Wednesday, August 05, 2015

Wednesday Watch

Evening Headlines 
Bloomberg:
  • China Stock Trading Falls as State Intervention Deters Investors. China stock trading slumped, with turnover on the Shanghai Composite Index falling 33 percent below the 30-day average, amid increasing government intervention and as hundreds of companies remained halted from trading. The benchmark Shanghai Composite slipped 0.2 percent to 3,750.93 at 10:51 a.m. local time, after gaining as much as 0.6 percent. Financial companies fell, while industrial shares advanced. The value of shares traded on the index has fallen 65 percent from this year’s high in June as trading halts, regulatory measures to curb bearish transactions and a suspension of initial public offerings drives investors away. A total of 515 mainland companies, or 18 percent of all listings, remain halted from trading. “The government’s unprecedented, rushed market intervention may have supported prices initially but at the expense of its long-term credibility,” Alex Wolf, an economist for emerging markets at Standard Life Investments Ltd., wrote in a report e-mailed Wednesday.
  • China to Set Up ‘Security Offices’ Inside Internet Companies. China plans to set up “network security offices” staffed by police inside major websites and Internet companies, a move to strengthen the government’s grip on the world’s largest population of Web users. The Ministry of Public Security will add police officers at “critical” Internet companies to help boost defenses against cyber-attacks and fight criminal activity, the state-run Xinhua News Agency reported, citing a ministry conference.  
  • Copper Drops With Aluminum as Bets Climb on Fed Rate Increase. Copper declined for the fourth time in five days as metals fell on speculation U.S. interest rates will be increased as soon as next month. The metal lost 0.9 percent after Federal Reserve Bank of Atlanta President Dennis Lockhart said he would only endorse putting it off should there be a significant deterioration in economic data. The Bloomberg Dollar Spot Index advanced to its highest since March. That makes commodities more expensive for buyers in other currencies and mining cheaper for producers located outside the U.S.
Wall Street Journal: 
  • Atlanta Fed’s Lockhart: Fed Is ‘Close’ to Being Ready to Raise Short-Term Rates. Lockhart says September could be ‘appropriate time’ to lift interest rate. Federal Reserve Bank of Atlanta President Dennis Lockhart said the economy is ready for the first increase in short-term interest rates in more than nine years and it would take a significant deterioration in the data to convince him not to move in September.
  • The Biden Advantage. To beat Hillary, he’d have to run against her dishonesty. This is the summer of Democratic discontent with Hillary Clinton’s presidential campaign. So it was only a matter of time before nervous partisans looked for alternatives who might save the progressive great and good from the national trauma of another Republican President. This explains the weekend recruiting flurry for Vice President Joe Biden, who has...
Fox News:
  • Fox News announces candidate line-up for prime-time debate. (video) Fox News has announced the line-up for the prime-time Republican presidential debate this Thursday, and here's who qualified: Real estate magnate Donald Trump; former Florida Gov. Jeb Bush; Wisconsin Gov. Scott Walker; former Arkansas Gov. Mike Huckabee; retired neurosurgeon Ben Carson; Texas Sen. Ted Cruz; Florida Sen. Marco Rubio; Kentucky Sen. Rand Paul; New Jersey Gov. Chris Christie; and Ohio Gov. John Kasich.
CNBC:
  • IMF review recommends delaying adoption of yuan. The International Monetary Fund should put off any move to add the yuan to its Special Drawing Rights currency basket until September 2016, an IMF staff report said, a move that would effectively end the Chinese currency's chances of an early inclusion.
Reuters: 
  • Disney(DIS) shares drop after company lowers cable outlook. Walt Disney Co lowered profit guidance for its cable networks unit and reported quarterly revenue slightly below Wall Street forecasts, sending its shares down 6 percent on Tuesday. The media company now expects annual operating income growth at the unit in the mid-single digits for fiscal years 2013 to 2016, Chief Financial Officer Christine McCarthy said on a conference call. It previously had forecast growth in the high single digits. The company cut its forecast because it expects lower revenue from a decline in subscribers and the impact of foreign exchange rates, McCarthy said. Sports network ESPN has experienced "modest" subscriber losses as viewing habits have shifted to digital platforms, Disney Chief Executive Officer Bob Iger said. Walt Disney shares dropped 6 percent to $114.10 in after-hours trading
Financial News:
  • Economic Slowdown Adds Uncertainty to China Reforms. Global economic depression and China's slowdown add uncertainty to financial reforms, Li Yang, former Vice President of the Chinese Academy of Social Sciences, writes in a commentary.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 112.75 -.5 basis point.
  • Asia Pacific Sovereign CDS Index 64.25 -.5 basis point.
  • S&P 500 futures +.15%.
  • NASDAQ 100 futures +.15%.

Earnings of Note
Company/Estimate
  • (CHK)/-.11
  • (DNR)/.12
  • (DISCA)/.47
  • (DISH)/.46
  • (D)/.73
  • (HCA)/1.34
  • (ICE)/2.77
  • (LL)/.04
  • (RL)/.98
  • (PCLN)/11.85
  • (PWR)/.44
  • (RDC)/.55
  • (SODA)/.32
  • (SUP)/.17
  • (TWX)/1.03
  • (WCG)/.97
  • (WEN)/.09
  • (AGU)/4.79
  • (CBS)/.72
  • (CF)/1.50
  • (HLF)/1.11
  • (ICPT)-2.00
  • (JACK)/.73
  • (JAZZ)/2.41
  • (GMCR)/.79
  • (MRO)/-.22
  • (PRU)/2.47
  • (RGLD)/.28
  • (TSLA)/-.59
  • (TSO)/4.02
  • (RIG)/.51
Economic Releases
8:15 am EST
  • The ADP Employment Change for July is estimated at 215K versus 237K in June. 
8:30 am EST
  • The Trade Deficit for June is estimated at -$43.0B versus -41.87B in May.
9:45 am EST
  • The Final US Markit Services PMI for July is estimated at 55.2 versus a prior estimate of 55.2.
10:00 am EST
  • The ISM Non-Manufacturing Composite for July is estimated to rise to 56.2 versus 56.0 in June.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,406,670 barrels versus a -4,203,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -133.330 barrels versus a -363,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,755,560 barrels versus a +2,588,000 gain the prior week. Finally, Refinery Utilization is estimated to fall -.13% versus a -.4% decline prior.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone Services PMI, Australia Unemployment report, weekly MBA Mortgage Applications report, (FAST) monthly sales update, CSFB Gaming/Lodging/Leisure/Restaurant conference and the (IDXX) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

No comments: