Thursday Watch

Evening Headlines
Bloomberg:

• The Bear Case for China Sees PBOC Following Fed to Zero Rates. Danny Gabay “bows to nobody” in his pessimism about China’s economy. Gabay, a former Bank of England economist, says the world’s second-biggest economy is barreling toward a hard landing. He and colleagues at Fathom Financial Consulting Ltd. reckon its growth rate has slowed to about 3 percent a year -- less than half the official estimate of 6.9 percent for the year to the third quarter and the 6.5 percent the government is aiming for over the next five years. That means desperate measures are in store, he says.
• RBA's Stevens Says Accommodative Policy Likely for Some Time. Australia’s central bank Governor Glenn Stevens said accommodative monetary policy is likely to be appropriate “for some time yet,” while adding the macroeconomic impact of recent mortgage rate increases by major banks “may not be large.” Stevens’s speech, titled “The Path to Prosperity,” ranged across the challenges Australia faces, which he noted hadn’t changed much since he last delivered an address at the same forum in Melbourne six years earlier. The nation is even more reliant on China, budget repair remains necessary and the country has to focus on boosting productivity to generate greater wealth, he said.
• Is a Global Financial Crisis Looming? (video)
• Scotch Whisky Exports Fall on Downturn in Brazil, Taxes in India. Scotch whisky exports continued to decline in the first six months of the year as the economic downturn in Brazil and high import taxes in India curbed demand for the spirit. Volume fell about 3 percent to 517 million bottles from the same period last year, the Edinburgh-based Scotch Whisky Association said in a statement Thursday. That matches the pace of contraction for all of 2014. The value of exported Scotch also dropped about 3 percent, the industry body said. 
• Bonds Tumble Around the Globe as Fed Rate Odds Climb Past 50%. Bonds are falling around the world as traders increased odds to more than 50 percent that the Federal Reserve will raise interest rates this year. Benchmark 10-year Treasury yields climbed to a seven-week high of 2.24 percent on Wednesday after Fed Chair Janet Yellen said policy makers may move as soon as their December meeting. German yields reached a two-week high. Australian 10-year yields rose for a sixth day Thursday.
• Emerging Currencies Drop With Aussie Bonds Amid Rising Fed Bets. Asian emerging-market currencies slipped against the dollar and Australian bonds dropped as comments by Federal Reserve Chair Janet Yellen sent bets on U.S. interest rates being increased next month soaring. Asian stocks were mixed. South Korea’s won and Malaysia’s ringgit led declines as the Bloomberg Dollar Spot Index traded near its highest levels since March. Traders have boosted the odds of December liftoff to 58 percent from as low as 27 percent midway through last month, reining in a rebound in emerging-market assets and triggering declines in sovereign bonds.
• Most Asia Stocks Climb After Yellen as Japan Gains on Weaker Yen. Most Asian stocks advanced after comments from Federal Reserve Chair Janet Yellen boosted the dollar against the yen, spurring equity gains in Tokyo. Two stocks rose for each that fell on the MSCI Asia Pacific Index, which added 0.1 percent to 134.92 as of 9:09 a.m. in Tokyo.  
• Iron Ore Chief Says Rio Can't Turn Off Tap to Boost Prices. Rio Tinto Group, the world’s second-largest iron ore producer, said it will keep defending market share and insisted it’s wrong to believe cuts to output would lift waning prices, which are headed for a third annual decline. “If you think for one second that you can just take some volume out and no one else will actually move to fill that volume, then you are fooling yourself,” Andrew Harding, Chief Executive Officer for iron ore and Australia, said Thursday in Perth. The producer is “vigorously competing against global suppliers for market share,” he said. 
• Passport's Burbank Says He's Bearish Commodities, Long Dollar. John Burbank, founder of $4.4 billion hedge fund Passport Capital, said he’s betting against commodities and “markets in general” while wagering on the U.S dollar for the next 12 months. He said he’s short Potash Corp. of Saskatchewan Inc. and Mosaic Co. while long fertilizer producer CF Industries Holdings Inc. “It’s a home run for the next 12 months,” Burbank said on Wednesday at the Invest for Kids conference in Chicago. He said the U.S. will feel “like a recession next year” and investors should be wary of most stocks.
• Gold Gets Thumped by the Fed as Bets Climb on December Liftoff. Gold traded near a one-month low after Federal Reserve Chair Janet Yellen and New York Fed President William Dudley said the U.S. central bank could raise interest rates as soon as next month, boosting the dollar and hurting the metal’s allure. Bullion for immediate delivery was at $1,110.33 an ounce at 10:19 a.m. in Singapore from $1,107.90 on Wednesday, when it fell to $1,106.53, the lowest since Oct. 2, according to Bloomberg generic pricing. Prices have sunk 5.1 percent in the past six days. Odds of a hike at next month’s meeting jumped to 58 percent on Wednesday from 46 percent a week ago, according to data tracked by Bloomberg.  
• Killer Chart: Why a Dec. Rate Hike Is a Real Possibility. (video) 
• Yellen and Dudley Signal December Is Still ‘Live’ for Rate Hike. Federal Reserve Chair Janet Yellen and New York Fed President William Dudley both said the central bank could boost interest rates as soon as next month.  
• Qualcomm(QCOM) Forecasts Show Struggle for License Deals in China. Qualcomm Inc.’s forecast for quarterly sales and profit fell short of some analysts’ estimates, underscoring the chipmaker’s struggle to collect technology-licensing fees for smartphones sold in China. The company said it’s facing tough negotiating tactics at phone makers in the world’s most populous nation, as some companies there withhold payments and stop reporting shipments in an attempt to secure better terms. That led to the weaker outlook for the company’s licensing business, its most profitable, sending shares down as much as 6.7 percent in extended trading. 

