Friday Watch

Evening Headlines 
Bloomberg:  

• Asia Currencies Set for Worst Week Since August on China Concern. Asian currencies headed for the worst weekly loss in six months as signs of a deeper economic slowdown in China and the Federal Reserve’s support for tapering asset purchases weighed on emerging markets. South Korea’s won led the declines as a gauge of manufacturing in China, the nation’s biggest export market, fell to a seven-month low. Thailand’s baht was set for its steepest five-day drop of 2014 as anti-government protests turned deadly, while violence in Ukraine also damped sentiment. Fed policy makers backed further stimulus cuts at their January review, the minutes of the meeting showed, a program that drove capital into developing countries. 

• Offshore Yuan Set for Worst Week Since 2011 on Growth Concerns. The yuan was set for its biggest weekly slide since September 2011 in offshore trading after China manufacturing data added to signs of a slowdown in the world’s second-largest economy. The yuan dropped 0.23 percent today to 6.0818 per dollar as of 12:41 p.m. in Hong Kong, extending this week’s loss to 0.77 percent, based on data compiled by Bloomberg. The currency fell 0.09 percent to 6.0886 in Shanghai, according to China Foreign Exchange Trade System prices, after the People’s Bank of China cut the daily reference rate by 0.05 percent to a two-month low of 6.1176. The offshore yuan is the worst performer in February among 12 Asian exchange rates tracked by Bloomberg. 

• Vicious Cycle Seen as Ore Pile Evokes Steel Bust: China Credit. China’s record imports of iron ore and copper, driven by traders who use them as loan collateral, risk repeating the vicious cycle of repayment difficulties and falling prices already seen in the steel-trading market. Xiao Jiashou, known as the “steel-trading king” in Shanghai, had his assets frozen as China Minsheng Banking Corp. sues for money owed. Lenders seeking repayment are finding irregularities, including the same pile of materials used as collateral for multiple borrowings, China International Capital Corp. said. Money-market costs have surged, with the benchmark three-month Shanghai Interbank Borrowing rate jumping to 5.6 percent yesterday from 3.89 percent in June 2013.

• Venezuelans Prepare for More Protests as Lopez Jailed. Venezuelan protesters prepared for another night of confrontations with National Guard troops and armed groups as opposition leader Leopoldo Lopez was ordered held at a military prison outside Caracas. People were gathering in public plazas and major intersections of Caracas, dragging piles of trash into the streets, which they burn to block roads. As government helicopters flew overhead, President Nicolas Maduro addressed the nation in front of the presidential palace, saying a sixth person was killed this week and vowing to bring people attacking transport workers to justice. 

• China’s Stocks Fall Most in Six Weeks on Sinopec Drop, Economy. China’s stocks fell the most in six weeks as China Petroleum & Chemical Corp. (600028) dropped after the biggest rally since 2009 and a manufacturing slowdown fueled concerns the economic expansion is weakening. China Petroleum, known as Sinopec, slid 1.4 percent after Jefferies Group LLC downgraded the Hong Kong-listed shares. PetroChina, the largest oil producer, retreated 3.9 percent. Citic Securities Co. (600030) led declines for brokerages after the Standard reported Sinolink Securities Co. and Tencent Holdings Ltd. cut commission fees for their online stock-trading service. The Shanghai Composite Index (SHCOMP) fell 1.2 percent to 2,113.88 as of 1:11 p.m., extending a 0.2 percent loss yesterday after a preliminary manufacturing index by HSBC Holdings Plc and Markit Economics fell to a seven-month low.

• Asian Stocks Rise After U.S. Manufacturing Gauge Climbs. Asian stocks rose, with the regional benchmark index rebounding from its biggest drop in two weeks, after a larger-than-forecast climb in a measure of U.S. manufacturing tempered concern about global growth. Samsung Electronics Co., which will unveil a high-end Galaxy phone next week, advanced 3 percent in Seoul. Toyota Motor Corp. (7203) climbed 1.5 percent amid a rally in Japanese shares as the yen weakened against the dollar. National Australia Bank Ltd. lost 2 percent in Sydney after the country’s biggest lender by assets flagged a possible increase in provisions at its British operations. The MSCI Asia Pacific Index gained 1 percent to 137.05 as of 12:11 p.m. in Hong Kong, extending this week’s advance to 1.3 percent.

• China's Iron Ore Stockpiles to Stymie Aussie Rally, Insight Says. The Australian dollar's rally this month will be short-lived as demand for its chief export wanes with China stockpiling record amounts of iron-ore, according to Insight Investment Management Ltd.

• China Iron Ore Makes Insight Aussie Bear; Deutsche Bank Sees 60s. The Australian dollar’s rally this month will be short-lived as demand for the nation’s chief export wanes with China stockpiling record amounts of iron-ore, according to Insight Investment Management Ltd.

Wall Street Journal: 

• Dozens Dead in Ukraine as Fresh Violence Flares in Kiev. Ukrainian Capital Plummets into Renewed Bloodshed. Ukraine slid deeper into turmoil Thursday as dozens of protesters were killed amid pitched battles in the center of the capital. President Viktor Yanukovych, under heavy Western pressure to call early elections, reached out to Russia as his grip on parts of the country appeared to weaken. As sirens wailed through Kiev's narrow streets, top European diplomats shuttled between Mr. Yanukovych and opposition leaders late into the night, pushing for fresh elections to pull the country back from the brink. 

• Noonan: Whose Side Are We On? America can take a clear stand without intervening in Ukraine.  

• Deadly Clashes in Ukraine: Streaming Coverage.

• Citigroup(C), Morgan Stanley(MS), J.P. Morgan(JPM) Poised for Another Windfall on Energy Future Holdings. Three investment banks — Citigroup , Morgan Stanley, and J.P. Morgan — could earn up to $300 million in fees, if they provide bankruptcy financing to Energy Future Holdings, the company formerly known as TXU.

Fox News: 

• Obama under pressure to wield more than 'rhetoric' in Ukraine crisis. President Obama is being pressed to act quickly on the crisis in Ukraine amid accusations that his administration is straddling the fence, as dozens more people were killed Thursday in clashes on the streets of Kiev.

CNBC:

• Youth unemployment in China: A crisis in the making. Youth unemployment has created "a generation at risk" according to the International Labor Organization, with worldwide youth unemployment forecast to rise to 12.8 percent by 2018. But these headline figures do not necessarily tell the real story given the discrepancies among different parts of the world.

• Fed taper 'predictable, unavoidable': OECD Secretary. A tapering of U.S. monetary policy is both predictable and unavoidable, Angel Gurría, secretary-general at the Organisation for Economic Co-operation and Development said on Friday.

Zero Hedge: 

• Here Is How High Frequency Trading Hurts Everyone.

• UBS On Goldilocks Hope And Emerging Market Vulnerabilities.

• Goldman's(GS) Swirlogram Posts Worst Reading In Over A Year.

• The Rental Bubble Is Also Bursting.

• Obama Administration Embeds "Government Researchers" To Monitor Media Organizations.

• "The Pig In The Python Is About To Be Expelled": A Walk Thru Of China's Hard Landing, And The Upcoming Global Harder Reset. (graph)

• Meanwhile, In Saudi Arabia...

Business Insider: 

• Madoff Said JPMorgan Executives Knew Of His Ponzi Scheme For Years.

• VENEZUELAN PROTESTER: We Have Reached The Point Of No Return.

• 17 Photos From The Massive Protests That Have Swept Venezuela.

• Bill Ackman's $1 Billion Herbalife Short Is Pershing Square's Worst Bet Ever.

Reuters: 

• RBS to retrench in investment banking, cut 30,000 jobs: FT. Royal Bank of Scotland (RBS.L) is expected to announce its withdrawal from many investment banking activities as well as much of its international business in a move that is expected to reduce staff numbers by at least 30,000 over the next three to five years, the Financial Times reported on Thursday. 

• World risks era of slow growth, high unemployment-OECD. Sweeping reforms are urgently needed to boost productivity and lower barriers to trade if the world is to avoid a new era of slow growth and stubbornly high unemployment, the OECD warned on Friday. 

• Illinois leads multistate probe of Sallie Mae's student loan practices. SLM Corp, better known as Sallie Mae, faces a multistate probe led by Illinois into its student loan practices, a spokeswoman for Illinois Attorney General Lisa Madigan said on Thursday. 

• Agrium(AGU) profit falls 72 pct as fertilizer prices drop. Canadian fertilizer company Agrium Inc reported a 72 percent decline in quarterly profit on Thursday as crop nutrient prices fell and nitrogen sales volumes weakened. 

• Priceline(PCLN) profit tops estimates as bookings rise. Priceline.com, the online travel agency known for its name-your-own-price auctions, posted a higher-than-expected quarterly profit on Thursday, boosting shares in extended trading. 

• U.S.-based stock funds attract $11 bln over week -Lipper.

• HP's(HPQ) first-quarter revenue falls less than expected. Hewlett Packard Co's quarterly revenue fell a less-than-expected 1 percent, as it grapples with rapidly slackening PC demand and battles to win business from enterprises in an uncertain economic environment.

Telegraph:

• Financial crisis threatens Russia as Ukraine spins out of control. Russia faces the choice of large losses from a default or the ever rising costs of propping up Ukraine's economy. 

China Securities Journal:

• China's Investment Growth May Slow on Overcapacity. China's investment growth may slow to about 18% because of overcapacity in manufacturing industry, declining real estate and infrastructure investment, citing Yu Bin, head of the macroeconomic department at the State Council's Development Research Center. A "noticeable" increase in China's export growth this year would be difficult to attain because the market share of labor-intensive and industrial products is declining, the report cites Yu as saying.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 136.0 +.75 basis point.

• Asia Pacific Sovereign CDS Index 105.0 +.25 basis point.

• FTSE-100 futures +.53%.

• S&P 500 futures +.33%.

• NASDAQ 100 futures +.28%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DDD)/.20

• (BSFT)/.42

• (FRO)/-.12

• (HMSY)/.24

• (IRM)/.22

• (NRG)/.17

• (SUP)/.23

Economic Releases
10:00 am EST

• Existing Home Sales for January are estimated to fall to 4.68M versus 4.87M in December.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, UK Retail Sales and the (ESRX) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial 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.