Evening Headlines
Bloomberg:
- Iran Told to Make Deal by Dawn With Talks Set to Miss Deadline. World powers warned Iran that they’re ready
to quit nuclear talks on Wednesday even if there’s no agreement,
according to a participant, as the approach of a deadline led to
brinkmanship on both sides. While negotiators have agreed to continue past midnight,
breaking with the official timetable, the talks won’t be
extended beyond April 1, said a diplomat from one of the six
countries negotiating with Iran, speaking on condition of not
being identified in line with protocol. The European foreign
ministers intend to leave the Swiss city of Lausanne on
Wednesday morning regardless of the outcome, the diplomat said.
- How Could the Bond Market React to a Greek Exit? (video)
- China’s Big Stock Market Rally Is Being Fueled by High-School Dropouts. Everyone is a trader now. There’s a story that Joseph Kennedy sold his stocks on the cusp of
the Great Crash of 1929 after a shoe shine boy shared trading tips with
him. If even the shoe polisher is buying stocks, he reasoned, the market
must be riding for a fall. New data from the China Household Finance Survey, a large-scale
survey of household income and assets headed by Professor Li Gan of
Southwestern University of Finance and Economics, provides fresh
insights into who has been driving the recent rally in China’s markets.
It is not reassuring. Gan’s survey, which was conducted at the end of 2014 and covers some
4,000 households across the country, finds that the biggest new
investors in China’s equity markets have below a high school education
and relatively low levels of asset ownership.
- China Enters Stock Frenzy as Rookie Traders Open Record Accounts. To get a sense of the frenzy in China’s
world-beating equity market, consider this: In a two-week span
last month, the rally lured 2.8 million rookie stock pickers,
almost the equivalent of Chicago’s entire population. The number of new equity accounts surged to a record during
the two weeks ended March 27, five times the average of the past
year, data from China Securities Depository and Clearing Co.
showed on Tuesday. About 4 million were opened in March, enough
for every person in Los Angeles. More than two-thirds of new
investors have never attended or graduated from high school,
according to a survey by China’s Southwestern University of
Finance and Economics. Signs of inexperienced investors’ growing influence on the
$6.5 trillion market have already shown up in the outperformance
of China’s equivalent of penny stocks and a jump in share-price
volatility to the highest level in five years. While fresh
capital may feed market momentum as the government steps up
efforts to support economic growth, foreign money managers have
been selling shares on concern the gains are overdone.
- Asian Stocks Sink With U.S. Futures After Quarterly Gains. Asian stocks slid with U.S. index futures,
and the dollar retreated against most peers. Oil extended losses
as negotiators near an accord that could see extra Iranian crude
adding to a global glut. The MSCI Asia Pacific Index dropped a fifth day, losing 0.2
percent by 10:58 a.m. in Tokyo as Standard & Poor’s 500 Index
futures tumbled 0.8 percent after the U.S. gauge capped its
longest run of quarterly gains since 1998. The Bloomberg Dollar
Spot Index weakened 0.2 percent as the yen and euro climbed 0.4
percent. Oil in New York fell after a third straight quarterly
decline. Gold rose for the first time in four days.
- Slump in S&P 500 Futures Leaves Investors Searching for Triggers. U.S. equity-index futures lurched lower on
elevated volume as investors struggled to pinpoint a trigger for
the selling. E-mini futures on the Standard & Poor’s 500 Index expiring
in June slumped as much as 1.3 percent, before paring losses to
0.8 percent as of 12:03 p.m. in Tokyo. Selling increased after
the contract slid below its average price over the past 100
days, with volume more than three times higher than the five-day
average for this time of the day. Futures on the Dow Jones
Industrial Average lost 0.8 percent.
- The Saudis Are Losing Their Lock on Asian Oil Sales. Ships carrying oil from Mexico docked in
South Korea this year for the first time in more than two
decades as the global fight for market share intensifies. Latin American producers are providing increasing amounts
of heavy crude to bargain-hungry Asian refiners in a challenge
to Saudi Arabia, the world’s largest exporter and the region’s
dominant supplier.
- Iron Ore’s 10-Year Low Not Slowing China Production Push. To understand why iron ore prices have
dropped to a 10-year low, look no further than a $10 billion
mine being developed by China’s state-owned Citic Ltd. on
Australia’s remote northwest coast. The Sino Iron project, the world’s costliest mine, has been
called a “disaster” by critics. It began shipping iron ore in
December 2013, about four years later than planned. Now, even
with prices at their lowest level in 10 years, Citic is adding
four production lines at the project, a plan that could pump
millions of tons of ore into an already saturated market.
Wall Street Journal:
- Iran Nuclear Talks Miss Deadline. U.S. says enough progress made to merit staying until Wednesday. Nuclear talks between Iran and six world powers crashed through
another deadline on Tuesday, casting doubt about whether the two sides
can reach a final deal to prevent Tehran from developing nuclear weapons
in exchange for the lifting of international sanctions. There
were some signs of progress in the early morning hours of Wednesday,
with Russian Foreign Minister Sergei Lavrov saying the sides reached
agreement in principle on a framework outlining elements of a final
nuclear deal...
- Wal-Mart Ratchets Up Pressure on Suppliers to Cut Prices. Retailer urges them to pull back on joint-marketing efforts to bring cost down. Wal-Mart Stores Inc. is increasing the pressure on suppliers to cut the
cost of their products, in an effort to regain the mantle of low-price
leader and turn around its sluggish U.S. sales.
- Hillary Obstructs Congress. She erased emails after the Benghazi probe wanted to see them. If the House panel investigating Benghazi really wants to get a look at
Hillary Clinton’s emails, perhaps it should subpoena the Chinese
military. Beijing—which may have hacked the private server she used to
send official email as Secretary of State—is likely to be more
cooperative than are Mrs. Clinton and her stonewall specialists now
reprising their roles from the 1990s.
Fox News:
- Think tank tallies 64 terror plots targeting American homeland since 9/11. The frightening plot to kill 150 National Guard members that unraveled
last week when FBI agents nabbed two Chicago-area cousins was the 64th
case since 9/11 of Islamist terrorists plotting to strike on American
soil, according to a new report that warns the radicalizing influence of
ISIS must be dealt with in the U.S. and abroad.
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.75 +.25 basis point.
- Asia Pacific Sovereign CDS Index 60.0 -.5 basis point.
- NASDAQ 100 futures -.98%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (AYI)/1.06
- (MON)/2.94
- (PRGS)/.24
- (CUB)/.55
- (SIGM)/.01
Economic Releases
8:15 am EST
- The ADP Employment Change for March is estimated to rise to 225K versus 212K in February.
9:45 am EST
- Final Markit US Manufacturing PMI for March is estimated at 55.3 versus a prior estimate of 55.3.
10:00 am EST
- Construction Spending for February is estimated to fall -.1% versus a -1.1% decline in January.
- ISM Manufacturing for March is estimated to fall to 52.5 versus 52.9 in February.
- ISM Prices Paid for March is estimated to rise to 38.0 versus 35.0 in February.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+4,181,250 barrels versus a +8,170,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -862,500 barrels versus a
-2,014,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -12,500 barrels versus a -34,000 barrel decline the
prior week. Finally, refinery utilization is estimated to rise by +.75%
versus a +.9% gain the prior week.
Afternoon:
- Wards Total Vehicle Sales for March are estimated to rise to 16.9M versus 16.16M in February.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Williams speaking, Eurozone PMI, China Manufacturing PMI, weekly
MBA mortgage applications report and the (WMT) strategic update could
also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.03 +3.58%
- Euro/Yen Carry Return Index 134.54 -.97%
- Emerging Markets Currency Volatility(VXY) 10.55 -.28%
- S&P 500 Implied Correlation 64.67 +1.51%
- ISE Sentiment Index 72.0 -15.29%
- Total Put/Call 1.04 +14.29%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.94 -.08%
- America Energy Sector High-Yield CDS Index 1,049.0 +2.27%
- European Financial Sector CDS Index 66.23 +.53%
- Western Europe Sovereign Debt CDS Index 22.19 +2.75%
- Asia Pacific Sovereign Debt CDS Index 59.99 -.83%
- Emerging Market CDS Index 320.61 +1.41%
- iBoxx Offshore RMB China Corporates High Yield Index 114.35 +.04%
- 2-Year Swap Spread 25.0 +.75 basis point
- TED Spread 25.0 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -25.0 -1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $51.35/Metric Tonne -2.54%
- Citi US Economic Surprise Index -58.6 +2.2 points
- Citi Eurozone Economic Surprise Index 58.40 -6.5 points
- Citi Emerging Markets Economic Surprise Index .3 +1.1 points
- 10-Year TIPS Spread 1.77 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +99 open in Japan
- DAX Futures: Indicating +19 open in Germany
Portfolio:
- Slightly Lower: On losses in my medical/biotech/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Merkel, Hollande Say Time Short for Greek Economic Plan. German Chancellor Angela Merkel and French
President Francois Hollande pressed Greece’s government to come
up with an economic plan that its creditors can approve, saying
time is short. “There’s no time to lose,” Merkel said at a news
conference with Hollande after they met in Berlin on Tuesday.
