Wednesday Watch

Evening Headlines 
Bloomberg:

• Steel Defaults Seen by S&P as Yuan Ruins Ore Loans: China Credit. The Chinese steel industry’s ability to survive 1 billion yuan ($161 million) of losses per month without more defaults is under threat as a slump in iron ore and the yuan undermines a key source of financing. The currency has weakened 2.5 percent this year and a measure of exchange-rate swings reached a record, prompting Goldman Sachs Group Inc. to predict funding that uses the steelmaking ingredient as collateral will drop over the next two years due to foreign-exchange hedging costs. Iron ore prices fell 11 percent in the past five months as cash shortages at closely held mills prompted what Morgan Stanley says is panic selling.

• China’s Overnight Rate in Longest Rising Streak Since October. China’s overnight money-market rate climbed for a seventh day, the longest stretch in five months, after the central bank drained more cash from financial system. The overnight repurchase rate, a gauge of funding availability among banks, climbed eight basis points, or 0.08 percentage point, to 2.94 percent as of 10:35 a.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That’s the highest since March 20.

• Asian Stocks Rise Sixth Day as U.S. Manufacturing Expands. Asian stocks rose, with the regional benchmark index extending its winning streak to a sixth day, after an increase in U.S. manufacturing boosted optimism about growth in the world’s biggest economy. Nissan Motor Co., a Japanese carmaker that gets 34 percent of its revenue in North America, added 2.3 percent. Consumer discretionary shares and telecommunication services companies gained the most among the 10 industry groups on the regional index. Goodman Fielder Ltd., a food supplier, slumped 18 percent in Sydney after it cut its fourth-quarter earnings forecast. The MSCI Asia Pacific Index gained 0.3 percent to 138.72 as of 9:26 a.m. in Tokyo as two shares rose for each that fell.

• Virtu Said to Delay IPO Amid Furor Spurred by Michael Lewis Book. Virtu Financial Inc., the high-frequency trader that announced plans last month to sell shares, has delayed the deal, two people with knowledge of the matter said. Virtu’s bankers won’t start marketing the initial public offering until after April 20, delaying the process from this week, according to the people, who asked not to be named because the decision is private.

Wall Street Journal:

• U.S. Gambit on Mideast Peace Talks Falters. Washington Hasn't Decided Whether to Free Spy; Palestinian Leader to Raise Pressure on Israel.

CNBC:

• Massive 8.0 quake off Chile coast sparks tsunami. A major earthquake of magnitude 8.0 struck off the coast of Chile on Tuesday, triggering a tsunami that hit the northern part of the country and a tsunami warning for all of South and Central America's Pacific coast.

Zero Hedge:

• If HFT Algos Were People They'd Be Perp Walked.

• This Is Where Today's Buying Deluge Came From. (graph)

• SEC Has Opened Several HFT Probes.

• Things That Make You Go Hmmm... Like Iron Fists And Velvet Gloves.

• Equity Futures Spike On Chile Earthquake, USDJPY Momentum Ignition. (graph)

People's Daily:

• China Yuan Weakening May Trigger Foreign Debt Risk. Yuan exchange rate depreciation and outflows of capital may trigger an "outbreak" of foreign debt risk, Zhang Monan, a researcher at the China Center for International Economic Exchanges, writes in a commentary. Chinese real estate developers sold large volumes of bonds overseas last year and in the first months of this year, Zhang writes in the newspaper.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 121.75 -3.25 basis points.

• Asia Pacific Sovereign CDS Index 88.25 -4.5 basis points.

• FTSE-100 futures +.21%.

• S&P 500 futures +.15%.

• NASDAQ 100 futures  +.20%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MON)/3.06

• (AYE)/.83

• (RECN)/.05

Economic Releases
8:15 am EST

• The ADP Employment Change for March is estimated to rise to 195K versus 139K in February.

10:00 am EST

• Factory Orders for February are estimated to rise +1.2% versus a -.7% decline in January.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,422,220 barrels versus a +6,619,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,277,780 barrels versus a -5,101,000 barrel decline the prior week. Distillate inventories are estimated to rise by +177,780 barrels versus a +1,555,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise +.04% versus a +.4% gain the prior week.

Upcoming Splits

• (GOOG) 2-for-1 

Other Potential Market Movers

• The Fed's Bullard speaking, Fed's Lockhart speaking, China Non-Manufacturing PMI, Brazil Central Bank decision, Eurozone PPI, weekly MBA mortgage applications report, ISM New York for March, (GM) Senate Panel Hearing and the (BWLD) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and real estate 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.