Evening Headlines
Bloomberg:
- ECB Readies for Athens Return as Greek Banks Remain in Emergency. The European Central Bank is embarking on a third tour of duty in Athens, with victory less certain than ever. Officials holding a telephone call on Wednesday to discuss the Emergency Liquidity Assistance that keeps Greece’s financial system alive will be mindful that their decision is just a precursor to a bigger task. They’re about to send a team back to the Greek capital to monitor compliance with austerity policies -- honed over two previous rescues since 2010 -- that the government accepted in return for a bailout deal. The ECB has an interest in seeing Greece make good on its commitments, as the institution is embroiled there on multiple fronts from saving the banks to deciding when to include the nation in monetary stimulus. If the government of Prime Minister Alexis Tsipras fails to convince on reforms, the ECB will once again be burdened with the dilemma over whether it’s obliged to let the lenders collapse.
- World’s Wildest Stock Market Submits to Communist Party Rule. It took three weeks of unprecedented government intervention, but Chinese authorities have finally managed to subdue the world’s wildest stock market. That’s the verdict from options traders, whose expectations of share-price swings on mainland exchanges have tumbled 48 percent since the end of June. In a market where daily fluctuations exceeding 3 percent had become the norm, this week’s moves of less than 1 percent in the Shanghai Composite Index have barely registered on the price charts. For bulls, the growing sense of calm is a key step toward restoring investor confidence after the Shanghai Composite lost as much as 32 percent from its June high. Bears point to the costs of intervention, including an exodus by international money managers and the moral hazard of backstopping one of the world’s most expensive stock markets. “The government has won the battle in terms of stemming the rout, but they’ve lost the war if you think of the bigger picture,” Megan Greene, the chief economist at Manulife Asset Management, whose parent company oversees about $648 billion worldwide, said in a Bloomberg Television interview in London.
- Hyundai Motor's First-Half China Sales Slump 8.5%. Hyundai Motor Co.’s deliveries in China slumped 8.5 percent in the first half of this year, the latest foreign carmaker to report slowing demand in the world’s largest vehicle market. The South Korean automaker sold 513,784 vehicles in China in the first six months of this year, according to an e-mail from the company. Excluding imports, sales last fell in the second half of 2007, when deliveries slumped 24 percent.
- A $4 Trillion Force From China That Helped the Euro Now Hurts It. For almost a decade, China’s effort to diversify the world’s biggest foreign-exchange reserves supported the euro. Now, the almost $4 trillion force may be working against the single currency. China’s central bank depleted $299 billion of reserves in the year through June to keep the yuan from falling, offsetting the private sector’s sales of the currency for dollars amid a stock-market rout and faltering economy. The decline in reserves is the longest in People’s Bank of China data going back to 1993. It may mark the end of an era of accumulation that led the bank to buy euros as part of reducing reliance on the dollar.
- Chinese Stocks in Hong Kong Fall to Extend World’s Worst Losses. Chinese stocks fell in Hong Kong trading, adding to losses for the benchmark index that have made it the world’s worst performer this month. Hong Kong’s Hang Seng China Enterprises Index retreated 1.5 percent to 11,692.13 at 10:03 a.m. local time, heading for the steepest loss in a week. China Railway Group Ltd., the nation’s biggest construction company by total assets, and China Telecom Corp. slid more than 2 percent. GF Securities Co. led declines among brokerages with a 1.5 percent drop. The H-shares gauge has fallen 9.9 percent in July, making it the worst performer among major global benchmarks tracked by Bloomberg, after Chinese policy makers introduced a spate of measures to prop up equities.
- Asia Stocks Drop With Nasdaq Futures on Apple’s Miss; Oil Slides. Asian stocks retreated with Nasdaq 100 Index futures as Apple Inc. tumbled in after-hours trade and the dollar held Tuesday’s losses. Oil resumed its decline while wheat sank for a ninth straight day. The MSCI Asia Pacific Index dropped 0.9 percent by 10:36 a.m. in Tokyo, with a rebound in the yen sending Japan’s Topix index down 1 percent.
- Commodity Rout Extends to Currencies Led Lower by Kiwi to Loonie. Janet Yellen is breaking up the six-year-long party in the currencies of economies tied to commodities, with New Zealand’s dollar suffering the worst hangover. The Federal Reserve chair’s determination to raise U.S. interest rates this year has seen the currencies of New Zealand, Australia, Canada and Norway underperform their developed-market peers in the past three months. The kiwi has lost 14 percent in that time, or more than the other three combined. The currencies are under pressure as commodity-exporting nations cut interest rates to support growth after raw-materials prices plunged 45 percent from their 2011 highs. None, though, will ease as aggressively over the next year as New Zealand, according to market-implied policy rates. Its Reserve Bank will start by lowering rates for a second straight meeting on Thursday, economist forecasts compiled by Bloomberg show.
- BHP(BHP) Fourth-Quarter Iron Ore Output Rises 6%. BHP Billiton Ltd., the world’s biggest mining company, said fourth-quarter iron ore output rose 6 percent to beat analysts’ estimates. Production was 60 million metric tons in the three months ended June 30, from 56.6 million tons a year earlier, Melbourne-based BHP said Wednesday in a statement. That compares with the 58.9 million tons median estimate of six analysts surveyed by Bloomberg. Total output will rise 6 percent to 247 million tons fiscal 2016. Total output in the year to June 30 was 233 million tons, it said.
