Wednesday, July 29, 2015

Wednesday Watch

Posted by Gary .....at 12:56 AM
Evening Headlines 
Bloomberg:  
  • Xi Swats ‘Blood-Sucking Mosquitoes’ as Graft Push Goes Small. Chinese President Xi Jinping, who has likened his nationwide corruption purge to hunting tigers and swatting flies, is sending Communist Party graft-busters after an even more annoying pest: mosquitoes. The term has been used in state media reports to describe a new initiative targeting corruption in rural villages where petty cadres hold sway. While tigers lurk far away, such mosquitoes are usually “buzzing around the corner” and “sucking blood,” the official Xinhua News Agency wrote in a commentary published July 4. The push against rural graft suggests a policy shift by Xi almost three years into a campaign that has brought down more than 100 senior officials, including top generals, a former top presidential aide and China’s retired security chief. With so many potential rivals locked away, Xi can afford to relieve some pressure on the political elite in Beijing to focus on his broader reform agenda.
  • China’s Richest Regions Saw Boost From Stocks Boom Last Quarter. Guangdong, Beijing and Shanghai, which account for the biggest chunks of China’s household equity ownership, received boosts from their sizable financial services sectors in the second quarter, regional economic data show. Shanghai, where the country’s major exchange and some of the largest brokerages are located, saw its financial-sector output surge more than 30 percent in the six months to June from a year earlier. That helped GDP expand 7 percent in first half, up from 6.6 percent in the January to March quarter. Growth also quickened in Beijing and Guangdong, home to Shenzhen, the wealthiest municipality in the nation by per capita GDP and the place where some of the country’s smaller and advanced-technology companies are listed. In the capital Beijing, where most state banks are headquartered, the financial industry accounted for 19.2 percent of the economy in the first six months. Its financial services increased 19.4 percent from a year earlier. Of the 7.7 percent growth in southern export hub Guangdong, 1.4 percentage point came from financial services. That sector jumped 23 percent from a year earlier in the first half, "driven by the rapid rally of the stock market," according to the local statistics authority. While the province’s expansion was constrained by faltering exports and rising labor costs, services surged 52.8 percent.
  • Fanuc Cuts Profit Target on Signs of Slowing Demand in China. Fanuc Corp. lowered its full-year profit forecast as demand from the information technology industry declines. The shares plunged in Frankfurt and New York trading. The maker of industrial robots and factory automation equipment said net income will probably be 159.5 billion yen ($1.3 billion) in the 12 months to March 31. That’s 17 percent lower than its April forecast and trails the 198.6 billion yen average of 20 analysts’ estimates compiled by Bloomberg. 
  • Ford(F) Sees China Auto Sales May Fall First Time Since 2000. Automakers may sell fewer vehicles in China this year for the first time since at least 1998 as demand slows in the world’s largest market, according to the low end of Ford Motor Co.’s revised projection. Ford is estimating industrywide sales to be between 23 million and 24 million units this year, Chief Financial Officer Bob Shanks said Tuesday, compared with the 23.5 million sold last year. The low end of that forecast would represent the first decline in at least 17 years, according to official sales data. Before 1998, only production figures were available.
  • Alarm Bell Rings in Tokyo at Rapid Rise in German Exports to China. Losing out in Asia to European Rival. As if Japan didn't have enough economic problems to overcome, officials in Tokyo have identified another worrying trend: lagging export growth to China. Rapid gains in German shipments to China have caught their attention, with exports from the European powerhouse doubling in value since 2008 and reaching 74.5 billion euros ($82.5 billion) last year.   
  • Japan’s Monthly Retail Sales Fall for Third Time This Year. Japan’s retail sales dropped for the third time this year, sapping an economy that analysts say struggled last quarter amid sluggish exports and production. Sales slid 0.8 percent from May, following declines in January and March. The median forecast in a survey by Bloomberg was for a drop of 0.9 percent. Weakness in consumer spending adds to risks to the world’s third-biggest economy, whose manufacturing sector has struggled with softness in exports to Asia. The task for Prime Minister Shinzo Abe is to convince companies to continue to boost wages to help consumers cope with a rise in living costs that the central bank sees picking up quickly this year. 
  • Chinese Stocks Fluctuate Amid Signs of Exodus of Small Investors. Chinese stocks swung between gains and losses as signs of waning interest by retail investors and margin traders countered speculation of state support for equities. The Shanghai Composite Index slipped 0.2 percent to 3,656.45 at 10:38 a.m., after gaining as much as 1.6 percent. The benchmark gauge has slumped 12 percent during four days of losses. Air China Ltd. plunged as much as 10 percent as the company resumed trading after announcing a private share sale. A total of 517 companies were still suspended from trading in mainland exchanges Wednesday, or 18 percent of all listings, down from 521 at Tuesday’s close.
  • Asian Stocks Rise for First Time in Six Days Before Fed Meeting. Asian stocks rose for the first time in six days, following U.S. and European shares higher, as investors awaited an update on monetary policy from the Federal Reserve. The MSCI Asia Pacific Index gained 0.4 percent to 140.85 as of 9:02 a.m. in Tokyo.  
  • Iron Ore Seen at $35 by Clarksons as Port Stockpiles Rebound. For a clue about where iron ore prices are headed, watch port stockpiles in China. Holdings will probably extend a rebound from a 19-month low as supply rises, according to Clarksons Platou Securities Inc., the world’s largest shipbroker, which says prices may slump to $35 a metric ton in the second half. Inventories, at 82.5 million tons last week, may climb to 95 million tons by September, said Australia & New Zealand Banking Group Ltd.
  • Copper’s Tumble Not Yet Over With Most Miners Still Making Money. The pain rippling through the copper market isn’t yet threatening profits for most miners, and that could mean more tears for bullish investors. Even with prices near a six-year low, about 90 percent of copper mines are profitable, meaning most producers have little incentive to reduce output, according to Standard Chartered Plc. Prices need to fall another 24 percent before major companies begin cutting back, Bloomberg Intelligence estimates. “You want miners to throw in the towel, start shutting down some mines,” Kenneth Hoffman, an analyst at Bloomberg Intelligence, said by telephone. “They keep forging ahead with all their plans. They’re still bringing new stuff on.”
  • Lew Warns That Puerto Rico Crisis Could Get Costly for U.S. U.S. Treasury Secretary Jacob J. Lew said a failure by Congress to help Puerto Rico resolve its debts may hit the retirement portfolios of average Americans, as he stepped up his call for lawmakers to help the island. Lew endorsed legislation granting the commonwealth access to an orderly bankruptcy regime that’s needed to prevent a chaotic and protracted resolution of Puerto Rico’s financial troubles, an event he said would be costly both for the island and the U.S.
  • Health Spending to Gobble Up More of U.S. Economy in Next Decade. Spending on health care will take up an increasing proportion of the U.S. economy over the next decade as the population ages and more people gain insurance coverage under Obamacare, a government report said. Payments for hospitals, doctors, drugs and insurance will rise by about 5.8 percent a year through 2024, 1.1 percentage points faster than overall economic growth, actuaries at the Centers for Medicare and Medicaid Services said Tuesday in an annual study. Health spending will account for 19.6 percent of gross domestic product in 2024, up from 17.7 percent last year.
Wall Street Journal:
  • China Pushes to Rewrite Rules of Global Internet. Officials aim to control online discourse and reduce U.S. influence. As social media helped topple regimes in the Middle East and northern Africa, a senior colonel in the People’s Liberation Army publicly warned that an Internet dominated by the U.S. threatened to overthrow China’s Communist Party.
  • Israel’s Choice: Conventional War Now, or Nuclear War Later. There was no ‘better deal’ with Iran to be had. Now this calamitous one offers Tehran two paths to the bomb. Almost everyone who opposes the deal President Obama has struck with Iran hotly contests his relentless insistence that the only alternative to it is war. No, they claim, there is another alternative, and that is “a better deal.”
