Wednesday, July 01, 2015

Thursday Watch

Posted by Gary .....at 11:16 PM
Evening Headlines 
Bloomberg:  
  • Europe Rebuffs Greek Overture as Poll Shows Voters Leaning ‘Yes’. Greek Prime Minister Alexis Tsipras and his creditors sparred heading into Sunday’s referendum on austerity as a poll suggested voters are inclined to accept deeper cuts. As rationing of pensions began in the first week of capital controls, a poll showed a narrow majority going against the government’s wishes in order to keep the euro. A late compromise bid by Tsipras, who’s urging citizens to vote “no,” was roundly quashed by the rest of the euro region, meaning negotiations will have to wait until after the plebiscite.
  • Greece Pushes Draghi’s Euro Nearer Reverse as Solidarity Fades. “The idea was to create an irrevocable monetary union that once you’re in, it’s forever,” said Charles Wyplosz, professor of economics at the Graduate Institute of International and Development Studies in Geneva. “The permanence is very much in doubt, especially because you really don’t have a lender of last resort. Under certain circumstances, the central bank can drop you.” 
  • For China’s Hottest Stocks, a 77% Gain in Four Days Is Bad News. In most stock markets, a 77 percent return in four days would leave investors feeling ecstatic. In China, it’s just the opposite -- at least when it comes to initial public offerings. That four-day advance in Guotai Junan Securities Co., which completed China’s biggest IPO in five years last month, is the worst start among 190 initial share sales on mainland bourses this year. Every other one recorded a gain at or near the 92 percent maximum allowed, according to data compiled by Bloomberg. While regulatory pressure on companies to keep their IPO prices low has led to instant gains once the shares start trading, returns are coming under pressure from a flood of new equity and a tumble in the Shanghai Composite Index. The Bloomberg China IPO Index has dropped 25 percent since the end of May, even as authorities considered a suspension of new deals to ease supply concerns. “Insanity has a limit,” said Francis Lun, the chief executive officer at Geo Securities Ltd. in Hong Kong. “If Guotai keeps rising like a penny stock, it will soon become the biggest company in the world, bigger than Apple.”
  • Egypt on War Footing as Sinai Attack Follows Cairo Assassination. Egypt’s army suffered its deadliest blow in years of fighting Islamist militants in the Sinai peninsula, losing dozens of soldiers in a wave of attacks as authorities vowed to respond with more firepower and harsher laws. More than 60 security personnel and six civilians were killed on Wednesday by assailants who used rockets and car bombs, according to the security directorate in north Sinai, which borders Israel and the Gaza Strip. The army command in Cairo gave a confirmed death toll of 17 soldiers in a televised statement, and said more than 100 of the jihadists were killed as F16 jets and Apache helicopters were deployed in pursuit. A group linked to Islamic State claimed responsibility.
  • Chinese Stocks Slump as Support Steps Fail to Stem Rout. Chinese stocks slumped, with a gauge of volatility jumping to its highest level since 2008, as margin traders unwound debt and the regulator moved to support shares. The Shanghai Composite Index slid 2.7 percent to 3,946.09 at 10:20 a.m., dragged down by industrial and utility shares.
  • Asian Stocks Rise for Third Day as Yen Weakness Buoys Japan. Asian stocks rose for a third day, following gains in Europe and America, with a weaker yen buoying equities in Tokyo as investors awaited developments in Greece and U.S. jobs data. The MSCI Asia Pacific Index gained 0.1 percent to 146.69 as of 9:01 a.m. in Tokyo. Japan’s Topix index advanced 1 percent after the yen slid 0.5 percent Wednesday.
Wall Street Journal: 
  • Asia’s Rich Show Love for Junk Bonds. Private-bank clients in region have loaded up on high-yield debt, a market dominated by Chinese property firms. Asia’s wealthy investors have bought nearly $17 billion of high-yield bonds in the past three years, more than double what they purchased in the previous three years despite rising risks among some of the biggest issuers. High-yield-bond issuance has soared in Asia since the start of 2013, and rich individual...
  • Free Raises for Everyone. Obama’s plan to help Democrats stay overtime in Washington. If after more than six years as President the economy hasn’t increased take-home pay, here’s an idea: Declare that millions of Americans get a raise by government fiat.
Fox News:
  • State Dept. withholds ‘classified’ info from Clinton emails, despite claim of 'no classified material'. (video) A State Department spokesman said Wednesday that details from 25 emails were deemed classified and withheld from the 3,000-page trove of Hillary Clinton documents released overnight -- despite the former secretary of state claiming she never sent classified material on her personal email. State Department spokesman John Kirby acknowledged at a briefing that details from the 25 emails are now considered "classified." The messages were released, with those portions redacted. However, Clinton declared in March that she "did not email any classified material to anyone" on her account.
MarketWatch.com:
  • Why are these ‘government’ heads getting raises of 567%? Did you hear the heads of the mortgage giants are getting a raise? Yep. They’ll be earning about six times more than they did last year. Hey, that’s more than good enough for government work, right? In an earlier era, this never would have happened. Say, last year, for instance.
Zero Hedge:
Business Insider:
  • Economists agree...A huge tax hike is coming. As for financial assets, the best way to protect those gains is simply to sell them – both before bubbles burst, and before capital gains rates get increased to ordinary tax rates.
Financial Times:
  • Tsipras urges Greeks to defy creditors’ ‘blackmail’. Greece’s prime minister accused Europe’s leaders of attempting to “blackmail” Greek voters, just hours after apparently holding out an olive branch to the country’s creditors by accepting most of the terms of the economic reform plan they had tabled last weekend.
Telegraph:
China Daily:
  • China's Shenzhen Home Prices Reach Record Levels. New home prices rose 6.58% in June vs. month earlier, citing survey by China Index Academy. Prices for existing houses rose 8.59% in June m/m, 19.12% y/y, according to the report.
China Securities Journal:
  • China Unlikely to Cut Interest Rate in 2H. China isn't likely to cut rates in 2H and may only do so if inflation is lower than 1.5% this year, Chen Bingcai, researcher at Chinese Academy of Governance, writes in a commentary.
Evening Recommendations 
  • None of Note
Night Trading
  • Asian equity indices are unch. to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 111.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 59.0 -.75 basis point.
  • S&P 500 futures -.08%.
  • NASDAQ 100 futures -.08%.

Earnings of Note
Company/Estimate
  • (ISCA)/.40
Economic Releases
8:30 am EST
  • The Change in Non-Farm Payrolls for June is estimated to fall to 233K versus 280K in May.
  • The Unemployment Rate for June is estimated to fall to 5.4% versus 5.5% in May.
  • Average Hourly Earnings for June are estimated to rise +.2% versus a +.3% gain in May.
  • Initial Jobless Claims are estimated to fall to 270K versus 271K the prior week. 
  • Continuing Claims are estimated to fall to 2236K versus 2247K prior.
10:00 am EST
  • Factory Orders for May are estimated to fall -.5% versus a -.4%.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Australia Retail Sales report, ISM New York for June, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (DAL) June Traffic report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and consumer 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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