Month: March 2012

Oil to retreat, US crude may test $100: Survey

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Benchmark crude oil prices will likely extend their losses this week as investors questioned whether the recent rally which sent Brent crude to a multi-year high is warranted by the fundamentals, CNBC’s weekly survey showed.

Ten out of 14 respondents expect prices to fall this week while the remaining four expect prices to rise. Balance of opinion in last week’s survey called for prices to rise but the bulls were wrong-footed by the pullback in Brent, which fell 2 percent for the week after five straight weekly gains, while its U.S. counterpart fell 2.8 percent, snapping a string of three higher weekly finishes.

“Fear and speculation” drove the gains in Brent crude last week to its highest level since July 2008, said Jonathan Barratt, CEO, of commodities newsletter Barratt`s Bulletin. “We see the Middle Eastern premium being built in plus speculators looking to actually take advantage of it.” Barratt told CNBC Asia last week. Though U.S. crude inventories continue to build “we`re not seeing that flowing through in terms of fundamentals really pushing the price,” he explained.

Key macro risk events for leading economic indicators like copper and crude oil this week include U.S. non-farm payrolls data for February. Forecasts are calling for an addition of about 210,000 jobs for February after the previous month`s gain of 243,000. But sub-par China fixed-asset investment, industrial production and retail sales this Friday — suggesting slower growth in the world`s second-largest economy — may undermine a positive U.S. jobs report.

Although oil prices are cooling, global energy markets remain edgy and highly vulnerable to negative headlines from the Middle East highlighting supply disruptions. Last Thursday was a classic example. Brent crude jumped above $128 a barrel, reacting to an Iranian media report of a pipeline fire in Saudi Arabia. Prices fell equally hard and as fast after Saudi Arabia reassured markets on Friday that there had been no explosion.

“If we can see a pop of a couple of dollars in a few minutes just on the back of one random news story without confirmation, just think what it might do if something real actually happened,” said Rebecca Patterson, Chief Markets Strategist JPMorgan Asset Management, responding to the price spike on Thursday.

The fact that oil prices hit higher levels than those seen during last year`s Arab spring suggests “that the market is still very sensitive to what`s happening in the Middle East and that maybe there isn`t as much risk premium priced in oil as we expected,” Patterson added.

Amongst the few bulls in this week’s survey, David Kotok, Chairman and Chief Investment Officer of Cumberland Advisors said profit taking would be limited. “The major trend is still up” because of the tensions surrounding Iran`s nuclear ambitions and widening sanctions against Tehran.

Oil-price shocks have a common theme, Kotok said in recent commentary: “There is a strongman. There is a shooting war or a threat of a shooting war. Diplomacy and sanctions and negotiation have failed. The final few days leading to the spike and the shock are impossible to forecast in advance.”

Kotok added: “History also shows that oil prices have an upward trend during the period leading to the final spike. In every case, the peak in price only came after something was seen as a terminal event or final action. Subsequently, prices plummeted.”

From a sector perspective, Kotok said Cumberland is overweight oil and energy in their ETF portfolios. “Energy stocks are now about one-eighth of the total market value, if you use the SandP 500 index as your guide. At the peak of the oil shock in 1980, the energy component of the stock market was close to 25 percent of total market value. Long-run forecasts with economic models argue for oil to be $175-200 per barrel by the end of this decade.”

Oil traders will be watching domestic politics in Iran for any implications on foreign policy. Clerical Supreme Leader Ayatollah Ali Khamenei has tightened his grip on Iran`s faction-ridden politics after loyalists won over 75 percent of seats in parliamentary elections at the expense of President Mahmoud Ahmadinejad, a near-complete count showed, Reuters reported on Sunday.

“If the elections prove to be difficult for the President and highlights a real undermining of his support then he will come out all verbal guns blazing at the West over the next few weeks and the risk on trade will be back with a vengeance,” warned Aiden Bradley, Managing Director and head of Pan-Asian Oil and Gas at RBS.

“Recent events (the refusal to allow weapons inspectors into a single identified military site) would seem to suggest provoking Israel or the U.S. into striking the nuclear facilities is perhaps already a Presidential `policy` decision.”

Should the retreat in oil prices prove shot-lived and a positive trend reasserts itself, will higher energy costs derail the fragile economic recovery, particularly for the consumer, or can the global economy absorb high oil prices?

