Daily Highlights: 9.18.09

• Asian stocks fall as consumer finance firm Aiful seeks debt delay, Hong Kong warns of bank risks.
• EU officials press Obama on capping bank bonuses, tougher climate change.
• Euro-zone's surplus in its trade with the rest of the world hit a 7-year high in July.
• For the first time in nearly 2 years, American households grew a little wealthier in Q2.
• Hong Kong’s central bank warns lenders against mortgage-rate reductions.
• Housing starts rose 1.5% in August as apartment construction rebounded.
• Mortgage rates in US decline for third week, reaching 5.04%.
• Philadelphia-area manufacturing beats forecasts as Fed Index jumps to 14.1.
• US Initial Jobless claims falls unexpectedly to 545,000 last week.
• AAR, parent of American Airlines raised $2.9B in funding, in part by selling assets.
• Airbus sees worldwide demand for 25,000 commercial aircraft over 20 years.
• American Axle's lenders amend revolving credit, term loan terms; Co. avoids Ch 11.
• Balfour Beatty Plc will acquire New York's Parsons Brinckerhoff Inc. for $626M.
• Blackstone to buy 50% stake in London's Broadgate from British Land, valued at $1.75B.
• Deutsche Bank ends talks about buying ABN Amro units, over valuations.
• Discover Fincl Srvcs' Q3 net more than tripled to $577.5M on lower overdue loans, exps.
• DuPont sees sales opportunity in emerging economies of $13B by 2012.
• Estee Lauder to close its Prescriptives brand, sees $35M-$40M charge.
• FedEx's CEO said he sees "encouraging signs" the recession has ended; Q1 net down 53%.
• Hanesbrands to stop making own yarn, sells operations; expects $100M.
• Hospira sees Y09 global sales rising 5-7% (prev 4-6%),excl. impact of foreign currency.
• IHS Inc.'s Q3 net rises 65% to $34.7M; to acquire Environmental Support Solns for $59M.
• Major Japanese consumer lender Aiful Corp. sought to reschedule its debt payments.
• OMV AG said to hire JPMorgan, Barclays, UniCredit for stock sale.
• Palm's qtrly loss nearly quadrupled to $164.5M on 81% dip in revs to $68M.
• Penn National Gaming negotiating with Fontainebleau Las Vegas to buy it.
• Sprint CEO declined to comment on takeover speculation swirling around his co.
• Tangshan Steel: Some Chinese mills have reduced production this month.
• Temasek's net fell 67% for year ended March 31 on global economic slowdown.
• Toshiba and Mitsubishi will skip paying a first-half dividend.
• Toyota’s request to seal U.S. racketeering suit denied by Judge.

Recent Egan-Jones Rating Actions

RYDER SYSTEM INC (R)
STONE ENERGY CORP (SGY)
ORACLE CORP (ORCL)
FEDEX CORP (FDX)
CREDIT SUISSE GROUP AG (CSGN VX)
EASTMAN KODAK CO (EK)
AMR CORP (AMR)
COMMUNITY HEALTH SYSTEMS INC (CYH)
BEST BUY CO INC (BBY)
COMPUTER SCIENCES CORP (CSC)
ALLIANT TECHSYSTEMS INC (ATK)
MOOG INC (MOG)
TORO CO (TTC)

Comments

[EagleProjets]

Just for sharing info

September 18th 2009  

FROM THE ECONOMIST INTELLIGENCE UNIT

The global economy is still very weak, but conditions are now improving in many countries. The Economist Intelligence Unit expects world GDP at purchasing power parity to contract by 1.4% this year (reflecting the severe downturn in late 2008 and early 2009). But we expect growth to resume in the second half of this year, creating momentum that will carry into 2010. With economic data already looking more hopeful, we have raised our growth forecast for 2010 to 2.9%, a slight improvement on the 2.7% we were forecasting previously.

One of the main reasons for the improving picture is that policy is now having a clearer effect. Since the onset of the crisis a year ago, the authorities have taken unprecedented steps to kick-start economic growth, protect the banking system and flood financial markets with cash. Central banks have slashed interest rates, and many have adopted unorthodox measures such as "quantitative easing" (buying various types of securities to increase the supply of money in circulation). At the same time, governments have dramatically increased public spending in an effort to create jobs and support economic activity.

These efforts have not only helped to prevent a more severe downturn, they are also now setting the stage for a recovery, albeit a weak one. The inventory cycle will complement the process, as businesses that had cut production in anticipation of lower demand start restocking to meet new orders. Some countries in which industrial production fell most sharply in late 2008 and early 2009 may snap back particularly strongly in the months ahead.

Risk of a double-dip downturn

Despite the hopeful signs, the world economy is not out of the woods. Our biggest worry is that growth will weaken again once the stimulus wears off. Government debt has increased dramatically in many countries—eliciting rising concerns about the solvency of the state—and the current levels of stimulus are not sustainable. Once government spending shrinks, the recovery could slide into reverse, leading to a "W-shaped" growth curve. (A simple "V" would imply a more rapid and decisive upturn.) Although we are not forecasting this for the world economy as a whole, we do expect US economic growth to slow in 2011, after picking up briefly in 2010, for precisely this reason.

A number of other factors could hamper recovery. First, although credit markets have stabilised in recent months, they remain under stress. Many banks, chastened by near-death experiences during the crisis, have tightened lending standards. This has made it more difficult for consumers and companies to borrow, especially if their creditworthiness has deteriorated as a result of financial losses. Credit provided by non-bank financial institutions has also been scaled back dramatically.

Second, the crash of late 2008 destroyed wealth on such a scale that many households and companies will focus on rebuilding their finances for several years. They will not consume or invest as much as before the crisis. Third, there is a related risk that a weaker domestic US economy will import less, creating difficulties for countries that rely on the US as an export market. These countries may have to adjust their economic strategies or endure much slower economic growth for a number of years. Fourth, global growth will be relatively weak for some time, making it more likely that the recovery will be a "jobless" one.

US: A "W-shaped" recovery

We expect the US economy to begin growing again in the third quarter of this year. In 2009 as whole, GDP will contract by 2.3%. Improving conditions later this year will feed into a recovery in 2010, when we expect the economy to grow by 1.7%. The US Federal Reserve's aggressive policies and the government's US$787bn fiscal package will help the economy to grow. However, we do not expect the Obama administration to pass a second stimulus package, owing to political resistance and concerns about the budget deficit. As a result, the momentum from the stimulus will fade and growth will fall back to 1.3% in 2011.

Japan: New government, same weak economy

Japan has entered a new political era following the momentous victory of the Democratic Party of Japan (DPJ) in the August 30th general election. The DPJ has promised change, but the party faces an uphill struggle fixing the economy, which has been brutally hit by the global downturn. We expect GDP to contract by an alarming 6.3% in 2009 as a whole. As in many other countries, public spending is beginning to have an effect, and the economy has recently started growing again. But Japan's astronomically high public debt limits the government's ability to continue providing fiscal stimulus. We expect the economy to grow by 1.3% in 2010.

Western Europe: Slightly improved euro zone prospects

The euro zone will contract by 4.1% in 2009. However, we have raised our forecast for 2010, when we expect GDP to grow by 0.5% (previously we were forecasting zero growth). The German and French economies have started growing again, and there are tentative signs that orders for euro zone exports are picking up. However, problems in housing markets and banks' heavy exposure to borrowers in Eastern Europe risk further turmoil in the financial sector. Also, unemployment remains artificially low because of government subsidies. If the economy fails to recover quickly enough, there could be bigger job cuts. Outside the euro zone, the UK's prospects remain bleak. We expect the economy to contract by 4.6% this year and by another 0.5% in 2010.

Eastern Europe: Baltic blues

Eastern Europe is enduring a particularly grim crisis. The downturn has severely restricted many countries' access to foreign capital, and the region is also seeing weak Western European demand for its exports. Political unrest is a concern. We expect the region as a whole to contract by 5.7% this year before growing by 1.5% in 2010. The three Baltic economies of Estonia, Lithuania and Latvia will be worst hit, collectively contracting by over 15% this year and by almost 4% again in 2010.

Asia: Exports are weak, China keeps improving

We expect world trade to fall by 9.4% this year. Asia's export focus means that the region's economies will slow sharply as a result, although growth will hold up well compared with most other parts of the world. We expect GDP in Asia and Australasia (excluding Japan) to grow by 3.3% this year, picking up to 5.5% in 2010 as trade begins growing again. Unsurprisingly, the star of the show will be China, where we have raised our growth forecast to 8.1% in 2009 and 8.5% in 2010 (previously 8% in both years) because of the government's rapid roll-out of a massive US$586bn stimulus programme.

Latin America: A mixed picture

Many countries in Latin America have been severely hit by the global crisis, though the picture is uneven. Countries with economies most closely linked to the US are generally still struggling. But more signs of recovery are emerging in economies that export a lot of raw materials to China. Brazil's prospects are relatively strong, aided by its sound financial system, diversified economy and large internal market. As a whole, Latin America will contract by 3.3% in 2009 before growing by 2.4% next year.

Middle East & Africa: Oil and asset-price shocks

Economic growth in the Middle East and North Africa will slow sharply to 0.8% in 2009, from 6% in 2008. The fall in oil prices since the peak last year and the bursting of property bubbles, particularly in the Gulf Co-operation Council countries, are key factors in the downturn. However, we expect the region to recover strongly in 2010 as oil prices rise again, and as production increases boost economic growth. In Sub-Saharan Africa, which has been badly hit by the downturn in the US and EU and by falling commodity prices, we expect GDP to contract by 1.7% this year before recovering to grow by 3.1% in 2010.

Exchange rates: The dollar will weaken gradually

We assume that the recent sharp fall in the US dollar, to around US$1.46 per euro, is temporary. This fall appears to have been linked to a surge in the price of gold, partly reflecting concerns that the Chinese government is diversifying its massive foreign reserves into gold. Although the dollar is likely to recover slightly in the short term, its overall prospects remain highly uncertain. On the one hand, a shrinking US current-account deficit and changing interest-rate expectations may lessen downward pressure on the US currency. On the other, as the global recovery gathers steam, it could reduce the dollar's safe-haven appeal. Concerns about the US government's solvency may also undermine the dollar. We forecast that the dollar will fluctuate around US$1.40 per euro between now and mid-2010, and will weaken gradually against the euro, the yen, sterling and the renminbi over the following four years.

Commodities: Oil prices to rise, defying fundamentals

Our oil-price forecast is essentially unchanged from last month. We expect a barrel of oil (dated Brent Blend) to cost an average of US$62 this year and US$74 in 2010. Although fundamentals of supply and demand suggest that prices should be lower—as demand is weak and global stocks at all-time highs—signs of economic recovery are keeping prices up. This pattern will continue into the first half of 2010, although prices will soften later that year as the effects of global economic stimulus fade. Prices will then rise more strongly in 2012-14, to an average of US$84 a barrel, as demand picks up and concerns about long-term supply come to the fore.

 http://img132.imageshack.us/img132/9283/world1w.png

[Bearish Spirits]

1. Bad day yesterday(any red day is BAD.)

2. Spike the dollar overnight so it can be weakened through the open of the U.S. market to drive up the futures.  No one's really watching overnight, so it won't have too much of a negative effect.

3. Make sure the futures are green when everyone usually wakes up.

4. Have Citi pump the market by upgrading Procter & Gamble...yet another stock that is on the cusp of overcoming the 38.2 Fib from the end of '07.  Another stock that's struggling to stay above its 200 EMA.  A company that sold off its pharmaceutical component to make earnings this quarter, yet somehow will make "better than expected profits next year."  A consumer products company without the consumer bouncing back. 

Reminds me of Intel getting upgraded a few days back to try to pump them over the 50 Fib.  Didn't work.

[deadhead]

P&G reducing their prices pretty much across the board says it all for me...if there is a company that resists pricing pressure, it's P&G.

Anecdotally, my wife is a HUGE fan of Tide, their flagship product.  She has downgraded and does not buy Tide anymore.

[Anonymous]

JPM upgrades TOL to overweight. TOL CEO Sells more stock (1.58MM shares). WSJ sees trouble for TOL ahead. What a Fing JOKE!

[OMFGjustINDEX]

As dawn descends down

To the worker bees below

The SEC fails.