Friday, August 30, 2013

Friday Watch

Evening Headlines 
  • Al-Qaeda Links Cloud Syrian War as U.S. Seeks Clarity on Rebels. More than two years into Syria’s civil war, radical Sunni Islamists are emerging as the prevalent force seeking to topple President Bashar al-Assad, according to military analysts in Europe and the Middle East. Their influence is among the biggest challenges facing the U.S. and allies such as Saudi Arabia as they decide which anti-Assad forces to back and how. “Two of the most powerful insurgent factions in Syria are al-Qaeda factions,” Evan Kohlmann, senior partner at Flashpoint Partners in New York, said by telephone. “Even were the Assad regime to fall and there be some kind of takeover by rebels, there’s not a clear understanding that everyone here will be able to agree and form any kind of government.”
  • Historic Vote Sees Cameron Defeated by Lawmakers on Syria. David Cameron’s plan for strikes against Syria was defeated as he became the first British prime minister in at least 150 years to lose a parliamentary vote on military action, once again demonstrating his weakness in the face of his own Conservative Party. Minutes after the defeat in the House of Commons last night by 285 votes to 272 of his already watered-down motion seeking authorization in principle for military strikes, the prime minister told lawmakers the U.K. will play no part in any response to the alleged use of chemical weapons by President Bashar Al-Assad against his own people. Coalition lawmakers joined the opposition to defeat the proposal. “The British Parliament, reflecting the views of the British people, does not wish to see British military action,” Cameron said. “I get that and the government will act accordingly.”  
  • Indonesia Rupiah Set for Worst Month Since 2008 on Fund Outflows. Indonesia’s rupiah headed for the worst month since the global financial crisis of 2008 on concern the U.S. will start cutting stimulus that has buoyed emerging-market assets as early as September. The currency pared its losses after Bank Indonesia raised its benchmark interest rate yesterday to a four-year high in an unscheduled move to stem exchange-rate weakness. The reference rate was boosted by 50 basis points to 7 percent, before a Sept. 2 report that economists predict will show faster inflation. Global funds pulled 1.02 trillion rupiah ($91 million) from local sovereign debt thismonth through Aug. 28 and a net $577 million from stocks through yesterday, official data show
  • Record $100 Billion Debt Due as Sales Plunge 44%: Korea Markets. Corporate bond sales in South Korea are falling to a six-year low just as companies face a record debt bill and credit-rating downgrades raise borrowing costs. Companies from SK Telecom, the country's largest mobile phone operator, to POSCO, Asia's fourth-biggest steelmaker, have almost $100 billion of won-denominated bonds and loans due before March 31, data compiled by Bloomberg show. Hanwha Investment Securities Co. says the "maturity wall" is hitting records in both 2013 and 2014. Local-currency note sales plunged 44% this year to $18.6 billion. South Korea industries are paying for a 57% jump in borrowing after the 2008 financial crisis when the government ensured easy credit to help create jobs.
  • Asia Stocks Swing From Loss to Gain; Energy Shares Fall. Asian stocks swung between gains and losses, with energy producers leading declines as the price of oil fell after the U.K parliament voted against military strikes on Syria. Japanese utilities rose. Inpex Corp., Japan’s No. 1 energy explorer, dropped 2.2 percent. Hokkaido Electric Power Co. added 4.3 percent in Tokyo as the utility forecast a smaller-than-expected net loss. Ping An Insurance (Group) Co., China’s second-largest insurer, gained 0.8 percent in Hong Kong after saying first-half profit rose. Shanghai Industrial Holdings Ltd., a shopping-mall operator, lost 1.6 percent in Hong Kong after reporting first-half profit fell 34 percent. The MSCI Asia Pacific Index was little changed at 129.77 as of 11:50 a.m. in Tokyo, having swung between gains of as much as 0.5 percent and losses of 0.1 percent. The gauge is down 1.2 percent this week, a second week of losses, while it has dropped 1.9 percent this month.
  • Real Free Fall Freezes Junk Market as Debt Surges: Brazil Credit. The plunge in the Brazilian real is extending the drought in the country's junk-bond market to the longest in two years as borrowing costs and leverage surge. Speculative-grade Brazilian companies haven't sold debt abroad since May 7, the longest stretch since the period ended June 2011, while no borrower regardless of rating issued debt in August, according to data compiled by Bloomberg. At 7.2%, average yields on Brazilian corporate debt are the highest in four years and one percentage point above the average in emerging markets, the biggest premium since 2005, data compiled by JPMorgan Chase show.
  • Gold Trade Most Bullish Since March on Syria Crisis: Commodities. Gold traders are the most bullish in five months as mounting concern about military action in Syria drove prices into bull market territory. Twenty-three analysts surveyed by Bloomberg expect prices to rise next week, six were bearish and five neutral, the highest proportion of bulls since March 8. Hedge funds and other speculators have the biggest bet on higher prices in six months and holdings of metal in exchange-traded products expanded in the past two weeks, data compiled by Bloomberg show.
  • Rebar Heads for Third Monthly Gain on Iron Ore, Lower Inventory. Steel reinforcement-bar futures in Shanghai advanced toward a third monthly gain, supported by lower inventory and higher prices for iron ore. Rebar for January delivery rose as much as 0.4 percent to 3,765 yuan ($615) a metric ton and traded at 3,757 yuan at 10:05 a.m. local time. Futures have gained 3.1 percent this month.
  • PIMCO Sees Taper in Worst MBS Slump Since 1999: Credit Markets. U.S. government-backed mortgage bonds are heading toward their longest monthly slump since 1999 as concern mounts that the Federal Reserve will begin paring its debt purchases even as the steepest rise ih home-loan rates in at least 40 years slows the housing rebound. Securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae lost .53% through Aug. 28, heading for their fourth month of declines and bringing losses since April to 2.97 percent, according to Bank of America Merrill Lynch index data. For almost a year, the Fed has been adding $40 billion of bonds to its balance sheet each month from the more than $5 trillion market. It expanded the purchases in January to include $45 billion of Treasuries.
Wall Street Journal: 
  • U.S. Prepares for Solo Strike On Syria After Britain Balks. The Obama administration laid the groundwork for unilateral military action in Syria, a shift officials said reflected the U.K.'s abrupt decision not to participate and concerns that President Bashar al-Assad was using the delayed Western response to disperse his military assets. The push for a quick international strike to punish Syria for what the U.S. said was a chemical-weapons attack appeared in disarray on Thursday, after British lawmakers defeated a government motion in support of military action. But President Barack Obama is prepared to act without Britain, officials said, noting that unlike U.S. involvement in the 2011 military operation in Libya, the options under consideration in Syria are smaller-scale and wouldn't require a coalition to be effective.
  • In Turmoil, Emerging Markets Raise Rates. Move by Indonesia Follows Brazil, Turkey; Trend Threatens to Deepen Slowdown. Major emerging-market central banks are moving to raise interest rates in an effort to stem an exodus of cash, in a trend that threatens to intensify an economic slowdown across the developing world. Indonesia raised its benchmark rate by half a percentage point on Thursday, one day after a half-point increase by Brazil and a week after a rate increase by Turkey. Other developing economies are under mounting pressure to tighten credit to support their weakening currencies. Brazil's central bank hinted at further increases to come. 
  • Apache(APA) to Sell Stake in Egypt Business to Sinopec for $3.1 Billion. Apache Corp. (APA) struck a deal with China Petroleum & Chemical Corp. (0386.HK, 600028.SH, SNP), or Sinopec, under which the U.S. exploration and production company will sell a 33% stake in its Egypt oil and gas business for $3.1 billion. Shares were up 3.1% at $81.09 after hours. Through the close, the stock is down 6.7% over the past three months. Apache said will continue to operate its Egypt upstream oil and gas business. The partnership is expected to close in the fourth quarter. 
  • Strassel: A Test of GOP Resolve on ObamaCare. Congress begged for a White House handout and got one. Republicans ought to reject it. Republicans are busy debating what gives them the most "leverage" in their fight to get rid of ObamaCare. One powerful tool, it happens, is an issue that few of them so far have wanted to talk about. The issue is the White House's recent ObamaCare bailout for members of Congress and their staffs. The GOP has been largely mute on this blatant self-dealing. The party might use what's left of its summer recess to consider just how politically potent this handout is, and what—were they to show a bit of principle—might be earned from opposing it.
Fox News:
  • Any US strike on Syria likely to extend beyond Damascus, sources say. The impending U.S. military action in Syria is likely to extend beyond the capital city of Damascus, and would be focused on the delivery systems for the Syrian regime's chemical weapons arsenal, sources told Fox News. These systems, and the U.S. military strikes against them, would accordingly include both command-and-control facilities located in the capital but also Syria's short-range missile launchers and artillery positions, which are said to be located in mountainous areas outside of the city.
Zero Hedge: 
  • Japan finmin: economic data show favourable trend for sales tax hike. Japanese Finance Minister Taro Aso said on Friday that a series of economic data issued earlier in the day presented a favourable economic trend towards a sales tax hike planned for next April. Japan's core consumer inflation rate accelerated to its highest in nearly five years in July and factory output rebounded smartly, suggesting that government and central bank efforts to end deflation are making some progress. "Taken together, these data suggest the economy is in an uptrend, and the numbers will affect environment for the sales tax hike," Aso told a news conference after a cabinet meeting. Aso also said failure to raises the sales tax would be seen as that Japan has no intention of proceeding with fiscal consolidation and therefore could lead to a plunge in share prices and government bonds.
  • Salesforce's(CRM) raised outlook reassures, lifts shares. Inc raised its fiscal 2014 sales outlook after reporting better-than-expected revenue and earnings on Thursday, reassuring jittery investors that the cloud software company will continue its red-hot growth. The company raised its full-year revenue guidance to between $4 billion and $4.025 billion, in line with Wall Street expectations of roughly $4 billion. The forecast sent shares 8 percent higher after the bell to $47.
  • Outlook for PC shipments worsens - IDC. The outlook for the struggling personal computer industry is worse than was previously believed, according to market research firm IDC, which on Thursday cut its 2013 forecast for global PC shipments for at least the second time. Worldwide shipments of PCs are likely to fall 9.7 percent this year as consumers continue to favor mobile gadgets, IDC said in a report. That is much worse than IDC's prediction in March that PC shipments would fall 1.3 percent this year and below its forecast in May of an 7.8 percent annual drop
  • Campbell Soup(CPB) sales disappoint, shares fall. Campbell Soup Co, the world's largest soup maker, reported quarterly revenue that fell short of analysts' expectations as sales in its core U.S. soup business slowed, sending its shares down 3 percent. 
  • Omnivision's(OVTI) forecast disappoints as competition rises. Chipmaker Omnivision Technologies Inc forecast current-quarter adjusted profit largely below expectations as rising competition and a slowdown of U.S. smartphone sales led to an inventory pile-up, sending its shares down 10 percent in extended trading.
  • Fed's IG says central bank violated document rules. The Federal Reserve's inspector general says the Fed violated its own rules for handling sensitive material when it inadvertently issued the minutes of a policy meeting a day before the scheduled release. The IG's report Thursday recommended procedural changes after the Fed minutes were sent a day early to more than 100 congressional staffers and financial industry lobbyists. The recipients of the March minutes included congressional staffers and employees of JPMorgan Chase, Goldman Sachs Group, Wells Fargo and other large banks.
The Daily Star:
  • Strike on Syria will burn Israel: Iran army chief. Any military action against Syria will have consequences beyond the region and leave Israel in flames, Iran’s army chief of staff General Hassan Firouzabadi said in remarks reported Thursday. “Any new [military] operation in the region will leave behind a lot of damage, which will be of interest to no one except the Zionists,” he said, warning that the fallout from the conflict would not be limited to the region. His remarks echoed those of Iranian officials in recent days. “The U.S. intervention will be a disaster for the region,” supreme leader Ayatollah Ali Khamenei, the Islamic Republic’s most powerful authority, said Wednesday. “The region is like a gunpowder depot. [Its] future cannot be predicted” in case of any military strikes against Syria.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 160.50 -4.5 basis points.
  • Asia Pacific Sovereign CDS Index 128.0 -4.75 basis points.
  • FTSE-100 futures -.12%.
  • S&P 500 futures +.31%.
  • NASDAQ 100 futures +.29%.
Morning Preview Links

Earnings of Note

  • (BIG)/.24
Economic Releases
8:30 am EST
  • Personal Income for July is estimated to rise +.2% versus a +.3% gain in June.
  • Personal Spending for July is estimated to rise +.3% versus a +.5% gain in June.
  • The PCE Core for July is estimated to rise +.2% versus a +.2% gain in June.
9:00 am EST
  • ISM Milwaukee for August is estimated to rise to 53.0 versus 52.43.
9:45 am EST
  • Chicago Purchasing Manager for August is estimated to rise to 53.0 versus 52.3 in July.
9:55 am EST
  • Final Univ. of Michigan Consumer Confidence for August is estimated to rise to 80.5 versus a prior estimate of 80.0.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Bullard speaking and the Italian cpi report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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