Tuesday, March 04, 2014

Tuesday Watch

Evening Headlines 
Bloomberg: 
  • Russia Calls Ukraine Presence Legal Citing Yanukovych Letter. Russia justified its intervention in Crimea as a legitimate response to a request from Ukraine’s ousted president amid threats posed by extremists, while Western leaders sought to keep the standoff from spiraling into war. The U.S. condemned what it called a breach of Ukraine’s sovereignty after Vitaly Churkin, Russia’s ambassador to the United Nations, said today the crisis is creating serious risks to Russian security and to the safety of millions of Russian-speaking compatriots in southeastern Ukraine. Former Ukrainian President Viktor Yanukovych wrote to Russian President Vladimir Putin requesting a military deployment, Churkin said.
  • Pro-Russia Mob Surrounds Main Ukraine Navy Base in Crimea. Some 200 pro-Russian vigilantes backed by several masked gunmen besieged Ukrainian navy headquarters in Sevastopol, Crimea, and threatened to cut off electricity and water if officers didn’t surrender the building. The crowd blocked the exits from the base and used loudspeakers to urge the officers inside the building to surrender. Crimea, where ethnic Russians comprise the majority, has become the focal point of Ukraine’s crisis after an uprising centered on Kiev triggered last month’s ouster of President Viktor Yanukovych.
  • Nikkei 225 Futures Trading Fault May Be System Error: JPX. Futures on the Nikkei 225 Stock Average stopped trading in Osaka for more than 20 minutes today, probably due to a system problem, bourse operator Japan Exchange Group Inc. said. Nikkei 225 large and mini contracts stopped trading a little after 11 a.m. Tokyo time, Naoya Takahashi, a spokesman for JPX, said by telephone. They resumed at about 11:30 a.m., he said. The halt may have been due to a system problem and the exchange is investigating the cause, Takahashi said.
  • RBA Holds Rate at Record-Low 2.5% as Mining Slowdown Dents Jobs. Australia’s central bank left its benchmark interest rate unchanged at a record low to spur domestic industries and offset a slump in mining investment. Governor Glenn Stevens and his board kept the overnight cash-rate target at 2.5 percent, the Reserve Bank of Australia said in a statement today in Sydney. The decision was predicted by all 32 economists surveyed by Bloomberg News and markets had priced in almost no chance of a move. After 2.25 percentage points of rate cuts from late 2011 through August, the RBA has held the benchmark rate steady as home prices advanced, inflation accelerated and a drop in the currency eased pressure on exporters.
  • Philippine Index to Monitor the Risk of Property Bubble. The Philippine central bank is set to introduce a residential property-price index in the first half of the year as it intensifies monitoring of asset-bubble risks, Deputy Governor Diwa Guinigundo said. The index initially will cover Manila and nearby provinces using data including building permits and wholesale prices of construction materials of new housing units from 2006 to 2012, Guinigundo, 59, said in an interview in his office in Manila late yesterday.
  • Asia Stocks Swing From Loss to Gain After Two-Day Slump. Asian stocks swung between gains and losses, after the regional index yesterday capped its first back-to-back declines in a month, as investors weighed the crisis in Crimea and ahead of the National People’s Congress annual meeting in China starting tomorrow. Mitsubishi Estate Co. (8802) gained 3.8 percent in Tokyo as Japanese developers the Topix index higher. Tencent Holdings Ltd., Asia’s biggest Internet company, gained 1.6 percent as Hong Kong shares rebounded from their biggest drop in a month. AGL Energy Ltd. sank 2.9 percent in Sydney after its A$1.51 billion ($1.35 billion) deal to buy power plants in Australia’s most-populous state was blocked by an antitrust regulator. The MSCI Asia Pacific Index rose 0.2 percent to 137.10 as of 10:09 a.m. in Hong Kong after falling as much as 0.4 percent.
  • Oaktree’s Marks Urges Caution as Money Flows Into Junk Loans. The head of the world’s largest distressed debt fund is emphasizing the need for making careful choices as loan funds inundated with unprecedented cash enable junk-rated companies to borrow at cheaper rates. “When things are rollicking and the market is permitting low-quality issuers to issue debt, that’s when you need a lot of caution,” Howard Marks, the founder and chairman of Oaktree Capital Group LLC, said in a telephone interview. “You have to apply a lot of discernment.” 
  • Citigroup(C) Joins JPMorgan(JPM) in Seeing Trading-Revenue Drop. Citigroup Inc. (C) and JPMorgan Chase & Co. (JPM) are bracing investors for a fourth straight drop in first-quarter trading, a period of the year when the largest investment banks typically earn the most from that business. Citigroup finance chief John Gerspach said yesterday his firm expects trading revenue to drop by a “high mid-teens” percentage, less than a week after JPMorgan Chief Executive Officer Jamie Dimon said revenue from equities and fixed income was down about 15 percent. If trading at the nine largest firms slumps that much, it would extend the slide from 2010’s first quarter to 36 percent.
Wall Street Journal: 
Fox News:
Zero Hedge:  
Reuters:
  • Computer-driven trade to grab market share in 2014 - study. Smaller asset managers and hedge funds will drive an increase in the use of computer-driven equity trading strategies in 2014 as brokerages cut back on the services they offer to less profitable clients, a study shows. Margin pressure among brokers has forced them to focus on servicing big-paying clients at the expense of the rest, many of whom will now look to use so-called "low touch", computer-based strategies to fill the gap, a study by consultants TABB showed on Tuesday.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.75% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 137.0 +4.0 basis points.
  • Asia Pacific Sovereign CDS Index 103.50 +1.25 basis points.
  • FTSE-100 futures +.41%.
  • S&P 500 futures +.27%.
  • NASDAQ 100 futures  +.31%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (RSH)/-.13
  • (AZO)/5.56
  • (BOBE)/.53
  • (AVAV)/.19
  • (SWHC)/.29
  • (TECD)/1.93
Economic Releases
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Lacker speaking, HSBC China Services PMI, Australia GDP, weekly retail sales reports, ISM New York for February, IBD/TIPP Economic Optimism for March, (BP) investor update, (CAT) analyst meeting and the (APC) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

No comments: