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Wednesday, January 21, 2015

Thursday Watch

Posted by Gary .....at 10:09 PM
Evening Headlines 
Bloomberg:
  • Revenge of Disaffected Europe Risks New Crisis Sparked in Greece. They speak different languages, they come from different backgrounds, yet all have the same message of frustration that’s threatening to redraw the European political map over the next year. Starting with elections this Sunday in Greece and heading west to Ireland via Britain and Spain, polls show Europeans will vent their anger over issues from widening income disparities and record unemployment to unprecedented immigration. For Athens pensioner Irini Smyrni, the moment she’d had enough was when her younger daughter lost her job with the government last year. For Dublin florist Nicola Johns, it was when her business fell behind on rent. 
  • Greek Election Battle in Final Days With Syriza Maintaining Lead. The election battle between Greek Prime Minister Antonis Samaras and opposition leader Alexis Tsipras moved into its final stretch, with Tsipras’s anti-bailout Syriza party maintaining its lead before voting day on Jan. 25. 
  • Draghi Is Pushing Boundaries of Euro Region with QE Program. Mario Draghi is about to bring Europe’s integration project across the Rubicon. At about 2:30 p.m. in Frankfurt, the European Central Bank president will probably commit to a quantitative-easing program that may exceed 1 trillion euros ($1.2 trillion). While the move comes much later than that of the Federal Reserve, which ended its own QE three months ago, the ECB’s arrival at this point still marks a critical juncture in the history of the currency and the European unity it embodies.
  • Emerging Markets, Currencies Look Ripe to Short Sell: Bloomberg Poll. Emerging-market stocks and currencies are luring global investors for all the wrong reasons right now. A quarterly Bloomberg Global Poll showed there was a two-fold surge in the number of respondents who identified developing-nation equities and currencies as the assets they’d most like to bet against. For currencies, the percentage jumped to 12 percent from 6 percent in November while for stocks, it rose to 7 percent from 3 percent.
  • Brazil Keeps Pace of Rate Increases by Boosting to 12.25%. Brazilian policy makers raised borrowing costs for a third straight meeting as analysts forecast they will miss the country’s inflation target. The central bank’s board, led by bank President Alexandre Tombini, boosted the benchmark rate to 12.25 percent from 11.75 percent, as forecast by 56 of 60 economists surveyed by Bloomberg. The vote was unanimous and took into consideration “the macroeconomic scenario and the inflation outlook,” according to the central bank statement. Four analysts had forecast a quarter-point increase.
  • Japan Margin Traders Record Yen Shorts Facing Swiss, Oil Shocks. (graph) Margin traders in Japan raised bets the yen would fall against the dollar to a record amid their currency’s best start to a year since 2010. Wagers from individuals for the Japanese currency to decline outnumbered bets it would gain by 522,856 contracts on Jan. 15, the biggest net shorts since Tokyo Financial Exchange Inc.’s Click 365 began collecting the data in 2006. The figure more than doubled since Sept. 30 as the Bank of Japan’s unexpected Oct. 31 decision to expand bond purchases, known as quantitative easing, drove the yen to an 8 1/2-year low in 2014.
  • Asian Stocks Fall Before European Central Bank Stimulus Decision. Asian stocks fell even amid speculation the European Central Bank will boost stimulus through a sovereign-bond purchase program under the quantitative-easing strategy. The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 134.46 as of 9:05 a.m. in Tokyo before markets open in China and Hong Kong. 
  • Oil Drops as Iraq Signals Production Boost to Offset Price Slide. Oil fell as Iraq said it needs to boost crude production and exports to compensate for lower prices, signaling the global supply glut that spurred the market’s collapse may persist. Futures dropped as much as 1.2 percent in New York. Iraq has lost about 50 percent of its revenue because of the price decline, Iraq’s Deputy Prime Minister Rowsch Nuri Shaways said in Davos, Switzerland. Crude stockpiles in the U.S., the world’s biggest oil consumer, probably expanded for a second week, a Bloomberg News survey shows before government data on Thursday.
