Thursday Watch

Evening Headlines 
Bloomberg: 

• Australian Unemployment Jumps to 10-Year High; Aussie Drops. Australia's unemployment rate climbed to the highest in more than 10 years in January, spurring traders to pare bets on an interest-rate increase and sending the Aussie to its biggest drop in almost three weeks. The jobless rate rose to 6 percent from 5.8 percent, the statistics bureau said in Sydney. The median estimate was an increase to 5.9 percent in a Bloomberg News survey of economists. The number of people employed fell by 3,700. “There’s no spinning it, Australia’s labour market is weak,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “Businesses are not confident in future economic conditions so are trimming jobs and working their existing staff harder.” 

• China Trust Assets Surge to $1.8 Trillion Amid Default Concern. China’s trust assets surged 46 percent in 2013 to a record 10.9 trillion yuan ($1.8 trillion), underscoring investor interest in products that pay more than bank deposits even as default risks mount.

• Hong Kong-Singapore Builder Slump to Deepen: Chart of the Day. Property developers in Hong Kong and Singapore will extend the biggest declines among global peers as government curbs deter buyers in Asia’s most expensive housing markets, according to AMP Capital Investors. 

• Samsung Miss in Worst Season Since ’06 Jars Bulls: Korea Markets. Stock strategists are cutting forecasts for gains in South Korea amid the most widespread profit disappointments in seven years. Samsung Electronics Co. (005930) and Posco are among the 74 percent of Kospi index companies whose fourth-quarter earnings missed analyst projections, on track for the highest proportion since the second quarter of 2006, data compiled by Bloomberg show.

• Asian Stocks Drop After Longest Streak of Gains This Year. Asian stocks dropped after the regional benchmark index climbed for a sixth day yesterday to cap its longest run of advances this year. Asahi Group Holdings Ltd. slid 3.2 percent in Tokyo after Japan’s second-largest beermaker’s net-income forecast missed estimates. Tokyo Tatemono Co. plunged 13 percent after the developer predicted full-year operating profit below analyst expectations. Qantas Airways Ltd. jumped 6.7 percent after the Sydney Morning Herald reported that Australian Treasurer Joe Hockey said the nation’s biggest carrier met pre-conditions for government support. The MSCI Asia Pacific Index slipped 0.6 percent to 135.64 as of 11:25 a.m. in Tokyo after rising as much as 0.1 percent.

• Rebar Near Lowest Since September 2012 as Spot Market Still Weak. Steel reinforcement-bar futures in Shanghai traded near the lowest level since September 2012 amid a weak post-holiday spot market and rising inventory. Rebar for May delivery on the Shanghai Futures Exchange traded at 3,389 yuan ($559) a metric ton at 10:01 a.m. local time. Futures settled at 3,386 yuan on Feb. 11, the lowest close for a most-active contract in 17 months.

• Cisco(CSCO) Third-Quarter Sales Forecast May Miss Some Some Estimates. Cisco Systems Inc. issued a sales outlook for the fiscal third quarter that may miss some analysts’ estimates amid weakness in emerging markets and a slump in demand from telecommunications-service providers. Revenue will decline 6 percent to 8 percent in the current period ending in April, the San Jose, California-based company said on a conference call today. That indicates sales of $11.2 billion to $11.5 billion, while analysts projected $11.3 billion on average, according to data compiled by Bloomberg (CSCO:US). The shares fell in extended trading.

Wall Street Journal: 

• For Many, Few Health-Plan Choices, High Premiums on Online Exchanges. Analysis Shows Americans in Poorer Counties Have Limited Options on Health-Care Exchanges. Hundreds of thousands of Americans in poorer counties have few choices of health insurers and face high premiums through the online exchanges created by the health-care law, according to an analysis by The Wall Street Journal of offerings in 36 states.

• Comcast(CMCSA) Acquiring Time Warner Cable(TWC) In All Stock Deal Worth $45.2 Billion. Deal Combines No. 1 and No.2 Cable Operators.

• Data Brokers Come Under Fresh Scrutiny. Consumer Profiles Marketed to Lenders.

• Center Links UBS and Yellen Spouse. Yellen's Husband, a Nobel-Winning Economist, Sits on Board of Zurich Center.

• Behind the White House's Health-Law Dodges. The delays are designed to shield Democrats from voter retribution, at least as long as he's in office. 

Barron's: 

• NetApp(NTAP) Off 4%: FYQ3 Revenue Misses, EPS Beats; Q4 View Light.

Fox News:

• Fox News Poll: Voters think worst is yet to come on the economy.

MarketWatch.com:

• Cisco(CSCO) CFO: ‘There’s been a slowdown, and it’s very abrupt’. The emerging markets problems Cisco spoke of last quarter are still there, and it’s hard to say when they will go away, Chief Financial Officer Frank Calderoni said Wednesday. “Clearly, there’s been a slowdown and it’s been very abrupt,” he told MarketWatch after the company’s earnings call. “It’s difficult to determine how long it will last.”

CNBC:

• Whole Foods(WFM) lowers 2014 guidance; shares slip. Whole Foods Market on Wednesday lowered its 2014 sales forecast after first-quarter sales missed Wall Street expectations. The grocery chain's shares fell more than 6 percent in after-hours trading. Same-store sales, a key gauge of performance for retailers, rose 5.4 percent for the fiscal first quarter, ended Jan. 19.  

• Why gasoline could spike 10 percent in the near future. (video)

• Docs face 'crushing' costs from diagnosis code switch, AMA says. Doctors face "crushing" costs from a looming rule change that will shake up the way diagnosis codes used for insurance claims are filed, the American Medical Association warned Wednesday. In some cases, the AMA expects doctors will have to pay three times the original estimate for implementing these new and more numerous codes.

• Are EM companies the real debt worry? (video) Emerging markets have convulsed recently amid concerns about government balance sheets, but investors may want to worry more about corporate ones instead. Dramatic falls in the currencies of countries such as Argentina and Turkey have triggered widespread selling across the emerging markets with the "Fragile Five" – India, Indonesia, Brazil, Turkey and South Africa –among the worst hit.

Zero Hedge:

• Investors Are Getting "High" On OTC Stocks In 2014. (graph)

• Spot The Average Federal Employee Salary. (graph)

• Channel-Stuffed US Car Dealers Cut Prices; Hope To "Sell Their Way Out Of This". (graph)

• Things That Make You Go Hmmm... Like The End Of Central Bank Innocence.

• It Begins... Another High-Yield Chinese Shadow Banking Trust Defaults.

• Did Canada Just Pop Its Housing Bubble? (graph)

• Europe Considers Wholesale Savings Confiscation, Enforced Redistribution.

ValueWalk:

• Why Quantitative Easing Didn’t Work.

Business Insider: 

• Now 8-12 Inches Of Snow Expected For New York City. 

• People Are Abandoning Cars On Snow-Covered Roads In North Carolina. (pics)

• SOCGEN: The Global Economy Is In The Middle Of A 3 Step-Crisis.

Reuters:

• Tennessee senator says new VW product on way if UAW union rejected. U.S. Senator Bob Corker of Tennessee said on Wednesday that if workers at the Volkswagen AG plant in his hometown of Chattanooga reject United Auto Worker representation, the company will reward the plant with a new product to build.

Telegraph:

• World asleep as China tightens deflationary vice. We keep our fingers crossed as we glimpse the first foam of a deflationary Ch'ient'ang'kian coming our way from China. The world's central banks have no margin for error. China's Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons. The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to prick China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle. This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications. Brazil, Russia, South Africa, and the commodity bloc are already in the cross-hairs.

Liquidity crunch a catalyst for big China slowdown – analysts The mini liquidity crunch is the early warning sign of a substantial economic correction long overdue, amid rising leverage and a broken growth model, say bearish analysts.


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Financial Express: 

• IBM India to Cut About 700-800 Workers.

Economic Information Daily:

• China Listed Coal Cos. See 2013 Losses, Profit Slump. Sixteen Chinese listed coal companies are reporting losses or declines in profits for 2013, citing Wind data. 17 of 27 listed coal companies have issued profit alerts or preliminary earnings reports as of yesterday. Debt-to-asset ratio at almost half of listed coal companies were above 50% for the first 3 quarters of last year, the report cites Wind as saying.

Shanghai Daily:

• Beijing Pollution Makes It 'Barely Suitable' for Living. Beijing is "barely suitable" for living because of heavy pollution, citing a blue paper for world cities compiled by the Shanghai Academy of Social Sciences and the Beijing-based Social Sciences Academic Press. Beijing air was highly polluted at least once a week on average in 2013, the report said.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 139.0 +3.0 basis points.

• Asia Pacific Sovereign CDS Index 106.25 -.25 basis point.

• FTSE-100 futures -.05%.

• S&P 500 futures -.25%.

• NASDAQ 100 futures -.26%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TAP)/.72

• (POOL)/-.11

• (CAB)/1.41

• (GT)/.63

• (BKC)/.23

• (DBD)/.58

• (BWA)/.71 

• (AVP)/.30

• (LPX)/.05

• (BG)/2.12

• (PEP)/1.00

• (DISCA)/.89

• (APA)/1.81

• (KRFT)/.61

• (A)/.66

• (TRLA)/.07

• (CLF)/.77

• (AIG)/.96

• (SKYW)/.14

Economic Releases
8:30 am EST

• Retail Sales Advance for January are estimated unch. versus a +.2% gain in December.

• Retail Sales Ex Auto for January are estimated to rise +.1% versus a +.7% gain in December.

• Retail Sales Ex Auto and Gas for January are estimated to rise +.1% versus a +.6% gain in December.

• Initial Jobless Claims are estimated to fall to 330K versus 331K the prior week.

• Continuing Claims are estimated to fall to 2960K versus 2964K prior.

10:00 am EST

• Business Inventories for December are estimated to rise +.4% versus a +.4% gain in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, ECB Monthly Bulletin, China CPI, $16B 30Y T-Bond auction, weekly EIA natural gas inventory report, Bloomberg US Economic Survey for February, weekly Bloomberg Consumer Comfort Index, (IT) investor day, (EMR) investor conference and the (ZION) investor conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.