Monday, June 09, 2014

Monday Watch

Weekend Headlines 
  • Ukrainian Leader Says Eastern Violence Must End This Week. Ukraine’s new leader, Petro Poroshenko, said the violence that’s rocked the former Soviet republic’s easternmost regions must end this week as peace talks began involving an envoy of Russian President Vladimir Putin. Poroshenko, who took the oath of office June 7, said negotiations should be held on a daily basis. Yesterday’s three-way talks in Kiev included Ukrainian ambassador to Germany Pavlo Klimkin, Russian ambassador to Ukraine Mikhail Zurabov and Heidi Tagliavini, a special representative of the Organization for Security and Cooperation in Europe.
  • Shanghai Island Shows Property Boom Promise as Debt Perils Lurk. Property prices are booming in an island town of 60,000 people near Shanghai while the market slumps elsewhere. It comes at a cost: swelling borrowing that’s threatening local-government finances. Tang Chunmei, a 43-year-old real estate agent in Chenjia Town, 45 kilometers (28 miles) from China’s financial hub, said average apartment prices may rise 35 percent in seven years. That contrasts with cooling nationwide, as home prices fell 0.3 percent in May in the first monthly drop since June 2012. Chenjia financed its expansion in part with a 800 million yuan ($128 million) bond sold through a financing unit last year, exceeding the town’s 120 million yuan of fiscal revenue, to build affordable apartments for farmers as rice fields are turned into tourist attractions. 
  • Asian Stocks Gain With Ringgit on Outlook as Copper Rises. Asian stocks rose, with the regional index headed for a more than seven-month high, while emerging-market currencies gained and the yen weakened after faster-than-estimated Japanese growth data fueled optimism over the global economy. Copper and nickel rebounded as wheat jumped. The MSCI Asia Pacific Index climbed 0.2 percent by 9:56 a.m. in Tokyo, rising a third day.
  • Copper Bets Cut Most in Month as Metal Leads Losers: Commodities. Hedge funds cut bullish copper bets by the most in a month on concern that a supply surplus will return as demand growth slackens in Europe and China. Money managers trimmed their net-long position by 24 percent to a four-week low. A probe into inventories in China spurred speculation that imports by the biggest consuming nation will drop, while the European Central Bank took unprecedented steps to combat deflation. Barclays Plc anticipates that global supply will outpace demand from the fourth quarter. Prices retreated 10 percent this year, the most among the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index.
  • World Needs Record Saudi Oil Supply as OPEC Convenes. OPEC ministers say they will almost certainly leave their oil-production ceiling unchanged when the group meets this week. What really matters for global markets is whether Saudi Arabia will respond to global supply shortfalls by pumping a record amount of crude.
  • Bridgewater Gains in May With Hedge Funds Climbing 1.2%. Hedge funds run by firms including Ray Dalio’s Bridgewater Associates LP posted gains last month as Paul Tudor Jones’s main strategy at Tudor Investment Corp. fell. Hedge funds on average rose 1.2 percent in May, according to Chicago-based Hedge Fund Research Inc., underperforming the 2.1 percent gain for the Standard & Poor’s 500 Index, which rallied to a record from an April 11 low amid optimism for economic growth. Equity, event-driven and macro hedge funds posted advances, according to HFR. The May gains bring hedge-fund returns on average to 2 percent for the year’s first five months, compared with 4.1 percent for the S&P 500.
Wall Street Journal:
  • China's Central Bank Prevails in Policy Battles Over Economic Future. China's central bank is turning into a policy heavyweight in a battle among the country's top economic authorities over how to fuel growth without piling on excessive debt. The government has sought to portray a united front on its "mini-stimulus" measures, or small adjustments to monetary policy to bolster growth. Behind the scenes, however, China's biggest economic agencies—the People's Bank of China, the...
Fox News:
  • Sen. Feinstein questions White House claims on Bergdahl's health, death threat. The chairman of the Senate Intelligence Committee raised questions Sunday about the Obama administration argument that Congress wasn’t informed about the prisoner swap for Army Sgt. Bowe Bergdahl because he might have been killed if the deal was made public. The California Democrat told CBS’ “Face the Nation” that she and the committee’s top Republican, Georgia Sen. Saxby Chambliss, had been briefed previously about the operation and kept that information confidential.
  • Uber a risky ride for passengers, states warn. Uber is under siege. It's not from a rival company, such as Lyft or Sidecar, because they may be in the same boat. It's from states that are warning passengers they may not be covered by insurance if the driver has an accident.
  • U.S. pensions ‘cash negative’ by 2016: Analyst. America's sprawling 401(k) pension system will turn cash flow negative in 2016, threatening disruption for asset managers and selling of equities, according to analysis by Cerulli Associates, a research house.
Zero Hedge:
Business Insider:
  • UAE warns Dubai property bubble may be forming. Low residential rental yields in Dubai and Abu Dhabi may indicate growing imbalances and overheating in the real estate sector, the United Arab Emirates central bank said on Sunday, in the first official warning about soaring property prices.
Financial Times:
  • U.K. Homebuyers Il-Prepared for Interest Rate Rises. U.K. homebuyers are complacent about their ability to repay mortgages if interest rates rise, citing research from Experian. Generation of homeowners who have lived only in low interest rate environment are "severely" under-prepared, citing Experian.
  • Masterly’ Russian operations in Ukraine leave Nato one step behind. The running theme of Nato’s criticism of Russia is that when it comes to Ukraine, the Kremlin has slipped back into a cold war mentality. But while Russia’s strategic thinking might recall the ruthless geopolitics of the past century, its tactics for military analysts have been a model of warfare in the 21st, employing everything from small groups of unidentifiable specialist personnel to cyber warfare.
  • ECB Money Won't Resolve Euro Risk, Fratzscher Says. President of the German Institute for Economic Research Marcel Fratzscher tells Handelsblatt that large and not unlikely risk remains that euro zone economies may fall into stagnation and deflation from which it may be difficult to exit. ECB measures won't solve the fundamental problems of the banking system and lack of structural reforms. More expansionary fiscal policy may be helpful in short term but won't resolve fundamental problems, including excessive national debt. DekaBank economist Ulrich Kater also said that politically generated economic upswing may collapse into sluggish economy and higher debt when it expires, warns against implementing large scale, debt-financed spending programs.
Folha de Sao Paulo:
  • Brazil's Rousseff Prioritizing Inflation Over Growth. President Dilma Rousseff's administration to prioritize keeping inflation below 6.5% rather than spurring economic growth, citing presidential advisers. Not much that can be done to reverse an economic slowdown this year, they said. Govt officials' worst-case scenario sees GDP expanding 1% this year, while best-case scenario contemplates close to 2% growth.
Night Trading
  • Asian indices are unch. to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 100.0 -3.0 basis points.
  • Asia Pacific Sovereign CDS Index 75.0 -3.5 basis points.
  • FTSE-100 futures +.34%.
  • S&P 500 futures -.01%.
  • NASDAQ 100 futures -.01%.
Morning Preview Links

Earnings of Note

  • (CASY)/.53
Economic Releases
  • None of note
Upcoming Splits
  • (AAPL) 7-for-1
  • (UNP) 2-for-1
  • (SXL) 2-for-1
Other Potential Market Movers
  • The Fed's Rosengren speaking and the Fed's Bullard speaking could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

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