Stable Prospects For Oil And Gas Companies Reflect The Economy And High Oil Prices

Credit quality for the U.S. oil and gas sector is--and should remain--relatively stable for the remainder of 2011 and into 2012, in Standard & Poor's Ratings Services' view. The ongoing gradual improvement in GDP supports oil prices and could aid natural gas, which accounts for 30% of industrial energy demand, though excess supply will continue to set the direction of natural gas prices. Our 2011 and 2012 forecast for West Texas Intermediate (WTI) oil of $97.67 and $103.59 per barrel bodes well for exploration and production (E&P) companies with a focus on oil and oilfield services and drilling contract companies. Despite $100 oil, consumers have not cut back much on driving, which has benefited refineries' gasoline and diesel throughput and kept their utilization rates high.

We believe robust oil prices are sustainable throughout the remainder of the year and into 2012, which benefit any producer focused on oil and natural gas liquids. Healthy oil prices, favorable price hedges, and lease requirements that require drilling to hold acreage are helping oilfield and contract drilling companies achieve very strong ratios. We expect E&P companies to keep their capital expenditures high through 2012, thus helping oilfield service companies and drillers maintain healthy credit ratios and earnings.

Economic Outlook

Our latest base-case economic forecast still assumes a weak recovery in 2011 and 2012. Our base-case outlook for the oil and gas industry reflects that assumption and the following expectations: 

• Real GDP remains moderately positive, with the economy growing 2.4% in 2011 and 2.6% in 2012. However, we can expect to shave off several basis points from our 2.4% estimate for 2011 after the disappointing economic news on July 29. U.S. GDP rose at an annualized rate of just 1.3% in the second quarter, after a downwardly revised 0.4% (originally 1.9%) in the first;
• Oil prices remain at about $100 per barrel, but below levels that would affect how much people drive and therefore, refinery throughput and margins;
• Oilfield services and drilling activity stays robust;
• Healthy capacity utilizations and margins continue for most refiners; and
• Capital market conditions and interest rates remain favorable.

At Standard & Poor's, we publish monthly our economists' scenario of where we think the U.S. economy could be heading. Beyond projecting GDP and inflation, we also include outlooks for other major economic categories. We call this forecast our "baseline scenario," and we use it in all areas of our credit analyses.
However, we realize that financial market participants also want to know how we think the economy could worsen--or improve--from our baseline scenario. Any point-in-time forecast of the economy will be wrong; it is simply a question of how far wrong. As a result, we now project two additional scenarios, one upside and one downside. These scenarios are set approximately at one standard deviation from the base line (roughly the 20th and 80th percentiles of the distribution of possible outcomes). We use the downside case to estimate the credit effect of an economic outlook that is weaker than our expected case.

Industry Credit Outlook

E&P producers reap the benefits of high oil prices

Several factors continue to support lofty crude prices: steady growth in the global economy, the loss of approximately 1.6 million barrels per day (1.8% of total daily consumption) of Libyan production, political turmoil in other North African countries and the Middle East, temporary North Sea production outages of approximately 400,000 barrels per day, and uncertainties surrounding Saudi Arabia's ability to ramp up additional capacity. Yet supply-demand fundamentals alone don't explain oil prices. The rise has mirrored the declining value of the U.S. dollar, which we expect to remain weak. High prices have benefited E&P producers' cash flows and, as a result, the companies have sought to acquire acreage in the oil and natural gas liquid rich fields, such as the Eagle Ford Shale and Granite Wash.

In sharp contrast, natural gas prices are still weak. Over the past couple of years, the number of natural gas rigs has largely exhibited inelastic behavior to declining prices, and a balancing of supply and demand remains elusive. Production economics and cash costs have taken a back seat to the ongoing need to drill to satisfy held by production (HBP) leases, joint venture agreements, and because of favorable producer hedges. Moreover, a significant backlog of drilled, but not yet completed, wells will continue to put downward pressure on gas prices.

We believe only a decline in supply could trigger an improvement in natural gas prices. Specifically, natural gas prices could increase when:

• Existing favorable price hedges roll off;
• Forward strip prices remain consistently below $5 per million cubic feet, which we believe to be an uneconomic threshold for a meaningful amount of production;
• Drilling declines meaningfully, possibly sometime in the latter half of 2012, due in part to a reduction in drilling to maintain lease acreage (HBP), particularly in the Haynesville shale; and
• A meaningful number of the drilled, but uncompleted, natural gas wells are completed.

Barring a recession, the confluence of these factors could reestablish the relationship between gas prices and rig count and ultimately lead to a reduction in natural gas inventories, thus increasing prices.

Demand for oilfield services and contract drilling is robust

Higher oil prices also benefit service providers that support oil drilling and production. Moreover, based on preliminary data, E&P capital budgets should be moderately up in 2012, continuing healthy demand for oilfield equipment and services. Land-based drillers, in particular, are benefiting as the drilling boom in liquids-rich shale plays offsets what we believe will be a slow but steady decline in natural gas drilling. With natural gas trading at record discounts relative to oil, we expect drillers to continue shifting to oil or liquids-based drilling (natural gas currently represents approximately 45% of the total rig count).

