Thusday Watch

Evening Headlines
Bloomberg:

• Divided Europe Searches for United Response to Terror. (video) Two days after Islamic State’s attacks on Brussels, European Union ministers will try to overcome their divisions and convince citizens that they can stop the wave of terrorism that’s hitting the region’s capitals. As Belgian police continue their hunt for the surviving perpetrators, interior ministers will meet in Brussels on Thursday afternoon to assess counter-terrorism and airport security after explosions at the airport and a subway station left 31 dead and 270 injured. Investigators, who have identified two of the suicide bombers as brothers Khalid and Ibrahim El Bakraoui, said they had found explosive materials in a hideout in northern Brussels -- including 15 kilograms (33 pounds) of TATP, 150 liters of acetone, 30 liters of hydrogen peroxide, detonators, a bag of nails and plastic trays, prosecutors said. They also found a will in a nearby rubbish bin, written by Ibrahim on a computer; he described himself as “frantic, not knowing what to do, being hunted everywhere,” federal prosecutor Frederic Van Leeuw told reporters.
• China's H-Share Rebound to Unravel Amid Yuan Risk, Aberdeen Says. The rally that’s driven Chinese stocks in Hong Kong to the cusp of a bull market will falter as concerns over yuan volatility and rising debt resurface, says Aberdeen Asset Management Plc. The Hang Seng China Enterprises Index is up 18 percent since slumping to an almost seven-year low in February, outpacing the 10 percent rebound by MSCI Inc.’s global gauge. Shares in the city advanced as the yuan stabilized, central banks around the world took steps to boost stimulus and commodity prices rebounded. Aberdeen Asset’s Nicholas Yeo isn’t convinced the calm will last. The H-share gauge is experiencing a “bear market rally or a dead cat bounce," not a bull market, said Yeo, head of China and Hong Kong equities and a director at the fund manager, which oversees about $430 billion. “Some of the flows in equities are not really due to equities but due to taking a view on the currency."
• Decade of Growth Poised to End for China Banks Stung by Bad Debt. More than a decade of profit gains at China’s largest banks probably came to an end last year, and the pain may deepen in 2016 as a surge in bad loans threatens their ability to maintain dividends. Combined net income at Industrial & Commercial Bank of China Ltd. and its four closest rivals probably slipped 0.3 percent last year, according to analysts surveyed by Bloomberg ahead of earnings reports due next week. The group boosted profits by an average 25 percent between 2004 and 2014. The weakest economic growth in a quarter century has driven soured credit at Chinese banks to a decade high, prompting the government to consider measures to resolve bad loans such as the debt-to-equity swaps that were used to clean up balance sheets following a banking crisis in 1999. The prospect of further bad-loan provisions drove big banks’ valuations to the lowest on record last month as investors speculated dividends might get cut. “Most investors are obviously bearish and should banks beat expectations on the bottom line, I don’t think that’s going to change their minds,” said Matthew Smith, a Shanghai-based analyst at Macquarie Group Ltd. “There are deeper issues there -- asset-quality related. The trend has been incrementally weaker.”
• No Early Signs of a Rebound in China. (video)
• China Stocks Drop Most in Two Weeks on Weak Profits, Small Caps. China’s stocks fell the most in two weeks as some of the nation’s largest firms including Anhui Conch Cement Co. and PetroChina Co. reported slumping profits and smaller companies retreated after a benchmark gauge entered a bull market. The Shanghai Composite Index dropped 1.6 percent. The ChiNext index of small-cap companies fell 1.5 percent after rising 20 percent from a February low on Wednesday.
• Asia Stocks Fall as Oil Drops, Investors Weigh Higher U.S. Rates. Asian stocks dropped for a second day as oil tumbled below $40 a barrel and investors weighed the direction of U.S. monetary policy. The MSCI Asia Pacific Index fell 0.5 percent to 128.10 as of 9:08 a.m. in Tokyo, heading for the lowest close in a week.
• Goldman(GS) to Fed: Stop Worrying So Much About the Stronger Dollar. It’s time for the Federal Reserve to end its dollar fixation. That’s the takeaway from a Goldman Sachs Group Inc. report Wednesday that suggests the U.S. currency poses little threat to the Fed’s inflation goals, challenging policy makers’ comments to the contrary. That’s good news for dollar bulls who are betting on expanded monetary-policy divergence between the U.S., Europe and Japan. Inflation is at the heart of the Fed’s debate about the timing of interest-rate increases as officials look to normalize monetary policy after seven years of near-zero interest rates. With a stronger dollar not translating into significantly cheaper import prices, Goldman Sachs suggests the central bank faces fewer headwinds to hiking rates than markets are currently pricing in.

