Sunday, November 08, 2015

Monday Watch

Posted by Gary .....at 10:19 PM
Today's Headlines
Bloomberg: 
  • Global GDP Worse Than Official Forecasts Show, Maersk CEO Says. The world’s economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting. That’s according to Nils Smedegaard Andersen, chief executive officer at A.P. Moeller-Maersk. His company, owner of the world’s biggest shipping line, is a bellwether for global trade, handling about 15 percent of all consumer goods transported by sea. “We believe that global growth is slowing down,” he said in a phone interview. “Trade is currently significantly weaker than it normally would be under the growth forecasts we see.” “We conduct a string of our own macro-economic forecasts and we see less growth -- particularly in developing nations, but perhaps also in Europe -- than other people expect in 2015,” Andersen said. Also for 2016, “we’re a little bit more pessimistic than most forecasters.”    
  • The New Chinese Birth Control: Sky-High Costs of Raising Kids. While China’s Communist Party rolled back its long-standing one-child policy last month, economists are expecting another equally powerful deterrent to kick in: the soaring cost of raising kids. Their projections are borne out by middle-class Chinese like Liu He. A project manager in Beijing’s thriving technology industry, 38-year-old Liu and her husband together make 40,000 yuan ($6,300) a month. About 40 percent of that goes toward their three-year-old daughter. There are fixed costs like food, kindergarten and a nanny besides savings for future painting and piano lessons, and even college in the U.S. some day.
  • Goldman's(GS) BRIC Era Ends as Fund Folds After Years of Losses. The BRIC era is coming to an end at Goldman Sachs Group Inc. The bank’s asset-management unit folded its money-losing BRIC fund, which invests in Brazil, Russia, India and China, and merged it last month with a broader emerging-market fund. Goldman Sachs pulled the plug on the nine-year-old product because it doesn’t expect “significant asset growth in the foreseeable future,” according to a filing to the U.S. Securities and Exchange Commission. Fourteen years after former Goldman Sachs economist Jim O’Neill coined the acronym that ushered in an unprecedented investment boom, the biggest emerging markets are now sputtering. Russia and Brazil have fallen into recessions. China, long an engine of the world’s growth, is poised for its weakest expansion since 1990. The downfall of the BRIC fund, which had lost 88 percent of its assets since a 2010 peak, also underscores how the strategy of bundling disparate countries into a single investment theme is losing its appeal among investors.
  • Dubai Stocks Enter Bear Market as Mideast Equities Slump on Oil. Dubai stocks dropped into a bear market, leading declines across most Middle Eastern equity markets, after Friday’s U.S. labor report increased expectations that the Federal Reserve will lift interest rates this year, pushing Brent crude lower. The DFM General Index slid 3 percent to 3,347.23, the lowest level since December and the biggest drop in more than two months. The gauge has fallen more than 20 percent since a peak in April. Saudi Arabia’s Tadawul All Share Index lost 0.6 percent, closing at the lowest level since January 2013. “When you see an aggressive drop in oil price, it puts people on edge,” said Ahmed Shehada, the Dubai-based executive director for advisory and institutions at NBAD Securities LLC, a unit of the U.A.E.’s biggest bank. “In addition, there are the banks’ results. A lot of operating income has dropped and this is having” an effect across the board, he said. 
  • India Nifty Futures Slump After Modi Suffers Loss in State Poll. Indian stock-index futures declined on concern an election defeat by Prime Minister Narendra Modi’s Bharatiya Janata Party party in the country’s third-most-populous state will hamper his ability to push through much-needed economic policies to strengthen the economy. SGX CNX Nifty Index futures for November delivery slid 1.9 percent to 7,827 at 9:11 a.m. in Singapore. The S&P BSE Sensex declined 0.2 percent to 26,265.24 on Friday. The Bank of New York Mellon India ADR Index of U.S.-traded shares fell 2 percent after better-than-forecast U.S. payroll figures on Friday boosted speculation the Federal Reserve will lift interest rates next month. 
