Evening Headlines
Bloomberg:
- China’s Stocks Extend Rout Amid Concern State to Reduce Support. China’s stocks slumped, extending Tuesday’s plunge, amid growing concern the government will pare back support for the equity market. The Shanghai Composite Index dropped 5 percent to 3,560.17 at 11:05 a.m. local time, poised for its lowest close since July 8 and falling below the 200-day moving average. About 39 stocks declined for each that rose on the gauge, which sank 6.2 percent on Tuesday. The Hang Seng China Enterprises Index slid 1.9 percent to a nine-month low.
- These Are the Biggest Losers Since the Yuan's Shock Devaluation. A week has passed since China roiled global markets with its first major devaluation in more than two decades. The epochal move hit beleaguered emerging markets the hardest, contributing to new record lows in the currencies of Colombia and Turkey. From Lima to Kuala Lumpur, here are the biggest losers since the orchestrated drop in the people's currency.
- Alibaba(BABA) Cash-Burning Buybacks Make Internet Bonds China’s Worst. China’s Internet bonds are lagging behind as disappointing earnings and plans for buybacks to shore up slumping shares fuel concern finances will deteriorate.
- Malaysia Riskier Than Mexico Has UBS Warning of Worse to Come. Malaysia is paying the price for weak foreign currency holdings and messy politics as the cost to protect its debt soars to near a four-year high. UBS Group AG predicts even more pain ahead. The spread on the nation’s credit-default swaps widened 74 basis points in 2015 to 180 this week, a level not seen since October 2011. It’s the worst performing in Asia and almost 40 basis points more than similar-rated oil-producer Mexico, which the Swiss bank says best illustrates the malaise for Malaysia. “The moves in CDS are telling us that the market is increasingly nervous about the central bank’s ability to manage the foreign-exchange selloff in light of its relatively light reserves position,” said Manik Narain, a London-based strategist at UBS. “Malaysia’s situation may now be more precarious.”
- Japan Export Growth Slows in July, Putting Pressure on Manufacturers. Japan’s export growth slowed in July, a sign that foreign demand is failing to provide much support to the world’s third-biggest economy. Shipment values increased 7.6 percent from a year earlier, slowing down from a 9.5 percent gain in June, the Ministry of Finance said on Wednesday. The volume of exports slipped 0.7 percent. Japan’s economy is struggling to emerge from a contraction last quarter driven by weak consumption and the biggest tumble in exports in four years. A slowdown in China is taking a toll, with export volumes to Japan’s biggest trading partner falling for a sixth month on weaker demand for cars.
- Bank of Japan pushing on a string as shrinking economy needs tow. Just as the Bank of Japan most needs to revive a contracting economy, the effectiveness of its monetary policy is at a record low. The money multiplier, a gauge of activity generated when the central bank eases, fell to 3.92 last month, the lowest in data dating to 2003. That's even as BOJ debt purchases of as much as 12 trillion yen ($97 billion) a month caused the monetary base to balloon about 150 percent. The phrase "pushing on a string" was adopted during the 1930s Great Depression to describe the difficulty in reviving demand with fund injections.
- ‘Buffett Indicator’ Flashes Warning on Japan’s Stock-Price Gains. One of Warren Buffett’s favorite gauges for valuing share prices is flashing warning signals for Japan after data showing that the world’s third-largest economy shrank in the second quarter while the stock market kept rising. Japan’s gross domestic product report this week makes for sobering reading, with the economy contracting an annualized 1.6 percent in the second quarter as consumers cut back purchases, businesses trimmed spending, and exports declined. Yet, the broader Topix index reached to the highest level since 2007 this month.
- Yen Traders Sense Currency Bottoming Even as Fed Rate Rise Looms. Traders are betting the yen is about as weak as it’s going to get this year, cutting their expectations for price swings by the most among major currencies this year, even as the Federal Reserve may increase interest rates next month. The yen is the only major currency where traders are paying a premium on options to protect against the exchange rate strengthening versus the dollar in three months. A gauge of demand for hedges against price swings over the next year sank to the lowest since November. U.S. policy makers release minutes from their July meeting later on Wednesday.
- Daewoo Shipbuilding Falls on Concern Liabilities Exceed Assets. Daewoo Shipbuilding & Marine Engineering Co. fell to the lowest price in almost 13 years in Seoul trading on concern that its liabilities outpace assets. Shares of the world’s second-largest shipbuilder dropped 6.2 percent to 6,070 won as of 10:42 a.m., the lowest intraday level since November 2002. The stock earlier declined as much as 7.9 percent and is among the 10 worst performing stock among the 1,002 members of the MSCI Asia Pacific Index today.
- Won Forwards Approach Four-Year Low as China Deters Risk Taking. Offshore forward contracts in the won traded near a four-year low on concern a slump in Chinese equities will spur outflows from South Korean assets. China’s benchmark stock index dropped the most in three weeks on Tuesday on speculation authorities will pare back efforts to support the market. South Korea’s Kospi index fell to a six-month low Wednesday. Global funds have pulled almost $1 billion from local equities this month. One-month non-deliverable forwards fell 0.3 percent to 1,186.86 a dollar as of 10:16 a.m. in Seoul, data compiled by Bloomberg show. They reached 1,196.85 on Aug. 12, the lowest since October 2011. In onshore trading, the spot rate was little changed at 1,184.70. The won has weakened 7.9 percent this year.
- Asian Stocks Fall as Oil Decline Signals Slowing China Economy. Asian stocks fell a fourth day as a deepening commodities selloff raised concern growth may be slowing in China, and as investors await clues from the Federal Reserve on the timing of a U.S. interest-rate increase. The MSCI Asia-Pacific Index dropped 0.1 percent to 136.83 as of 9:01 a.m. in Tokyo, extending a seven-month low.
- OPEC's ‘Fragile Five’ Face Rising Cost in the Fight for Oil Market Share. The costs of OPEC’s plan to protect members' share of the oil market by out-producing rivals are mounting. As oil prices slump to six-year lows, the risks of worsening political turmoil are rising in the organization’s most vulnerable nations. This includes Algeria, Iraq, Libya, Nigeria and Venezuela, a group dubbed the `Fragile Five' by RBC Capital Markets Ltd.
- One of the Most Successful Trading Strategies This Year May be Coming to an End. (graph) Investors who've been minting money according to the Wall Street adage that the trend is your friend just got a reminder that nothing works forever. A Citigroup Inc. index that tracks U.S. momentum stocks like Apple Inc. and Netflix Inc. did something last week it hadn't done since June -- it fell. While still trouncing the Standard & Poor's 500 Index in 2015, analysts at the bank have warned that the strategy is approaching a threshold where rotations have occurred in the past.
- Bond Traders Aren’t Buying Into Good News on U.S. Economy. Good economic news just isn’t that bad for Treasuries any more. The reaction in the $12.8 trillion U.S. government bond market to surprisingly strong data has become more muted in recent months, according to Goldman Sachs Group Inc. At the same time, the influence of unexpectedly weak data has grown for longer maturities, while staying about the same for others, the New York-based bank wrote in a report published Tuesday. That’s a sign investors are taking a dim view of the world’s biggest economy, even as the Federal Reserve prepares to raise interest rates for the first time in a decade.
Wall Street Journal:
- Yuan’s Devaluation Brings Losses for Some. Investors assumed China would keep the currency stable. They were wrong. In the rough-and-tumble world of global currencies, where exchange rates can swing by double-digit percentages in days, the yuan’s 3% fall against the U.S. dollar marked a minor change. But it is proving cataclysmic for investors who watched the yuan climb for a decade and anchored bets around the notion it would hold steady.
- Dark Clouds Loom for Airlines Even as Their Profits Take Off. Stocks remain in a slump as airlines face labor woes, competition probes and investor fears.
- CEO Fiorina Fought the Good Fight. No big-tech chief executive created value between 1999 and 2005. And Carly was one of them.
