09Mar2015 Market Open Commentary:

Here is the Market Open from CNN Money

North and South American markets are mixed. The S&P 500 is higher by 0.32%, while the Bovespa is leading the IPC lower. They are down 1.86% and 0.47% respectively.

“Motivated” Seller Whiting Petroleum Jumps Despite 1043x Forward P/E

Whiting Petroleum – the largest oil producer in the Bakken shale formation – has caught some investors’ (and TV talking heads) eyes this morning as it has jumped over 11% on speculation that its decision to put itself up for sale – as a “motivated” seller – somehow means the collapse in the share price will be reversed by some greater fool who sees “synergies.” We wonder though… who exactly is going to buy this company that trades at a 1043x Forward P/E?

As Bloomberg noted Friday,

Whiting Petroleum Corp., the largest oil producer in the Bakken shale formation, has hired a bank to pursue a possible sale, people familiar with the matter said.

The Denver-based company, which has a market value of $5.7 billion, has reached out to potential buyers including Norway’s Statoil ASA, one of the people said, asking not to be identified as the information is private.

Whiting, which acquired Kodiak Oil & Gas Corp. for $3.8 billion last year, is searching for a buyer as the price of crude oil has fallen by half since July to about $50 a barrel. The company has been exploring the sale of its oil and gas processing assets in North Dakota, people with knowledge of the matter said last month.

And today the stock jumps… because who doesn’t wnat to buy a company whose valuation is a mere 1043x Fwd P/E…

One quick question – what happens if no one wants to buy them? Two words… “massive r …

Czech government approves sale of 15 Czech-made light combat planes to Iraq

PRAGUE (AP) — The Czech Republic’s government says it has approved a deal to deliver 15 Czech-made light combat planes to Iraq. Defense Minister Martin Stropnicky says the military will sell the subsonic L-159 planes for 750 million koruna ($30 million) back to the maker, Aero Vodochody, which will then broker a deal with Iraq because the military is banned by law from selling directly. Stropnicky said Monday Aero is expected to repair the planes and deliver them in two or three years. The light combat and training planes were made between 1999 and 2003. The Czech army had been trying to sell most of them because it has no use for them. Last year, the government approved another deal to deliver up to 28 of the aircraft to the United States.

Simon offers to buy Macerich for $22.4 billion in cash and stock

(Reuters) – Simon Property Group Inc , an owner of malls and outlet centers, said it had offered to buy real estate investment trust Macerich Co in a cash and stock deal for $22.4 billion including debt.

ECB Confused How To Mask Losses On Negative Yield Bond Purchases

As we noted last week, Mario Draghi’s move to purchase €1.1 trillion in EGBs at 124% of par may have mitigated market jitters regarding the ECB’s ability to source enough bonds to meet PSPP monthly asset purchase targets, but it also virtually guarantees that the central bank (and perhaps some eurozone NCBs) will be forced to operate from a negative equity position should sovereign spreads blow out.

We also pointed out that due to the ECB’s explicit willingness to buy bonds with negative yields, the usual “we’ll hold them to maturity” excuse won’t work when it comes to explaining away accounting insolvency. Fortunately, the central bank’s governing council has a plan to deal with the increasing amount of EMU bonds trading with negative yields: “Try to avoid them.”

Via Bloomberg:

ECB said to lack QE Accord on losses from negative-yield bonds

ECB Governing Council hasn’t agreed on how to treat losses incurred on bonds with negative yields, according to three euro-zone central bank officials.

National central banks might try to avoid buying such securities for now, one of the people says

This of course begs the following question: what happens when PSPP purchases drive yields on all EMU debt into negative territory?

E.C.B. Begins Its Bond-Buying Program for the Eurozone

Known as quantitative easing, the policy is intended to help push the eurozone’s inflation rate back toward an official target of below, but close to, 2 percent.

09Mar2015 Pre-Market Commentary: McDonald’s Sales Down, And GM In Buyback Mode

Written by Gary

International markets are mixed but generally in the red – USA futures are lower predicting a lower open today. McDonald’s sales down, and GM in buyback mode. German exports fall, and what is going on in Greece?

Read more …

Sharp Fall in McDonald’s Sales Blamed on Competition and Changing Tastes

The fast food giant reported a startling 4 percent drop in February sales in the United States, and a 1.7 percent decrease globally.

GM plans $5 billion share buyback, averts proxy fight

DETROIT (Reuters) – General Motors Co. said Monday it would launch a new, $5 billion share buyback in an agreement with dissident investors, and put forward a more detailed plan for capital allocation that promises investors the potential for further cash returns.

Key Events In The Coming Week

To some (mostly those in the 1-10% wealth bucket) the main event today is the iWatch unveiling. To others (mostly those not in the 1-10% wealth bucket) it is the Eurogroup meeting in which the fate of Greece will be discussed and perhaps decided. One thing is certain: virtually nobody will care when the Fed’s Mester and Kocherlakota speak later today as the Fed is now – supposedly – set to hike no matter what. Here is what the other main events are for the balance of the week (from DB):

Kicking off Tuesday will be money supply data out of Japan as well as CPI and PPI out of China. Closer to home we’ve got industrial production numbers for January due in France and Italy as well as the manufacturing print for the former. The calendar picks up a notch in the US with JOLTS, wholesale inventories and the NFIB small business optimism survey all due.

