MORNING COFFEE

Basel III Requirements Help Stocks.  Stocks are set to open higher after the Basel Committee on Banking Supervision more than doubled the capital requirements for banks.  The new requirements are less stringent then many analysts had anticipated and give the banks more time then expected to comply with the rules. Banks will now be required to have common equity equal to at least 4.5% of assets and regulators plan to introduce an additional buffer of 2.5%. If a bank does not meet the second requirement, the company cannot pay dividends, and will not be forced to raise cash. The required Tier 1 capital ratio will be at least 6%. Lenders will have eight years to fully comply with the new standards.

 Eurozone GDP Forecast Raised. The European Commission announced that it was raising its 2010 forecast for eurozone GDP growth.  The new estimate stands at +1.7% up from the original +0.9% growth forecast.  The upward revision is due to much stronger growth out of Germany, and puts it in line with ECB projections of +1.4-1.7%.

Upgrades

Continental Air (CAL): CRT Capital raised their rating from Hold to Buy and placed a target price of $42.00 on the company.

UAL (UAL): CRT Capital raised their rating from Hold to Buy and placed a target price of $42.00 on the company.

Downgrades

Western Digital (WDC): Robert W. Baird lowered their rating from Outperform to Neutral and lowered their target price from $40.00 to $27.00.

Coverage Initiated

Microsoft (MSFT): Standpoint Research initiated coverage with a Buy rating and target price of $29.00.

Coverage Reiterated/Price Target Changed

Novellus (NVLS): Caris & Company reiterated their Above Average rating and lowered their target price from $33.00 to $28.00.

Applied Materials (AMAT): Caris & Company reiterated their Average rating and lowered their target price from $15.00 to $12.00.

Salesforce.com (CRM): Kaufman Bros reiterated their Buy rating and raised their target price from $120.00 to $1400.00.

·         Futures: Dow +0.8%. S&P +0.8%. Nasdaq +0.8%. Crude +1.0% to $77.24. Gold 0.0% at $1246.80.

·         Asia: Japan +0.9% to 9322. Hong Kong +1.9% to 21658. China +0.9% to 2688. India +2.2% to 19208.

·         Europe: London +1.1%. Paris +1.1%. Frankfurt +1.0%.