- Tech Rally Unravelling With Apple Poised for $50 Billion Slump. The biggest technology rally since October was knocked cold, as disappointing earnings reports punished Microsoft Corp. and left Apple Inc. in danger of its worst-ever loss of market value. Five days after Google Inc.’s earnings sparked the largest one-day increase in market capitalization, computer and software shares are tumbling. Apple, Microsoft and Yahoo! Inc. retreated on disappointing results. Apple, the world’s most valuable company, dropped 6.7 percent, a slump that would wipe more than $50 billion from its value.
Wall Street Journal:
- Hedge Funds Gear Up for Another Big Short. Some money managers are looking to profit from potential trouble at some ‘alternative’ mutual funds and bond ETFs.
- Iran can easily stretch out the inspection of suspect nuclear sites for three months or more. The Obama administration assures Americans that the Iran deal grants access within 24 days to undeclared but suspected Iranian nuclear sites. But that’s hardly how a recalcitrant Iran is likely to interpret the deal. A close examination of the Joint Comprehensive Plan of Action released by the Obama administration reveals that its terms permit Iran to hold inspectors at bay for months, likely three or more.
Fox News:
- Army chief Odierno, in exit interview, says US could have ‘prevented’ ISIS rise. (video) The Army’s top officer told Fox News Tuesday it’s “frustrating” to watch the gains he helped achieve in Iraq disintegrate at the hands of the Islamic State, saying in an exit interview that the chaos now unfolding “might have been prevented” had the U.S. stayed more engaged.
- British charge Muslim man in plot against U.S. military, trying to join ISIS. (video) A Muslim delivery driver used his rides to scout the largest U.S. air base in Britain, all the while planning to run over an American serviceman, kill him with a knife and detonate a suicide vest, according to UK prosecutor Mark Dawson.
MarketWatch.com:
- Microsoft(MSFT) reports biggest-ever quarterly loss. Microsoft Corp. said its revenue fell 5.1% in its latest quarter, hurt by continued weak PC demand, and posted its biggest quarterly loss ever on a hefty write-down and other items related to the Nokia mobile-phone business acquired last year.
CNBC:
Business Insider:
- Toyota is holding off building the Lexus brand in China because of the country's stalled auto market.
Reuters:
- Intuitive Surgical(ISRG) posts 30 pct rise in profit. Robotic surgical equipment maker Intuitive Surgical Inc reported a better-than-expected quarterly profit and forecast surgical procedures to grow 11 to 13 percent this year, sending its shares up 13 percent.
- Higher costs to attract eyeballs weigh on Yahoo(YHOO) forecast. Yahoo Inc forecast lower-than-expected revenue for the current quarter as it struggles to revive its core online advertising business and spends more to attract users to its websites. Shares of Yahoo were marginally down at $39.34 in after-market trading.
Financial News:
- China Researcher Sees Lower Potential Growth in Next 5 Years. China's potential economic growth for 2016-2020 may slow to around 6%-6.5%, as earlier high growth driven by investment and exports would be unsustainable, HKEx chief China Economist Ba Shusong writes in article. China may see L-shaped recovery in economic growth, rather than V-shaped rebound, Ba wrote.
Netease:
- China Regulators to Evaluate Banks' Equity Investments. People's Bank of China and China Banking Regulatory Commission have ordered commercial banks to assess their equity investment, citing a person familiar with the matter. Regulators aim to stress test risk exposure of banks' equity investment.
Evening Recommendations
- None of note
Night Trading
- Asian equity indices are -1.0% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.25 +.75 basis point.
- Asia Pacific Sovereign CDS Index 58.25 +1.0 basis point.
- S&P 500 futures -.41%
- NASDAQ 100 futures -1.2%.
Earnings of Note
Company/Estimate
- (ABT)/.50
- (ARMH)/.07
- (AN)/1.02
- (BA)/1.39
- (KO)/.60
- (EMC)/.41
- (ITW)/1.28
- (OC)/.54
- (STJ)/1.00
- (WHR)/2.61
- (AXP)/1.33
- (CAKE)/.62
- (CCI)/1.06
- (FFIV)/1.60
- (LVS)/.61
- (NEM)/.26
- (OII)/.68
- (QCOM)/.95
- (RJF)/.89
- (SNDK)/.34
- (TXN)/.70
- (TSCO)/1.11
- (WFT)/-.12
- (XLNX)/.54
Economic Releases
9:00 am EST
- The FHFA House Price Index for May is estimated to rise +.4% versus a +.3% gain in April.
10:00 am EST
- Existing Home Sales for June are estimated to rise to 5.4M versus 5.35M in May.
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-1,450,000 barrels versus a -4,346,000 decline the prior week. Gasoline
supplies are estimated to rise by +565,000 barrels versus a +58,000
barrel gain the prior week. Distillate inventories are estimated to rise
by +1,680,000 barrels versus a +3,819,000 barrel gain the prior week.
Finally, Refinery Utilization is estimated to fall by -.09% versus a
+.6% gain prior.
- (ETE) 2-for-1
- (AZN) 2-for-1
Other Potential Market Movers
- The UK inflation report, BoE Meeting Minutes, (CPB) investor day and the weekly MBA Mortgage Applications report could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and technology shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.
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