Friday, August 22, 2014

Friday Watch

Posted by Gary .....at 12:49 AM
Evening Headlines 
Bloomberg: 
  • Islamic State Poses Imminent Threat to U.S., Hagel Says. The militant Islamic State poses an “imminent threat” to the U.S. and may take years to defeat, Defense Secretary Chuck Hagel said. “They are an imminent threat to every interest we have, whether it’s in Iraq or anywhere else,” Hagel said today at a Pentagon news conference. The beheading by Islamic State of American journalist James Foley, shown in a graphic video released this week, has drawn fresh attention and international condemnation to the terrorist group that has seized a swath of Syria and Iraq in its quest to create a Sunni caliphate. Islamic State “is as sophisticated and well-funded as any group that we have seen,” Hagel said. “They’re beyond just a terrorist group. They marry ideology, a sophistication of strategic and tactical military prowess. They are tremendously well funded.” 
  • Russian Convoy Set to Enter Ukraine. A convoy carrying humanitarian aid from Russia is poised to start crossing the border to Ukraine as world leaders step up diplomatic efforts to ease tension in the country wracked by separatist unrest. Deliveries may start today to Ukraine’s easternmost regions, where months of fighting has left thousands of residents without water and electricity, the Red Cross said. German Chancellor Angela Merkel will arrive tomorrow in Kiev, while Ukrainian President Petro Poroshenko said he’ll seek to negotiate a peace agreement with his Russian counterpart, Vladimir Putin, and European Union representatives next week.
  • Poorly Paid Chinese Savers Skirt Deposits for Structured Notes. Chinese investors looking for a better return than what they’re getting on bank deposits have boosted structured product offerings in the nation to the most in more than 18 months. The number of structured offerings, which in China are sold under the banner of wealth- and asset-management products, offered by banks jumped to 253 in July, the most since December 2012, according to research firm Cnbenefit. Savers diverted 1.6 trillion yuan ($260 billion) of deposits into asset-management products last month, sending local-currency bank holdings down by a record amount, central bank data back to 2000 show.   
  • India to Unveil Warship to Deter Chinese Submarines Near Coast. India will unveil its first home-built anti-submarine warship tomorrow in a move to deter China from conducting underwater patrols near its shores. Defense Minister Arun Jaitley will commission the 3,300-ton INS Kamorta at the southeastern Vishakapatnam port. The move comes a week after Prime Minister Narendra Modi introduced the largest indigenously built guided-missile destroyer and vowed to bolster the country’s defenses so “no one dares to cast an evil glance at India.”
  • Smell of Ebola Lingers as Health Workers Fight Disease. Ebola has a specific smell, says Sebastian Stein, a medical worker in Sierra Leone. While he can’t really describe it, he can tell you the effect. “It’s full on. It’s in your face,” he said. Sulaiman Kanneh Saidu, who runs an Ebola treatment center, recalls running to a police station to escape an angry mob when he tried to move a diagnosed patient, along with other suspected cases, to a hospital. The mob wanted the patients treated at home, and that’s where they ended up, he said.
  • Li & Fung Falls on Challenging U.S., Europe Outlook. Li & Fung Ltd. (494), the world’s largest supplier of clothes and toys to retailers, fell the most in eight months in Hong Kong trading after saying conditions will remain challenging in key U.S. and European markets. The company controlled by William and Victor Fung dropped as much as 5.1 percent, the biggest intraday decline since Dec. 12, to HK$9.95 and traded at HK$10 as of 9:55 a.m.
  • Asian Stocks Advance, Extending Weekly Gain, on U.S. Data. Asian stocks rose after reports from U.S. housing to manufacturing showed the world’s largest economy is strengthening. Japan’s Nikkei 225 Stock Average headed for a 10th day of gains, the longest winning streak in 26 years. Iluka Resources Ltd. climbed 4.3 percent in Sydney, leading an advance in the region, after posting an unexpected profit. Santos Ltd. jumped 3.8 percent as earnings increased at the Australian oil and gas producer. SoftBank Corp. accounted for the largest gain on the Nikkei 225, rising 0.6 percent in Tokyo. The MSCI Asia Pacific Index (MXAP) added 0.2 percent to 148.74 as of 9:36 a.m. in Hong Kong, on course for a second week of gains.
  • Italy May Need More From Draghi as Debt Load Mounts: Euro Credit. Italy’s best hope may again be the bond market’s favorite Italian: Mario Draghi. The nation’s mounting debt, coupled with a shrinking economy, is close to unsustainable, Ashoka Mody, a former deputy director at the International Monetary Fund, said yesterday in a telephone interview from New Delhi. “Unless there is an extraordinary fiscal effort or a growth recovery, the Italian debt must be regarded with a reasonable probability to be unsustainable today,” said Mody, now a visiting professor in international economic policy at the Woodrow Wilson School, Princeton University.
Wall Street Journal: 
  • U.S. Eyes Wider Action on Islamist Militants. Killing of Journalist Fuels Push for International Campaign; Officials Say Syria Vital to Defeating Islamic State. The beheading of journalist James Foley has prompted American officials to begin working to knit together a broader international campaign to combat the extremists of the Islamic State, an effort that the Pentagon warned will require taking the fight beyond Iraq and into neighboring Syria. The Obama administration has indicated it is prepared to continue selective airstrikes against the extremists inside Iraq, where they have seized significant swaths of territory. But Gen. Martin Dempsey, the chairman of the Joint Chiefs...
  • U.S. Bond Issuance Nears $1 Trillion. Companies Take Advantage of Low Interest Rates to Issue Bonds. U.S. corporate-bond issuance is hurtling toward a record for the third consecutive year, as companies take advantage of a surprising interest-rate decline to stock up on cash. Companies around the globe have sold about $994.9 billion of bonds in the U.S. this year as of Thursday morning, according to data provider Dealogic, which has figures dating back to 1995. That is up more than 4% from a year ago, with sales on pace to cross the..

Fox News: 
  • Pentagon broke law with Bergdahl prisoner swap, government watchdog says. (video) A nonpartisan government watchdog agency said Thursday that the Pentagon broke the law when it swapped five Taliban leaders for Army Sgt. Bowe Bergdahl earlier this year. The Government Accountability Office, in a legal opinion issued at the request of congressional lawmakers, said the Defense Department violated the law by failing to notify key Capitol Hill committees at least 30 days in advance. Further, the report said the Pentagon broke another law by using funds that were not technically available.
CNBC:
  • Fed's Charles Plosser on 'risky' policy, watching wages. (video) The Federal Reserve's current policy on interest rates is too "risky" and could lead to "traumatic" consequences, one of the Fed's most outspoken hawks said on Thursday. "We are running a very risky policy, if you will, given where the stance of the economy is and seems to be going," Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, said in an interview.
Zero Hedge:
Business Insider:
Reuters:
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are unch. to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 100.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 68.5 -1.25 basis points.
  • FTSE-100 futures +.08%.
  • S&P 500 futures +.05%.
  • NASDAQ 100 futures  +.09%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (ANN)/.69
  • (FL)/.54
  • (HIBB)/.31
Economic Releases 
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Yellen speaking, ECB's Draghi speaking and the Canadian inflation report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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