Monday, February 01, 2016

Tuesday Watch

Evening Headlines

  • Cruz Upsets Trump in Iowa Republican Vote; Clinton Holds Lead. Senator Ted Cruz of Texas won the Iowa Republican caucuses in an upset over billionaire Donald Trump, while Democrat Hillary Clinton was clinging to a narrow edge over Senator Bernie Sanders of Vermont. Senator Marco Rubio was doing better than expected and might be afforded an opportunity to make a case for establishment Republicans to coalesce around him. With 85 percent of precincts counted in the Republican contest, Cruz led Trump 28 percent to 24 percent. Rubio surged into third with 23 percent. Retired surgeon Ben Carson was fourth with 9 percent. None of the other eight Republicans, including former Florida Jeb Bush and Ohio Governor John Kasich was drawing more than 5 percent. In the Democratic race Clinton had 50 percent support to 49 percent for Sanders with more than three-quarters of precincts reporting. The third Democrat in the race, former Maryland Governor Martin O’Malley was set to announce a suspension of his campaign.
  • The Global Consequences of China's Manufacturing Slowdown. (video)
  • Hong Kong Retailers Face Weak Chinese New Year Sales Season. Hong Kong retailers looking for a fortuitous start to the Chinese New Year should expect to be disappointed as a weaker yuan, stock market volatility and a drop in same-day visitors from the mainland put further pressure on a sector already suffering after months of sliding sales. Reports from the retail and catering sectors suggest same-day visitors to Hong Kong so far this year are “a bit weaker” than last year, according to Anthony Lau, executive director of the Hong Kong Tourism Board. The group said last week that the number of monthly visitors in December was down 11 percent year-on-year, and the number of tourists from mainland China fell 16 percent over the same time frame. The total number of annual visitors to Hong Kong fell 2.5 percent last year to 59.3 million.
  • Hong Kong Property Slump Worries Investors. In a city that saw demand propel property prices to a record last year, the estimate that transactions reached a 25 year-low in Hong Kong shows how quickly sentiment has turned. Home prices have slumped almost 10 percent since September and monthly sales in January fell to the lowest since at least 1991, according to Centaline Property Agency Ltd. Amid a spike in flexible mortgage rates this month and anemic demand for new developments, the low transactions volume for January is the latest evidence that prices have further to fall. "The danger is that when sentiment turns negative, it’s very hard to turn things around," Michael Spencer, Deutsche Bank AG’s Hong Kong-based Asian chief economist, said in a telephone interview. "Developers realize they missed the best opportunity to sell."
  • Japan Trading Houses Facing $13 Billion Hit on Commodity Misfire. A handful of companies that have dominated almost every kind of raw-material business in Japan for decades may take as much as $13 billion in charges during the current fiscal year. The global commodity slump is squeezing the “sogo shosha,” or general trading houses like Mitsubishi Corp. that supply everything from gasoline and steel to seafood and noodles in resource-poor Japan. They invested in metals and energy only to see prices fall. Already, Sumitomo Corp. has taken a $650 million writedown at a nickel project in Madagascar. Its rivals will probably report impairments as soon as this week, says Goldman Sachs Group Inc. 
  • Ringgit Slides With Stocks as 1MDB Woes Come Back Into Focus. The ringgit led declines in Asia and stocks fell as state-investment company 1Malaysia Development Bhd. came back to haunt the currency just as a pickup in oil was stoking a recovery. A week after Prime Minister Najib Razak, who chairs the company’s advisory board, was cleared in a probe over any wrong doing related to a political donation, the Swiss Attorney General announced it’s pursuing an investigation into alleged diversion of funds from 1MDB. Singapore has also seized bank accounts related to possible money laundering associated with the firm, which was in the limelight last year due to concern about its rising debt. The ringgit weakened 0.7 percent to 4.1845 a dollar as of 9:56 a.m. in Kuala Lumpur, after last week posting its biggest rally since October as the outlook for the oil-exporting nation’s finances improved amid a recovery in Brent crude.
  • Asian Shares Slip With U.S. Futures as Oil Selloff Dogs Markets. Asian stocks and U.S. index futures retreated as oil extended its decline, with commodity producers from Sydney to Tokyo slipping amid lingering anxiety over the world economy. Asia-Pacific equities snapped a four-day advance amid fading optimism sparked by last week’s Bank of Japan stimulus move. Japanese shares fell from their highest level in almost a month and energy companies drove declines in Australia as U.S. crude extended last session’s 6 percent selloff, dropping back toward $31 a barrel. Malaysia’s ringgit led a retreat in high-yielding currencies while the yen rose. The MSCI Asia Pacific Index fell 0.3 percent as of 10:57 a.m. Tokyo time, with groups of mining stocks and oil and gas producers sliding at least 0.8 percent.
  • Think Crude's Cheap? Biodiesel's Going for Free in Some Places. Biodiesel’s become so cheap in the U.S. that some refiners are being paid to use it. Midwest refiners are paying as little as 64.5 cents a gallon for the fuel after factoring in a $1-a-gallon tax subsidy and other credits. Add further incentives offered by California into the mix and some customers are effectively getting biodiesel for free in the Golden State.
  • Fidelity Writes Down Snapchat Holding by 63 Percent. Snapchat Inc.’s valuation was cut by 63 percent in December by one of its largest investors. This was Fidelity Investments’ second writedown of the photo-sharing app maker in three months. Mutual funds have recently marked down the values of their stakes in several private technology companies, including Dropbox Inc. and Zenefits. The moves are another jolt of sobriety for Silicon Valley startups as they face a tighter fundraising environment. The Fidelity Blue Chip Growth Fund, one of the funds that holds Snapchat, reported the value of its Snapchat shares at $6.37 million as of Dec. 31, according to a public filing. The same holding had been valued at $17.4 million on Nov. 30.
Wall Street Journal:
  • Ted Cruz Beats Donald Trump in Iowa’s GOP Race. Marco Rubio posts a strong showing in third place. Texas Sen. Ted Cruz outmuscled businessman Donald Trump to win the first-in-the-nation Iowa caucuses on Monday, cementing his status as the leading alternative to the Republican front-runner. With 99% of the precincts reporting, Mr. Cruz led the GOP field as the top pick of 28% of Republican caucus-goers, followed by Mr. Trump at 24% and Florida Sen. Marco Rubio at 23%. The Texas senator also was projected the...
  • Hillary Clinton and Bernie Sanders Dig in for Long Battle Beyond Iowa Caucus. Clinton campaign says it’s well positioned; Sanders vows to press on. Hillary Clinton had hoped to wrap up her party’s nomination early, and for months that seemed plausible given her vigorous fundraising, stack of endorsements and robust ground organization.
  • Gilead(GILD) and Biden’s Cancer Campaign. You can’t make medical progress by punishing medical advances. Joe Biden is leading a White House “moonshot” to cure cancer by 2020, and good for him. Along the way maybe he can warn his fellow politicians to stop undermining medical advances with price controls.
Fox News:
Zero Hedge:
Business Insider:
  • Marco Rubio to score big endorsement from Tim Scott. Marco Rubio is expected to secure the widely coveted endorsement of South Carolina Sen. Tim Scott on Tuesday, according to three sources. Scott, the only black Republican is the U.S. Senate, will be Rubio’s second major congressional endorsement in the state; the Florida senator has also secured the backing of South Carolina Rep. Trey Gowdy. Rubio is expected to make a major play in South Carolina’s Feb. 20 primary.
  • Varoufakis Says Greek Debt Repayments Will Be Difficult. Former Greek Finance Minister Yanis Varoufakis says in guest column in Bild that Greece's economy was severely injured and it's unlikely Greece can pay back its debts. Repayment to Germany will be hard, especially since Greece lost a third of govt revenue and gross domestic product and banks can't yet even grant credits to a profitable co.
Night Trading 
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 151.25 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 78.5 +1.75 basis points.
  • Bloomberg Emerging Markets Currency Index 67.93 -.15%.
  • S&P 500 futures -.38%.
  • NASDAQ 100 futures -.38%.

