N AMERICAN MORNING BRIEFING: Stks Seen Up Ahead Of Bernanke

21st Jul 2010 11:34

DJIA Futures 10204.5 +24.5 +0.2% S&P 500 Futures 1084.1 +4.0 +0.4% Nasdaq Futures 1850.6 +10.9 +0.6% Above are as of 0559 ET FTSE 100 5220.2 +80.8 +1.6% Xetra DAX 6050.6 +83.1 +1.4% CAC40 3530.8 +62.8 +1.8% Above are as of 0544 ET Nikkei 225 9278.8 -21.6 -0.2% Hang Seng 20487.2 +222.6 +1.1% Above are closing prices SNAPSHOT: -Stocks seen higher; Treasurys steady; dollar mixed; Nymex crude higher at $78.07; gold slightly lower at $1191.02. -Watch for: Bernanke testimony at 1400 ET; earnings from Morgan Stanley, Wells Fargo, EBay, Starbucks. OPENING CALL: Stocks are set for minor gains Wednesday after an improvement in sentiment Tuesday as traders brushed aside a poor earnings report from Goldman Sachs. "We are looking at a bit of a better open as there seems to have been a shift and sentiment has changed, but we could still see some range trading over the next few days," James Hughes, analyst at CMC Markets in London said. He noted major corporate earnings from the likes of Coca Cola and eBay will command market attention given the lack of important economic data scheduled for release. Fed chairman Ben Bernanke's comments later in the session will also be watched closely for "stance and tone" after some poor recent domestic indications for the economy, Hughes added. EQUITIES: BP's (BP) agreement to sell $7 billion of oil and gas assets in North America and Egypt to Apache (APA) looks like a good deal for the embattled British company that is reeling from the Gulf of Mexico oil spill. The price tag demonstrates that although BP needs to raise the funds to cover the huge cost of the spill, its $10 billion divestment process can yield good value and could even produce a more focused company with stronger growth, analysts said. The value of the deal is at the top end of expectations, said NCB Stockbrokers analyst Peter Hutton, equating to $4.50 per barrel of estimated resources, higher than recent deals by Royal Dutch Shell and Total (TOT) at $3.90 and $2.10 per barrel respectively. Meanwhile, Apache's chief executive said Tuesday that the $7 billion acquisition fleshes out the oil and gas producers' existing assets. "This really plays to Apache's core competencies of finding value in under-worked assets," CEO Steven Farris said during a conference call to discuss the acquisition. Apache was 3.9% higher in Frankfurt at 0545 ET. Sara Lee (SLE) is exploring a sale of its struggling North American bakery business and has asked its financial advisers to gauge interest from potential buyers, the Wall Street Journal reported. There has been no formal auction arranged and Sara Lee could decide not to dispose of the unit, which had $2.2 billion in annual sales, people familiar with the matter said. But the company's advisers have selectively reached out to companies and private-equity firms that might be interested in the unit, which makes bread under the Sara Lee, Earth Grains and other brand names. The business could fetch at least $1 billion or more, those people said. Sara Lee shares traded up 3.0% in Frankfurt at 0501 ET. AIG (AIG) has chosen Goldman Sachs (GS) and Morgan Stanley (MS) as global coordinators for the listing of a stake in its largest overseas life-insurance business, the Wall Street Journal reported. The insurer, majority owned by the government, has also enlisted Deutsche Bank to advise on the initial public offering of AIA Group, the pan-Asian life insurer that AIG must sell to help repay taxpayers, people familiar with the matter said. RBS Aviation Capital, one of the world's largest aircraft lessors, has ordered 95 narrow-body aircraft from Boeing (BA) and Airbus, in a deal valued at $7.6 billion. The order consists of 43 Boeing 737-family narrow-body aircraft and 52 Airbus A320-family narrow-body aircraft. Boeing shares were up 2.2% in Frankfurt at 0500 ET. A $550 million settlement by Goldman Sachs (GS) of civil charges over its disclosures regarding a complex financial instrument tied to subprime mortgages received final approval. A federal judge signed off on the pact with the SEC in which the investment bank would pay one of the largest penalties in Wall Street history. The approval came just five days after the agreement was announced and resolves a civil litigation that had weighed on the firm's results. BONDS: Treasurys were steady in London ahead of Bernanke's testimony from 1400 ET. There is no domestic economic data of note slated so Bernanke's testimony to a Senate panel will be the focus of attention. BNP Paribas saw potential for a rise in yields: "The market is anticipating some form of quantative easing announcement from Chairman Bernanke at his report...a view that is misguided according to our economists, which opens the door for a backup in rates." The 2-year note was little changed at 100-03/32 yielding 0.576%; the 10-year was a tad up at 104-20+/32 yielding 2.951%; and the 30-year up was at 106-30/32; yielding 3.975%. Corporate bonds: Spreads on European corporate credit default swap spreads were tighter Wednesday after strong earnings helped domestic stocks close higher, with further corporate earnings reports awaited later in the day. FOREX: Both the euro and the dollar came under pressure Wednesday as investors ran scared ahead of Ben Bernanke's testimony to Congress Wednesday and Thursday and the results of the European bank stress tests on Friday. Given the recent slowdown in domestic economic data, Bernanke is widely expected to pave the way for a second round of quantitative easing. Fears of this bearish outlook has already driven short-term Treasury yields lower and the dollar has weakened in recent days. By 0525 ET, the dollar was down in Europe at Y87.01, while the euro was down at $1.2857 and the pound had risen to $1.5278. COMMODITIES: Oil futures were ticking higher Wednesday after a positive start for European equities, but "eyes will be firmly back on fundamentals," said Andrey Kryuchenkov of VTB Capital, with the release of weekly Department of Energy inventory statistics Wednesday. Domestic crude stocks were expected to fall by 1.3m bbls, according to the mean of 14 analysts' forecasts. Gasoline stocks were seen rising by 700,000 bbls, while stocks of distillate, which includes heating oil and diesel, were expected to rise by 1.6 m bbls. The API reported a bearish set of statistics Tuesday with a 241,000 bbl draw in domestic crude stocks for the week ending July 16, which fell short of expectations of a draw exceeding 1m bbls. Improving risk appetite and limited physical demand may push spot gold to consolidate further, said TheBullionDesk.com. Gold was also "overshadowed by a top-heavy technical outlook," but TheBullionDesk.com added: "The fact gold rallied yesterday while SPDR ETF holdings declined is encouraging." =======TODAY'S CALENDAR======= ET PERIOD 1030 Jul 16 EIA Weekly Petroleum Status Report 1130 President Obama signs the Wall Street reform bill 1400 Fed Chairman Bernanke testifies before Senate panel ============================== OTHER TOP STORIES OF THE DAY: Japan Wary Of US Slowdown; Still Upbeat On Domestic Economy Japan's government expressed greater concern about repercussions from a possible U.S. economic slowdown in its monthly report Wednesday, although it stuck to its cautiously upbeat tone on the current shape of its own economy. SEC Looked At Repo Accounting Before Lehman, Study Says U.S. federal regulators were aware of and concerned about potentially questionable accounting of short-term trades on Wall Street long before Lehman Brothers' collapse raised the issue, a report indicates. Check Point 2Q Profit Up 36% On Cost Containment, Rev Gains Check Point Software Technologies Ltd.'s (CHKP) second-quarter profit jumped 36% as costs barely rose and demand improved for its products and services. WSJ: US Forces Step Up Pakistan Presence U.S. Special Operations Forces have begun venturing out with Pakistani forces on aid projects, deepening the American role in the fight against Islamist militants in Pakistani territory that has been off limits to U.S. ground troops. US Rep Minnick Plans Bill To Aid Commercial Real-Estate Market A U.S. House lawmaker is planning to unveil legislation this week aimed at stabilizing the commercial real-estate market by offering federal guarantees for new loans to the battered sector. WSJ: Treasury To Curtail Some TARP Lending Programs The Treasury Department, under Congressional orders to shrink and end sooner the much-maligned Troubled Asset Relief Program, plans to curtail two programs originally intended to help consumer and small-business lending. US Approves Antitrust Immunity For Oneworld Airlines U.S. regulators on Tuesday granted antitrust approval to allowing five members of the Oneworld airline alliance to expand cooperation. WSJ: Temporary Order Against Facebook Asset Transfer To Expire Friday A temporary restraining order against transfer of assets by Facebook Inc. will expire this Friday, parties in lawsuit involving the company said, after a federal judge held a hearing on the matter. SNB Warns On Hefty 1H Loss Due To Swiss Franc Gains The Swiss National Bank, or SNB, Wednesday warned it expects to post a loss of about 4 billion Swiss francs, or $3.8 billion, in the first half due to the franc's sharp rise against the euro in 2010. -By Michael Haddon, Dow Jones Newswires; 4420-7842-9289; [email protected] (MORE TO FOLLOW) Dow Jones Newswires July 21, 2010 06:34 ET (10:34 GMT)