Tuesday, April 29, 2014

Tuesday Watch

Evening Headlines 
Bloomberg:
  • U.S. Drip-Feed of Sanctions Seen Risking Putin Backlash. The latest U.S. penalties against Vladimir Putin’s inner circle may provoke the Russian president into escalating the Ukraine crisis without crippling key sectors of his nation’s economy. The sanctions imposed by the Obama administration yesterday on seven officials and 17 companies won’t go unanswered, Deputy Foreign Minister Sergei Ryabkov told Interfax. While markets showed relief as Russia’s largest banks avoided U.S. measures, Putin may take this round personally, according to Konstantin Simonov, president of Russia’s National Energy Security Foundation.
  • Russia Recession Risk Seen at Record High as Sanctions Escalate. Russia faces a fifty-fifty chance of recession, the highest since Bloomberg started to track the measure, as the crisis in Ukraine raises the risk of further sanctions, according to a survey of economists. The probability of a recession over the next 12 months rose to 50 percent, the highest since the first such Bloomberg survey in June 2012, according to the median estimate of eight economists surveyed before the U.S. and the European Union announced their latest salvo of sanctions yesterday. The gauge was at 45 percent last month. 
  • China’s Provinces Miss Growth Goals Even After Ambitions Lowered. Almost all Chinese provinces failed to meet their growth targets in the first quarter even after scaling back their ambitions as the government instructs officials to focus on reining in debt and curbing pollution. Thirty of 31 provinces and municipalities reported missing their goals, with the biggest shortfall in northeastern Heilongjiang, where an expansion of 4.1 percent compared with an 8.5 percent target for the year. Most localities’ targets are lower than in 2013. The latest data were released by government websites and newspapers. Premier Li Keqiang risks the nation sliding into a deeper slowdown as the government cracks down on overcapacity in the steel industry, wrestles with shadow banking risks and rolls out economic restructuring measures.
  • Asian Stocks Swing From Gain to Loss on Earnings Outlook. Asian stocks swung between gains and losses as investors weighed corporate earnings and after U.S. equities advanced. Posco climbed 3.1 percent after the Korean Economic Daily said South Korea’s largest steelmaker is considering the sale of Daewoo International Corp. Samsung Electronics Co. fell 0.1 percent in Seoul after rising as much as 0.5 percent as the world’s No.1 maker of smartphones posted first-quarter profit that beat analyst estimates. Newcrest Mining Ltd., Australia’s biggest gold producer, slipped 1.4 percent as the price of the bullion headed for a second day of decline. The MSCI Asia Pacific Excluding Japan Index was little changed at 475.84 as of 9:49 a.m. in Seoul.
  • Aluminum Declines to Lowest in Two Weeks as Inventories Expand. Aluminum fell to the lowest in more than two weeks in London as inventories expanded. Copper declined for the first time in seven sessions. Inventories of unwrought aluminum climbed to 1.215 million metric tons in March, from a revised 1.171 million tons a month earlier, the International Aluminium Institute said in a report today. In the warehouses tracked by the London Metal Exchange, stockpiles rose for a third day to 5.3 million tons, the longest stretch of gains this year.
  • Zell Says Homeownership Rate to Fall as Marriages Delayed. The U.S. homeownership rate may fall to as low as 55 percent because more Americans are choosing to rent as they postpone getting married and having children, said Sam Zell, chairman of landlord Equity Residential. Demographic and lifestyle changes, more than economic factors, are driving down the ownership rate over the long term, Zell said today at the Milken Institute Global Conference in Beverly Hills, California. As of 2010, about 54 percent of adults were married, down from 57 percent a decade earlier, according to the U.S. Census Bureau. 
  • LinkedIn(LNKD) Slumps as Social-Media Stock Plunge Accelerates. The selloff in social-media stocks is gathering steam. Facebook Inc. (FB), Twitter Inc. (TWTR), LinkedIn Corp. (LNKD) and Yelp Inc. (YELP) fell today, marking at least four straight days of declines. All have lost at least 19 percent of their market value this year except Facebook, which is up 2.7 percent. That stands in contrast to last year, when each stock was up by a record. Investors are questioning whether the Web companies can keep up revenue expansion, as some show signs of slowing gains in the number of users. Social-media companies, which generate revenue via advertisements or subscriptions, have been valued on their promises of fast growth, not the fundamentals of their business, according to Jeff Sica, chief investment officer at Sica Wealth Management LLC in Morristown, New Jersey.
Wall Street Journal: 
Fox News:
CNBC: 
  • 'Almost every asset is overvalued': Apollo pro. "The quantitative easing and the excess money and the low interest rates have driven pricing up of almost all financial assets to beyond what their intrinsic value might be," Joshua Harris, co-founder and chief investment officer of $161 billion private equity firm Apollo Global Management, said Monday at the Milken Institute's Global Conference in Los Angeles.
Zero Hedge:
ValueWalk:
Business Insider:
Reuters:
  • US CFTC launches inquiry into evasion of swaps rules. The U.S. swaps regulator plans to research whetherU.S. banks' overseas trading activity is complying with its rules, a senior official said on Monday, as Wall Street adapts to new rules for the $690 trillion global market. Scott O'Malia, a Republican member of the Commodity Futures Trading Commision, said he had asked the agency's staff for a legal opinion on whether U.S. banks were possibly evading its rules when doing business in Europe.
Telegraph:
China Securities Journal:
  • China May Use Fiscal Policy to Curb Overcapacity. China will continue its proactive fiscal policy with fine-tuning at appropriate times with more specific industry targets to curb overcapacity, according to a front-page commentary, written by reporter Gu Xin. Heavily polluting industries may have their export quotas reduced if cos. fail to meet pollutant emission standards, the commentary wrote.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 128.0 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 88.75 -1.0 basis point.
  • FTSE-100 futures +.24%.
  • S&P 500 futures +.17%.
  • NASDAQ 100 futures  +.21%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (ADM)/.74
  • (VLO)/1.41
  • (ETN)/1.00
  • (BSX)/.18
  • (HCA)/.85
  • (MRK)/.79
  • (GT)/.60
  • (DBD)/.24
  • (WWW)/.30
  • (CPLA)/.73
  • (MGM)/.09
  • (DDD)/.15
  • (COH)/.61
  • (S)/-.07
  • (BMY)/.43
  • (CMI)/1.67
  • (EBAY)/.67
  • (X)/.30
  • (TWTR)/-.03
  • (AFL)/1.58
  • (TRLA)/-.13
  • (PNRA)/1.52
  • (ESRX)/1.00
  • (HTZ)/.09
Economic Releases
9:00 am EST
  • S&P/CS 20 City MoM SA for February is estimated to rise +.8% versus a +.85% gain in January.
10:00 am EST
  • Consumer Confidence for April is estimated to rise to 83.2 versus 82.3 in March. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Senate vote on Fed Board nominations, Eurozone confidence/German CPI reports, UK gdp report, weekly retail sales reports and the Barclays Retail/Consumer Discretionary Conference 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 modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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