Tuesday, August 28, 2012

Fasten Your Seatbelts, FX Investors

By: Kelley Holland The forex markets will soon be littered with event risk, this strategist says. Enjoying the dog days of August? You'd better because we're in for a bumpy ride. The slow times are about to end, says Camilla Sutton, chief currency strategist at Scotiabank. "September is littered with event risk," she wrote in a note to clients, with key events likely to sway both the euro and the dollar at different times. The fun actually starts at the tail end of August. That's when China will release its latest PMI report - oh, and Federal Reserve Chairman Ben Bernanke is scheduled to give a little speech in Jackson Hole. European Central Bank President Mario Draghi will speak a day later, and then on September 6, "we expect the ECB to clarify the details of its bond buying program" at its monthly meeting, Sutton says. A week later, Germany's top court is due to issue its ruling on the constitutionality of providing aid to troubled euro zone countries, and on September 13 the Fed could announce another round of quantitative easing, which would probably push the dollar[.DXY 81.34 -0.32 (-0.39%) ] lower. On top of all that, it's unclear when or whether Spain will request aid, Sutton says. "Delaying a request for aid threatens rising yields and ultimately another weight on EUR." And while "commentary following the meetings between Chancellor Merkel, President Hollande and Prime Minister Samaras appear to support the view that Greece will receive its next tranche of €31bn," she says, "a negative report would push Grexit back into the headlines and limit any EUR gains."

Monday, August 6, 2012

U.S. Stocks Advance on Europe as Earnings Beat Estimates

U.S. Stocks Advance on Europe as Earnings Beat Estimates By Rita Nazareth - Aug 7, 2012 4:48 AM GMT+0800 U.S. stocks rose, sending the Standard & Poor’s 500 Index to a three-month high, as German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan and earnings beat forecasts. Hewlett-Packard Co. (HPQ), Bank of America Corp. (BAC) and Caterpillar Inc. (CAT) increased at least 1.5 percent. Cognizant Technology Solutions Corp. (CTSH), a provider of consulting and outsourcing services, climbed 11 percent after raising its forecast. Best Buy Co. surged 13 percent after founder Richard Schulze offered to take the electronics retailer private at $24 to $26 a share. Knight Capital Group Inc., the firm driven to the brink of bankruptcy by trading losses last week, tumbled 24 percent. About five stocks advanced for every three that fell on U.S. exchanges at 4 p.m. in New York. The S&P 500 (SPX) rose 0.2 percent to 1,394.23, gaining 2.1 percent in two days. The Dow Jones Industrial Average added 21.34 points, or 0.2 percent, to 13,117.51. Volume for exchange-listed stocks in the U.S. was 5.7 billion shares, or 15 percent below the three-month average. “The earnings season has surprised because expectations were so low given the economic soft patch which hit the second quarter,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management. His firm oversees about $320 billion. The prospect for bond purchases by the ECB “has also boosted bullish attitudes among investors.” U.S. stocks followed European shares higher as Merkel’s government backed the ECB’s bond-buying plan announced last week, her deputy spokesman Georg Streiter said today. About 73 percent of the S&P 500 companies which reported second-quarter results have beaten earnings estimates even as 59 percent missed sales projections, data compiled by Bloomberg show. Biggest Gains Seven out of 10 groups in the S&P 500 rose today as commodity and technology shares had the biggest gains. Hewlett- Packard, the world’s largest maker of personal computers, added 2.4 percent to $18.69. Bank of America gained 2.8 percent to $7.64. Caterpillar, the largest maker of construction and mining equipment, climbed 1.6 percent to $86.35. Cognizant surged 11 percent to $64.21. The company is gaining revenue as its clients seek savings by outsourcing tasks to India and other lower-cost nations amid a slowing global economy, Chief Financial Officer Karen McLoughlin said. The company has also been building an emerging-technologies business focused on data analysis and mobile solutions. Best Buy jumped 13 percent to $19.99. Credit Suisse Group AG, Schulze’s financial adviser, is confident it can obtain financing for an offer, according to a letter sent to the board today. The offer is at least 36 percent more than Best Buy’s closing price Aug. 3, and the midpoint of the range gives the company an equity value of $8.5 billion. Job Cuts Navistar International Corp. (NAV) advanced 10 percent to $24.62. The maker of International brand trucks jumped after Crain’s Chicago Business reported that the company has told employees it’s considering options for the business including job cuts. ViroPharma Inc. (VPHM) gained 14 percent to $22.66 after it won U.S. regulatory approval to expand manufacturing of Cinryze, the company’s drug to treat hereditary angioedema, an inherited disease in which patients have attacks of inflammation of the face and throat, which can be fatal. NII Holdings Inc. (NIHD) climbed 19 percent to $8.08. The wireless carrier that operates the Nextel brand in Latin America rose after Wells Fargo & Co. predicted its second-quarter results would top the average analyst estimates. Zimmer Holdings Inc. (ZMH) added 1.3 percent to $59.78. The company and Seikagaku Corp. won a U.S. patent-infringement trial brought by Sanofi’s Genzyme over a treatment for arthritis in the knee. Bankruptcy Risk Investors also watched the latest developments with Knight (KCG) Capital, which received a $400 million cash infusion after a deal reached yesterday. The company faced too much bankruptcy risk to make its share price the top priority as it negotiated a rescue, said Thomas Joyce, the chairman and chief executive officer. The Jersey City, New Jersey-based company, one of the country’s biggest market makers, had to lock up an infusion of capital to preserve its businesses, Joyce said in a telephone interview today. Knight fell 24 percent to $3.07 as investors prepared for hundreds of millions of shares to enter the market via convertible securities. “This was absolutely the right thing to do for this organization,” Joyce said. “We understand the dilution is a large amount, but for the future of Knight Capital Group, as tough as it was to see happen, it was the right thing to do.” ‘Dry Powder’ Tyson Foods Inc. (TSN) slipped 8 percent to $14.17. The largest U.S. meat processor cut its full-year sales forecast and said profit will be lower after the cost of animal feed rose because of the country’s drought. The company is also cutting capital expenditures and stock buybacks partly to keep “a lot of dry powder around for an opportunistic acquisition,” Chief Executive Officer Donnie Smith said. AES Corp. (AES) slumped 4.4 percent to $11.71. The power producer with operations in 27 countries reported that 2012 profit would be at the lower end of guidance. HCA Holdings Inc. (HCA) lost 4 percent to $25.55. The biggest U.S. hospital operator said its cardiology practices had come under scrutiny from the U.S. Justice Department. Interpublic Group of Cos. tumbled 7.8 percent to $10.11 after Publicis Groupe SA said it hasn’t held takeover talks with the ad company or engaged a bank to support discussions, following a newspaper report saying the French company may bid. FreightCar America Inc. (RAIL) slid 8.7 percent to $19.15 after the maker of railroad freight cars posted quarterly profit and sales that trailed analysts’ estimates. S&P Downgrade Global investors can’t get enough American securities a year after S&P downgraded U.S. government debt. The dollar has outperformed its peers in the past 12 months, rising by 10 percent against a basket of six currencies. U.S. stocks have been the best performing equity market in terms of dollars, with the Dow Jones Industrial Average advancing 14 percent. Treasuries also have done better since the S&P action late on Aug. 5, 2011, returning 6.7 percent to investors compared with 6.1 percent for other government bonds. “We’re seeing negative data come in from a lot of parts of the world,” said Kenneth Rogoff, a professor at Harvard University in Cambridge, Massachusetts, and a former chief economist at the International Monetary Fund. “The rest of the world is looking at the United States and saying, ‘I wish we were the United States.’”