- Putin's Syria Gamble Stokes Fears His Real Goal Is Aiding Assad. (video) Russia President Vladimir Putin’s sudden escalation of airstrikes inside Syria is forcing the world to confront his latest military adventure, against a backdrop of deep distrust over whether defeating the Islamic State is his only goal. While the U.S. and its allies want to see the extremists crushed, Putin’s actions -- the U.S. said he bombed an area where the terror group doesn’t operate -- fueled fears that he really just wants to prop up ally President Bashar al-Assad, who Western leaders say should step aside. It also raises the odds of high-stakes accidents as Russian and U.S. jets share the same air space but potentially different missions.
- ETF Investors Exit Emerging-Market Stock Bets as China Falters. Traders dumped exchange-traded funds tracking emerging-market stocks at the fastest pace in over a year last quarter amid concerns over the slowdown in China, a selloff in commodities and the prospect of higher interest rates in the U.S. Investors pulled $6.1 billion from U.S.-traded ETFs that offer exposure to a basket of developing-nation equities in the three months through September, the most since the first quarter of 2014, according to data compiled by Bloomberg. Exchange-traded funds that invest in both emerging-market stocks and debt as well as individual countries saw outflows in 12 out of 13 weeks ending Sept. 25, with losses totaling $12 billion, the data show.
- Japan Inc.'s Confidence Is Waning as Headwinds Hit Abenomics. Weakness in the Japanese economy and the slowdown in Asia are chipping away at the nation’s business confidence, with the latest survey from the central bank showing sentiment among large manufacturers worsening. The Tankan index for large manufacturers fell to 12 in September from 15 in June, the Bank of Japan said Thursday, lower than the median estimate of 13 in a Bloomberg survey of economists. The index is forecast to drop to 10 in December. There’s growing concern that Japan’s economy may have contracted in the quarter that’s just ended, which would tip the nation into its second recession since Japanese Prime Minister Shinzo Abe took office in 2012. Large companies that have benefited from the weak yen and rising profits under Abe have yet to make a significant commitment to expanding domestic investment.
- Strategist Known as Mad Dog Says Yen Can Climb to 100 per Dollar. The yen has already hit bottom and could strengthen to 100 per dollar next year as Bank of Japan Governor Haruhiko Kuroda’s unprecedented monetary easing is proving ineffective for the economy, said Eishi Wakabayashi, a former currency trader who twice forecast the yen’s surge to record highs. “The dollar is destined to decline against the yen because it’s been supported forcibly,” meaning that the yen’s 2015 low of 125.86 per dollar was an excessive depreciation, New York-based Wakabayashi said in a Sept. 25 interview in Tokyo. “The quantitative easing worked only psychologically on asset prices, weakening the yen and lifting stocks while failing to boost inflation. That’s become clear and we will see the repercussion from these shock therapies.”
- Singapore's Home Prices Match Longest Losing Streak in 2002. Singapore home prices dropped for an eighth quarter, matching the longest losing streak in 13 years, as tighter mortgage curbs cooled demand in Asia’s second-most expensive housing market. An index tracking private residential prices fell 1.3 percent in the three months ended Sept. 30 from the previous quarter, according to preliminary data from the Urban Redevelopment Authority on Thursday. The slump was the most since June 2009, in the aftermath of the global financial crisis.
- Asian Stocks Track U.S. Advance as Investors Await China Data. Asian stocks followed U.S. shares higher, after the regional benchmark index posted its worst quarter since 2011, as investors awaited Chinese factory data. The MSCI Asia Pacific Index advanced 0.2 percent to 124.09 as of 9:01 a.m. in Tokyo.
- America's Oil Output Refuses to Collapse. Here's One Reason Why. Somewhere amid the maze of wells that Murphy Oil Corp. has scattered across Texas’s sprawling Eagle Ford shale formation, Brett Pennington is carrying out a little experiment. What will happen, the exploration chief wants to know, when he jams huge quantities of sand down the narrow mouth of one of these wells. Will more crude seep out? Or, rather, will he smother the opening and choke off the flow?