Earnings of Note 
  • (ADT)/.46
  • (AGCO)/.79
  • (ADM)/.66
  • (BAX)/.32
  • (BP)/.04
  • (DOW)/.70
  • (EMR)/.51
  • (XOM)/.64
  • (LYB)/2.15
  • (KORS)/1.46
  • (PFE)/.52
  • (PBI)/.53
  • (RCL)/.92
  • (R)/1.75
  • (SMG)/-1.13
  • (UPS)/1.42
  • (CHRW)/.87
  • (CMG)/1.86
  • (GILD)/2.97
  • (ILMN)/.82
  • (IAC)/.92
  • (MANH)/.35
  • (RHI)/.70
  • (TDW)/-.31
  • (YHOO)/.13
Economic Releases
9:45 am EST
  • The ISM New York for January.
10:00 am EST
  • The IBD/TIPP Economic Optimism Index for February is estimated to rise to 47.6 versus 47.3 in January.
  • Total Vehicle Sales for January are estimated to rise to 17.3M versus 17.22M in December.
Upcoming Splits
  • (AFSI) 2-for-1
  • (FRO) 1-for-5
Other Potential Market Movers
  • The Iowa Caucus results, Fed's George speaking, Eurozone PPI, China Services PMI, BoJ Minutes, weekly US retail sales reports and the (F) January sales call could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

No comments: