Thursday, September 22, 2016

Friday Watch

Posted by Gary .....at 10:04 PM
Evening Headlines
Bloomberg:
  • China to Rein in Green Growth for First Time After Record Boom. After installing more wind and solar farms than anywhere else on the planet, China is ratcheting back the pace of growth in an industry that’s helped lower the costs of green energy worldwide. Installations of new wind and solar farms in China is expected to drop 11 percent in 2017 from a record high this year, according to Bloomberg New Energy Finance. That would be the first decline in the history of the modern renewables business, now a little more than a decade old, for a nation that has provided about a third the investment for the industry. After five years of breakneck growth in the supply, China’s electricity demand is stagnating along with a pause in the nation’s economic expansion. President Xi Jinping’s government has started re-calibrating subsidies for the business, a move that’s likely to hit the industry’s leading manufacturers, Xinjiang Goldwind Science & Technology Co. and Trina Solar Ltd.
  • The China Property Companies That Look Like Shadow Banks. (video) Oil Pares Gains as Saudi, Iran Said to Meet Again Before Algiers. Oil pared gains as rival OPEC members Saudi Arabia and Iran met in Vienna for a second day before the wider group gathers in Algiers to discuss action to stabilize the market. Futures dropped as much as 1 percent in New York after rising 2.2 percent Thursday. Officials from the two countries, whose rivalry derailed an oil supply accord earlier this year, are yet to reach an agreement, a person who was briefed on the discussions said. Now is the right time for a deal, according to Falah Al-Amri, Iraq’s governor to OPEC. Prices are unlikely to climb above $50 a barrel unless the group reduces production, he said. 
  • Kuroda’s Steep Yield Curve Quest Undermined as Long Bonds Surge. Japanese bonds rose, sending 30-year yields to a two-week low, as the central bank’s pledge to control yields spurs speculation the authority will keep prices from falling. The 30-year yield slid 5 1/2 basis points to 0.46 percent, as of 10:17 a.m. in Tokyo according to Japan Bond Trading Co. It was as low as 0.45 percent, a level not seen since Sept. 8. The Bank of Japan announced this week it plans to shift monetary policy to controlling yields in the government debt market. Long-term bonds are leading the advance, luring investors with higher yields than those offered by shorter maturities. The spread between two- and 30-year yields narrowed to about 68 basis points, also a two-week low. “I expect yield curves in Japan and the U.S. to flatten further,” said Eiji Dohke, the chief bond strategist at SBI Securities Co. in Tokyo. The BOJ “will be controlling the yield curve.”
  • Analysts Are Trying to Persuade Traders That the Bank of Japan's Plan Will Fail. Yield-curve targeting could further fuel deflation, analysts fear. When you try to say "Don't fight the Fed" in Japanese, something gets lost in translation. In a quest to vanquish deflation, the Bank of Japan has unleashed billions in asset purchases including everything from sovereign debt to exchange-traded funds and moved its policy rate into negative territory. Nothing has worked. Now, the central bank is testing out a new approach: targeting the yield curve, with a promise to keep 10-year yields around zero and avoid excessive flattening, which hurts banks' profitability.
  • Lowe Stamps Asset-Bubble Policy on RBA After 25 Years in Waiting. For a quarter-century, Philip Lowe and a small band of like-minded peers pressed the need to manage credit growth and asset prices, sometimes to incredulous colleagues. Now, as Reserve Bank of Australia’s new governor, his theory has more sway. In his first testimony to a parliamentary committee Thursday, Lowe emphasized the signature issue he’s developed since the early 1990s, which has found a more receptive audience in the wake of the 2008 financial crisis. Sure, the RBA could probably return inflation to target faster with looser policy, Lowe acknowledged, but doing so would risk igniting a new round of borrowing among already debt-laden households. “We have considered that a very quick return of inflation to the 2 to 3 percent range, at the cost of a material deterioration in the health of private-sector balance sheets, was unlikely to be in the public interest,” Lowe said in Sydney. Just three days earlier, hereleased an accord with the government that made an explicit link between monetary policy and financial stability. 
  • U.S. Abandons Syria Truce Efforts and Lays The Blame With Russia. U.S. Secretary of State John Kerry abandoned his bid to salvage a cease-fire aimed at easing Syria’s 5 1/2-year civil war, saying it was pointless to press ahead without a “major gesture” from Russia to end the violence. Kerry spoke to reporters after the U.S., Russia, Iran and other members of the International Syria Support Group met in New York on Thursday to discuss a truce that went into effect Sept. 12 but quickly unraveled. The U.S. says Russia has failed to use its influence over President Bashar al-Assad to stop the violence, or to ground its own jets, which entered the conflict on Assad’s behalf a year ago.
  • Asian Stocks Pare Weekly Gain as Bonds Extend Rally; Oil Falls. A rebound in global equities sputtered in early Asian trading as oil retreated from a two-week high. Bonds extended gains, buoyed by central bank commitments to keep monetary policies loose. The MSCI Asia Pacific Index pared its biggest weekly rally in two months as Japanese shares retreated following a holiday. Equity index futures foreshadowed gains in China, Hong Kong and Taiwan following gains in U.S. stocks. South Korea’s won and the yen fell, trimming this week’s gains versus the dollar. Benchmark bonds rallied in Australia, Japan and New Zealand, while gold was little changed. Oil fell with investors counting down the days until major producers meet to discuss limiting output at talks next week in Algiers. The MSCI Asia Pacific Index was down 0.3 percent as of 9:27 a.m. Tokyo time, trimming its weekly gain to 3.5 percent. Japan’s Topix index fell 0.5 percent, while Australia’s S&P/ASX 200 Index added 0.4 percent.
  • Goldman(GS) Stays on Top for Commodities Amid Diminishing Revenues. Goldman Sachs Group Inc. retained its crown as the bank with the largest commodities revenue in the first half, while lenders saw their worst income from natural resources in at least a decade. The New York-based firm made the most money from raw materials among the top 12 investment banks after coming top in the past two years, according to Coalition Development Ltd., a London-based business analytics company. JPMorgan Chase & Co. came second and Citigroup Inc. dropped to third, Coalition said in a report Friday. Revenue at the 12 banks fell by a quarter to $2.2 billion from a year earlier on weak performances in energy and industrial metals, it said earlier this month. That was the worst first half in at least a decade, Coalition estimated.
Wall Street Journal:
Fox News:
Zero Hedge:
Business Insider:
Telegraph:
Night Trading 
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 115.75 -1.25 basis points. 
  • Asia Pacific Sovereign CDS Index 31.0 unch.
  • Bloomberg Emerging Markets Currency Index 73.06 -.09%. 
  • S&P 500 futures -.07%. 
  • NASDAQ 100 futures -.08%.
Morning Preview Links

Earnings of Note
Company/Estimate 
  • (FINL)/.54
Economic Releases
9:45 am EST
  • The Preliminary Markit US Manufacturing PMI for September is estimated at 52.0 versus 52.0 in August. 
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Fed's Rosengren speaking, Fed's Harker speaking, Fed's Mester speaking, Fed's Lockhart speaking and the (OSK) analyst day could also impact trading today.
BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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