Thursday, March 03, 2016

Friday Watch

Posted by Gary .....at 10:54 PM
Evening Headlines
Bloomberg: 
  • Hot Money Rolling Into China Property Seen Deflating Bond Bubble. China’s ball of hot money, which rolled from property to stocks to bonds leaving a trail of unprecedented gains and losses, looks set to come full circle. Home prices in Shenzhen, China’s southern business hub, have jumped 52 percent over the past year, while those in Shanghai surged 18 percent, prompting the official Xinhua News Agency to warn against “panic” buying. The yield premium on top-rated five-year corporate bonds over government securities has risen to 70 basis points after slumping to an eight-year low of 54 in January. “The heating up of property will hurt the bond market,” said Ji Weijie, credit analyst at China Securities Co. “Money that goes into property will not come out easily because it’s usually a long-term investment.” Global brokerages are warning China’s bond “bubble” risks a collapse similar to last summer’s Shanghai stock rout and foreign funds are heading for the exit in record numbers. While surging local demand has helped sustain a 105 percent surge in Chinese note issuance this year, investors’ shift into property assets could make refinancing harder for firms facing a record 4.8 trillion yuan ($735 billion) in onshore debt coming due this year.
  • Kuroda Says BOJ Not Currently Considering Lowering Rates Further. Bank of Japan Governor Haruhiko Kuroda said Friday that he’s not considering lowering the central bank’s benchmark interest rates deeper into negative territory at this time. Kuroda, speaking to lawmakers in Tokyo, also said he would use the “three dimensions” of qualitative and quantitative easing and negative rates as necessary to ensure that the BOJ’s 2 percent inflation target is met soon. He reiterated that the BOJ is always monitoring risks, and won’t hesitate to take action as needed. He also said Japan’s banks have ample capital and extremely good profits. The BOJ has faced a backlash against the Jan. 29 decision to charge commercial banks on a share of the cash they park at the central bank. The reaction to the policy has cast a cloud over the BOJ’s next policy meeting, scheduled for March 14-15.
  • China’s Stocks Pare Weekly Gain as Property Developers Retreat. China’s stocks pared a weekly advance before the start of a gathering of the nation’s leaders on Saturday, as real estate and financial companies declined. The Shanghai Composite Index fell for the first time in four days, erasing early gains. A gauge of Chinese shares traded in Hong Kong was poised for its biggest weekly advance in nearly two months. Property developers retreated as an official at a government think tank warned about the urgent need to prevent a slump in home prices after a recent rally. Chinese stocks have advanced this week on continued optimism that policy makers will take measures to boost the country’s economic growth at the National People’s Congress. Yin Zhongli, a researcher at the Chinese Academy of Social Sciences, wrote in the 21st Century Business Herald that home prices in four of the nation’s biggest cities have run out of control.
  • Asian Stocks, Oil Climb to Eight-Week Highs; Won, Rupiah Advance. Asian stocks and oil both rose to eight-week highs and emerging-market currencies strengthened ahead of key U.S. jobs data and the start of the Chinese national legislature’s annual gathering. The MSCI Asia Pacific Index of shares and crude were both headed for weekly gains of at least 5 percent. The Bloomberg JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, climbed for a fifth day as Indonesia’s rupiah advanced to a nine-month high. China’s yuan strengthened after the central bank raised its daily fixing. Gold fell 0.6 percent, after entering a bull market on Thursday, and copper advanced. The MSCI Asia Pacific Index rose 0.2 percent as of 11:09 a.m. Tokyo time, headed for the highest close since Jan. 6.
Wall Street Journal:
Fox News:
  • Personal attacks fly between Trump, Rubio as Kasich defends continuing campaign. (video) Sparks flew between Donald Trump and Marco Rubio at the Fox News Republican debate in Detroit Thursday, with Rubio going after his business record and Trump calling the Florida senator a liar. “He has spent a career convincing Americans he’s something that he’s not in exchange for their money," Rubio said.
MarketWatch:
Zero Hedge:
Business Insider:
Breaking911:
Politico: 
  • Trump: I won't release off-record remarks to New York Times. Under pressure from his rivals to release his off-the-record comments to the New York Times, Donald Trump said he wants to reintroduce compromise to the Republican Party. During Thursday's debate, Trump said that in terms of immigration and "almost anything else" in politics, there needs to be give and take. "There always has to be some, you know, tug and pull and deal," Trump said. "There is always negotiation. And the best negotiator that knows what he is doing will make a great deal. But we need give and take in government. If you don't have give and take you are never going to agree on anything." Trump said he wouldn't let the New York Times release the transcript of his comments to the paper, saying he had too much respect for the commitment to keep remarks off the record. Marco Rubio immediately attacked him on that point, saying it was up to him, not the Times, to allow the comments to go public.
Reuters:
  • Forever blowing bubbles, Chinese investors pump Shanghai property. Frenzied property buying in Shanghai has set alarm bells ringing that a new bubble is forming, just months after China's frothy stock markets crashed, raising fears about a replay of the real estate bust that has hit the country's growth since 2012. Home prices in the city, China's biggest financial hub, climbed 3.6 percent in February from the previous month, according to a survey by CRIC, extending the 17.5 percent annual gain it recorded in January, which was seven times faster than the country as a whole. "The (property) market seems crazy again. I have no idea why it's crazy, but it should be the right time to buy," said Wang Zhongcai, a 50-year-old clerk, who was queuing, among many others, to register ownership of a small investment apartment he had bought.
  • Snapchat raises $175 mln from Fidelity in latest funding round -source. Snapchat has raised $175 million in fresh funding from Fidelity Investments and other investors, according to a source familiar with the matter. The investment is an extension of Snapchat's Series F financing round, which the company began raising last year, the person told Reuters.
  • U.S. tech companies unite behind Apple ahead of iPhone encryption ruling. Tech industry leaders including Alphabet Inc's Google, Facebook Inc, Microsoft Corp , AT&T and more than two dozen other Internet and technology companies filed legal briefs on Thursday asking a judge to support Apple Inc in its encryption battle with the U.S. government.
Financial Times:
  • Oil crash takes heavy toll on midstream energy companies. This week the Cushing Marketlink pipeline, a central artery in the North American oil market, dropped its already-discounted rate for shipping light crude by a further 10 per cent to $2.50 a barrel. But this wasn’t the real bargain. As the pipeline lowered the official rate, shippers were subletting space on Marketlink for just $0.50 a barrel, industry executives say.
21st Century Business Herald:
  • Shanghai Asks Banks to Avoid Competition on Mortgage Rates. Shanghai regulator held meeting with banks on Wednesday to learn about their home mortgage lending plans and cooperation with property agents, citing people familiar with the matter. Many first-time home buyers in Beijing and Shanghai can get 15% discount on mortgage rates; some banks offer discounts of 17% or more. Multiple bank officials said they will pay more attention to mortgage applications backed by falsified home purchases, leveraged financing for down payments.  
  • China Researcher Warns Risks in Housing Market. China faces urgent task to prevent home prices from steep decline after surges in tier-1 cities, Yin Zhongli, a researcher with the Chinese Academy of Social Sciences, writes. Home prices in Beijing, Shanghai, Shenzhen and Guangzhou have run out of control, Yin said. Similarities in movements of home prices and stock prices year ago warrant close attention from authorities, he said. 
Night Trading 
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 148.0 -1.25 basis points. 
  • Asia Pacific Sovereign CDS Index 70.0 -3.0 basis points. 
  • Bloomberg Emerging Markets Currency Index 69.69 +.1%. 
  • S&P 500 futures +.09%. 
  • NASDAQ 100 futures +.14%.
Morning Preview Links

Earnings of Note
Company/Estimate 
  • (BIG)/1.98
  • (SPLS)/.28
Economic Releases 
8:30 am EST
  • The Trade Deficit for January is estimated at -$44.0B versus -$43.36B in December.
  • The Change in Non-Farm Payrolls for February is estimated to rise to 195K versus 151K in January.
  • The Unemployment Rate for February is estimated at 4.9% versus 4.9% in January. 
  • Average Hourly Earnings for February are estimated to rise +.2% versus a +.5% gain in January.
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Eurozone retail sales report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and industrial 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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