Fox News:
- Billionaire George Soros warms up to coal as stock prices hit bottom. Billionaire investor George Soros, who has demonized fossil fuels for years through his think tanks and political contributions, seems to have warmed up to Big Coal now that stocks are dirt cheap. The left-wing hedge fund legend has raised eyebrows with major purchases of stock in two large coal companies, firms his critics say he helped bring to their knees. While buying low is the hallmark of any shrewd investor, buying coal goes against the political and environmental ideology Soros has long espoused. “I find it very interesting that George Soros would buy shares in those coal companies,” said Daniel Simmons, vice president for Policy at the Washington DC-based free market energy group, Institute for Energy Research. “I am confused given the non profits he funds and how hard they have worked to demonize coal.”
MarketWatch.com:
CNBC:
- Hackers post stolen Ashley Madison user data: Report. Hackers who breached the networks of cheating website AshleyMadison.com have made the sensitive customer information publicly available, according to a report by Wired. Almost 10 gigabytes worth of data, including member account details, log-ins and payment transaction details, were posted on Tuesday to the dark web.
Zero Hedge:
- Margin Debt Drops For 1st Time In 8 Days As Chinese Stocks Continue Plunge Despite Stable Yuan. (graph)
- Only The Date Is Unknown. (cartoon)
- China's Richest Traders Are Rushing To Dump Their Stocks To The Retail Masses, Just Like In The US. (graph)
Reuters:
- U.S. FDA approves 'female Viagra' with strong warning. The first drug to treat low sexual desire in women won approval from U.S. health regulators on Tuesday, but with a warning about potentially dangerous low blood pressure and fainting side effects, especially when taken with alcohol. The U.S. Food and Drug Administration said the pink pill, to be sold under the brand name Addyi and made by privately held Sprout Pharmaceuticals, will only be available through certified and specially trained health care professionals and pharmacies due to its safety issues. Addyi, whose chemical name is flibanserin, is designed for premenopausal women whose lack of sexual desire causes distress. The condition is formally known as hypoactive sexual desire disorder, or HSDD.
Financial Times:
- Surge in emerging market capital outflows hits growth and currencies. A surge of capital gushing out of emerging markets has risen toward $1tn over the past 13 months, roughly double the amount that fled during the financial crisis amid slumping confidence in the world’s developing economies. The sustained exodus of capital reinforces concerns that emerging market economies, suffering slowing growth and weakening currencies, are relinquishing their longstanding role as locomotives for global growth to become a drag on demand instead.
Telegraph:
- Unworkable and unreformable, the euro surely cannot survive another serious downturn. The euro in its present form will die not of the financial traumas that first threatened its existence, but of popular anger.
Evening Recommendations
- None of note
Night Trading
- Asian equity indices are -1.5% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 120.5 +4.25 basis points.
- Asia Pacific Sovereign CDS Index 71.0 -.25 basis point.
- S&P 500 futures -.10%.
- NASDAQ 100 futures -.13%.
Earnings of Note
Company/Estimate
- (AEO)/.14
- (CTRN)/-.11
- (EV)/.62
- (HRL)/.54
- (LOW)/1.24
- (STPLS)/.12
- (TGT)/1.11
- (HGR)/.45
- (LB)/.68
- (NTAP)/.23
- (SMTC)/.24
- (SPTN)/.51
- (SNPS)/.59
Economic Releases
8:30 am EST
- The CPI for July is estimated to rise +.2% versus a +.3% gain in June.
- The CPI Ex Food & Energy for July is estimated to rise +.2% versus a +.2% gain in June.
- Real Avg Weekly Earnings YoY for July.
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -354,000 barrels versus a -1,682,000 decline the prior week. Gasoline supplies are estimated to fall by -1,090,000 barrels versus a -1,251,000 barrel decline the prior week. Distillate inventories are estimated to rise by +1,490,000 barrels versus a +2,994,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.36% versus unch. prior.
- US Fed releases minutes from July 28-29 FOMC meeting.
- None of note
Other Potential Market Movers
- The Fed's Kocherlakota speaking, weekly MBA mortgage applications report and the (CAT) investor conference call could also impact trading today.
BOTTOM LINE: Asian
indices are mostly lower, weighed down by industrial and technology
shares in the region. I expect US stocks to open mixed and to
weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
No comments:
Post a Comment