Tuesday, May 13, 2014

Tuesday Watch

Evening Headlines 
Bloomberg:
  • Modi Calls for Indian Unity as Exit Polls Signal He Will Take Power. Narendra Modi called for unity in India as exit polls signaled his opposition bloc would win a majority in national elections, boosting his chances of taking power after pledging to revive Asia’s third-largest economy. Modi’s Bharatiya Janata Party and its allies will win 249 to 340 seats, according to six exit polls released yesterday, with 272 needed for a majority. The Congress party and its allies, in power for the past decade, are projected to win 70 to 148 seats. Results will be announced on May 16.
  • Asian Stocks Advance After U.S. Gauges Rally to Records. Asian stocks rose, with the regional benchmark gauge on course for its biggest increase in six weeks, after U.S. equity indexes climbed to records and as investors weighed earnings. Nissan Motor Co., Japan’s second-biggest carmaker, jumped 4.6 percent after forecasting profit will rise to the highest since 2008. Samsung Electronics Co., Asia’s largest technology company, advanced 1.6 percent in Seoul after adding 4 percent yesterday. Sharp Corp., a Japanese electronics maker, soared 5.8 percent after full-year results beat estimates. The MSCI Asia Pacific Index gained 0.9 percent to 139.02 as of 9:26 a.m. in Tokyo, heading for the steepest advance since March 31, as all of its 10 industry groups rose.
  • Tire Rubber Plunging as Vietnam Tappers Expand World Glut. Producers of natural rubber used mostly in tires are creating a global surplus for the fourth straight year, leaving prices mired in a bear market that is the worst of any major commodity. Farmers will expand output faster in 2014 than the gain in demand from surging car sales, creating the biggest glut in at least a decade, the International Rubber Study Group said May 2 in an estimate that was triple its forecast in December. Futures in Tokyo, down 62 percent from a record in 2011 after touching a four-year low last month, may drop 11 percent further to 180 yen a kilogram ($1,761 a metric ton) this year, a survey of 13 analysts by Bloomberg News showed.
Wall Street Journal:
Fox News:
CNBC:
  • AT&T(T) could strike deal for DirecTV as soon as 2 weeks: Report. AT&T and DirecTV are discussing a cash and stock deal that could be struck in as soon as two weeks, according to a report from Dow Jones, citing sources. The deal would come in at around $100 a share, according to Reuters citing a source.
  • Credit Suisse deal with US authorities could top $2B: Report. New York state's banking regulator is seeking hundreds of millions of dollars from Credit Suisse in a probe into potential tax evasion that could push a settlement with U.S. authorities over $2 billion, sources close to the matter told Reuters. The New York regulator made an opening bid of $1 billion, one of the sources said, though negotiations are expected to push down the amount of the final penalty.
Zero Hedge:
Reuters:
  • U.S. investor Jim Rogers pegs junk bonds as a short-sell candidate. Junk bonds, which have done well this year, look like the most promising short trade the bond market has to offer, prominent investor Jim Rogers told Reuters in an interview on Monday. Rogers said the group's narrow spreads made it an attractive target relative to other types of bonds. He added that he is not making the trade himself without giving further details.
  • Australian iron ore trade faces labour unrest as boom fades. Tugboat workers at Australia's main iron ore port threaten to hold a strike that could halt a quarter of the world's iron ore exports and cost miners $100 million a day, just as the industry battles to slash costs and get more out of its workers. The dispute comes as resource firms say Australia has become far more expensive than other locations as a now maturing project construction boom, driven by Chinese demand, led to fat pay packets and lavish conditions.
  • Rackspace(RAX) results beat estimates as web-hosting demand rises. Rackspace Hosting Inc reported better-than-expected quarterly results as demand rose for its web-hosting services, and the company forecast current-quarter revenue above Wall Street estimates. The company's shares rose as much as 12 percent in trading after the bell.
Financial Times:
  • This time China’s property bubble really could burst by George Magnus. Chinese property is the most important sector in the global economy. It has been pivotal in the country’s economic development, provided lucrative business for industrial commodity producers from Perth to Peru, and been the backbone of the surge in world exports to China. In the past few years, predictions that the sector was about to implode at any moment have not been borne out – but now is the time for the world to pay attention. Property activity indicators have been trending lower since mid-2013, and the downturn in the sector now threatens to turn into a bust. At best, China is entering a deflationary phase at a time of global fragility. The default risks in the weakly regulated shadow banking sector – and the rapid rise in local government debt – are real, and property-related.
Liquidity crunch a catalyst for big China slowdown – analysts The mini liquidity crunch is the early warning sign of a substantial economic correction long overdue, amid rising leverage and a broken growth model, say bearish analysts.


While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3222433/Liquidity-crunch-a-catalyst-for-big-China-slowdownanalysts.html?copyrightInfo=true
TheHinduBusinessLine: 
  • India's Public sector banks’ bad debts hit 9-year high. Bad debts of public sector banks have surged to a nine-year high, with the corporate sector accounting for the biggest increase. This will be one of the key challenges before the new government. Indeed, the current favourite to form the new government, the Bharatiya Janata Party, had in its manifesto expressed concerns over the bad debt situation. It promised “necessary steps to reduce non-performing assets (NPAs) in the banking sector” if it comes to power.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 119.75 -2.5 basis points.
  • Asia Pacific Sovereign CDS Index 84.75 +.25 basis point.
  • FTSE-100 futures +.40%.
  • S&P 500 futures +.07%.
  • NASDAQ 100 futures  +.12%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (CVG)/.27
  • (FOSL)/1.17
  • (TTWO)/.09
Economic Releases
7:30 am EST
  • The NFIB Small Business Optimism Index for April is estimated to rise to 94.5 versus 93.4 in March. 
8:30 am EST
  • Retail Sales Advance for April are estimated to rise +.4% versus a +1.1% gain in March.
  • Retail Sales Ex Auto MoM for April are estimated to rise +.6% versus a +.7% gain in March.
  • Retail Sales Ex Auto and Gas for April are estimated to rise +.5% versus a +.8% gain in March.
  • Import Price Index for April is estimated to rise +.3% versus a +.6% gain in March.
10:00 am EST
  • Business Inventories for March are estimated to rise +.4% versus a +.4% gain in February.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Lockhart speaking, Fed's Lacker speaking, Germany ZEW Index, China Retail Sales/Industrial Production, China FDI, weekly US retail sales reports, Oppenheimer Industrial Growth Conference, BofA Healthcare Conference and the Citi Energy/Utilities Conference could impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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