Offshore drillers face mixed prospects, with nascent signs of increasing demand offset by the specter of newbuild rig deliveries. Although the pace and prospects for tenders remains materially better than in 2010, the impact of scheduled additions to offshore fleets over the next several quarters is a risk in our view. Based on scheduled deliveries, we expect that global jackup and floating rig fleets will increase by approximately 7% and 13%, respectively, by the end of 2012. While we believe the recent trends of increasing dayrates and utilization for jackup rigs will continue over the next couple of years, given E&P companies' spending projections and the moderate nature of planned fleet additions, mid to deepwater floating rigs will likely face greater challenges because of the number of new deliveries coming on line. We expect to see further bifurcation between the segments with newer, higher-specification floating units achieving strong utilization levels and older, lower specification units facing lower utilization and potential declines in dayrates. Permitting activity in the Gulf of Mexico remains slow since the Macondo disaster, and will likely continue slow into 2012. The timing of a sustained recovery in drilling in the Gulf is still uncertain.

Refining and marketing margins should remain solid

President's Birthday Bash & Stampede at Wall Street

Bear Attack on Wall Street

The S& P 500 Reached 1205 the threshold that breached after QE 2 announcement, in late 2010. Expectedly, the derivative markets sprang back to 1222. Well, on the back of bear profit taking, As no one had expected such a fall.
What spooked market players ? Was it Indigestion of Worst economic data and News flow ?
Yea, the US Debt Debate brought out, so much, that whole world became disgusted. The Politicians were never ' Good Bed Fellows' and hardly, ever for economic recovery. The Last, 3 years honeymoon ending in sorrow.

The Man spooking Markets

Well, Is this a market that is worth entering ? Yes, it does for a nimble footed and supple foxy trader. And, with a strict stop loss.

Tomorrows, job Numbers is going to be an Insipid event..?

Its wager. A hard wager. Play like a bull and make some losses good.

The Best Bottom line is unusual than ever, One Year Treasury Yields sink in Negative zone..?

factually, impossible. In sense, if I borrow, the lender shall pay me a premium..? Not possible.

It shows no one wants to borrow, as Interest rates might Go Up and Invested amount would not give me any thing.  The Investment scene is Ugly and may get Uglier.

The Call on the verge from me was to stand aside and play the short term diection.

But, this is the Last Phase, of the cycle of Recession

Value gets desecrated and Everything will Lose Value,
Before there is a Reset

Return of 2007 Bear Sterns Ghost in July 2011

S&P 500 Corporations Are Reporting Solid Second-Quarter Earnings Growth; Earnings Per Share Reach Record Of $25

At the start of 2011, the Valuation and Risk Strategies (VRS) research team referred to the recently reported record-setting $380.9 billion in December retail sales as evidence that "a large portion of the U.S. economy has now normalized and put the 2008 credit crisis behind it.

Six months later, we are now witnessing yet another historic milepost of the recovery. Second-quarter 2011 S&P 500 corporate earnings are currently tracking at $25.12 per share (17.6% growth), representing a new record for quarterly earnings that eclipses the prior high-water mark of $24.17 recorded in the second quarter of 2007, according to Capital IQ data.

From our perspective, the symmetry here is nearly perfect; in early July 2007, we first started hearing talk of problems at a Bear Stearns sub-prime RMBS hedge fund, which, in hindsight, turned out to be the very early incubation days of the credit crunch. On the fourth anniversary of the start of the credit crunch, after U.S. GDP bottomed out in the second quarter of 2009, S&P 500 profitability has now fully recovered from the credit crisis on the heels of the recovery in retail sales recorded at the start of the year.

VRS Research is impressed with the way that the second-quarter earnings season is unfolding. This past quarter's headwinds included historic flooding and tornado activity in the U.S. Midwest, negative supply-chain repercussions from the March disaster in Japan, a spike in global uncertainty due to simmering fiscal problems in peripheral Europe and the U.S., and a general sense of economic malaise following recent sub-par U.S. employment growth. These economic headwinds prompted stock analysts to reduce consensus second-quarter expected earnings growth to as low as 12% on July 14, from as high as 15.2% on May 4.

Reported earnings, however, have been quite strong so far. Second-quarter S&P 500 earnings are currently growing at 17.6% (60% reported), with 72% of companies beating consensus expectations, while 19% have missed the estimates. Companies on average are reporting earnings that are 6.5% higher than what was expected at the time each company announced earnings. As economic recovery moves forward, we continue to believe that top-line revenue growth remains the main contributor to sustained double-digit earnings growth. 

US New Home sales : Reality, Fact & Figures

The warmer weather of spring and early summer has yet to bolster new home purchases, as sales of new single-family homes were down again in June 2011. Sales dipped another 1.0% in June to a seasonally adjusted annual rate (SAAR) of 312,000 homes, according to a July 26, 2011, report published by the U.S. Census Bureau.

