Monday Watch

Weekend Headlines 
Bloomberg: 

• Netanyahu to Push Iran as Worse Threat Than Islamic State. Israeli Prime Minister Benjamin Netanyahu will urge world leaders to keep up the pressure on Iran over its nuclear program even as they confront the threat of Islamic State militants in Iraq and Syria. Netanyahu, addressing the United Nations General Assembly today, will expand on his Sept. 22 remarks mocking “esteemed commentators in the West” who say “the major powers need to go easy on Iran’s nuclear program so that Iran will fight” Islamic State, according to aides familiar with his speech. They asked not to be identified because it hasn’t been delivered.

• Turkey Wants Secure Syria Zone as Militants Strike Kurds. Turkish President Recep Tayyip Erdogan said setting up a “secure zone” inside Syria is necessary to help refugees return after they fled Islamic State’s onslaught against Kurdish areas into Turkey. Erdogan’s remarks to the World Economic Forum in Istanbul may anger Kurdish officials, who accuse him of siding with Islamic State against the Kurds in Syria to justify creating a buffer zone that would smother the autonomous region there. The Turkish government denies supporting Islamic State or any militant group.

• Ukraine Warns of Renegade Rebel Attacks Threatening Cease-Fire. Ukraine warned that groups beyond the control of rebel leaders in the country’s east were continuing attacks on government forces, undermining a truce that has mostly held since it was signed this month. Two autonomous rebel units, “Zarya” and “Don,” fired from long-range artillery at the Ukrainian army near Shchastya, a town 15 kilometers north of Luhansk, regional Governor Hennadiy Moskal said Sept. 27 on his website. Ukrainian troops repelled an attack on the Donetsk airport yesterday, according to military spokesman Andriy Lysenko.

• Alibaba Slumps in First Week as Short Sellers Enter Trade. Day one for shareholders of Alibaba Group Holding Ltd (BABA) was great. Week one proved less so. China’s largest e-commerce company slumped 3.7 percent to $90.46 last week.'

• Softbank Discussing Buyout of DreamWorks Animation. Softbank Corp., the Japanese wireless carrier headed by Masayoshi Son, is in talks to buy Jeffrey Katzenberg’s DreamWorks Animation SKG Inc. film studio, people familiar with the situation said. 

• Commerzbank Said to Face U.S. Laundering Controls Probe. Commerzbank AG (CBK), the German lender seeking to resolve a probe into Iran sanctions violations, also faces a U.S. inquiry into whether it broke anti-money-laundering laws, according to a person with knowledge of the situation.

• Hong Kong Dollar, Stocks Slide Amid Protest Crackdown. Hong Kong’s stocks fell to a two-month low, its currency dropped and equity-market volatility surged amid the biggest police crackdown on protesters since the city returned to Chinese rule. The benchmark Hang Seng Index sank 1.3 percent as of 9:50 a.m. in Hong Kong to the lowest intraday level since July 18 as developers and retailers tumbled. The MSCI Hong Kong Index headed for its biggest drop in a year, while a gauge of stock volatility jumped 15 percent, poised for the steepest surge since February. The city’s currency slid 0.03 percent to HK$7.7602 per greenback.

• Asia Stocks Fall, Led by Hong Kong, as Dollar Climbs. Asian stocks dropped, led by a rout in Hong Kong, after clashes between police and pro-democracy protesters in the Chinese city. The dollar extended gains and the cost of insuring debt against default jumped after U.S. economic data bolstered the outlook for higher interest rates. The Hang Seng Index lost 2.3 percent by 11:22 a.m. in Tokyo, erasing its gain for the year and dragging the MSCI Asia Pacific Index to a 0.7 percent decline.

• Iron Ore Seen Weak by Albanese as High-Cost Mines Face Pain. Iron ore prices that fell to a five-year low this month are seen staying weak for a sustained period as supply exceeds demand and China’s economy slows, according to Tom Albanese, former head of Rio Tinto Group. High-cost producers are facing a “pain point” at prices of about $80 a metric ton, Albanese, chief executive officer of London-based Vedanta Resources Plc (VED), said in interviews with Bloomberg Television and a reporter today. While low-cost producers would still be able to make good money in iron ore, there will be closures of higher-cost mines over time, he said.

• Nickel Poised to Enter Bear Market on Path to Quarterly Loss. Nickel fell, heading for a bear market, on concern that demand will slow in China, the biggest metals user, and after Philippine lawmakers clarified last week they won’t seek an ore-export ban for at least seven years. The metal in London retreated as much as 2.5 percent and is down 13 percent this quarter. Profits at industrial companies in China fell last month for the first time in two years as a slowdown deepens, data showed Sept. 27.

• Hedge Funds Raise Bullish Cocoa Bets on Ebola Concerns. Hedge funds raised bullish bets on cocoa before prices climbed to the highest since 2011 on concern that the deadly Ebola disease will disrupt supplies from West Africa, which produces 70 percent of global supply. Money managers raised their net-long positions by the most in 16 weeks.

• Warren Calls For Hearings on New York Fed Allegations. U.S. Senator Elizabeth Warren called for a congressional investigation into allegations that the Federal Reserve Bank of New York had been too deferential to the institutions it regulated. “Congress must hold oversight hearings on the disturbing issues raised by today’s whistle-blower report when it returns in November -- because it’s our job to make sure our financial regulators are doing their jobs,” Warren, a Massachusetts Democrat and member of the Senate Banking Committee, said in a statement today. 

