Friday, July 22, 2011

Morning Note

*I'll update this post as I get more info up to 10 minutes before the open.

July 22, 2011

Equity futures are trading above fair value, following Europe higher after Eurozone leaders agreed a further €159B aid package to Greece to which private lenders will contribute. Three of the four options offered to lenders to swap or relend existing debts would extend Greece's repayment terms by 30 years, while the fourth would do so by 15 years. All options offer a much lower interest rate thanGreece's current 15%-25% cost of borrowing.


Lipper funds reports equity fund outflows of ($2.6B) in w/e 20-Jul vs inflows of $3.5B in w/e 13-July. Excluding ETFs, equity fund outflows were ($947M) in w/e 20-Jul vs inflows of $336M in w/e 13-Jul.

Libor fixings 

- Overnight Libor: Dollar: 0.122% vs prior 0.123% ; Sterling: 0.564% vs prior 0.564%; Euro: 0.945% vs prior 0.991%
- 1-month Libor: Dollar: 0.187% vs prior 0.187% ; Sterling: 0.632% vs prior 0.632%; Euro: 1.395% vs prior 1.392%
- 3-month Libor: Dollar: 0.253% vs prior 0.253% ; Sterling: 0.833% vs prior 0.833%; Euro: 1.556% vs prior 1.551%

Sep WTI crude +$0.26 to $99.39

Natural gas +$0.026 to $4.388

Gold +$4.80 to $1592.70

10-year yield 2.999%
30-year yield 4.295%


Asian Markets

Asian markets followed Wall Street higher after news of a potential resolution to the Greek crisis unfolded last night with the unveiling of a €159B aid package for the troubled country. Financial and commodity stocks led the rally. Hong Kong led the region with index heavyweight HSBC (5.HK) rising 2.8% the gainers. Japanstrengthened as the yen weakened on lessening risk aversion, helping out exporters. Korea rallied on news the two halves of the divided country will hold their first formal talks since February in Bali. Australian stocks rose with the A$ as an economic report showed import and export prices rose more than expected, cutting fears of an easing cycle. Shale gas plays such as Beach Energy (BPT.AU) rose 3.4% on speculation of M&A in the sector. Taiwan was up with the region with Acer (2353.TT) rising 0.5% on news it isto acquire privately-held Us-based iGware, a provider of cloud service platforms. China lagged the region. Coal company China Shenua Energy (601088.CH) rose 2% as it said its production rose 40% y/y in June. Lijiang YuLong Tourism (002033.CH) rose 3.9% after reporting a large rise in H1 profits. The yen is trading at 78.67 to the dollar.


European Markets

European equity markets extended yesterday's gains as investors risk appetite returned following the agreement by EU leaders of the Greek bailout package and plans to prevent further regional contagion. Indices saw session highs early before paring gains as investors assessed a raft of regional earnings releases and disappointing economic data. Advancing sectors lead decliners 16-3. Construction +2.1%, travel & leisure +1.9% and banks +1.8% lead gainers, the peripheral banks leading the sectors advance - Greek banks up as much as +7% and gains of over +4% not uncommon amongst Spanish and Portuguese banks. Chemicals and healthcare both (0.3%) and food & beverage both (0.1%) are the only fallers. France Jul Business Climate 105 vs consensus 107 and prior revised 110 from 109. Germany Jul IFO business climate 112.9 vs consensus 113.8 and prior 114.5 current conditions 121.4 vs consensus 122.5 and prior 123.3 expectations 105.0 vs consensus 105.0 and prior 106.3. EuroZone May Industrial New Orders due at 5ET
The pound and the euro are trading at $1.6290 and $1.4402 respectively


No key economic releases scheduled today.


