Sunday, March 13, 2016

Monday Watch

Today's Headlines
  • Merkel's CDU Loses Support in Elections Swayed by Refugee Crisis. Chancellor Angela Merkel faces an increasingly splintered political landscape after voters punished her party and lifted the anti-immigration Alternative for Germany to its best showing yet in three state elections dominated by the refugee crisis. Support for Merkel’s Christian Democratic Union tumbled across the board Sunday as her candidates failed to capture two western states including Baden-Wuerttemberg, home to carmaker Daimler AG. Her party hung on to win the most votes in Saxony-Anhalt in the formerly communist east, though Alternative for Germany, or AfD, upended the coalition math there by winning about 24 percent support in its first attempt in the state. While Merkel didn’t make the rounds of evening talk shows, CDU party officials signaled she won’t renounce her stance of fighting for open travel and commerce within the European Union and a deal with Turkey to stanch the flow of refugees from war-torn Syria. Merkel will chair a meeting of her party’s national leadership on Monday to assess the election results and plans to hold a news conference at 1:15 p.m. in Berlin.
  • China's Growth Target Is the Next Test for Its Central Bank. China’s central bank chief oozed calm in an annual press briefing in Beijing Saturday, supported by weeks of composure in markets as investor anxiety over the nation’s currency policy eased. How long the lull lasts will depend on how policy makers manage a balancing act made tougher by a weaker-than-anticipated start to the year for the world’s No. 2 economy. After People’s Bank of China Governor Zhou Xiaochuan spoke at the country’s annual gathering of the legislature, data showed an “alarming” failure of growth to respond to recent stimulus, Bloomberg Intelligence analysts Tom Orlik and Fielding Chen concluded. 
  • China's Output and Retail Sales Slow. (video)
  • Chinese Lenders Repay Loans Borrowed During Stock Rout: Chart. Financial firms in China are repaying bank loans they took during the stock rout last year as the government unwinds its support for the equity market, according to Mark Williams, chief Asia economist at Capital Economics in London. 
  • China Pledges Greater Effort to Crack Down on Financial Crime. China’s judicial authorities vowed to do more to combat financial crimes in the coming year, as the economy slows and leaders remain concerned that financial risks might lead to higher unemployment and social unrest. Chief prosecutor Cao Jianming said in his annual report to the country’s top legislature on Sunday that his department would prioritize investigations into finance, securities and insurance to "guarantee a healthy development of capital market." The Supreme People’s Procuratorate plans to tackle financial crimes involvin illegal fundraising to protect the public and focus on contract fraud crimes to establish a "fair and orderly environment of market competition", he said.
  • Hedge Funds Look to Space With New China Economy Gauge. (pic) "What we have is an independent third look at the facilities in China". San Francisco-based SpaceKnow Inc. has launched the China Satellite Manufacturing Index, or SMI, based on analysis of thousands of photos taken from commercial satellites.
  • Suicide Car Bomb Rocks Turkey's Capital, Killing at Least 34. A suicide car bomb in Turkey’s capital killed at least 34 people and wounded many more, the third time the city has been hit in five months. Two public buses were completely burned out in Sunday’s blast in Ankara, which occurred near a bus station about 200 meters (650 feet) from Prime Minister Ahmet Davutoglu’s office at around 7 p.m. local time. Health Minister Mehmet Muezzinoglu said at least 125 people were injured, with 19 in serious condition. Police immediately cordoned off the area near Ankara’s Guvenpark as authorities investigated. The explosion comes less than a month after a Feb. 17 car bombing near military buildings in the capital killed at least 30 people, most of them soldiers. That attack was claimed by a group called the Kurdistan Freedom Falcons, or TAK, which is linked to Kurdish PKK separatists. A pair of Islamic State suicide bombers in October killed more than 100 people in Ankara.
  • Asian Stocks Rise for Third Day Ahead of Central Bank Meetings. Asian stocks rose after four weeks of gains, tracking a global rally that sent U.S. equities to their highest this year, as Japanese shares led the advance. The MSCI Asia Pacific Index added 0.6 percent to 127.47 as of 9:01 a.m. in Tokyo, extending its gain from this year’s low to 13 percent. The focus now turns to policy decisions this week by the Bank of Japan, the Federal Reserve and others after stocks jumped on Friday as investors reevaluated the European Central Bank’s stimulus. Chinese data over the weekend showed industrial production and retail sales both slowed in the first two months of the year, highlighting the pressure leaders face to meet this year’s growth target. “Central banks are going to be dominating market sentiment,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion, told Bloomberg Radio. “That could be enough for the risk rally to continue, but I think it is starting to run out of steam. The Fed is going to be front and center” this week.
  • Iran on Oil Freeze: ‘Leave Us Alone’ Until Production Higher. Iran plans to boost crude output to 4 million barrels a day before it will consider joining other suppliers in seeking ways to rebalance the global oil market. “They should leave us alone” until then, Oil Minister Bijan Zanganeh said, according to the Iranian Students News Agency. “After that we will work with them.” Saudi Arabia, Russia, Venezuela and Qatar proposed an accord to freeze oil output and tackle a global surplus. Oil extended gains after their initial meeting on Feb. 16, and has climbed more than 40 percent since the 12-year low in January. Oil at $70 a barrel is “suitable,” ISNA cited Zanganeh saying.
  • Morgan Stanley(MS) Says Bonds Set to Surge in 2016 Year of the Bull. Morgan Stanley, one of the Wall Street banks that deals directly with the Federal Reserve, cut its bond yield forecasts for 2016 and said the U.S. central bank will wait until December before raising interest rates. “The global backdrop for rates markets looks so supportive that 2016 may become known as the ‘Year of the Bull,”’ according to a report the company issued Sunday by analysts including Matthew Hornbach, head of global interest-rate strategy in New York. The company’s new and previous forecasts for 10-year yields by Dec. 31 are:
Wall Street Journal:
Fox News:
  • Maryland officer killed in 'unprovoked' shooting outside police headquarters. (video) A police officer was shot and killed Sunday outside a Maryland police station in an "unprovoked attack", authorities said. A second person, not a police officer, also was shot and wounded, police said. Two suspects in the officer's shooting were in custody. Police identified the slain officer as 28-year-old Jacai Colson, a four-year veteran of the Prince George's County Police Department who was days shy of his birthday. "One of your defenders lost his life in defense of this community today," Police Chief Hank Stawinski said Sunday night. The shooting occurred Sunday afternoon outside the Landover police station in Prince George's County, a suburb of Washington, D.C. Law enforcement sources told FOX 5 DC that the attack was "ambush-style."
Zero Hedge:
 Business Insider: Washington Post:
  • The Latest: Al-Qaida-linked group claims Ivory Coast attack. The Latest on the beach attack in Ivory Coast (all times local): A group that monitors jihadist websites says that al-Qaida in the Islamic Maghreb has claimed responsibility for the attack that killed at least 14 civilians and two security forces in Ivory Coast’s Grand-Bassam beach resort town. SITE Intelligence Group said the Islamic extremist group made the declaration in a post to its Telegram channels, calling three of the attackers “heroes” for the assault on the Grand Bassam beach resort.
Night Trading
  • Asian indices are +.50% to +1.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 135.25 -8.25 basis points.
  • Asia Pacific Sovereign CDS Index 66.25 -1.5 basis points.
  • Bloomberg Emerging Markets Currency Index 71.11 +.07%.
  • S&P 500 futures -.04%.
  • NASDAQ 100 futures +.08%.
Morning Preview Links

Earnings of Note
  • (DDD)/.06 
Economic Releases
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Japan Industrial Production report and the OPEC monthly update could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by industrial and real estate shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the week.

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