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MARKETS UP AFTER MORE UNCERTAINTY IN EUROPE ... EH? By WSS Research Team

By Carlos Guillen

Yesterday, the anticipation of a plan to impose a tax on depositors' bank accounts as a condition for a bailout deal had stocks trading lower, then after this anticipation actually became reality and got voted down by the Cypriot Parliament, stocks were up again ... Huh? Quite interestingly in today's first half of the trading session, stocks are up after a second plan to ameliorate the debt situation in Cyprus also appears to be off the table.

Experts from Troika (European Commission, the European Central Bank, and the International Monetary Fund) met today to discuss a second plan to secure a 10 billion Euro bailout ($13 billion) after parliament resoundingly rejected the first plan to tax the deposits of regular civilians. As part of the second proposal, Cypriot authorities offered to turn pension-fund assets into government bonds in a bid to raise about 4.2 billion Euros of the 5.8 billion Euros the deposit tax would have raised; however, troika officials were not convinced as this would add to an already mounting government debt. Cypriot authorities also offered to wind down the country's two largest banks (Laiki Bank and Bank of Cyprus) and have the bad assets transferred into a bad bank and their good ones merged into a new smaller entity that would be sold to Russian bank VTB. However VTB Bank has said that it has no plans to take stakes in Cypriot banks. Moreover, the Troika was not satisfied with this plan either, because it is concerned about who would pick up the cost for the bank resolution and the impaired assets.

So at the end of the day, nothing has been resolved, and banks in Cyprus will continue to be closed until at least the end of this week to prevent bank runs. Banks may open on Tuesday at the earliest, given that Monday is a scheduled bank holiday, but the rumor is that banks there may stay shut for even longer. Despites this fiasco, which had markets lower on Monday and part of yesterday, investors have chosen to ignore all things Europe and get into stocks, lifting the Dow Jones Industrial Average over 50 points, heading back to all time highs.

FedEx Flubs
BY David Urani

The shipping giant fell way short of consensus earnings per share expectations this morning, by $0.15. Meanwhile, revenues (+4.2% y/y) were slightly below expectations at $10.9 billion. Beyond that, their expectations have been muted, with management now expecting to see 2013 EPS of $6.00-6.20 versus their previous outlook of $6.20-6.60.

The company blames overcapacity in the airfreight market on its weak outlook. They say that policy decisions and rising fuel costs have changed the landscape, with customers opting for slower ground-based transport instead of air. Consequentially, management says it's guilty of building up its fleet too fast in many areas. This seemed to be particularly true in China.

Consequentially, cost cutting initiatives are underway including the company buying out several officers and managing directors, and notifying thousands of others of buyout offers. Additionally, it's looking like management may choose to ground some of its fleet and take impairment charges on the aircraft.

This is weighing on related stocks, although it seems to be more an issue of overcapacity and customer preference for cheaper transportation options than actual demand slowdown; we do note there were generally lighter packages as well.

https://www.wstreet.com/user/register.asp?source=3