Company Specific News

Earnings
APD (Air Products reports Q3 EPS $1.46 ex-items vs Reuters $1.46. Reports Q3: Revenues $2.58B vs Reuters $2.52B)
BAS (Basic Energy Services reports Q2 EPS $0.40 vs Reuters $0.48. Reports Q2: Revenues $296.9M vs Reuters $289.9M)
CB (Chubb (CB) Q2 operating EPS $1.27 vs Rtrs $1.01)
CPX (Complete Production Services reports Q2 EPS $0.69 vs Reuters $0.44. Reports Q2: Revenues $552.0M vs Reuters $540.3M)
GE (General Electric reports Q2 EPS $0.34 vs Reuters $0.32; Reports Q2: Revenues $35.63B vs Reuters $34.70B)
PRSP (Prosperity Bancshares reports Q2 EPS $0.75 vs Reuters $0.74)
SLB (Schlumberger reports Q2 EPS $0.87 vs Reuters $0.85. Reports Q2:
Revenues $9.62B vs Reuters $9.20B)
STI (SunTrust Banks reports Q2 EPS $0.33 vs Reuters $0.31. des
Reports Q2: Net interest income $1.286B vs $1.277B q/q vs $1.208B y/y)
VOLVB.SS (Volvo reports Q2 net SEK5.12B vs Reuters SEK 4.89B and year-ago SEK 3.15B. Reports Q2: Revenues SEK78.96B vs Reuters SEK 79.48B and year-ago SEK68.77B)
XRX (Xerox reports Q2 EPS $0.27 ex items vs Reuters $0.24. Reports Q2: Revenues $5.61B vs Reuters $5.63B)


Newspaper Articles / Headlines

Barron's
Barron's Weekday Trader is positive on Bank of New York Mellon. Barron's Weekday Trader is positive on Bank of New York Mellon (BK) citing the bank's variety of services that break way from the classic roll of a lending and deposit bank such as custodial services for big institutions, asset management and private banking. The article mentions these services have helped insulate the bank from credit quality concerns of recent years. In addition, the article notes the bank currently features a 12% long term growth rate, trades around 0.9x price to book and 9.5x forward earnings which is discounted when compared to the bank's historical levels.

Financial Times
Iberdrola SA loses court battle to limit Grupo ACS's voting power. The FT reports that the company has lost an appeal in the high court against new legislation that would allow 19% shareholder ACS to vote its entire stake.
Two ex-News of the World executives challenge James Murdoch's testimony. The FT, citing a statement from the pair, reports that they say he had been informed of an email relating to phone hacking at the newspaper when approving a six-figure settlement with the victim.
Three South African government departments appeal against Wal-Mart's (WMT) takeover of Massmart

Kommersant
News Corp sells News Outdoor. Sources in the advertising market tell Kommersant that the deal may have been for $350M, excluding debt. News Corp owned 79% of News Outdoor, which is Russia's largest outdoor advertising company and had RUB6.99B ($230M) in revenues in 2010. A source says News Outdoor's operations in the Czech Republic are not included in the transaction.

New York Post
Citi hopes to sell EMI by Labor Day. Sources tell the NY Post that the bank is speeding up the sales process and has asked for preliminary bids by 28-Jul. Citi may end up selling EMI's new-music-and-catalog business separately from its publishing business.

Nikkei
Toyota Motor raises FY production target to 7.7M units from prior 7.39M units. The Nikkei reports that the new target has been revealed to parts suppliers.

Wall Street Journal
Prudential PLC (PRU.LN) one of 12 cornerstone investors for ChinaEverbright IPO. The WSJ citing a person familiar with the situation, reports that the bank had been expected to list mid-July and has yet to announce a new date. At current prices, it could raise up to $6B.
- Looking into allegations of bribery, voicemail hacking by News Corp, Justice Department preparing subpoenas. A government official tells the WSJ that the subpoenas still need to be approved by high-level Justice officials. Sources say News Corp "expects a possible broad investigation" -- it's not clear if the emphasis belongs on "expects" or "possible" -- regarding the bribes it allegedly paid UK police, which may have violated the Foreign Corrupt Practices Act. A probe could be launched by Justice, the SEC, or both.
WSJ is positive on Morgan Stanley. A "Heard on the Street" column says the bank's results mean that at the very least, its shares should rise 10% to tangible book value.
Nevada casinos work to offer more than college hoops betting. The article is a summary, breaking no news. It focuses on the fact that casinos are now allowed to take bets on events that aren't sports-related. Growth in sports-betting revenues is outstripping overall revenue growth for Nevada casinos.
- WSJ is cautious on BRIC stocks. A "Heard on the Street" column puts up Sify Technologies, which plunged 18% today on the revelation that it has three times as many shares as the market thought yesterday, as the poster child for the dangers that infrequent financial disclosure from BRIC stocks exposes investors to.
WSJ is more positive on LM Ericsson than market is. A "Heard on the Street" column says the company is likely to escape the pressure on its margins soon, and services division sales are picking up.
- Nielsen Holdings to get Wal-Mart 's (WMT) sales data. The WSJ reports that Wal-mart will reverse its 10-year decision to keep sales private in order to get a better understanding of customer habits.
Cotton price swing makes VF Corp wonder about price rises. CEO Eric Wiseman tells the WSJ in an interview that he has never seen this kind of volatility in cotton and that the current low cotton prices will affect goods in shops next year but he is hoping that price rises will stick to recoup some margin lost.
- News Corp prepares for US legal fight. The WSJ, citing people familiar with the strategy, reports that the company is getting ready for a broad inquiry by the SEC and the DoJ the company is anticipating an investigation under the Foreign Corrupt Practices Act
AIG selects BofA (BAC), Citigroup (C), and JPMorgan (JPM) for possible ILFC IPO. Additional headlines state that the IPO for International Lease Finance Corp could take place this fall, as it previously reported on 18-July. Also noted is that the Treasury Dept must approve the company's choice of banks for the IPO


Research

Bank of America Merrill Lynch: upgraded DF; downgraded BCR, RT
Benchmark: upgraded DGI
Canaccord: upgraded AMD
Cowen: downgraded COH
Deutsche Bank: downgraded SFN
FBR Capital: downgraded TCB, HBAN, SFG
Goldman Sachs: downgraded CB
Nomura Securities: downgraded CHT
RW Baird: downgraded SWFT
Stephens: upgraded VSAT; downgraded GPN
Wells Fargo: upgraded AMD; downgraded GLP


Hot Stocks: Microsoft (MSFT) sees business PC growth outpacing consumer PC growth in FY12...Bristol-Myers (BMY) to acquire Amira Pharmaceuticals...Hewlett-Packard (HPQ) announced additional $10B share repurchase program...Oracle (ORCL) announced that it acquired Ksplice, Inc., the creator of innovative zero downtime update technology for Linux...athenahealth (ATHN) to acquire Proxsys, a leading provider of services and technology focused on the front end of the revenue cycle for hospital systems...Apple (AAPL) announced Lion downloads topped 1M on its first day...Meredith (MDP) to provide editorial content to new European online network...Johnson & Johnson (JNJ) unit announced FDA recommends approval for REMICADE...Merck & Co. (MRK), acting through an affiliate and known as MSD outside the U.S. and Canada, and China's Simcere Pharmaceutical Group (SCR) announced the signing of a framework agreement to establish a joint venture focused on serving China's expanding health care needs...Books-A-Million (BAMM) submitted bid in Borders (BGPIQ) bankruptcy