Fox News: 
  • House lawmaker files motion to oust Boehner. In a move unprecedented in the history of the House of Representatives, a Republican lawmaker filed a motion Tuesday to remove House Speaker John Boehner, R-Ohio, from his post, in another sign of dissatisfaction with Boehner’s leadership by a number of House conservatives. Rep. Mark Meadows, R-N.C., filed the resolution -- a “motion to vacate the chair” -- late Tuesday, claiming that he “has endeavored to consolidate power and centralize decision-making, bypassing the majority of the 435 Members of Congress and the people they represent.”
CNBC:
  • Gilead(GILD) posts huge beat on earnings and revenue. (video) Gilead Sciences delivered quarterly earnings and revenue on Tuesday that easily surpassed analysts' expectations on the strength of strong sales for its hepatitis C treatments. The company reported adjusted second-quarter earnings of $3.15 per share on $8.24 billion in revenue. Analysts had expected the company to report earnings of $2.71 a share on $7.61 billion in revenue, according to a consensus estimate from Thomson Reuters. Gilead's second-quarter total revenue rose more than 26 percent from the year-ago period's $6.54 billion figure. The stock rose more than 3 percent in after-hours trading immediately following the earnings announcement.
Reuters:
  • Akamai(AKAM) forecasts revenue, profit below estimates; shares sink. Online content distributor Akamai Technologies Inc forecast third-quarter revenue and profit below estimates, citing a stronger dollar. Shares of Akamai, which claims to deliver between 15 and 30 percent of all Web traffic, fell as much as 13 percent in after-hours trading on Tuesday. The company's second-quarter profit fell nearly 8 percent after 11 quarters of growth, as costs rose.
Telegraph:
21st Century Business Herald:
  • China Academic Urges Isolating Bank Funds From Stocks. Chinese regulators should set up a "firewall" to prevent bank funds from being invested in stock markets through various unofficial channels, including umbrella trusts, Yin Zhongli, a researchers with the Chinese Academy of Social Sciences, writes in an article. Stock regulators shouldn't be burdened with tasks to support economic growth, Yin writes.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 108.25 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 62.0 -1.25 basis points.
  • S&P 500 futures -.08%.
  • NASDAQ 100 futures -.10%.

Earnings of Note
Company/Estimate
  • (ADT)/.49
  • (MO)/.71
  • (AMT)/1.17
  • (ANTM)/2.75
  • (CBG)/.43
  • (CLF)/-.14
  • (EXC)/.52
  • (GD)/2.05
  • (GT)/.77
  • (HES)/-.72
  • (HLT)/.23
  • (HUM)/1.63
  • (IP)/.92
  • (JLL)/1.85
  • (MA)/.85
  • (NOC)/2.36
  • (PX)/1.45
  • (SPW)/.75
  • (STRA)/.99
  • (AEM)/.09
  • (BAX)/.30
  • (ESV)/1.05
  • (FB)/.47
  • (LRCX)/1.47
  • (MAR)/.81
  • (MCK)/2.91
  • (MET)/1.49
  • (OI)/.58
  • (SCTY)/-1.58
  • (WDC)/1.47
  • (WFM)/.45
  • (WMB)/.23
  • (WYNN)/.98
Economic Releases
10:00 am EST
  • Pending Home Sales for June are estimated to rise +.9% versus a +.9% gain in May.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +134,000 barrels versus a +2,468,000 barrel increase the prior week. Gasoline supplies are estimated to rise by +112,000 barrels versus a -1,725,000 barrel decline prior. Distillate supplies are estimated to rise by +1,020,000 barrels versus a +235,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.04% versus a +.2% gain the prior week. 
2:00 pm EST
  • The FOMC is expected to leave the benchmark Fed Funds rate at .25%. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Japan Industrial Profits report, $35B 5Y T-Note auction, weekly MBA mortgage applications report, (MSFT) Windows 10 launch and the (YHOO) consumer product event  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 mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

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