Friday Watch

Evening Headlines
Bloomberg:  

• New Chinese Index Charting 'Silk Road' Freight Sinks to Lowest Level. (graph) A new Chinese shipping index that tracks freight movements among the countries on the route of one of President Xi Jinping's key trade initiatives has fallen to the lowest level since it was established. The Maritime Silk Road Freight Index was launched on a trial basis by the Shanghai Shipping Exchange last July. The index takes January 2015 as its base point, and at that time it had a value of 100. The latest update, released on February 29, shows that the index has declined to 65.11 after falling 10.3 percent over the previous month alone. The index is divided into four subindexes—container imports, container exports, dry bulk imports and tanker imports—each of which began with a value of 100. The dry bulk figure has declined to 56.14, down 7.3 percent since the end of January. The index is based on the freight volume and rate, and the data is taken from other indices published by the SSE. In August, the state-owned China Daily newspaper reported SSE President Zhang Ye as saying the index was intended to "enhance the transparency and influence of the market." China's economic slowdown has triggered a drastic decline in worldwide shipping activity. China's exports fell 25.4 percent year on year in February, and imports were down 13.8 percent. The Baltic Dry Index, the global measure of the cost of shipping coal, iron ore, grain and other non-oil commodities, fell to a record low in February. At 9 a.m. on Friday it stood at $384, down from a peak of $1,222 in August.
• Shanghai Property Surge May Prompt Cooling Measures: Chart. As China reports property prices next week, the cost of real estate has been soaring in the top-tier cities of Beijing, Shenzhen and Shanghai. The rise has worried officials in the nation’s financial hub. Shanghai authorities held a meeting this week to discuss measures to cool the surge in property, according to people familiar with the matter.
• This Weekend in China: a Double Dose of Data. (video)
• Top Forecaster Says Indian Stocks Overvalued, Sees Earnings Cut. Indian equities are expensive even after the worst start to the year since 2011 for the most accurate forecaster for the nation’s benchmark stock index. The reason: earnings. Company earnings will grow 12 percent in 2016, slower than the “very optimistic” 18.5 percent forecast by analysts, Devendra Joshi, Asia equity strategist at HSBC Holdings Plc, said in a phone interview from Hong Kong. The S&P BSE Sensex ended 2015 within 1 percent of his year-end target of 25,800, the closest call among the gauge’s forecasters.The Sensex, which tumbled into a bear market last month, is still valued at a 47 percent premium over a gauge of emerging markets.
• Nikon, Casio in Short Sellers' Sights as Tech Pessimism Abounds. Hedge funds have boosted their bearish bets on Japanese technology companies such as Nikon Corp. and Casio Computer Co. as the industry struggles to deliver the next killer product. Technology companies account for eight of the 10 Japanese stocks that are most targeted by short sellers, who have collectively wagered 197.1 billion yen ($1.7 billion) that the shares will fall, according to data compiled by Bloomberg. Camera maker Nikon is the most-shorted stock. Oxford Asset Management, Vinva Investment Management Ltd. and Stats Investment Management Co. are among hedge funds that are wagering against Japanese tech stocks, according to filings with the Japan Exchange Group.
• Scenes From the Disaster Zone: Five Years on in Fukushima. (pic) Five years since the meltdown at the Fukushima Dai-Ichi nuclear power plant, progress has been made to rebuild much of the prefecture. Yet within evacuation zones designated by the Japanese government, scars are still obvious. Many evacuees who fled are unwilling to return. Thousands still live in temporary housing outside these zones.  Photographs by Ko Sasaki and Tomohiro Ohsumi for Bloomberg. 
• China Stocks Head for Weekly Loss as Investor Interest Dwindles. China’s stocks headed for a weekly loss as suspected state intervention failed to revive confidence among investors in the world’s worst-performing equity market. The Shanghai Composite Index declined for a third day, falling 0.8 percent, on turnover that was 36 percent below the average for this time of day. Financial and energy producers led losses before data this weekend that projected to show no let-up in the slowdown in industrial production and fixed-asset investment. The yuan strengthened in onshore trading after the central bank raised its daily reference rate by the most since November. Trading on the world’s second-largest stock market has tumbled to the lowest level since 2014 as margin traders unwind bullish positions in the face of suspected buying by state-directed funds. China’s benchmark gauge has lost 22 percent this year, the most among 93 global benchmark indexes tracked by Bloomberg, as worsening economic data and meddling by the government deter investors. "Fundamentals are not improving," said Steven Leung, a Hong Kong-based executive director for institutional sales at UOB Kay Hian. "Most people are staying on the sidelines," watching for any policy statements from ongoing government meetings, he said. The Shanghai Composite dropped to 2,781.59 at 10:28 a.m., heading for its lowest close since March 1 and extending losses this week to 3.3 percent. 
• Most Asian Shares Fall, Euro Holds Gains After ECB; Yuan Rises. Most Asian stocks fell, set for their first weekly loss in a month, and the euro held gains after an unprecedented new round of European monetary stimulus was neutered by Mario Draghi damping the outlook for further interest-rate cuts. China’s yuan rose. Benchmark stock indexes declined across most of the region, following a 1.7 percent drop in the Stoxx Europe 600 Index. The euro traded near a three-week high versus the dollar, after its biggest one-day gain in more than a month. The yuan climbed to its strongest level since mid-February after the central bank boosted a daily fixing by the most in four months. Ten-year Japanese bond yields rose back above zero as those on Australian sovereign notes climbed to January levels. U.S. oil advanced beyond $38 a barrel, while copper and nickel gained. The MSCI Asia Pacific Index slipped 0.1 percent as of 11:40 a.m. Tokyo time, headed for a 0.7 percent weekly loss.
• OPEC-Russia Oil Coalition Struggles With Its Very First Step. A month after promising co-operation that would re-balance global oil markets, the producer coalition forged by Saudi Arabia and Russia is having difficulty taking its first step. OPEC members and rival producers have yet to decide when, or where, to hold talks on a proposed accord to freeze oil output, a strategy aimed at curbing the worldwide oversupply. Dates and locations suggested by one producer -- this month or next, in Moscow, Doha or Vienna -- are promptly snubbed by another in the fledgling alliance. On Wednesday the process received another setback when a gathering of Latin American producers scheduled for Friday in Quito, Ecuador, was pushed back.

Wall Street Journal:

• Miami Republican Presidential Debate: Live Updates.

Fox News:

• Republican Debate: Live Blog.
• Report details ISIS atrocities against Christians, presses State for ‘genocide’ label. (video) Holding a bloody shirt he carries with him to remember the Islamic State's crimes against Iraqi Christians, Douglas Bazi described for a Washington audience Thursday how he's suffered at ISIS' hands: He was kidnapped, had his teeth bashed in with a hammer and watched as his church was bombed. “There is not ‘life’ in Iraq,” Bazi said, noting his congregation has been targeted so often it is called the “church of the martyrs, or the church of the blood.”

MarketWatch:

• Robots are coming for your job, and most of you don’t even know it.

CNBC:

• CLO business on Wall St is showing a big slowdown. Wall Street hopes for a rebound as CLO issuance is off to its poorest start since 2009. 
• U.S. watches as Fukushima continues to leak radiation.
• Despite her rhetoric, big pharma likes Hillary. The pharmaceutical industry has donated $589,344 to Hillary Clinton's campaign, according to the nonprofit research group Center for Responsive Politics. That's more than any other candidate — despite Clinton's proclamation that she's proud to call the pharmaceutical industry her enemy.

Zero Hedge:

• How Vancouver Is Being Sold To The Chinese: The Illegal Dark Side Behind The Real Estate Bubble.
• The Brazilian 'Earthquake' & The Empire Of Chaos.
• Japanese Government Bond Futures Are Flash-Crashing (Again). (graph)
• The Incredible Story Of How Hackers Stole $100 Million From The New York Fed.
• The Germans React To Draghi's Monetary "Tidal Wave".
• German Bank That Almost Failed Now Being Paid To Borrow Money.
• Gold Soars As Draghi "Dud" Unleashes Chaos In Bonds, Stocks, & FX. (graph)
• Did Draghi Just Blow His Bazooka's Wad: Gold Soars, EUR Spikes, Stocks Slump. (graph)

Business Insider:

• China just made a move to tackle the biggest threat to its economy, and it reeks of desperation. This is usually the last stop before bankruptcy. Chinese officials have told Reuters that they will start allowing commercial banks to swap nonperforming loans in super-indebted companies for stock. That move is usually called a debt-for-equity swap. From Reuters:
• Apple's(AAPL) angry response to the Department of Justice: a 'cheap shot' that's 'intended to smear the other side'.
• A former top aide to Vladimir Putin died of 'blunt force trauma' at a DC hotel.
• There's a doomsday event that could crush Hong Kong's housing market.
• Negative interest rates are destroying Japan's money market funds.
• Saudi Arabia has no intention of ending the oil glut. (graph)
• The US is planning to blame Iran for a cyber attack on dam in New York.
• Foreign demand for US real estate is probably going to dry up.

Reuters:

• U.S.-based stock funds break nine-week streak of outflows: Lipper. U.S.-based stock funds attracted $4.6 billion in new cash during the week ended March 9, Lipper data showed on Thursday, breaking a nine-week streak of outflows. Taxable bond funds in the United States attracted $5.8 billion in new cash during the same weekly period, their seventh straight week adding new cash, the Lipper data showed. Investors added $2.4 billion in new cash to relatively low risk money-market funds during the week, according to the fund research service.
• CMBS market on edge as US property prices decline. The US$600bn US commercial mortgage bond market is on edge after new data showed that a six-year bull run in property prices looks to be nearing an end. Moody's this week reported a 0.3% drop in its monthly property price index for January, calling it the first definitive pause in price growth since 2010. "This is a significant milestone that signals that a shift in sentiment among commercial property investors is under way," the company said.

Bild:

• German Economists Criticize Draghi Internet Rate Policy. ECB lending at a negative interest rate of up to .4% to banks amounts to a prohibited subsidy policy in support of zombie banks and countries at risk of bankruptcy, IFO president Hans-Werner Sinn said. Says euro-region countries, which are net debtors, unscrupulously used their majority in the EU Council to craft interest rate conditions in a way so that they passed. ECB policies will always be ineffective, according to Lars Feld of the Walter Eucken Institute. Countries like Italy haven't carried out reforms despite the interest rate lows, are spending more than they raise and new measures won't change anything, citing Feld. ZEW President Clemens Fuest warns of risk of real-estate and bond market bubbles and weakening banks.

Night Trading 

• Asian equity indices are -.50% +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 143.5 -2.25 basis points. 
• Asia Pacific Sovereign CDS Index 67.75 -1.0 basis point. 
• Bloomberg Emerging Markets Currency Index 70.58 +.09%. 
• S&P 500 futures +.34%. 
• NASDAQ 100 futures +.39%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BKE)/1.09
• (CTRN)/.25
• (GCO)/2.13
• (HIBB)/.74 

Economic Releases 
8:30 am EST

• The Import Price Index MoM for February is estimated to fall -.7% versus a -1.1% decline in January.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The UK Trade Balance report, IEA release and the (GWW) Feb. sales report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.