Thursday, January 02, 2014

Thursday Watch

Posted by Gary .....at 12:36 AM
Evening Headlines 
Bloomberg: 
  • Chinese Manufacturing Gauges Drop as Xi Grapples With Risks. Chinese manufacturing indexes fell in December, underscoring challenges for President Xi Jinping as he tries to sustain growth in the world’s second-largest economy while rolling out reforms. A Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics fell to 50.5 from 50.8 the previous month, according to a statement today, and a separate gauge compiled by the statistics bureau and logistics federation released yesterday declined to 51 from 51.4.
  • Hyundai-Kia Forecast Slowest Sales Growth in Eight Years. Hyundai Motor Co. (005380) and affiliate Kia Motors Corp. (000270), South Korea’s two largest automakers, forecast their weakest sales growth in eight years as competition intensifies and the stronger won hampers exports. Hyundai and Kia’s combined deliveries will increase 4 percent to 7.86 million vehicles in 2014, Chung Mong Koo, chairman of both automakers, told employees during a new year address in Seoul today. That’s the slowest growth since 2006 and falls short of the 8 million units projected based on the average estimate of five analysts surveyed by Bloomberg News. 
  • Singapore GDP Contracted Last Quarter as Output Eased: Economy. Singapore’s economy shrank for the first time in five quarters after its manufacturing and services industries weakened. Gross domestic product fell an annualized 2.7 percent in the three months to Dec. 31 from the previous quarter, when it expanded a revised 2.2 percent, the trade ministry said in a statement today. The median of 11 estimates in a Bloomberg News survey was for a 1.3 percent contraction.
  • China’s Stocks Decline After Manufacturing Gauges Show Slowdown. China’s stocks retreated, led by energy and consumer companies, after gauges of manufacturing in the world’s second-largest economy fell. Yanzhou Coal Mining Co. and Datong Coal Industry Co. paced declines among energy stocks. Kweichow Moutai Co. (600519) and Wuliangye Yibin Co., the nation’s biggest liquor makers, dropped at least 1.7 percent. Bullion producer Shandong Gold Mining Co. jumped 6.1 percent after scrapping an asset-purchase plan. The Shanghai Composite Index (SHCOMP) dropped 0.4 percent to 2,106.70 at the 11:30 a.m. break. It slid 6.8 percent last year, making it the worst-performing benchmark equity index in Asia.
  • Asian Stocks Drop After China Manufacturing Gauges Slide. Asian stocks dropped, with a regional index of equities retreating from a three-week high, after gauges of manufacturing in China declined, underscoring challenges for President Xi Jinping as he tries to sustain economic momentum while rolling out reforms. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, fell 1.2 percent in Hong Kong. Hyundai Motor Co. and Kia Motors Corp. fell at least 4.7 percent after South Korea’s largest automakers forecast their weakest sales growth in eight years. BHP Billiton Ltd., Rio Tinto Group and Fortescue Metals Group Ltd., Australia’s biggest iron-ore exporters, gained at least 0.6 percent as shipments from the world’s No. 1 exporter of the commodity resumed after a cyclone. The MSCI Asia Pacific excluding Japan Index slipped 0.5 percent to 466.04 as of 11:41 a.m. in Hong Kong, erasing gains of as much as 0.2 percent. Japanese markets are closed for a holiday. 
  • Gold Rebounds With Silver. Gold rallied from its worst year in more than three decades as a decline to a six-month low was seen spurring physical purchases, potentially prompting some investors to reverse bets on lower prices. Silver jumped. Bullion for immediate delivery traded at $1,224.09 at 12:03 p.m. in Singapore from $1,205.65 on Dec. 31, when prices sank to $1,182.27, the lowest level since June 28. 
  • Rebar Rises First Time in Three Days as Property Prices Advance. Steel reinforcement-bar futures in Shanghai climbed for the first time in three days as rising new home prices in China signaled housing construction will increase and a manufacturing gauge showed continued expansion. Rebar for May delivery on the Shanghai Futures Exchange gained as much as 0.5 percent to 3,587 yuan ($593) a metric ton and traded at 3,582 yuan by 10:49 a.m. local time.
  • Fiat Agrees to Buy Rest of Chrysler in $4.35 Billion Deal. Fiat SpA (F) agreed to buy the remaining stake in Chrysler Group LLC owned by a United Auto Workers retiree health-care trust in a $4.35 billion deal, the last step needed before the Italian and U.S. carmakers can merge to create the seventh-largest automaker. Sergio Marchionne, chief executive officer of both carmakers, structured the deal, announced yesterday, so that Chrysler puts up most of the cash, easing strains on the Italian parent as it seeks to end losses in Europe.
  • New Year Storm to Dump Foot of Snow From NYC to Boston. Almost a foot of snow is forecast for the New York area, potentially snarling travel across the U.S. Northeast following the New Year’s Day holiday. The storm may give way to the coldest temperatures so far this season.
Wall Street Journal: 
  • A Few Brave Investors Scored Huge, Market-Beating Wins. Gold Bears and Stock Bulls Were 2013's Victors. A trader who made more than $100 million from a $10 million bet against gold. A hedge fund that gained 42% after a bullish wager on stocks. A firm that saw returns of 48% thanks in part to soaring Japanese stocks. These were among the winning investors who managed to rack up huge gains forecasting a handful of key shifts in a year that vexed many market gurus.
  • The Economic Hokum of 'Secular Stagnation'. Blaming the market for the failure of bad government policies is no more persuasive now than it was in the 1930s. The evidence continues to mount that government policy has been to blame for the disappointing economic performance in recent years. Yet many don't want to hear it, and they offer a series of alternative explanations including most recently the re-emergence of a chestnut, "secular stagnation." When it became clear that the recovery from recession—which officially ended in mid-2009—was unprecedentedly weak, policy makers found an excuse in the depth of the financial crisis. Treasury Secretary Tim Geithner argued in August 2010 that "recoveries that follow financial crises are typically a hard climb. That is reality." This argument is put forth frequently by government officials, and it's loosely based on a popular 2009 book by Carmen Reinhart and Kenneth Rogoff, "This Time Is Different."
Fox News:
  • ‘Rate Shock’? ObamaCare launch brings renewed concern over insurance tax. New Year's Day marks the start of coverage under ObamaCare for millions of people -- but it also marks the start of a massive tax increase which could further inflate premiums. Beginning Wednesday, the Affordable Care Act imposes an annual fee on health insurers. The fee is projected to bring in $8 billion next year and roughly $100 billion over the next decade, making it one of the biggest under the law.
MarketWatch.com:
  • Thai political crisis worsens. Antigovernment protesters across Southeast Asia took to the streets to mark the New Year, with Thailand lurching further toward a full-blown crisis after election officials Wednesday said demonstrators are close to achieving their goal of preventing fresh polls from going ahead.
CNBC:
  • US consumers a hard sell for traditional retail. If there was one lesson from this year's holiday shopping season, it is that many traditional retailers are having to work a lot harder to persuade Americans to open their pocketbooks.
Zero Hedge:
ValueWalk:
Business Insider:
Reuters: 
Financial Times:  
  • ECB modestly successful in tempering eurozone rates divergence. European Central Bank action has had only modest success in easing big differences in interest rates paid by businesses across the eurozone, which remain near peaks seen at the height of the region’s debt crisis.
    Companies in the eurozone’s weakest economies still face significantly higher borrowing costs than rivals in countries such as Germany, according to a cross-market analysis by Goldman Sachs. The extent of the divergence has fallen since a peak in May 2013 but is higher than in mid-2011.
Telegraph:
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.75% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 129.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 105.25 +.25 basis point. 
  • FTSE-100 futures +.19%.
  • S&P 500 futures n/a.
  • NASDAQ 100 futures n/a.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (RECN)/.15
Economic Releases
 8:30 am EST
  • Initial Jobless Claims are estimated to rise to 342K versus 338K the prior week.
  • Continuing Claims are estimated to fall to 2900K versus2923K prior.
8:58 am EST
  • Markit US PMI Final for December is estimated at 54.7 versus 54.7 in November.
10:00 am EST
  • ISM Manufacturing for December is estimated to fall to 56.8 versus 57.3 in November.
  • ISM Prices Paid for December is estimated to rise to 53.0 versus 52.5 in November.
  • Construction Spending for November is estimated to rise +.7% versus a +.8% gain in October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone Manufacturing PMI, China Services PMI and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology 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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