Monday, October 27, 2014

Monday Watch

Posted by Gary .....at 12:50 AM
Weekend Headlines 
Bloomberg:
  • Israel’s Lapid Says Relations With U.S. in ‘Crisis'. Israeli Finance Minister Yair Lapid told a gathering in Tel Aviv today that relations between Israel and the U.S. are in a “crisis.” The administration of President Barack Obama blocked some senior officials, including Vice President Joe Biden, from meeting with Israeli Defense Minister Moshe Ya’alon during his recent visit to the U.S., Ynet website reported yesterday. The decision was meant to signal displeasure with Ya’alon’s criticism of U.S. efforts to reach an Israeli-Palestinian peace agreement and Obama’s policy on Iran, the website reported. “There is a crisis with the Americans and it has to be treated like a crisis,” Lapid said, according to comments relayed in an e-mail by his spokesman. “Relations with the U.S. are critical and important to Israel, and everything must be done to resolve the crisis and restore good ties.” Lapid didn’t mention Ya’alon in his comments.
  • Rousseff Re-Elected on Call to Save Brazil’s Social Gains. Brazil’s President Dilma Rousseff won re-election and stretched her Workers’ Party’s rule to a record 16 years by convincing voters her opponent threatened social gains she pledged to expand in her second term. Rousseff, who has maintained record-low unemployment even as the economy posted the slowest growth under any Brazilian president in more than two decades, had 52 percent of the vote with 99.99 percent of ballots counted by the electoral court in Brasilia. Senator Aecio Neves, a former governor of Minas Gerais state, had 48 percent. The result was the closest presidential election since the return of democracy in 1985.
  • Brazil Stock ETF Tumbles in Tokyo on Rousseff’s Victory. An exchange-traded fund investing in Brazilian equities plunged the most in three years in Tokyo after President Dilma Rousseff won re-election, damping speculation for a change in policies that have wiped out $553 billion of stock market value and left the economy in recession. The NEXT FUNDS Ibovespa Linked ETF (1325) dropped 6.3 percent at 10:06 a.m. in Tokyo, heading for the biggest drop since September 2011.
  • Iran Hangs Woman at Center of Amnesty Group Campaign. Iranian authorities executed a woman found guilty of murder despite a campaign by rights group Amnesty International to have her sentence overturned on grounds that the investigation had been “deeply flawed.” Reyhaneh Jabbari, 26, was hanged yesterday, state-run Islamic Republic News Agency reported, citing Tehran’s prosecutor’s office.
  • EU Stress Test Shows How Capital Rules Give Room to Hide. The European Union’s toughest-ever stress test was meant to leave banks with nowhere to hide. The results show how the bloc’s capital rules got in the way. A total of 24 lenders failed the European Banking Authority’s stress test with a capital shortfall of 24.6 billion euros ($31.2 billion). The EBA used EU rules as applicable over the three-year horizon of the test. These give national supervisors scope to allow banks to count instruments whose eligibility as core capital will be gradually eliminated over the next four years.
  • Italy Banks Emerge as Biggest Losers in ECB Health Check. Italian banks showed the largest combined capital shortfall in the European Central Bank’s review of the region’s lenders as the country struggles to emerge from its third recession in six years. Banca Monte dei Paschi di Siena SpA, Italy’s third-largest lender, emerged with a capital gap of 2.1 billion euros ($2.7 billion) while Banca Carige SpA (CRG) must replenish 814 million euros of capital after taking into account funds raised this year, the ECB said in a statement today. Of the nine Italian banks that failed a stress test, four still showed holes after measures they took this year, according to the ECB’s report.
  • Russia Brain Drain Saps Talent as Sanctions Hit Financing. “Russian venture-capital funds want to invest their money only in Russia, but we want to build an international business and they won’t support us,” Kulizhnikov, a former analyst at investment firm Alor SPB, said at a forum at Moscow’s Digital October center on Oct. 10. “We don’t need that much. Maybe $5 million to $10 million, to hire engineers, specialists, etc.” 
  • China Stocks Head for Longest 2014 Losing Streak on Link Delay. China’s stocks fell for a fifth day, sending the benchmark index toward its longest losing streak this year, amid concern the delay to the start of the Hong Kong-Shanghai bourse link will sap demand for shares. Citic Securities Co. and Haitong Securities Co., the nation’s biggest-listed brokerages, dropped more than 2 percent in Shanghai and Hong Kong. Hong Kong Exchanges & Clearing Ltd. plunged 4.6 percent after Charles Li, the chief executive officer of the bourse operator, said he had no idea when authorities will give the green light to proceed on the link. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. slid to a three-month low after third-quarter profit dropped. The Shanghai Composite Index (SHCOMP) slid 0.7 percent to 2,285.66 at 9:53 a.m., while the Hang Seng China Enterprises Index (HSCEI) declined 1 percent.
  • Asia Stocks Rise as ECB Stress Tests Ease Europe Concern. Asian stocks rose, after the regional benchmark gauge capped its first weekly advance in seven weeks, as a stress test passed by most European banks added to signs of recovery in the region. The MSCI Asia Pacific Index (MXAP) gained 0.5 percent to 138.22 as of 9:01 a.m. in Tokyo, the highest intraday level since Oct. 10, before markets opened in Hong Kong and China.