- Vale(VALE) Gain Is Iron Market Pain as Giant Project Ahead of Schedule. The world’s top iron-ore producer has some bad news for the oversupplied market: its biggest project is running ahead of schedule. S11D, part of the Carajas mining complex in northern Brazil, is on track to beat a targeted December 2016 start date, Vale SA Chief Financial Officer Luciano Siani said in an interview Wednesday. The project -- the industry’s largest and, according to Vale, the most profitable -- will add 90 million metric tons of annual capacity to global supply, although Vale intends to control the speed at which it hits the market, Siani, 45, said in Toronto, where he is holding meetings with investors and analysts. “We will manage the ramp up in order to preserve the premium for this high grade ore,” he said.
- Wal-Mart(WMT) Said to Plan Hundreds of Job Cuts at Headquarters. Wal-Mart Stores Inc. is planning job cuts at its headquarters that could involve hundreds of workers, including senior managers, according to people familiar with the situation. The cuts are expected to begin in the next week, said the people, who asked not to be identified because the deliberations are private.
Wall Street Journal:
- Russian Airstrike in Syria Targeted CIA-Backed Rebels, U.S. Officials Say. One area hit was location primarily held by rebels receiving funding, arms, training from CIA and allies. A Russian airstrike Wednesday targeted an area in western Syria primarily held by rebel forces backed by the Central Intelligence Agency and allied spy services, U.S. officials said.
- Chinese Domino Effect Still Threatens World Markets. Emerging markets and others continue to feel reverberations from China stocks’ epic third-quarter tumble.
- Hillary Clinton Emails Had a Two-Month Gap. Archive of messages turned over to officials begins weeks into the start of her tenure. About two months of emails from the start of Hillary Clinton’s tenure as secretary of state are missing, and federal officials haven’t been able to recover them.
- Taliban Tighten Grip on Afghan City. Top official says government knew of Taliban threat to Kunduz but couldn’t respond soon enough.
- Questions About Leak at Federal Reserve Escalate to Insider-Trading Probe. Firm at center of probe says it is a media organization with special legal protections.
- The ‘Wage Gap’ Myth That Won’t Die by Sarah Ketterer. You have to ignore many variables to think women are paid less than men. California is happy to try.
- Trump: Odd Man Out. The famous Trump base has hit a ceiling. He should retire, and enjoy.
- Russia-linked hackers tried to access Clinton's email server. (video) Hackers linked to Russia attempted at least five times to gain access to Hillary Clinton’s private email account while she was secretary of state, according to emails released Wednesday. Clinton originally received the infected emails, disguised as speeding tickets, over four hours on the morning of Aug. 3, 2011. The infected emails instructed recipients to print the attached tickets, which would have allowed hackers to take control of their computers.
- Brazilian Nightmare Worsens On Bad Budget Data, Record Low Confidence, Horrific Government Approval Ratings.
- Chinese SMEs are struggling. (graph) “A key factor weighing on the headline index was a sharper contraction of manufacturing output in September,” said Markit. “According to panelists, worsening business conditions and subdued client demand had led firms to cut their production schedules. Weaker customer demand was highlighted by a further fall in total new orders placed at Chinese goods producers in September. “Furthermore, the rate of reduction was the steepest seen for just over three years. Data suggested that the faster decline in total new business partly stemmed from a sharper fall in new export work. The latest survey showed new orders from abroad declined at the quickest rate since March 2009." In what will no doubt raise questions over China’s economic transitions from an industrial to services economy, there was also worrying news on activity across the nation’s services sector. The separate Caixin services PMI gauge dipped to 50.5 in September from 51.5, falling to the lowest level in 14-months.
- Chinese firms are bearing up on the economy. Based on the latest quarterly survey of banks, companies and households conducted by the People’s Bank of China – a report that captures the views of 20,000 urban households, 5,000 businesses and 3,100 banks – sentiment towards the economy deteriorated sharply despite relative stability in business profits, orders and labor market conditions. “The business survey for Q3 makes for gloomy reading,” said Chang Liu and Mark Williams, economists at Capital Economics in a research note released overnight. “The headline index on firms’ confidence in the state of the economy fell to its lowest since the trough in 2009. Firms’ sentiment about their own circumstances deteriorated too, with this index falling below 50 for the first time since 1999″.
- The next shoe to drop. Here’s how the junk-bond debacle bleeds into stocks. Part of the fuel that powered stocks to such vertiginous heights over the last few years was the M&A boom. Companies bid for each other with huge premiums over the already inflated stock prices. These deals were mostly funded with shares, of which companies could print an unlimited amount, and with debt, of which even over-indebted junk-rated companies could issue nearly unlimited amounts, thanks to the Fed’s policies that drove yield investors to near-insanity.
- Express Scripts(ESRX) says Praluent, Repatha will not be "budget busters". Express Scripts Holding Co said on Wednesday two costly new potent cholesterol fighters will not be "budget busters" for its clients and that most prescriptions for the drugs have been rejected because patients did not meet required medical criteria. "We're seeing a lot of patients who either don't qualify or their physicians are not providing (needed) information," said Everett Neville, a vice president of Express Scripts, whose company is the largest pharmacy benefit manager in the United States.
- Brazil central bank vows to do what it takes to control inflation. Brazil’s central bank is willing to do whatever is necessary to control inflation while the country grapples with the thorny issue of how to rebalance the nation’s public finances, a senior official has said. Tony Volpon (pictured), head of international affairs at the central bank, said that while tax increases to balance the budget could raise prices, monetary policy would be adapted to ensure that inflation eventually converged to the official target of 4.5 per cent.
- ‘Fragile’ economy threatens oil oversupply rebalance, says energy expert. A fragile global economy threatens the progress of rebalancing an oversupplied oil market, says Gary Ross, executive chairman of Pira Energy Group, the research company. Cuts in oil production were happening more slowly than expected after crude prices collapsed in the past year, said Mr Ross. Even with oil companies pulling the plug on big projects and deploying fewer rigs to drill for oil, supply remains robust.
- Emerging market growth miracle in 'jeopardy', warns IMF chief Christine Lagarde. Falling commodity prices mean economies face a fifth consecutive year of declining growth, says Christine Lagarde.
- Deutsche Bank could be forced into riskier lending. If the troubled German lender’s latest round of cost cuts fail, it could be forced to take more drastic action to improve returns, according to analysts at credit ratings agency Moody’s.
- None of note
- Asian equity indices are +.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 160.50 -4.5 basis points.
- Asia Pacific Sovereign CDS Index 92.5 -1.75 basis points.
- S&P 500 futures +.49%.
- NASDAQ 100 futures +.73%.
Earnings of Note
7:30 am EST
- Challenger Job Cuts for September.
- Initial Jobless Claims for last week are estimated to rise to 271K versus 267K the prior week.
- Continuing Claims are estimated to fall to 2230K versus 2242K prior.
- Final Markit US Manufacturing PMI for September is estimated at 53.0 versus 53.0 in August.
- Construction Spending for August is estimated to rise +.5% versus a +.7% increase in July.
- ISM Manufacturing for September is estimated to fall to 50.6 versus 51.1 in August.
- ISM Prices Paid for September is estimated to rise to 40.0 versus 39.0 in August.
- Wards Total Vehicle Sales for September are estimated to fall to 17.6M versus 17.72M in August.
- None of note
Other Potential Market Movers
- The Fed's Williams speaking, ECB's Draghi speaking, Eurozone Manufacturing PMI, BoE Minutes, Australian Retail Sales report, Japan Unemployment report, Bloomberg weekly Consumer Comfort Index, weekly EIA natural gas inventory report, (F) September conference call and the (CLX) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.