Thursday, February 01, 2018

Friday Watch

Evening Headlines
Bloomberg:
  • China Default Angst Flares After Rare Case With Junk Bond. A rare event in a corner of China’s credit market is fueling concern that more defaults are looming, adding to strains sparked by the government’s crackdown on leverage. A timber company in the country’s northeast decided this week not to pay off perpetual bonds despite having an option to do so. That was a first for a junk-rated issuer of such securities in China. Firms that raise money with perpetuals never have to pay off the principal, in theory. But in practice, the bonds usually have coupon rates that increase at set dates along with options letting issuers repay the securities to avoid the escalating interest charges.
  • Japan Authorities Raid Coincheck Office After $500 Million Heist. Japan’s Financial Services Agency raided Coincheck Inc.’s offices a week after the cryptocurrency exchange lost about $500 million to hackers, hauling out documents and computers as evidence. The inspection was conducted to ensure security for users, Finance Minister Taro Aso said. The theft, which follows the disappearance of about $470 million worth of Bitcoins from the Mt. Gox exchange in 2014, sent shockwaves through the global virtual currency community.
  • Asia Stocks to Slide as Tech Stumbles, Bonds Drop. Australian shares slipped and futures in Korea and Japan pointed to a lower open. In the U.S., the Nasdaq 100 Index bore the brunt of the selling during the main session. Bellwethers Apple Inc. and Alphabet Inc. reported earnings that disappointed although Apple reversed initial losses to trade higher. Other major averages notched modest retreats in an up-and-down session that actually saw the CBOE Volatility Index decline. The U.S. 10-year yield spiked to the highest level since April 2014. Futures on South Korea’s Kospi fell 0.3 percent. Australia’s S&P/ASX 200 Index slid 0.2 percent.
  • Nasdaq 100 Stocks Snap Back. The main exchange-traded fund tracking the Nasdaq 100 Index was up 0.6 percent as of 6:43 p.m. in New York after Apple Inc. indicated demand for its iPhone X is brisk and Amazon.com Inc. reported its strongest holiday sales growth in eight years. The security trading under QQQ was poised to trim its weekly decline to 1.1 percent, from 1.7 percent when exchanges closed.
  • Bond-Market Pain Reaches 30-Year Treasuries as Yield Breaches 3%. The benchmark 10-year U.S. yield hurtled toward 2.8 percent, setting fresh highs since 2014, and the 30-year yield broke through 3 percent for the first time in eight months. Treasuries found little support throughout the trading session -- no more month-end buyers like pensions and index funds to step in, and little sign of demand from Asian buyers. Most traders were content to let the bear-market narrative run its course after the worst January for the world’s biggest bond market since 2009.
  • Loeb, Laffont Hedge Funds Start Year With Big January Gains. Loeb’s Third Point Ultra fund returned 5.5 percent in January and his Third Point Offshore fund rose 3.7 percent, according to a person familiar with matter. Laffont’s Coatue Qualified Partners surged 9.9 percent last month, according to an investor document seen by Bloomberg News.
Wall Street Journal:
CNBC: 
Business Insider: 
  • 2 economists just eviscerated bitcoin, saying it should be trading at $20. Here's their logic: The supply of bitcoin increases only slowly towards its famous fixed limit and is now around 15m. The use of bitcoin as a means of payment is currently around $100m per month, or $1,200m a year. Were bitcoin just like ordinary money each bitcoin would be used around four times a year in making transactions. So we have 60m bitcoin payments supporting $1,200m worth of bitcoin transactions, which requires that each bitcoin is worth $20. There's always a "but" with such analysis. And the "but" in this case is that bitcoin could be worth its current value, but it would have to see a 1000-fold increase in its use as a form of payment. 
Night Trading 
  • Asian equity indices are -.75% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 64.50 +.25 basis point
  • Asia Pacific Sovereign CDS Index 11.5 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 76.47 -.07%.
  • S&P 500 futures -.25%.
  • NASDAQ 100 futures +.40%.
Morning Preview Links

Earnings of Note
Company/Estimate

  • (AZN)/.83
  • (CHTR)/.99
  • (CVX)/1.24
  • (CLX)/1.23
  • (EL)/1.44
  • (XOM)/1.03
  • (LYB)/2.55
  • (MAN)/2.06
  • (MRK)/.94
  • (MINI)/.36
  • (PSX)/.90
  • (SNE)/104.31
  • (S)/-.05
  • (WFT)/-.21
  • (WY)/.35
  • (HTLD)/.11
Economic Releases
8:30 am EST
  • The Change in Non-Farm Payrolls for January is estimated to rise to 180K versus 148K in December.
  • The Unemployment rate for January is estimated at 4.1% versus 4.1% in December.
  • Average Hourly Earnings MoM for January is estimated to rise +.2% versus a +.3% gain in December.
10:00 am EST
  • Final Univ. of Mich. Consumer Sentiment for January is estimated to rise to 95.0 versus a prior estimate of 94.4. 
  • Factory Orders for December are estimated to rise +1.5% versus a +1.3% gain in November.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone PPI report could also impact trading today.
BOTTOM LINE:  Asian indices are mostly lower, weighed down by consumer and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

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