Wall Street Journal:

• Fed’s Yellen: December Is ‘Live Possibility’ for First Rate Increase. Speaking before House committee, emphasizes no decision has been made yet. The Federal Reserve may raise short-term interest rates in mid-December so long as the U.S. economy remains on track, Chairwoman Janet Yellen said Wednesday.
• U.S. Detects Flurry of Iranian Hacking. American officials say they believe cyberattacks tied to arrest in Tehran of Iranian-American businessman. Iran’s powerful Revolutionary Guard military force hacked email and social-media accounts of Obama administration officials in recent weeks in attacks believed to be tied to the arrest in Tehran of an Iranian-American businessman, U.S. officials said.
• China Life Insurance Invests More Than $1 Billion in U.S. Warehouses. Deal marks country’s largest overseas real-estate purchase to date. State-owned China Life Insurance Co. is investing more than $1 billion in U.S. warehouses, according to a person with knowledge of the deal, marking its largest cross-border real-estate purchase to date.
• Obama Looks More Likely to Close Guantanamo Via Executive Action. President making last-ditch effort to get Congress on board, but his allies say move won’t work. 
• Health Co-Ops’ Failures Spur Finger-Pointing. Nonprofits’ financial squeeze causes consumers to lose coverage.
• The ObamaCare Albatross. The entitlement that keeps on giving to Republicans. The Democratic Party has prospered for decades by promising voters entitlements in return for Election Day loyalty. It worked with Social Security and Medicare, and so it was supposed to work for ObamaCare: Pass it and they will come. Instead the Affordable Care Act has become a recurring political catastrophe for Democrats, most recently on Tuesday in Kentucky.

Fox News: 

• Explosion likely brought down Russian airliner, sources say. (video) Evidence suggests an explosion -- and not a mechanical malfunction -- brought down the Russian passenger jet over Egypt, two sources told Fox News Wednesday. One congressional source put the chance of an explosion at 80 percent. That source says an ISIS device is under strong consideration, but that investigators have not reached a conclusion.

MarketWatch.com:

• OPEC’s lost sway: U.S. boasts record surplus with oil cartel. (graph)

CNBC:

• Talk of euro parity with US dollar heats up. The euro versus the U.S. dollar hitting $1.0843 Wednesday reignited a debate among traders over whether the currency will trade in parity with the dollar before the end of the year. The euro zone currency has been steadily moving down on European Central Bank President Mario Draghi's dovish commentary. Wednesday, the euro reacted to hawkish comments from Fed Chair Janet Yellen, suggesting a U.S. central bank rate hike could come in December.

