Friday Watch

Evening Headlines 
Bloomberg: 

• Kerry Warns Putin on Ukraine as Russian Troops Drill. U.S. Secretary of State John Kerry warned that Russia was running out of time to comply with an accord aimed at easing tensions in Ukraine, as Russian forces began new military exercises on the two countries' border. Speaking in Washington, Kerry accused Russia of using the “barrel of a gun and the force of a mob” to force its will on Ukraine. Kerry said Russia has failed to live up to commitments made a week ago in Geneva to de-escalate the situation and said continued lack of cooperation would bring consequences. “If Russia continues in this direction, it will not just be a grave mistake, it will be an expensive mistake,” Kerry said at the State Department. Earlier today, President Barack Obama said the U.S. and its allies were ready to impose further sanctions on Russia if it continues stirring trouble. 

• BOJ Said to Be Concerned Japan Bond Market Ignores Inflation. Bank of Japan officials are increasingly concerned the nation’s bond market is failing to reflect emerging inflation, raising the risk of a sudden surge in yields, according to people familiar with the matter. Japan’s benchmark 10-year government bonds yield 0.615 percent, little changed from March 2013, even after a jump in the consumer-price inflation rate of almost 2.5 percentage points since then. The yields have been held down by the BOJ’s own purchases, part of its unprecedented monetary stimulus unleashed by Governor Haruhiko Kuroda a year ago.

• Obama Visits South Korea as North Shows Nuclear Test Signs. U.S. President Barack Obama arrives in South Korea today for talks on containing North Korea, after the regime fired almost 90 rockets over a period of four weeks and stepped up activity at its nuclear test site. 

• China’s Stocks Head for Steepest Weekly Loss in Two Months. China’s stocks fell, sending the benchmark index to its steepest weekly loss in two months, as the nation’s biggest liquor maker reported slowing profit growth and concern grew that new share sales will divert funds. Kweichow Moutai Co., the largest maker of baijiu liquor, plunged 5 percent after profits climbed 3 percent in the first quarter, compared with 21 percent growth in the same period last year. Huayi Brothers Media Corp. dropped 1.1 percent as the ChiNext index of small companies slid for a fifth day, its longest losing streak since June. The Shanghai Composite Index (SHCOMP) slid for a third day, falling 0.2 percent to 2,052.14 at 9:50 a.m. local time. It has slumped 2.2 percent this week, the biggest loss since the week ending March 14.

• Japan Drives Asian Stock Gains as Wheat Climbs on Ukraine. Asia stocks outside Japan fell, dragging the regional benchmark index toward a weekly loss. The yen weakened after inflation data while wheat climbed and nickel pared the biggest monthly advance since 2012 as the U.S. warned Russia of an “expensive mistake” in Ukraine. Hong Kong’s Hang Seng Index dropped 0.8 percent by 11:44 a.m. in Tokyo, with the MSCI Asia Pacific Index heading to a 0.4 percent loss for the week. Japan’s currency lost as much as 0.2 percent, spurring a 0.7 percent gain by the Topix index.

• U.S. Said to Ask BofA for More Than $13 Billion Over RMBS. U.S. prosecutors are seeking more than $13 billion from Bank of America Corp. to resolve federal and state probes into the lender’s sale of bonds backed by home loans in the run-up to the 2008 financial crisis, according to people familiar with the matter. The settlement would come on top of the $9.5 billion the bank agreed last month to pay to resolve Federal Housing Finance Agency claims, said two people who asked not to be named because the negotiations are private. A deal could come within the next two months, the people said.

Wall Street Journal: 

• Ukraine Halts Military Push, Fearing Attack From Russia. Moscow's Saber-Rattling Leaves Kiev in Quandary; U.S. Unsure of Putin's Intent. Ukrainian forces moved in on a pro-Russian stronghold Thursday, killing several militants in a firefight at a roadside checkpoint, but quickly halted their advance after Russia activated the thousands of troops it has massed just across the border. Moscow's saber-rattling—launching new land and air military drills—left Ukraine's new government in a quandary: whether to risk pressing ahead with what it calls its antiterrorist operation in the restive east, or risk more bloodshed and provoking an invasion. 

• Crisis in Ukraine. Streaming Coverage:

• Demand for Home Loans Plunges. Interest-Rate Spike Puts Mortgages at 14-Year Low. Mortgage lending declined to the lowest level in 14 years in the first quarter as homeowners pulled back sharply from refinancing and house hunters showed little appetite for new loans, the latest sign of how rising interest rates have dented the housing recovery. Lenders originated $235 billion in mortgage loans during the January-March quarter, down 58% from the same period a year ago and down 23% from the fourth quarter of 2013,...
  

• Foreclosure Errors Top Reported Rate. Consulting Firm Scouring Bank Files Was Finding More Mistakes Than Regulators Reported When They Ended the Review. A consulting firm that scoured major U.S. banks' foreclosure files for mistakes was finding far higher rates of error than regulators reported when they abruptly ended the review last year, a congressional inquiry has found. The top Democrat on the House Oversight Committee, Rep. Elijah Cummings (D., Md.), on Thursday disclosed excerpts of documents from consulting firm Promontory Financial Group, which reviewed thousands...

• In Japan, Obama Reassures Abe on Islands Disputed With China. President Treads Carefully, Still Provokes Anger in Beijing. President Barack Obama offered Japanese Prime Minister Shinzo Abe an unequivocal affirmation that if islands at the center of Japan's territorial dispute with China were ever attacked, the U.S. would come to Japan's aid. Mr. Obama walked a careful line, stopping short of taking Japan's side on which country has sovereignty over the East China Sea islands—claimed by both China and Japan and administered by Tokyo—and emphasizing there had been no shift in the U.S. position. And he nudged his counterpart to open up...

CNBC:

• Amazon(AMZN) shares higher after revenue tops expectations. Amazon.com rallied in extended-hours trading after the e-commerce giant posted revenue that topped estimates, while earnings were in line with forecasts. The company posted earnings of 23 cents a share, matching Wall Street expectations, while revenue was higher at $19.74 billion, versus expectations for $19.43 billion. Shares climbed in extended-hours trading.

Zero Hedge:

• And Then There Is Everything Else: Summary Of All The Ignored Conflicts And Crises Around The World 

• U.S. Exports A Record Amount Of Gold To Hong Kong In January.

• Tokyo CPI Spikes To Highest Since 1992 (Well Above Abe's 2% Target). (graph)

• 52 Year-Old French Banker Jumps To Her Death In Paris (After Questioning Her Superiors).

• Bank Of England Chief Economist-To-Be Warns: "It's Time To Rethink Everything".

• Treasury Yield Curve Collapses At Fastest Pace In 7 Years. (graph)

• Demography + Debt = Doom.

• Meet AISight - The "Pre-Crime"-Detecting Software Being Installed On Global CCTVs.

ValueWalk:

• General Motors(GM) Being Investigated By SEC, NHTSA, And More.

Business Insider: 

• John Kerry Just Gave Russia A Final Warning.

• Here's What Really Happened In The Armenian Genocide That Obama Refuses To Acknowledge.

• Microsoft(MSFT) Reports Earnings, Everything Is Right In Line.

Reuters:

• Visa(V) says revenue growth to slow, Russia sanctions hurting volumes. Visa Inc, the world's largest credit and debit card company, said U.S. sanctions on Russia were hurting its card transaction volumes and that revenue growth would slow further this quarter, sending its shares down 5 percent after the bell. Visa's quarterly revenue growth slid to a single digit in percentage terms for the first time in more than four years, due to a strong U.S. dollar.

• Broadcom(BRCM) results beat forecasts but China hurts. Broadcom Corp beat Wall Street expectations in the first quarter, although profit and revenue were lower than a year earlier as the company's high-end chips for smartphones faced fierce competition in China. 

• Cliffs Natural(CLF) posts Q1 loss on lower iron ore, coal prices. Cliffs Natural Resources Inc, which is facing off against an activist investor that wants to break up the company, posted a first-quarter loss on Thursday on the back of lower market prices for iron ore and metallurgical coal. The Cleveland, Ohio-based miner reported a net loss of $83 million, or 54 cents a share, in the three months to end-March from a net profit of $97 million, or 66 cents a share, in the same period a year earlier.

Telegraph:

• Suspicion grows that China is exporting deflation worldwide by driving down yuan. 

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 126.0 +3.5 basis points.

• Asia Pacific Sovereign CDS Index 87.75 +.25 basis point.

• FTSE-100 futures -.12%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures  -.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ALK)/1.21

• (AEP)/.90

• (B)/.52

• (BKW)/.19

• (CL)/.68

• (COV)/.95

• (F)/.31

• (LEA)/1.70

• (STT)/1.00

• (TYC)/.41

• (VFC)/.63

• (WY)/.24

• (WHR)/2.33

Economic Releases
9:45 am EST

• Preliminary US Markit Services PMI for April is estimated to rise to 55.5 versus 55.3 in March.
  

9:55 am EST

• Final Univ. of Mich. Consumer Confidence for April is estimated to rise to 83.0 versus a prior estimate of 82.6. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK retail sales report could impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial 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.