Sunday, December 06, 2015

Monday Watch

Posted by Gary .....at 10:33 PM
Today's Headlines
Bloomberg: 
  • Short Sellers Descend on Asian Stocks as Profit Outlook Decays. The cheaper Asian stocks get, the more emboldened bears get in betting on further declines. Short interest in six regional markets is up 18 percent this year, and a separate measure of investor demand to borrow shares and sell them rose by a record, according to Markit Ltd. The MSCI Asia Pacific Index is trading at the lowest valuation relative to global equities in more than a decade as the gauge heads for a second straight annual retreat. Australia saw the biggest increase in bearish bets, followed by Hong Kong and Singapore, the Markit data show. China’s economy expanded an average 10 percent a year over the past decade, helping drive demand for everything from Australian iron ore to New Zealand milk, while central bank moves to flood the financial system with cash fueled housing booms in Singapore and Hong Kong. The backdrop now looks a lot more enticing for short sellers, with the Federal Reserve about to raise rates and Chinese growth decelerating to a forecast 6.9 percent, the slowest in 25 years, weighing on demand for goods and services across Asia. “Our faith in the Chinese ability to engineer a soft landing is not high," said Harry Rosenbluth, a San Francisco-based senior adviser at Boston Partners Asset Management, which oversees $74 billion and owns a smaller percentage of Asian equities than are contained in benchmark indexes it tracks. “If there’s a big miss in terms of a global growth slowdown, these stocks have vulnerability.” 
  • China to Cut Trading Hours for Stock-Index Futures from January. China will cut the trading hours for stock-index futures contracts from January after a government campaign to prevent bearish wagers sparked a record collapse in volumes. Instead of starting from 9:15 a.m., trading in the morning will begin from 9:25 a.m., in line with the cash market, while the afternoon session will end at 3 p.m., 15 minutes earlier than the current time, the China Financial Futures Exchange said in statement on Friday. The change will affect futures contracts linked to the CSI 300 Index, CSI Smallcap 500 Index and the Shanghai Stock Exchange 50 A-Share Index. Volumes in the country’s CSI 300 and CSI 500 futures hovered near record lows last week after falling 99 percent from their June highs. Ranked by the World Federation of Exchanges as the most active market for index futures as recently as July, liquidity in China has dried up as authorities raised margin requirements, tightened position limits and started a police probe into bearish wagers.
  • Citic Securities Unable to Reach Investment-Banking Heads. Citic Securities Co. said it has been unable to contact two executives, adding to deepening turmoil at a brokerage that is being investigated amid a government probe into China’s stock-market rout. Chen Jun and Yan Jianlin, both members of the brokerage’s eight-person executive committee, its highest decision-making body, can’t be reached, the Beijing-based firm said in an exchange filing on Sunday. Chen is head of Citic Securities’ investment-banking business, while Yan leads investment banking at its international unit. All operations are normal, it said. Some media reports had mentioned that Chen and Yan were “suspected of being requested to assist in an investigation,” Citic Securities said in its statement. The two were taken away by authorities and it’s uncertain whether they were being investigated or assisting in a probe, the Caixin magazine reported Dec. 4 on its website.
  • Aussie Debt Swells Faster Than Global Demand Amid Resources Rout. However fast the biggest buyers of Australia’s sovereign bonds boost purchases, they aren’t keeping pace with debt issuance as a commodity collapse pulls down government revenue. Foreign holdings of outstanding Federal debt slid to 63.6 percent in the September quarter, the least since 2009, official data show. That’s even after investors added nearly A$12 billion ($8.8 billion), the most since 2013. The Australian Office of Financial Management will probably increase its A$78 billion borrowing plans for the 12 months ending June 30 after Treasurer Scott Morrison hands down a mid-year economic and fiscal outlook later this month, according to Royal Bank of Canada.