Many believe it`s the pace of the ascent that matters. A disorderly move higher against a backdrop of tensions in the Middle East is the worst outcome, argues JPMorgan Asset management`s Rebecca Patterson.

“It`s not so much the level but the speed of the move and actually in the case of the United States the time of year of the move,” Patterson said. “We`re seeing real economic improvement – that is a great reason for oil to rise. If that`s helping push up oil, I don`t think you need to worry as much about equities.”

But if supply shocks alone are pushing oil up, especially if it occurs around May or early June with the U.S. summer driving season, “then you definitely want to be paring back on some of your cyclical assets especially the consumer discretionary stocks,” Patterson explained.

The nationwide average for gasoline prices rose for the 26th straight day last Sunday, topping the $3.76-a-gallon mark, according to the motorist group AAA.

The average price of regular unleaded gasoline climbed 0.7 cent in the latest 24-hour period. The price of gas is up from $3.47 a month ago and $3.69 a week ago. Last year at this time, gas was $3.49 a gallon. Prices are within a nickel of the $4 mark in Connecticut, New York and Oregon, according to AAA.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Pinterest’s rapid rise boosts small business sales

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Fine art photographer Carl Christensen, 47, had to be nudged by his wife to use social media to increase his sales. He joined Facebook reluctantly. He blogged uneasily.

“I really approached it kicking and screaming,“ said Christensen, who operates his own gallery, Integrity Studio, in New Hope, Pa. “I found no intrinsic value in talking constantly and inanely about myself.“

But recently, Christensen found a social media site that not only suits his nature, but also boosts his revenues. He credits the fast-growing site Pinterest for amplifying his online sales to 50% of his current business. On the site, he can let his art speak for itself.

Pinterest invites visitors to set up their own “pinboards” and tack up photos they like in categories they invent – from vintage motorcycles to meat loaf recipes. The Palo Alto, Calif., firm makes it easy even for the computer-shy to capture photos from Web magazine layouts, retailers` websites, blogs, or their own computer files. Each image added to a pinboard is called a “pin.” After Christensen started pinning his own photos last year, other users snapped them up for their own boards on Pinterest.

The site`s meteoric recent growth has marketing experts buzzing and companies of all sizes leaping in. Pinterest received more than 103 million total visits in February, according to Experian Hitwise. As of last week, according to Hitwise, it was the third most popular social networking site behind Facebook and Twitter in the U.S., with users spending an average of 16 minutes per visit on the site.

Marc Andreessen, a co-founder of early Web browser Netscape whose venture capital firm Andreessen Horowitz, has invested in Pinterest, told CNBC`s Squawk Box, “It`s on fire, it`s doing phenomenonally well. It`s one of these companies with about 20 people building a service that now tens of millions of people are using.”

Pinterest allows members to comment on each other`s picks and follow their friends` pinboards. Users might assemble ideas for their home renovation plans on one board, and showcase their favorite books or charities on others. They can “re-pin“ pictures they like from other people`s boards. The result is an electronic word-of-mouth network that can lead to snowballing attention for a workout regimen, barbecue techniques, or a manufacturer`s product.

Chobani, the Greek yogurt maker based in Norwich N.Y,, found that bloggers were using Pinterest to feature dishes using its product, said digital communications manager Emily Schildt. So Chobani jumped in, creating its own pinboards for “Chobaniacs“ to enhance its engagement with customers. “Pinterest is huge in terms of referral traffic,“ Schildt said.

Pinterest offers its own hints for brands that want some bounce from the site: Repinning the picks of other users is one of the best ways to build a network of followers, it suggests on its site. Also, Pinterest suggests businesses spotlight “aspects of your brand that may not come to mind at first,“ such as work with charitable foundations. And make use of the interplay between Pinterest and other social media sites, the Palo Alto company advises.

Pinterest cites the Travel Channel`s tactic: It asked its Facebook users what pinboards it should create. Bergdorf Goodman`s strategy also earned a mention from Pinterest. The department store asked Facebook followers to complete the sentence “In the morning I never forget…” and then displayed the responses on a company pinboard.“

For Christensen`s small business, Integrity Studio, Pinterest has become an electronic display window that leads directly to sales. It funnels customers to his online shop on another site, Etsy.com, where they can buy his photographs. Etsy, a popular vendors` marketplace for craftworkers and visual artists, recently added Pinterest`s “Pin It“ button next to each item on sale. Customers press the button to add an item to their pinboards. Even if they don`t buy it, the artist benefits from greater exposure on Pinterest.

Small retailers engaged in e-commerce should explore Pinterest – especially if their products have strong visual appeal, said Jason Hennessey, CEO of the digital marketing agency Everspark Interactive of Atlanta, Ga.

But they need to invest time in Pinterest to reap the rewards, Hennessey said. Small marketers must generate interest in their work by participating in Pinterest communities, rather than simply promoting their products. For example, business owners can create pinboards highlighting the ideas of others whose taste they share. A custom cabinetry maker could exhibit the best projects from top woodworking magazines.

Retailers should follow other people and invite customers to post their own images on company pinboards, Hennessey said. “People will see your engagement and start to follow you.“

Online retailers should also take advantage of Pinterest features not frequently used by casual visitors, Hennessey said. For example, consumers often add little or no text to photos they pin. But businesses can add brand names and descriptions, with key words that move their images to the top of Pinterest search results, he said.

Businesses can also make sure that a Pinterest user who clicks on their photos will be taken directly to the site where they originated, such as the company website or online shop. Pinterest allows such web addresses to be added, Hennessey said. If no information is entered, Pinterest will only display the site from which a photo was pinned or repinned – but this could be a blogger`s site. This is called a “dead link“ if it doesn`t help visitors find a product`s maker, for example, or the recipe for a dish that`s pictured.

Carl Christensen labels his photos, and tracks the Pinterest response to each one. Based on that, he decides which images to display in the front window of his gallery, and which to enlarge into the mural-sized prints he sells there for more than $3,000. His wife Ina Christensen, who encouraged him to use social media, runs her own jewelry business using Etsy and Pinterest. When they added Pinterest to the mix, their online sales rose from 30 percent to 50 percent of their revenues, Christensen said.

Swapping images and ideas with Pinterest followers is a comfortable fit for Christensen, who said he always chats up visitors to his gallery about their work and other experiences. On Pinterest, he can build similar bonds with visitors, their friends, and their friends` friends, he said.

“Like in life, nothing attracts a crowd like a crowd,“ Christensen said.

To follow CNBC`s pinboards, click here: http://pinterest.com/cnbcpins/

Email us at SmallBiz@cnbc.com

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Apple stock to hit $1000? Steve Wozniak believes so

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Apple’s stock price has the potential to hit USD 1,000 as the company has a tremendous amount of growth ahead of it due to the integrated nature of its products and services, Steve Wozniak, Apple co-founder, told CNBC in an exclusive interview on Thursday.

Apple shares closed at USD 542.44 on Wednesday, up 1.31%. They are up more than 55% over the past year.

“You know, people talk about USD 1,000 stock price… you know, at first you want to doubt it but I actually believe that and I don`t really follow stock markets,” Wozniak said.

He said that Apple’s retail store, iTunes, iPhone, iPad and computer making divisions were “a lot of companies into one,” adding that “every one [company] is so excellent.”

Some analysts have said that, with Apple joining the select club of companies whose market value exceeded USD 500 billion, the only way is down as there is no more room for it to grow.

But Apple`s business has a lot of upside potential, according to Wozniak.

“Apple is on such a winning course because it`s encapsulated all of its different big products that I mentioned, they all work together so well that you are in a course that if you buy a product from another company it doesn`t really do as much as one from Apple does. So Apple has a large room for growth,” he said.

“Apple has that much growth left because we`re talking something like Apple TV that works with all these other great, great companies and products all in the same sphere,” Wozniak explained.

“It`s not like a side project `we`re going to start a TV company`. No, we`re going to start TV within the whole Apple world. Assuming that we are going to, I don`t know,” he added.

Gene Munster, an analyst with Piper Jaffray, told CNBC last year that the highly anticipated Apple TV was likely to be launched in late 2012.

“Steve Jobs`s hands are all over it,” Munster said, adding that it will be watched closely as the first major product launch following the Oct. 5 death of the company`s visionary leader.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why Nasdaq 3000 is ‘bigger deal’ than Dow 13000

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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While the Dow hitting 13,000 made big headlines earlier this week, the Nasdaq’s ascent to 3,000 could be the more significant of the two psychological milestones.