Not all of the country suffered, however. The Northeast and West saw declines in sales of 15.8% and 12.7%, respectively, while sales were up 3.4% and 9.5% in the South and Midwest, respectively. But despite the pockets of improvement, the overall drop in June brings annualized home sales closer to record lows after declining 0.6% in May. Sales peaked at 1,389,000 homes in July 2005 and declined 77.5% through June 2011.

Meanwhile, the inventory of new homes for sale (164,000 units) in June declined to the lowest level since 1963. When new home sales are slow and inventory is depressed, it creates less competition and price strain on existing homes. However, an imbalance exists between supply and demand in the housing market; the lack of demand and high supply of existing homes (including shadow inventory) continue to hurt both the new and existing housing markets. This week's weak new home sales and last week's disappointing existing home sales data highlight the continued weakness in the overall U.S. housing sector.

The median price of new houses sold in June was $235,200, while the median price of existing homes sold during the same month was $184,300. As a result, median prices on new homes were 28% higher than prices on existing homes in June, which is higher premium than the historical level of roughly 15%. Therefore, when making a choice based on price, buyers are likely to prefer existing or even distressed homes over new ones. We expect this high premium to continue to sway consumer demand to existing homes and somewhat damper new home sales. We see this as a positive for existing home sales and prices to an extent. Overall, however, we believe it will take years for the new home market to regain a strong footing.

The home sales activities provide insights on the direction and movement of U.S. home prices as key economic trends. In general, new home sales data tend to lead existing home sales. This is because new home sales are counted in the report when the buyer signs the initial home sales contract (similar to the pending sale of existing homes) versus existing home sales, which are counted when buyers complete the purchase. Despite a modest decline in new home sales this month, we believe low levels of new home sales and a record low new home inventory may somewhat aid in the slow recovery of the existing housing market.

Key Highlights From The June New Home Sales

• New home sales declined 1.0% in June following a 0.6% decline in May (revised from 2.1%).
• New home sales peaked in July 2005 and declined about 77.5% through June 2011. However, new home sales are currently 1.6% above where they were in June of 2010. While last year's sales were generally boosted by the tax rebate, new home sales started to decline in May 2010.
• The Northeast and West regions posted decreases in sales for the second straight month, while sales were up in the Midwest and South. All regions except the Northeast posted increases on a year-over-year basis.
• Sales in the Northeast dropped 15.8% in June, and were 51.5% below a year ago; sales in the Midwest increased 9.5% in June and increased 2.2% year-over-year; sales in the South increased 3.4% and were up 4.6% year-over-year, and sales in the West declined 12.7% but were 23.2% above a year ago. Overall, the South accounts for about 58% (181,000 homes) of U.S. new home sales (312,000 homes).
• The national median new home sale price was $235,200, up 5.8% from May and up 7.2% from June of 2010.
• The estimated inventory of new homes in June was a record low 164,000 new homes, which is down 1.8% from May and down 22.3% from a year ago, while the months' supply declined to 6.3 months in June from 6.4 one month earlier at the current sale pace.

New Home Sales

On or about the 25th of each month, the U.S. Census Bureau reports the sales and prices of new single-family houses for the nation and the four regions. New residential sales data for July 2011 will be released on Tuesday, August 23, 2011, at 10:00 a.m. EDT.

The Interest rate Arrow here on …

The FED Inflation Target

- The Federal Reserve continues to hold to its mantra that it will keep U.S. interest rates low for an "extended period of time." However, that message seems to be meeting deaf ears. U.S. corporate...

Economic Research: It's Only Up From Here

The Federal Reserve continues to hold to its mantra that it will keep U.S. interest rates low for an "extended period of time." However, that message seems to be meeting deaf ears. U.S. corporations are racing ahead of what everyone knows is coming eventually: the day when the Fed will start to tighten monetary policy after nearly four years (and counting) of easy money.

Corporate America's expectations aren't unfounded. With interest rates at historic lows, the U.S. economy continuing to grow, and rising fears that inflation is lurking around the bend, it doesn't take an expert to conclude that U.S. interest rates have only one way to go: up. The questions, then, are how fast and how much? Will the upcoming moves derail the recovery and who will feel the most pain?

However and whenever the Fed acts, we don't expect its moves to derail the recovery. Although the recent shock of oil reaching $100 per barrel and the supply shock from the Japanese crisis are having a much bigger effect on economic growth, the U.S. Economic recovery still looks to be in place. Household and corporate balance sheets have improved since the financial crisis (partly at the expense of the public-sector balance sheet). Personal savings rates have increased, and corporate profit margins have widened to record highs. With private demand finally picking up, businesses have started to hire again--though only enough to keep the pace of recovery at half-speed.

With the unemployment rate stubbornly above full employment levels and the current soft patch pointing to another modest GDP figure for second-quarter 2011, the Fed will likely tread carefully with its interest-rate moves, giving the economy more time to heal. At Standard & Poor's, we expect the Fed to only start increasing interest rates by early 2012 and to continue to do so through 2014 until they reach 4.0% by year-end. Higher rates will increase borrowing costs in the U.S. and slow down growth, since the better returns from higher interest rates for cash-rich investors would only partially offset the slow down.

Some groups will be at risk once the Fed takes the air out of the economy's sails. The still-fragile housing sector will likely be the first to feel the effects of higher interest rates. Debt-poor consumers will cut back on spending as they attempt to cover their higher debt charges. Businesses that are losing revenue will reduce hiring, which will further slow down growth.

The baseline forecast is for a gradual increase in interest rates. But there are risks to this outlook. Even if the Fed raises rates in baby steps, long-term rates could climb more quickly than expected over worries that inflation will climb higher or that the government cannot manage its massive debt.

As Low As We Can Go

Any increases will be relative, of course. Over the past few years, the Fed has lowered the federal-funds rate to nearly zero--the lowest it can go--in hopes of spurring lending. Even that wasn't enough to stimulate consumer spending and raise employment rate. So the Fed followed with an alphabet soup of measures aimed at boosting liquidity in the economy, plus new insurance programs, which aimed to help calm investor fears. These strategies helped spur private demand that had all but dried up. By the spring of 2009, the financial markets had started to heal.

In the process of engineering a steady, although painfully slow U.S. recovery, the Fed flooded markets with liquidity, and created a $2.86 billion balance sheet that needs to be unwound at some point. Everyone is wondering when the Fed will initiate its exit from easy money, how fast the withdrawal pace will be, and what the effect on growth might be.

Although a few members of the Federal Open Market Committee (FOMC) had expressed concern over the current loose monetary policy, the recent economic slowdown kept the Fed on the side-lines at the FOMC meeting in June, and the Fed continues to hold back on tightening, keeping the federal funds rate between 0% and 0.25%. The discount rate is set at 0.75% and is below the historical spread from the federal funds rate.

In fact, no one dissented from that position at the June FOMC meeting. The Fed continues to label inflation in the economy as transitory and unemployment as elevated. At the post-meeting news conference, Fed Chairman Ben Bernanke, while not calling inflation a long-term concern of the Fed, did call it distressing for consumers.

The upshot is that the Fed does seem to be thinking about when to begin raising rates. Its recent decision to stop buying long-term Treasury debt, while reinvesting as the notes mature to keep its portfolio level, signalled a revisiting of its easy policy at the next meeting. However, Mr Bernanke's statement on June 22 that the Fed doesn't "have a precise read on why this slower pace of growth is persisting," sounds like the Fed's "transitory" mantra is running thin. The Fed expects the economy to settle into a disappointing recovery and seems to believe that it has done all that it can do, for now. Mr Bernanke reiterated that no new quantitative easing program, or QE3, is in the works.

At the April FOMC meeting, members extensively discussed their stimulus plan exit strategy, according to the meeting minutes. There has been some internal debate at the Fed about raising the discount rate to 1.25% to maintain the traditional one percentage point spread over the Fed funds rate. If that happens, consumers would likely be lightly affected because the prime rate would probably remain at 3.25%. But it would be viewed as a precursor to a Fed-rate increase.

We expect that the Fed will move slowly in tightening policy rates for several reasons. Unemployment rates are high, and wages are sluggish. With industrial companies still operating at low capacity rates, growth will likely remain slow through next year, with inflation (excluding energy and food) staying soft.

When the Fed eventually raises nominal interest rates, the increases will likely lag behind the increase in inflation. In short, monetary and fiscal conditions, like the rest of the world, will continue to be easy and should make the recovery resilient for now.

Why So Slow?

Some observers think policy should soon shift from easing to tightening to ward off inflation. But with the U.S. economy hitting a few bumps along the road to recovery, we expect that the Fed won't overact. GDP grew a tepid 1.9% in first-quarter 2011. In our opinion, that means low interest rates are still needed to spur growth.

A surge in Equities? Like a rocket.. A Bear Squeeze...

                                                       The End Debt Theatrics :          

The Stock Markets have remained subdued, today with both Eyes and Ears towards the D.C.
Untied States, with a great Art of Drama and Political fluttering have sold its, debts to the world, Again.
The Drama of Debt Limit has brought the financial world at Knees, almost begging the government to raise the debt limit. Does US economy has strength, to return the Debts ?
Is it not the world will one day get bored with this Theatrics and Do, What Lenders does to its defaulter ?
Sure. The day will come.
And, Now very soon. When US Debt will have no Buyers.
The splurging King of the world has empty coffers.
The debt limit talk is Humbug Political drama, for collecting more Money, in the Name of USA.
US is already paying back its old Debts, with New Debts and Adding More Debts.


When this Drama ends on Wednesday evening and with end of month, Options market on wrong foot, 
Expect a Huge 'Squeeze'  on Upside.

The Central Bank Action is now on frozen and Quarterly Results are ' better than expected' sure to add, fill up for an Upside Trigger.


Please, Do Not Go short on US Market and Loose Money.