  • Goldman(GS) Cuts Brent, WTI Forecast as Production to Outpace Demand. Goldman Sachs Group Inc. (GS) cut its forecasts for Brent and West Texas Intermediate crude prices next year and said OPEC was losing its pricing power as U.S. shale oil output increases. Brent will average $85 a barrel in the first quarter, down from a previous forecast of $100 a barrel, and WTI will sell for $75 a barrel in the period, from an earlier estimate of $90 a barrel, analysts including Jeffrey Currie wrote in a report. 
  • Copper to Nickel Drop on Concern China’s Demand Remains Subdued. Copper retreated for a second day and nickel extended its longest weekly slump in 13 years on concern that demand will remain weak in China, the world’s biggest consumer of industrial metals. Copper in London fell as much as 0.5 percent and nickel slid as much as 0.7 percent. China’s economic growth will slow to 7.2 percent in the current quarter, Song Guoqing, an academic member of the People’s Bank of China monetary policy advisory committee, said on Oct. 25. The second-biggest economy in the world may expand 7.3 percent next year, according to Song. China set the 2014 growth target at 7.5 percent.
  • S&P 500 Rising at Five Times GDP Shows Recovery Priced In. For almost six years, one of the most powerful bull markets on record has coexisted with the weakest economic recovery since World War II. This month’s selloff in stocks shows how much investors want that to change. In the latest fit of nerves, market volatility soared to a three-year high and the Standard & Poor’s 500 Index dropped as much as 9.8 percent in the 26 days ending Oct. 15. Everything from Ebola to Europe and the Federal Reserve were blamed for the retreat, the fourth to exceed 3 percent this year. Another explanation is that investors are finding their patience taxed after waiting five years for economic growth to catch up with the market. From March 2009 through June 2014, the S&P 500 has increased 4.7 percent a quarter, about five times faster than gross domestic product, data compiled by Bloomberg show. That’s the biggest gap since at least 1947.
Wall Street Journal: 
  • Christie Defends Mandatory Ebola Quarantine for Health-Care Workers. But Administration’s Fauci Says Quarantines Send Wrong Message. The White House pushed back against the governors of New York, New Jersey, Illinois and other states that instituted procedures to forcibly quarantine medical workers returning from West Africa, deepening an emotional debate brought on by recent Ebola cases in the U.S. A senior administration official said Sunday that new federal guidelines under development would protect Americans from imported cases of the disease but not interfere with the flow of U.S. health workers to and from West Africa to fight the epidemic there.
  • New Alarm Sounds in U.S. Over ‘Lone Wolf’ Attacks. New York Hatchet Attack Shows Danger of Self-Radicalized Terrorists. New York City’s top counterterrorism official went to Florida last week to warn a group of police chiefs about the growing threat of self-radicalized terrorists. Back home in New York on Thursday, a 32-year-old man provided Exhibit A, attacking two police officers with a hatchet before he was shot and killed by police. At first glance, the attack outside a Queens department store seemed simply the act of a deranged man acting alone. But to a growing number of local and national law-enforcement officials, the attack...
  • The Incredibility Infection. The White House objects to the state quarantines its own failures invited. So the Obama Administration is pressuring the Governors of New York and New Jersey behind the scenes to reverse their decision on Friday to impose a mandatory quarantine on health workers returning from treating Ebola patients in West Africa. Well, if it weren’t for the Administration’s incompetence in handling Ebola risks on U.S. soil, maybe the state leaders wouldn’t have felt they had to take matters into their own hands.
Barron's:
Fox News:
Zero Hedge:
Business Insider:
Spiegel:
  • Merkel Annoyed by CEOs Wanting to Ease Russia Sanctions. German Chancellor Angela Merkel is "irritated" by DAX CEOs calling to try to loosen EU sanctions against Russia, citing people close to the events.
Financial News:
  • China Won't Loosen Monetary Policy Comprehensively. Overall monetary policy easing is not an option for the central government now as the debt problem could hinder economic restructuring, according to a commentary written by reporter Xu Shaofeng.
Night Trading
  • Asian indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 115.0 unch.
  • Asia Pacific Sovereign CDS Index 67.75 -.25 basis point.
  • FTSE-100 futures +.44%.
  • S&P 500 futures +.09%.
  • NASDAQ 100 futures +.19%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (AWI)/.78
  • (MRK)/.88
  • (STX)/1.25
  • (ADVS)/.36
  • (AMGN)/2.11
  • (AVB)/2.13
  • (BWLD)/1.07
  • (CLF)/.02
  • (HIG)/.83
  • (MSTR)/-.26
  • (TWTR)/.01
Economic Releases
9:45 am EST
  • The Preliminary Markit US Services PMI for October is estimated to fall to 57.8 versus 58.9 in September.
10:00 am EST
  • Pending Home Sales for September are estimated to rise +1.0% versus a -1.0% decline in August.
10:30 am EST
  • Dallas Fed Manufacturing Activity for October is estimated to rise to 11.0 versus 10.8 in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The German IFO and the (SCHW) business update could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and technology 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 week.

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