Friday, September 13, 2013

Friday Watch

Evening Headlines 
  • Hoyer Says Obama Could Strike Syria Without Congress Vote. The second-ranking House Democrat said President Barack Obama has the authority to use military force against Syria without returning to the U.S. Congress for approval should diplomacy fail to compel Syria to surrender its chemical weapons arsenal. Democratic Whip Steny Hoyer of Maryland said neither he nor House Minority Leader Nancy Pelosi “believe the president is required to come to Congress in this instance, and could act on his own.” He made his comments in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend
  • BRIC Markets Sink to Worst Place for Investors in Global Poll. The largest developing nations for the first time have the worst market opportunities as optimism for stronger growth shifts to the U.S. and Europe, according to a Bloomberg Global Poll. India fared the poorest, followed by Brazil, Russia and China, a worldwide poll of investors, analysts and traders who are Bloomberg subscribers showed this week. The number of respondents who see the European Union as one of the two best opportunities rose to 34 percent, its best showing in the poll dating to 2009, with the U.S. at 51 percent. 
  • Asian Stocks Fall, Snapping 11-Day Rally, Ahead of Fed. Asian stocks fell, with the regional benchmark index on course to snap an 11-day rally, as the U.S. and Russia hold talks on Syria and investors await the outcome of a Federal Reserve meeting next week. BHP Billiton Ltd. (BHP), the biggest mining company, slipped 1.1 percent in Sydney as metal futures headed for a weekly decline. Mitsui OSK Lines Ltd., which has the world’s largest merchant shipping fleet, fell 3.3 percent after a gauge of freight rates halted an eight-day rally. Sun Hung Kai Properties Ltd., the world’s No. 2 developer by market value, dropped 1.8 percent in Hong Kong after setting a lower sales target this year. The MSCI Asia Pacific Index dropped 1 percent to 136.31 as of 12:43 p.m. in Tokyo, halting its longest stretch of gains this year, as three shares fell for each that rose.
  • Rubber Set for Worst Week Since June as Yen’s Gain Cuts Appeal. Rubber dropped for a second day, heading for the worst weekly loss since June, as the Japanese currency strengthened to near a one-week high against the dollar, reducing the appeal of the yen-based contracts. Futures for February delivery on the Tokyo Commodity Exchange fell as much as 2.3 percent to 271.6 yen a kilogram ($2,721 a metric ton), the lowest since Sept. 2, and was at 272.8 yen at 10:42 a.m. local time. Prices lost 3.5 percent this week, the biggest drop since the five days through June 14.
  • Rebar Heads for Third Weekly Loss on Output Gain, Demand Concern. Steel reinforcement-bar futures in Shanghai headed for a third weekly loss as steel mills expanded production while demand remained lackluster. Rebar for delivery in January on the Shanghai Futures Exchange declined as much as 1 percent to 3,672 yuan ($600) a metric ton, the lowest since Aug. 6, and was at 3,678 yuan at 10:07 a.m. local time. The most-active contract has lost 1.2 percent this week
  • Washington Leadership Vacuum Raises Risks of Shutdown. President Barack Obama couldn’t get Democrats to go along on Syria. House Speaker John Boehner couldn’t get fellow Republicans to go along on a budget bill. The one man who has proven he can cut deals with the White House, Senate Republican leader Mitch McConnell of Kentucky, is consumed with a tough re-election bid. It’s enough to have Americans asking: Who’s running Washington
  • Fed Message Muddled as Misunderstood Taper Meets Slowing Growth. Federal Reserve Chairman Ben S. Bernanke and his colleagues meeting next week are poised to take two steps that appear inconsistent. They will probably lower their estimates for growth for this year and next for the third consecutive time. Simultaneously, they are forecast to start scaling back the $85 billion in monthly bond purchases they have been relying on to stoke the recovery.
  • Hedge-Fund Manager 36 South Doubles Bets on Securities Swings. 36 South Capital Advisors LLP, whose Black Swan Fund returned 204 percent in 2008, has doubled bets this year on greater fluctuations in markets including currencies, commodities and equities. The manager overseeing $626 million has increased volatility investments to 90 percent of assets from 50 percent at the beginning of the year, Chief Executive Officer and Head of Investments Jerry Haworth of the London-based company said in a telephone interview yesterday. Central bank intervention, including asset purchases globally in the wake of the 2008 global financial crisis, have calmed investor jitters and suppressed price gyrations, making protection against bigger security price swings cheaper to obtain for funds such as 36 South.
  • Twitter Says It Filed Confidential IPO Registration With U.S. Twitter Inc., the microblogging service with more than 200 million members worldwide, filed to go public, moving closer to the most highly anticipated offering since Facebook Inc. Goldman Sachs Group Inc. (GS) will be the lead underwriter for the initial public offering, according to people with knowledge of the matter who asked not to be identified because the information isn’t public. Twitter -- which disclosed it had filed to go public in one of its 140-character messages known as a tweet -- didn’t say when it may complete its market debut, or how much it plans to raise.
Wall Street Journal:
  • GE(GE) Closes In on Algeria Power Sale. General Electric Co. is close to securing a nearly $2 billion sale to Algeria of turbines for six power plants, according to people familiar with the matter, a major contract win for the conglomerate's crucial but struggling power-turbine business.
  • Embattled J.P. Morgan(JPM Bulks Up Oversight. Bank to Increase Spending, Staff as It Faces Host of Regulatory and Legal Woes. J.P. Morgan Chase & Co., facing a host of regulatory and legal woes, plans to spend an additional $4 billion and commit 5,000 extra employees this year to clean up its risk and compliance problems, according to people close to the bank. As part of a companywide effort, the bank is spending an additional $1.5 billion on managing risk and complying with regulations, including a 30% increase in risk-control staffing, these people said. In addition, it expects to add $2.5 billion to its litigation reserves in the second half of the year, these people said. 
  • At Wells Fargo(WFC), a Bear Among Bulls. Contrarian Analyst Sees S&P 500 Falling to Finish Year. Gina Martin Adams is out on a limb. The strategist at Wells Fargo WFC -0.56% Securities is the only stock-market guru at a major Wall Street firm calling for U.S. shares to slump. She is sticking with a call made earlier this year that the S&P 500-stock index will end 2013 at 1440. That would mean a 14% decline over the next 31/2 months, all but wiping out this year's gains. Ms. Adams reasons that once the Federal Reserve begins to pull back on its stimulus efforts, the stock market will lose a crucial source of support amid soft earnings growth.
  • Doubts Rise as China Touts Upturn. Beijing's Reliance on Credit-Fueled Megaprojects, Exports Raises Questions About Rebound's Length. China's leaders are trumpeting their commitment to overhauls, but there are signs a recent turnaround in the Chinese economy relies on old policies, raising doubts about how long the rebound can continue. Some economists and business leaders say Beijing is pulling the same levers it has used in the past to produce growth, leaving untouched a reliance on exports abroad and credit-fueled investment in large infrastructure projects at home—the very model China says it wants to scrap.
  • Hedge Funds Are Among the Winners of the Lehman Spoils. Investors Profit Via Claims on Bankrupt Bank's Assets; Paulson Up $1 Billion-Plus.
  • Vladimir Putin Takes Exception. A riddle wrapped in a mystery inside an op-ed piece.
Fox News:
  • Tea Party Republicans flex muscle, put Boehner in tight spot as shutdown looms. House Speaker John Boehner once again finds himself caught in the middle of a Capitol brawl between Tea Party Republicans and his Democratic counterparts, as he tries to navigate the choppy political waters and prevent a government shutdown at the end of the month. Tea Party-aligned members of Boehner's caucus are flexing their muscle and pressuring him to allow a vote on an anti-ObamaCare measure as part of ongoing budget talks. They want the vote tied directly to the budget measure, and rejected a compromise plan earlier this week -- leaving unclear how Congress might pass a short-term spending bill before funding runs out on Sept. 30.
Zero Hedge:
Real Clear Politics:
  • U.S. central bankers criticize SEC's money-market proposals. Heads of the 12 U.S. Federal Reserve regional banks on Thursday strongly criticized a component of a U.S. Securities and Exchange Commission proposal aimed at preventing runs on money-market funds, saying it does little to change current rules. 
  • Online sales tax bill moving ahead in U.S. House. The U.S. Congress is moving ahead on legislation allowing states to collect sales taxes from online shopping, with the chairman of a key committee expected to release basic principles for the bill shortly. 
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.0% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 140.0 +5.0 basis points.
  • Asia Pacific Sovereign CDS Index 111.75 -2.0 basis points.
  • FTSE-100 futures +.02%.
  • S&P 500 futures +.07%.
  • NASDAQ 100 futures +.12%.
Morning Preview Links

Earnings of Note

  • (DRI)/.70
Economic Releases
8:30 am EST  
  • The Producer Price Index for August is estimated to rise +.2% versus unch. in July.
  • The PPI Ex Food & Energy for August is estimated to rise +.1% versus a +.1% gain in July.
  • Advance Retail Sales for August are estimated to rise +.5% versus a +.2% gain in July.
  • Retail Sales Ex Auto for August estimated to rise +.3% versus a +.5% gain in July.
  • Retail Sales Ex Auto and Gas for August is estimated to rise +.3% versus a +.4% gain in July.
9:55 am EST 
  • Preliminary Univ of Mich. Consumer Confidence for September is estimated to fall to 82.0 versus 82.1 in August.
10:00 am EST
  • Business Inventories for July are estimated to rise +.2% versus unch. in August.
Upcoming Splits
  • (CGNX) 2-for-1
  • (AFOP) 2-for-1
Other Potential Market Movers
  • The Eurozone Trade balance report and (PFG) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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