Friday Watch

Evening Headlines 

Bloomberg:    

• Stocks Turmoil Leaves Chinese Investors in Nowhere-to-Run Bind. Wei Lili is running out of investment options. Apartment prices in her city of Wuhan are beyond her reach even after a recent property slump, and the volatile stock market is too great a risk. “It takes more than a million yuan to buy a flat, and stocks are like a roller coaster -- they are too soul-wrenching for me,” said Wei, 52, a government worker in the central Chinese city. She’s lost almost half of a 30,000 yuan ($4,800) investment in stocks, she said, declining to elaborate. The party may be ending for Chinese investors who have seen housing prices boom over most of the past decade and gained from wagers on everything from surging commodity prices to industrial-company loans. With the stock market in a funk, lackluster prospects for an oversupplied housing market and interest rates falling, savers like Wei face a new era of lower investment returns should the recent equities rout persist.

• China ETF Heads to Record Monthly Drop Amid Mainland Stock Rout. The biggest U.S. exchange-traded fund tracking mainland Chinese stocks fell for the second time this week, heading for the biggest monthly loss since its was started in 2013 amid concern Chinese policy makers will fail to stem a selloff in the A-share market. Investors in the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF are enduring the widest price swings on record and have pulled more than $274 million from the fund’s assets in the past four weeks as the government implemented unprecedented intervention measures to stem a rout that wiped out $4 trillion in market value. Historical 30-day volatility in the ETF surged to 96.75 percent on Thursday as the fund dropped 3 percent to $39.83 in New York.

• Aussie Wage Challenge: Find Five Bartenders for Each Lost Miner. The prospect of escalating job losses in Australia’s mining industry looms as an increasing strain on the nation’s economy, with new jobs paying a fraction of those that are disappearing. A survey of 50 mining executives found 80 percent plan to cut workers in the next 12 months, up from 50 percent a year ago, according to results released Wednesday by Newport Consulting. While services jobs -- helped by tourism -- are rising, the problem for consumption growth is that it takes five bartenders to make up the compensation for each lost miner. 

• Taiwan Economy Grows Least Since 2012 as China Hurts Exports. Taiwan’s economy grew at the slowest pace in three years as exports collapsed amid weaker global demand and rising competition from regional rivals. Gross domestic product rose 0.64 percent in the three months through June from a year earlier, according to preliminary data released by the statistics bureau Friday. That compares with a pace of 3.37 percent in the previous quarter, and is lower than all estimates in a Bloomberg survey whose median was 2.55 percent. 

• China’s Stocks Extend Slump in Worst Monthly Decline Since 2009. China’s stocks fell, with the benchmark index heading for its worst monthly drop in almost six years, as the government struggled to rekindle investor interest amid a $3.5 trillion rout. The Shanghai Composite Index slid 1.6 percent to 3,647.39 at 9:35 a.m. local time, making it the world’s worst performer this month with a 15 percent slump. Energy stocks led declines before the release of manufacturing data on Saturday.

• Asia Stocks Climb to Pare July Drop as Fed Outlook Boosts Dollar. Asian stocks advanced, trimming a third monthly loss amid signs the steepest rout in commodities since 2011 has been arrested. The dollar maintained gains as speculation firms over the timing for U.S. rate increases. The MSCI Asia Pacific Index rose a third day, adding 0.3 percent by 10:38 a.m. in Tokyo and paring its July drop to 3.4 percent.

Wall Street Journal: 

• Investigators Face Pressure to Confirm MH370 Link. Plane debris and suitcase found on remote island set to be analyzed in France. Accident investigators appeared tantalizingly close to determining whether a piece of plane debris belongs to Malaysia Airlines Flight 370, but still faced a long and complex process in trying to solve one of the world’s greatest aviation mysteries.

• Hillary’s Friends in High Places. Everyone—from her aides to the State and Justice departments—is bending over backward to protect her. ‘Friends of Bill” was a 1990s Washington catchphrase, shorthand for President Clinton’s favored inner circle. His wife, it turns out, has a far bigger fan club. “Friends of Hillary”—the people looking out for her welfare, and benefiting in turn—seem to occupy the highest echelons of government and business.

Fox News:

• Clinton campaign reportedly growing edgy over possible Biden run. (video) Aides close to Hillary Clinton are getting increasingly nervous that Vice President Joe Biden may throw his hat into the 2016 presidential race later this summer, Democratic sources told Fox News.

CNBC:

• Exclusive: Secret NSA Map Shows China Cyber Attacks on U.S. Targets. A secret NSA map obtained exclusively by NBC News shows the Chinese government's massive cyber assault on all sectors of the U.S economy, including major firms like Google and Lockheed Martin, as well as the U.S. government and military.

Zero Hedge:

• Why Do So Many Working Age Americans Choose Not To Enter The Workforce?

• Brazil's Economy Slides Into Depression, And Now Olympians Will Be Swimming In Feces. (graph) 

• Chinese Stocks Extend Yesterday's Plunge Despite Regulators "Asking" Insurers To Stop "Net Sales". (graph)

• "Greed Is King" - What We Learned Talking To Chinese Stock Investors.

