Sunday, October 11, 2015

Monday Watch

Today's Headlines 
  • Slow-Gear World Economy Vexes Officials at Fed, China Crossroads. Global policy makers used nearly all their tools to get the world economy out of a stall six years ago. What’s vexing them now is how to shift into higher gear. The prospect of the world’s biggest economy being healthy enough for its central bank to raise interest rates for the first time in nearly a decade would usually be reason to cheer. So might efforts by the next-largest to move toward more balanced growth. A sluggish and uneven global recovery is making these turning points -- the Federal Reserve’s plan to raise rates and a slowing of China’s once high-flying economy -- harder to digest for central bankers and finance chiefs who met over the weekend in Lima. Clouding the picture is lackluster investment from companies sitting on cash, still too reluctant to deploy the capital that typically drives recoveries. "The world is not in crisis, but there’s a great sense of unease, and that sense of unease explains why globally, almost everywhere, private investment is much weaker than you would expect at this stage in the cycle," Singapore Deputy Prime Minister Tharman Shanmugaratnam said in the Peruvian capital at the International Monetary Fund’s annual meeting, which wrapped up Sunday.
  • This Analyst Says China's Stock Rally-to-Rout Is About to Repeat. In August, Thomas Schroeder correctly predicted a rebound in Chinese stocks wouldn’t last. Now, he says, the benchmark equity gauge will plumb new lows as a bear-market rally fails. The Shanghai Composite Index will climb 29 percent to 4,100 in the next three months, before slumping as much as 41 percent to 2,400 in early 2016, Schroeder, the Bangkok-based founder and managing director of Chart Partners Group Ltd., said in an interview in Singapore 
  • China's Supertanker Traffic Jam Propels Global Shipping Rates. Supertankers hauling crude to China are contending with increased waiting times to unload as some on-land storage depots reach capacity amid an oil-buying binge by the world’s most populous nation. At least 19 two-million-barrel-capacity ships -- known as VLCCs -- were stationed off China’s coast for two weeks or more, according to vessel-tracking data compiled by Bloomberg on Oct. 9. In normal market conditions, most would normally arrive at a port and depart within a day, according to George Los, a New York-based analyst at shipbroker Charles R. Weber Co. As delays have increased, benchmark daily earnings for the tankers jumped above $100,000 this month for the first time since the global recession. This tanker traffic jam shows just how much crude the world’s second biggest importer is buying at a time when economic growth is forecast to slow to the lowest level in 25 years. China’s purchases have jumped almost 10 percent this year from 2014.
  • Asia Stocks Climb After Biggest Weekly Rally Since December 2011. Asian stocks rose after posting their steepest weekly advance since December 2011, with technology and industrial shares leading gains. The MSCI Asia Pacific Excluding Japan Index climbed 0.2 percent to 425.16 as of 9:32 a.m. in Hong Kong, with Tokyo markets closed for a holiday.
  • Fed’s Fischer Says Economy May Merit Liftoff Later This Year. Federal Reserve Vice Chairman Stanley Fischer said the U.S. economy may be strong enough to merit an interest-rate increase by year end, while cautioning that policy makers are monitoring slower domestic job growth and international developments in deciding the precise timing of liftoff. At the Federal Open Market Committee’s meeting in September, “most participants, myself included, anticipated that achieving these conditions would entail an initial increase in the federal funds rate later this year,” Fischer said Sunday in Lima, where attended the annual meeting of the International Monetary Fund. “Of course, that assessment was premised on the assumption of continued solid economic growth and further improvement in the labor market, which are key factors supporting our expectation that inflation will rise to our 2 percent objective,” he said in prepared remarks released by the Fed.
Wall Street Journal: 
  • Central Bankers Urge Fed to Get On With Interest-Rate Increase. Many officials at IMF meeting in Lima, Peru, say they would prefer certainty over agony of waiting. Talk of the Federal Reserve’s first rate increase in almost a decade tends to send many investors into a frenzy. For the world’s central bankers, it is increasingly likely to elicit sighs of resignation.
  • Iran Test-Fires New Missile. Test threatens to complicate nuclear deal reached in July with world powers. Iran test-fired a new generation of surface-to-surface ballistic missiles on Sunday, its state news agency reported, a move that could complicate the implementation of the country’s July nuclear deal even as its parliament ratified the historic pact’s outlines.
  • Profit Margins Take Spotlight in U.S. Earnings Season. Investors fret about companies’ stagnant revenues, lack of room for further cost cuts. As third-quarter U.S. corporate results roll out this week, many investors are putting an increased focus on profit margins as a sign of companies’ ability to propel earnings higher.
  • Afghan Taliban’s Reach Is Widest Since 2001, U.N. Says. The Taliban insurgency has spread through more of Afghanistan than at any point since 2001, according to data compiled by the United Nations as well as interviews with numerous local officials in areas under threat. In addition, the United Nations Assistance Mission in Afghanistan over the past two weeks has evacuated four of its 13 provincial offices around the country — the most it has ever done for security reasons — according to local officials in the affected areas.
Zero Hedge:
Night Trading
  • Asian indices are +.25% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 141.5 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 79.25 -2.25 basis points.
  • S&P 500 futures -.14%.
  • NASDAQ 100 futures -.10%.

Earnings of Note
  • (INFY)/14.11
Economic Releases 
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Lockhart speaking, Fed's Evans speaking, Fed's Brainard speaking and the BoJ Minutes could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial 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 week.

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