That`s because the Nasdaq, which measures 100 stocks primarily in technology and related fields, actually has been a market leader and could say more about where stocks are headed than the narrowly focused Dow and its 30 industrial companies.

The Nasdaq was within a few points of the 3,000 milestone on Thursday, while the Dow continued to hover around the 13,000 mark.

“The Dow went over 13,000 a bunch of times,” says Dave Rovelli, who focuses on tech stocks as managing director of trading at Canaccord Genuity. “To see the Nasdaq going to 3,000 on real earnings – Microsoft, Cisco, everybody participating – is a lot bigger deal.”

In fact, the 3,000 barrier resembles something of a historic high in Rovelli`s eyes.

Sure, the Nasdaq surged to an all-time closing high of 5,408.60 on March 10, 2001. But that was back in the days of what former Federal Reserve Chairman Alan Greenspan called the “irrational exuberance” that pumped up the Internet bubble, which soon after exploded and sent the market into a lasting tailspin.

“When we went from 3,000 to 5,000 that was just irrational exuberance. They were putting 500 multiples on Internet stocks that had no earnings,” Rovelli says. “To me, the Nasdaq now is making all-time highs. You`re taking out something that was irrational.”

In fact, the last time the index crossed 3,000 was later that year, on Dec. 11, as tech went from market darling to problem child while the industry struggled through the designs of handheld devices that now are driving the sector higher.

“The smartphone market is just mind-boggling,” Rovelli says. “This is true earnings, true momentum, with real potential for growth.”

Importantly, the current cyclical bull-market rally has been pushed by non-defensive sectors like technology, which has led the Standard and Poor`s 500 sectors, with financials the second-biggest gainer.

On the major indexes, the Nasdaq was up about 16% heading into Thursday`s trading, while the SandP 500 gained 8.6% and the Dow rose 6.6%. Small-cap stocks, as measured by the Russell 2000, are up about 7% thus far in 2012 and underperformed the broader market in February.

“We want to see leadership from the more aggressive areas, especially technology,” says Ryan Detrick, senior analyst at Schaeffer`s Investment Research in Cincinnati. “Usually in a bull market you see technology and small caps. Technology we`ve been having, which is a little more significant for a potential longer rally.”

Should the Russell catch up – even though it doesn`t have a nice, round number in sight – that would be an even better sign.

“Small caps haven`t done much recently. They`ve been kind of consolidating,” Detrick says. “You definitely want to see small-cap leadership like we did late last year and earlier this year.”

To be sure, many in the market dismiss the big landmark numbers. Short-term traders see little significance in them unless they signal verifiable resistance or support levels in technical analysis.

“All of these numbers are irrelevant except to the public and the papers,” says Keith Springer, president of Springer Investment Advisory in Sacramento, Calif. “To the real traders I don`t think it makes any difference.”

Yet it`s unmistakable that the Dow has struggled to break free of 13,000, even though it broke the barrier intraday a week ago. Meanwhile, the SandP 500 is caught in 1,370-1,375 range, where it peaked in 2011, while the Nasdaq almost immediately retreated Wednesday after slipping past 3,000.

“While Dow 13,000 is just a psychological number, 1,370 on the SandP is a big deal,” Detrick says. “That`s where we`ve been going for the last week or so. So that`s a little more significant from a technical point of view.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why Greece hasn’t defaulted on its debt-so far

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Does Greece’s recent debt restructuring constitute a default? The widely-watched decision on Thursday was no-or at least not yet.

Credit default swaps (CDS) are a form of insurance that investors can buy in case the issuer of a bond they`ve bought defaults, or can`t pay them back in full. If there is a default, also known as a “credit event,” the credit default swaps pay off the bond investors.

Deciding whether there is a “credit event” is the job of a group called the International Securities and Derivatives Association. The ISDA decided Thursday that Greece had not, in fact, defaulted on its bonds so far.

However, Greece still faces several major events that are far more likely to lead to a default, which would trigger the CDS payouts.

The ISDA was asked to rule on two questions related to the Greek government`s recent offer to bond holders to pay them only 46.5% of what they are owed.

The first question was whether a recent bond swap between the European Central Bank and the Greek government caused all other bondholders to be subordinated-or put behind the ECB is getting paid back. Subordination is usually one of the triggering events for payout of CDS insurance.

The ECB`s bond swap with Greece didn`t include the 53.5% haircut that the other bondholders faced. The ISDA was asked if this was not effectively a “subordination” of other debt holders. The committee of 15 voted unanimously no.

The second question was whether the current offer to bondholders, in and of itself, was a credit event. The committee also unanimously voted no.

Experts on CDS, and holders of Greek debt say these two votes aren`t necessarily noteworthy because they`ve been taken too early in the process to be meaningful.

For the ISDA to vote that something constitutes a credit event, a bondholder first must not get paid back. So far, all bondholders have been paid in full.

The real test will come on March 20, when Greece has a debt repayment of more than USD 14 billion euros (USD 18.6 billion). Greece is hoping to complete a debt exchange before then that would cut that payment by more than 50%.

As part of the offer, the Greek government has told bondholders it has the right to retroactively impose something called a “collective action clause.”

This means that if more than two thirds of bond holders agree to tender their bonds and take less money-the government can then impose the deal “collectively” on all the bondholders, even those who didn`t want to go along with it. That will be likely be decided by the end of next week.

At that point, a bondholder can complain to ISDA. The ISDA then will have something real to consider rather than something that is currenly only proposed or theoretical.

In fact, ISDA itself said: “The situation in the Hellenic Republic is still evolving and today`s decisions do not affect the right or ability of market participants to submit further questions… as to whether a Credit Event could occur at a later date.”

So this Greek drama isn`t done yet.

Just this morning, Pimco co-founder Bill Gross told CNBC that the decision on Greece is a “disappointment” to buyers of credit default swaps. Even so, Pimco-which is on the ISDA`s voting committee-joined the other members in deciding there was no default.

Still, Gross suggested that Greece still could trigger a “credit event” that would cause future payouts on the credit-default swaps. He added, however: “If I were a buyer of protection on Greece and have seen the result this morning in terms of no protection, you know I would be upset.”

When asked about this on Capitol Hill, Federal Reserve Chief Ben Bernanke said that the question could be asked once again that if and when a collective action clause is imposed, then the question will likely be reconsidered. Nearly everyone involved in the process believes that would be a triggering event for CDS.

The European Union originally wanted to avoid the triggering of CDS payouts for fear the ripple effects would be similar to what occurred in the market post-Lehman Brother`s bankruptcy. But those fears have faded, as the possibility of a Greek failure has been priced into the markets.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Is the profit-taking in gold a buying opportunity?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The heavy sell-off in gold during Wednesday`s US session was driven by profit-taking, according to several strategists, who tell CNBC they expect a bounce back in the precious metal as investors use the fall as a buying opportunity.

Gold prices dropped 5% to below USD 1,690 an ounce on Wednesday, marking its biggest one-day drop in more than three years, after US Federal Reserve Chairman Ben Bernanke dashed hopes of further monetary easing.

“People are reading too much into Bernanke today and using it as a reason to take profits. I don`t think that we`re coming to the end when it comes to liquidity and quantitative easing,” Ed Ponsi, Managing Director, Barchetta Capital Management told CNBC.

In Thursday`s early Asian session, gold had recovered some of the losses, rising 1.4%.

According to Ponsi, Bernanke`s comments were used as an excuse for heavy profit taking in gold and the euro, something that was unlikely to continue.

“A lot of hedge funds are up more at the end of February than they were all of last year, so that`s a ripe situation for profit taking and overreaction.”

Nick Trevethan, senior commodities strategist at ANZ Research agrees that investors` move to lock in gains before month-end was a significant contributor to the fall in gold prices. “The last day of the month was probably as significant as what Bernanke didn`t say.”

Matthew Grossman, Chief Equity Market Strategist, Adam Mesh Trading Group says Bernanke`s earlier pledge to keep interest rates at zero through the end of 2014 and the mixed economic data out of the country would continue to support gold prices.

“We`re not going to keep getting those rosy numbers in unemployment data and when that happens I bet people are going to be talking about, once again, is QE3 back on the table,” Grossman said.

For investors looking to gain exposure to the precious metal, Grossman and Trevethan say the overnight decline presents an attractive buying opportunity.

“This is a buying opportunity for many investors who were worried that the train left the station and they weren`t involved,” Grossman said.

Trevethan says his target for gold to end the year at USD 1800 an ounce is still on track.

“Prices are looking very attractive and we expect to see further rises in the market – a mix of short covering and bargain conscious consumers,” Trevethan said. “The broadly bullish longer term for bullion hasn`t changed.”

“We had seen gold trading at USD 1710-1760 for quite a period, last week we broke up out of that range. What we did yesterday was undo all of that, we pierced the bottom end of the trading range. But, it doesn`t look like it will stay that (way) for very long,” he added.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Bernanke back in the hot seat as QE expectations cool

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As markets enter the month of March, central bankers are sounding a bit more like “lions,” than the usual “lambs.”

Fed Chairman Ben Bernanke dealt markets a surprise Wednesday when his comments during the first of two days of Congressional testimony suggested that another round of easing may not necessarily be in store. He helped send stocks lower, the dollar higher and precious metals to their worst day in more than two months.

Traders said it was more about what Bernanke didn`t say than what he did say. “It was different because I think what we saw was Bernanke questioning the appropriateness of more aggressive easing through QE3,” said Zane Brown, fixed income strategist at Lord Abbett. “The fact it was noticeably absent in his testimony, I think indicates a change in thinking.”

Brown said it will be important to see if Bernanke raises quantitative easing in Thursday`s 10 am testimony before the Senate Banking committee, and how he might answer questions related to it. The Fed had been expected by many market participants to embark on a third round of quantitative easing.

Fed officials have signaled the Fed could purchase mortgage securities in a further easing round, instead of Treasurys, if the economy needed help. Many analysts believe just the idea of more QE has been a factor behind the rising stock market and commodities prices.

Even as Bernanke is sounding a bit less aggressive on easing, that lion is still really seen as a pussy cat, as the Fed chairman is expected to once more reassure markets that rates are going to stay low for a long time. Bernanke`s comments also came as Bank of England policy maker Martin Weale said he doesn`t see a case for more stimulus after the BOE`s current round of bond purchases is complete, adding that rising energy costs threaten to bring inflation.

Bernanke too raised the possibility of a temporary pickup in inflation from rising gasoline prices, so traders were quick to tie the two commentaries together. The Fed has made it clear that if inflation were to become a factor, the likelihood of QE diminishes.

Brown said two factors that would push the Fed to ease were high unemployment and tight lending. Unemployment is slowly edging down and was last reported at 8.3 percent, below the Fed`s stated expectation. “We`ve had three quarters in a row where lending has improved. Commercial and industry, mortgage loans and credit card lending has been expanding,” he said. He also said the markets now expect to see weekly jobless claims continue to come in around 350,000, a sign that the jobs market is healing.

Brown also said comments from St. Louis Fed President James Bullard this week indicate he may think that lower mortgage rates won`t help housing further, a sign that perhaps the Fed is backing away from the idea of mortgage purchases.

Bernanke did say that the job market is far from normal, and he warned that fiscal tightening could impact the economy, a big worry for the Fed. As expected, he stayed cautious on the economy and said the recovery was uneven and modest.

Bernanke`s comments come against a backdrop of mixed data. Durable goods was weaker than expected Tuesday, but the revisions to fourth quarter GDP, reported Wednesday, took it to 3%, above the 2.7% expected. It also showed that personal income rose 1.4%, twice the original amount reported for the fourth quarter.

“We may be on a rethink here,” said Brown.

After Bernanke`s testimony, Philadelphia Fed President Charles Plosser, a hawk, said on “Closing Bell” that the Fed`s case for easing goes away with improvement in the economy and he is encouraged by what he is seeing. He also said he believes the Fed should raise rates before its targeted yearend 2014, and in fact his own target is 2012 for the first rate hike.

There are several Fed speakers Thursday, including Cleveland Fed President Sandra Pianalto, who speaks at 8 a.m.; Atlanta Fed President Dennis Lockhart, who speaks on the economy and banking at 12:30 p.m., and San Francisco Fed President John Williams, who speaks at 11:30 p.m. at an economic forecast dinner in Hawaii.