  • Asian Currencies Fall on Outflow Risks as Fed Move Edges Closer. Malaysia’s ringgit and the South Korean won led losses in Asia on prospects the growing possibility that the U.S. will raise interest rates next month will spur capital outflows as domestic assets become less appealing. The ringgit declined to a one-month low after a report on Friday showed American employers added 271,000 jobs in October, the most in a year. A gauge of the dollar was near the highest level in Bloomberg-compiled data going back to 2004 as futures traders raised bets for monetary tightening in the U.S. to 68 percent from 56 percent the day before the numbers. Asian currencies also fell after a report from China, the biggest overseas market for many regional economies, reaffirmed growth is slowing. The ringgit slumped 1.2 percent as of 10:31 a.m. in Kuala Lumpur, the biggest loss in almost three weeks, according to prices from local banks compiled by Bloomberg. It is down 19 percent this year in Asia’s worst performance amid a plunge in commodity prices. The won declined 0.9 percent and the Indonesian rupiah retreated 0.8 percent.
  • Asia Stocks Outside Japan Fall After U.S. Payrolls, China Trade. Asian stocks outside Japan dropped as a strong U.S. payrolls report bolstered the case for higher interest rates this year and data showed Chinese exports fell for a fourth month. Japanese shares gained after the yen weakened. The MSCI Asia Pacific Excluding Japan Index lost 0.7 percent to 420.57 as of 9:52 a.m. in Tokyo.
  • Steel Exports From China in Retreat as Trade Frictions Escalate. The flood of steel that mills in China are pushing onto global markets fell in October from a record amid rising trade frictions and weak overseas demand, signaling that what’s been a safety valve for the world’s top producer may now be starting to close. Outbound cargoes of steel shrank 20 percent to 9.02 million metric tons last month from September, according to customs data released on Sunday. That was the lowest figure since June, and below the monthly average so far this year of 9.21 million tons. “The slump in steel exports last month compared with September reflects rising trade frictions for Chinese products,” Helen Lau, an analyst at Argonaut Securities (Asia) Ltd. in Hong Kong, said after the release of the trade data, which showed overall exports from the country dropped for a fourth month, adding to signs of headwinds. “There have been complaints in Asean, Europe and recently the U.S.” about Chinese steel, Lau said.
  • Global Coal Consumption Heads for Biggest Decline in History. Coal consumption is poised for its biggest decline in history, driven by China’s battle against pollution, economic reforms and its efforts to promote renewable energy. Global use of the most polluting fuel fell 2.3 percent to 4.6 percent in the first nine months of 2015 from the same period last year, according to a report released Monday by the environmental group Greenpeace. That’s a decline of as much as 180 million tons of standard coal, 40 million tons more than Japan used in the same period. The report confirms that worldwide efforts to fight global warming are having a significant impact on the coal industry, the biggest source of carbon emissions. It comes a day before the International Energy Agency is scheduled to release its annual forecast detailing the ways the planet generates and uses electricity. “These trends show that the so-called global coal boom in the first decade of the 21st century was a mirage,” said Lauri Myllyvirta, Greenpeace’s coal and energy campaigner. The decline in coal use will help reduce greenhouse-gas emissions that are blamed for heating up the planet.
  • Fed's Williams Says October Rate Decision Was a Close Call. The U.S. economy has reached at least one measure of full employment and the decision to keep interest rates near zero in October was a close one, said John Williams, president of the Federal Reserve Bank of San Francisco. “To my mind, the decision was a close call, in part reflecting the crosscurrents we’re navigating,” Williams said Saturday at an education event in Tempe, Arizona. “On one hand, the U.S. economy continues to grow and is closing in on full employment. On the other, in large part due to developments abroad, inflation has remained lower than we’d like.” Williams told reporters later that he’s waiting to see incoming data before making predictions about a rate increase at the Dec. 15-16 Fed meeting in Washington. 
  • Hedge Funds Raised Treasury Shorts to Most Since '13 Before Jobs. Hedge funds picked just the right time to increase bearish bets on Treasuries by the most since March 2013. Large speculators including hedge funds boosted net short positions in 10-year notes by 128,601 contracts to 164,264 in the week ended Nov. 3, data from the Commodity Futures Trading Commission show. U.S. employers added the most jobs of any month this year in October, the Labor Department said Friday, sending benchmark Treasury yields to the highest since July. Traders see a 68 percent chance the Federal Open Market Committee will raise interest rates by its December meeting, up from 56 percent odds before the payroll data.
Wall Street Journal:
  • China Exports Slump as Global Demand Shrinks. Trade data suggest China’s export scene is worsening. China’s exports fell in October for the fourth consecutive month, as a once-powerful engine of the country’s growth continued to sputter in the face of weak global demand. The world’s appetite for goods from China—the world’s second-largest economy accounts for nearly one-fifth of global factory exports—has been lower than expected this year. Meanwhile, weak domestic demand continues to reduce imports. Both are contributing to China’s growth slowdown. “The mix of the data is again not encouraging,” said...
  • Takeover Loans Have Few Takers on Wall Street. Wall Street banks are struggling to sell billions of dollars of buyout loans, a sign that investor appetite for riskier debt remains muted despite a robust autumn rally in other financial markets. Wall Street banks are struggling to sell billions of dollars of loans they made to finance the corporate buyout boom, a sign that investor appetite for riskier debt remains muted despite a robust autumn rally in other financial markets.
  • Hedge-Fund Prodigy Takes a $300 Million Hit. Star money manager Nehal Chopra’s Tiger Ratan Capital Fund LP has fallen 33% in three months.
  • Prosecuting Climate Dissent. Progressives target Exxon for punishment over its research. Sheldon Whitehouse got his man. The Rhode Island Senator has been lobbying for prosecutions of oil and gas companies over climate change, and New York Attorney General and progressive activist Eric Schneiderman has now obliged by opening a subpoena assault on Exxon Mobil. This marks a dangerous new escalation of the left’s attempt to stamp out all disagreement on global-warming science and policy.
Fox News:
MarketWatch.com:
  • Investors are ignoring the strong dollar at their peril."Going into 2016, a stronger dollar and the advent of a tightening cycle, even a gentle one, could impede both U.S. earnings growth and multiple expansion,” warned Russ Koesterich, BlackRock Global Chief Investment Strategist, in a blog post earlier this week. “For now, however, based on last week’s U.S. stock market performance, investors appear to be overlooking this fact.”
CNBC:
  • China regulators to allow IPOs to resume. China's securities regulator said on Friday it would allow the resumption of initial public offerings in China, lifting a suspension put into effect in July as regulators desperately tried to slow a devastating stock market crash.
Reuters:
  • Weyerhaeuser(WY) to buy Plum Creek(PCL), creating $23 bln timber company.
    Weyerhaeuser Co will purchase Plum Creek Timber Co Inc in a deal announced on Sunday that the two companies said would create a $23 billion timber, land and forest products company, the largest in the United States. The new company, which will keep the Weyerhaeuser name, will manage more than 13 million acres of timberland that will allow it to drive economies of scale and capitalize on the U.S. housing recovery, the companies said. The merger combines the two largest owners of timberland in the United States.
Financial Times:
Telegraph:
Night Trading
  • Asian indices are -1.0% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 124.5 unch.
  • Asia Pacific Sovereign CDS Index 70.75 +1.5 basis points.
  • Bloomberg Emerging Markets Currency Index 71.13 -.05%.  
  • S&P 500 futures +.12%.
  • NASDAQ 100 futures +.17%.
Morning Preview Links 

Earnings of Note
Company/Estimate 
  • (ACI)/-5.53
  • (CF)/.24
  • (DISH)/.38
  • (HTZ)/.54
  • (ICPT)/-2.73
  • (PCLN)/24.24
  • (BID)/-.28
  • (ATW)/1.93
  • (XONE)/-.07
  • (JAZZ)/2.56
  • (MDR)/-.05 
Economic Releases
10:00 am EST
  • The Labor Market Conditions Index for October is estimated to rise to .9 versus 0.0 in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Rosengren speaking, German Trade Balance report, Japan Trade Balance report, $24B 3Y T-Note auction, Baird Industrials Conference, BofA Merrill Energy Conference, CSFB Healthcare Conference and the (UAL) October Sales/Revenue release could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial 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 week.

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