Hanuman Morning Report

8/12/2010
Hanuman Morning Report
US Market
Change
% Change
Value
Dow Jones
- 3.03
- 0.03%
11,359.16
S & P 500
+ 0.63
+ 0.05%
1,223.75
NASDAQ
+ 3.57
+ 0.14%
2,598.49
WTI Crude Oil
- $0.64
- 0.72%
$88.32
Gold Futures
- $22.1
- 1.58%
$1,401.10
- $0.0060
- 0.61%
$0.9837
Commodities
Currency
AUDUSD
U.S. Overnight Market Commentary
U.S. stocks erased gains in the final hour of trading, pulling the Standard & Poor’s 500 Index down
from a two-year high, after a probe of insider trading reportedly widened and President Barack
Obama said he’ll push to overhaul the tax code in two years. The S&P 500 rose 0.1 percent to
1,223.75 at 4 p.m. in New York after surging 1 percent earlier. The Dow lost 3.03 points, or less
than 0.1 percent, to 11,359.16. “It all happened at the same time, taking the market off its highs,”
said Michael Nasto, senior trader at U.S. Global Investors Inc., which manages about $US2.5 billion
in San Antonio. “Investors got a little spooked during Obama’s press conference,” he said. “Then,
we had news that the SEC may widen the insider trading probe. That took some wind out of
stocks.” The S&P 500 traded for about 1,233.50 at 2:40 p.m. before falling after Obama said he will
fight to let the tax cuts for the wealthiest taxpayers expire in two years. Obama defended the deal
he struck with Republicans to temporarily extend Bush-era tax cuts as necessary to spare middleincome Americans a tax increase and to spur job creation. Equities also slumped at the end of the
day after Reuters said U.S. authorities widened their investigation of insider trading on Wall Street,
issuing subpoenas to “several large hedge funds” it didn’t identify. Reuters cited people familiar with
the investigation that it didn’t name. The stock market’s gains earlier in the day were driven by
Obama’s agreement to extend tax cuts and the Treasury’s sale of $US10.5 billion in Citigroup
stock, which brought the country’s third-biggest bank a step closer to independence from the
government following a $US45 billion bailout in 2008. “The announcement of a compromise on
taxes is a net positive and takes off the table a great degree of uncertainty,” said Kevin Caron, a
market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., which oversees about
$US90 billion in client assets. “The U.S. government wants to rehab companies and then exit its
role as an investor, as happened with Citigroup and General Motors. Stocks certainly have room to
move higher.”
8/12/2010
U.S. News
Consumer borrowing in the U.S. unexpectedly rose in October for a second straight month, led by
an increase in non-revolving credit, including student loans held by the federal government. Credit
climbed by $US3.38 billion after increasing a revised $US1.23 billion in September, the Federal
Reserve said today in Washington. Non-revolving loans rose for a third month as federal
government education-related lending jumped an unadjusted $US31.8 billion. The report showed
credit-card debt fell for a 26th consecutive time, showing Americans continue to pay down debt,
one reason spending is just now starting to recover. Car sales last month increased to the highest
level in a year and holiday sales have perked up, indicating households may soon start borrowing
again. “Consumers are buying more cars and this is helping to push up non-revolving consumer
credit,” Chris Rupkey, financial chief economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York,
said before the report. “We are expecting the best holiday season in years. The outlook for
consumers is improving.” Economists projected a $US1 billion decline in credit, according to the
median of 33 estimates in a Bloomberg News survey. Projections ranged from a decrease of $US5
billion to a gain of $US3 billion. The Fed revised the September reading to $US1.23 billion from a
previously estimated $US2.1 billion increase.
Job openings in the U.S. rose in October for the first time in three months, a sign gains in payrolls
will accelerate in early 2011. The number of positions waiting to be filled increased by 351,000 to
3.36 million, the most since August 2008, the Labor Department said today in Washington.
Excluding a drop among government agencies, the 369,000 increase in openings at companies
was the biggest in four years. Combined with declining claims for jobless benefits and surveys
showing hiring at manufactures and service providers is picking up, today’s report may help ease
concern the labor market lost momentum in November. The government reported last week that the
world’s largest economy created 39,000 jobs for the month, fewer than the most pessimistic
forecast of economists surveyed by Bloomberg News. The November payrolls report “looks like
more of a bump in the road,” said Jonathan Basile, a senior economist at Credit Suisse in New
York. Openings are “a positive force for what could eventually happen. It takes time to go from
openings to hiring. It’s still going to be a slow process.” Job openings increased 12% in October
from a revised 3.01 million in the prior month, the Labor Department report showed. The rate of
available positions rose to 2.5% from 2.3% in September. Professional and business services,
which include accountants, computer systems experts and temporary-help agencies, had the
biggest increases in available employment, followed by education and health care. Openings
dropped at construction firms and government agencies.
Almost six in 10 U.S. adults say a housing recovery is at least two years away, and more than a
third say flawed lender practices are partially to blame, according to a survey by Trulia Inc. and
RealtyTrac Inc. Half of respondents in the poll had less faith in banks and the government following
disclosures that lenders may have used false documents and signatures in taking back property, a
practice known as robo-signing, the real estate data companies said today in a report. More than a
third of respondents said the rebound won’t happen until 2014 or later. “American homeowners,
sellers and buyers are tamping down their expectations for a swift recovery in the housing market
and bracing themselves for a long, slow climb back to a healthy real estate market,” Pete Flint, chief
executive officer of San Francisco-based Trulia, said in the report. Mounting foreclosures and an
unemployment rate close to 10% are delaying a recovery in the industry that triggered the worst
recession since the 1930s. Home sales tumbled 21% in the third quarter from a year earlier and
half of U.S. metropolitan areas showed price declines, the National Association of Realtors reported
8/12/2010
last month. Demand is unlikely to pick up soon amid a “catastrophic drop in confidence,” Robert
Shiller, a Yale University economist and co-creator of the S&P Case-Shiller Index, said in a Nov. 30
Bloomberg Television interview. The home-price gauge has dropped 29% since peaking in 2006.
Bank of America Corp. agreed to pay $US137 million to settle investigations of its involvement in a
conspiracy to rig bids on 88 municipal bond contracts, the U.S. Securities and Exchange
Commission and Justice Department said. Bank of America, based in Charlotte, North Carolina,
agreed to pay $US36 million to settle an SEC case. The bank will pay an additional $US101 million
to resolve investigations by other federal and state agencies, the SEC said. Bank of America has
been aiding a nationwide Justice Department probe since at least 2007 in return for leniency. The
settlement also involves 20 states, the Office of the Comptroller of the Currency, the Internal
Revenue Service and the Federal Reserve Bank, Connecticut Attorney General Richard
Blumenthal said in a release. The company’s “cooperation has led to an aggressive, ongoing
investigation by the Department of Justice into anticompetitive activity in the municipal bond
derivatives industry,” Christine Varney, who heads the Justice Department’s Antitrust Division, said
in a statement. “Bank of America is pleased to put this matter behind it and has already voluntarily
undertaken numerous remediation efforts,” the company said in a statement. Eight former bankers
and financial advisers, including former employees of UBS AG, JPMorgan Chase & Co. and Bank
of America, have pleaded guilty in connection with the probes.
Copper rose to a 31-month high in New York and reached a record in London on speculation that
an extension of U.S. tax cuts will help bolster the economy, increasing demand for the industrial
metal. President Barack Obama said he’ll agree to extend all Bush- era tax cuts by two years.
Ireland’s austerity measures helped ease concern Europe’s debt crisis will spread. Copper also
gained as China’s benchmark money-market rate fell the most in three years and inventories
tracked by the London Metal Exchange shrank further. “Prices are up again today as favorable
messages surrounding stimulus in the U.S. and continued demand in China emerge,” John Meyer,
an analyst at Fairfax IS, said in a report. Copper for March delivery added 4.15 cents, or 1%, to
settle at $US4.0495 a pound at 1:20 p.m. on the Comex in New York. Prices reached $US4.1315,
the highest level since May 5, 2008, when they touched a record $US4.2605. On the LME, copper
for three-month delivery climbed as high as $US9,044 a metric ton, surpassing the previous peak of
$US8,966 on Nov. 11. The contract rose $US110.50, or 1.3%, to $US8,880 a ton.
GE Capital earnings this year may climb to about $US3 billion, more than managers projected, as
delinquencies slow and the unit gains market share in key businesses such as mid-market lending,
the unit’s chief said. Profit should rise next year and in 2012 after this year’s increase, which
includes tax gains, said Michael Neal, chief executive officer of General Electric Co.’s finance unit.
GE Capital’s profit last year was $US1.7 billion last year. GE Chief Executive Officer Jeffrey Immelt
is shrinking the percentage that the finance division contributes to the Fairfield, Connecticut-based
parent company’s profit and sales. GE Capital is focusing on businesses it dominates, such as
lending to small and mid-sized companies and aircraft-industry loans and leasing. “We’ll be smaller
and more focused but more profitable,” Neal, who is also a vice chairman of the parent company,
said during a presentation for investors broadcast on the Internet. Consumer businesses should
make up 15% to 20% of the portfolio going forward, he told investors. The company’s ability to build
businesses in markets such as commercial lending and leasing after the financial crisis gives it an
edge, Neal said.
8/12/2010
Europe’s Overnight Market Commentary
European shares hit a four-week closing high on Tuesday, boosted by economic recovery hopes
after the United States extended Bush-era tax cuts, while miners gained on rising demand
expectations. The pan-European FTSEurofirst 300 .FTEU3 index of top shares closed 0.9% higher
at 1,115.66 points, having earlier hit its highest intraday levels since late September 2008. "The
Obama tax cuts have diminished some of the uncertainty for the markets, as they were more than
expected," Koen De Leus, strategist at KBC Securities said. Investor sentiment got a lift after
President Barack Obama announced late on Monday a compromise deal to renew tax cuts not just
for the middle class, but also for wealthier Americans, a move that is expected to increase
consumer spending and boost the economy. However, De Leus said it was a relief rally.
Uncertainty about the euro zone debt crisis could "destroy all the profits which have been made in
the past week", he added. Since the Irish were bailed out last month, investors have grown nervous
that the debt problems could spread. So far, Germany and other fellow euro zone states have
resisted calls from the International Monetary Fund to do more to address the currency bloc's debt
crisis.
European news
U.K. manufacturing expanded twice as much as economists forecast in October, a sign the
recovery is maintaining momentum into the final quarter of the year. Output rose 0.6% from
September, the most in seven months, the Office for National Statistics said today in London. The
median forecast of 23 economists in a Bloomberg News survey was for an increase of 0.3%.
Overall industrial output fell 0.2% as utilities and mines cut production. Prime Minister David
Cameron is relying on exports and investment to keep the economy growing as the government
prepares to step up the pace of spending cuts and increase value-added tax on sales to tackle the
record budget deficit. “They’re a good set of figures,” David Tinsley, an economist at National
Australia Bank in London and a former Bank of England official, said in a telephone interview. “The
underlying momentum is pretty sound. Things are looking alright for fourth-quarter GDP.” The Bank
of England is this week forecast to keep its bond- purchase plan at £200 billion ($US313 billion).
Policy makers remained split last month on whether the economy faces a greater risk from slowing
growth or faster inflation.
German factory orders rose in October as domestic demand picked up, another sign the country’s
economic recovery is broadening. Orders, adjusted for seasonal swings and inflation, increased 1.6
from September, when they fell 4%, the Economy Ministry in Berlin said today. Economists
expected a 1.9% gain, according to the median of 40 estimates in a Bloomberg News survey. From
a year earlier, orders climbed 17.9% when adjusted for working days. Europe’s largest economy is
benefitting from rising consumption at home as companies step up hiring and investment to meet
export orders. The Bundesbank last week raised its 2010 growth forecast to 3.6%, which would be
the fastest since records for a reunified Germany began in 1992, even as the euro area’s sovereign
debt crisis curbs demand in markets such as Greece, Ireland, Portugal and Spain. “The rebound in
orders is consistent with the German industrial sector regaining some momentum in the final
months of this year,” said Aline Schuiling, an economist at ABN Amro in Amsterdam. “The sector is
not only benefitting from robust foreign demand, but also from accelerating domestic demand.”
8/12/2010
Russia moved a step closer to membership in the World Trade Organization today by signing an
agreement with the European Union settling “key questions” that have hampered its accession bid
for years. Russian Economy Minister Elvira Nabiullina and EU Trade Commissioner Karel De Gucht
signed a memorandum of understanding that sets the terms to resolve all EU-Russia bilateral
issues. Russia, the largest economy outside the WTO, applied for membership in the Genevabased trade arbiter in June 1993. “This is really a milestone,” said European Commission President
Jose Barroso. “Our difficult bilateral issues are resolved. Russia becoming a WTO member in 2011
is a realistic perspective.” Among the bigger EU concerns that have been settled are Russia’s
pricing policies for lumber exports and railway fees. Finland and the Baltic countries complained
that the policies unfairly aid Russian companies by overcharging European rivals. Russia has
agreed to cut the timber export duty to about 15% of customs value from 25%, though the lower
levy won’t be applied until it joins the WTO. The 27-nation EU is Russia’s biggest trading partner,
accounting for 50.4% of volume in the first nine months of this year, according to the Federal
Customs Service in Moscow. Trade in goods and services between the two economies climbed
almost 35% in the first nine months of 2010 to $US217.8 billion, according to data distributed by the
Kremlin.
Julian Assange, founder of the WikiLeaks website that leaked thousands of secret U.S. military and
State Department documents, was denied bail by a U.K. judge at an extradition hearing over rape
allegations in Sweden. Assange, 39, will remain in custody at least until his next hearing on Dec.
14, Judge Howard Riddle ruled today at City of Westminster Magistrate’s Court in London. Assange
told the court he will fight the extradition. “These are serious sexual offenses” and Assange has
“weak community ties” and access to significant funds, Riddle said of his reasons for denying bail.
He said the case isn’t about WikiLeaks, where Assange is editor-in-chief. WikiLeaks drew
condemnation for posting classified documents on its website, including U.S. embassy
communications and a military video of a July 2007 helicopter attack in Iraq that killed a Reuters
television cameraman and his driver. Created in 2006, WikiLeaks receives confidential material and
posts it on the Internet “so readers and historians alike can see evidence of the truth,” according to
its website. U.S. Attorney General Eric Holder said at a news conference on Nov. 29 that the
Justice Department was conducting a criminal investigation into the release of government
documents, saying such leaks put lives at risk. The U.S. embassy in London said it didn’t send a
representative to today’s hearing.
Sources: AFR, Bloomberg, CBS, CNN, Dow Jones News Wires, Financial Times, Reuters, Pulse and Wall
Street Journal.