The Better strategy, if so ever, I am wrong will be to Jump the Gun, When the Shot is Fired...

An Inside View : US Debt ratings-Standard&Poor's video

Inter-National Data Summary: US, Europe, Asia-Pacific

U.S.

• Housing starts jumped 14.6% over May to an annualized 629,000 units in June, the highest level since January. Housing starts are up 16.7% over last June. The reading was much stronger than the consensus expectation of 575,000, though after May starts were downwardly revised to 549,000 (previously 560,000 units). Multifamily starts surged 31.8% over May to 170,000 units. Single-family starts were up 9.4% to 453,000 units. Building permits, a leading indicator for future construction activity, were up 2.5% to 624,000 in June.
• U.S. existing home sales fell for the third straight month by 0.8% month over month to an annualized 4.77 million units in June, weaker than consensus expectations of an increase to 4.9 million. The 7.0% month-over-month drop in condo/co-op sales to 530,000 units largely explains the overall decline. Single-family sales were flat for the month. Condo/co-op sales are down 18% year over year while single family home sales are down 7.4% year over year. The months' supply of unsold homes rose to 9.5 from 9.1 in May and is still above the six-month historic average. The sales price jumped to $184,300 from $169,300 in May and is up 0.8% over last June.
• The S&P/Experian consumer credit default rates decreased in June to 2.14% from 2.23% in May and 3.44% a year ago. All loan types saw declines.
• Industrial production edged up 0.2% month over month in June, which is the first rise seen in two months, offsetting the 0.1% decline in May (previous 0.1% gain). Auto production remained weak again, down 2.0% in June after dropping 1.5% the month before because of continued Japan-related weakness. Manufacturing capacity utilization remained at its May level of 74.4%, and it is still less than the 80-point benchmark rate.
• Consumer prices (CPI) fell by 0.2% month over month in June, which was a larger drop than the 0.1% decline that the consensus expected, after a 0.2% month-over-month increase was seen in May. Core CPI, excluding food and fuel, was up 0.3% over May, the same rate as in May, though stronger than the 0.2% increase that the consensus expected. On a year-over-year basis, overall CPI is up 3.7%. Core CPI is up 1.6% over last year and is still within the Fed's implicit 1% to 2% comfort zone. Energy prices fell 4.4% month over month but are up 20.1% over last June.
• The New York Fed Empire State index climbed four points to a disappointing negative 3.8 reading in July, partially offsetting the near 20-point drop to negative 7.8 in June, and still less than zero, indicating contraction, for a second time. New orders edged down to negative 5.6 after plummeting to less than zero (negative 3.6) in June. The employment index dropped again in July to 1.1 from its 14-point plunge to 10.2 the month before. The price readings also weakened.
• The initial jobless claims fell 22,000 to 405,000 in the week ended July 9 from an upwardly revised 427,000 the week before (was 418,000). Continuing claims climbed 15,000 to 3.727 million for the week ended July 2, though after the week before was upwardly revised to 3.712 million (previously 3.681 million).
• The U.S. Treasury budget deficit was $43.1 billion in June and narrower than the $68.4 billion deficit seen in June 2010 and the consensus expectation of $65.5 billion. Receipts edged down 0.6% over last June to $249.7 billion, Outlays fell 8.4% year over year to $292.7 billion. The deficit now stands at $970.5 billion for the first nine months of the fiscal year, narrower than the $1.004 trillion deficit for the same period in fiscal year 2010.
• Oil prices increased to $100 per barrel on (Thursday- midday) from $97.37 per barrel the previous week on rising speculation that debt problems on both sides of the Atlantic would be resolved soon and signs that crude stocks and Natural Gas are shrinking in U.S. The Energy Information Administration (EIA) inventory data showed a 3.7 million-barrel fall in crude stocks, which was larger than the 1.5 million-barrel drop that markets expected. Total product demand was up 1.6% year over year.
• U.S. bond yields edged down two basis points (bps) to 2.93% on Wednesday (midday), after a disappointing existing home sales report increased worries that the recovery is losing steam. Mortgage rates slipped marginally to 4.54%. Mortgage applications increased to 15.5% during the week ended July 15 following a drop of 5.1% the previous week. The refi index increased by 23.1% from a 6.2% drop the previous week. The purchase index decreased by 0.1% this week, following a decline of 2.6% the previous week.
• The dollar weakened against most trading partners this week as signs of progress on a U.S. budget deal prompted a rise in risk tolerance. The euro rose to $1.422/€ on Wednesday (midday) from $1.404/€. The yen rose to ¥78.77/$ from ¥79.31/$.
• LEI rose by 0.03% Month over Month ( see the separate post giving the Details, Dow trading @12735 and Nasdaq@ 2838, S&P 500 @1345   
• In The Anvil :
  •  S&P/Case-Shiller Home Price Index (July 26; negative 4.2). Consumer confidence (July 26; 57.0). New home sales (July 26; 0.31 million). Durable orders (July 27; 0.5). Beige Book for FOMC Meeting (July 27). Initial claims (July 28). Advance second-quarter GDP (July 29; 1.7%). Employment cost index (July 29; 0.6). Chicago ISM (July 29; 60.0). Consumer sentiment (July 29; 64.0).