  • Bankruptcy Forecaster Sees Junk-Debt Bubble Bursting Next Year. A bubble in the leveraged-finance market is growing and may burst in 12 to 18 months, said Edward Altman, a specialist in credit markets who developed a model for predicting corporate bankruptcies. “We think it’s building,” Altman told a gathering of corporate restructuring experts Wednesday in New York. He said the current “benign credit cycle” encouraged by low interest rates has been going on for five years and led to a “frothy” market. “You’ll be busier at this time next year.” A financial crisis isn’t necessarily expected, since few economists are also predicting a U.S. economic recession, Altman told the Turnaround Management Association, a group of consultants, lawyers, liquidators and other professionals who advise distressed companies. Altman is the director of research in credit and debt markets at New York University’s Salomon Center for the Study of Financial Institutions. He developed the “Z-Score,” a method of predicting a company’s likelihood of bankruptcy.
  • AmEx(AXP) to Cut More Than 4,000 Jobs This Year After Unit Sale. American Express Co. will cut several thousand jobs this year across the company as part of a restructuring, according a person familiar with the decision. AmEx, the biggest U.S. credit-card issuer by purchases, will take a $313 million pretax charge in the fourth quarter to “improve operating efficiencies,” the New York-based company said Wednesday in a statement as it reported results for the period. The person, who asked not to be identified because the reductions weren’t publicly disclosed, declined to elaborate.
Wall Street Journal:
  • U.S. Steel to Idle Plants and Lay Off 545 More Workers. Company to Idle Units in Illinois and Indiana; Cites Low-Cost Imports, Restructuring.
  • State of the Union Drew Lowest TV Audience in 15 Years. President Barack Obama‘s 2015 State of the Union address drew the lowest television viewership for any such speech in the last 15 years, according to new data from Nielsen. 
  • Google(GOOG) to Sell Wireless Service in Deals With Sprint, T-Mobile. Move Likely to Push Rivals to Cut Prices, Improve Speeds.  
  • Falling Oil Prices Worry Regional-Bank Investors. Questions About Loans to Energy Firms Dominate Conversation During Earnings Blitz. 
  • Obama’s American Sniper. Seeing “American Sniper” made the State of the Union speech pretty unbearable.
  • The World’s Monetary Dead End. The European Central Bank embraces quantitative easing despite the sorry track record of ‘helicopter money.’ Central banks in the U.S., Japan and Europe are trapped in a loop. They are fully invested in the theory that zero rates and bond buying are stimulative and add to inflation, yet growth, inflation and median incomes keep going down. 
  • Now He’s After Middle-Class Savers. Mr. Obama prepares to wipe out popular vehicles for funding education. President Obama is pitching his new tax plan as a way to help the middle class at the expense of the rich. But middle-class savers are bound to notice if he achieves two of the White House’s stated goals—to “roll back” tax benefits of 529 college savings plans and “repeal tax incentives going forward” for Coverdell Education Savings Accounts.
Fox News:
  •  Police are using new radar that can track you inside your home. (video)
Zero Hedge:
  • Japan Bought The Most Foreign Stocks Since Records Began Last Week. (graph)
  • The Only Road Out Of Davos.
  • Total Announced Job Cuts In 2015 Just Topped 32,000. (graph)
  • The Most Economically-Correlated Commodity Is Flashing Red. (graph)
  • Panmure: Draghi's QE Will Fail, 2015 Will Be The Year Of "The Great Unwinding". (graph)
  • Market Tensions Mount: Canada, Crude, Copper, Small-Caps, & Credit. (graph)
  • 12 Signs That The Economy Is Really Starting To Bleed Oil Patch Jobs.
  • Kaisa Default Contagion: China's $245bn Corporate Bond Market "Is Too Complacent". (graph)
  • Greece - By The Numbers.
