March 28, 2011

Stocks are opening up moderately for a 4th straight day while treasuries are sliding (and yields rising) for an eighth consecutive day. Consumer spending rose greater than expected to 0.7% vs. expectations of an increase of 0.5% for February, a level consistent with GDP growth of 2.7-3.0%. Personal income rose by 0.3% vs. expectations of a 0.4% increase. The PCE core inflation increased to 0.9% from 0.8%, and the PCE deflator rose to 1.6% from 1.2%, both in line with expectations. The net on spending is that Q1 spending has decelerated from Q4, unless real spending accelerates to 2.0% in March, which would be the highest level since October 2001.

Leaks inside the containment unit of Japan’s damaged nuclear have led to dangerous levels of radiation outside the reactor. For the first time since the tsunami radiation levels outside the buildings are now high enough to cause death. Water outside the #2 reactor are high enough to cause death after four hours of exposure, and severe illness after just 30 minutes. The struggle now will be trying to keep the leaking water from spreading into ground water or the radiation spreading into the air. Elevated radiation levels have been detected in crops near the plant as well as the water supply in Tokyo, which is 140 miles to the south. Recent soil tests are also showing signs of plutonium, which was only used in reactor #3 and could indicate the fuel rods in that facility also were exposed and partially melted down.

EBAY is acquiring GSI Commerce for $2.4 billion, a 50% premium to Friday’s close.

Cotton prices are finally easing after a record crop in the US will allow stockpiles to increase for the first time since 2007.

GDP growth estimates are being cut for Japan as disruptions due to the disaster are expected to negatively impact production for the next 3-6 months. GDP estimates for 2012 are being increased due to the anticipated rebuilding efforts. Japan’s enormous debt/GDP ratio will cause concern as the country struggles to pay for the rebuilding.

S&P downgraded Portugal’s credit rating on Friday.

The future of the Euro may be in the hands of the German electorate as Chancellor Angela Merkel’s Christian Democratic party faces challenges in this year’s elections. Last week the party lost the Baden-Wurttemberg stat election, losing control of the state for the first time in 58 years.

The German government lowered its projected budget deficit this year from 3% to 2.5% of GDP, and is looking for 1.5% in 2013.

APAC markets were mixed overnight, and European markets are up slightly today.

Kentucky, U-Conn, Butler, and Virginia Commonwealth will travel to Houston to play in the Final Four this weekend. How unlikely was that combination of teams, seeded 4, 3, 8 and 11 respectively? On ESPN’s website there were only two brackets out of six million submitted with that combination of teams in the Final Four.

Have a great day

Ned