Wednesday Watch

Evening Headlines 
Bloomberg: 

• Crimea’s Russian Militia Swells as Referendum Risks Call to Arms. Vladimir Tyunin used to be the director of a humanitarian institute in the Ukrainian city of Sevastopol. He now commands 100 trained men at the heart of the standoff between Russia and the West. “I have a group of people that can do any kind of task,” Tyunin, 57, said last week in the port on the Crimean peninsula. “These are special forces. They can assault buildings, they can block buildings. We are ready to protect ourselves.” As diplomats around the world seek to defuse the crisis, Crimea is preparing for a March 16 referendum on splitting from Ukraine and joining Russia. Pro-Moscow supporters like Tyunin’s unit, which he says participated in the siege of the Ukraine Navy’s headquarters, are on the front line of a conflict that so far has been fought more with words than weapons. 

• Misery Index Rising to 33-Year High on Abenomics: Japan Credit. Japanese Prime Minister Shinzo Abe looks set to drive an indicator of economic hardship to a 33-year high by increasing taxes and prices amid stagnant wages. The misery index, which adds the jobless rate to the level of inflation, will climb to 7 percentage points in the three months starting April 1 when Japan raises its sales levy to 8 percent from 5 percent, based on the median estimates of economists in Bloomberg News surveys of unemployment and consumer prices. That would be the highest level for the measure since June 1981 when Japan was emerging out of depression after the oil shocks in the 1970s. 

• China Export Prowess Wanes in U.S., Europe. The Made in China label is losing traction with its two biggest customers. After three decades of gains, China’s share of U.S. imports has plateaued and in Europe it’s in decline. 

• Chaori Solar Warns Bonds May Be Delisted After Third Net Loss. Shanghai Chaori Solar Energy Science & Technology Co., the first company to default in China’s onshore bond market, said its notes may be delisted as it heads toward its third consecutive year of net losses.

• ETF Outflows Biggest in World as Economy Slumps: China Overnight. Exchange-traded funds focused on China are posting the world’s biggest outflows amid concern economic growth is slowing. Withdrawals from U.S.-based Chinese ETFs totaled $87.5 million March 10, the most among 46 nations, bringing this year’s redemption to $380.7 million, according to data compiled by Bloomberg. The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., fell 1.6 percent to $33.90. The Bloomberg China-US Equity Index of the most-traded stocks in the U.S. dropped 2 percent to 99.60, led by Vipshop Holdings Ltd. (VIPS:US).

• Asian Stocks Slide With Crude as China Concern Spurs Yen. Asian stocks fell, with the regional index headed for a three-week low, oil dropped and emerging-market and commodity-linked currencies weakened amid concern that China’s economy may be faltering. Gold advanced and copper traded near its lowest since July 2010. The MSCI Asia Pacific Index dropped 1.4 percent by 10:57 a.m. in Tokyo, set for the lowest close since Feb. 20 as a gauge of Chinese stocks in Hong Kong slid 1.8 percent.

• Gold Climbs for Second Day as Ukraine Tension Spurs Haven Demand. “The Ukraine situation is lending support to gold,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “The fear premium is back because of the developments.” Gold futures for April delivery rose 0.4 percent to settle at $1,346.70 an ounce at 1:37 p.m. on the Comex in New York. Yesterday, the price gained 0.2 percent. On March 3, the metal reached $1,355, the highest for a most-active contract since Oct. 30.

• WTI Oil Falls as U.S. Crude Supplies Rise; Brent Drops. “Oil is caught up in the general concern that is emanating from China,” said Ric Spooner, a chief analyst at CMC Markets in Sydney. “Increasing inventories last night didn’t help. If West Texas does develop downward momentum from here, the next support is at about $95.”

• Pimco Cuts Government Debt on Outlook for Fed Buying. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., cut holdings of Treasuries and U.S. government debt in February as turmoil in Ukraine fueled haven demand and investors bet the Federal Reserve will conclude bond purchases this year. The proportion of the securities in the $236 billion Total Return Fund (PTTRX) was 43 percent, the company’s website showed. That compared with 46 percent in January, which was the most since at least July, when Pimco revised how it classifies assets. Mortgage debt accounted for 29 percent in February, the least since July 2011, compared with 36 percent the previous month.

Wall Street Journal:

• Senate-CIA Dispute Erupts Into a Public Brawl. Feinstein Says CIA Spied on Congress; Brennan Rebuts.

• China Slowdown Is Rocking Raw Materials.

• ObamaCare's Secret Mandate Exemption. HHS quietly repeals the individual purchase rule for two more years. ObamaCare's implementers continue to roam the battlefield and shoot their own wounded, and the latest casualty is the core of the Affordable Care Act—the individual mandate. To wit, last week the Administration quietly excused millions of people from the requirement to purchase health insurance or else pay a tax penalty.

Fox News:

• Republican David Jolly beats Alex Sink in Florida special election. Republican David Jolly narrowly defeated Democrat Alex Sink on Tuesday in a Tampa-area House race largely seen as a critical test for ObamaCare. With nearly 100 percent of the vote counted, Jolly had 48.5 percent of the vote to Sink's 46.7 percent. Libertarian Lucas Overby had 4.8 percent.

CNBC:

• Markets watching to see why copper getting scorched. Wary financial markets are watching the decline in copper, to see if the red metal is acting as a fire alarm for the global economy. With a quiet economic calendar Wednesday, the Treasury's 10-year auction could also take on a higher profile than normal, especially ahead of next week's Fed meeting.

Zero Hedge: 

• Jeff Gundlach's "What Hath QE Wrought" Webcast.

• How Long Does This Go On Before There's A Currency Crisis? (graph)

• Dot-Com 2.0 Visualized (Or Peak Greater Fool). (graph)

• NSA-Fan Feinstein Slams CIA Spying And Intimidation.

• Red Line Crossing: Ukraine Effectively Gifts Crimea To Russia, Says "Will Not Intervene Militarily".

Business Insider: 

• GUNDLACH: Interest Rates Will Rise Slowly, Then Quickly.

• Emerging Markets May Have A Debt Problem. (graph)

• New Jersey Just Drop-Kicked Tesla(TSLA).

• Hedge Funders' Beloved Fannie And Freddie Trade Is Getting Demolished Today.

NY Times:

• Obama Will Seek Broad Expansion of Overtime Pay. President Obama this week will seek to force American businesses to pay more overtime to millions of workers, the latest move by his administration to confront corporations that have had soaring profits even as wages have stagnated.

Reuters: 

• U.S. refiners form lobby against easing crude export limits. Four U.S. oil refiners, trying to counter growing calls to lift the nation's ban on most crude oil exports, have launched the first major lobbying effort to keep abundant U.S. oil supplies from being sold overseas. Rising U.S. shale oil production has opened the door to a possible revision of the decades-old policy restricting most exports of unrefined petroleum.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times: 

• Engine of Wall Street profits sputters in first quarter. Wall Street’s once lucrative fixed income divisions are set for their worst start to the year since before the financial crisis, with revenue declines of up to 25 per cent prompting banks to plan more redundancies on top of the tens of thousands of job cuts they have already made.

China Securities Journal:

• China Funding Cost to Face Pressure on Freed Rates. Interest rate liberalization in China will likely increase pressure on funding costs, according to a commentary written by reporter Ren Xiao. Some capital outflow can't be ruled out as yuan two-way volatility may become the norm, the commentary says.

Evening Recommendations

• None of note
  

Night Trading

• Asian equity indices are -1.50% to -.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 1287.0 -1.0 basis point.

• Asia Pacific Sovereign CDS Index 98.25 +4.25 basis points.

• FTSE-100 futures -.30%.

• S&P 500 futures -.09%.

• NASDAQ 100 futures  -.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WSM)/1.35

• (SGMS)/.07

• (DRC)/1.28

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,090,000 barrels versus a +1,429,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,800,000 barrels versus a -1,604,000 barrel decline the prior week. Distillate supplies are estimated to fall by -259,000 barrels versus a +1,414,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.2% versus a -.6% decline the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The G7 Meetings, $21B 10Y T-Note auction, weekly MBA mortgage applications report, Australia Unemployment, UBS Consumer Conference, RBC Consumer/Retail Conference, JPMorgan Gaming/Lodging/Restaurant/Leisure Forum,  could also impact trading today.

BOTTOM LINE: Asian indices are lower, boosted 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.