 Zero Hedge:

• Mission Accomplished? Chinese Stocks Re-Enter "Bull Market" - Up 24% From August Lows. (graph)
• Desperate-To-Hike Fed Admits "Inflation Is Not As Low As You Think". (graph)
• October Gun Sales Hit Record High For Six Consecutive Months.
• After Topping $500, Bitcoin Is (Again) Plunging On Extreme Volume. (graph)
• How The Global Debt Bubble Is Crushing Commodity Prices. (graph)
• FaceBook(FB) Hits All Time High After Beating Across The Board; Over 1BN Daily Users: The Quarter In Charts. (graph)
• New Poll Shows 60% Of Americans Think Hillary Clinton Is Untrustworthy & Dishonest.
• Buffett Bloodbath: Kraft Heinz Laying Off 10% Of Workforce.
• Global Trade In Freefall: China Container Freight At Record Low; Rail Traffic Tumbles, Trucking Slows Dow. (graph)
• Hawkish-er Yellen Sparks Dollar Pop As Stocks, Bonds, Commodities Drop. (graph)

Business Insider:

• US intelligence: A bomb planted by ISIS most likely brought down the crashed Russian plane.
• Bernie Sanders may be the only person happy about where this giant monetary experiment goes.
• Marco Rubio is gaining in a key metric that reliably predicts who wins presidential nominations.
• Hot security company FireEye(FEYE) just lowered guidance and its stock is plummeting.
• Whole Foods(WFM) earnings miss, shares collapse.
• China has broken the world's 'bubble machine'.
• The White House won't be saving the failing Obamacare co-ops.

Reuters:

• Fertilizer maker CF Industries'(CF) profit tumbles 31 pct. U.S. fertilizer producer CF Industries Holdings Inc reported a 31 percent drop in third-quarter profit on Wednesday after markets closed, pressured by weakening prices. Nitrogen fertilizer prices have fallen sharply year over year, weighed down by excessive global production and soft demand. CF and other North American producers, however, benefit from low costs of natural gas, a key ingredient in nitrogen fertilizer production. 

Evening Recommendations 

• None of note

Night Trading 

• Asian equity indices are -.75% to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 124.5 +.25 basis point.
• Asia Pacific Sovereign CDS Index 68.25 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 71.92 -.08%.
• S&P 500 futures -.02%.
• NASDAQ 100 futures -.07%.

Morning Preview Links 

Earnings of Note
Company/Estimate

• (AES)/.36
• (APA)/-.36
• (AZN)/.97
• (CELG)/1.22
• (DUK)/1.51
• (MGA)/1.09
• (TAP)/1.29
• (ZEUS)/-.09
• (RL)/1.74
• (RGLD)/.28
• (SFM)/.19
• (SYMC)/.42
• (TK)/.26
• (MNST)/.81
• (NVDA)/.35
• (SHAK)/.07
• (DIS)/1.14

Economic Releases 

7:30 am EST

• Challenger Job Cuts for October.

8:30 am EST

• Initial Jobless Claims are estimated to rise to 262K versus 260K the prior week. 
• Continuing Claims are estimated to fall to 2140K versus 2144K prior.
• Preliminary 3Q Nonfarm Productivity is estimated to fall -.3% versus a +3.3% gain in 2Q.
• Preliminary 3Q Unit Labor Costs are estimated to rise +2.5% versus a -1.4% decline in 2Q.

Upcoming Splits

• None of note

Other Potential Market Movers 

• The Fed's Fischer speaking, Fed's Harker speaking, Fed's Dudley speaking, Fed's Evans speaking, Fed's Lockhart speaking, Fed's Tarullo speaking, BoE inflation report, BoE rate decision, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (CSC) investor day and the (FAST) investor day could also impact trading today. 

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology 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.