Weekly jobless claims are reported at 8:30 a.m. EST Thursday, as is personal income. ISM manufacturing data and construction spending are reported at 10 a.m. Monthly sales data from chain stores and auto makers are also reported throughout the day. According to Thomson Reuters, chain stores are expected to show a 4.8 percent gain in February. Car sales are also expected to remain strong and could match January`s 14 million average selling rate.

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Markets Mayhem

The Dow closed out February with a loss of 53 points, to 12,952, but it was up 2.5% for the month and is now up 6% year to date. The Nasdaq, riding a tech rally and biotech rally since the start of the year is up 13.2% and was up 5.4% for February. It lost 19 points to 2,966, after crossing above 3,000 Wednesday for the first time since December, 2000.

The SandP fell 6 points to 1,365 Thursday, and was up 4% for the month of February, and 8.6% year-to-date. Its February gain is the best since 1998.

“Since 1945, we have had 25 years in which the market was higher in both January and February,” said Sam Stovall, chief equity strategist with SandP Capital IQ.

“It signals a good year ahead because in 24 of those 25 years, the market was up for the full year and the one time it was not up, it was flat,” he said. February is traditionally a weak time for stocks, and analysts have been expecting a correction. For March, the SandP has averaged a 1.4% gain, Stovall said.

“Actually, the market is a little bit on the lion side. March is the fourth best month,” said Stovall.

Gold was the dramatic mover Thursday, losing USD 77.31 per troy ounce, or 4.3% to USD 1709.90. The dollar gained 1% against the euro in its biggest move since Jan. 13. The euro slid to 1.3324.

The 10-year yield rose to 1.981% Wednesday, but just after Bernanke`s speech was released, it shot above 2% briefly, spurring rumors of a “fat finger” trade. But some market participants immediately dismissed it as an error.

“The market was trading well. You had LTRO (the European lending operation). One big trade set that off, and we`ve not seen any selling since,” said David Ader, head of Treasury strategy at CRT Capital, just before midday Wednesday.

“It looks like a one off,” he said, dismissing the rumor. The Chicago Mercantile Exchange later said there was no evidence of a mistake trade in Treasury futures.

What Else to Watch

Besides Bernanke, the focus will also be on Europe where EU finance ministers and leaders meet at a summit. Talks are set to focus on the euro zone agreement on tighter fiscal integration. Traders are also watching for news from the International Swaps and Derivatives Association which has a special committee reviewing developments in Greece`s restructuring for a potential “credit event,” that could trigger credit default swaps.

Earnings are expected ahead of the opening bell from Big Lots, Kroger, Royal Ahold, Royal Bank of Canada, Toronto Dominion, Martha Stewart Omnimedia and Wendy`s. Foot Locker reports after the bell.

Yelp, the latest internet company to go public, is expected to price its IPO after the close.

Copyright 2011 cnbc.com

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Indonesia to be largest luxury market in SE Asia: LVMH

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Indonesia will become the largest luxury market in southeast asia over the next few years, Ravi Thakran, LVMH`s head for South Asia, South East Asia and Middle East told CNBC.

According to him, Indonesian consumers currently buy their luxury goods mostly from Hong Kong and Singapore, but Indonesia`s political stability and improving retail infrastructure will help boost the country`s luxury sector.

“I really see a new `I` emerging in BRICS. Going forward, we believe the Indonesian market will be one of the big surprises,” said Thakran, who added that the country remains an under-penetrated market for high-end goods.

LVMH is planning to open 20 to 22 new cosmetic stores under its Sephora brand in Indonesia over the next two to three years as well as a big flagship store for Fendi within 12 months.

LVMH, the world`s biggest luxury goods group, has remained largely unaffected by global economic uncertainties. Its 2011 profit reached USD 4.04 billion and sales jumped 16 percent on year. Around 25% of its revenue comes from countries in Asia, excluding Japan.

Thakran said that Asia`s luxury consumers have `come of age` and they are acquiring a more refined taste with watches and jewelery being particularly popular. “When you look at jewelery or watches, Asians are buying the highest priced segment and the most sophisticated of the products.”

LVMH remains positive on China, which is currently the world`s second largest luxury market, with Thakran saying that he sees no sign of a slowdown in the country`s luxury segment.

“In fact, Chinese numbers across the region, be it in Dubai, Singapore, Hong Kong, they are buying more and more in all these markets.”

Copyright 2011 cnbc.com

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow