Tuesday, November 10, 2015

Wednesday Watch

Posted by Gary .....at 10:34 PM
Evening Headlines
Bloomberg:
  • China's Shanshui Cement to Default on Onshore Bonds on Thursday. China Shanshui Cement Group Ltd. will default on a local bond payment due Thursday after a shareholder tussle stymied financing, becoming at least the sixth company to renege on onshore note obligations this year. The firm "will be unable to obtain sufficient financing on or before" the Nov. 12 maturity date on its 2 billion yuan ($314 million) of 5.3 percent securities, it said in a filing to the Hong Kong stock exchange Wednesday. "It is therefore certain that the Group will default on the onshore debt," it said. The company’s $500 million of 7.5 percent dollar debentures due in 2020 slid 37 cents to a record low 45 cents as of 8:40 a.m. in Hong Kong. 
  • China Fund That Gained 24% on Bonds Sees Substantial Correction. An executive who oversees China’s top bond fund, which returned 24 percent in the first nine months, predicts a “substantial correction” in riskier debt as the restart of initial public offerings drives money back into shares. Cash that piled into lower-rated notes after a stock rout in June is likely to return to equities, according to Shao Jiamin, head of fixed income investment at HFT Investment Management Co. in Shanghai. HFT Pure Bond Fund ranked No. 1 among 270 peers this year through Sept. 30, according to Haitong Securities Co. “The renewal of IPOs, along with the year-end effect of tighter liquidity, will lead to a jump in bond yields in general,” Shao said. “For those lower-rated bonds whose valuations are unreasonable, there will be a substantial correction.”
  • JD.Com(JD), Vipshop(VIPS) Slump as Economy Concern Outweighs Singles' Day. Online retailers including JD.com Inc. and Vipshop Holdings Ltd. slumped, leading U.S.-traded Chinese stocks lower as fresh signs that growth in the world’s second-largest economy is faltering outweighed an anticipated sales boost during the annual Singles’ Day promotion. The Bloomberg China-US Equity Index fell 1 percent in a second consecutive decline in New York. Vipshop, an online discount retailer of branded apparel and other products, contributed the most to the gauge’s retreat, dropping 6.6 percent to $19.52. JD.com, the country’s second-biggest e-commerce company fell 2 percent to $28.2. Alibaba Group Holdings Ltd. was little changed at $81.43 after falling as much as 2.2 percent.
  • RBNZ Sees Risk of 'Damaging Correction' in Auckland Housing. Auckland’s soaring housing market and low milk prices pose increased risks to New Zealand’s financial system, the country’s central bank said. “The increasingly stretched Auckland market is at risk of a damaging correction, especially if economic conditions deteriorate,” the Reserve Bank said Wednesday in Wellington in its semi-annual Financial Stability Report. Many indebted farms are also coming under increased pressure, “which would be exacerbated if low dairy prices are sustained or dairy farm prices fall significantly,” it said.
  • Japan Banks Seen Losing Profit Driver as Asian Economies Weaken. Japan’s three biggest lenders will probably report a drop in second-quarter profit after Asia’s economic slowdown weakened overseas loan growth and global financial-market volatility crimped fee businesses. Combined net income at Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. fell 24 percent from a year earlier to 597 billion yen ($4.8 billion) in the three months ended Sept. 30, according to calculations based on the average of five analyst estimates compiled by Bloomberg.
  • Russia Said to Plot Strategy to Block IMF Lending to Ukraine. Russia is exploring strategies to try to block the International Monetary Fund’s next loan payment to Ukraine as a dispute between the two countries over a $3 billion bond comes to a head, according to a person familiar with the matter. Russia bought the bond from the government of Ukrainian leader Viktor Yanukovych in December 2013, before he was overthrown and Russian forces annexed Crimea in a move that set off a conflict that has killed 8,000 people. Ukraine proposed the security be included in a restructuring of debt held by private creditors. Russia has refused to accept the terms, insisting the bond is a loan between governments, rather than commercial debt. 
  • Dollar Stuck Near Decade High as Stocks Rally Falters. The dollar is stuck near a decade high against major counterparts as traders look to stocks as a gauge of risk sentiment to withstand higher U.S. interest rates. The greenback reached a six-month high against the euro Tuesday as markets price in the possibility of the European Central Bank expanding its stimulus next month ahead of a meeting by the Federal Reserve. The odds of U.S. policy makers increasing rates in December grew after October saw the biggest gain in payrolls this year, shifting market focus to whether risk assets are resilient enough for the first rate increase since June 2006. The dollar has advanced at least 1 percent against all of its 10 developed-nation peers this month.
  • Asian Stocks Fluctuate as Investors Await China Economic Reports. Asian stocks fluctuated, with the regional benchmark index trading near the lowest since mid-October, as investors awaited a spate of Chinese data for clues on the extent of the slowdown in the world’s second-largest economy. About the same number of shares gained and fell on the MSCI Asia Pacific Index, which added 0.1 percent to 132.87 as of 9:07 a.m. in Tokyo.
Wall Street Journal:
Fox News:
  • GOP candidates tout tax plans, vow to gut IRS at evening debate. Republican presidential candidates touted plans to simplify the tax code – and made a punching bag out of the IRS -- at the opening of the first of two GOP debates Tuesday evening. New Jersey Gov. Chris Christie said at the Fox Business Network/Wall Street Journal debate that he would get rid of special interest deductions virtually across the board.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -.75% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 126.75 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 69.75 -1.0 basis point.
  • Bloomberg Emerging Markets Currency Index 70.94 +.16%.
  • S&P 500 futures +.08%.
  • NASDAQ 100 futures +.06%.
Morning Preview Links 

Earnings of Note 
Company/Estimate
  • (ADT)/.48
  • (M)/.53
  • (NAT)/.26
  • (NTES)/2.12
  • (PLKI)/.45 
Economic Releases 
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The China Industrial Production/Retail Sales reports, Australia Unemployment report, Japan Machine Orders report, weekly MBA mortgage applications report, Jefferies Energy Conference, UBS Building Products Conference and the Morgan Stanley Tech/Media/Telecom Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial 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.

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