Friday, May 08, 2015

Friday Watch

Evening Headlines 
Bloomberg:
  • Varoufakis Says Greece Ready to Take EU Impasse Down to the Wire. Greek Finance Minister Yanis Varoufakis said his government is prepared to go “down to the wire” in talks with its creditors as policy makers signal they’re losing patience with the country after months of brinkmanship. Varoufakis, who denies he’s been sidelined by Greek Prime Minister Alexis Tsipras in the negotiations, said he expects an agreement in the next two weeks, though one is unlikely to be announced when euro-area finance chiefs meet on Monday.
  • China's Very High Mountain of Debt. Total debt is at 282 percent of GDP, with the rapid pace of credit expansion worrying policy makers. China's debt mountain is casting a shadow over the world's second-largest economy. Total debt has reached 282 percent of GDP, according to the McKinsey Global Institute. While other big economies aren't far behind, it's the pace of China's credit expansion that's worrying policy makers, spurring targeted stimulus strikes while trying to avoid a debt sugar hit. 
  • China Exports Drop in April, Compounding Pressure on Economy. China’s exports unexpectedly declined in April and imports slumped, adding downward pressure on an economy grappling with overcapacity and a property downturn. Overseas shipments fell 6.2 percent from a year earlier in yuan value, the customs administration said in Beijing on Friday. That compared with the median estimate for a 0.9 percent rise in a Bloomberg survey of analysts. Imports slid 16.1 percent -- the fourth straight double-digit decline -- leaving a trade surplus of 210.21 billion yuan ($33.9 billion). Stronger demand from a recovering U.S. economy is being offset by sluggishness in Europe and a slide in shipments to Japan, compounding challenges for an economy that last quarter expanded at the slowest pace since 2009. 
  • The Hot Money Cools on China. Some $300 billion has been moved out in the past six months. While the world marvels at the rise of Chinese stock prices, money is quietly leaving the country at the fastest pace in at least a decade. Louis Kuijs, Royal Bank of Scotland’s chief China economist, estimates that China lost $300 billion in financial outflows in the six months through March. Deltec International, a Bahamas investment firm, puts the number even higher.
  • Australian Banks May Just Be Getting Started on Raising Capital. Australia’s biggest banks this week announced the largest collective fundraising since the global financial crisis. They may just be getting started. National Australia Bank Ltd., Westpac Banking Corp. and Australian & New Zealand Banking Group Ltd. revealed proposals to raise a combined A$8 billion ($6.4 billion) in capital to bolster their reserves against potential mortgage losses at home and to meet tougher global standards.  
  • Putin Stirs War Euphoria as Ex-Allies Skip WWII Victory Parade. The banners of war have been hung, the streets peppered with patriotic posters. State television is broadcasting hourly updates from the front lines and there’s even a free app, so there’s no excuse to miss out.
    President Vladimir Putin is preparing Russia for a collective military celebration that’ll be replete with state-of-the-art weaponry and thousands of goose-stepping troops. But the victory being glorified isn’t over Ukraine in the current conflict. It’s over Nazi Germany seven decades ago.
  • Asian Stocks Climb From One-Month Low Before U.S. Jobs Report. Asian stocks rose, after the regional benchmark index closed Thursday at its lowest in a month, as investors awaited U.S. labor data. The MSCI Asia Pacific Index gained 0.1 percent to 150.49 as of 9:45 a.m. in Tokyo after ending yesterday at its lowest since April 7. The measure is poised for a 1.6 percent slide this week, its second straight weekly decline.  
  • Iron Imports by China Shrink in April Amid Property Slowdown. Iron ore imports by China dropped in April compared with the same month a year earlier, adding to signs that demand in the world’s largest user may be slowing as the property market cools. Imports totaled 80.2 million metric tons in April, in line with 80.5 million tons in March, and 3.8 percent lower than a year earlier, according to customs data on Friday. Purchases from overseas in the first four months were 307.3 million tons compared with 305 million tons in the same period in 2014.
  • Iron Ore Outlook Cut by ANZ as China Steel Downturn Will Persist. A prolonged downturn in steel consumption in China will hurt the outlook for iron ore, according to Australia & New Zealand Banking Group Ltd., which cut price forecasts through 2017. Iron ore will average $55 a metric ton next year, down from an earlier forecast of $60, and $60 in 2017, down from $63, ANZ said in an e-mailed report on Friday. The outlook for 2015 was pared by $1 to $56 a ton, with prices seen holding in a range of between $50 and $60 over the next 12 months.
  • Tesla(TSLA) May Need to Raise Capital After Losses, Analysts Say. Analysts are voicing concerns about Tesla Motors Inc.’s cash, saying the maker of electric cars and energy-storage products may need to raise money. Tesla said it had $1.51 billion in cash and cash equivalents as of March 31, down from $1.91 billion three months earlier. Adam Jonas, an analyst with Morgan Stanley, called Tesla’s cash burn “eye watering” in a note early Thursday.
Wall Street Journal:
MarketWatch.com: 
CNBC: 
Zero Hedge: 
Business Insider:
Reuters: 
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are +.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 106.75 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 60.25 +.25 basis point.
  • S&P 500 futures +.12%.
  • NASDAQ 100 futures +.18%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (AOL)/.32
  • (NILE)/.08
  • (EBIX)/.43
  • (HCN)/1.04
  • (JD)/.00
  • (WLH)/.18
Economic Releases 
8:30 am EST
  • The Change in Non-Farm Payrolls for April is estimated at 230K versus 126K in March.
  • The Unemployment Rate for April is estimated to fall to 5.4% versus 5.5% in March.
  • Average Hourly Earnings for April are estimated to rise +.2% versus a +.3% gain in March.
10:00 am EST
  • Wholesale Inventories for March are estimated to rise +.3% versus a +.3% gain in February. 
  • Wholesale Sales for March are estimated to rise +.5% versus a -.2% decline in February.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Canadian Unemployment report and the (CSX) annual meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial 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 50% net long heading into the day.

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