• Does This Look Like An Accidental Relationship To You?

• Least Transparent Ever: IRS Used "Wholly Separate" Message System To Hide Communications.

• "Why Commodities Defaults Could Spread", UBS Explains. (graph)

• Shorting The Buyback Contradiction.

• LinkedIn(LNKD) Pumps'n'Dumps As Revenue Growth Rate Continues To Slow. (graph)

• From Hill-ary To Mountain-ary - How UBS Sent Millions To The Clintons After Saving The Bank In 2009.

• 7 'Saves' In 7 Months: A Market Going Nowhere Fast. (graph)

• Another Day, Another V-Shaped Manic-Melt-Up Recovery In Stocks (To Unchanged). (graph)

Business Insider:

• 'Housing Bubble 2' has bloomed into full magnificence.

• The CFO of FireEye(FEYE), once a Wall Street darling, is leaving and the stock is tumbling.

• There's one part of the SoulCycle IPO filing no one can stop laughing about.

• Oil execs think lower prices are here to stay.

• Large Mexican investors are turning their backs on the peso.

• Investors are ignoring obvious signs of the coming bear market. (graph)

• Another coal giant may be about to go under. According to a Bloomberg report on Thursday, Alpha Natural Resources is planning to file for bankruptcy as soon as Monday.

• 3 charts that will scare you. (graph)

• A hacker has a way to almost completely control a GM car and it only costs $100.

• The Euro is creating tons of problems for many European countries.

NY Post:

• Jana Partners sells off its entire stake in ATM-maker NCR(NCR). The hedge fund, which became NCR’s biggest shareholder earlier this year, shed its nearly 9 percent stake before talks collapsed over a potential $9 billion sale to a bidding group led by Thoma Bravo.

Reuters:

• LinkedIn's(LNKD) revenue beat fails to connect with investors. LinkedIn Corp, operator of the biggest social networking site for professionals, reported a better-than-expected 33 percent rise in quarterly revenue on Thursday, driven by strong growth in its business serving recruiters. LinkedIn's shares were down 3.9 percent in after-hours trading, however, as investors focused on the company's widening losses and an underwhelming full-year revenue forecast.

• U.S.-based high-yield bond funds had $1.7 bln outflows -Lipper.

• Expedia(EXPE) beats Wall Street view, shares rise. Expedia Inc on Thursday posted a second-quarter profit above analysts' expectations and announced a larger dividend as travel bookings grow, sending its shares up more than 7 percent in after-market trade. 

• Amgen(AMGN) profit tops Street view, boosts full-year forecast. Amgen Inc on Thursday reported higher-than-expected second-quarter profit and revenue, helped by strong sales of its Enbrel rheumatoid arthritis drug and cost cutting, and the company raised its full-year forecasts. Amgen's shares rose 1.8 percent in extended trading.

Financial Times: 

• Corporate giants sound profits alarm over China slowdown. Some of the world’s largest companies have sounded the alarm about the slowdown in the Chinese economy, warning that weaker growth would hit profits in the second half of the year. Car companies such as PSA Peugeot Citroën, Audi and Ford have slashed growth forecasts while industrial goods groups such as Caterpillar and Siemens have all spoken out on the negative impact of China.

Telegraph:

• Greece crisis escalates as IMF witholds support for a new bail-out deal. Talks over new rescue package are derailed after less than a week as IMF seeks explicit assurances over debt relief from the Europeans.

Shanghai Securities News: 

• China Asks Insurers to Avoid Net Sales of Equities. China Insurance Regulatory Commission asked insurers to try their best to avoid net sales of equities in near future, citing a person from an insurer.

South China Morning Post:

• Foreign Short Selling 'Overblown' by China, Markit Says. Accusations of foreigners short selling shares is "overblown" by Chinese market regulators and not the cause of a recent rout in the stock market, citing financial data co. Markit analyst Relte Stephen Schutte as saying. Official data shows minimal short selling of individual shares with shorting of domestic ETFs at only 1.2% of total domestic ETFs under management, Schutte said.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.5% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 110.75 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 62.5 +1.25 basis points.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.11%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AXL)/.71

• (AON)/1.30

• (MT)/-.04

• (CBOE)/.50

• (CVX)/1.15

• (DSX)/-.18

• (XOM)/1.11

• (HMC)/84.22

• (ITT)/.59

• (LM)/1.13

• (NWL)/.62

• (PSX)/1.81

• (RCL)/.73

• (STX)/.66

• (TYC)/.56

• (WY)/.20

Economic Releases

8:30 am EST

• The 2Q Employment Cost Index is estimated to rise +.6% versus a +.7% gain in 1Q. 
  

9:00 am EST

• ISM Milwaukee for July is estimated to rise to 50.0 versus 46.55 in June.

9:45 am EST

• Chicago Purchasing Manager Index for July is estimated to rise to 50.8 versus 49.4 in June.

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for July is estimated at 94.0 versus a prior estimate of 93.3.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI report, Eurozone Unemployment report and the China Manufacturing PMI report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.