Wall Street Journal:

• Brussels Suicide Bomber Slipped Terror Net. Revelation points to latest in string of miscues that have plagued Belgium’s counterterrorism efforts. One of the Brussels suicide bombers was detained last summer on suspicion of being an Islamic State fighter, but Turkish authorities sent him on the path toward freedom after their Belgian counterparts couldn’t establish that he had any link to terror groups. The revelation Wednesday from Turkish President Recep Tayyip Erdogan was the latest in a string of miscues that has plagued Europe’s efforts to crack a terror network that has... 
• Brussels Attacks Linked to Paris Cell. Two suicide bombers identified as brothers; manhunt in Belgium continues for other suspects. Authorities identified two suicide bombers who hit the airport and subway here as brothers with criminal pasts, and began to trace a clear line between their plot and the terrorists behind the November killings in Paris.
• U.S. Oil Takes Biggest Losses in a Month as Stockpiles Keep Growing. Market losses being limited by continued talk about a production freeze. Oil prices took some of their biggest losses of the last month on Wednesday as data showed U.S. stockpiles keep rising and production is holding strong, which thwarted recent bets that those trends may be winding down.

Fox News:

• ISIS has sent 400 fighters to attack Europe, officials say. The Islamic State group has trained at least 400 fighters to target Europe in deadly waves of attacks, deploying interlocking terror cells like the ones that struck Brussels and Paris with orders to choose the time, place and method for maximum carnage, officials have told The Associated Press. The network of agile and semiautonomous cells shows the reach of the extremist group in Europe even as it loses ground in Syria and Iraq. The officials, including European and Iraqi intelligence officials and a French lawmaker who follows the jihadi networks, described camps in Syria, Iraq and possibly the former Soviet bloc where attackers are trained to attack the West. Before being killed in a police raid, the ringleader of the Nov. 13 Paris attacks claimed he had entered Europe in a multinational group of 90 fighters, who scattered "more or less everywhere."
• Fox News Poll: Cruz, Kasich ahead of Clinton in 2016 hypothetical matchups. Republicans are eager to win back the White House in 2016.  A new Fox News national poll finds both John Kasich and Ted Cruz ahead of Democratic front-runner Hillary Clinton in hypothetical matchups, while Donald Trump trails her. Cruz is preferred over Clinton by three percentage points (47-44 percent). Clinton tops GOP front-runner Donald Trump by 11 points (49-38 percent).

MarketWatch:

• Here’s why companies may have to cut dividends soon.

CNBC:

• Rockefeller fund dumping fossil fuels, hits Exxon on climate issues. The Rockefeller Family Fund said on Wednesday it will divest from fossil fuels as quickly as possible and "eliminate holdings" of Exxon Mobil, chiding the oil giant for allegedly misleading the public about climate change risks. The U.S.-based charity will also divest its coal and Canadian oil sands holdings. The move is especially notable because a century ago John D. Rockefeller Sr. made a fortune running Standard Oil, a precursor to Exxon Mobil.

Zero Hedge:

• ISIS Sends 400 Specially Trained Fighters To Unleash "Wave Of Bloodshed" In Europe.
• When "Mother's Milk" Runs Dry. (graph)
• Bob Pisani Says "The Fed Is Alarmed By Market Complacency" - Why This Is A Big Problem For Yellen.
• Stocks Stand On "Tremulous Grounds". (graph)
• Record Loss For Petrobras As Political And Economic Crisis Worsen.
• Bonds Best-Bid But Bullion Blasted As Belgium-Bombing-Bounce Is Battered. (graph)

Business Insider: 

• The definitive ranking of Wall Street investment banks in every business line.
• Ted Cruz is trying to flip the script in Donald Trump's home state.
• Defense official: Prisoners released from Guantanamo Bay have killed Americans.
• Reports: 2nd suspected suicide bomber at Brussels airport was ISIS bomb maker.
• KB Home(KBH) shares spike after earnings beat.
• Wall Street deal makers are back in the darkest days of the crisis. (graph)
• A poll asked voters to describe a Trump administration with a word — 'scared' topped the list. For GOP frontrunner Donald Trump, the term most associated with his potential presidency was "scared" by a landslide, the Quinnipiac University survey found. A full 117 people used that word. The next most frequent words used were "disaster" (46), "frightened" (45), "terrified" (45) , and "horrified" (42). The first listed positive word associated with a Trump presidency was "good," used by 36 respondents. For Democratic frontrunner Hillary Clinton, the results were better — but not by much. The most frequently used word to describe the thought of a Clinton presidency was "disaster," which was said by 68 people.
• A short-seller you've never heard of has been quietly killing it.

Reuters:

• Corporate China grubbing for cash as liquidity tightens. Chinese companies, with ever more cash tied up in stocks and unpaid bills, are facing their tightest liquidity crunch in a decade, according to a Reuters analysis, forcing some into more costly and less secure borrowing to stay afloat. The analysis of Chinese listed companies that have reported 2015 earnings shows it takes them almost 170 days to turn working capital - broadly the net amount tied up in stocks and bills payable and receivable - into cash. For the 141 of the companies that have been around for at least a decade, the figure is 130 days, compared with roughly one month 10 years ago, and both the amount clients owe them and the amount they owe suppliers are at the highest level since at least 2006. The figures demonstrate the growing strains on Chinese companies as banks, chastened by a doubling in bad loans last year, become increasingly reluctant to lend into China's slowing economy.
• Energy Transfer(ETE) paints grim picture of Williams(WMB) deal. Energy Transfer Equity slashed expectations for its more than $14 billion takeover of rival pipeline company Williams Cos Inc on Wednesday, saying cost savings could be all but wiped out by low oil prices and higher capital costs.
• EMERGING MARKETS-Brazil currency leads Latam losses on political woes.

Telegraph:

• Europe is now drowning under the cost of welfare bills. When she isn’t shipping in more Syrian refugees, or trying to find new ways to destroy the Greek economy, the German Chancellor Angela Merkel is fond of quoting an alarming statistic: Europe accounts for just 7pc of the world’s population, and 25pc of its GDP, and yet it also accounts for a massive 50pc of its welfare spending.

Night Trading 

• Asian equity indices are -1.0% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 151.25 +1.75 basis points. 
• Asia Pacific Sovereign CDS Index 57.75 +.25 basis point. 
• Bloomberg Emerging Markets Currency Index 71.25 -.12%. 
• S&P 500 futures unch. 
• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ACN)/1.18
• (CMC)/.13
• (FINL)/.80
• (SCHL)/-.32
• (SIG)/1.93
• (WGO)/.34
• (GME)/2.26 

Economic Releases  
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 268K versus 265K the prior week.
• Continuing Claims are estimated at 2235K versus 2235K prior.
• Preliminary Durable Goods Orders for February are estimated to fall -3.0% versus a +4.7% gain in January.
• Preliminary Durables Ex Transports for February are estimated to fall -.3% versus a +1.7% gain in January.
• Preliminary Cap Goods Orders Non-Defense Ex Air for February are estimated to fall -.5% versus a +3.4% gain in January.     

9:45 am EST

• Preliminary Markit US Services PMI for March is estimated to rise to 51.4 versus 49.7 in February. 

11:00 am EST

• Kansas City Fed Manufacturing Activity for March.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, Eurozone Manufacturing PMI report, Japan CPI report, UK retail sales report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and (DG) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.