Thursday, July 31, 2014

Thursday Watch

Evening Headlines 
Bloomberg
  • EU Blacklists Russian Oligarchs to Pressure Putin. Assets of Russian oligarchs Arkady Rotenberg and Yury Kovalchuk were frozen by the European Union in its effort to pressure President Vladimir Putin to stop supporting rebels in eastern Ukraine. Rotenberg, who helps control SMP Bank and InvestCapitalBank OAO, and Kovalchuk, the biggest shareholder in OAO Bank Rossiya, were among eight people that the EU added yesterday to its blacklist of individuals and organizations being punished for the Ukrainian unrest. Three entities -- Russian National Commercial Bank, weapons maker Almaz-Antey and airline Dobrolet -- also were added, according to the EU’s Official Journal. The move marks the bloc’s first strike against business figures described by European leaders as Putin’s “cronies,” and it aligns EU policy more with that of the U.S.
  • Samsung Profit Misses Estimates on Phone Slowdown. Samsung Electronics Co. (005930) posted second-quarter profit that missed analysts’ estimates on increased marketing for its cheaper smartphones as it tries to fend off competition from Apple Inc. and Chinese producers. Net income, excluding minority interests, was 6.18 trillion won ($6 billion) in the three months ended June, the Suwon, South Korea-based company said in a filing today. That compares with the 6.83 trillion-won average of 17 analyst estimates compiled by Bloomberg. The shares fell.
  • Asian Stocks Poised for Third Monthly Gain After U.S. GDP. Asian stocks rose, with the regional index poised to cap a third monthly gain, as the U.S. economy grew faster than forecast and Federal Reserve comments on the jobs market added to the case for keeping interest rates low. Mitsubishi Motors Corp. gained 3.3 percent in Tokyo after the carmaker posted profit that beat analyst estimates. Casio Computer Co. jumped 9 percent after the Japanese electronics manufacturer raised its earnings forecasts for the first half. Samsung Electronics Co. fell 2.1 percent in Seoul after the world’s biggest maker of smartphones posted net income that fell short of expectations amid increased competition from Apple Inc. and Chinese producers. The MSCI Asia Pacific Index (MXAP) added 0.2 percent to 149.78 as of 9:25 a.m. in Tokyo, with almost three stocks rising for each that fell.
  • Investment Bank Job Cuts Loom as Cost Drop Trails Revenue. The largest global investment banks face further cost reductions, like the job cuts JPMorgan Chase & Co. (JPM) began this month, after a drop in first-half expenses failed to match a decline in revenue. Pretax profit at the banking and trading units at seven of the nine largest firms fell in the first six months as costs for the group decreased less than 1 percent from the same period a year earlier, according to data compiled by Bloomberg. Revenue dropped 5 percent, driven by the worst first-half trading results since the financial crisis.
Wall Street Journal: 
  • Growth Rebound Stokes Fed Debate. Economy Bounces Back After Weak Start to Year, but Central Bank Signals Patience as Questions Linger. Federal Reserve officials delivered a modestly more upbeat assessment of the economy Wednesday amid a second-quarter growth rebound and deepening debate inside the central bank about when to start raising interest rates. U.S. gross domestic product, a broad measure of the nation's output of goods and services, advanced at a seasonally adjusted annual rate of 4.0% in the second quarter, the Commerce Department said Wednesday, a...
  • Winds of War, Again. One wishes Barack Obama and John Kerry more luck in Ukraine and the Middle East than Neville Chamberlain had in Munich. 
Fox News: 
CNBC:
Zero Hedge: 
Business Insider:
Reuters:
Telegraph: 
  • Global QE ends as China opens second front in bond tapering. China's central bank, and others, have become "major players on world equity markets", effectively fuelling stock bubbles in much the same way they previously fuelled credit bubbles. "There are major shifts going on global capital markets. People have been lulled into a false sense of security by low volatility and they haven't paid attention. We're not seeing any risk aversion in financial markets," he said.
Evening Recommendations
Susquehanna:
  • Rated (LULU) Positive, target $49.
Night Trading
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 103.5 -.25 basis point.
  • Asia Pacific Sovereign CDS Index 71.0 -.5 basis point.
  • FTSE-100 futures +.07%.
  • S&P 500 futures -.12%.
  • NASDAQ 100 futures  -.09%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (RYL)/.68
  • (CL)/.73
  • (H)/.45
  • (ADP)/.63
  • (BZH)/.22
  • (CME)/.79
  • (AVP)/.21
  • (MA)/.77
  • (STRA)/1.26
  • (MCK)/2.33
  • (CI)/1.84
  • (BDX)/1.68
  • (BG)/1.37
  • (COP)/1.61
  • (ITT)/.52
  • (MOS)/.74
  • (APA)/1.64
  • (K)/1.02
  • (XOM)/1.86
  • (PPS)/.65
  • (TRLA)/-.16
  • (JLL)/1.37
  • (MHK)/2.20
  • (LNKD)/.39
  • (SPF)/.13
  • (FLR)/.99
  • (EXPE)/.76
  • (MCHP)/.67
  • (TSLA)/.04
  • (DDD)/.18
  • (GPRO)/.07
Economic Releases
7:30 am EST
  • The Challenger Job Cuts report for July.
8:30 am EST
  • The 2Q Employment Cost Index is estimated to rise +.5% versus a +.3% gain in 1Q. 
  • Initial Jobless Claims are estimated to rise to 300K versus 284K the prior week.
  • Continuing Claims are estimated to fall to 2492K versus 2500K prior.
9:00 am EST
  • ISM Milwaukee for July is estimated to rise to 61.0 versus 60.57 in June.
9:45 am EST
  • Chicago Purchasing Manager for July is estimated at 63.0 versus 62.6 in June.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone CPI/Unemployment reports, China HSBC Manufacturing PMI, weekly EIA natural gas inventory report, RBC Consumer Outlook Index, weekly Bloomberg Consumer Comfort Index, (KORS) annual meeting and the (MLHR) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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