Wednesday, October 07, 2015

Thursday Watch

Evening Headlines 
  • Asia Stocks Rise for Seventh Day Before China Opens From Holiday. Asian stocks rose for a seventh day, following U.S. shares higher, with Chinese markets set to open after a week-long holiday that saw a global equity rally. The MSCI Asia Pacific Index gained 0.2 percent to 131.95 as of 9:00 a.m. in Tokyo, heading for an almost seven-week high.
  • Four Ways the Oil Price Crash Is Hurting the Global Economy. Remember when the oil price plunge was going to be a huge economic tailwind? Lower oil prices were roundly celebrated as a tailwind for global growth. In theory, the movement of wealth from commodity producers, which often stow away oil revenue in sovereign wealth funds, to consumers, which spend a far larger portion of their income, is a positive for economic activity. But strategists at Credit Suisse believe that so far, the global economy has seen only the storm from lower crude, not the rainbow that follows. 
  • Is the U.S. Economy Actually Weaker Than We Think? (video)
  • Citi Economist: 'The Market Has Lost Its Anchor'. (video)
  • Traders Flee Pharma Junk Bonds as Price Scandal Engulfs Industry. Pharmaceutical companies are emerging as the latest pocket of sorrow in the beleaguered junk-bond market as a renewed public debate on drug-pricing tactics unnerves investors. Bonds sold by companies from Valeant Pharmaceuticals International Inc. to Endo International Plc and Concordia Healthcare Corp. have underperformed the broader junk-debt gauge, Bloomberg bond index data show. That comes at an inopportune time for companies like Concordia and Sucampo Pharmaceuticals Inc., which are marketing more than $2 billion of loans to finance acquisitions. 
  • Bass Joins Mangrove Showing Hedge Funds Can Challenge Patents. Kyle Bass may have to stop calling the U.S. Patent and Trademark Office a “kangaroo court.” The agency’s Patent Trial and Appeal Board agreed Wednesday to review a patent for a Shire Plc colitis drug, saying a group set up by Bass’s Hayman Capital hedge fund had a “reasonable likelihood” of proving the patent owned by Cosmo Pharmaceuticals SA is invalid. Shire called the decision to begin the review on Lialda drug patents disappointing but only an initial step of a process that will take about a year.
Wall Street Journal:
  • In Canada, Miniature Heavy-Oil Sites Overcome Slump in Crude Prices. Smaller operations benefit from lower costs, faster production ramp-ups and higher prices for their crude.
  • IMF: Emerging-Market Troubles Risk Triggering Asset Fire Sales. Over-borrowing by developing nations may total $3 trillion, the fund says. Global markets should brace for more turmoil as a reckoning from years of gorging on cheap debt nears, the International Monetary Fund warned Wednesday. The fund, in its semiannual assessment of risks to the global financial system, said the fallout from the end of easy-money policies by central banks could stall the world’s economic expansion, expose lofty asset prices and weigh on overextended lenders.
  • Earnings Growth Slowing for Private Middle-Market Companies. Earnings growth at private, middle-market companies slowed during the first two months of the third-quarter. Rising labor costs and a strong U.S. dollar put pressure on margins, according to a report Wednesday by middle-market lender Golub Capital. Revenue grew nearly 8% and earnings rose about 4% during the first two months of the third quarter compared with a year ago, according to the firm’s Golub Capital Altman Index. The index measures median revenue and earnings growth for roughly 150 privately owned companies in Golub’s loan portfolio. Revenue grew 9% and earnings jumped almost 7% during the second-quarter.
  • Republicans on the Brink. The GOP may be throwing away a chance at victory in 2016. Back in the old era of American politics—say the election of 2008—the highest goal of Republicans or Democrats was to win the presidency and to control both houses of Congress. With what the ancients then called “control of government,” the victorious party would enact legislation reflecting its beliefs and ideas.
Fox News: 
  • Clinton breaks with Obama – on trade, Syria and more. (video) Hillary Clinton, despite having served a full term in the Obama Cabinet, is making an overt effort to distance herself from the president’s agenda as she tries to distinguish herself as a candidate -- and blunt attacks from both ends of the political spectrum. 
Zero Hedge:
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 149.25 +.25 basis point.
  • Asia Pacific Sovereign CDS Index 81.25 -2.75 basis points.
  • S&P 500 futures -.23%.
  • NASDAQ 100 futures -.33%.

Earnings of Note
  • (DPZ)/.74
  • (ISCA)/-.06
  • (AA)/.14
  • (ANGO)/.11
  • (HELE)/1.03
  • (RT)/.05
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 274K versus 277K the prior week.
  • Continuing Claims are estimated to rise to 2200K versus 2191K prior.
2:00 pm EST
  • US Fed Minutes from Sept. 16-17 FOMC Meeting.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Kocherlakota speaking, Fed's Williams speaking, Fed's Bullard speaking, BoE rate decision, ECB minutes, $13B 30Y T-Bond auction, weekly EIA natural gas inventory report, Bloomberg Oct. US Economic Survey, weekly Bloomberg Consumer Comfort Index and the (VIP) investor day 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 50% net long heading into the day.

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