                                                                            Europe :

• Italy's lower house of parliament approved a EUR48 billion austerity package on July 15, 2011, in record time to calm the increasing contagion fears spreading from the Greek debt crisis. The mix of spending cuts and tax measures is aimed at ensuring the government reaches its target of balancing the budget by 2014.
• The minutes of the July 6 - 7 meeting of the Bank of England's Monetary Policy Committee (MPC) revealed a more dovish tone, indicating that any rises in interest rates are being put off into the future.
• Germany's ZEW index of economic sentiment slipped for the fifth consecutive month to negative 15.1 in July, its lowest level since January 2009, from negative 9.0 in June. Europe's government debt crisis weighed on optimism despite the continuing strength of the German economy.
• Russian industrial production increased by 5.7% year over year in June. The manufacturing sector, which grew 7.1% year over year during the period, led the growth.
• The eurozone trade deficit declined to EUR0.6 billion from EUR2.5 billion in April. Exports grew 1.5% month over month in May, faster than April's rise of 0.2%. Meanwhile, import growth slowed to 0.2% from 0.8%.
• The eurozone inflation rate remained steady at 2.7% in June but continues to remain at more than the target that the European Central Bank set.
• European Data update is being done separately. Greece Talks are being viewed ... European Markets Closed +ve  cac 3816.25, Dax 7290.14  , FTSE: 5899.89
•  Flash PMI's from Markit tomorrow and 
  •  EMU industrial orders (July 22). Germany Ifo expectations (July 22). France production outlook (July 22). Italy retail sales (July 22). Germany retail sales (July 25). Germany consumer confidence (July 26). U.K. GDP (July 26). Hometrack house prices (July 26). Germany import price index (July 27). CPI (July 27). Switzerland leading indicator (July 27). U.K. total orders (July 27). Germany unemployment rate (July 28). EMU, U.K. consumer confidence (July 28). U.K. nationwide house prices (July 29). France consumer spending (July 29). PPI (July 29). Spain, EMU CPI (July 29). U.K. consumer credit (July 29). France, Germany, EMU PMI manufacturing (Aug. 1). EMU unemployment rate (Aug. 1). EMU PPI (Aug. 2). France, Germany, EMU PMI services (Aug. 3). EMU PMI composite (Aug. 3). Retail sales (Aug. 3).

                                                                  Japan And Other Asia-Pacific

• South Korea's central bank left its key interest rate unchanged at 3.25% in its policy meeting held on July 13 because of rising uncertainty on the global economic recovery, including the eurozone debt crisis.
• New Zealand's economy rose by 0.8% quarter over quarter in the March quarter, stronger than the 0.5% quarter-over-quarter growth in the last quarter of 2010 and consensus expectations of just 0.4% quarter over quarter, owing to the February Christchurch earthquake. The increase was the fastest quarterly expansion since the December 2009 quarter.
• Singapore's economy contracted 7.8% quarter over quarter in the second quarter, after a 27.2% jump in the first quarter. On a year-over-year basis, the pace of economic growth slowed to a mere 0.4% in the second quarter. The manufacturing sector, where output contracted by 5.5% year over year after a 16.4% year-over-year jump in the previous quarter, led the deceleration.
• New Zealand consumer prices (CPI) rose 1% during the second quarter, increasing year-over-year inflation to 5.3%. The reading was much stronger than the consensus forecast of an increase of just 0.7% quarter over quarter and 5.1% year over year.
• India's wholesale price index (WPI) rose by 9.4% year over year in June 2011, up from 9.06% in May.
• Coming releases:  Retail sales (July 27). Trade balance (July 27). CPI (July 28). Unemployment rate (July 28). Personal income (July 28). PCE (July 28). Industrial production (July 28). Shipments (July 28). PMI (July 28). Housing starts (July 29). Auto sales (Aug. 1). Trade balance (Aug. 4). Leading index (Aug. 5). Current account (Aug. 7). Consumer confidence (Aug. 9).

Dr. Trichet's Banking Lab. Post Mortem. Rating Agencies

Most European Banks Pass The Stress Test, But Capital Concerns Persist: "

Standard & Poor's Ratings Services does not currently expect to revise any of its ratings based on the release of the results of the European Banking Authority's (EBA) stress tests on European banks. Most of the 90 participating banks passed the tests, which we had expected in view of significant capital raising by the banks since the financial crisis and the modest macroeconomic downturn assumed by the EBA.

