Monday, September 30, 2013

Monday Watch

Weekend Headlines 
Bloomberg:
  • Government Shutdown 1 Day Away as Deal Evades Lawmakers. The Senate will reconvene tomorrow afternoon, when it will reject a House plan passed early today to delay and limit President Barack Obama’s Affordable Care Act. In response, the House would add “another provision” to the spending measure and send it back to the Senate, said Representative Kevin McCarthy, the top House Republican vote counter. The provision would “reflect the House” and would be one “the Senate can accept,” McCarthy of California said on “Fox News Sunday” without offering details. A likely option would end the government’s contribution to the health insurance of members of Congress and their staffs, as a way of testing Democrats’ willingness to make any changes to the health law, according to a leadership aide who spoke on condition of anonymity to discuss party strategy
  • China Factory Gauge Unexpectedly Misses Preliminary Estimate. A Chinese manufacturing index (EC11CHPM) rose less than analysts forecast in September, unexpectedly weakening from a preliminary estimate in a result that casts doubt on the strength of the economy’s rebound. The Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics rose to 50.2 in September from 50.1 in August. The final number was less than last week’s 51.2 preliminary reading and the 51.2 median estimate in a Bloomberg News survey. A similar gauge from the government is due tomorrow.
  • Rupiah Leads Emerging-Market Losses in Worst Quarter Since 2008. Indonesia’s rupiah is leading declines in emerging markets this quarter as the currency headed for its worst three-month performance since 2008 due to a record current-account deficit. Government bonds fell. The currency weakened 14.9 percent since the end of June to 11,658 per dollar as of 10 a.m. in Jakarta, the biggest loss among 24 developing-nation exchange rates tracked by Bloomberg. It fell 6.3 percent in September, the most since April 2009
  • Asian Stocks Fall, Paring Monthly Gain, Over U.S. Budget. Asian stocks fell, with the benchmark index paring its biggest monthly gain since 2012, on concern the U.S. government is headed for a shutdown amid a budget stalemate. Toyota Motor Corp., which gets 31 percent of its revenue in North America, declined 2.6 percent. BHP Billiton Ltd., Australia’s biggest oil producer, dropped 1.4 percent as crude fell. Mizuho Financial Group Inc., Japan’s third-largest bank, lost 3.6 percent after its lending unit was penalized by Japan’s banking regulator for failing to end transactions with “anti-social” groups. The MSCI Asia Pacific Index dropped 1.4 percent to 138.87 as of 11:01 a.m. in Tokyo, with all 10 industry groups falling.
  • Rubber Drops to 1-Month Low as Yen Gains on U.S. Budget Concern. Rubber dropped to the lowest level in more than a month as the Japanese currency climbed against the dollar, cutting the appeal of yen-denominated futures, amid concern the U.S. government is headed for a partial shutdown. The contract for March delivery on the Tokyo Commodity Exchange lost as much as 1.7 percent to 265.6 yen a kilogram ($2,717 a metric ton), the lowest level since Aug. 23, and was at 267 yen at 10:23 a.m. The drop pared gains for a most-active contract to 13 percent this quarter, the best rally since the three months through Dec. 31.
  • Gold Bulls Raise Wagers Most in Month on Stimulus: Commodities. Hedge funds’ combined holdings in gold futures rose the most this month as continued U.S. monetary stimulus spurred investors to sell short contracts and sent prices toward the first quarterly advance in a year. The net-long position in bullion jumped 12 percent to 78,654 futures and options in the week ended Sept. 24, the most since Aug. 27, U.S. Commodity Futures Trading Commission data show. Long wagers gained 1.8 percent and short bets fell 17 percent, the biggest drop in four weeks. Combined net-long holdings across 18 U.S.-traded commodities climbed 1.7 percent, the first gain in September.
  • Europe’s Record Jobless Rate Seen Resisting Recovery. Europe’s nascent economic recovery is too green to make any impact on the region’s jobs market yet, according to economists. Unemployment in the 17-nation euro area remained at a record high of 12.1 percent in August, according to the median estimate of 30 economists in a Bloomberg News survey. The European Union’s statistics office is due to publish the jobless numbers at 11 a.m. tomorrow in Luxembourg. “Europe is faced with a high level of structural unemployment and this is not going to change any time soon,” said Annamaria Grimaldi, an economist at Intesa Sanpaolo SpA in Milan. “The recovery is happening painfully slowly and that’s another reason why we’ll see jobless rates far above 11 percent well into 2015.”
Wall Street Journal:
  • Government Heads Toward Shutdown. Senate Doesn't Reconvene Until Monday Afternoon, Hours Before Deadline. The nation braced for a partial shutdown of the federal government, as time for Congress to pass a budget before a Monday midnight deadline grew perilously short and lawmakers gave no signs Sunday they were moving toward a resolution. Leaders of both parties said they wanted to avoid the first federal closure since 1996, but their public appearances seemed aimed more at affixing blame for the impasse. 
  • Health Law Hits Late Snags as Rollout Approaches. Technical Problems Remain as Oct. 1 Deadline Nears. Obama administration officials scrambling to get the health law's insurance marketplaces ready to open on Tuesday keep hitting technical problems, while government-funded field workers across the country say they aren't fully prepared to help Americans enroll in the program. 
  • Signs Raise Threat of a Red October. In the coming month, markets face four huge tests: the Washington debt crisis, the release of September employment data, third-quarter earnings releases and the Federal Reserve’s next policy meeting. All four of these horsemen could disrupt investments and some could tank the market. Money managers hope all will be nonevents and stocks will finish the year higher. But there are no guarantees.
Fox News:
  • Israel's Netanyahu to warn US, UN about Iran's 'smiley campaign'. Just days after the first conversation between the leaders of the U.S. and Iran in 34 years was hailed as a “breakthrough” in relations between the two countries, Israeli Prime Minister Benjamin Netanyahu is taking an unpopular message to the White House and the United Nations: Don't be fooled by Tehran's “sweet talk.” Netanyahu, who contends Iran is using conciliatory gestures as a smoke screen to conceal an unabated march toward a nuclear bomb, will meet with President Obama Monday to deliver strong words of caution to the U.S.
  • With shutdown just hours away, Republicans say Democrat-led Senate a no-show. The countdown to a government shutdown is now marked by hours as the Senate returns Monday afternoon to decide before midnight whether to accept the Republican House’s weekend spending-bill offer, make a counter-proposal or let the clock expire. House Republican leaders on Sunday chided Senate Majority Leader Harry Reid and others in the Democrat-led chamber for not hustling back to Capitol Hill to negotiate, after the lower chamber early Sunday morning passed its proposal, which includes a one-year delay on ObamaCare. “O Senate, where art thou,” said Tennessee Rep. Marsha Blackburn, riffing on the movie “O Brother, Where Art Thou.”
CNBC:
Zero Hedge:
Business Insider:
New York Times: 
  • Obamacare Is a Gigantic Shell Game. Here's where the shell game comes in: the administration says that the actual numbers of the insurance aren't important and what really matters is how much people will pay after the subsidies. But subsidies aren't free. They are paid for through higher taxes or greater deficit spending. And these taxes are a dead weight on the economy that impede economic growth. The dislocations are cascading through our economy. Millions of hourly workers are having their full-time jobs cut to part time, businesses are freezing hiring, spouses are losing coverage, major labor unions are calling for repeal and Obamacare's premium taxes and other costs are driving up the cost of insurance for everyone. This law is not ready for prime time. Congress should delay the law for a year and put together what both sides now know must be a bipartisan effort at reform that works with, rather than against, our economy.
LA Times:
  • 52% of Californians want $68-billion bullet train stopped, poll finds. A majority of voters want the California bullet train project stopped and consider it a waste of money, even as state political leaders have struggled to bolster public support and make key compromises to satisfy critics, a USC Dornsife/Los Angeles Times poll found. Statewide, 52% of the respondents said the $68-billion project to link Los Angeles and San Francisco by trains traveling up to 220 mph should be halted. Just 43% said it should go forward. The poll also shows that cracks in voter support are extending to some traditional allies, such as Los Angeles-area Democrats, who have embraced the concept of high-speed rail as a solution to the state's transportation problems.
The Daily Beast:
AP:
  • No. 2 nuke commander suspended amid casino probe. The No. 2 officer at the military command in charge of all U.S. nuclear war-fighting forces is suspected in a case involving counterfeit gambling chips at a western Iowa casino and has been suspended from his duties, officials said.
Der Spiegel: 
  • Schaeuble Prepares Rich Tax to Woo SPD in Coalition. Germany's Finance Minister Wolfgang Schaeuble is preparing a proposal to increase maximum income tax rate to 46% to 48%.
Weekend Recommendations
Barron's:
  • Bullish commentary on (MSFT), (BCO), (AMC) and (NOV).
  • Bearish commentary on (SFM). 
Night Trading
  • Asian indices are -1.25% to -.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 155.50 +5.5 basis points.
  • Asia Pacific Sovereign CDS Index 119.25 +3.0 basis points.
  • FTSE-100 futures -.83%.
  • S&P 500 futures -.62%.
  • NASDAQ 100 futures -.43%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (CALM)/.49
  • (DMND)/-.03
  • (PAYX)/.43
Economic Releases
9:00 am EST
  • ISM Milwaukee for September is estimated to rise to 50.0 versus 48.21 in August.
9:45 am EST
  • Chicago Purchasing Manager for September is estimated to rise to 54.0 versus 53.0 in August.
10:30 am EST
  • Dallas Fed Manufacturing for September is estimated at 5.0 versus 5.0 in August.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone CPI report, Canadian GDP report, China Manufacturing PMI, RBA rate decision and the Johnson Rice Energy Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.

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