Focus on Wednesday will likely be in the Asia timezone and in particular in China when we get retail sales, industrial production and fixed assets data for February. Machine tool orders and PPI for Japan are also due. It’s fairly quiet in Europe with just industrial and manufacturing production for the UK due along with German labour costs and French employment data. The monthly budget statement in the US will be worth keeping an eye on Wednesday.

Focus on Thursday will be in Germany where we get the final revision to the February CPI reading following a +0.1% yoy headline in the last revision. We will also get inflation data out of France as well as UK trade data and Euro-area industrial production. It’s a busier day in the US too with the highlight being the February retail sales print. Initial jobless claims, import price index and business inventories are also due.

We close out the week in Japan with industrial production whilst closer to home we see Italian CPI and UK construction output. In the US we finish with PPI and the preliminary March reading for the University …

McDonald’s February sales fall more than expected

(Reuters) – McDonald’s Corp’s worldwide sales at established restaurants dropped for the ninth straight month, falling a steeper-than-expected 1.7 percent in February as sales in the United States were hurt by “aggressive competitive activity”.

McDonalds Stock Slides After Fast-Food Chain Reports 9th Consecutive Month Of Declining Global Sales

While the debate rages just what is causing the persistent weakness in McDonalds same store sales now stretching into its second year, there is no debate that whatever the reason may be, the once-iconic fast food chain is hurting. Because after staging a modest year end comeback and almost rising back to flat in December when it almost broke even, dropping “only” 0.1%, since then global sales have once again slowed down markedly, and have dropped by 1.8% and 1.7% in January and February respectively.

And while the biggest weakness continues to be in the Asia-Pac and Middle East region, where sales tumbled 8.8% from a year ago, it was the US where the trouble is certainly visible, and after rising by 0.4% for both of the preceding two months, MCD same store US sales in February tumbled by 4.0%, far below the -0.7% expected.

Whether the above is due to a shift in tastes, or the simplest explanation – that the US consumer can’t even afford McDonalds is the right one – is applicable, stocks are not too excited and will rather wait until MCD announces a mega stock buyback before frontrunning the management’s price indescriminate buying of its own shares, as has been the case with most other “successful” public equities in recent years.

Stocks Pop, Bond Yields Drop – SSDD As USDJPY 121 Fun-durr-mentals Hold

Presented with little comment.. more of a shoulder shrug…

Yeah that happened…

Because of this…

But a little context…

Charts: Bloomberg

French FinMin Sees “No” Risk Of Greek Default, Market… Disagrees

As if the stream of nonsense from European (elected and unelected) officials was not already at 11 on the Spinal Tap amplifier of insanity, French Finance Minister Sapin just uttered the following:

*FRANCE’S SAPIN SEES NO RISK OF GREEK BANKRUPTCY

The credit markets – which are once again pushing higher in yield, and wider in spread today – remain on edge, entirely disagreeing with Sapin’s statement of total falsehood.

It appears he has taken a page from Juncker’s playbook – “when it’s serious, you have to lie”

Alcoa to buy titanium supplier RTI as aerospace focus continues

CHICAGO (Reuters) – Metals company Alcoa Inc on Monday it would acquire titanium supplier RTI International Metals Inc as it continues to invest in more profitable products for the aerospace and automotive industries.

Goldman Blames Weather For Stronger Oil Prices, Sees WTI Sliding Back To $40

As we noted over the weekend when we showed a simple contango math calculation by SocGen according to which storage costs imply another 20% drop in Brent prices, now none other than Goldman – which has been oddly bearish on oil over the past few weeks – says that its Brent forecast remains at $40/bbl for two simple reasons: i) the global inventory glut is set to resume and ii) it’s the weather’s fault there has been a slowdown in the crude build-up.

From Goldman’s Damien Courvalin:

Clear skies after a perfect storm?

The global build in crude inventories has stalled: OPEC disruptions have returned, demand has been strong, refining margins are stellar and product markets are backwardated. And while the build in US inventories has surprised to the upside, E&Ps are exhibiting a faster focus on financial discipline than we had expected. Net, the past month has featured a reversal of the late 2014 perfect storm of bearish catalysts: weak demand, low disruptions and profligate spending. And while this reversal is consistent with a rational and efficient market response to the collapse in oil prices, the contribution of weather and the premature rally keep us expecting that prices will remain below the current forward curve in 2015.

Rather, a sunny spell soon to end

Weather has played a great part in keeping crude off the market, disrupting Iraqi exports (sandstorms) with cold weather in the US and drought in Brazil supporting demand. And while we reiterate our out-of-consensus view that demand growth will be strong in 2015, on the back of better economic growth and low oil prices, we did not expect de …

Greece’s Hope for Eurozone Aid Shifts Back to Brussels

The finance minister’s remarks about potential referendum stoked criticism as the European Union demanded that the government demonstrate it is serious about making changes.

G.M. to Buy Back $5 Billion in Company Stock and Avert Proxy Fight

The move addresses how G.M. will spend some of its $25 billion in cash reserves, some of which is money left from the 2009 government bailout.

GM Authorizes $5 Billion Stock Buyback, Will Return All Cash Over $20 Billion To Shareholders

Doubting if the growth ahead of GM is now over, and the great post-bankruptcy “success story” is rapidly fading as the company has been pushed to resort to the kind of financial engineering which has pushed the S&P higher for all of 2014, and follows a record month of stock buyback announcements? Then doubt no more: moments ago GM announced it is authorizing an immediate $5 billion stock buyback, and plans to return all cash above a $20 billion floor to shareholders.

From the Press Release:

General Motors Co. (GM) today announced a comprehensive capital allocation framework, as improving business performance and strong capital discipline enable increased returns to shareholders. GM said a foundational element of its approach will be to return all available free cash flow to shareholders while it maintains an investment-grade balance sheet underpinned by a target cash balance of $20 billion.

GM also announced that its Board of Directors authorized the initial repurchase of $5 billion in GM shares to begin immediately and conclude before the end of 2016. GM in February announced its intent to increase its quarterly stock dividend to $0.36 per share effective in the second quarter of 2015 as part of the Board’s regularly scheduled second quarter 2015 dividend declaration process, which would result in an expected dividend payout of approximately $5 billion through year-end 2016.

“As we continue to execute on our plan to become the most valued automotive company, our track record of improved operating performance, strong earnings momentum, and disciplined capital investments provide the foundation for a comprehensive capi …

Frontrunning: March 9

ECB Starts Buying German, Italian Government Bonds Under QE Plan (BBG)

Creditors Reject Greece’s Reform Proposals (BBG)

Is Apple Watch the Timex digital watch of the Internet era? (Reuters)

Tesla shedding jobs in China as sales target missed (Reuters)

Malaysia Airlines says expired battery on MH370 did not hinder search (Reuters)

Gunmen kill more than 12 Islamic State militants in eastern Syria (Reuters)

GM Plans Share Buyback, Averting Proxy Fight (WSJ)

Wisconsin capital marked by third day of protests after police shooting (Reuters)

Hedge Funds Are Losing Faith in Oil Rally While Inventory Swells (BBG)

German expo …

EU aides play down Greek reform plan, no early progress

AMSTERDAM/BRUSSELS (Reuters) – Euro zone officials played down plans submitted by cash-strapped Greece to its international creditors in a bid to secure fresh funds, a day after Athens’ outspoken finance minister irked EU partners by raising the prospect of a referendum.

All eyes on Apple’s Cook as Watch launch expected

SAN FRANCISCO (Reuters) – Apple Inc Chief Executive Officer Tim Cook on Monday is expected to announce details of the first product developed under his leadership, a watch that Apple hopes will transform the market of wearable technology.

Start Of European QE Upstaged By Greek Jitters; Apple Unveils iWatch

Because as everyone knows, the one main problem facing Europe today is not trillions on non-performing loans, rampant unemployment, deflation, the surge of anti-austerity political parties coupled with rising xenophobia, and broad socio-economic instability, but bond yields which are not negative enough, earlier today first Germany, then Italy, then France were all delighted to announced they have commenced buying sovereign bonds in the open market, culminating with the following tweet by the ECB intern moments ago:

ECB and Eurosystem national central banks have, as previously announced, started purchases under the Public Sector Purchase Programme.

— ECB (@ecb) March 9, 2015

The buying promptly led to Bund yields once again sliding lower, and the 10Y was down -5bps to 0.35%, on its way to -0.20%. Italy’s 10-year yield declined three basis points to 1.29 percent. As Bloomberg reports, “The QE purchases are having the expected effect and the market is very positive,” said Michael Leister, a senior rates strategist at Commerzbank AG in Frankfurt. “In the core we’re seeing yields dropping sharply lower led by the ultra-long end so these are very much QE-style moves. Near-term it’s going to stay quite volatile because there are some sellers who did front-run these purchases and now are keen to sell.” Then again, judging by the early reaction in yields, there are more keen buyers and frontrunners than sellers.

Since negative yields across the flat European curve is now just a matter of time, we hope that the millions in record youth unemployed across the continent managed to BTFD in Bunds – this may be all …

Airbus says ALC has firmed up order for 55 aircraft

PARIS (Reuters) – European planemaker Airbus said on Monday that Air Lease Corporation (ALC) had firmed up an order for 55 Airbus aircraft, comprising 25 A330-900neo and 30 A321lR.

Exclusive: China’s international payments system ready, could launch by end-2015 – sources

HONG KONG/BEIJING (Reuters) – China’s long-awaited international payment system to process cross-border yuan transactions is ready, and may be launched as early as September or October, three sources with direct knowledge of the matter told Reuters.

Euro zone sentiment hits seven-and-a-half-year high in March

BERLIN (Reuters) – Sentiment in the euro zone surged to its highest level in 7-1/2 years in March as investors heartened by the European Central Bank’s bond-buying program brushed off concerns about the economic turmoil in Greece.