Sunday, October 18, 2015

Monday Watch

Today's Headlines 
  • China Ponders Tool Deemed Too Risky Post 2008 to Cut Bad Loans. China is facing calls to bring back an instrument to fight bad loans it had deemed too dangerous after the global financial crisis: debt tied to failed assets. China Construction Bank Corp. said in August it’s exploring bad-debt securitization, in which lenders package soured loans into notes sold to investors. While a central bank official said in May such products are under study, regulators this month declined to comment on the plans. Only three Chinese firms have issued such bonds before a 2009 halt to all asset-backed securities that ended in 2012 with products tied only to performing assets. 
  • Lackluster Global Economy Is Weighing on China, Xi Tells Reuters. A “sluggish” world economy is weighing on China’s growth, President Xi Jinping said in an interview with Reuters ahead of his visit to the U.K. and the publication of his nation’s third-quarter figures for gross domestic product. China isn’t immune to the lacklustre performance of the global economy, Xi said in a written question-and-answer. The nation has concerns about its own economy and is working hard to address them, he added.
  • China's Selling Tons of U.S. Debt. Americans Couldn't Care Less. For all the dire warnings over China’s retreat from U.S. government debt, there is one simple fact that is being overlooked: American demand is as robust as ever. Not only are domestic mutual funds buying record amounts of Treasuries at auctions this year, U.S. investors are also increasing their share of the $12.9 trillion market for the first time since 2012, data compiled by Bloomberg show.
  • Won Retreats as Growth in Key Chinese Export Market Seen Slowing. The won retreated before data that may show economic growth in China, South Korea’s biggest export market, slowed last quarter. China’s gross domestic product increased 6.8 percent from a year earlier, compared with 7 percent in the previous three months, according to the median estimate in a Bloomberg survey before Monday’s report. The won rallied for a third week in the five days to Oct. 16, pushing the dollar’s 14-day relative-strength index below a key level that signaled the greenback was poised for a reversal. A report later in the week may show South Korea’s growth accelerated last quarter. The won fell 0.2 percent to 1,131.43 a dollar as of 9:59 a.m. in Seoul, data compiled by Bloomberg show.
Wall Street Journal 
  • Syrian Regime, Backed by Russia, Iran and Hezbollah, Expands Ground Offensive to Aleppo. Fighting began on southern outskirts of city. Syrian pro-regime forces backed by Russian airstrikes have expanded their ground offensive to the strategic city of Aleppo, one of the clearest signs yet of how Russia’s recent military intervention has emboldened President Bashar al-Assad and his loyalists. In the bitterly fought multi-sided war, Aleppo is among the most coveted prizes. Losing partial control of the city, which was once Syria’s largest and its commercial capital, was an embarrassment to the regime. But with the backing of Russian warplanes, Iranian... 
  • Wave of Megadeals Tests Antitrust Limits in U.S. Analysis shows that in many industries, most firms are competing in highly concentrated markets. A growing number of industries in the U.S. are dominated by a shrinking number of companies. The past year has brought major mergers in many industries, from health insurers and food manufacturers to cable-TV providers. At the same time, many companies are focusing on narrower markets that they can more easily dominate.
Zero Hedge:
Business Insider: 
  • PAUL SINGER: Developed countries are hopelessly and utterly insolvent. Speaking at the inaugural Tel Aviv Sohn Conference, Singer said that since the 2008 financial crisis developed, countries had been propped up by a "cult" of central bankers, according to tweets from Bloomberg TV's Elliott Gotkine. Singer said the balance sheets of developed economies were hopelessly and utterly insolvent once long-term entitlements were added in, according to the tweets. Singer has previously said prices of stocks and bonds have been "distorted" by central-bank monetary policy. And if central banks decide they need to do more — such as another round of stimulus through quantitative easing — Singer thinks everything will go to hell.
  • Why Australia's IAG threw in the towel on China. When Insurance Australia Group , the country's largest general insurer, announced ambitious plans in June to ramp up its business in mainland China, several institutional investors including Jason Kim were seriously concerned. Kim, a portfolio manager at Nikko Asset Management which owns about A$143 million ($104 million) worth of IAG shares, asked the board to reconsider, arguing China, the world's fourth-largest insurance market, was difficult and high-risk. Between June and September, institutional shareholders held private discussions with senior executives at IAG, which is 3.7 percent owned by Warren Buffett's Berkshire Hathaway Inc , people familiar with the matter said. They expressed concerns about spending up to A$1 billion in a market where the chance of failure was high.
Financial Times:
  • Russia retreats to autarky as poverty looms. Vladimir Putin is falling back on Soviet-era self-reliance as oil wealth evaporates and sanctions cut off vitally-needed technology. Vladimir Putin is falling back on Soviet-era self-reliance as oil wealth evaporates and sanctions cut off vitally-needed technology.
Night Trading
  • Asian indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 139.0 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 75.0 -.25 basis point.
  • S&P 500 futures -.16%.
  • NASDAQ 100 futures -.14%.

Earnings of Note
  • (GPC)/1.24
  • (HAL)/.28
  • (HAS)/1.53
  • (MTB)/2.00
  • (MS)/.63
  • (VRX)/2.69
  • (BMI)/.63
  • (BXS)/.37
  • (BRO)/.47
  • (FLEX)/.25
  • (IBM)/3.30
  • (IEX)/.89
  • (SONC)/.42
  • (STLD)/.23
  • (ZION)/.42
Economic Releases 
10:00 am EST
  • The NAHB Housing Market Index for October is estimated at 62.0 versus 62.0 in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Brainard speaking, Fed's Lacker speaking and the RBA Minutes could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and consumer shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.

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