Thursday, April 17, 2014

Thursday Watch

Evening Headlines 
  • U.S. Grain Losses Seen Up to $6.3 Billion on China Ban. China’s rejection of U.S. grain grown with seeds genetically modified by Syngenta AG may cost U.S. growers as much as $6.3 billion in losses through August 2015, a U.S. trade group estimated. The Asian nation turned away at least 1.45 million metric tons of corn since late November, “substantially greater” than the 908,800 reported by the Chinese government, the National Grain & Feed Association, based in Washington, said today in a statement. The grain contained a gene developed by Basel, Switzerland’s Syngenta, and that MIR 162 variety hasn’t been approved by China. 
  • Weibo Said to Raise $286 Million With Bottom-End Pricing. Weibo Corp., the Chinese microblogging service owned by Sina Corp. and Alibaba Group Holdings Ltd., raised $285.6 million its U.S. initial public offering after pricing the shares at the low end of a marketed range, people with knowledge of the matter said. Weibo sold 16.8 million Class A American depositary shares for $17 each, said the people, who asked not to be identified discussing a private matter. The shares had been offered for $17 to $19 apiece. The Beijing-based company’s shares will be listed on the Nasdaq Stock Market under the symbol WB.
  • Asia Stocks Rise Second Day on U.S. Data, Yellen Comments. Asian stocks rose for a second day after U.S. industrial production increased more than forecast in March and Federal Reserve Chair Janet Yellen said the central bank remains committed to supporting the economic recovery. GungHo Online Entertainment Inc. (3765) surged 17 percent in Tokyo after the Internet games maker said six of its titles are generating profit. Canon Inc. gained 2.2 percent after the Nikkei reported earnings in the March quarter increased about 50 percent. Santos Ltd. sank 1.5 percent in Sydney as first-quarter sales at the oil and natural gas explorer missed estimates. The MSCI Asia Pacific Index gained 0.3 percent to 138.44 as of 9:30 a.m. in Tokyo, before markets open in Hong Kong and China.
  • Rubber Surplus Seen Exceeding Forecast as Thai Output Revised. A surplus in the global natural-rubber market this year will be 78 percent more than estimated in December as demand growth weakens and production in Thailand surpasses forecasts, according to The Rubber Economist Ltd. The glut is seen at 652,000 metric tons in 2014, compared with 366,000 tons predicted in December, Prachaya Jumpasut, managing director of the London-based industry adviser, said in an e-mail. The surplus for 2013, previously estimated at 336,000 tons, was put at 714,000 tons.
  • Senators Urge Ban on Banks’ Physical Commodity Ownership. U.S. banks including Goldman Sachs Group Inc. (GS) should be banned from owning commodities businesses because they could threaten the institutions and global supply chains, Senators Sherrod Brown and Elizabeth Warren told the Federal Reserve. Financial holding companies “should be prohibited from owning physical assets like warehouses, pipelines and tankers,” Democrats Brown of Ohio and Warren of Massachusetts said in a letter to the Fed today. “These activities pose significant safety and soundness, legal and reputational risks to the institutions.”
  • IBM(IBM) Sales Fall Again, Pressuring Rometty’s Profit Goal. Ginni Rometty’s profit goal for IBM just got harder to reach. First-quarter revenue for the computer-services company led by Rometty fell 3.9 percent from a year earlier to $22.5 billion, the eighth straight decline as sales continued to tumble in its hardware unit and in developing countries. Analysts had estimated $22.9 billion on average. IBM shares fell 3.9 percent in late trading
  • Google Revenue Falls Short of Estimates, Ad Prices Drop. Google Inc. (GOOG:US)’s costs are rising as the search provider finds it harder to keep up with a shift to advertising on mobile phones and sales fell short of estimates. Revenue, excluding sales passed on to partners, was $12.2 billion in the first quarter, missing a projection by analysts for $12.3 billion, according to data (GOOGL:US) compiled by Bloomberg. Reporting for the first time since Google held a de-facto split of the stock earlier this month, the shares fell as much as 6.4 percent in extended trading. The stock advanced 3.8 percent to $556.54 at the close in New York.
Wall Street Journal: 
Fox News:
  • Fox News Poll: Many voters say Obama lies to the country on important matters. About six in ten American voters think Barack Obama lies to the country on important matters some or most of the time, according to a Fox News poll released Wednesday. Thirty-seven percent think Obama lies “most of the time,” while another 24 percent say he lies “some of the time.” Twenty percent of voters say “only now and then” and 15 percent “never.”
Zero Hedge: 
  • The Richest Man In Asia Is Selling Everything In China. Here’s a guy you want to bet on– Li Ka-Shing. Li is reportedly the richest person in Asia with a net worth well in excess of $30 billion, much of which he made being a shrewd property investor. Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it. Since August of last year, he’s dumped billions of dollars worth of his Chinese holdings. The latest is the $928 million sale of the Pacific Place shopping center in Beijing– this deal was inked just days ago. Once the deal concludes, Li will no longer have any major property investments in mainland China. This isn’t a person who became wealthy by being flippant and scared. So what does he see that nobody else seems to be paying much attention to?
Business Insider:
Financial Times:
  • Too Much Leverage Makes Banks Too Vulnerable. Banks have too little capital, new regulations "enshrine" excess leverage, Robert Jenkins, former member of BOE's Financial Policy Committee, writes in FT op-ed.
Market News International:
  • China March FDI Falls 1.47% y/y. March non-financial foreign direct investment in China fell 1.47% y/y to $12.24b, without citing a source.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 123.0 -.5 basis point.
  • Asia Pacific Sovereign CDS Index 87.75 +.25 basis point.
  • FTSE-100 futures -.10%.
  • S&P 500 futures -.20%.
  • NASDAQ 100 futures  -.15%.
Morning Preview Links

Earnings of Note

  • (BLK)/4.10
  • (BBT)/.70
  • (PPG)/1.85
  • (BHI)/.78
  • (KEY)/.24
  • (HON)/1.26
  • (AN)/.72
  • (SHW)/1.10
  • (BX)/.55
  • (ADS)/2.71
  • (UNH)/1.09
  • (SLB)/1.20
  • (DD)/1.59
  • (MAT)/.07
  • (GE)/.32
  • (FITB)/.42
  • (MS)/.60
  • (BAX)/1.09
  • (PM)/1.16
  • (PEP)/.75
  • (GS)/3.49
  • (UNP)/2.37
  • (CMG)/2.87
  • (WERN)/.20
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to rise to 315K versus 300K the prior week.
  • Continuing Claims are estimated to rise to 2780K versus 2776K prior.
10:00 am EST
  • The Philly Fed Business Outlook Index for April is estimated to rise to 10.0 versus 9.0 in March. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The German inflation data, Bloomberg Economic Expectations Index for April, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (LULU) analyst day and (DIS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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