Thursday, February 11, 2016

Friday Watch

Evening Headlines
  • Global Assault on Banks Intensifies as Investors Punish Weakness. Credit Suisse Group AG shares plunged to the lowest in a generation and a one-year contract to insure Deutsche Bank AG debt against default surged to a record as a global rout in financial companies intensified. Theories abound as to what lies behind the selloff, with some traders fretting over falling oil prices, China’s slowing economy and negative interest rates. A pullback by some sovereign-wealth funds has also been blamed for lower asset prices. Whatever the cause, the hammering has been the worst in Europe, where concerns persist about the health of some of the biggest banks eight years after the financial crisis. “The market is aggressively penalizing banks,” said Nikhil Srinivasan, who oversees 480 billion euros ($543 billion) as chief investment officer at Assicurazioni Generali SpA in Milan. “It’s going to be a challenging 2016, and I don’t see a short tunnel -- this could go on for a while.”
  • South Korea Halts Small-Cap Equity Trading After Index Sinks 8%. Trading in South Korea’s Kosdaq exchange for smaller stocks was temporarily halted after the benchmark gauge plunged more than 8 percent. Trading was suspended for 20 minutes at 11:55 a.m. in Seoul after the measure dropped 8.2 percent. A loss of 15 percent would trigger another halt of 20 minutes, while a drop of 20 percent would stop trading for the rest of the day, according to the bourse. The decline is the biggest since December 2011. The Kospi gauge of larger companies slid 2.1 percent
  • Yen's Biggest Two-Week Rally Since 1998 Fuels Intervention Fears. The yen is poised for its biggest two-week advance versus the dollar since the Asian financial crisis in 1998, intensifying speculation the Bank of Japan may intervene to weaken it. Japan’s currency has strengthened against all its 31 major peers since Jan. 29 amid demand for haven assets. Government officials expressed concern at the moves, fueling speculation Japan may intervene to halt gains that imperil the economy through disinflation and lower profits for exporters. Finance Minister Taro Aso said Friday that the authorities will respond to markets appropriately, if necessary, as recent movements in the yen have been rough. The currency briefly surged past 111 per dollar Thursday. “The verbal intervention has already started, with MOF officials talking about moves being rough, which looks like the new code word for undesired strength,” said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd. in Sydney, referring to the Ministry of Finance. “110 might be some line in the sand when the MOF will lean on the BOJ to shore things up.”
  • Asian Stocks Extend World Rout Amid Rising Yen While Oil Rallies. The global equity bear market deepened in Asian trading, with Japanese stocks headed for their worst week since 2008 as anxiety over central banks’ ability to revive the world economy fueled a rally in the yen. Oil rebounded from a 12-year low. The Topix index slumped 5.5 percent in Tokyo as traders returned from holiday, pushing the regional Asian benchmark toward its steepest weekly drop since gyrations in Chinese assets at the start of the year. U.S. index futures were steady after losses there helped the MSCI All-Country Index cap a 20 percent slide from its May record. The yen was set for its strongest two-week advance since 1998. U.S. crude rose from a 12-year low. The MSCI’s Asia Pacific Index was down 2.7 percent as of 11:29 a.m. Tokyo time, on track for a weekly decline of 5.9 percent. The Topix has lost 12.7 percent this week, the most since October 2008. While Japan resumed trading after a Thursday break, markets in mainland China, Taiwan and Vietnam remain closed for Lunar New Year holidays.
  • The Shipping Industry Is Suffering From China’s Trade Slowdown. So many boats, so little cargo as Chinese exports and imports drop. When business slows and owners of ships and offshore oil rigs need a place to store their unneeded vessels, Saravanan Krishna suddenly becomes one of the industry’s most popular executives. Krishna is the operation director of International Shipcare, a Malaysian company that mothballs ships and rigs, and these days he’s busy taking calls from beleaguered operators with excess capacity. There are 102 vessels laid up at the company’s berths off the Malaysian island of Labuan, more than double the number a year ago. More are on the way. “There’s a huge demand,” he says. “People are calling us not to lay up one ship but 15 or 20.”
Wall Street Journal:
  • Risk Grows of Markets Sparking Recession. While many economic indicators aren’t flashing concern, the global financial turmoil could cause a slowdown. Is the U.S. headed for recession? The markets suggest so. With Thursday’s selloff, the Dow Jones Industrial Average is now down 14.5% from its all-time high last May. Yields on risky bonds continue to climb, while investors have sought safety in U.S. Treasurys, sending those yields lower. And oil has hit a nearly 12½-year low. Yet the...
  • More Cuts Loom as Oil Nears $25. U.S., Canadian producers are losing at least $350 million a day at current prices. As crude prices slide toward $25 a barrel, many oil companies have little choice but to start making the steep cost cuts they have avoided up until now, jettisoning every well that can’t break even or isn’t needed to keep the lights on.
  • How Sanders Exposed Clinton. Hillary was ‘tough’ and ‘masterful’—until Bernie whispered what was obvious. Democrats awoke Wednesday with a thought usually reserved for Republicans: Hillary Clinton is a disaster. The marvel is that she fooled them for so long.
Fox News: 
  • Dem Debate: Clinton, Sanders clash over Wall Street ties. Bernie Sanders clashed with Hillary Clinton at Thursday’s Democratic debate over Clinton’s Wall Street ties, once again suggesting that the financial sector’s big donations are meant to buy influence. “Let’s not insult the intelligence of the American people. People aren’t dumb,” Sanders said. “Why in God’s name does Wall Street make huge campaign contributions? I guess just for the fun of it." They sparred on the issue as Sanders touted the fact he’s “the only candidate up here” who has no super PAC supporting him. A super PAC backing Clinton, he said, recently raised $15 million from Wall Street. Clinton countered by noting that President Obama took Wall Street donations too, but “when it mattered, he stood up and took on Wall Street.”
Zero Hedge:
Business Insider: 
Night Trading 
  • Asian equity indices are -2.0% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 177.25 +8.0 basis points. 
  • Asia Pacific Sovereign CDS Index 86.5 +3.25 basis points. 
  • Bloomberg Emerging Markets Currency Index 68.19 -.03%. 
  • S&P 500 futures +.45%. 
  • NASDAQ 100 futures +.36%.
Morning Preview Links

Earnings of Note
  • (AXL)/.68
  • (IPG)/.62 
  • (CPN)/-.06 
  • (ITT)/.55 
  • (LPNT)/1.05 
  • (RRGB)/.82 
  • (RUTH)/.25 
  • (ZAYO)/.03
Economic Releases
8:30 am EST
  • The Import Price Index MoM for January are estimated to fall -1.5% versus a -1.2% decline in December.
  • Retail Sales Advance MoM for January are estimated to rise +.1% versus a -.1% decline in December. 
  • Retail Sales Ex Autos MoM for January are estimated unch. versus a -.1% decline in December. 
  • Retail Sales Ex Autos and Gas MoM for January are estimated to rise +.3% versus unch. in Decmeber.
10:00 am EST
  • Business Inventories for December are estimated to rise +.1% versus a -.2% decline in November.
  • Preliminary Univ. of Mich. Consumer Sentiment for February is estimated to rise to 92.3 versus 92.0 in January.
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Fed's Kaplan speaking and the Eurozone GDP report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, weighed down by financial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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