  • Emerging Market Debt Sales Are Down 98 Percent. The commodity-price slump and the slowdown in China’s economy are crippling developing nations’ ability to borrow abroad, even as international debt sales from advanced nations remain at a five-year high. Issuance by emerging-market borrowers slumped to a net $1.5 billion in the third quarter, a drop of 98 percent from the second quarter, according to the Bank for International Settlements. That was the biggest downtrend since the 2008 financial crisis and helped to reduce global sales of securities by almost 80 percent, a BIS report said. 
  • Turkey's Never Had It So Bad as Record Outflows Seen Persisting. Foreign investors look set to keep pulling their money out of Turkey after dumping a record amount of stocks and bonds this year. Investors from abroad withdrew $7.6 billion from assets in 2015, including $1.4 billion in outflows last month as the party that President Recep Tayyip Erdogan helped found swept back into power, initially triggering a rally in the nation’s assets. Declines resumed as the war in neighboring Syria and Russian sanctions threatened the country’s $720 billion economy.
  • Won Declines Most in Three Weeks as Fed Bets Spur Korea Outflows. The won fell the most in three weeks as global funds sold South Korean stocks after a jobs report supported bets the U.S. will increase interest rates next week for the first time in almost a decade. Overseas investors sold more local shares than they bought for a fourth day after data on Friday showed American employers added more jobs in November than forecast in a Bloomberg survey. The Federal Reserve’s near-zero benchmark borrowing costs have supported demand for emerging-market assets, and futures contracts show a 74 percent probability of an increase at its Dec. 15-16 meeting. South Korea’s central bank will hold borrowing costs at a record low of 1.5 percent for a sixth month when it meets on Thursday, according to all economists surveyed by Bloomberg. The won weakened 0.8 percent, its biggest drop since Nov. 16, to 1,165.23 a dollar as of 10:20 a.m. in Seoul, data compiled by Bloomberg show. The currency fell 0.3 percent last week and has declined 5.6 percent this year. Global investors have pulled $2.2 billion from South Korean stocks this quarter, according to exchange data.
  • Mideast Stocks Drop as OPEC Decision Signals No End to Oil Rout. Dubai stocks fell to a three-week low, leading declines in most Middle Eastern markets, after OPEC decided to forgo an output reduction that might have propped up oil prices and eased the pressure on the region’s export revenues. Abu Dhabi equities dropped the most in a week. Shares in the Middle East are catching up with Friday’s losses across emerging markets after the Organization of Petroleum Exporting Countries kept production at about 31.5 million barrels a day, amid a glut in global oil supply. “The market is going to continue to see some selling pressure this week” as OPEC’s decision will continue to damp sentiment, said Saleem Khokhar, who manages about $2.5 billion as head of equities at the asset management group of National Bank of Abu Dhabi PJSC, the U.A.E.’s biggest bank. “The banking sector has been pretty aggressively sold, so we do see some real value there, although take on board it’s going to be a soft economy next year.” The DFM General Index retreated 0.9 percent to 3,174.34, led by Dubai Islamic Bank, the second-largest weight on the gauge, which declined the most since August. The ADX General Index fell 0.9 percent. National Bank has fallen 37 percent this year, more than five times the drop in Abu Dhabi’s gauge. 
  • Asian Stocks Rise After U.S. Jobs Report Buoys Economic Outlook. Asian stocks rose after a U.S. employment report boosted optimism in the world’s largest economy, with Japanese shares climbing as a weaker yen sent exporters higher. The MSCI Asia Pacific Index advanced 0.4 percent to 132.62 as of 9:00 a.m. in Tokyo.
  • Opec unity shattered as Saudi-led policy leads to no limits. ‘Effectively, it’s ceilingless. Everyone does whatever they want’ — Iranian Minister. Opec abandoned all pretence this week of acting as a group. It’s now every member for itself. At a chaotic meeting Friday in Vienna that was expected to last four hours but expanded to nearly seven, the Organisation of Petroleum Exporting Countries tossed aside the idea of limiting production to control prices. Instead, it went all in for the one-year-old Saudi Arabia-led policy of pumping, pumping, pumping until rivals — external, such as Russia and US shale drillers, as well as internal — are squeezed out of market share. “Lots of people said that Opec was dead; Opec itself just confirmed it,” Jamie Webster, a Washington-based oil analyst for IHS Inc, said in Vienna.
