Evening Headlines
Bloomberg:
- Greece Approves EU Demands in Order to Keep the Euro. Greece passed a second bundle of policy measures demanded by the country’s European creditors as Prime Minister Alexis Tsipras urged lawmakers to stop the country being forced out of the euro. Tsipras won the support of at least 151 lawmakers in a televised, public vote in the 300-seat parliament in Athens for a bill that will simplify court decisions and transpose European rules on failing banks. Echoing the rhetoric of the predecessors he once demonized, Tsipras said he’ll implement the creditors’ program even though he thinks the policies being imposed are wrong. He insisted he’ll do everything he can to improve the final deal.
- Catalans Spur the Remaking of Spain With Battle for Independence. Catalonia’s bid for independence has opened the floodgates: Now all Spain’s major parties are looking to remake the way the way the state’s power is carved up. Catalan President Artur Mas plans to use voting for the region’s parliament on Sept. 27 -- weeks before national elections are due -- as a de-facto referendum on leaving Spain. Just as the Scottish independence movement has prompted a rethink of how the U.K. is governed, Spain’s national parties are responding with plans to prevent the disintegration of a country whose mainland borders are unchanged since the 17th century.
- China Auto Market in ‘Downward Spiral,’ Japan Group Says. China’s vehicle market has shown signs of a “downward spiral” that will eventually hit Japanese carmakers, according to the head of Japan’s auto association. “There’s excessive competition and carmakers are building excessive capacity, and to raise utilization of the plants, they will engage in excessive selling,” Fumihiko Ike, chairman of Japan Automobile Manufacturers Association, told reporters in Tokyo Thursday. Japanese automakers are coming off a record first-half in China, cementing a comeback from anti-Japanese protests in 2012, even as competitors like Volkswagen AG and Hyundai Motor Co. posted sales declines. The gains are a bright spot in the world’s largest car market, which is headed for the slowest expansion in four years as economic growth moderates and cities cap vehicle registrations. The slump in demand has prompted automakers to cut prices, threatening profit margins.
- Fitch Sees Risk in Japan Relying on Growth for Debt Reduction. Fitch Ratings Ltd. said Japan’s increasing reliance on economic growth to cut its debt burden exposes the nation to greater risks. Relying on growth as the “primary engine of fiscal stabilization is riskier” than focusing on reducing deficits and government borrowing, Andrew Colquhoun, Fitch Ratings’ head of Asia-Pacific sovereign ratings, said in an interview in Tokyo on July 21. The government’s target of a primary budget surplus five years from now “is a bit of a tall order,” he said.
- Asian Stocks Rise as Japan Rally Counters Drop in Mining Shares. Asian stocks rose as a rally in Japanese equities countered a decline in mining shares amid a deepening commodities rout. The MSCI Asia Pacific Index gained 0.1 percent to 143.76 as of 9:05 a.m. in Tokyo. A gauge of commodities returned to a 13-year low, with a rout that started in gold infecting other metals, oil and farm products.
- Copper Slumps to Two-Week Low as Goldman Gets Even More Bearish. Copper dropped to the lowest in two weeks after Goldman Sachs Group Inc. cut its forecasts and said China’s demand will grow at the slowest in almost two decades. Goldman Sachs lowered its copper price outlook by as much as 44 percent through 2018 as consumption in China weakens and supply expands faster than expected. The bank’s gloomier forecasts on Wednesday came amid a fresh rout in commodities markets, as industrial metals, gold and iron ore tumbled.
- Cotton Stockpiles in India Swell to Record as China Cuts Imports. Cotton stockpiles in India are poised to jump to a record as exports plunge and a revival in monsoon rains boost crop prospects. Inventories will surge 25 percent to 7.39 million bales by October from 5.89 million a year earlier, the Cotton Association of India estimates. That would be the highest ever, data from the nation’s Cotton Advisory Board show. The surplus may further widen with next year’s harvest likely to be a near record 40 million bales, according to trader Gill & Co.
- Distressed-Debt Market Upended Amid Deepening Commodities Rout. The worst commodities slump in 13 years is wreaking havoc for investors seeking to profit from companies in distress. Distressed bonds have lost 8.2 percent this month as oil and coal prices slid, bringing this year’s loss to 12.2 percent, according to a Bank of America Merrill Lynch index that tracks the debt. The securities are on pace to lose more than 20 percent for the second straight year, the worst performance since 2008. SandRidge Energy Inc. bonds have lost almost 30 percent since June, while notes of miner Cliffs Natural Resources Inc. are down more than 27 percent.
- Fed September Liftoff Odds Stay at 50% Despite Global Troubles. Forget the world crises. Six weeks of international turmoil from Greece to China have had zero impact on economists’ outlook for the first Federal Reserve rate rise. Odds for a September liftoff remain at 50 percent, exactly where they were in June, according to the median of 46 responses in a July 20-22 survey. They assigned 40 percent odds to a later move and saw no chance of a decision when the Federal Open Market Committee gathers July 28-29 in Washington. The outlook for a September move remained intact even as crises in Greece and China temporarily rocked markets and dimmed global economic prospects. Now that those concerns have eased, U.S. policy makers can focus on their dual mandate for full employment and low, stable inflation at home.
Wall Street Journal:
- Giant Hedge Fund Bridgewater Flips View on China: ‘No Safe Places to Invest’. Investment firm warns that recent stock gyrations will have broad, negative repercussions. The world’s biggest hedge fund has turned on the world’s fastest-growing economy. Bridgewater Associates LP, one of Wall Street’s more outspoken bulls on China, told investors this week that the country’s recent stock-market rout will likely have broad, far-reaching repercussions.
- Bank of America(BAC) Financial Chief Exits as Part of Shake-Up. Some had seen Financial Chief Bruce Thompson as heir apparent to CEO Brian Moynihan.
- Apple(AAPL) Cuts Annual Spending Forecast By $1 Billion. Reduction comes on more efficient spending on tooling gear and facilities; no product changes planned.
- The Calamity of Obama’s Iran Deal by Mitt Romney. If the ayatollahs have a nuclear weapon, they will use it. Now they’re on the path to get one. When giving Moses the Ten Commandments, God says that he will “visit the iniquity of the fathers upon the children unto the third and fourth generation.” Of course, God doesn’t have to punish these later generations himself; rather, the perils that follow are the natural course of events. Bad actions or bad choices made by one generation lead
Fox News:
- Seattle sees fallout from $15 minimum wage, as other cities follow suit. (video) Evidence is surfacing that some workers are asking their bosses for fewer hours as their wages rise – in a bid to keep overall income down so they don’t lose public subsidies for things like food, child care and rent.
MarketWatch.com:
- Here’s the real reason the Fed wants to raise rates. Federal Reserve policy makers are hoping, even praying, that no unexpected domestic development or international crisis intervenes to prevent them from taking the first baby step to normalize interest rates at the Sept.16-17 meeting. Why? Fed officials point to a number of reasons: the unnatural state of a near-zero benchmark rate; the potential risk of financial instability; an improving labor market; diminishing headwinds; and yes, expectations of 3% growth just over the horizon.
CNBC:
- Qualcomm(QCOM) cuts workforce by 15%; stock turns down. (video) Qualcomm announced Wednesday that it would cut its workforce by about 15 percent contributing to a total of $1.4 billion in cost reductions. It also announced changes to its board and executive compensation. Shares were up as high as 2 percent in extended trading before reversing to a drop of nearly 2.5 percent.
- Cigna(CI) shares spike on Anthem(ANTM) takeover report. Cigna shares rose more than 6 percent in the after-hours session. The stock closed Wednesday at about $151.
Business Insider:
- The death of US coal. After decades of strong financial numbers and dominance in the electric power sector, coal producers are starting to fall apart faster than anyone could have anticipated. SNL Financial has produced some jaw dropping data on the quickly deteriorating coal industry, with a horrific performance in the second quarter.
Reuters:
- Texas Instruments(TXN) revenue forecast misses on weak chip demand. Texas Instruments Inc forecast third-quarter revenue below analysts' expectations due to weak demand for its chips used in PCs and industrial and communications equipment. The company, which also reported lower-than-expected revenue for the second quarter, said its communications business was hurt by weak demand from wireless base stations. Chief Financial Officer Kevin March said the company did not expect any recovery in communications or PC markets in the current quarter. "With industrial slowing a bit like it did in the second quarter, we are expecting that our third quarter will be probably a little bit weaker than we would normally expect at this time of the year," March told Reuters.
- Spurt in retail sales helps SanDisk(SNDK) beat profit expectations. Data storage products maker SanDisk Corp reported a quarterly profit that was double what analysts had expected, helped by higher retail sales and new products. The company's shares rose 13 percent to $61.20 in after-market trading on Wednesday.
- F5 Networks(FFIV) revenue, profit beat as services income jumps. Network equipment maker F5 Networks Inc reported higher-than-expected quarterly revenue and profit as it earned more from services including cybersecurity and data traffic management. F5's revenue from its services business rose 15.5 percent to $234.8 million in the third quarter, accounting for nearly half of its total revenue. Shares of the company, which also forecast current-quarter profit above analysts' expectations, rose 6 percent in extended trading on Wednesday.
- U.S. senator urges probe of Apple's music streaming practices. A U.S. senator wants two federal agencies to investigate whether Apple Inc is breaking antitrust law in how it treats music services that compete with the streaming service it launched in June. Democratic Senator Al Franken in a letter on Wednesday said that he was concerned that some Apple practices could limit choices and raise prices for consumers. The letter was sent to Attorney General Loretta Lynch and Federal Trade Commission Chairwoman Edith Ramirez.
Telegraph:
- Capital exodus from China reaches $800bn as crisis deepens. China is reverting to credit stimulus after attempts to engineer a stock market boom failed horribly. The day of reckoning is delayed again.
Caixin:
- Some China Automakers Cut July Vehicle Output Target. FAW-Volkswagen cuts vehicle output target by ~30,000 units from ~100,000 units, citing people familiar with the matter. A production base of SAIC-GM cuts July output target by ~40% from earlier plan. Changan Ford also cuts production target for July, according to the report.
Evening Recommendations
- None of note
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -.25 basis point.
- Asia Pacific Sovereign CDS Index 59.0 +.75 basis point.
- S&P 500 futures +.20%.
- NASDAQ 100 futures +.31%.
Earnings of Note
Company/Estimate
- (MMM)/1.99
- (ALK)/1.73
- (ADS)/3.25
- (ABC)/1.15
- (BSX)/.21
- (BMY)/.36
- (CAB)/.62
- (CAM)/.77
- (CAT)/1.27
- (CELG)/1.21
- (CMCSA)/.84
- (CS)/.54
- (CY)/.13
- (DHR)/1.04
- (DOW)/.82
- (DNKN)/.48
- (LLY)/.74
- (FCX)/.08
- (GM)/1.08
- (GNTX)/.25
- (KMB)/1.36
- (MCD)/1.24
- (NUE)/.25
- (PTEN)/-.27
- (PHM)/.27
- (DGX)/1.23
- (RS)/1.11
- (R)/1.62
- (SNA)/2.00
- (LUV)/1.02
- (TROW)/1.20
- (UA)/.05
- (UNP)/1.35
- (UAL)/3.31
- (VRX)/2.47
- (ALTR)/.25
- (AMZN)/-.13
- (T)/.63
- (COF)/1.97
- (CB)/1.86
- (ETFC)/.27
- (JNPR)/.40
- (MXIM)/.39
- (RHI)/.66
- (SBUX)/.41
- (V)/.58
Economic Releases
8:30 am EST
- Chicago Fed National Activity Index for June is estimated to rise to -.05 versus -.17 in May.
- Initial Jobless Claims are estimated to fall to 278K versus 281K the prior week.
- Continuing Claims are estimated to rise to 2240K versus 2215K prior.
10:00 am EST
- The Leading Index for June is estimated to rise +.3% verssu a +.7% gain in May.
- The Kansas City Fed Manufacturing Activity Index for July is estimated to rise to -5.0 versus -9.0 in June.
- (ETE) 2-for-1
- (AZN) 2-for-1
Other Potential Market Movers
- The China Manufacturing PMI, Japan Manufacturing PMI, UK retail sales report, $15B 10Y TIPS auction, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.
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