• Fisher Says Fed Must Weigh Wage Pressures in Setting Rate Policy. The Federal Reserve mustn’t “fall behind the curve” as it weighs when to start raising interest rates, Dallas Fed President Richard Fisher said, citing strengthening U.S. growth and building wage-price pressures. Fisher, a vocal advocate for tighter monetary policy to protect against inflation, also said today that two soon-to-be-released economic reports from his Fed district would “knock your socks off.”

Wall Street Journal:

• China's One-Two Punch Threatens to Hit Economic Growth. Anticorruption Drive Could Disrupt Plans for Wider Overhauls.

• Billions Fly Out the Door at Pimco. About $10 Billion Is Withdrawn After Departure of Gross.

• Small Caps Miss Out on Stock Rally.

• When Central Bankers Become Central Planners. Macroprudential regulation is not likely to prevent asset bubbles. But credit allocation will depress growth.

Fox News:

• US 'understimated' rise of ISIS, Obama says. President Obama acknowledged Sunday that U.S. intelligence officials "underestimated" the threat posed by the Islamic State and overestimated the Iraqi army’s capacity to defeat the militant group.

CNBC:

• Is the long-expected high-yield selloff under way?

• Political reticence blunts ECB’s asset purchase plan.

Zero Hedge:

• S&P Warns On Germany As Anti-Euro Political Party Soars In Popularity.

• The Rise In Volatility.

• BofA Fears "This Would Exacerbate Any Equity Market Sell-Off". (graph)

• High-Yield Credit's Worst Week In 15 Months Sends Stocks Sliding. (graph)

• What Happens When A Money Printer Finally Crashes. (graph)

• The Escape Velocity Delusion: Running Out Of "Next Year".

• What Consumer-Facing CEOs Think: "It's Like Being At War".

• Peak Debt - Why The Keynesian Money Printers Are Done. (graph)

• Goldman(GS): "Some European Economies Already Qualify As A Japanese-Style Stagnation".

• This Riot Is Not In Ferguson, It Is In Hong Kong.

• Russia Discovers Massive Arctic Oil Field Which May Be Larger Than Gulf Of Mexico.

• "Hope Is Not Good Policy" - Saxo Bank Warns The Entire World Is Headed For A Minsky Moment.

• Can Market Forces Prevail: The Eurozone’s Unresolved Situation.

• Police Officer Shot In Ferguson.

• The Plunge Protection Team Is Opening An HFT-Focused Chicago Office.

• The "Only Chart That Matters", Projected Until 2016. (graph)

• "I Am Putting Everything In Goldman Sachs Because These Guys Can Do Whatever The Hell They Want".

Business Insider:

• MICHAEL LEWIS: The 'Ray Rice Video' Of Wall Street Has Arrived. The recordings "portray a New York Fed that is at times reluctant to push hard against Goldman [Sachs]," Bernstein writes.

• Another Round Of Nude Celebrity Photo Leaks Hits The Internet.

• Now Part Of Spain Is Fighting For Independence.

• Taliban Escalates Attacks In Afghanistan.

• We Screwed Up On Ebola, And Now The Crisis Is Getting Much Worse.

• Macy's(M) CEO Offers An Ominous Insight About American Consumers.

• Ukraine Backs Off From EU-Backed Russia Gas Deal.

• Cell Phones Give Away Much More Data Than Customers Realize.

• Ukraine's Poroshenko Is Starting To Lose Support As Putin Gets His Way.

• Hong Kong Protesters Aren't Going Anywhere Despite Massive Police Crackdown.

• It Was A Bad Weekend For Europe.

• John Hussman Just Issued His Strongest Warning Of A Stock Market Crash Yet.

• The Arrest Of A Billionaire Does Not Bode Well For Russia's Economy.

• The Russian Navy Is Aiming To Be Much Larger Than The US Navy.

Reuters:

• Top U.S. regulators warn banks over 'Shellshock' bug. A group of top U.S. financial regulators urged banks to quickly fix their software to protect it against the "Shellshock" computer bug, saying it could expose them to fraud.

Financial Times: 

• Geneva Report warns record debt and slow growth point to crisis. A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, a hard-hitting report will warn on Monday.

Wirtschaftswoche:

• Ifo's Sinn Urges Germany to Act Against ECB ABS Purchases. Germany should take legal moves to oppose the European Central Bank's purchase of asset-backed securities, Hans-Werner Sinn, head of the Ifo economic institute, says in preview of guest editorial to be published in the coming edition. ECB would exceed its treaty-restricted monetary mandate with the planned purchases, Sinn said.

Night Trading

• Asian indices are -.75% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 99.0 +4.5 basis points.

• Asia Pacific Sovereign CDS Index 69.25 +4.0 basis points.

• FTSE-100 futures -.12%.

• S&P 500 futures -.29%.

• NASDAQ 100 futures -.25%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CALM)/1.17

• (CTAS)/.75

• (COCO)/.11

Economic Releases
8:30 am EST

• Personal Income for August is estimated to rise +.3% versus a +.2% gain in July.

• Personal Spending for August is estimated to rise +.4% versus a -.1% decline in July.

• The PCE Core for August is estimated unch. versus a +.1% gain in July. 

10:00 am EST

• Pending Home Sales for August are estimated to fall -.5% versus a +3.3% gain in July.
  

10:30 am EST

• Dallas Fed Manufacturing Activity for September is estimated to rise to 10.5 versus 7.1 in August.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Consumer Confidence report, China HSBC Manufacturing PMI, Deutsche Bank Leveraged Finance Conference, Johnson Rice Energy Conference, (NI) investor day and the (F) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 50% net long heading into the week.