March 23, 2011
US equity markets are opening weaker this morning. Technicians at Bank of America/Merrill are looking for another 10% drop in the S&P 500, which would pull the index down to 1150. They are looking for the defensive stocks to lead on the way down, then the cyclical to regain leadership after the correction. Oil has moved back to $105 (WTI) per barrel and may have an additional $10-12 before hitting technical resistance. Domestic bonds are stronger, continuing their range bound trading (see left hand side of chart below courtesy Kimble Charting Solutions). New home sales came in at a record low 250K unites for February, below the 290K consensus, a 17% decline.
JP Morgan is suggesting that Portugal’s government may collapse this week. The yields on Portugal’s 5 year notes jumped 20bps to 8.2% this morning in front of a parliamentary vote which may push the country towards an EU bailout.
The Fed denied a request from Bank of America to raise its dividend, citing concerns about the bank's capital position.
The Egyptian stock exchange opened this morning for the first time in almost two months, and immediately went limit down (10%).
Authorities are worried that Japan's nuclear crisis is leading to radioactive contamination of fish, milk, vegetables and livestock near the Fukushima Daiichi power plant. Officials said the distribution of marine products was halted after the earthquake. The World Health Organization said a spread of contamination through food is a greater concern than airborne radiation. The U.S. is a major market for Japanese food exports and began blocking food imports from Japan today. In Tokyo signs of radioactive iodine above safety levels were found in the tap water.
European finance ministers agreed on how to establish a permanent rescue fund able to lend as much as €500 billion. The fund will replace a temporary fund in 2013. "We now have a comprehensive strategy to strengthen the foundations of the euro area and to restore confidence in euro-area sovereign-bond markets," said Olli Rehn, the EU's commissioner for economic and monetary affairs.
Apollo Global Management, a buyout firm co-founded by Leon Black, is looking to raise about $400 million in its latest attempt to go public. The firm sold shares in a private placement in 2007 with the intention of following it with an initial public offering, but that plan was pulled due to the financial crisis.
Germany's economy has kept growing this year and is expected to accelerate through 2011, according to a report from the Finance Ministry. Estimates are for GDP to increase by 2.3%. German employers are adding staff and increasing work hours, according to the report.
The cost of rebuilding Japan after its earthquake and tsunami could be the highest recorded for a natural disaster since such data were first compiled in 1965. The World Bank said the cost could be as much as $235 billion, the Japanese government is estimating $309 billion. The most expensive natural disaster previously was the earthquake that hit Kobe, Japan, in 1995
Jean-Claude Trichet, president of the European Central Bank, said he has "nothing to add" to the central bank's March 3 statement indicating that higher interest rates could come as soon as April. Other ECB officials suggested that tighter monetary policy is needed to control inflation.
The Federal Reserve will be required to make public the emergency help it gave to banks through "discount window" borrowing during the credit crunch, after fighting a request for the information for two years. The U.S. Supreme Court allowed a lower-court decision ordering the disclosure to stand. The decision requires the Fed to reveal the names of banks that borrowed money and how much they were lent.
Liz Taylor died this morning at the age of 79. For her 1963 role of Cleopatra she signed a then record $1 million, and ended up earning $6 million because of filming delays. She won two academy awards and five total nominations in her career.
Have a great morning