NY Times:
  • U.S. Not Expected to Fault Officer in Ferguson Case. Justice Department lawyers will recommend that no civil rights charges be brought against the police officer who fatally shot an unarmed teenager in Ferguson, Mo., after an F.B.I. investigation found no evidence to support charges, law enforcement officials said Wednesday.
Reuters:
  • New York says Barclays not cooperating in 'dark pool' probe. New York's top law enforcer on Wednesday accused Barclays Plc of defying his subpoenas in a probe of high-speed trading in its private "dark pool," and moved to expand his lawsuit accusing the British bank of fraud.
  • JPMorgan(JPM) CEO Dimon's pay package rose above $20 mln in 2014.
  • SanDisk(SNDK) warns of weak first half of 2015, hurt by lean inventory. Memory chipmaker SanDisk Corp forecast current-quarter and full-year 2015 revenue well below Wall Street expectations, saying it would be unable to meet demand for flash memory storage chips until mid-year due to lean inventory levels. 
  • U.S.-based stock funds attract first weekly inflows since Nov -ICI.
  • Fear of deflation as Chinese hold back on gadgets, getaways. Lennon Yu may be Beijing's worst nightmare: the 24-year-old is willing to wait for car prices to fall before buying. This mindset, if it becomes widespread, could threaten to trap China's cooling economy in a deflationary rut. 
  • F5 Networks(FFIV) revenue misses estimates as big deals slow down. Network equipment maker F5 Networks Inc reported revenue that missed Wall Street's estimates for the first time in eight quarters due to "a marked decrease in the number of deals greater than $1 million". The company also forecast current-quarter revenue and profit below market estimates, sending its shares down nearly 16 percent to $106 in extended trading.
Telegraph: 
  • European economic storm is casting dark clouds over Davos. Slow growth and low inflation seem to have become the established condition, at least for advanced Western economies.
  • EU has squandered last chance to make euro workable, warns Ex-Bundesbank chief. Axel Weber says it is "hard to say" whether Europe would be in better shape today if the euro had never been launched, a tactful evasion understood as nostalgia for the stability of the D-Mark. 
  • Ukraine president Petro Poroshenko tells Russia: we will never bow down. Ukraine's president tells Russian policymakers: you are not for peace, you are for war. 
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 113.0 -8.0 basis points.
  • Asia Pacific Sovereign CDS Index 71.5 -3.25 basis points.
  • S&P 500 futures +.13%.
  • NASDAQ 100 futures +.10%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (LUV)/.55
  • (TRV)/2.54
  • (CY)/.14
  • (ALK)/.93
  • (BBT)/.73
  • (KEY)/.26
  • (PCP)/3.08
  • (JCI)/.77
  • (VZ)/.72
  • (UNP)/1.52
  • (COF)/1.75
  • (ETFC)/.25
  • (ISRG)/4.37
  • (KLAC)/.51
  • (ALTR)/.35
  • (MXIM)/.29
  • (FII)/.38
  • (SBUX)/.80
  • (JBHT)/.88
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 300K versus 316K the prior week.
  • Continuing Claims are estimated to fall to 2400K versus 2424K prior. 
9:00 am EST
  • The FHFA House Price Index for November is estimated to rise +.3% versus a +.6% gain in October.
11:00 am EST
  • The Kansas City Fed Manufacturing Activity Index for January is estimated at 8.0 versus 8.0 in December.
  • Bloomberg consensus estimates call for a weekly EIA crude oil inventory build of +2,670,000 barrels versus a +5,389,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,350,000 barrels versus a +3,171,000 barrel gain the prior week. Distillate inventories are estimated to rise by +780,000 barrels versus a +2,925,000 barrel gain the prior week. Finally, Refinery Utilization is expected to fall by -.83% versus a -2.9% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The ECB rate decision, Draghi press conference, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for January, eco10weekly EIA natural gas inventory report and the (PGH) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity 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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