Thursday Watch

Evening Headlines 
Bloomberg:

• Russia Urges ‘Emergency Steps’ Over Ukraine After Rebel Losses. Russia called for unspecified “emergency” measures to halt the violence in eastern Ukraine after separatist militias suffered the heaviest casualties of their insurgency. “It’s necessary to take emergency steps to stop the bloodshed and start an inclusive internal Ukrainian dialogue,” Foreign Minister Sergei Lavrov told his German counterpart Frank-Walter Steinmeier by phone yesterday, according to the ministry’s website. “There’s no excuse” for military action in the southeastern part of the country, Lavrov said. Ukraine stepped up air patrols over the eastern city of Donetsk yesterday as a convoy of pro-Russian rebels moved through the city with an anti-aircraft gun in tow, threatening renewed violence after dozens of militants were killed in a government operation to retake the area’s biggest airport.

• Free Toasters for China's Depositors? by A. Gary Shilling. In part two of this four-part series, I wrote about China’s shadow banks and the government’s efforts to assert more control over them.

• Japan Retail Sales Fall at Record Pace After Sales-Tax Rise. Japan’s retail sales dropped at the fastest pace in at least 14 years last month after the first consumption-tax increase since 1997 depressed consumer spending. Sales in April declined 13.7 percent from the previous month, the trade ministry reported today, more than the median forecast of an 11.7 percent decline in a Bloomberg News survey of 11 economists.

• Thais Say Facebook(FB) Goes Down as Junta Releases Red Shirts. Internet users in Thailand reported temporarily losing access to Facebook Inc. (FB), sparking speculation the social media site had been blocked by the military. At the same time, the junta that seized power a week ago released leaders from the Red Shirt movement opposed to the coup.

• EU Firms in China Worried About Tech Security, Poll Finds. The European Union Chamber of Commerce in China said its members are concerned about the security of their technology systems in the country, citing a poll conducted after the U.S. indicted five Chinese military officials for allegedly stealing corporate secrets. Eighty of 100 companies responding to a survey are concerned about their information-technology systems in China, while 53 percent are more concerned about security in the country than in other regions, the EU Chamber said in an e-mail. Most members have noticed increased online censorship or slower Internet speeds in China in the past few weeks, according to the survey.

• Asian Stocks Fall as Japan Retail Sales Slump in April. Asian stocks fell, with the regional benchmark index retreating from a six-month high, as investors weighed a worse-than-estimated drop in Japan’s retail sales before a report that’s expected to show the U.S. economy contracted last quarter. Fast Retailing Co. (9983), Asia’s biggest clothing seller, slipped 1.1 percent in Tokyo. BHP Billiton Ltd., the world’s No. 1 mining company, dropped 1.6 percent in Sydney as copper futures declined. Samsung Electronics Co., the largest maker of smartphones, climbed 1.5 percent in Seoul after unveiling a prototype health-monitoring wristband. The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 141.72 as of 9:37 a.m. in Tokyo, after yesterday reaching its highest level since Nov. 29.

Wall Street Journal: 

• Ziffs Shut Down Hedge Fund, Shift Way Wealth Is Managed. Brothers Had Already Begun Winding Down Other Fund.

• Lawyers Push to Corral GM Recall Cases. Panel to Rule If Single Court Should Manage Product Liability Suits.

• Doubling Down on a Muddled Foreign Policy. The president has somehow managed to combine the worst features of isolationism and multilateralism. 

Fox News: 

• Watchdog finds ‘systemic’ problems at VA, Shinseki faces bipartisan calls to resign. The official watchdog for the Department of Veterans Affairs claimed in a scathing report that the department has a "systemic" problem with clinics lying about patient wait times, as lawmakers on both sides of the aisle joined calls for Secretary Eric Shinseki to resign.

• Lawmakers and interest groups clash as Obama prepares to announce performance standard for power plants. Lawmakers and Washington interest groups are engaged in a battle over whether looming EPA rules will help or hurt as President Obama prepares to announce a highly anticipated performance standard for power plants June 2.

CNBC:

• Apple(AAPL) to acquire Beats Electronics for $3 billion. (video) Apple will acquire headphone maker Beats Electronics for $3 billion, Apple said on Wednesday. The deal is expected to close in the fiscal fourth quarter. Apple will pay $2.6 billion in cash and another $400 million in equity. It will also continue to use the Beats brand. 

• China's millionaire machine slows. (video) China's millionaire machine has slowed, suggesting that the country's economic weakness is reaching the top of the economy.

Zero Hedge:

• What Happened The Last Time Bonds & Stocks Were So Disconnected? (graph)

• Chart Of The Day: Global Youth Unemployment.

• NYPD Prepares To Use Drones As CA License Plate Readers Stir Controversy.

• Commuters Herded Like Cattle As China Escalates Its Own "War On Terror".

• Bacon Prices To Soar Even More: The Pig Diarrhea Virus Is Back For Round Two.

Business Insider:

• A Staggering 2.1 Billion People Worldwide Are Overweight Or Obese.

• Putin's Invitation To A World War II Ceremony Has Western Leaders Freaking Out.

• Microsoft's(MSFT) CEO Blew It At The Code Conference, Industry Insiders Whisper.

Reuters:

• Brazil pauses interest rate hikes despite high inflation. Brazil left its benchmark interest rate unchanged on Wednesday, pausing one of the world's longest-running tightening cycles to avoid choking its weakening economy despite high inflation. In a unanimous decision, the central bank's monetary policy committee, known as Copom, kept its Selic rate at 11 percent, breaking a streak of nine consecutive hikes as expected by a majority of analysts and market traders.

• Palo Alto(PANW) revenue rises 49 pct, settles lawsuits with Juniper. Cyber security software maker Palo Alto Networks Inc reported a better-than-expected 49 percent jump in quarterly revenue as it added more customers, and said it settled patent litigation with network gear maker Juniper Networks Inc.

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

Telegraph:

• Europe has an even bigger crisis on its hands than British a exit. British people will vote to leave the EU unless offered a new dispensation, writes Ambrose Evans-Pritchard.

The Australian: 

• Iron ore price slips further. The iron ore price has fallen further as fears over weakened steel demand in China continue to weigh on the commodity. Benchmark iron ore for immediate delivery to the port of Tianjin in China is trading at $US96.80 a tonne, down from $US98.10 in the previous session. Last week the iron ore price crashed through the $US100 a tonne mark for the first time in nearly two years and it currently sits at its lowest point since September 13, 2012 when it traded at $US96.10 a tonne. Credit Suisse this week warned that even if iron ore manages some stability in the near term -- or even modest gains -- the second half of the year is likely to see the commodity price fall below 2012's low of $US87 a tonne.

Shanghai Securities News:

• China Asks Banks to Control Worsening Bad Loan. Chinese regulator asked banks to control worsening ratios of outstanding bad loans and conduct stress tests. The regulator said in an internal meeting that banks asset risks are "under control" while spreading to different regions and industries, the report said.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 110.50 -4.5 basis points.

• Asia Pacific Sovereign CDS Index 80.25 -.75 basis point.

• FTSE-100 futures +.15%.

• S&P 500 futures +.05%.

• NASDAQ 100 futures  +.03%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (TECD)/.92

• (SAFM)/1.70

• (BNNY)/.34

• (PLL)/.83

• (LGF)/.43

• (BLOX)/.03

• (ESL)/1.30

Economic Releases
8:30 am EST

• 1Q GDP is estimated to fall -.5% versus a prior estimate of a +.1% gain.

• 1Q Personal Consumption is estimated to rise +3.1% versus a prior estimate of a +3.0% gain.

• 1Q GDP Price Index is estimated to rise +1.3% versus a prior estimate of a +1.3% increase.

• 1Q Core PCE is estimated to rise +1.3% versus a prior estimate of a +1.3% increase.

• Initial Jobless Claims are estimated to fall to 318K versus 326K the prior week.

• Continuing Claims are estimated to fall to 2650K versus 2653K prior.

10:00 am EST

• Pending Home Sales for April are estimated to rise +1.0% versus a +3.4% gain in March.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -118,180 barrels versus a -7,226,000 barrel decline the prior week. Gasoline supplies are estimated to rise by 190,910 barrels versus a 970,000 barrel decline the prior week. Distillate supplies are estimated to rise by +445,450 barrels versus a +3,399,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.33% versus a -.1% decline the prior week.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Pianalto speaking, Fed's Mester speaking, Japan CPI, $29B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the (AKS) annual meeting could impact trading today.

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