Stocks Spread Trading News

The Financial Markets - 8 Apr 09

• The Fed’s Fisher, speaking in Tokyo, said that the US economic data is grim and that the Fed is duty bound to use every tool possible to clean up the mess in the financial system. Inflation was deemed unlikely to present a serious threat.
  
  
• US data overnight saw consumer credit fall $7.5bn against an expectation of a fall of $3bn. ABC consumer confidence moved down to -50 from -49.
  
  
• The Fed released preliminary February data for consumer credit, which doesn’t include mortgage debt and doesn’t make for pretty reading. Seems that the velocity of money is going to slow further, giving two fingers to helicopter Ben.
  
  
• UK Nationwide Consumer Confidence fell back down to 41 in March from 43, matching January’s record low. Meanwhile, the NIESR projects Q1 GDP contracted a further 1.5% qoq, pointing out that the path is similar to that which unfolded in the 1979 recession, where the contraction lasted for more than a year.
  
  
• Its official - life insurance companies are now eligible for TARP. It seems that the US taxpayer is going to be backstopping every bond buyer in the US. The latest bitter pill to swallow for Joe the Plumber is that the TARP will be extended to “certain eligible” life insurers. The report is very sketchy.
  
  
• Another mega merger in the pharma space with rumours that Novaritis could be eying up a bid for Bayer at a modest 15% premium.
  
  
• The German government has decided to expand the car incentive scheme which gave such as boost to March sales to €5bn in total, allowing it to run to the end of the year and quelling any fears that the bonuses may be stopped earlier. This may slow the surge somewhat in April, following the 40% increase in sales in March, but a smoother sales profile would be advantageous in any case to car manufacturers. This should be a boon to the volume players, Volkswagen, Fiat and Peugeot who benefited so strongly in March.
  
  
• The Irish Competition Authority has opted to appeal to the Supreme Court a ruling in favour of Kerry’s purchase of Breeo Foods. Kerry already wrote off €20m of the proposed transaction in its 2008 accounts and adjusted down the purchase price to €140m. The deal bolsters its position in the Irish consumer food market at a time when demand is weakening. If the deal is aborted, the synergies available from a merger disappear but Kerry will pocket its purchase price and walk away from the €20m tab.
  
  
• The Glanbia-PJ Cussons nutrition business in Nigeria has moved into profit in the latest quarter, according to PJ Cussons in an IMS update.
  
  
• GM and Segway unveiled a new two-wheeled urban transportation device developed as a clearner alternative to traditional cars. Project P.U.M.A. (Personal Urban Mobility and Accessibility), which looks like passenger car of a rickshaw, is powered by a lithium ion battery and has a top speed of about 35 miles an hour.
  
  
• To paraphrase Prince, today were gonna have a hangover like 1929? Thomas Worsley, a 97-year old economist who worked in the Roosevelt administration, offers up some not-so-reassuring comparisons between now and then.
  
  

Can The Bear Market Rally Can Go Further?

1. EVERYONE thinks this is a bear market bounce, and is basically uncommitted to the rally. Until higher prices are a consensus view, we won’t have enough longs to hurt and the shorts can be squeezed harder.
   
   
2. The market expects a 36% yoy fall in earnings, which is a lot and enough to give some cover.
   
   
3. The more important part of the earnings releases will be the financials in a few days time and that part should be good. Banks have been rushing to tell us how good things have been in their dealing businesses. Huge corporate bond issuance, a pick-up in equity issuance, very steep front ends to yield curves, and central banks both selling and buying bonds create a dealer-friendly market. The results should reflect this, especially when quite a few assets became less rather than more distressed over Q1.