Friday, November 08, 2013

Friday Watch

Evening Headlines 
Bloomberg:
  • Japanese Households Without Savings Climb to Most Since ’63. The share of Japanese households with no financial assets rose to a record as falling incomes forced people to dig into their savings, highlighting the potential for widening disparities under Abenomics. The proportion reached 31 percent, according to a Bank of Japan survey released in Tokyo yesterday, up from 26 percent a year earlier and the highest since the poll began in 1963. The BOJ surveyed 8,000 households of two or more people aged 20 years or older from June 14 though July 23. 
  • China Muni-Bond Stalling Shows Debt Threat as Party Meets. Two years after China started a trial municipal-bond program, plans to take it nationwide have stalled, leaving local authorities reliant on off-budget funding fueled partly by land seizures. While authorities added two provinces to the trial this year, a draft budget proposal authorizing national sales with approved quotas was dropped in June 2012 and has yet to be revived. This year’s municipal-bond issuance is equivalent to less than 1 percent of local-government borrowing as of 2010, the last official tally.
  • Asia Stocks Fall on U.S. Stimulus Bets After GDP Quickens. Asian stocks fell, with the regional benchmark index heading for the longest streak of weekly losses in five months, after faster U.S. economic growth fueled concern the Federal Reserve may reduce stimulus sooner than expected. Fortescue Metals Group Ltd. (FMG) sank 4.4 percent after Teck Resources Ltd. sold a stake worth about A$500 million ($473 million) in Australia’s third-biggest iron-ore exporter. Sony Corp., a TV maker that gets 68 percent of sales outside Japan, lost 3.1 percent after the yen yesterday surged against the dollar, curbing the outlook for exporters. Samsung Electronics Co. preferred shares declined 4.8 percent in Seoul after Citigroup Inc. managed the sale of a $350 million stake in the electronics firm. The MSCI Asia Pacific Index dropped 0.5 percent to 139.62 as of 12:34 p.m. in Hong Kong, extending this week’s retreat to 1.1 percent, its third straight weekly loss.
  • Indian Rupee Leads Losses in Asian Currencies on Fed Outlook. India’s rupee led losses in Asian currencies this week as overseas investors cut holdings of the region’s stocks on speculation U.S. policy makers will cut stimulus this year. The Bloomberg-JPMorgan Asia Dollar Index fell 0.1 percent in the five days, following last week’s 0.5 percent drop. Economists surveyed by Bloomberg Oct. 17-18 predicted the Fed would begin paring stimulus in March. 
  • Rebar Futures in Shanghai Swing Before Communist Party Plenum. Steel reinforcement-bar futures in Shanghai swung between gains and losses before a key policy meeting in China starting tomorrow that may introduce measures to curb polluting industries. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, rose as much as 0.2 percent and declined as much 0.4 percent before trading at 3,670 yuan ($602) per metric ton at 11:21 a.m. local time.
  • Euro Bulls Crack as Odds of Return to 2013 Lows Jump: Currencies. The surprise decision by the European Central Bank to cut interest rates means there’s now about an even chance that the euro, this year’s best performing major currency, erases all of its gains in a matter of months. There is an almost 50 percent probability the euro, which has risen more than 5 percent against the greenback since reaching a 2013 low in April, will give back its increase by mid-2014, according to data compiled by Bloomberg. The odds are the highest in seven weeks and up from 37 percent prior to the ECB lowering its key rate yesterday to a record.
  • Fed Anxiety Rises as QE Raises Risk of Loss With Political Cost. The longer the Federal Reserve continues its bond-buying stimulus, the higher the odds it will face a year without any money to give the U.S. Treasury after taxpayers received a record $88.4 billion profit in 2012. The Fed’s financial-crisis actions -- from acquiring debt in the 2008 rescues of Bear Stearns Cos. and American International Group Inc. to three rounds of quantitative easing -- have led so far to the record payments. Now, the prospect of a stronger economy and rising interest rates means the value of the Fed’s bond holdings will fall at the same time its funding costs climb because the central bank pays interest on the excess reserves it holds for banks.
Wall Street Journal: 
  • Yellen Hearing to Stir Up Fed Issues. Senators will press Janet Yellen on a number of issues next week during a confirmation hearing on her nomination to lead the Federal Reserve, but one likely topic is a matter over which she has no control: the vacancy for a Fed vice chairman for supervision. It is up to President Barack Obama to nominate a candidate for the job, a new role within the seven-member Fed board created by the Dodd-Frank financial law more than three years ago. He has yet to do so, frustrating Republican critics and some Democratic supporters of the law.
MarketWatch.com:
  • Fed’s Dudley blasts big banks for ethical lapses. There is evidence of deep-seated cultural and ethical failures at many large U.S. banks, a top Federal Reserve official said Thursday. William Dudley, the president of the New York Federal Reserve Bank, said many large financial institutions display an “apparent lack of respect for law, regulation, and the public trust.”
CNBC: 
  • Why small caps might be signaling bigger problems: Pro. Selling that started in small caps has spread to the major indexes, and now the S&P 500 and Dow are both signaling a possible broader selloff. Paul LaRosa, chief market technician at Maxim Group, points out that the Dow and the S&P 500 both had "outside days" Thursday.
Zero Hedge: 
Business Insider:
The Blaze:
  • Two Major Fact Checkers Are Saying President Obama Isn’t Telling You the Full Truth. As the White House flails to defend President Barack Obama’s discredited pledge about keeping your old insurance even under Obamacare, it’s not just Republicans pointing out that the administration has being less than honest when explaining what it really meant. On Thursday, The Washington Post’s Fact Checker gave Obama and White House press secretary Jay Carney three out of four “Pinocchios” for blaming the insurance companies, rather than the new health care law, for the growing number of cancellation letters. On Wednesday, the Pulitzer-winning PolitiFact website gave Obama its highest ranking for dishonesty, “Pants on Fire,” for his tortured defense earlier this week of what he really meant when promising no one would lose their current plan.
Reuters: 
  • Nvidia's(NVDA) current-quarter revenue misses Street. Nvidia Corp gave a revenue forecast for the current quarter that was shy of Wall Street's expectations as the graphics chipmaker faces tough competition in tablets and a slow personal computer market. With the personal computer industry losing steam, Nvidia has expanded its graphics chips into mobile devices, but it is meeting stiff competition from Qualcomm In c and other rivals. In the third quarter, revenue from Nvidia's Tegra mobile business fell 54 percent and revenue from its PC graphics chip business declined 2 percent.
Telegraph:
Economic Daily News:
  • Cathay Pacific Sees Cargo Volume Slowing Next Year. Co. doesn't expect performance of its cargo unit to return to "stable growth" this and next year, citing James Woodrow, director for cargo.
Jiefang Daily:
  • Shanghai Urges Strengthening of Property Curbs. Shanghai Mayor Yang Xiong aks the city to "strictly" implement property curb policies, strengthen market supervision and ensure healthy and orderly development of the city's real estate industry, citing Yang speaking at a government meeting. The city should strictly carry out differentiated credit, tax polices and restrictions on home purchases, according to the meeting.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -1.0% to -.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 138.0 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 107.25 -1.0 basis point. 
  • FTSE-100 futures -.47%.
  • S&P 500 futures +.21%.
  • NASDAQ 100 futures +.22%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (CVC)/.12
  • (COV)/.90
  • (EBIX)/.33
  • (HMSY)/.22
  • (MINI)/.31
Economic Releases
8:30 am EST
  • The Change in Non-farm Payrolls for October is estimated at 120K versus 148K in September.
  • The Unemployment Rate for October is estimated to rise to 7.3% versus 7.2% in September.
  • Average Hourly Earnings for October are estimated to rise +.2% versus a +.1% gain in September.
  • Personal Income for September is estimated to rise +.3% versus a +.4% gain in August.
  • Personal Spending for September is estimated to rise +.2% versus a +.3% gain in August.
  • The PCE Core for September is estimated to rise +.1% versus a +.2% gain in August.
9:55 pm EST
  • Preliminary Univ. of Mich. Consumer Confidence for November is estimated to rise to 74.5 versus 73.2 in October.
Upcoming Splits
  • (VXX) 1-for-4
Other Potential Market Movers
  • The Fed's Bernanke speaking, Fed's Williams speaking, Fed's Lockhart speaking,   China Trade Balance, USDA Crop Report, China Inflation Data and the (OC) investor day could also impact trading today.
BOTTOM LINE: Asian indices are 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 modestly lower. The Portfolio is 25% net long heading into the day.

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