Analysts on Greece: “A growing part of the economy is moving into the black economy.”
Groundhog Day! Greek debt deal is near! Different day, same headline.
The two-tier negotiations continue: On the debt swap with private creditors, and between the Greek government and the troika (International Monetary Fund/European Central Bank/European Union) on budgetary reforms.
Check that: There is a third tier of negotiations. That's the one between Prime Minister Lucas Papademos, the rest of the Greek government, including all political parties, and the rest of the Greek nation.
This may be the toughest of the three negotiations. Remember, Papademos is a technocrat — he's not really part of any party. You think it's tough negotiating with Charles Dallara, head of the Institute of International Finance? Try negotiating on big cuts in the minimum wage and in pensions with socialists, conservatives, and far-right parties.
The problem: He can't really present a plan until he's got the outlines of a deal with the troika, but they see what's coming.
The bigger problem: No one has a clue what the true gross domestic product of Greece is. That's because the situation keeps deteriorating. Why? Because relentless austerity is driving the country into the third world. Unemployment is officially 18 percent, but press stories routinely say one of two Greek youth are unemployed.
Tax revenues are low because tax evasion is rampant, and the government has done very little to reduce expenditures.
Natixis Global Asset Management summarized why the Greek government can't get its hands around taxes or expenditures: “A growing part of the economy is moving into the black economy.”
Want a deadline? OK. Euro zone finance ministers are meeting Monday. Want another? March 20, when 14.5 billion euros ($19 billion) of debt come due.
1) January retail same-store sales: Very mixed bag, with 50 percent exceeding, 50 percent missing — that's well below the long-term average of 57 percent, according to RetailMetrics. Department stores got hit with the warm weather.
Despite the mediocre sales, a number of companies raised guidance: Macy's, Ross Stores, Gap, Hot Topic, Kohls, Big Lots, and Fred's.
Lower guidance: Ann Taylor, Abercrombie & Fitch, WetSeal, Stage Stores.
2) Spain and France sold debt, all at lower average yields than prior auctions, again supporting the notion that the ECB’s three-year lending facility has eased liquidity concerns.
3) Volume stinks everywhere, even in Europe. Deutsche Bank CEO Josef Ackerman's last quarter as chief executive ended in disappointment, but the key here is that trading revenues from debt products dropped 38 percent.
Profits from old-school banking businesses such as private banking were offset by losses in investment banking, and that is just going to add to the chorus of critics in Europe who are arguing that banks should go back to their traditional duties and stop all this nonsense about trading stuff. More good news for volume.
4) Glencore and Xstrata merger talks: Consolidation may finally be real in commodity space. Xstrata, one of the world's biggest mining companies (based in Switzerland) confirmed it had been approached about an all share merger of equals. Glencore is also based in Switzerland and is also one of the world's biggest suppliers of commodities to industries.
This would be a real powerhouse: Likely the biggest producer of coal, and many base metals like lead and zinc. Who owns whom? Not clear, but Glencore already owns roughly 34 percent of Xstrata.
5) Earnings season is halfway over, but it's looking a bit tougher this morning on warnings of a tough year ahead:
Cigna shares fall 5.6 percent pre-market after reporting lower-than-expected fourth-quarter profit and forecasting 2012 earnings below the Street’s view. Cigna earned $1.11 per share, versus analysts’ $1.19 per share estimate, on weaker results in its disability and life coverage business. The health insurer projects 2012 earnings per share between $5 and $5.40, lower than the Street’s $5.67 view. The insurer expects a rise in the use of health-care services in 2012 after Americans spent much of last year delaying nonemergency procedures and doctor visits to save money in the weak economy.
AstraZeneca slides 3 percent after the drug maker announced it will cut 7,300 jobs and warned of a tough year ahead because of government spending cuts on health care and stiff competition. The drug firm reported fourth-quarter earnings per share of $1.16, short of analysts’ $1.56 estimate. The company increased its full-year dividend by 10 percent to $2.80 and announced a $4.5 billion share buyback program.
Sony drops 5.4 percent pre-market after it witnessed a net loss of more than $2 billion for the three months ended Dec. 31 and forecast a wider full-year loss due to its weak TV business and the impact of the strong yen on its European operations. For the fiscal year through March, Sony sees a net loss of 220 billion yen ($2.9 billion), after anticipating last November an 90 billion yen ($118 billion) net loss.
Unilever slumps 4.8 percent after saying 2012 will be hurt by a slowing of growth in emerging markets, which account for over half the company's business, and weaker demand in Europe and North America. Unilever said price hikes and weak consumer confidence has subdued growth in emerging markets.
Abercrombie & Fitch sinks 12.7 percent premarket as the retailer forecasts fourth quarter profit of $1.10 to $1.15 per share, sharply below analysts’ $1.54 expectation. The retailer sees margin pressures from markdowns.
Ann Inc. falls 10.6 percent after slashing its sales forecast and saying it’s “disappointed” with the company’s most recent results. The parent company of retailer Ann Taylor projects fourth-quarter sales of $566 million, versus the Street’s $578 million expectation.
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