We consider the EBA's stress test assumptions to be akin to a 'BB' stress scenario under our rating methodology. It is therefore not unexpected that the stress test results are relatively favorable. In our rating analysis, we routinely assess the resilience of banks' capitalization to more substantial stress events through our risk-adjusted capital ratios. The risk-weights and capital charges incorporated in our risk-adjusted capital framework assess the potential impact of a mid-single-digit percentage point decline in GDP over three years in mature economies. In addition, we have undertaken periodic analyses of more severe scenarios. These "what-if" scenarios are not the central expectation on which we base our ratings, but simulate potential downside risks. Our conclusion from this work is that, although the sector undoubtedly appears to have improved its position since the financial crisis, capital remains a neutral or a negative rating factor for most European banks. We expect that the stress test process is likely to add further impetus to banks' capital raising efforts in the lead-up to the implementation of Basel III.

Rather than the simple pass/fail outcome, we consider that the most informative aspect of the EBA's stress test process is the release of risk exposure data. This information is much more granular than the disclosures typically found in banks' regular reporting. We will continue to analyze these figures and expect the outcome of our analysis to support the conclusions we have reached with our risk-adjusted capital ratios.

 

                                                                   Overview

• We do not currently expect to take rating actions on the basis of the information disclosed in the European bank stress test results published on July 15, 2011.


• Through our risk-adjusted capital framework, we routinely assess the resilience of rated banks' capitalization to more substantial stress events than the moderate downturn scenario used in the EBA's stress tests.


• Although the sector undoubtedly appears to have improved its position since the financial crisis, we continue to believe that capital remains a neutral or a negative rating factor for most European banks.


• We consider that the European bank stress tests did not fully capture key rating factors such as the potential implications of a sovereign default or banks' funding imbalances.

In our view, the value of stress testing exercises stems from the credibility of the underlying assumptions. Having reviewed the stress test results, we remain of the view that the exercise was an improvement on the equivalent process undertaken last year, but could usefully have been more challenging in terms of the severity of the economic and market assumptions. For example, the EBA's adverse scenario assumed a 0.4% contraction in real GDP in the EU as a whole in 2011-2012. Although this is well below consensus expectations, we consider that a moderately harsher scenario would have added greater value in terms of assessing the resilience of the sector.
The results of the stress test vary considerably across the sector, and this variance is in line with the large gap seen in our ratings on the banks with the strongest and weakest creditworthiness. Sovereign support remains an important rating factor for many European banks. For example, the EBA reported that, of the €1 trillion of core Tier 1 capital held by the 90 stress tested banks at year-end 2010, 16% had been provided by governments or other public sector entities. Equally, indebted governments rely to a material extent on their domestic banks to fund their deficits, as illustrated by the data on banks' sovereign exposures. The unwinding of this interdependency is likely to be difficult and take an extended period of time. In our view, the potential implications of a sovereign default or restructuring on the banking sector were not fully considered in the EBA's stress tests.

Other than higher funding costs, which had a material impact on the results, the stress test process did not consider banks' funding and liquidity positions. We consider that the major challenges facing European banks are their ability to access public funding markets, reduce their dependence on central bank money, and strengthen their liquidity buffers. These issues will have a material impact on the sector's growth and earnings potential in the coming years. The EBA has stated that it has conducted reviews of European banks' liquidity positions, but will not publish the findings."

                                                                 ( Standard & Poors )
What is the Take Away ..?


The European Banks are tested Essentially for the ' Milder ' Adverse Economic Scenario than the Implied by the Ground Circumstance. Where the Capital is inter-dependent between Banks and Or Government, the Effects are not replicated. I.e. the Impact Value should be doubled or given to that Factor. 


In Short, the Data is not analysed to the Logical Extent, but is Validated superficially.


DR.Trichet your lab has smooth wheel Under the " Running Wheels" ?

Halliburton, IBM, Mosiac Beat the Street

Halliburton Co.
                                                             

 S&P Equity Research on Monday upgraded Halliburton Co. to buy from hold. Analyst Stewart Glickman said Halliburton's second-quarter profit of 81 cents a share beat his estimate by 13 cents a share. "We had expected strong results in North America but results were still significantly better than we had projected, led mainly by liquids-rich shale play activity," Glickman said in a note to clients. "While international margins continue to be weighed down by Middle East project start-up delays and sluggish activity in the U.K., we think international margins will recover in 2012."
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.
 Mosaic Co.
 late Monday reported its fourth-quarter net income attributable to Mosaic rose to $649.2 million, or $1.45 a share, from $396.1 million, or 89 cents a share, in the same quarter last year. Revenue increased 54% to $2.86 billion. Analysts surveyed by FactSet Research had forecast earnings of $1.37 a share on revenue of $2.58 billion. "Looking to fiscal 2012, we anticipate another good year given continued healthy global nutrient demand," said Jim Prokopanko, president and chief executive officer of Mosaic, in a statement.


