Sunday, June 22, 2014

Monday Watch

Weekend Headlines 
Bloomberg: 
  • Militants Seize Iraqi Town Near Border With Jordan. Gunmen fighting Iraqi forces seized more territory along the country’s borders with Jordan and Syria, as President Barack Obama warned that advances by militants could spill over into neighboring countries. Fighters from the Islamic State in Iraq and the Levant, an al-Qaeda breakaway group, took all the border crossings with Jordan and Syria, Hameed Ahmed Hashim, a member of the Anbar provincial council, said by telephone yesterday. Militants took Rutba, about 145 kilometers (90 miles) east of the Jordanian border, Faleh al-Issawi, the deputy chief of the council, said by phone. Anbar province in western Iraq borders both countries. The Jordanian army didn’t immediately respond to a request for information about the situation on the border. 
  • Putin Backs Cease-Fire in Ukraine Amid Russia Army Drills. Russian President Vladimir Putin voiced support for a cease-fire in Ukraine declared by his counterpart, calling for all sides to halt military activities even as he put more than 65,000 troops on combat alert. Putin said that while he supports the week-long truce that President Petro Poroshenko announced on June 20, the move shouldn’t be an ultimatum to militia groups and won’t be “viable or realistic” without “constructive steps” to start negotiations with rebel leaders in southeast regions. The statement, issued late yesterday by the Kremlin, came after the Defense Ministry in Moscow announced snap military drills across central Russia, the biggest since the country annexed Ukraine’s Black Sea peninsula of Crimea in March. Poroshenko, in office two weeks, is seeking to quell violence in the Luhansk and Donetsk regions that’s left hundreds dead. 
  • China Beige Book Shows Economy Slowing on Investment. China’s economic slowdown deepened this quarter, as capital spending showed weakness and fewer companies applied for credit, a private survey showed. Half of businesses reported higher investment, the smallest proportion and the sharpest drop since the survey began 10 quarters ago, according to the China Beige Book, a report published quarterly by New York-based China Beige Book International. The slowdown hurt hiring and wages, and interest rates offered by shadow lenders fell below levels offered by banks, it said. “Since investment has been the engine of the economy for the past seven years, this weakness has sweeping effects on sectors, regions and gauges of firm performance,” Leland Miller, president of China Beige Book International, said in a statement with Craig Charney, director of research and polling. “Overinvestment has been an addiction and withdrawal symptoms will not be pretty.” 
  • Abe’s Support Drops to Lowest Since He Took Office in Asahi Poll. Support for Japanese Prime Minister Shinzo Abe fell to 43 percent in an opinion poll published today, with more than half the respondents opposing his push to broaden the role of Japan’s defense forces. Backing for Abe was down 6 percentage points from a month earlier in the Asahi newspaper poll, the lowest reading in an Asahi survey since he took office in December 2012.
  • Asian Stocks Advance With Aussie, Copper After China PMI. Asian stocks jumped, with the regional index extending a six-week rally, the Australian dollar rose and copper gained as a measure of Chinese manufacturing unexpectedly signaled expansion. Crude oil rose as Iraqi insurgents seized more territory, while gold fell. The MSCI Asia Pacific Index gained 0.5 percent by 10:58 a.m. in Tokyo, following a 0.4 percent advance last week.
  • Hedge Funds Bet on Sugar as Dryness Threatens Crops: Commodities. Hedge funds got more bullish on sugar before prices climbed to the highest since October as dry weather threatened supply from India to Brazil. Money managers raised their net-long position for the first time in four weeks. A lack of rain in Brazil is compounding damage from the first-quarter drought and will cut yields, says Job Economia & Planejamento, a researcher in Sao Paulo.
Wall Street Journal:
  • Secret U.S. Plan to Aid Iraq Fizzled Amid Mutual Distrust. The Obama's Administration Devoted Only a Handful of U.S. Specialists to the Task. Amid growing signs of instability in Iraq, President Barack Obama authorized a secret plan late last year to aid Iraqi troops in their fight against Sunni extremists by sharing intelligence on the militants' desert encampments, but devoted only a handful of U.S. specialists to the task. So few aircraft were dedicated to the program, which also faced restrictions by the Iraqis, that U.S. surveillance flights usually took... 
  • Inflation Is Back on Wall Street Agenda. For years, critics have warned that the Federal Reserve’s easy-money policies would produce massive inflation. So far, they have been wrong. Last week, however, the Labor Department released the strongest inflation numbers since 2012, and now Wall Street is debating what it means for investments. Stock and bond investors are split.
  • China Metal Probe Weighs on Copper Outlook. Hedge funds and other money managers are building up short positions in the global copper market, according to U.S. data, riding on allegations of fraudulent metal-backed financing in China to amplify pressure on prices of one of the world's most heavily traded metals. These positions are likely to further weigh on the outlook for the red metal, as the effects of an official probe on metal stockpiles in the eastern Chinese port of Qingdao continue to ripple across global markets. The port's operator has confirmed... 
  • Presbyterians Join the Anti-Israel Choir. Divesting from companies likeMotorola Solutions to show solidarity with the Palestinians. The Presbyterian Church (U.S.A.) is bleeding members. Between 2000 and 2013, almost 765,000 members left the organization, a loss of nearly 30%. Last week the church's leadership met in Detroit for crisis talks. No, not about the emptying-pews crisis. The Israel-Palestinian crisis. With a dwindling membership, the Presbyterian Church (U.S.A.) clearly needs new friends, but the church does itself no favors by courting Israel's enemies.
MarketWatch.com:
Zero Hedge:
Business Insider:
  • Hillary Clinton Says She Isn't 'Truly Well Off'. Clinton responded to criticism of her wealth in an interview with the Guardian newspaper published Saturday night by suggesting Americans won't be concerned about the more than $100 million her family has reportedly earned in recent years because they're not "truly well off." "They don't see me as part of the problem," Clinton said of Americans who are upset about income inequality, adding, "Because we pay ordinary income tax, unlike a lot of people who are truly well off, not to name names; and we've done it through dint of hard work."
Wall Street All-Stars:
Washington Post:
Reuters:
Financial Times: 
  • Central banks set to cut debt holdings. Central banks are planning to cut their exposure to longer-term debt to protect themselves from losses when the Federal Reserve ends its bond-buying this autumn, increasing the risk of instability in global markets.
Telegraph:
RIA Novosti:
  • Putin Says Military Action in Ukraine Hasn't Stopped Yet. Russia observed "rather active" artillery shelling from Ukrainian side overnight, citing Russian President Vladimir Putin.
Kathimerini:
  • Bank of China's Wellink Sees Global Economic Danger. "Global Economy is susceptible to external shocks," Nout Wellink, independent director at Bank of China, is cited as saying in an interview. Market conditions globally don't reflect fundamentals of real economy. Central banks will find it difficult to taper unconventional monetary policies. European Central Bank may proceed to purchase asset-backed securities in future, thus exhausting its means to intervene in economy.
Night Trading
  • Asian indices are unch. to +.5% on average.
  • Asia Ex-Japan Investment Grade CDS Index 100.0 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 74.50 -1.0 basis point.
  • FTSE-100 futures +.10%.
  • S&P 500 futures +.24%.
  • NASDAQ 100 futures +.27%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (SONC)/.29
  • (MU)/.72
  • (HTZ)/.08
Economic Releases
8:30 am EST
  • Chicago Fed Nat Activity Index for May is estimated to rise to .2 versus -.32 in April.
9:45 am EST
  • Preliminary June Markit US Manufacturing PMI is estimated to fall to 56.0 versus 56.4 in May.
10:00 am EST
  • Existing Home Sales for May are estimated to fall to 4.74M versus 4.65M in April.
Upcoming Splits
  • (OZRK) 2-for-1
  • (CELG) 2-for-1
  • (CORE) 2-for-1
  • (MIDD) 3-for-1
Other Potential Market Movers
  • The Eurozone Manufacturing PMI and the Morgan Stanley REIT Summit could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity 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 week.

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