GDP growth in 2014) is taking shape.

 

The flow of credit to the private sector (adjusted for securitization and sales) stopped decreasing in January, after a cumulative €45bn fall during the previous two months. The growth rate stood at -2.0% yoy, unchanged from December. Although credit flows seem to have reached a bottom, it is hard to distinguish a material improvement here.

Indeed it is, and it also means that Draghi continues to be in a no way out, since credit destruction is not bad enough to prompt much more easing, or certainly QE, and is not nearly good enough to stimulate any economic growth except net of GDP definition revisions.

Here is the breakdown by country on a three year basis:

And the Y/Y change in outstanding levels:


    



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Ukrainian Currency Collapses By 28% Against Gold In 4 Days

Today’s AM fix was USD 1,331.00, EUR 974.81 and GBP 799.88 per ounce.
Yesterday’s AM fix was USD 1,340.00, EUR 975.33 and GBP 803.12 per ounce.    

Gold dropped $11.60 or 0.87% yesterday to $1,329.00/oz. Silver fell $0.62 or 2.83% at $21.24/oz.

Get a clear picture of what a bail-in actually is with Goldcore’s 11 page bail-in guide, ‘Protecting Your Savings In The Coming Bail-In Era’


Ukrainian Hryvnia in Gold, 5 Year – (Bloomberg)

Gold is marginally higher in dollars and most major currencies today. However, yesterday’s sell off means that gold is vulnerable technically to further falls and initial support is at $1,322/oz and $1,307/oz.

The political and economic crisis in Ukraine has led to a currency crisis. The Ukrainian hryvnia has fallen by 50.14% against gold in 2014 and by 28% in the last four days alone. Ukrainians who own gold have protected their savings – again showing gold’s safe haven properties.

Yesterday, gold hit a four-month high at $1,345.35 before falling almost 1%, possibly due to profit taking and technical selling.

Gold has risen more than 10% so far this year on uncertainty over the pace of the U.S. economic recovery, worries about growth in China and continuing robust global physical demand. Geopolitical tension between Russia and the western powers over Ukraine will likely support gold.

In the physical market, premiums for gold bars in Singapore slipped to 80 cents to the spot London prices from a high of $1.50 last week after a recent increase in prices spurred sales of scraps.

Premiums in Hong Kong were unchanged at $1.30 to $1.70. In Tokyo, gold bars were offered at discounts of 25 cents to the spot London prices from zero last week after rallies in yen denominated gold contracts on Tokyo Commodity Exchange.
  
In other markets, Asian shares struggled to find a solid footing on Thursday as escalating tensions over the Ukraine led to weakness into equity markets and the risk of a renewed bout of risk off.

Ukraine is seeing bank runs, as central bank reserves shrink and some 7% of bank deposits were withdrawn in just 3 days.  Bank run fears mean some financial institutions operating in Ukraine closed branches and imposed limits on cash withdrawals this week.

Italy’s Unicredit closed eight branches temporarily, while other branches reduced opening hours and imposed withdrawal limits of 1,500 hryvnias per day for Unicredit customers and 500 a day for customers of other banks.

Bail-ins are likely to be the next step taken by the authorities in Ukraine. Preparations have been or are being put in place by the international monetary and financial authorities for bail-ins. The majority of the public are unaware of these developments, the risks and the ramifications.

Get a clear picture of what a bail-in actually is with Goldcore’s 11 page bail-in guide, ‘Protecting Your Savings In The Coming Bail-In Era’


    



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Frontrunning: February 27

  • European Bonds Surge on Slowing German Inflation, Ukraine Tumult  (BBG)
  • Ukraine tensions hit shares (Reuters)
  • Debating Geithner’s Appearances in 2008 Transcripts  (Hilsenrath)
  • Tensions in Asia Stoke Rising Nationalism in Japan (WSJ)
  • GM Investigated Over Ignition Recall Linked to 13 Deaths (BBG)
  • Smartphone wars shift from gadgetry to price (Reuters)
  • Some Companies Alter the Bonus Playbook (WSJ)
  • London’s Subterranean Luxury Manors Lure New Breed of Lenders (BBG)
  • Japan No Country for Old Farmers as 7-Eleven Takes Plow (BBG)
  • Dream of U.S. Oil Independence Slams Against Shale Costs (BBG)
  • EU’s Highest Court Rules Spain Fuel Tax is Unlawful (WSJ)
  • And in other news… Arizona governor vetoes bill widely criticized as anti-gay (Reuters)
  • Britain’s economic recovery is rooted overseas (FT)
  • Porsche Founder’s Legacy Hits Nazi Past in Czech Hometown (BBG)
  • Rajan Says RBI Aims to Curb Inflation ‘Over Time,’ Not Abruptly (BBG)

 

Overnight Media Digest

WSJ

* New York’s financial regulator is probing mortgage-servicing firm Ocwen Financial Corp’s relationships with several businesses, saying that borrowers may be harmed because of the companies’ close ties.

* The Consumer Financial Protection Bureau filed a lawsuit against ITT Educational Services Inc on Wednesday claiming the company engaged in predatory lending by pushing its students into high-cost private loans likely to default.

* The Obama administration has asked a special surveillance court for approval to retain records of millions of Americans’ phone calls stored by the National Security Agency – an unintended consequence of lawsuits seeking to stop the data-surveillance program.

* Verizon Communications Inc is investigating possible security breaches at two unnamed retailers that appear similar to intrusions at other merchants late last year.

* A record $14 million whistleblower award paid by the Securities and Exchange Commission last year was for a tip about an alleged Chicago-based scheme to defraud foreign investors seeking U.S. residency, according to people familiar with the payment.

* China’s central bank engineered the recent decline in the country’s currency as part of its efforts to prepare the tightly tethered yuan for wider trading, according to people familiar with the central bank’s thinking.

* Oil Search Ltd said it would raise $1.09 billion to fund the purchase of stakes in two large natural gas discoveries in Papua New Guinea, boosting its bets on an impoverished country soon to join the ranks of global gas producers.

* Data released Wednesday by the Federal Deposit Insurance Corp shows that the outstanding balance on loans for land acquisition, development and construction rose in the fourth quarter to $209.9 billion, compared with $206 billion in the third quarter. While that is a relatively small gain, economists note that if the overall balance is growing it means that originations of new loans are likely rising even faster. It was the third consecutive quarter of growth.

* Sales of new homes surged unexpectedly in January, easing concerns about a deeper housing-sector slowdown.

* Boeing Co filed plans this week with the Federal Communications Commission for a smartphone dubbed Boeing Black, which is designed for defense and security customers and won’t be available to average consumers.

* Electric car maker Tesla Motors Inc said on Wednesday its proposed battery “Gigafactory” would cost up to $5 billion and allow it to sell as many as 500,000 vehicles a year.

 

FT

Spanish group Telefonica’s bid to takeover E-Plus, Germany’s top mobile operator, for 8.6 billion euros has been challenged by Brussels in an antitrust objection, claiming that the buyout would raise mobile tariffs by up to a third.

The Financial Conduct Authority is set to increase scrutiny of trading houses in an attempt to increase transparency in markets. In a report to be published on Thursday, the FCA will say that the rise in proportion of activity in London markets by unregulated, overseas entities poses a challenge to its market supervisions, alongside risks to market standards and integrity.

A Whitehall memo cites a U-turn by David Cameron in ensuring insurance cover to the 9,000 “newly built or high value” households, which were earlier excluded from benefiting from the Flood Re scheme.

U.S. private-equity giant Blackstone is nearing a deal to buy a 20 percent stake in Italian fashion brand Versace, according to people familiar with the talks.

Scotland’s financial services industry head has warned that an independent Scotland’s use of the British pound without the permission of the rest of the UK could endanger the stability of the nation’s financial sector.

 

NYT

* The turn to bigger screens is a sharp departure from the dominant strategy of phone makers just a few years ago, when critics often mocked devices with big screens, joking that people would never buy them.

* Federal prosecutors in Manhattan are said to have issued a grand jury subpoena to Mt. Gox, while regulators in Japan weigh how to regulate Bitcoin.

* In the wake of the implosion of the Bitcoin trading platform Mt. Gox, countries like the United States and Japan are gathering data on virtual currency.

* Senators accused Credit Suisse of helping thousands of Americans hide billions of dollars in assets from United States tax authorities.

* Mythili Raman, an acting assistant attorney general overseeing some of the biggest investigations into Wall Street misdeeds, will soon depart the Justice Department.

* JPMorgan Chase and American Express said in statements on Wednesday that they oppose an Arizona bill that would let businesses there invoke religion to refuse services to gay and lesbian customers, according to Business Insider.

* The Blackstone Group is contemplating buying a roughly 20 percent stake in Versace at a valuation of about 1 billion euros, or $1.37 billion, in the latest sign that the finance industry’s interest in high fashion shows few signs of abating.

* The investment profits generated by private equity, long a subject of debate in Washington, would be taxed at a higher rate under a proposal on Wednesday by the chairman of the House Ways and Means Committee.

 

Canada

THE GLOBE AND MAIL

* The Conservative government says it shut out opposition parties from a historic delegation to Ukraine because one leader made light of the crisis and the other “wouldn’t pick a side” at the outset of the political uprising.

* The federal government has ruled that the proposed New Prosperity copper-gold mine near Williams Lake cannot proceed, striking what could be a final nail into the project that has put the province of British Columbia at loggerheads with Ottawa.

Reports in the business section:

* Royal Bank of Canada’s latest quarterly results prove the lender can consistently make over C$2 billion ($1.80 billion). Now the country’s most profitable bank must demonstrate it can earn even more.

* One of the world’s biggest and most respected hedge funds predicts that Canada’s economy has a tough decade ahead of it. Ray Dalio’s Bridgewater Associates says the country’s economy is just beginning a tough period of rebalancing.

NATIONAL POST

* Alberta is on track to record a C$1.4 billion surplus on day-to-day spending this year, but it will be C$8.5 billion in the hole on the capital side due to borrowing for new schools and roads.

FINANCIAL POST

* Despite posting vastly lower sales than it expected in Canada, Target Corp expects its sales in this country to double this year over last, but it has a long way to go before hitting its longer-term forecast of C$6 billion.

 

China

CHINA SECURITIES JOURNAL

– Tencent Holdings Ltd has developed insurance products to compete against Alibaba Group Holding Ltd, which will be marketed using Tencent’s popular WeChat mobile messaging app.

SECURITIES TIMES

– The Shanghai Stock Exchange said it would push forward the development of the blue chip market in 2014, promoting the issuance procedures of preferred shares included, to provide strategic and emerging industries with better services.

CHINA DAILY

– Chinese aircraft manufacturer AVIC Xi’an Aircraft Industry Group has applied to ground some of its MA-60 regional commuter-class planes after a problem with the landing carriage kept an MA-60 trying to land in Shenyang circling the airport for two hours.

SHANGHAI DAILY

– Thirty-seven Chinese citizens filed suit in Beijing demanding apologies and reparations from Japan for forced labour during the World War II.

PEOPLE’S DAILY

– Constructive advice and sincere criticism is needed to activate institutional benefit through China’s democracy, an editorial said in the mouthpiece of the Chinese Communist Party ahead of the National People’s Congress in early March.

 

Britain

The Telegraph

ANDREW BAILEY POURS DOUBT ON SALMOND’S PLANS FOR SHARED FINANCIAL REGULATOR

Andrew Bailey has told MPs that Alex Salmond’s plan for the Bank of England to continue to regulate Scottish financial institutions after independence was “not a system in place anywhere else.”

RSA SET TO ANNOUNCE 800 MLN STG RIGHTS ISSUE

RSA Group is set to announce a discounted rights issue of around 800 million pounds ($1.33 billion) to bolster its capital position as the insurer suffered a 200 million pound fraud in its Irish business in the run-up to Christmas.

The Guardian

BRITAIN SHOULD KEEP OPEN POSSIBILITY OF JOINING EURO, SAYS LABOUR FRONTBENCHER

Britain should keep open the possibility of eventual membership of the European single currency, according to a Labour frontbencher Lord Liddle who says it would be “ludicrous” for the UK to cut itself off from the EU mainstream for ideological reasons.

SCOTTISH ENGINEERING FIRM WEIR ORDERS INDEPENDENCE REPORT

One of Scotland’s biggest companies, engineering group Weir , has commissioned a report into the implications of Scottish independence on businesses after warning that “very serious questions” need to be answered.

The Times

CHANCELLOR ARRIVES ON CRUTCHES TO DEFEND THE EUROPEAN DREAM

Angela Merkel will set out the case for Britain to stay in the European Union in her address to both Houses of Parliament today, while warning that there are limits to the powers that can be won back from Brussels.

CO-OP TO SELL FARMS AND PHARMACIES IN SURVIVAL PLAN

Britain’s struggling Co-operative Group said on Wednesday it had kick started the sale of its farms and was looking at selling part or all of its pharmacy business.

Sky News

RBS Slashes Costs As Markets Chief Bows Out

Royal Bank of Scotland will unveil plans to slash billions of pounds from its cost-base on Thursday in an overhaul aimed at facilitating its eventual return to private sector ownership.

Cameron Criticised On Flood Defence Spending

The boss of the country’s biggest insurance firm, Legal & General, has told Sky News he is concerned about a lack of spending on flood defences.

 

Fly on the Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Jobless Claims for the week of Feb. 22 at 8:30–consensus 335K
Durable goods orders for January at 8:30–consensus -1.6%
Kansas City Fed manufacturing activity index at 11:00–consensus 2

ANALYST RESEARCH

Upgrades

Acuity Brands (AYI) upgraded to Overweight from Neutral at Piper Jaffray
Air Products (APD) upgraded to Buy from Neutral at Citigroup
Baidu (BIDU) upgraded to Buy from Hold at Stifel
CSR (CSRE) upgraded to Overweight from Equal Weight at Morgan Stanley
Care.com (CRCM) upgraded to Overweight from Neutral at JPMorgan
First Solar (FSLR) upgraded to Outperform from Neutral at RW Baird
ICF International (ICFI) upgraded to Market Perform from Underperform at Wells Fargo
Nordson (NDSN) upgraded to Buy from Hold at BB&T
PetroChina (PTR) upgraded to Buy from Neutral at Goldman
Ralph Lauren (RL) upgraded to Buy from Neutral at Goldman
Sinopec (SNP) added to Conviction Buy List at Goldman
Sony (SNE) upgraded to Buy from Neutral at Citigroup
Teekay (TK) upgraded to Outperform from Neutral at Credit Suisse
Weatherford (WFT) upgraded to Buy from Neutral at UBS
WellCare (WCG) upgraded to Outperform from Neutral at Credit Suisse
Workday (WDAY) upgraded to Outperform from Market Perform at FBR Capital

Downgrades

AGCO (AGCO) downgraded to Equal Weight from Overweight at Morgan Stanley
Baidu (BIDU) downgraded to Equal Weight from Overweight at Morgan Stanley
CNOOC (CEO) downgraded to Neutral from Buy at Goldman
Campus Crest (CCG) downgraded to Neutral from Outperform at RW Baird
Cedar Realty Trust (CDR) downgraded to Hold from Buy at Wunderlich
Clean Harbors (CLH) downgraded to Perform from Outperform at Oppenheimer
Cree (CREE) downgraded to Neutral from Overweight at Piper Jaffray
Cypress Semiconductor (CY) downgraded to Sector Perform at Pacific Crest
Deutsche Bank (DB) downgraded to Neutral from Buy at BofA/Merrill
Dyax (DYAX) downgraded to Market Perform from Outperform at Leerink
GameStop (GME) downgraded to Underperform from Neutral at Longbow
Globus Medical (GMED) downgraded to Hold from Buy at WallachBeth
ITT Educational (ESI) downgraded to Neutral from Buy at BofA/Merrill
JAKKS Pacific (JAKK) downgraded to Neutral from Buy at B. Riley
LightInTheBox (LITB) downgraded to Perform from Outperform at Oppenheimer
Nektar (NKTR) downgraded to Neutral from Buy at MKM Partners
UTi Worldwide (UTIW) downgraded to Market Perform from Outperform at Avondale
VF Corp. (VFC) downgraded to Neutral from Buy at Goldman

Initiations

Allison Transmission (ALSN) initiated with an Equal Weight at Morgan Stanley
Cummins (CMI) initiated with an Equal Weight at Morgan Stanley
EP Energy (EPE) initiated with a Buy at Citigroup
Express (EXPR) initiated with a Neutral at Wedbush
Francesca’s (FRAN) initiated with an Outperform at Wedbush
KaloBios (KBIO) initiated with an Outperform at JMP Securities
Manhattan Associates (MANH) initiated with a Buy at B. Riley
Microsoft (MSFT) initiated with a Neutral at B. Riley
Navistar (NAV) initiated with an Equal Weight at Morgan Stanley
Oracle (ORCL) initiated with a Buy at B. Riley
PACCAR (PCAR) initiated with an Overweight at Morgan Stanley
PTC Inc. (PTC) initiated with a Buy at B. Riley
Ross Stores (ROST) initiated with an Outperform at Wedbush
SAP (SAP) initiated with a Neutral at B. Riley
TIBCO (TIBX) initiated with a Buy at B. Riley
TJX (TJX) initiated with a Neutral at Wedbush
The Buckle (BKE) initiated with a Neutral at Wedbush
Trevena (TRVN) initiated with a Buy at Needham
Urban Outfitters (URBN) initiated with an Outperform at Wedbush
Veeco (VECO) coverage resumed with a Neutral at Piper Jaffray
WABCO (WBC) initiated with an Equal Weight at Morgan Stanley
Wabash (WNC) initiated with an Underweight at Morgan Stanley
Zumiez (ZUMZ) initiated with a Neutral at Wedbush

COMPANY NEWS

Williams Partners (WPZ) to acquire Williams’ (WMB) Canadian assets for $1.2B, sees assets immediately accretive
J.C. Penney (JCP) said the SEC was not recommending action its liquidity, cash position and debt and equity financing, as well as the company’s underwritten public offering of common stock last September
J.C. Penney (JCP) forecast FY14 SSS up mid-single digits, Q1 SSS up 3%-5%
Tesla (TSLA) announced a $1.6B convertible note offering and outlined plans for its Gigafactory
Sinovac Biotech (SVA) said its Phase III trial of its EV71 vaccine showed efficacy against hand, foot and mouth disease
IDC: Gamers spent four times as much on Google Play (GOOG) games in Q4 vs. year ago
Nordstrom (JWN) boosted dividend 10% to 33c per share
Riverbed (RVBD) board of directors member Satya Nadella stepped down to more fully devote time to his new position as Microsoft (MSFT) CEO
Bayer (BAYRY) to acquire Dihon Pharmaceutical Group in China

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
TRI Pointe Homes (TPH), Orion Marine (ORN), Assured Guaranty (AGO), Great Plains Energy (GXP), L Brands (LB), BioMarin (BMRN), Kennedy Wilson (KW), DCP Midstream (DPM), Autodesk (ADSK), Safe Bulkers (SB), Nutrisystem (NTRI), J.C. Penney (JCP)

Companies that missed consensus earnings expectations include:
Hilton (HLT), Sears (SHLD), PetroQuest (PQ), Delek US (DK), American Water (AWK), Vanguard Natural (VNR), BioScrip (BIOS), Southwest Gas (SWX), Churchill Downs (CHDN), Darling (DAR), Baidu (BIDU), Babcock & Wilcox (BWC), Halcon Resources (HK), TiVo (TIVO)

Companies that matched consensus earnings expectations include:
Republic Airways (RJET), Transocean (RIG), Aegean Marine (ANW), ICF International (ICFI), STAAR Surgical (STAA)

NEWSPAPERS/WEBSITES

Market research firm IDC predicts global smartphone growth will fall sharply this year, Reuters reports
Blackstone (BX) near deal for Versace stake, FT reports
Verizon (VZ) investigating additional retail breaches, WSJ reports
Royal Bank of Scotland (RBS) CEO Ross McEwan says the bank is not yet strong enough for any profitable U.K. sale, NY Times reports
Credit Suisse (CS): Tax evasion limited to a few employees, WSJ reports
Baidu (BIDU) CEO: More acquisitions coming, Reuters reports
FDA eases worries regarding certain diabetes medications (MRK, NVO, BMY), AP reports
J. Crew considering possible IPO this year, NY Post reports
Berkshire (BRK.A) expected to post record profit, Bloomberg reports
Solar (FSLR, SUNE, SCTY) brightens for investors, WSJ reports

SYNDICATE

Allete (ALE) 2.8M share Secondary priced at $49.75
Cesca Therapeutics (KOOL) files to sell 5.01M shares of common stock for holders
DCP Midstream (DPM) files to sell 12.5M common units representing limited partners
Lumenis (LMNS) 6.25M share IPO priced at $12.00
Neurocrine Biosciences (NBIX) 8M share Secondary priced at $17.75
Tesla (TSLA) announces $1.6B convertible notes offering
United Insurance (UIHC) files to sell $50M of common stock


    



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Futures Sell Off As Ukraine Situation Re-Escalates

Three unlucky attempts in a row to retake the S&P 500 all time high may have been all we get, at least for now, because the fourth one is shaping up to be rather problematic following events out of the Crimean in the past three hours where the Ukraine situation has gone from bad to worse, and have dragged the all important risk indicator, the USDJPY, below 102.000 once again. As a result, global stock futures have fallen from the European open this morning, with the DAX future well below 9600 to mark levels not seen since last Thursday. Escalated tensions in the Ukraine have raised concerns of the spillover effects to Western Europe and Russia, as a Russian flag is lifted by occupying gunmen in the Crimean (Southern Ukrainian peninsula) parliament, prompting an emergency session of Crimean lawmakers to discuss the fate of the region. This, allied with reports of the mobilisation of Russian jets on the Western border has weighed on risk sentiment, sending the German 10yr yield to July 2013 lows.

Regional German CPIs have fallen across every reported state, suggesting today’s expectation of an unchanged German prelim CPI could be unfounded (currently seen inline with the previous at 1.3%). This disinflationary threat heightens the focus on tomorrow’s Eurozone CPI estimate – the catalyst for the November rate cut from the ECB. Somewhat bucking the trend, Italian debt markets were unfazed by the geopolitical tensions as peripheral bonds are in favour once more – the Italian treasury sold 5yr debt at the lowest auction yield on record, as the IT 10yr yield fell below 3.5% to multiyear lows.

Turning to the day ahead, markets will be watching Janet Yellen’s return trip to Congress today for her Senate Banking Committee testimony (10am USET), which was postponed from February 13th due to bad weather. Though much of her testimony will be similar to her February 11th appearance at the House Financial Services, there have been a few more data releases since that day and markets will be wondering what she has to say on the weather-effect now that the worst of the storms appear to have passed. In addition to Yellen, a number of central bank representatives from the ECB (Nowotny) and Fed (Fisher, Lockhart) will be giving speeches today. The highlights on the data docket will be Euroarea money supply data, German unemployment, US durable goods and initial jobless claims.

Bulletin headline summary from Bloomberg and RanSquawk:

  • Global equities are being weighed upon heavily by escalated tensions in the Ukraine which has fuelled risk-off sentiment.
  • Today’s fall in regional German CPIs comes ahead of tomorrow’s Eurozone CPI release which will be a release closely watched by the ECB ahead of the upcoming rate decision and has thus seen a weaker EUR with expectations of a rate cut mounting.
  • Attention for the rest of the session turns to weekly jobs data and durable goods orders from the US, with Fed’s Yellen due to be presenting the (delayed) second part of her semi-annual testimony.
  • Treasuries gain, 10Y yields near lowest levels in over two weeks, amid escalating unrest in Ukraine and month-end extensions; week’s $109b auction cycle concludes today with $29b 7Y notes.
  • 7Y yields 2.11% in WI trading, below January’s auction stop.
  • Yesterday’s 5Y notes were awarded at 1.530% vs 1pm WI yield of 1.538%; 2.98 bid-to-cover was highest since Sept. 2012
  • An armed group occupied the parliament and government buildings in the capital of the Crimea region, replacing the Ukrainian flag with Russia’s tricolor
  • Arseniy Yatsenyuk won the support of Ukrainian protesters in Kiev to lead an interim cabinet and avert a default after the nation’s bloodiest unrest since World War II as the U.S. said it was working on a $1b rescue
  • Yatsenyuk said in Bloomberg TV interview that Russia “would never intervene” with military
  • China’s one-year interest-rate swaps dropped by the most in eight months after the PBOC signaled cash supply in the financial system is adequate
  • German unemployment fell for a third month in Feb., with the number of people out of work falling by a seasonally- adjusted 14k (est. 10K) to 2.914m
  • RBS posted its biggest full-year loss since receiving a government bailout in 2008 as CEO Ross McEwan outlined plans to shrink its investment banking and overseas operations
  • Republican lawmakers want Yellen and her FOMC colleagues to replace discretionary policy with a rules-based approach to what they say would be more understandable and reliable; Yellen testifies before Senate at 10am ET
  • Sovereign yields lower. EU peripheral spreads tighten. Nikkei -0.3%; Shanghai Composite gains 0.3%. European stocks and U.S. stock-index futures fall. WTI crude falls; gold and copper little changed

US Event Calendar:

  • 8:30am: Durable Goods Orders, Jan., est. -1.6% (prior -4.3%, revised -4.2%);
    • Durables Ex-Transportation, Jan., est. -0.3% (prior -1.6%, revised -1.3%);
    • Cap Goods Orders Non-defense Ex-Air, Jan., est. -0.2% (prior -1.3%, revised -0.6%)
    • Cap Goods Shipments Non-defense Ex-Air, Jan., est. -1% (prior -0.2%, revised 0.6%)
  • 8:30am: Initial Jobless Claims, Feb. 22, est. 335k (prior 336k)
  • Continuing Claims, Feb. 15, est. 2.985m (prior 2.981m)
  • 10:00am: Fed’s Yellen testifies to Senate Banking Committee
    11:00am: POMO – Fed to purchase $3.5b-$4.25b in 2018 sector
  • 1:00pm: U.S. to sell $29b 7Y notes

Asian Headlines

10yr JGBs reversed early gains overnight to finish lower by 3 ticks at 145.15, despite firm demand seen at the 2yr auction, whilst data overnight also showed that foreigners became net buyers of Japanese bonds. The Nikkei 225 saw indecisive trade overnight and fluctuated between gains and losses to close in the red (-0.3%). The Shanghai Composite saw gains of 0.3% being buoyed by the oil & gas sector after the NDRC lifted fuel prices and Sinopec were raised to conviction buy at Goldman Sachs. (RANsquawk)

BoJ’s Sato said long term rates are likely to shoot up long before exit and the BoJ can continue QE after CPI reaches 2% if it judges that gains are not sustainable. However, Sato added that the BoJ could exit easing before inflation reaches 2%. (BBG)

EU & UK Headlines

German Unemployment Change (000’s) (Feb) M/M -14k vs. Exp. -10k (Prev. -28k)

– German Unemployment Rate (Feb) M/M 6.8% vs. Exp. 6.8% (Prev. 6.8%)
German CPI Saxony (Feb) Y/Y 1.2% (Prev. 1.4%)
German CPI Bavaria (Feb) Y/Y 0.9% (Prev. 1.1%)
German Hesse CPI (Feb) Y/Y 1.0% (Prev. 1.2%)
German Brandenburg CPI (Feb) Y/Y 1.2% (Prev. 1.5%)
German CPI North Rhine Westphalia (Feb) Y/Y 1.6% (Prev. 1.7%)
German CPI Baden Wuerttemberg (Feb) Y/Y 1.1% (Prev. 1.3%)

Eurozone M3 Money Supply (Jan) Y/Y 1.2% vs Exp. 1.1% (Prev. 1.0%)
– Eurozone M3 3-month average (Jan) M/M 1.2% vs Exp. 1.2% (Prev. 1.3%)

EU Consumer Confidence (Feb F) M/M -12.7 vs. Exp. -12.7 (Prev. -12.7)
– EU Economic Confidence (Feb) M/M 101.2 vs. Exp. 100.7 (Prev. 100.9, Rev. 101.0)
– EU Industrial Confidence (Feb) M/M -3.4 vs. Exp. -4.0 (Prev. -3.9, Rev. -3.8)
– EU Service Confidence (Feb) M/M 3.2 vs. Exp. 2.5 (Prev. 2.3, Rev. 2.4)
– EU Business Climate Indicator (Feb) M/M 0.37 vs. Exp. 0.20 (Prev. 0.19, Rev 0.25)

UK YouGov inflation expectations fell from 2.4% to 2.2% in Jan, according to Citi.

Italian auction results: Sells EUR 7bln vs. Exp. EUR 7bln, 5yr auction yield lowest on record.

Barclays preliminary pan-Euro agg month-end extensions: +0.07y (12m avg. +0.07y)

Barclays preliminary Sterling month-end extensions:+0.05y (12m avg. +0.06y)

US Headlines

Fed’s Pianalto (voter, neutral) said the Fed’s QE program has pushed down long-term rates and that QE tapering is likely to continue with employment gains. (BBG)

Barclays preliminary US Tsys month-end extensions:+0.13y vs. prelim. +0.12y (12m avg. +0.07y)

Equities

Risk-aversion has weighed heavily upon European equities with the DAX seeing notable underperformance as it accelerated below the 9600 level. The FTSE 100 has also being weighed upon by RBS who provided a particularly disappointing pre-market update which revealed an operating loss of GBP 8.2bln vs. Exp. GBP 6.7bln loss. In terms of other notable movers, Veolia Environment are seen higher by nearly 7% following their strong Q4 numbers whilst Man Group are seen higher by over 11% after share buyback news and better than expected assets under management.

FX

Following the fall in German CPI’s EUR has softened against most other currencies, breaking through the 50DMA at 1.3651. Elsewhere in FX, the JPY benefited from flight to quality, with the decline in USD/JPY seeing the pair break below the 100DMA at 101.82 with analysts at IFR noting that Japanese bank stops are touted below 101.50. This move also follows the earlier comments from BoJ’s Sato saying the BoJ could exit easing before inflation reaches 2%.

Commodities

Iranian oil exports rose around 100,000bpd in Feburuary, for the fourth consecutive month, with more being exported to ally Syria, according to sources who track tanker movements. (RTRS)

Iraq’s Basra oil refinery is planning a 50% capacity boost, up to 210,000bpd, by 1st March. (BBG)

ANZ analysts have increased end-Q1 targets for gold to USD 1,280 per oz, up from USD 1,150 per oz. With forecasts steady at 1,450 per oz at year-end, with 2015 forecasts rising USD 1,500 per oz. (BBG)

* * *

Finally, the overnight recap from DB’s Jim Reid

Markets were dampened to some degree by EM stories yesterday with the S&P 500 (unch) failing to hold its intra-day record highs at the close for the third day running. Will Yellen’s delayed and second testimony today be the catalyst for closing through the all time highs again? Though EM underperformed as group yesterday, the stories were mostly idiosyncratic. Starting with the Ukraine and Russia, there are fears of an escalation in regional tensions after Vladimir Putin placed Russian armed forces near the Ukrainian border on alert and ordered an unscheduled military exercise in the area. The FT says that the moves were prompted by pressure from nationalistic elements within Russia’s leadership after media reports about alleged threats to ethnic Russian interests in Crimea. US secretary of State John Kerry urged Moscow to “be very careful in the judgements that it makes” over Ukraine, stoking fears that the Ukraine could be a new front for a proxy US-Russian standoff. News ( Reuters) that the US would offer a $1bn loan guarantee to the Ukraine failed to stem the nervousness, and markets are still left waiting for details of the potential EU/IMF package. The Ruble and Ukrainian Hryvnia fell by 1.0% and 4.4% against the greenback respectively, and the Ruble traded above 36.0 for the first time since Q1 2009. The Russian 10yr bond sold off by 5bp, in an otherwise better day for fixed income. In Turkey, there were fresh corruption allegations centred around a voice recording of a conversation between the PM and a family member (Reuters). This prompted the TRY to fall 0.75% against the USD with Turkish bonds taking another leg lower. Elsewhere in EM, the Brazilian central bank has decided to hike the benchmark Selic rate by 25bp to 10.75% as expected in its latest bid to rein in above-target inflation.

Turning to China and overnight markets, sentiment has been supported by a stabilisation in the CNH and CNY which are both slightly firmer following a fortnight of depreciation against the USD. Stocks are trading firmer throughout the region led by the Hang Seng (+1.3%) and Shanghai Comp (+0.7%), with the exception being Australia (ASX200 -0.5%). There’s been some focus on the Chinese import iron prices which have fallen by 5% in the last week and a half and more than 12% year-to-date in its worst start to the year since 2008. There has been talk about destocking and lower construction demand, but we shouldn’t dismiss the possibility that the most recent fall in iron ore prices has been driven by an unwind of USD-yuan carry trades (where iron ore importers have been using the inventory as collateral to borrow USD to fund yuan investments). Indeed the carry trade as a whole has taken a sharp hit of late amid the yuan’s depreciation, as we detailed yesterday. Our FX strategists write that the RMB complex has been thrown into complete disarray over the past few days, with the scale of moves in onshore and offshore spot particularly striking given the hitherto low vols on these currency pairs. They do not think this represents a structural shift in PBoC policy towards depreciating the currency. But equally, they worry that such strategic policy moves carry risks of error, particularly given the scale of the problem, as was the case with the episodes of domestic cash squeezes in June and December of last year.