I.B.M


International Business Machines Corp. said Monday its second-quarter net income rose to $3.66 billion, or $3 a share, from $3.39 billion, or $2.61 a share in the same period last year. Armonk, N.Y.-based IBM said revenue rose 12% to $26.7 billion. Analysts polled by FactSet Research had expected IBM to report earnings of $3.02 a share, and $25.4 billion in revenue for the quarter. IBM also said it is raising its earnings guidance for the full year, to "at least" $12.87 a share on a GAAP basis, from $12.73 a share. Shares of IBM fell nearly 1% in after-hours trading, following the earnings announcement

5th of S&P 500 Reports and Housing Data, Debt Crisis wait Next Week

The European Banking Drama and Italian/ Spanish Banks, (De) stressed Test will Continue to Haunt the Market, as Last Weeks Legacy. The Hectic activity at White House and failed Summit, may drive the Monday.
The Bond Market may usurp the Yields, as a Feat Gauge. While, US Markets closed with VIX above 20%.
The Monday's Earning reports are IBM, Mosiac, Haliburton, Chales Schwab.

Tuesday,  A Banking Day :  The course will begin the with Australian Bank Rate decision. Indian market would have HDFC Bank and Crompton Greaves, Chambal fertilizer results. Soon, ZEW survey will take the Shot at German Economic Sentiment and other consumer surveys. The US markets shall open with Building Permits and Housing Starts. But, the Bank of America, Goldman Sachs, Wells Fargo, Coca Cola and Novartis  all will bring the markets live. While, Apple, Blackrock, Yahoo will  post Closing Bell. While, Crude oil is expected to play the rear. The Dodd-Frank Regulation will catch the talks.

Wednesday : The China will fire its Economic Leading Indicators, to Kick start the Trade. The Chinese Banks are expected to take it slow on Rates and reserves, for a while. In India, Dr Reddy's will bring out results. The Minutes of Bank of England should a passing event. The Existing Home Sales are expected to be show More Ghost Inventories live and MBA Purchase applications being sideways. The banking agenda continues with Bank of Canada declaring Rate decision. CAD $/ USD movement will be the trade.
 The EIA Petroleum Inventories may impress the Fresh series for the Crude/ its Derivatives. FED will have its bytes. AMR, BlackRock, EMC and Abbott will spread the result card. Intel, eBay, American Express add on Bell.

Thursday :  The Japanese Merchandise data and Import/Export to Opens the Yen/$. The Indian Markets digets the results from Hero Honda, Hind.Zinc, Sesa Goa, Kotak-Mah. Bank. The Inflation figures will set the back drop for the forthcoming RBI meet. The European summit on Greece will rumble at Brussels.
The Flash PMI's of Germany, France and Major Euro area will echo the activity. The US FHFA Housing Index, Jobless claims and LEI may push the DEBT talk in Full Focus. AT&T, Morgan Stanley, Pepsico, and the Market will close the bell with Microsoft, along with Roche, AMD.

Friday :  The China PMI is trade opener. Indian market have Axis Bank, Canara and Allahabad Bank results.
The Candian CPI carries to the US Trade, Where, Caterpillar, GE, Verizon, Honeywell may reflect what is passed on the Consumers and what is absorbed.

All the impasse will not over shadow the US Debt reaching the Crisis Point

Put Options by Ben Bernanke, FED Chairman

The Semi annual Testimony and the F.O.M.C. minutes have both been Identical and were a significant Out liners of the FED, in terms of economic events and Time.
Dr. Bernanke has candidly acknowledged the Variables and Uncertainties arising.

Lets see: Bernanke's Put Options in terms of  Economy :
                               Conditions for the FED Put Option
 On the one hand, the possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might re-emerge, implying a need for additional policy support. Even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further. 
1)  One option would be to provide more explicit guidance about the period over which the federal funds rate and the balance sheet would remain at their current levels. 
2)  Another approach would be to initiate more securities purchases or to increase the average maturity of our holdings. 
3)  The Federal Reserve could also reduce the 25 basis point rate of interest it pays to banks on their reserves, thereby putting downward pressure on short-term rates more generally. 


                                 The Caveat for the above actions follows :


Of course, our experience with these policies remains relatively limited, and employing them would entail potential risks and costs. However, prudent planning requires that we evaluate the efficacy of these and other potential alternatives for deploying additional stimulus if conditions warrant.


                                               Analysis in term of the Market :


      A)   The FOMC minutes and Semi Annual Testimony has already giving the ' Explicit Guidance', however '
'Persistent condition' time span, can be  assumed to be till the Next F.O.M.C. Meet. 
             S&P500 = 1305-1325 range, Crude $ 95/ per BBL and USD Index = 75
 Pull factors : Better than Expected Result Season. i.e. Index earning $ 95-97 EPS.
 Pushing Down : Economic Indicators, Bond Yields
 Unconsidered Event : Socio Political Event and Natural Calamities, Spike in Oil Prices.


     B)    Jackoson's Hole Meet with Bankers May Be the Next Time Line.

It seems improbable FED to take any more tightening Action till 2 Meets. That's About 2-3 Months. And, Keep watching for the Next Clue
  The Probable Interpretation : FED Maintained the  duel stance One of tightening by avoiding continuation of  ' Asset Purchase program' ( QE-3) and Keeping it in its armour. Simultaneously, allowing market forces to  take over the reign on the economic activity and preferring to stay on the Mode of Observation. 
              The caveat for this Crystal Gazing is US Debt failure. Which is a ' Black Swan Event'