Friday, November 27, 2015

Friday Watch

Posted by Gary .....at 12:57 AM
Evening Headlines
Bloomberg:
  • Terror Suspect on the Loose Leaves Fearful Brussels in Bind. Authorities put Brussels on its highest terror alert because they feared Salah Abdeslam was on the loose and planning a murderous attack on the city. He hasn’t been found. Now what? With Abdeslam, a suspect linked to the Nov. 13 massacre that left 130 people dead in Paris, probably at large in the Belgian capital, the government wasted no time on Saturday warning people of an “imminent” terror strike on multiple targets. It closed schools, shopping centers and the subway network, advised cafes to shut early and told people to avoid large gatherings. Soldiers patrolled the streets. On Wednesday, after four days of lockdown, the government allowed schools, malls and public transport to re-open with increased security, while keeping the terror threat level for Brussels at the maximum of 4, as Abdeslam continued to elude police. “The Belgian government is in a bind,” said Roland Freudenstein, policy director of the Martens Centre for European Studies in Brussels. “They probably did not anticipate a situation in which they would have to lift the lockdown -- for obvious economic, financial and even psychological reasons -- without any substantial new arrests or discovery of weapons caches, let alone finding Abdeslam.”  
  • Terror and Refugees May Weigh on Euro-Area Economy, EU Says. Conflict in the Middle East, the biggest wave of refugees to Europe since World War II and the terrorism threat is having an impact on the euro area’s economy, the European Commission said, underscoring the fragile nature of the region’s recovery. With euro-area growth forecast to be 1.8 percent in 2016, compared to 2.8 percent in the U.S., the European Union warned that international instability could further undermine efforts to resuscitate the currency zone’s economy. “There are a number of conflicts in our neighborhood and, as regards security challenges, of course this is something we need to pay particular attention to in the aftermath of the Paris terror attacks,” European Commission Vice President Valdis Dombrovskis told a press conference in Brussels. “It’s premature at this stage to draw far-reaching conclusions as regards the impact of those factors on the economy,” he said.  
  • Cameron Urges Syria Strikes to Counter Islamic State Threat. David Cameron appealed to lawmakers to back his calls for British airstrikes in Syria, saying Islamic State poses an “urgent” threat that will intensify the longer the organization is allowed to grow. The prime minister addressed Parliament on Thursday, setting out his case for action against the terrorist group, also known as ISIL, in the wake of the attacks on Paris and following progress at Syrian peace talks in Vienna. If the government believes it has enough support, Cameron has suggested he wants to call a vote in the House of Commons next week.
  • Russia Retaliates for Jet Downing as Erdogan Calls for Calm. Russia began retaliating for the downing of one of its warplanes by Turkey, whose president made conciliatory gestures while reiterating that his military would do the same again if its airspace was violated. Turkey hasn’t apologized for its “treacherous stab in the back” or offered compensation after shooting down the jet, President Vladimir Putin said Thursday in Moscow at a meeting with new ambassadors to Russia. “It seems that the Turkish government is deliberately pushing Russian-Turkish relations into deadlock. We regret that.”
  • China to Probe Largest Brokerage for Alleged Rule Violations. China’s securities regulator will probe Citic Securities Co. for alleged rule violations in the latest move against the country’s largest brokerage, where some top executives have already been placed under investigation. The firm received a notice from the China Securities Regulatory Commission on Thursday saying it will be investigated because it allegedly violated regulations on the supervision and administration of securities firms, Citic said in a Shanghai stock exchange statement. The brokerage said it will fully cooperate with the probe and that all of its operations are normal.
  • China seen warning bond market about overheating with rules. The new regulations from the China Securities Depository and Clearing Corp. apply to exchange market investors who use existing noteholdings as collateral to borrow funds for new debt purchases. China is adjusting rules concerning the use of borrowed money to buy certain bonds, prompting speculation authorities are signalling that they won’t tolerate overheating. The new regulations from the China Securities Depository and Clearing Corp apply to exchange market investors who use existing noteholdings as collateral to borrow funds for new debt purchases, it said in a statement on its website Wednesday. CSDC may adjust the amount of borrowing that’s allowed in proportion to the face value of the debentures used as collateral, based on the number of holders of the pledged notes, their trading volume and the issuer credit profile, it said without giving more details.   
  • Morgan Stanley(MS) Sees 11% Won Drop as Euro Hammers Asian Exports. When Morgan Stanley’s top currency strategist visited Asia last week he told clients their fixation with the U.S. Federal Reserve was causing them to overlook risks in Europe. Asian currencies will weaken next year as declines in the euro, already at a seven-month low on bets the European Central Bank will step up monetary stimulus on Dec. 3, acts as a drag on the region’s export-driven economies, Hans Redeker, New York-based global head of foreign-exchange strategy, said in an interview in Singapore. Overseas shipments shrank in eight months this year in China, 10 months in South Korea and nine months in Taiwan. In the euro-area, September marked an eighth straight gain from year-earlier levels. “You shouldn’t underestimate the impact of the euro," Redeker said, adding that Europe has a “significant manufacturing base.” Asian companies face high debt levels and excess capacity as economies reel from a slowdown in China, he said. 
  • IMF Ratio Concern Depresses Yuan as Mizuho Warns of Further Drop. The yuan fell toward a three-month low amid concern China will win a smaller weighting in the IMF’s Special Drawing Rights than some analysts predict. While International Monetary Fund staff estimate a weighting of 14 to 16 percent, the market consensus is for 10 percent because of the currency’s limited usability, according to Mizuho Bank Ltd. Anything less than that will spark a decline, said Ken Cheung, a Hong Kong-based strategist at the Japanese lender. Many observers are still going by the IMF projection, said Sue Trinh, head of Asia foreign-exchange strategy at Royal Bank of Canada.
  • China Brokerages Lead Drop as Haitong Securities Halts Trading. Chinese stocks slumped as some of the nation’s largest brokerages disclosed regulatory probes and falling profit at industrial companies signaled no improvement in the country’s economic slowdown. The Shanghai Composite Index dropped for a second day, while the Hang Seng China Enterprises Index sank 2 percent. Citic Securities Co. and Guosen Securities Co. plunged at least 6 percent in Shanghai after saying they were under investigation by the China Securities Regulatory Commission for alleged rule violations, while Haitong Securities Co. suspended trading in its shares without giving a reason. Industrial profits slid 4.6 percent last month, data showed Friday, compared with a 0.1 percent drop in September. The Shanghai Composite dropped 1.5 percent to 3,580.18 at the 11:30 a.m. local-time break, while the Hang Seng China Enterprises Index headed for its lowest close in almost two months. The Hang Seng Index retreated 1.2 percent.   
  • Emerging-Market Assets Head for Weekly Decline as China Tumbles. Emerging-market stocks and currencies headed for a weekly decline as China’s economy showed further signs of slowing. The Turkish lira was poised for its biggest weekly drop since March as Russia began retaliating for the downing of a warplane this week. The MSCI Emerging Markets Index lost 0.7 percent at 12:15 p.m. Hong Kong time, and a gauge of developing-nations currencies decreased for a third day. Chinese stocks declined and the yuan fell toward a three-month low as industrial profits tumbled and brokerages said they were under official investigation for rule violations. Citic Securities Co. slumped the most in two months in Hong Kong, while Air Asia Bhd. slid after swinging to a quarterly loss. A decline in China’s industrial earnings adds to signs the country’s worst economic slowdown in 25 years is deepening.
  • China Pig Iron Maker Says It May Miss Bond Payments Next Month. A Chinese producer of pig iron said it may not be able to repay bonds next month if investors demand their early redemption as it struggles with a cash shortage. Sichuan Shengda Group Ltd., based in the southwestern province of Sichuan, is uncertain it can repay the notes due in 2018 that holders can opt to sell back to the company early on Dec. 5, it said in a statement on Chinamoney’s website Thursday. Sichuan Shengda issued the 300 million yuan ($46.9 million) of securities in 2012 with a 7.25 percent coupon.
  • Don't Catch the Metals Knife. The China Nonferrous Metals Industry Association has asked the government's National Development and Reform Commission to buy nickel, aluminum and other metals to prop up prices, people with knowledge of the matter told Bloomberg News. They're also pushing regulators to investigate short-selling of metals contracts, according to other people. Chinese nickel and copper producers will meet Friday and Saturday to discuss their response to the price slump, people familiar with companies in those industries said. Nickel and aluminum contracts traded in London, and copper traded in Chicago, all gained more than 2 percent Thursday on the news. This won't end well.
  • Black Friday Retailers Pile on Discounts to Lure Frugal Shoppers. The shaky condition of U.S. retail will be put to the test this weekend, when Wal-Mart Stores Inc., Macy’s Inc. and other chains roll out their Black Friday specials. About 135.8 million Americans are expected to shop in stores or online over the four-day weekend, according to the National Retail Federation, the largest U.S. retail trade organization. The amount they’ve spent has declined over the past two years, dropping 11 percent to $50.9 billion in 2014.
Wall Street Journal: 
  • Paris Attacks: Plot Was Hatched in Plain Sight. Terrorists used tools of everyday modern life to plan the attacks on the French capital undetected. Three days before the attacks that ripped through Paris, Djazira Boulanger handed the keys to her row house, across the street from a kindergarten, to a guest who had booked it over the website Homelidays.com. His name was Brahim Abdeslam. She didn’t know that Mr. Abdeslam was a central figure in plotting the deadly assault.
  • Big Banks Cut Back on Loans to Small Business. Small businesses get fewer loans from banks, turning to alternative lenders that charge significantly higher rates. The biggest banks in the U.S. are making far fewer loans to small businesses than they did a decade ago, ceding market share to alternative lenders that charge significantly higher rates.
Fox News:
Zero Hedge: 
CNN:
  • Turkey Won't Apologize for Russian Warplane, Erdogan Says. Turkish President Recep Tayyip Erdogan says in interview with CNN, published on its website, that Russia needs to apologize. "I think if there is a party that needs to apologize, it is not us." "Those who violated our airspace are the ones who need to apologize. Our pilots and our armed forces, they simply fulfilled their duties, which consisted of responding" to "violations of the rules of engagement."
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -1.25% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 128.75 -1.75 basis points.
  • Asia Pacific Sovereign CDS Index 68.50 -1.5 basis points.
  • Bloomberg Emerging Markets Currency Index 70.56 -.04%.
  • S&P 500 futures +.18%.
  • NASDAQ 100 futures +.23%.
Morning Preview Links 

 Earnings of Note 
Company/Estimate
  • None of note
Economic Releases
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The UK GDP report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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