If this is seen as further damaging China’s growth prospects, it could snowball into a wider global risk off event. China remains an underperformer in the credit space overnight, with Chinese bank CDS 10bp wider today in illiquid markets, while EM sovereigns such as Indonesia continue to tighten. On a separate but not completely unrelated matter, the Australian dollar suffered another drop today (- 0.3%) following significantly weaker than expected private capex data (Q4 capex – 5.2% vs -1.3% expected).

Returning to DM, there was some better news on the housing front after January’s new home sales in the US beat expectations (468k vs 400k), jumping 9.6% (-3.4% expected) on a sequential basis. Markets were left wondering why the weather did not have a larger impact on the data, but DB’s Joe Lavorgna writes that the strong January result was in fact partly due to a rebound in the Northeast (+73.7% vs. – 40.6%), which appears to have been severely impacted by adverse weather in December. US homebuilding stocks jumped 3% yesterday thanks largely to the data, which took the S&P 500 homebuilders index to its highest level since late May 2013. The index has now managed to recover all of its losses following Bernanke’s ‘tapering’ JEC speech last year.

Away from the housing theme, there were some interesting micro themes which popped up yesterday. US retailers (+1.11%) were the best performing stocks in the US, driven by an earnings beat from Target (+7.04%) which was a tailwind for other major retailers including Staples (+4.62%). Target’s Q4 revenue and earnings beat convinced some that the impact of the company’s data breach was only temporary. Other retailers such as Lowe’s (+5.4%) and Abecrombie & Fitch (+11.3%) also had very strong days, but their performance was mostly driven by the announcement of new/accelerated share buybacks. On the topic of stock buybacks, the FT reports that US investment grade companies have been exceptionally active in raising debt financing to fund stock buybacks in 2014.

Indeed, the total amount of debt raised for buybacks in the year-to-date is already >55% of the total debt funds raised for buybacks by US investment grade
companies in the whole of 2013.

Turning to the day ahead, markets will be watching Janet Yellen’s return trip to Congress today for her Senate Banking Committee testimony (10am USET), which was postponed from February 13th due to bad weather. Though much of her testimony will be similar to her February 11th appearance at the House Financial Services, there have been a few more data releases since that day and markets will be wondering what she has to say on the weather-effect now that the worst of the storms appear to have passed. In addition to Yellen, a number of central bank representatives from the ECB (Nowotny) and Fed (Fisher, Lockhart) will be giving speeches today. The highlights on the data docket will be Euroarea money supply data, German unemployment, US durable goods and initial jobless claims.


    



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Pro-Russian Gunmen Seize Ukraine Crimean Parliament; Russia Puts Jets On High Alert; Hryvnia In Record Plunge

All those clips we showed in the past few days of Russian forces amassing in the Crimean (such as this one)? Well, turns out they were all predictive of what has just happened in the Crimean region parliament at Simferopol, where around 120 pro-Russian Gunmen occupied the parliament building and raised the Russian flag. The scene was the site of Wednesday’s scuffles between Tatar groups and pro-Russian supporters. As Euronews reports, local Tatar leader Refat Chubarov posted that the buildings have been occupied by men in uniforms bearing “no recognisable insignia.” Kyiv says it would regard any movements by Russian military in Crimea outside Moscow’s Black Sea Base in Sevastopol as an act of aggression. Following the fall of President Viktor Yanukovych divisions in Ukraine have come to the fore. All this happens as Russian troops in the area are building up and at the same time as Russia put fighter jets on combat alert, according to Interfax.

The Russian flag flies atop the parliament building:

Euronews clarifies that the 120 men that seized Crimea parliament “have enough weapons to defend [the buildings] for a month” according an MP quoted by Interfax agency. Former Crimean Prime Minister and UDAR MP Serhiy Kunitsyn said to the agency that he spent all the night in contact with the armed group, “These professionally trained people are armed. They brought weapons – automatic weapons, grenade launchers, and machine guns,” he said, while speaking from the Ukraine parliament on Thursday.

According to Bloomberg, the group is allowing deputies to enter the legislature in the city of Simferopol for a possible vote on the status of Crimea, home to Russia’s Black Sea fleet, the Center of Journalist Research said. Ukraine prosecutors began a terrorism probe. .

“Provocateurs are on the march,” Acting Interior Minister Arsen Avakov said on his Facebook Inc. page as police cordoned off the block around parliament. “It’s time for cool heads, the consolidation of healthy forces and precise actions.”

At the same time Ukraine’s Foreign Ministry summoned Russia’s acting envoy in Kiev for immediate consultations.

“I am appealing to the military leadership of the Russian Black Sea fleet,” said Olexander Turchinov, acting president since the removal of Viktor Yanukovich last week. “Any military movements, the more so if they are with weapons, beyond the boundaries of this territory (the base) will be seen by us as military aggression

Reports Reuters:

There were mixed signals from Moscow, which put fighter jets along its western borders on combat alert, but earlier said it would take part in discussions on an International Monetary Fund (IMF) financial package for Ukraine. Ukraine has said it needs $35 billion over the next two years to stave off bankruptcy. The fear of military escalation prompted expressions of concern from the West, with NATO Secretary General Anders Fogh Rasmussen urging Russia not to do anything that would “escalate tension or create misunderstanding”.

 

Polish foreign minister Radoslaw Sikorski called the seizure of government buildings in the Crimea a “very dangerous game”. “This is a drastic step, and I’m warning those who did this and those who allowed them to do this, because this is how regional conflicts begin,” he told a news conference.

 

It was not immediately known who was occupying the buildings in the regional capital Simferopol and they issued no demands, but witnesses said they spoke Russian and appeared to be ethnic Russian separatists.

 

Interfax news agency quoted a witness as saying there were about 60 people inside and they had many weapons. It said no one had been hurt when the buildings were seized in the early hours by Russian speakers in uniforms that did not carry identification markings.

 

“We were building barricades in the night to protect parliament. Then this young Russian guy came up with a pistol … we all lay down, some more ran up, there was some shooting and around 50 went in through the window,” Leonid Khazanov, an ethnic Russian, told Reuters. “They’re still there … Then the police came, they seemed scared. I asked them (the armed men) what they wanted, and they said ‘To make our own decisions, not to have Kiev telling us what to do’,” said Khazanov.

 

About 100 police were gathered in front of the parliament building, and a similar number of people carrying Russian flags later marched up to the building chanting “Russia, Russia” and holding a sign calling for a Crimean referendum. One of them, Alexei, 30, said: “We have our own constitution, Crimea is autonomous. The government in Kiev are fascists, and what they’re doing is illegal … We need to show our support for the guys inside (parliament). Power should be ours.”a

As a reminder, so far Putin has been silent on his views about the sovereignty of the Crimean region which is host to the critical Russian Sevastopol naval base. Russian President Vladimir Putin has ignored calls by some ethnic Russians in Crimea to reclaim the territory handed to then Soviet Ukraine by Soviet Communist leader Nikita Khrushchev in 1954. The United States says any Russian military action would be a grave mistake. But Russia’s foreign ministry said in a statement that Moscow would defend the rights of its compatriots and react without compromise to any violation of those rights.

Russian Lenta, citing the Crimean information agency, reports that the Crimean deputees have begun a referendum on the status of the Crimean autonomy, which is not quite a secession. Yet.

Elsewhere, Ukraine’s deposed president, who as we reported first some time ago had fled to Russia, reappeared, as expected in Russia, and claimed legitimacy to his post saying the Ukraine’s “mob” actions were illegal . From Reuters:

Ukraine’s Viktor Yanukovich said on Thursday he was still the legitimate president of his country and that people in its southeastern and southern regions would never accept the “lawlessness” brought by leaders chosen by a mob. Russian news agencies quoted a statement by Yanukovich as saying he had asked Moscow to guarantee his personal safety.

 

The statement could not be independently verified and it was not clear where Yanukovich was, although some media groups have suggested he is in Moscow after fleeing Ukraine, where he was toppled by opposition forces at the weekend.

 

Russian President Vladimir Putin’s spokesman said he had no information and could not comment on the statement.

 

“I, Viktor Fedorovich Yanukovich appeal to the people of Ukraine. As before I still consider myself to be the lawful head of the Ukrainian state, chosen freely by the will of the Ukrainian people,” he was quoted as saying.

 

“Now it is becoming clear that the people in southeastern Ukraine and in Crimea do not accept the power vacuum and complete lawlessness in the country, when the heads of ministries are appointed by the mob.”

 

“On the streets of many cities of our country there is an orgy of extremism,” he said, adding that he and his closest aides had been threatened physically.

 

“I have to ask the Russian authorities to provide me with personal safety from the actions of extremists.”

 

Russian television showed what it said was a copy of the statement.

 

Interfax news agency quoted a source in the authorities as saying Moscow would ensure Yanukovich’s safety on the Russian territory.

 

“In connection with the appeal by president Yanukovich for his personal security to be guaranteed, I report that the request has been granted on the territory of the Russian Federation,” the source was quoted as saying.

And just to make sure tensions reach a fever pitch, Interfax reported a few hours ago that Russian fighter jets along the Western Border were put on high alert:

The crews of fighter jets deployed in Russia’s Western Military Districts have been placed on high alert as part of surprise combat drills ordered by Russian President and Supreme Commander-in-Chief Vladimir Putin on Wednesday, the Defense Ministry said.

 

“Our fighter jets are constantly patrolling the airspace over border districts,” the ministry said in a press release, seen by Interfax-AVN on Thursday. “As soon as they were put on high alert, aviation units of the Western Military District redeployed to their operative air fields,” it said.

 

At the moment, “the district’s bombers are tackling combat training tasks targeting an imaginary adversary at aviation training ranges,” the ministry said.

Not surprisingly, the Ukraine economy, already in critical condition, is shutting down and the Hryvnia is imploding: Ukraine’s currency weakened 10.3 percent to 11.2 per dollar at 12:21 p.m. in Kiev, the lowest level since it was introduced in 1996, data compiled by Bloomberg show. The central bank imposed capital controls this month to stem its decline.

Finally, the story in pictures as reported by Euronews:


    



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Andrew Napolitano on New Assaults on American Law

Edward Snowden may have revealed the nature and extent of the
spying that the National Security Agency (NSA) has been
perpetrating on Americans, but some of the NSA’s most troublesome
behavior has yet to become a part of the public debate. Andrew P.
Napolitano explores these new assaults on the American legal
system, including the erosion of attorney-client privilege. If you
have spoken to a lawyer recently and if that lawyer is dealing with
the federal government on your behalf, you can thank President
Barack Obama for destroying the formerly privileged nature of your
conversations, Napolitano writes. 

But that is not the only legal protection that’s being
destroyed. Last week, in a case in federal court in Oregon, the
same Justice Department that told the highest court in the land
last year that it would dutifully and truthfully reveal its sources
of evidence—as case law requires even when the source is an NSA
wiretap—told a federal district court judge that it had no need or
intention of doing so. If this practice of using NSA wiretaps as
the original source of evidence in criminal cases and keeping that
information from the defendants against whom it is used is
permitted, we will have yet another loss of liberty.

View this article.

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