  • Iron Seen Below $40 as China's Reserves Rise to Seven-Month High. Iron ore will probably drop below $40 a metric ton this week after stockpiles at ports in China climbed to the highest in about seven months, according to Australia & New Zealand Banking Group Ltd. Port holdings, tracked as a gauge of demand in the largest consumer, jumped 2.1 percent to 89.50 million tons last week, according to Shanghai Steelhome Information Technology Co. Inventories have expanded in seven of the past eight weeks.
Wall Street Journal:
Barron's:
  • Had bullish commentary on (TLT), (CELG), (AA), (HMHC), (CVS), (EA), (FL), (GM), (MHK).
  • Had bearish commentary on (KMI).
Fox News: 
  • Obama acknowledges California attack was act of terrorism, confident US military will defeat extremists. President Obama on Sunday night acknowledged that the U.S. is "at war with terrorism" and sought to assure Americans that the growing global terror threat will be defeated, following a series of deadly terror attacks on American soil and around the world. "This was an act of terrorism designed to kill innocent people," Obama said in his first Oval Office address since 2010, showing the magnitude of the situation. "I am confident we will succeed in this mission because we are on the right side of history. He spoke four days after terrorists apparently associated with the Islamic State fatally shot 14 people and wounded dozens more in San Bernardino, Calif.,  and after last month’s Paris bombing attacks that killed 130.
  • Clinton says term 'radical Islam' an injustice to vast majority of Muslims. Democratic presidential front-runner Hillary Clinton declined Sunday to say that a “radical” form of Islam is behind terror attacks connected to the Islamic State and other such attacks committed by fringe members of the Muslim religion.
CNBC:
Zero Hedge:
Business Insider:
The Daily Caller:
  • NY Daily News Columnist Sees Social Media Backlash After Saying San Bernardino Victim Had It Coming. New York Daily News columnist Linda Stasi wants to make it clear: the terrorist attack that took 14 innocent lives in San Bernardino was awful. But she also wants to make it clear that there were really only 13 innocent lives lost and one NRA loving bigoted Jew was killed too. A backlash on Twitter ensued. “They were two hate-filled, bigoted municipal employees interacting in one department. Now 13 innocent people are dead in unspeakable carnage,” Stasi wrote. Which murder victim isn’t considered “innocent” by Stasi? Nicholas Thalasinos, the Messianic Jew Stasi labels as “a radical Born Again Christian/Messianic Jew” who “spent his free time writing frightening, NRA-loving, hate-filled screeds on Facebook” about Islam. “Thalasinos was an anti-government, anti-Islam, pro-NRA, rabidly anti-Planned Parenthood kinda guy, who posted that it would be “Freaking Awesome” if hateful Ann Coulter was named head of Homeland Security,” she continued.
Telegraph:
Night Trading
  • Asian indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 130.75 +.25 basis point.
  • Asia Pacific Sovereign CDS Index 68.50 -.75 basis point.
  • Bloomberg Emerging Markets Currency Index 70.51 -.11%.  
  • S&P 500 futures -.05%.
  • NASDAQ 100 futures -.05%.
Morning Preview Links 

 Earnings of Note
Company/Estimate 
  • (MFRM)/.81
  • (CASY)/1.51
  • (CENT)/-.09
  • (HRB)/-.48
  • (PBY)/.06
  • (UNFI)/.68  
Economic Releases
10:00 am EST
  • The Labor Market Conditions Index for November is estimated at 1.6 versus 1.6 in October. 
3:00 pm EST
  • Consumer Credit for October is estimated to fall to $19.0B versus $28.918B in September.
Upcoming Splits
  • (BT) 2-for-1
Other Potential Market Movers
  • The Fed's Bullard speaking, China Trade Balance report, Raymond James Tech/Communications conference, UBS Media/Communications conference and the (SLG) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology 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 week.

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