Preview from Europe: Markets Still Seeking Direction

It was a tale of two markets yesterday. The NASDAQ benefited from hopes of government spending on tech and telecoms infrastructure but the wider market fretted over the fate of the ‘bad bank‘ plan.

Today’s Market Moving Stories

• Significant policy moves from Australasia overnight. The RBA (Aussie Central Bank) cut rates by 1% to 3.25%, the lowest level in 45 years and also announced an AUD 24bn stimulus package to ward off a recession. Over in Japan, the Bank of Japan said that it will begin a yen 1trn ($111bn) programme of direct equity/stock purchases from the banks until April 2010 and hold these until at least March 2012. It’s really a token drop in the ocean.
• More grim news headlines emanating from China today. It’s been a bit of a recurring theme of mine here that the ugly spectre of civil unrest and possible regime change may prompt the authorities to embark on a devaluation of the yuan leading to a trade war with the US. This could plunge the world into a depression. Stories like 20 million jobless Chinese migrants only heighten such worries.
• US Treasury Secretary Geithner is set to outline (yet another) new financial rescue plan in a speech next week. I wonder if he’s regretting taking the job already as he didn’t even get a honeymoon hiatus. Staying in the US, the Fed Senior Lending Officer survey showed that 65% of banks had tightened lending standards to large and mid-sized firms since their October report.
• Fed member Fisher (a former hawk) said that “its time for fiscal policy to kick in and help restore confidence.”
• The Association of British Bankers has called upon the BoE not to cut interest rates any further as this would hurt savers. Wish I’d some savings to get “hurt”. Surely the idea is to force people to spend!
• German retail sales released this morning came in much weaker than expected falling –0.2% for –0.3 YOY. Last month's number was also revised considerably lower. While this should be further food for thought for the mandarins of the ECB in Frankfurt, they will no doubt ignore the fresh warning signs of economic collapse and opt for the pointless pause in the rate cutting, talking voodoo-liquidity trap nonsense when we face a possible deflationary spiral.
• Goldman Sachs have gone all negative on the Dow Jones.

Equities

• BP (BP) had a BIG miss, posting a $3.3bn quarterly loss and now plans to cull 5k jobs.
• Scandinavian airline SAS were also in the red, swinging to a fiscal year loss of SEK 6.3bn. More worryingly for their stock price, they are said to be planning a rights issue! They also plan to wield the axe and slash a total of 8.6k jobs and refocus back on the home market.
• Better tidings from defensive play Imperial Tobacco (ITY) who said trading to end Sept ’08 was in line with expectations. They are likely to gain from sterling’s weakness in terms of repatriated profits from sales abroad.
• Vodafone (VOD) also made a point of mentioning the silver lining of the weak pound when announcing their results today and upped guidance for 2009. Telecom stocks are up today on European exchanges.
• DCC’s interim management statement guides 13-15% earnings growth on constant currency basis. Previous guidance had been 10% growth. This stronger performance has been driven by the energy division, which has benefited from integration synergies arising from acquisitions in recent years and much colder weather in the UK and Ireland. On the downside is the weakness of sterling earnings going forward when translated into euro.
• CRH (CRH) may be softer in tone after Dyckerhoff, the German-based cement and ready-mixed-concrete producer, gave a somber outlook for both European and US markets for 2009.
• A report in the Journal of Neurology said that blood washing reduces Elan’s (ELN)controversial drug Tysabri to acceptable levels within 2 weeks. The view is that these results may make doctors more comfortable with prescribing the drug.

Data And Earnings Today
Economic releases are purely of a second division nature with US Pending Home Sales (consensus is flat) and US Total Vehicles Sales (10.2m expected).

To make up, we’ve an interesting day of earnings reports ahead. The mixed bag of companies includes Merck (MRK) (expected EPS $0.74) , Schering-Plough (SGP) ($0.30), Dow Chemical (DOW) ($0.07), Motorola (MOT) ($0.00), Northrop Grumman (NOC) ($1.55), PNC Bank (PNC) ($0.75), Disney (DIS) ($0.52), UPS (UPS) ($0.85), Electronic Arts (ERTS) ($0.90), Met Life (MET) ($0.14), Tyco (TYC) ($0.47) and Yum Brands (YUM) ($0.45).

And Finally… More Public Opposition To Banking Bailouts

Disclosures: None

Comments

[Honest Corr...:]

Warning: Undercover Black Deeds in Japanese Corporations...

Japanese companies are famous for their high-quality service provided worldwide.

Any partner of a Japanese company expects a discreet and trustworthy business way. Unfortunately, it doesn’t look as it seems.

In our case, Japanese corporations’ representatives working in Russia and the CIS have elaborated an excellent fraud scheme including money-laundering, kickback clients and employees, asset misappropriation etc. ...

The scheme runs as follows:

1. Toshiba Corporation serving as a cover generally doesn’t sign official distribution contracts in Russia and the CIS. Russian nationals such as Mr. Vadim Danilov (Toshiba fake official trader) are hired by the corporation. In addition, all transactions are based on pledging Toshiba managers’ word of honor.

2. An “official” supplier – NAC Trading Ltd. - delivering appliances to Media Markt Saturn, located in Moscow, doesn’t have any procuration from Toshiba Corporation.

3. Defective appliances covered by an insurance company are sent to Russia from a warehouse Kouvola, Finland as new ones via a fake Toshiba trader.

4. Toshiba Corporation issues invoices on official blanks in which written payment requisites of third parties (Nana Europe OY) responsible for payment transfers to Toshiba Corporation and MCLOGI (Mitsubishi Corporation LT, Inc.).

5. It is strongly recommended by the Japanese companies to make all payments using off-shore banks since Toshiba prefers not to be responsible for anything if its Russian clients have any claims and complaints.

6. So, there is a bundle: Toshiba Corporation (Supplier) represented by Mr. Natsume – MCLOGI (delivering service) represented by Mr. Baba – Nana Europe OY (Toshiba “agent” in Finland supplying appliances to Russia) represented by Mr. Ogawa – NAC Trading Ltd. (Nana Europe branch in Russia responsible for financial flows in Russia), at a final stage RCAS (a private company of Mr. Baba and Mr. Natsume) located in Estonia transfers the cleaned funds from off-shore banks to Toshiba and MCLOGI.

To sum-up, it has been shown that the Japanese corporations use fraud schemes and transactions to snatch large sums and frame up hired managers and Russian big companies.

Feb 03 07:10 AM

[OldLimey:]

Mr. Mole, Sir: "While this should be further food for thought for the mandarins of the ECB in Frankfurt, they will no doubt ignore the fresh warning signs of economic collapse and opt for the pointless pause in the rate cutting, talking voodoo-liquidity trap nonsense when we face a possible deflationary spiral."

Your posts are pithy, witty, and informative. I read them every day. But is there any chance you could stop the daily drip of anti-ECB propaganda? You're writing from a country that is bankrupt and stays afloat for no other reason than the fact it is a member of the eurozone. The ECB is still (just about) clinging to a semblance of prudence while other central banks trip over each other going down a path which Japan has spent the last two decades proving does not work. What the BoE, Fed, and now the RBA are doing has little to do with the Keynesianism you seem so attached to; they are trying to reflate the Hindenburg and take us back to 2006. They will fail, of course, but it would be nice if at least one major currency came out of the fiasco worth something against hard assets.

Feb 03 02:14 PM