Monday, November 02, 2015

Tuesday Watch

Evening Headlines 
  • Six Ways to Gauge How Fast China's Economy Is Actually Growing. (graph) There are many ways to analyze China's GDP, and all the ones presented here show it trending below the government's official statistics for the third quarter.
  • China's Money Exodus. Here’s how the Chinese send billions abroad to buy homes.
  • Hong Kong's Stock Rally Seen Too Good to Last as Volume Fades. Wherever Alex Wong looks, he sees signs that Hong Kong’s stock rebound isn’t going to last. The Hang Seng Index’s 8.6 percent surge in October came on the lowest trading volume since February. Chinese investors sold more shares in the city than they bought, and small-caps were the worst-performing part of the market.
  • EPA's New VW Cheating Allegations Threaten to Taint CEO Mueller. New allegations from U.S. regulators that German automaker Volkswagen AG cheated on more diesel-powered models, including one Porsche, could be trouble for new Chief Executive Officer Matthias Mueller, who came from the company’s prestigious sports-car maker after his predecessor, Martin Winterkorn, resigned.
  • Asian Stocks Track S&P 500 Recovery as Aussie Gains Before RBA. Asian stocks climbed after signs of stabilization in global manufacturing activity helped drive the Standard & Poor’s 500 Index to levels not seen since before China’s yuan devaluation in August. Australia’s dollar extended gains amid bets the central bank will hold interest rates at a review. The MSCI Asia Pacific excluding Japan Index rose for the first time in six days amid signs of resilience in U.S. and European manufacturing and after measures of factory activity in China stabilized, albeit at levels denoting contraction. 
  • Oversupply Will Drive Iron Ore, Oil Below $40, Merchant Says. The rout in commodities is set to get worse as resilient supply and faltering Chinese demand will see global gluts persist, sending oil and iron ore below $40, according to Merchant Commodity Fund. Prices are still trying to find a floor with excess supply in almost every commodity, said Michael Coleman, managing director of RCMA Asset Management Pte, which runs the $210 million fund. Any rally in raw materials will be probably short-lived as demand isn’t improving and production cuts are insufficient to stem surpluses, he said in an interview.
  • Passport's Burbank Says No Place Safe in China-Led Downturn. One of this year’s most successful hedge fund managers has a message for investors: watch out for China.John Burbank’s main hedge fund at Passport Capital, which rose 18 percent in the first nine months of 2015 betting on macroeconomic events, has "greatly" cut its exposure to markets across the world as it prepares for a China-led global downturn, the investor said in a letter to clients Oct. 30. "The big risk for global markets over the next several months is a worsening in China’s economy -- characterized by nonperforming loan issues -- which could lead China to de-peg from the U.S. dollar, lower rates and, in the process, force the liquidation of risk assets around the world," Burbank wrote. The world may be heading into "a global downturn that leaves no region safe, including the United States."
  • JPMorgan(JPM), BofA(BAC), Citigroup(C) Among Big U.S. Banks That S&P May Cut. JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. are among at least eight large U.S. banks that may have credit grades cut by Standard & Poor’s on the prospect that the U.S. government is less likely to provide aid in a crisis. The companies -- along with Wells Fargo & Co., Goldman Sachs Group Inc., Morgan Stanley, Bank of New York Mellon Corp. and State Street Corp. -- had senior unsecured and nondeferrable subordinated debt ratings placed on negative credit watch, S&P said Monday in a statement.
  • White Middle-Aged Americans See Mortality Increase, Deaton Finds. Middle-aged, non-Hispanic white Americans saw a "marked increase" in mortality between 1999 and 2013, a reversal from a decades-long decline that can be largely explained by a spike in suicide, substance abuse and liver disease, new research shows."No other rich country saw a similar turnaround," Angus Deaton, the Princeton University professor who won this year’s Nobel Prize in economics, and co-author Anne Case write in a study dated Sept. 17. 
Wall Street Journal:
  • TransCanada Requests Suspension of U.S. Permit for Keystone XL Pipeline. Move comes in face of expected rejection by Obama administration; could put off request until after 2016. The company behind the Keystone XL pipeline on Monday asked the U.S. government to suspend its permit application, throwing the politically fraught project into an indefinite state of limbo, beyond the 2016 U.S. elections. Calgary, Alberta-based TransCanada Corp. sent a letter to the State Department, which reviews cross-border pipelines, to suspend its application while the company goes through a state review process in Nebraska it had previously resisted. The move comes in..
  • Farmers Shift to Leases, Threatening to Swell Machinery Glut. Leasing out tractors, combines helps makers sustain demand but risks saturating used market. Farmers increasingly are leasing tractors, combines and other equipment as grain prices continue to slump, helping prop up manufacturers’ sagging sales. But this shift raises the risk of further saturating the farm-machinery market.
  • Ben Carson Vaults to Lead in Latest Journal/NBC Poll. Retired neurosurgeon overtakes Donald Trump for lead among Republican presidential candidates.  
  • Valeant(VRX) Critic Gets a Taste of His Own Medicine as Attack Misfires. As short seller Andrew Left’s eagerly awaited report falls flat, he faces allegations of his own.
  • Thank You, CNBC. For giving millions of Americans front-row seats to the press bias against Republicans. Stuck in a Regulatory Mash-Up. A genetically modified potato could combat blight and cut fungicide use—if the FDA and EPA will let it.
Fox News:
  • Antarctica isn’t melting -- a new study finds it’s actually gaining ice. The thickening ice in parts on Antarctica means the continent isn’t contributing to rising sea levels, contrary to the conclusion of the United Nations Intergovernmental Panel on Climate Change’s 2013 study. Rather, it is taking water out of the ocean at the rate of a quarter of a millimeter per year, said H. Jay Zwally, a glaciologist at the University of Maryland and the NASA Goddard Space Flight Center who led the study.
  • AIG(AIG) earnings miss Street's most dismal estimates. (video)
  • Philidor to shutter as drug partnerships dissolve. Philidor, a pharmacy facing backlash from accusations about Valeant Pharmaceuticals' practices, announced Monday it would close after losing the drugmaker's business. Last week, some pharmacy benefit managers, and then Valeant, cut ties with Philidor, which short-seller Citron Research claimed had been used to prop up sales of Valeant drugs. Philidor said it would start to shut down principal operations after losing Valeant, its main client.
Zero Hedge:
Evening Recommendations 
  • Rated (RL) Positive, target $142.
Night Trading
  • Asian equity indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 128.25 -2.75 basis points.
  • Asia Pacific Sovereign CDS Index 70.75 -1.5 basis points.
  • Bloomberg Emerging Markets Currency Index 72.09 +.09%. 
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures +.03%.

Earnings of Note
  • (ADM)/.65
  • (CIT)/.75
  • (DISCA)/.38
  • (EMR)/.97
  • (EXPD)/.60
  • (FSS)/.23
  • (HCP)/.77
  • (H)/.25
  • (K)/.84
  • (MLM)/2.19
  • (MBLY)/.13
  • (MOS)/.52
  • (NSM)/.34
  • (ODP)/.16
  • (RRGB)/.53
  • (RDC)/.50
  • (SMG)/-.15
  • (S)/-.07
  • (VMC)/.96
  • (ZTS)/.40
  • (CVC)/.22
  • (CBS)/.80
  • (CERN)/.54
  • (DVN)/.52
  • (ETSY)/-.03
  • (HLF)/1.05
  • (MTZ)/.33
  • (PZZA)/.45
  • (TSLA)/-.60
  • (TDW)/-.03
  • (X)/-.22
  • (WBMD)/.32  
  • (ZG)/-.03 
Economic Releases
9:45 am EST
  • ISM New York for October is estimated to rise to 45.7 versus 44.5 in September.
10:00 am EST
  • Factory Orders for September are estimated to fall -.9% versus a -1.7% decline in August.
  • IBD/TIPP Economic Optimism for November is estimated to rise to 47.4 versus 47.3 in October.
  • Wards Total Vehicle Sales for October are estimated to fall to 17.7M versus 18.07M in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Australia Trade report, weekly US retail sales reports, Goldman Sachs Industrials Conference, (DAL) October Traffic data, (F) October Sales call and the (LB) investor update could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer 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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