Thursday Watch

Evening Headlines 

Bloomberg:

• Shanghai Halts Land Auctions as Surging Prices Worry Officials. Shanghai has halted six land auctions since Oct. 12, as officials are seeking to rein in the property market after the government’s loosening of curbs triggered surging prices. The city on Oct. 12 called off an auction for a plot of land in Yangpu district, with a starting price of 4 billion yuan ($630 million), two days before it was scheduled, saying “more conditions are needed to be met to develop the land.” The auction has been rescheduled to resume next month, with plans to more than double the number of apartments that can be built on the land. As of Monday, auctions for another five residential and commercial sites were suspended in suburban Qingpu, Jiading and Songjiang districts. 

• Sydney Housing Boom Over as Price Growth Slows, Domain Says. Sydney’s housing boom is over, according to online real estate listing firm Domain. House prices grew just 3.2 percent in the three months ending Sept. 30, less than half the pace of the previous quarter and the slowest quarterly rate since March 2014, Domain said in a report published Thursday.“The extraordinary house price growth Sydney has recorded over the last three years is now clearly receding,” the firm’s senior economist Andrew Wilson said in the report, titled “Boom is Over.”  

• ECB Haunted by Paradox as Draghi Weighs Risks of QE Signaling. Mario Draghi’s challenge on Thursday is to show that he’s readier than ever to step up stimulus, without panicking investors over the euro area’s health. In the run-up to the European Central Bank’s meeting in Malta, the institution’s president and most of his Governing Council said it’s too early to decide whether to expand their 1.1 trillion-euro ($1.2 trillion) bond-buying program. Yet with economists seeing the need for a fresh boost before year-end, he’ll probably be pressured to provide reassurance that the penultimate monetary-policy session of 2015 won’t leave the ECB behind the curve. Officials sitting down to talk will have to deal with a complex scenario of mixed domestic economic signals, an uncertain global outlook, and divergent opinions on what’s needed to combat feeble inflation. The paradox for Draghi is that when he holds his regular press conference, he may find himself addressing the risks to the recovery without yet committing to action.

• Deep Dive: Is Canada an Emerging Market? (video)

• Asian Stocks Follow U.S. Equities Lower as Material Shares Slide. Asian stocks fell from a two-month high, following a decline in U.S. equities, as material and health-care companies led losses. Investors awaited the opening of Chinese markets after yesterday’s slump. The MSCI Asia Pacific Index slipped 0.3 percent to 134.17 as of 9:04 a.m. in Tokyo.   

• The Relationship Between Currencies and Commodities. (video)

• Credit Contagion: Are Widening Spreads a Red Flag? (video)

• Obama Seeks Broad Bankruptcy Power for Puerto Rico in Crisis. President Barack Obama is pressing for Congress to give Puerto Rico sweeping powers to reduce its $73 billion debt burden through bankruptcy, escalating administration involvement as the Caribbean island’s access to cash dries up. Puerto Rico would be provided with a form of bankruptcy protection not now available to American territories. Administration officials also called for lawmakers on Wednesday to increase health-care funding for Puerto Rico, extend tax credits to the poor and put independent oversight in place to monitor the government’s budget.

• Ackman Feeling Shortseller's Sting as Citron Sinks Valeant(VRX) Stock. Back at you, Bill Ackman. Ackman, the billionaire hedge fund manager, has long maintained that Herbalife Ltd. is a house of cards -- a suggestion that’s drawn howls from the company. Now another Wall Street scold, Citron Research’s Andrew Left, says one of Ackman’s picks looks like the Enron Corp. of Big Pharma -- a claim the company, Valeant Pharmaceuticals International Inc., rebutted Wednesday.

• AmEx(AXP) Misses Estimates as Expenses Increase, Revenue Declines. American Express Co., the credit-card issuer grappling with the loss of its biggest partner, posted third-quarter profit that missed analysts’ estimates as expenses rose and revenue declined. Shares fell in extended trading. Net income slid 14 percent to $1.27 billion, or $1.24 a share, from $1.48 billion, or $1.40, a year earlier, the New York-based company said Wednesday in a statement. The average estimate of 29 analysts surveyed by Bloomberg was for profit of $1.31 a share. Revenue declined 1.3 percent to $8.19 billion, missing estimates. 

Wall Street Journal:

• House Freedom Caucus Offers Support But Not Endorsement for Paul Ryan. Wisconsin Republican doubles down on demand for endorsement from hard-line GOP group.

• Valeant(VRX) Rebuts Critical Report That Pummels Stock. Shares decline more than 15% after declining as much as 40% earlier Wednesday.

• This Child Doesn’t Need a Solar Panel. Spending billions of dollars on climate-related aid in countries that need help with tuberculosis, malaria and malnutrition. In the run-up to the 2015 U.N. Climate Change Conference in Paris from Nov. 30 to Dec. 11, rich countries and development organizations are scrambling to join the fashionable ranks of “climate aid” donors. This effectively means telling the world’s worst-off people, suffering from tuberculosis, malaria or malnutrition, that what they really need isn’t medicine, mosquito nets or micronutrients, but a solar panel. It is terrible news. 

MarketWatch.com:

• Community Health's(CYH) preliminary results miss target. Hospital operator Community Health Systems Inc. reported preliminary third-quarter results well below analysts' projections and cut its outlook for the year, citing a decline in admissions and a deterioration in payer mix. Typically, commercial payers, Medicare and Medicaid, which all combined account for a larger share of the company's revenue in the latest period, negotiate for lower rate increases. Shares, down nearly 25% this year, fell 15% to $34.41 in late trading.

CNBC:

• 5 reasons oil could be nearing a new tipping point. Oil's bounce back from the summer's lows has the look of a bottoming in crude prices, but some strategists say the shakeout is not over. "I'm pretty sure we're going to see a new low. The probabilities are that we see a new low or two or three," said Edward Morse, head of global commodities research at Citigroup.

• AT&T(T) warns of revenue miss in Q3. 

Zero Hedge: 

• China Calms Fears, Says "Stock Plunge Is Normal Correction" As Panic-Buying Resumes On Japanese Open. (graph)

• Capital Is Still Flowing Out Of China, Here's How Beijing Is Hiding It. (graph)

• Who Really Controls Iraq? Inside Iran's Powerful Proxy Armies.

• QE vs Negative Rates: A Cost-Benefit Analysis Of The Monetary Twilight Zone.

• Citi Is Now Mocking Its Own Economic Forecasts. (graph)

• Saudi Arabia Will Be Broke In 5 Years, IMF Predicts. (graph)

• Goodbye Middle Class: 51% Of All American Workers Make Less Than $30,000 A Year.

• John Thain Quits As CEO Again, This Time Without Blowing Up His Company First.

• Stocks Turmoil As "Easing" Exuberance & "Hope" Hype Trumped By Biotech Bloodbath. (graph)

Business Insider:

• The fraud allegations against Valeant exposed an industry secret that's going to infuriate Washington.

• David Einhorn has gone back to one of his most famous short positions - and it is a killer call. Hedge fund manager David Einhorn, the founder of $8 billion Greenlight Capital, has re-entered his famous short of Keurig Green Mountain(GMCR).

• The end of the economic world has begun.

• Putin's aggression is baffling NATO.

• This chart goes a long way to explaining why crude is getting slammed. (graph)

• It's the 'red swan' that we should really be worried about.

Reuters:

• Texas Instruments' profit, revenue beat estimates. Texas Instruments Inc reported better-than-expected quarterly profit and revenue, helped by higher sales of its analog and embedded chips. Shares of the company, which also forecast current-quarter profit that beat analysts' estimates, rose 9 percent in after-market trading on Wednesday.

Financial Times:

• Fund manager David Herro criticises corporate ‘climate appeasers’. A top US fund manager has accused multinational companies that signed a White House-sponsored pledge to tackle climate change of “appeasing environmental extremism”. David Herro, who runs the $29bn Oakmark International Fund at Harris Associates, said executives at the 81 signatories, which include Johnson & Johnson, Intel and Hershey, were putting “pop science” ahead ofshareholder value. “Our corporate leaders would rather cave in to political pressure that is based on pop science and emotion than focus on creating shareholder value? How sad,” Mr Herro wrote in comments under an FT.com article on the news. “Shareholders should seriously question executives who appease such environmental extremism and zealotry,” he added.

Telegraph:

• Defiant Portugal shatters the eurozone's political complacency. Brussels faces a second anti-austerity revolt as the Portuguese Left tears up the script and demands the right to govern.

South China Morning Post:

• Hong Kong home prices to fall 17 per cent in 27 months, says CLSA. Bear market for once sizzling property market looms.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 140.0 +1.25 basis points.

• Asia Pacific Sovereign CDS Index 78.25 +1.0 basis point.

• Bloomberg Emerging Markets Currency Index 72.31 +.04%. 

• S&P 500 futures +.24%.

• NASDAQ 100 futures +.29%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (MMM)/2.01

• (ALK)/2.10

• (ADS)/3.93

• (AB)/.42

• (AEP)/1.00

• (CAM)/.82

• (CAT)/.79

• (DHR)/1.04

• (DOW)/.68

• (LLY)/.76

• (FCX)/-.09

• (MCD)/1.28

• (PH)/1.46

• (NUE)/.49

• (PTEN)/-.34

• (PCP)/2.94

• (PHM)/.43

• (DGX)/1.26

• (RTN)/1.43

• (RS)/1.02

• (R)/1.73

• (SWK)/1.46

• (SNA)/1.94

• (TROW)/1.14

• (UA)/.44

• (UNP)/1.43

• (UAL)/4.55

• (HTLD)/.25

• (GOOG)/7.21

• (ALTR)/.31

• (AMZN)/-.12

• (T)/.69

• (COF)/1.97

• (JNPR)/.53

• (LSTR)/.90

• (MXIM)/.41

• (MSFT)/.58

• (SKX)/.55

Economic Releases

8:30 am EST

• The Chicago Fed National Activity Index for September is estimated to rise to -.2 versus -.41 in August. 

• Initial Jobless Claims are estimated to rise to 265K versus 255K the prior week.

• Continuing Claims are estimated to rise to 2186K versus 2158K prior.

9:00 am EST

• The FHFA House Price Index for August is estimated to rise +.5% versus a +.6% gain in July. 

10:00 am EST

• Existing Home Sales for September are estimated to rise to 5.39M versus 5.31M in August.

• The Leading Index for September is estimated unch. versus a +.1% gain in August.

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for October is estimated to fall to -9.0 versus -8.0 in September.

Upcoming Splits

• None of note

Other Potential Market Movers

• The ECB Rate decision, ECB Press Conference, Japan PMI, UK Retail Sales report, Bloomberg Economic Expectations Index for Oct., weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (MJN) investor day and the (MFRM) analyst day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.