Sunday, September 27, 2015

Monday Watch

Posted by Gary .....at 10:57 PM
Today's Headlines 
Bloomberg:
  • China Industrial Profits Fall Most Since 2011 as Economy Slumps. Chinese industrial companies’ profits declined the most in at least four years, the latest sign that the nation’s old growth drivers are faltering. Industrial profits tumbled 8.8 percent in August from a year earlier, the National Bureau of Statistics said Monday in Beijing. It was the biggest drop since the government began releasing monthly data October 2011, according to data compiled by Bloomberg. Profits in coal mining plunged 64.9 percent, while oil and gas profits tumbled 67.3 percent, according to the report. The drop was attributed to falling product prices, lower investment returns and foreign exchange losses contributed, He Ping, an official at the National Bureau of Statistics, said in an analysis on the agency’s website.
  • Catalan Separatism Refuses to Die as Mas Claims Mandate With 48%. Artur Mas refuses to quit. The Catalan president has already ruptured his party in his bid to secede from Spain. On Sunday, voters in the region narrowly rejected his plan to build an independent state and left him needing a deal with an anti-capitalist party that rejects the rule of law if he wants to govern. He’s still not giving up. Before the vote, Mas had said the regional ballot was effectively a referendum on independence. Afterwards, he said 48 percent support is enough. “We have a strong mandate to push ahead with this project,” Mas said, declaring victory at a post-election rally in Barcelona.
  • Zero Inflation Looms Again for ECB as Oil Drop Counters Stimulus. If the euro area is about to run out of inflation -- again -- it won’t shock Mario Draghi. The European Central Bank president said more than three weeks ago that the inflation rate could turn negative this year because of the renewed decline in oil prices. The 19-nation region is set to take a step in that direction on Wednesday, when data will show consumer prices stagnated in September for the first time in five months, according to a Bloomberg survey of economists.
  • China Stocks Fall to Two-Week Low on Slumping Industrial Profits. China’s benchmark stock index fell for a second day after a report showing industrial companies’ profits dropped the most in at least four years added to concern the economic slowdown is deepening. The Shanghai Composite Index slid 1 percent to 3,060.74 at 9:49 a.m. local time, heading for the lowest level since Sept. 15. Industrial companies’ profits plunged 8.8 percent in August from a year earlier, compared with a 2.9 percent drop in July. China Shipbuilding Industry Co. tumbled 4 percent to lead declines for industrial shares.“The industrial profit figure was well below the market consensus figure and is likely to add some downward pressure to today’s session,” said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co. in Shanghai.
  • Asian Stocks Swing Before China Data; Japanese Shares Retreat. Asian stocks fluctuated, with the regional benchmark index on course for its worst quarter in four years, as investors awaited data on Chinese industrial profits. Shares in Japan slid. The MSCI Asia Pacific Index added less than 0.1 percent to 125.08 as of 9:04 a.m. in Tokyo after slipping as much as 0.1 percent.
  • China's Baoshan Steel Starts Zhanjiang Mill Amid Falling Prices. Baoshan Iron & Steel Co. started production at its new project in China’s southern port city of Zhanjiang even as steel prices plunge amid sluggish demand in the country, which is facing its slowest pace of economic growth in 25 years. The No. 1 blast furnace of the project, designed to have an annual capacity of 4.1 million metric tons of melted iron, was ignited Sept. 25, the company, China’s biggest publicly traded steelmaker, said in a filing to the Shanghai Stock Exchange on Sunday. The project will be fully operational a year later with an expected annual crude steel production of 8.75 million tons, it said. It usually takes three to six months of trial production before a new steel mill begins commercial operation. Chinese mills face declining domestic demand for the first time in a generation amid a property slump, which crushed prices in the nation that produces more than half of world output. Steel reinforced bar, which is used in construction, almost halved in the past two years on the Shanghai Futures Exchange while hot-rolled coil, used in automobile and machinery, dropped 42 percent since its debut in March 2014.
  • Profit Pessimism Rivaling Crisis Days as Stocks Support Erodes. (graph) Any hopes that investors had of earnings growth salvaging what is poised to be the first down year for stocks worldwide since 2011 are quickly fading. Cuts to profit estimates outnumber increases by the most in three years, and the pessimism could reach levels last seen during the financial crisis, based on an index tracking the changes compiled by Citigroup Inc. China’s slowdown, a fragile recovery in Europe, and disappointing U.S. economic reports are combining to jeopardize one of the key drivers of a bull market that saw stocks rise as much as 156 percent since 2009. “Fundamentals aren’t great anywhere,” said Peter Dixon, a global equities economist at Commerzbank AG in London, who recommends trimming allocation to stocks. “It has become a fairly difficult background for corporates to operate. Valuations will start looking more stretched, and a lot of people are beginning to wonder whether we’re nearing a wider correction.”
Wall Street Journal:
  • Legendary Investor Richard Rainwater Dies. Master deal maker helped turn Bass brothers of Texas into billionaires. Richard Rainwater was a legendary deal maker who helped turn the Bass brothers of Texas into billionaires and later became one himself, while serving as a mentor to a new generation of investment wizards.
Zero Hedge:
Business Insider:
  • Hillary Clinton just had her toughest grilling yet. Former Secretary of State Hillary Clinton's Sunday "Meet the Press" interview featured question after question on her email use at the State Department. Host Chuck Todd asked the Democratic presidential front-runner roughly a dozen inquiries about the controversy — before moving on to questions about her sinking poll numbers and policy flip-flops over the years. Todd began the interview by playing a seven-year-old clip of Clinton saying she wants "a much more transparent government."
  • GOLDMAN SACHS: 'Peak coal' is coming. Goldman Sachs released a September 22 research note that predicted that coal will decline and never come back. “Peak coal is coming sooner than expected,” the investment bank concluded. “The industry does not require new investment given the ability of existing assets to satisfy flat demand, so prices will remain under pressure as the deflationary cycle continues.”
Reuters:
Les Echos: 
  • IMF Set to Cut Global Growth Forecasts, Lagarde Says. A growth rate of 3.3% for this year is no longer realistic, nor is 3.8% next year, IMF Chief Christine Lagarde said.
Night Trading
  • Asian indices are -1.25% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 151.25 -.5 basis point.
  • Asia Pacific Sovereign CDS Index 86.25 +.5 basis point.
  • S&P 500 futures -.40%.
  • NASDAQ 100 futures -.42%.

Earnings of Note
Company/Estimate 
  • (CALM)/3.14
  • (MTN)/-1.82
  • (CMTL)/.37
  • (SNX)/1.44
Economic Releases
8:30 am EST
  • Personal Income for August is estimated to rise +.4% versus a +.4% gain in July.
  • Personal Spending for August is estimated to rise +.3% versus a +.3% gain in July. 
  • PCE Core for August is estimated to rise +.1% versus a +.1% gain in July.
10:00 am EST
  • Pending Home Sales for August are estimated to rise +.4% versus a +.5% gain in July.
10:30 am EST
  • Dallas Fed Manufacturing Activity for September is estimated to rise to -10.0 versus -15.8 in August.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Dudley speaking, Fed's Evans speaking, Fed's Williams speaking, German retail sales report, Johnson Rice Energy Conference and the (DTE) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.

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