Friday, August 16, 2013

Friday Watch

Posted by Gary .....at 12:37 AM
Evening Headlines 
Bloomberg:
  • Violence Convulses Egypt as Obama Calls Off War Games. A main government installation near Cairo was attacked and 11 security personnel were gunned down in new eruptions of violence following the military-backed government’s deadly suppression of an Islamist protest. The U.S. canceled joint war games with Egypt to signal its outrage over a death toll that increased to almost 600. Hundreds loyal to ousted Islamist President Mohamed Mursi attacked the governor’s offices in Giza near Cairo, some hurling firebombs and firing guns, governorate spokesman Amin Abdel-Moneam said yesterday by phone. Clashes also erupted elsewhere across the riven nation as the violent breakup of two pro-Mursi protest camps deepened the fault lines Islamists and their rivals have drawn. Forces were told to use live bullets to fend off assaults on buildings or troops, the government said in an e-mailed statement. Islamists denied carrying out any attacks. 
  • WTI Oil Trades Near Two-Week High Amid Unrest in Egypt. West Texas Intermediate crude traded near the highest price in two weeks as an escalating conflict in Egypt fanned concern that oil shipments through the country may be disrupted. Futures were little changed in New York after rising for a fifth day yesterday, capping the longest stretch of gains since April. A government installation near Cairo was attacked and 11 security personnel were gunned down in the latest episode of violence that has killed more than 600 people.
  • China Conducts Live-Fire Exercises as Tensions Simmer With Japan. China performed live-fire military exercises in the East China Sea as part of drills the army said were routine, as tensions simmered with Japan over islands in the area claimed by both countries. The military is conducting 10 days of exercises off the coast of Liaoning province, China Central Television reported on its website today, citing the People’s Liberation Army. Four Chinese ships entered Japanese waters around the islands, Japan’s coast guard said in an e-mailed statement.
  • China Shanghai Composite Surges as Exchange Said to Investigate. The measure rallied from an early drop of 1 percent and rose 3.2 percent to 2,148.39 at the break as of 11:30 a.m. local time, according to the exchange website and data compiled by Bloomberg. The Shanghai bourse is looking into the spike, said a technical services official at the exchange, who declined to be identified because of its rules. The bourse said its operations are normal, according to a statement posted to its official microblog. There was no news to spur such a rally in the market, said Gerry Alfonso at Shenyin & Wanguo Securities Co.
  • Asian Stocks Drop as Bond Risk Gains; Kiwi Drops on Quake. Asian stocks fell, paring this week’s advance, after an unexpected drop in U.S. jobless claims fueled speculation the Federal Reserve will cut stimulus. Bond risk rose, while copper led gains among industrial metals. The MSCI Asia Pacific Index dropped 0.6 percent at 11:18 a.m. in Tokyo, paring a weekly advance to 0.1 percent. Standard & Poor’s 500 Index (SPX) futures added 0.1 percent. Credit risk in Japan rose the most in almost seven weeks. Government bonds slumped, with 10-year yields at the highest level in at least a month for 18 of 24 developed markets tracked by Bloomberg. Copper and zinc both rallied 0.8 percent. The New Zealand dollar weakened 0.2 percent after an earthquake near Wellington. 
  • Rebar Pares Third Weekly Gain on Concern Fed May Taper Stimulus. Steel reinforcement-bar futures fell, paring a third weekly gain, on speculation that the Federal Reserve scaling back stimulus may slow global growth. Rebar for January delivery fell as much as 0.5 percent to 3,802 yuan ($622) a metric ton on Shanghai Futures Exchange, and traded 3,808 yuan at 11:13 a.m. local time. Futures have risen 1.4 percent this week, trimming this year’s drop to 4.5 percent. 
  • Rubber Pares Weekly Advance on Stronger Yen Ahead of U.S. Data. Rubber declined for a second day, paring a second weekly advance, as the Japanese currency strengthened against the dollar ahead of data that may add to signs of an improvement in the U.S. economy. Rubber for delivery in January on the Tokyo Commodity Exchange fell as much as 1.1 percent to 261.6 yen a kilogram ($2,685 a metric ton) and was at 264.1 yen at 11:20 a.m. local time. Futures have gained 1.1 percent this week, paring this year’s loss to 13 percent. 
  • Dell(DELL) Results Underscore Challenges Facing Turnaround Plan. Dell Inc. reported results that underscore the challenges facing the company amid a decline in personal-computer sales, whatever the outcome of a vote next month on Michael Dell’s $24.9 billion plan to go private. Net income for the fiscal second quarter fell 72 percent to $204 million, or 12 cents a share, from $732 million, or 42 cents, a year earlier. Revenue for the quarter ended Aug. 2 was little changed at $14.5 billion. Analysts on average predicted profit of $275 million on $14.2 billion in sales. The plunge in earnings bolsters the case made by Chief Executive Officer Dell and Silver Lake Management LLC that shareholders should accept their proposal to restructure Dell as a private company.
Wall Street Journal:
  • President Obama Treads Lightly in Response as Egyptian Crisis Deepens. U.S. Officials Question Whether Long-Term Ally Can Remain Stable State. The deadly fight in Egypt's streets has led U.S. officials to question whether America's long-standing ally can remain a fundamentally stable state. Worries that Egypt is headed to an extended armed insurrection, and that the U.S. has little power to stop it, help explain President Barack Obama's cautious response to this week's bloody crackdown by Egyptian security forces on Muslim Brotherhood supporters, U.S. officials say. In response to violence that has left hundreds dead on the streets of Cairo, Mr. Obama on Thursday canceled a coming U.S.-Egyptian military exercise to show displeasure at the actions of the country's military leaders—but stopped short of cutting off aid more broadly.
  • Critics Decry Risks Posed by Link Between China's Banks and Bonds. The Market 'Is Like a Child Compared to That in Other Countries'. Worried about a boom in lending by the country's fast-growing "shadow banks," China created a cash crunch in June to squeeze their source of funding. One unintended consequence, though, was a selloff in the country's $4 trillion bond market. The selloff—triggered by banks selling bonds to raise cash—bolstered critics of China's financial system, who point to its bond market as an underrecognized risk to the country as it struggles to control surging lending amid a weakening.
  • 'Alternative' Investments Draw Flak. Investors Flock to New Risky Products, and Regulators Are Raising Concerns. Individual investors are pouring tens of billions of dollars into a new generation of complex investment products, and regulators are raising concerns that not all buyers understand the costs and risks. Outside scrutiny is intensifying on securities firms' sales practices and whether so-called alternative products—ranging from certain types of mutual funds to vehicles that invest in highly indebted companies—are suitable for all of the Americans flocking to them.
  • Fed's Bullard Floats Idea of Small Cuts to Bond Buying. Measured Reduction in Purchases Would Be Important Market Signal. The Federal Reserve could hedge its bets by making small moves rather than large, aggressive ones when it starts pulling back on its $85 billion-a-month bond-buying program, said James Bullard, president of the Federal Reserve Bank of St. Louis.
Barron's: 
  • AMAT(AMAT) Slips: FYQ3 Misses, Q4 View Light; Names Dickerson CEO. Chip equipment maker Applied Materials (AMAT) this afternoon reported fiscal Q3 revenue that missed analysts’ estimates, and named a replacement for its chief executive officer. Revenue in the three months ended in July fell to $1.98 billion, yielding EPS of 18 cents a share. Analysts had, on average, been expecting $2.06 billion and 19 cents per share.
Fox News:
  • ObamaCare pushing Americans into part-time work, critics say. The warnings about ObamaCare from Big Labor and other critics may be coming true, as more evidence surfaces that President Obama’s health care overhaul is causing employers to prepare to push people into part-time work to avoid additional costs tied to the law. The Affordable Care Act requires mid-sized and large employers to sponsor health insurance for all full-time employees, which it defines as those who work 30 hours a week or more. Big labor unions, which had been in favor of the new law, are now sounding the alarm against it. They argue the sticker shock from the premium hikes is leading businesses to offset the impact by capping hours on employees, despite a recently announced one-year delay in that insurance mandate. If workers don’t clock 30 hours a week, the reasoning goes, employers won't have to offer health insurance. This sets a dangerous precedent that could affect millions of families across the United States, analysts say.
CNBC:
Zero Hedge:
Business Insider:
New York Times:
  • Easy Credit Dries Up, Choking Growth in China. A painful credit crisis is now spreading across Shenmu and cities nearby, as thousands of businesses have closed, fleets of BMWs and Audis have been repossessed and street protests have erupted. Now the leading purveyors of Western fashions are deserted, monthly sales at restaurants are down as much as 97 percent and the marble entrance to the Fortune Garden Club is shuttered. All but one of the city’s car dealerships have failed. 
Nasdaq: 
  • Jos A Bank's(JOSB) 2nd-Quarter Guidance Disappoints on Sales Weakness. Men's retailer Jos. A. Bank Clothiers Inc. expects fiscal second-quarter results will fall far short of expectations, as a highly promotional marketing campaign failed to resonate with consumers and led to a surprise sales decline. Shares dropped 4.9% to $41.92 in after-hours trading.
Real Clear Politics: 
  • Does the President Own Obamacare? If House Republicans had somehow erased chunks of the Affordable Care Act -- the employer mandate, the ability to screen who gets subsidies and the annual cap on out-of-pocket costs for a year -- the Democrats would have blasted those moves as unconscionable acts of sabotage. But the GOP didn't sneak in those changes. President Barack Obama did. The employer mandate discourages job creation and encourages employers to cut back employees' weekly hours. The lowering of verification standards for subsidies is a backdoor way to buy the business of young people who otherwise might not qualify. Delaying the copayment cap should keep health care premiums from shooting up in 2014. These delays, however, don't fix the inevitable problems; instead, they string out the gloom of uncertainty that has cast a pall over the American economy. They just put off the day of reckoning until 2014, a midterm election year. So what do you think the president will do then?
Reuters:
  • Nordstrom(JWN) sales rise less than expected, forecasts cut. Nordstrom Inc on Thursday reported lower than expected revenue in its second fiscal quarter as comparable sales at its department stores slipped, prompting the luxury department store chain to lower its full-year sales and profit forecast. The luxury retailer reported that comparable sales in the quarter ending Aug. 3 rose 4.4 percent from the year-ago period, below the 6.8 percent increase analysts were expecting, according to Thomson Reuters I/B/E/S. Overall sales rose 6.4 percent to $3.1 billion. It was the second quarter in a row that Nordstrom - long favored by investors for its growth and discipline - had reported disappointing sales and lowered its sales forecast. Shares were down 2.3 percent to $58 in after-hours trading.
  • Evacuations start at some Gulf of Mexico operations as storm threatens. Workers for some Gulf of Mexico oil and gas operators were being evacuated from offshore facilities on Thursday as a low-pressure system threatened to strengthen into a cyclone but production was not interrupted. The U.S. National Hurricane Center said a weather disturbance in the northwestern Caribbean Sea had become less organized overnight and had a 50 percent chance of becoming a tropical cyclone in the next 48 hours, down from a 70 percent chance.
  • U.S. Fed balance sheet expands for second week. The U.S. Federal Reserve's balance sheet grew for a second straight week on a rise in its holdings of U.S. Treasuries and mortgage-backed securities, Fed data released on Thursday showed. The Fed's balance sheet liabilities, which are a broad gauge of its lending to the financial system, stood at $3.603 trillion on Aug. 14, up from $3.542 trillion on Aug. 7. 
  • US retailer CDS pressured by headwinds. US retailers could see the cost of insuring their debt against default rise in coming months if recent results are anything to go by, as a slowdown in consumer spending starts to bite.
Telegraph:
  • China fires warning shot over price-fixing. The gaze of the Chinese authorities is set to move beyond the pharmaceuticals and baby-milk sector to a broad sweep of industries, according to a senior official at the country’s pricing regulator. 
Les Echos: 
  • French Banks' Fund Mgmt Arms Have EU27b Withdrawn in 2Q. Units of Credit Agricole, Societe Generale, BPCE, BNP Paribas hit with withdrawals, citing its own calculations. Asset manager BNP Paribas IP hardest hit, with EU19b in withdrawals.
Liquidity crunch a catalyst for big China slowdown – analysts The mini liquidity crunch is the early warning sign of a substantial economic correction long overdue, amid rising leverage and a broken growth model, say bearish analysts.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3222433/Liquidity-crunch-a-catalyst-for-big-China-slowdownanalysts.html?copyrightInfo=true
Business Standard: 
China Securities Journal:
  • China's Biggest Cities Should Keep Property Curbs. China shouldn't ease property purchase curbs in 1st-tier cities which still have supply pressure, citing Gu Yunchang, vice-president of the China Real Estate Association.
  • China Isn't Ready to Scrap Home Purchase Curbs. The Chinese property market would be hurt if real estate purchase curbs were loosed on a "large scale" without alternative effective and market-oriented policies in place, a commentary written by reporter Zhang Min says. Price surges would be "unavoidable" if curbs are pulled back, the commentary says.
Qiushi:
  • China NDRC Sees Risks of Overdue Local Govt Debt Rising. There is "relatively large" pressure on China's central government fiscal revenue and expenditure, National Development and Reform Commission Chairman Xu Shaoshi writes in an article published in Qiushi magazine. Risks are growing that local governments won't be able to repay debt on time, Xu wrote. China should continue its proactive fiscal policy and prudent monetary policy, Xu writes.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 142.0 +6.0 basis points.
  • Asia Pacific Sovereign CDS Index 111.25 +3.25 basis points.
  • FTSE-100 futures -.24%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.12%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • None of note
Economic Releases 
8:30 am EST
  • Preliminary 2Q Non-farm Productivity is estimated to rise +.6% versus a +.5% gain in 1Q.
  • Preliminary 2Q Unit Labor Costs are estimated to rise +1.2% versus a -4.3% decline in 1Q.
  • Housing Starts for July are estimated to rise to 900K versus 836K in June.
  • Building Permits for July are estimated to rise to 945K versus 911K in June.
9:55 am EST
  • Preliminary Univ. of Mich. Consumer Confidence for August is estimated to rise to 85.2 versus 85.1 in July.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone trade data could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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