Ukrainian Casualties Test Cease-Fire as Gas Threat Looms Large. Casualties among Ukraine’s army tempered
optimism about a cease-fire holding as the authorities in Kiev
grappled with simultaneous threats to the country’s finances and
While the situation in the conflict zone was “relatively
calm” during the night with only sporadic cease-fire
violations, three government troops still died in 24 hours,
Ukrainian officials said on Friday. The U.S. is considering
whether to shut one or more Russian banks out of the world
financial system if pro-Russian rebels continue to violate the
cease-fire, two Obama administration officials said.
Russian Sanctions Seen Entrenched as EU, U.S. Keep Pressure. The European Union will probably overcome
internal divisions and extend economic sanctions against Russia
that expire in July even as the conflict in eastern Ukraine
shows signs of abating, according to a survey of economists. The punitive measures will remain in place, according to 13
of 24 respondents surveyed by Bloomberg. Analysts are evenly
split over whether initial violations of a cease-fire negotiated
in Belarus this month may trigger new and tighter curbs. The
EUâ€™s next planned leadersâ€™ summits, which may include a debate
on Russian sanctions, are on March 19-20 and June 25-26.
Islamic State Completes Takeover of Town Near Base Used by U.S. Islamic State fighters have completed their
takeover of the town of Al-Baghdadi in western Iraq, increasing
the threat to a nearby airbase where U.S. advisers are
stationed, a local official said. The Iraq army unit protecting a residential compound in Al-Baghdadi, the military’s last position in the town, pulled out
late on Thursday, Faleh al-Issawi, deputy chief of Anbar
provincial council, said by phone. A group of Islamic State
fighters entered, and efforts to dislodge them, including
airstrikes by the U.S.-led coalition, have failed, he said.
European Stocks Climb Amid Airbus Earnings, U.S. Confidence Data. European stocks advanced, extending their
highest level since 2007, amid better-than-expected financial
results from companies including Airbus Group NV, and U.S.
consumer sentiment data.
The Stoxx Europe 600 Index rose 0.4 percent to 392.21 at
the close of trading. Shares earlier fell as much as 0.3
percent, before advancing as a report showed the University of
Michigan final index of sentiment fell this month less than
U.S. Oil Discount Poised for Record Widening as Supplies Surge. (video) U.S. crude’s discount to European prices
headed for a record widening in dollar terms this month as lower
prices failed to curb the nation’s highest oil output in more
than three decades. West Texas Intermediate traded for $12.32 a barrel less
than Brent, the North Sea benchmark, as supplies expand at the
U.S. storage hub in Cushing, Oklahoma. The spread expanded by
$7.57 a barrel this month. U.S. crude stockpiles and output rose
to the highest level in weekly data that started in the early
Nathan’s Brings Hot Dogs to Junk-Bond Market as Risk Returns. Nathan’s Famous Inc., the fast-food chain
that started as a Coney Island hot dog stand in 1916, is tapping
the junk-bond market for the first time, raising money for a
shareholder payout just as debt investors regain their appetites
for risk. The company plans to sell $125 million in five-year debt
and will use $116 million of the proceeds for a dividend, it
said Friday in a statement. Moody’s Investors Service gave the
debt its seventh-lowest speculative-grade rating, citing weak
protections for investors and “very modest” revenue and
earnings from the fast-food chain. Investors are shifting cash back into the riskiest, and
highest-paying, corporate debt as an oil-price plunge stabilizes
and unprecedented stimulus from central banks around the world
suppress yields. Nathan’s may need to pay as much as 10.25
percent on its debt, according to a person with knowledge of the
offering. “Whenever you see a company come to market to finance a
dividend, and not very cheaply, it raises questions about if its
really the best use of the cash,” Jody Lurie, a Philadelphia-based analyst at Janney Montgomery Scott, which manages $61
billion in assets, said in a telephone interview.
Islamic State Says It Destroyed Ancient Relics in Mosul Museum. Islamist militants used sledgehammers and
drills to smash ancient artifacts and statues in Iraq’s northern
city of Mosul, saying the relics were against the teachings of
Islam, according to a video by Islamic State. The five-minute video, posted on websites used by the
jihadist group, shows several bearded men inside what’s
identified as the Mosul Museum, breaking up large sculptures. In
another scene, a man drills through the statue of a winged bull,
an Assyrian protective deity, that was almost 3,000 years old.
Easy Money Outweighs Fed to Fuel Record Debt Flows to Asia Haven. This year was tipped to be the one when U.S.
interest-rate increases would suck money from emerging markets.
It’s not turning out that way in Asia. Unprecedented economic stimulus from Europe to Japan has
prompted investors to pump a combined $14.4 billion into Indian,
South Korean and Indonesian local-currency government debt this
year, the most on record for the three markets, exchange data
show. That’s helped cut the average yield on emerging-market
sovereign notes in Asia by 21 basis points to 4.19 percent,
compared with the 4.72 percent for developing nations globally.
Asian Stocks Head for Biggest Monthly Gain Since September 2013. Most Asian stocks rose, with the regional
benchmark’s poised for its biggest monthly advance since
September 2013, as health-care and consumer shares climbed. About three shares rose for every two that fell on the MSCI
Asia Pacific Index, while added less than 0.1 percent to 146.35
as of 9:07 a.m. in Tokyo. The gauge is on track for a 4.3
percent gain this month and a 0.9 percent weekly advance after
Greece and its creditors this week brokered a deal to extend
bailout funding for four months and Federal Reserve Chair Janet
Yellen damped concerns of an imminent rate increase.
Gold Heads for Weekly Climb on Signs China Demand Increasing. Gold headed for its first weekly advance in
more than a month on signs demand in China is picking up and as
investors assess the outlook for U.S. interest rates. Bullion for immediate delivery added as much as 0.2 percent
to $1,211.76 an ounce and traded at $1,210.20 at 10:13 a.m. in
Singapore, according to Bloomberg generic pricing. Gold is up
0.7 percent this week, the first gain since the period to Jan.
23. Prices are set to drop 5.7 percent in February.
Aluminum Premiums in Europe Decline by Most in at Least 17 Years. The premium aluminum buyers in Europe pay to
obtain the metal had the sharpest three-month drop in at least
17 years, according to researcher Harbor Aluminum. The fee added to London Metal Exchange prices dropped to
$300 a metric ton as of Thursday, with some “distressed”
selling at as low as $250 a ton, according to Jorge Vazquez,
managing director at Harbor Aluminum in Austin, Texas. That’s
down from $425 to $445 on Nov. 25, and the sharpest three-month
drop since the data begins in 1998, Vazquez said.
Goldman(GS) Sells Record Default-Swap-Tied Note as Risky Bets Revive. Goldman Sachs Group Inc. sold its largest
note ever tied to an index of credit-default swaps on high-yield
bonds earlier this month, as investors go coupon-hunting in
risky debt. On Feb. 18, the investment bank issued 30 million Swiss
francs ($31.6 million) of five-year securities linked to the
Markit iTraxx Europe Crossover Series 22 Index, its biggest such
deal since Bloomberg began collecting the data in 2000. Sales of
notes tied to the Crossover index, which tracks 75 European
companies with an average rating five levels below investment
grade, more than doubled to $171.6 million in February from the
same period last month.
Wall Street Journal:
Presidential Hopefuls Court the GOP Base. Republican presidential aspirants tout their conservative credentials at annual CPAC event. For conservative Republicans, the most wide-open presidential contest
in decades has created a wealth of contenders, a field of would-be
candidates eager to tout their credentials in pushing the GOP to the
political right. Many of them began making their appeals Thursday
at the annual gathering of the Conservative Political Action Conference
that has become a landmark on the campaign calendar.
Wealthy Jeb Bush Supporter Aims to Push Him to Combat Climate Change.
As Jeb Bush wins support from donors who favor moderate positions on
social issues such as gay marriage, the potential 2016 Republican
presidential candidate is also getting pushed on the environment and
climate change. At least one wealthy Republican donor who supports Mr. Bush, Andrew Sabin,
aims to push the former Florida governor to adopt a platform that would
take steps to combat climate change and environmental degradation if
Resale Prices Tumble on Electric Cars. Tax credits on new models, worries about battery life undercut efforts to peddle used Nissan Leaf.
Nissan Motor Co. ’s Leaf electric car has been a big seller for
Atlanta car dealer Pat Hoban over the past three years, thanks to its
low monthly lease price.
But as those car leases are beginning to expire amid cheap gasoline,
the vehicle is becoming a bit of a headache.
The Federal Communications Commission’s decision Thursday to
regulate the Internet as a public utility is a depressing moment for
American innovation and economic liberty. The FCC is grabbing political
control over a vibrant market that until now has been driven by
inventors and consumers.
Intel chief says 2014 deadliest year for terror ever recorded, in counter to upbeat Kerry. The top U.S. intelligence official on Thursday gave a drastically
different assessment than Secretary of State John Kerry of the terror
threat -- declaring 2014 the deadliest year for global terrorism ever
recorded, after Kerry claimed that threat was diminishing. Director of National Intelligence James Clapper, testifying on
Capitol Hill, catalogued the growing terror-fueled violence in stark
J.C. Penney(JCP) shares tumble after surprise miss on profit. Shares of department store chain J.C.
Penney Co Inc tumbled 12 percent in after-hours trade on
Thursday after it posted a surprise quarterly loss and forecast
small margin improvements this year. J.C. Penney said sales at stores open more than a year rose
4.4 percent in the holiday quarter, the high end of its guidance
for 3.5 to 4.5 percent growth, driven by demand for men's
apparel, jewelery, and home goods.
Investors tell hedge funds they want lower fees -survey. Institutional investors are
sending a strong message to hedge funds after last year's
largely lackluster returns: charge us less and perform better.Nearly one quarter of 134 investors polled by Preqin Ltd
said fees would be a key issue in 2015, the research group wrote
in its first-half outlook, released on Thursday.
EU's Schulz Criticizes Greek Call for Debt Cut. Greek Finance
Minister Yanis Varoufakis undermines trust by calling into question
agreements made with European counterparts only few days ago and coming
up with new demands, EU Parliament President Martin Schulz says in an
Greek Gov’t raises concern over payment to IMF in March. The
Euro Working Group discussed Greece’s imminent funding problems on
Thursday amid mounting concern about how the country will meet its
obligations next months. Earlier in the day, Minister of State for
Coordinating Government Operations Alekos Flambouraris suggested that
Greece might delay payment to the International Monetary Fund if it
cannot find the necessary money.
None of note
Asian equity indices are -.25% to +.50% on average.
Asia Ex-Japan Investment Grade CDS Index 100.0 -.75 basis point.
Asia Pacific Sovereign CDS Index 61.0 -2.75 basis points.
4Q GDP is estimated to rise +2.0% versus a prior estimate of a +2.6% gain.
4Q Personal Consumption is estimated to rise +4.3% versus a prior estimate of a +4.3% gain.
4Q GDP Price Index is estimated unch. versus a prior estimate of unch.
4Q Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.1% gain.
9:00 am EST
ISM Milwaukee for February is estimated to rise to 54.0 versus 51.60 in January.
9:45 am EST
Chicago Purchasing Manager for February is estimated to fall to 58.0 versus 59.4 in January.
10:00 am EST
Pending Home Sales for January are estimated to rise +2.0% versus a -3.7% decline in December.
Final Univ. of Mich. Consumer Sentiment for February is estimated to rise to 94.0 versus a 93.6 prior estimate.
None of note
Other Potential Market Movers
Fed's Mester speaking, UK GDP report, (WFM) investor conference, (ETN)
analyst conference and the (G) analyst day could also impact trading
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and consumer shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.
Merkel Tested by Dissent on Greek Bailout in Her Party. Chancellor Angela Merkel faces increased
dissent within her governing coalition over extending Greece’s
bailout as part of her goal of keeping the euro area intact. While senior lawmakers say almost all of Merkel’s Christian
Democratic bloc will back the four-month reprieve for Greece in
a lower-house vote on Friday, 22 of the 311 caucus members
opposed the measure in a straw poll Thursday, nine more than
voted against passage of Greece’s second bailout in 2012.
Merkel’s Truths Lead Greece to Unavoidable Deal on Euro Bailout. (video) It took a few simple truths from Germany’s
Angela Merkel on the basics of euro-area crisis management to
pacify the combative new government in Athens. The chancellor explained to Greek Prime Minister Alexis
Tsipras what an aide in her office called reality. There wasn’t
much time to reach the deal needed to keep Greece afloat and
Germany wasn’t going to budge, Merkel told him in a 50-minute
phone conversation on Feb. 19. It was their first substantive
exchange since he’d won election Jan. 25.
Ukraine Says Truce Takes Hold as Army Begins Weapons Pullback. Ukraine signaled the latest attempt at peace
in its easternmost regions is taking hold and said the military
would start withdrawing heavy weapons from the front lines. There were no cease-fire breaches after 12:45 a.m. local
time, the military said Thursday, before announcing the arms
removal. While Russian Foreign Minister Sergei Lavrov accused
the U.S. and Europe of seeking to derail dialogue, he said the
peace deal was showing tangible results and there are no “ideal
truces.” The rebels said some fighting continues.
Major Firms Are Saying the Stage Is Set For Another Crisis In The Bond Market. The stage is set for another financial
crisis to unravel years of relative calm in debt markets. At least that’s how firms from UBS Group AG to Invesco Ltd.
see it. Here’s why: Prices in the world’s biggest bond market
are swinging and the plunge in oil is sinking the economies of
nations from Venezuela to Nigeria. To top all that off, the fundamental structure of the bond
market has changed in a way that makes it difficult for
regulators to gauge exactly where risks are building. As stresses grow, “we believe the probability of an
‘accident’ increases,” Invesco analysts including Rob Waldner
wrote in the $786.5 billion manager’s February fixed-income
outlook. “The overall environment for risky assets, and
particularly for credit, is deteriorating.”
Consumer Comfort Falls to 2015 Low as View of U.S. Economy Dims. Consumer sentiment retreated last week to
the lowest level of the year as Americans’ views of the economy
and their finances dimmed. The Bloomberg Consumer Comfort Index fell to 42.7 in the
period ended Feb. 22 from 44.6 a week earlier. The 1.9-point
decline was the biggest since May 2014. A gauge of the current
state of the economy slumped by the most in almost four years.
Confidence has deteriorated in three of the last four weeks
as gasoline prices started climbing from the lowest level since
2009. Sentiment is also being restrained by what Federal Reserve
Chair Janet Yellen this week called “sluggish” wage growth,
even as the labor market continues to improve.
Greek Bailout May Be Bigger Than Expected, Says EU's Oettinger.
Greece's 2015 budget to be burdened by election and following
insecurity, EU Commissioner Guenther Oettinger says in interview. Greece
must not abandon reforms and shift focus to fighting tax evasion and
corruption as fiscal effects unclear. France needs to present proposals
by May to reduce budget deficit to prevent tougher stance by EU
including possible sanctions, Oettinger says.
Ukraine Risks Losing IMF Support for Aid If War Escalates. Ukraine risks losing support from IMF member
countries for a proposed $17.5 billion bailout if the conflict
in the former Soviet republic continues to escalate, according
to two people familiar with the matter. The new four-year loan program is awaiting approval by the
International Monetary Fund’s executive board, which represents
the lender’s 188 member nations. Getting the panel’s consent
will become more challenging if pro-Russia rebels continue their
advance and seize territory such as the strategic port city of
Mariupol, one of the people said.
Bond Rout Might Not Be So Bad as Economists Cut Yield Forecasts. This year’s selloff in Treasuries might not
be so bad after all. While economists surveyed by Bloomberg predict prices will
fall, sending benchmark 10-year yields up more than half a
percentage point, they’re also scaling back forecasts for the
size of the decline. Ten-year yields will be 2.62 percent by
Dec. 31, based on the latest responses, down from about 3.60
percent that the surveys projected six months ago.
Asian Stocks Retreat From Highs as Aussie Bonds Climb. Asian stocks slipped from a five-month high
while Australian bond yields fell to a three-week low after the
nation’s business investment slumped more than estimated. Oil
held above $50 a barrel in New York.
The MSCI Asia Pacific Index dropped 0.3 percent by 11:10
a.m. in Tokyo, with five stocks falling for every three that
Wall Street Journal:
Fed’s Yellen Fends Off Charges of Partisan Tilt. House Republicans seize
on calendar records, pre-election speeches that seem to favor Democrats
as evidence of need to audit central bank. Federal Reserve Chairwoman Janet Yellen came under fire from Republican
lawmakers who charged she had politicized the central bank, allegations
she rejected in her most acrimonious congressional hearing in a year as
U.S., Israel Trade Barbs Over Iran Talks. Top U.S. officials sharpened efforts to undermine Israeli Prime Minister Benjamin Netanyahu ahead of his Washington visit. Top U.S. officials sharpened efforts to undermine Israeli Prime
Minister Benjamin Netanyahu ahead of his visit to Washington next week
as tensions rose over his push to scuttle a possible nuclear deal with
Iran. At what U.S. officials say is a historic low point in
relations between the longtime allies, the White House now sees Mr.
Netanyahu as a serious threat to President Barack Obama’s efforts to
reach an agreement with Iran.
The CPI for January is estimated to fall -.6% versus a -.4% decline in December.
The CPI Ex Food and Energy for January is estimated to rise +.1% versus unch. in December.
Durable Good Orders for January is estimated to rise +1.6% versus a -3.4% decline in December.
Durables Ex Transports for January are estimated to rise +.5% versus a -.8% decline in December.
Cap Goods Orders Non-Defense Ex Air for January are estimated to rise +.3% versus a -.6% decline in December.
Initial Jobless Claims are estimated to rise to 290K versus 283K the prior week.
Continuing Claims are estimated to fall to 2395K versus 2425K prior.
9:00 am EST
The FHFA House Price Index for December is estimated to rise +.5% versus a +.8% gain in November.
11:00 am EST
The Kansas City Fed Manufacturing Activity Index for February is estimated at 3.0 versus 3.0 in January.
None of note
Other Potential Market Movers
Fed's Lockhart speaking, Japan CPI, German Unemployment Rate, $27B 7Y
T-Note auction, weekly Bloomberg Consumer Comfort Index, weekly EIA
natural gas inventory report and the (CR) analyst conference 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.