APPLE IS SAID TO CONSIDER MAKING BID FOR HULU ONLINE TV SERVICE. Apple is in early talks that may lead to an offer for the Hulu online video service, two people with knowledge of the auction said., i'd think a major neg for nflx?
Top Stories
US Equity Strategy FLASH (Thomas J Lee, CFA)
Corporates are the new "sovereigns": 22 stocks to own around sovereign default
EW ($82.55/UW/Michael Weinstein)
Quarterly Results Take a Back Seat as US Sapien Launch Beckons
BCR ($112.23/N/Michael Weinstein)
A Tough 2Q: Implications for the Group
TC ($10.01/N/Michael F. Gambardella)
D/g to N, New PT of $12.50; Lower Moly Prices + Mt. Milligan Spend Weighing on Valuation
FCX ($55.34/OW/Michael F. Gambardella)
Raising EPS and PT to $74; Cash Generation and Growth Prospects Remain Strong
NUE ($40.63/OW/Michael F. Gambardella)
Lowering 2011E EPS on Summer of "Sheet," Still Expecting 2012 Spring in Demand & Pricing
AFL CBI ($42.34/OW/Scott Levine)
Another Clean Beat; Raising Estimates & Price Target Following Recent Bookings Surge
WDC ($35.13/OW/Mark Moskowitz)
Stark Contrast: WD�s Execution and Operating Model Avoid the Banana Peels that Tripped-up Seagate
CREE ($32.75/OW/Christopher Blansett)
Lowering Estimates and Price Target on Weaker-than-Expected LED Demand in C2H11
AFL RBCN ($14.95/OW/Christopher Blansett)
Lowering Estimates and Price Target on Lower Core Pricing and Slower Growth in 6" Revenue
VECO ($40.74/OW/Christopher Blansett)
Lowering Ests and Price Target on Increased Risk of Shipment Delays to China & Weaker MOCVD Demand Elsewhere
MMI ($25.19/UW/Rod Hall, CFA)
Patent Wars: A few thoughts on the MMI patent portfolio @ jpm



Microsoft downgraded to Market Perform from Outperform at William
Blair - William Blair downgraded Microsoft based on
Microsoft downgraded to Market Perform from Outperform at William Blair - Willia
m Blair downgraded Microsoft based on

Microsoft downgraded to Market Perform from Outperform at William Blair -
William Blair downgraded Microsoft based on headwinds that include margin
pressure from cloud computing, market share risk, and slowing revenue growth.

GREECE/FITCH: Fitch added that it will place the Greek sovereign
rating into 'Restricted Default' and assign 'Default' ratings to the
affected Greek government bonds on the date that the offer period for
the proposed debt exchange closes. Fitch will assign new post-default
ratings to Greece and to the new debt instruments once the default event
is cured with the issue of new securities to participating bondholders.
Fitch will assign new post-default ratings to Greece and to the new debt
instruments once the default event is cured with the issue of new
securities to participating bondholders

Knee-jerk reaction to Caterpillar's (CAT) report is
negative after a bottom-line miss and updated outlook. CAT raises full-year
view EPS view to $6.75-$7.25 excluding Bucyrus business, $6.25-$6.75
including Bucyrus. Bit confusing as it's not quite clear whether Street's
$7.08 EPS view is including or ex Bucyrus. Judging by negative reaction,
looks as if it may be including Bucyrus. CAT down 5.9% premarket at $105.00.
At that level during regular trading, CAT's drop would be a roughly 50-point
negative drag on the DJIA. S&P futures flat, Dow futures down 18.



GLOBAL NEWS
? E.U.�
1. Stocks rose for a fourth day while Greek, Irish and Spanish bonds rallied as European officials agreed to a $229b bailout to contain the debt crisis.
2. The ECB�s willingness to drive up borrowing costs in the midst of a debt crisis threatens to widen the gaps between the region�s economies.
? GREECE�
1. Greece faces a �restricted default� after the EU crafted a $229B bailout for the nation, which includes getting bondholders to assume part of the cost.
2. Banks pledged to participate in a bond exchange and debt buyback program as part of a new rescue package for Greece.
3. Greece led a decline in the cost of insuring against a default on European government bonds after politicians agreed on an aid package.
? U.S. DOLLAR�
1. The European sovereign debt crisis is driving French companies to raise funds in the dollar market at the fastest rate in four years.
2. President Obama and House Speaker Boehner press for a broad agreement to boost the debt limit while cutting spending by trillions of dollars and overhauling the tax code
? IMF� Investigators probing the recent ransacking of International Monetary Fund computers have concluded the attack was carried out by cyber spies connected to China.
? GERMANY�
1. German Ifo Business Confidence Fell to Nine-Month Low in July
2. K1 Group founder Helmut Kiener was convicted of defrauding investors with a $497MM Ponzi scheme and sentenced to 10 years and eight months in prison.
? SPAIN�Spanish Banks� Quest for Capital Piles Risk on Their Customers
? ARGENTINA� Argentine securities tied to economic growth are climbing to a record.
? JAPAN� Japan to Hold Reduced Oil Stockpiles for an Extended Period
? LIBYA� NATO Allies Opens to Possibility Qaddafi Could Stay in Libya
? INDIA-- India Inflation May Curb Consumer Stock Rally

THOUGHTS OF THE DAY
? CS-- Credit Suisse Banker Indicted by U.S. in Tax Conspiracy Case
? COMMODITIES�
1. Beef Prices Seen Rising to Record
2. Oil Heads for Fourth Week of Gains
3. Copper May Rise on Mine Strike
4. Sugar Heads for Fourth Weekly Gain
5. Coffee Rises
? GE-- GE Profit Rises 18% as Finance Unit Blunts Energy-Sales Drop
? MSFT� Microsoft Fourth-Quarter EPS, Rev. Beat Est.
? BHP� BHP�s Escondida Workers Strike as Coal Miners Prepare for Action
? NOK� isn�t just losing mobile-phone market share to iPhone maker AAPL. NOK�s dominance in China, the world�s largest wireless market, is being eroded as prices sink. NOK�s 2Q handset shipments in China fell to 11.3MM, less than half the previous Q�s number and 41% less than a year earlier.
? AAPL�
1. Apple Surpasses Lenovo Sales in China on Strength of IPhones
2. Apple Is Said to Consider Making Bid for Hulu Online TV Service
? VOD-- Vodafone Service Growth Beats Estimates on Data Sales Surge
? TOMTOM-- TomTom Posts Surprise Loss on Writedown, Plans Cost Cuts
? HPQ� Hewlett-Packard Authorizes $10 Billion in Added Stock Buybacks
? NEW HIGHS: 266.
? NEW LOWS: 28.
? OVERBOUGHT: 144.
? OVERSOLD: 116.

MSFT: 4Q on to Windows 8 (Ed Maguire)
 
MSFT�s 4Q results saw a modest top line beat and good EPS beat with benefit from tax benefit. PC weakness had a clear impact on Windows revenues at the consumer while corporate spending offset this both in PCs but also in Office and Server & Tools revenues. Windows was flat YoY, company saw PC growth of 1-3%. Enterprise (Server and Tools) grew 12% YoY driven by Windows Server and System Center. Business Division (Office) grew 7% driven by corporate business while consumer declined 8%. Online Services grew 17% as operating loss narrowed from -121% to -110%. Entertainment and Devices grew 30% YoY. , clsa

GOLD IN EUR TERMS: THE
CORRECTION IS TAKING SHAPE:
Gold traded to �1145 five trading
sessions ago, and we were sellers into
that strength amidst raucous laughter,
with some even suggesting that our
decision to lighten up on the trade
marked the start of the next leg upward.
Instead, our selling marked what we
shall think will be seen as interim highs.
We�ve not �dry powder� with which to
shoot, and we�ll be returning to the
market as a buyer on another �20-25
lower from here. �1080 seems like a
reasonable target. gartman





San Francisco Cell Phone Retailers to Warn Consumers on Radiation Risk: The
city has passed an ordinance that will require retailers to "post general
warnings" about the possible risks associated with cell phone usage. Last
May the World Health Organization published a report saying that cell phones
are "possibly carcinogenic."











http://seaofopportunity.blogspot.com/ 


 *Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow! No position at this time. 


Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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