Futures are essentially flat on light news flow. A Financial Times article this morning speculates that the ECB will have to renew quantitative easing, thus weighing on the euro and – subsequently – European markets: http://www.ft.com/cms/s/0/efa4fe64-8948-11df-8ecd-00144feab49a.html. Additionally, details on the exact construct of the much anticipated European bank stress tests are expected from the Committee of European Bank Supervisors today. Also, the world’s second largest maker of building materials –
CRH LN – announced much weaker than expected first-half earnings and sales in . UBS cuts S&P500 2010 estimates to $84/share from $87 and 2011 to $91 from $97. WSJ reports BP may sell 10% stake to London . State Street Bank (STT; +9%) raises guidance for Q2. Agriculture Bank of China IPO sets record at roughly ~$22 billion, which values the company at roughly $186 billion, or 8th largest bank in the world by market cap. JPM cuts GOOG estimates. According to Reuters, Abu Dhabi will not pursue the “nuclear option” of dumping Treasuries and buying gold, arguing that gold is too illiquid and volatile to represent a major destination for its FX reserves. Also note that China ’s IIB defaulted on a Eurobond, which marks the country’s first private bank default in at least 10 years. Looking ahead, JPM research highlights some things on the horizon for July: Russia
There are still key event-risks hanging over July:
* US earning season (ever more imp in light of disappointing NFP data last wk & ISM non-manuf #s yest)
's plans to test mkt w/T-bill sales next wk Greece
* Much anticipated Spanish govt auction of 10Y next wk.
* European bank stress tests due for publication 7/23
It would seem investors continue to “sit on their hands” to some extent, as today’s highly polarized debates rage on: should we stimulate further, or cut back spending? Raise taxes or cut taxes? Are you in the inflation camp or the deflation camp? Is the euro going to parity with the USD or is it undervalued? Will Q2 earnings truly surprise, or is the bar being re-set so low that upcoming beats will be meaningless? Are European bank stress-tests confidence building, or a joke? Will FinReg renew investor confidence in Wall Street or does it represent more of the same ol’ thing? Will the coming midterm elections crush the Democrats, or re-invigorate them? Double-dip or slow-and-steady rebound?
China bubble or cooling off and staving off the bubble? Gold the only viable stor of wealth, or gold as nonsense? China Germany or ? Or the Oranje? Ginger or Mary Ann? I am obviously leaving out about 100 things, but you get my point… I can’t really remember a time – aside from 6th grade dodgeball, or maybe that 8th grade dance – where so many people were lined up on extreme opposite sides of the room, so to speak. And as we all know, the one thing the market hates is uncertainty. So, for now, summer is as summer does…light volumes, pockets of liquidity (thus some odd stock behavior and some wild swings), and lack of conviction rule the day. Spain
Worth noting that more and more “municipal bond fear” commentary seems to be creeping into the news. Here’s something this morning from Allstate’s CEO:
Allstate CEO Says
State, Local Borrowing ‘Out of Control’ 2010-07-07 10:00:03.0 GMT By Dakin Campbell, Andrew Frye and Erik Schatzker U.S.
July 7 (Bloomberg) -- Allstate Corp. Chief Executive Officer Thomas Wilson said a surge in borrowing by
state and local governments may trim the value of municipal debt holdings, and called for political leaders to cut costs. “Government borrowing is way out of control.” Wilson, 52, said yesterday in a Bloomberg Television interview from Aspen, U.S. . “We need to get our house in order.” Colorado said concerns about budget deficits and funding shortfalls will likely lead to market-value declines in the municipal bond market rather than widespread defaults. Allstate, the largest publicly traded U.S. home and auto insurer, cut its municipal-bond portfolio in three straight quarters through the end of March, reducing its holdings to $20.1 billion from $23.1 billion as of June 30, 2009. Wilson
And here’s a story from yesterday:
July 6 (Bloomberg) -- Citigroup Inc., State Street Corp. and U.S. Bancorp are among U.S. banks whose municipal bond holdings have reached a 25-year high just as state budget deficits swell to $140 billion, the most since the start of the recession. Commercial lenders added more than $84 billion to their holdings since 2003, according to the Federal Reserve, pushing total investments to $216.2 billion at the end of the first quarter. Bank regulators and ratings companies are ramping up scrutiny of banks most at risk of being forced to raise more capital should debt prices slide. “There is a huge untold problem here,” said Walter J. Mix III, a former commissioner of the California Department of Financial Institutions who closed 30 banks during the last banking crisis in the 1990s. “The economics lead to the conclusion that there will be downward pressure on these bonds.”
FBRC positive S. FCN lowers guidance. FDO beats by 1c but guides Q4 lower. Speculation from CNBC that another rise in the cost of postage will cost NFLX $50M per year. RNOW cut at Janney. SIRI saw better than expected net-adds in Q2. KEYB cuts TEX. BofAMLCO ups KRC. OPCO ups VRSN. SUSQ ups QEP.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
STATE ST CORP 36.22 +8.64% 44901
FANNIE MAE .280 -5.88% 159299
FAMILY DOLLAR ST 37.40 -5.17% 149938
BANK NY MELLON 25.85 +4.49% 14826
NORTHERN TRUST 47.92 +4.26% 3500
COMCAST CORP-A 17.20 -3.37% 251
TENET HEALTHCARE 4.4600 +3.24% 9332
NISOURCE INC 14.56 -2.61% 500
VERISIGN INC 26.59 +2.51% 500
GENWORTH FINANCI 13.21 +2.48% 13073
MEREDITH CORP 31.04 +2.34% 1400
FREDDIE MAC .350 -2.23% 116620
JUNIPER NETWORKS 24.60 +2.12% 2300
Today’s Trivia: Numbered jerseys were first used at the 1954 World Cup…since then, what number has scored the most goals?
Yesterday's Answer: No European team has ever won a World Cup outside of
Europe, something that is now guaranteed to change this year.
Best Quotes: Good tidbit from BTIG last night…Now that we are just over halfway through 2010, only 4 of the 24 major S&P 500 industry groups are in positive territory. The irony is that the leader is Consumer Services at +1.3%, yet those two words have been among the least popular in the investor mindset. The other three are Insurance, Banks and Real Estate, go figure.