Sunday, April 19, 2015

Monday Watch

Weekend Headlines 
Bloomberg: 
  • Iranian Commander Rejects Nuclear Inspections at Military Bases. International inspectors won’t be allowed access to military bases in a deal with world powers to curb Tehran’s nuclear program, a top Iranian commander said. “They will not even be permitted to inspect the most normal military site in their dreams,” said Brigadier General Hossein Salami, deputy head of Iran’s Revolutionary Guard Corps, according to the state-run Press TV news channel. “Visiting a military base by a foreign inspector would mean the occupation of our land because all our defense secrets are there,” Salami said. “Even talking about the subject means national humiliation.   
  • Draghi Warning Unheeded as Euro’s Best Streak in a Year Stalls. European Central Bank President Mario Draghi is warning investors not to bet against the euro. They don’t seem to have gotten the message. The euro’s longest winning streak in a year stalled Monday as regional leaders wrangled with a defiant Greece over how to avoid a default. Draghi said in Washington Saturday that while the situation is “urgent,” it’s premature to speculate about a Greek exit from the currency union. Bets by hedge funds and other large speculators for the euro to decline against the dollar remained near a record high in the latest data from the Washington-based Commodity Futures Trading Commission.
  • Fed Crisis-Liquidity Function Reviewed for Potential Use by IMF. IMF member nations are discussing how to expand the lender’s mandate to include keeping markets liquid during a financial crisis, a role played by a group of major central banks led by the Federal Reserve in 2008. The International Monetary Fund’s main committee of central bank governors and finance ministers is working on ways for the fund to provide a better financial “safety net” during a crisis, said Singapore Finance Minister Tharman Shanmugaratnam, who last month finished a four-year term as chairman of the panel. Singapore remains a member of the International Monetary and Financial Committee.
  • World Braces for Taper Tantrum II Even as Yellen Soothes Nerves. The world economy is about to discover if to be forewarned by the Federal Reserve is to be forearmed. Two years since the Fed triggered a selloff of their assets in the so-called “taper tantrum,” the finance chiefs of emerging markets left Washington meetings of the International Monetary Fund praising Chair Janet Yellen for the way she is signaling plans to raise U.S. interest rates. 
  • Metals, Aussie Rise on China Stimulus as Stocks Swing; Oil Gains. Industrial metals rallied with commodity-producers’ currencies, while Chinese money-market rates fell to a two-year low after the central bank cut the amount of reserves banks need by the most since the global financial crisis. Oil climbed with U.S. index futures. Copper and zinc futures rose at least 0.7 percent by 12:03 p.m. in Tokyo, as the currencies of Australia, New Zealand and Canada strengthened at least 0.3 percent versus the dollar. Chinese interest-rate swaps slid to the lowest level since 2012, while the Shanghai Composite Index fluctuated after advancing more than 6 percent last week.
  • Nigeria, Algeria See Oil Prices Staying Low for a Long Time. Oil prices are likely to stay low for a long time after falling more than 40 percent in the past year, said officials from two OPEC nations. Nigeria and Algeria both warned that oil prices, currently at around $60 a barrel, probably won’t recover to the 2011-2013 level of more than $100 a barrel. “You forecast at your own risk, but it seems to me that we should be regarding this as a permanent shock,” Ngozi Okonjo-Iweala, the Nigerian finance minister, said on a panel discussion Sunday in Washington near the end of the International Monetary Fund’s spring meetings. “We should prepare our economies for that eventuality.”
  • Copper Bulls Backing Away as China Woes Trump Supply Concerns. Investors are backing away from copper after the biggest two-month rally since 2012. The problem is that demand is slowing in China, which accounts for about half of global copper use. Producers including Freeport-McMoRan Inc. say Chinese buying hasn’t picked up as it normally does at this time of year, and Goldman Sachs Group Inc. and Societe Generale SA are among banks predicting lower prices.
Wall Street Journal: 
  • Republican Presidential Candidates Spar Over Party’s Future. New Hampshire gathering exposes split over whether to broaden GOP’s appeal or rally the base. The biggest gathering yet of Republican presidential hopefuls this past weekend sharpened divisions in the broad field of candidates over the path to return the GOP to the White House, making the 2016 primary race a moment for the party to define its national identity.
  • Investors Grow Wary of Emerging-Market Debt. Fear of defaults grows as developing economies slow and dollar has climbed. Emerging-market bonds are being submerged in investors’ worries. Facing rising corporate defaults from Brazil to China to Ukraine, some portfolio managers are selling debt issued by emerging-market companies.
  • Whatever the Ayatollah Wants. President Obama keeps giving and giving and giving. Give Ayatollah Ali Khamenei credit for knowing his opposition. Two weeks ago the Supreme Leader declared that Western sanctions had to be lifted immediately as a condition of a nuclear deal. And sure enough, on Friday President Obama said Iran would get significant sanctions relief immediately upon signing a deal. The Ayatollah knows that Mr. Obama wants an agreement with Iran so much that there’s almost no concession the President...
Fox News: 
  • White House condemns ISIS video that purportedly shows killing of Ethiopian Christians in Libya. The White House Sunday evening condemned a video purportedly showing a mass execution of Ethiopian Christians in Libya by terrorists affiliated with Islamic State. "We express our condolences to the families of the victims and our support to the Ethiopian government and people as they grieve for their fellow citizens," National Security Council spokesperson Bernadette Meehan said in a statement. "That these terrorists killed these men solely because of their faith lays bare the terrorists' vicious, senseless brutality."
CNBC: 
Zero Hedge:
Business Insider:
Reuters:
  • U.S. regulators may recommend testing food for glyphosate residues. U.S. regulators may start testing food products for residues of the world's most widely used herbicide, the Environmental Protection Agency told Reuters on Friday, as public concern rises over possible links to disease. Glyphosate, the active ingredient in Roundup herbicide, has come under intense scrutiny since a research unit of the World Health Organization reported last month it was classifying glyphosate as "probably carcinogenic to humans." The herbicide is considered safe by the EPA, as well as many foreign regulatory agencies, including in the European Union.
  • DoubleLine's Gundlach says U.S. high-yield credit could face crisis. The U.S. high-yield credit market, which has benefited from massive flows in the last few years from investors looking for higher returns, could unravel in about two years after the Federal Reserve starts raising interest rates, DoubleLine Capital chief executive Jeffrey Gundlach said on Sunday. "I think that's the next bond market crisis," Gundlach told TV program Wall Street Week.
Telegraph: 
Xinhua:
  • PBOC's Zhou Says Slower Growth More Sustainable. Slowdown in China's GDP growth to 7% in first quarter leaves more room for structural adjustments and shift in growth mode, citing People's Bank of China Governor Zhou Xiaochuan who made comments in Washington. Slower expansion can help nation achieve more balanced, more sustained growth, Zhou says
Night Trading
  • Asian indices are -.75% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 109.5 +5.5 basis points.
  • Asia Pacific Sovereign CDS Index 61.75 +2.5 basis points.
  • S&P 500 futures +.40%.
  • NASDAQ 100 futures +.25%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (STI)/.72
  • (HAL)/.36
  • (MTB)/1.76
  • (RCL)/.14
  • (HAS)/.07
  • (MS)/.78
  • (IBM)/2.81
  • (BXS)/.33
  • (SANM)/.53
  • (BRO)/.40
  • (LRCX)/1.30
  • (STLD)/.14
  • (BMI)/.42
Economic Releases
8:30 am EST
  • The Chicago Fed National Activity Index for March is estimated to rise to .1 versus -.11 in February.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone construction report 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 modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.

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