While talks between Greek officials and the country’s euro-area
lenders in Brussels are “a start,” they “aren’t there yet,”
she said.
- Greece Opposes EU’s Sanctions on Russia, Tsipras Tells Tass. Greece opposes European Union sanctions
imposed against Russia over the conflict in Ukraine, Prime
Minister Alexis Tsipras said, denouncing the approach as
“senseless” and calling for a negotiated solution. Greece has suffered from a Russian food import ban that
President Vladimir Putin imposed in response to the sanctions,
Tsipras said in an interview with state-run Russian news service
Tass published on Tuesday. After his government was sworn in two
months ago, Tsipras said that he told EU leaders that they
couldn’t assume he would support the penalties. “We disagree with sanctions,” Tsipras told Tass. “I see
it as a road to nowhere.”
- Foreign Investors Are Cashing Out of China. International investors are cashing out of
China’s world-beating equity rally. Foreigners sold a net 1.7 billion yuan ($274 million) of
Chinese shares via the Shanghai-Hong Kong exchange link in the
week through Monday, while the two biggest Hong Kong exchange-traded funds tracking mainland stocks had withdrawals of $622
million. Money flowed out of the link again on Tuesday as the
Shanghai Composite Index dropped from a seven-year high.
- Winners are Losers in Last Day of Quarter for European Equities. The industries and markets that led the
rally in European shares this quarter were responsible for their
decline on Tuesday.
The Stoxx Europe 600 Index lost 0.6 percent to 397.3 at the
close of trading in London, trimming its best first-quarter
rally since 1998. Carmakers and chemicals companies fell the
most among 19 industry groups.
- U.S. Oil Storage to Be Maxed Out by This Summer: Schork. (video)
- Appalachia Miners Wiped Out by Coal Glut That They Can’t Reverse. The principal problem is sinking coal
prices. They’ve dropped 33 percent over the past four years to
levels that have made most mining companies across the
Appalachia mountain region unprofitable. To make matters worse, there’s little chance of a quick
rebound in prices. That’s because idling a mine to cut output
and stem losses isn’t an option for many companies. The cost of
doing so -- even on a temporary basis -- has become so
prohibitive that it can put a miner out of business fast,
Blackburn and other industry analysts say. So companies keep pulling coal out of the ground, opting to
take a small, steady loss rather than one big writedown, in the
hope that prices will bounce back. That, of course, is only
adding to the supply glut in the U.S., the world’s second-biggest producer, and driving prices down further. It’s become, in essence, a trap for miners.
- Fed’s Lacker Sees ‘Strong’ Case to Raise Rates at June FOMC. Federal Reserve Bank of Richmond President
Jeffrey Lacker said the main interest rate should be raised in
June amid a stronger job market, consumer-spending growth and
inflation heading back toward the Fed’s target. “A strong case can be made that the federal funds rate
should be higher than it is now,” Lacker, who votes on policy
this year, said Tuesday in the text of remarks at the district
bank in Virginia. “Unless incoming economic reports diverge
substantially from projections, the case for raising rates will
remain strong at the June meeting.”
- San Francisco Boom Pins Office Landlords to Tech Bets. (video) San Francisco real estate developers are planning to add
more than 8 million square feet (743,000 square meters) of
office space in the next four years, the equivalent of 16
Transamerica Pyramids, and are betting on strong demand from
technology tenants to fill it. While companies such as
Salesforce and Uber Technologies Inc. have already reached deals
for some of those towers, the pace of construction may make
landlords vulnerable as they increasingly depend on an industry
known for its booms and busts. San Francisco is one of only three markets in the U.S.
where the coming office supply is forecast to outpace tenant
leasing this year and next, according to Reis Inc., a real
estate research company. The others are Houston and Fort Worth
in Texas, where developers added new offices amid growth in the
energy industry, which is now being hurt by a plunge in oil
prices.
- Apple(AAPL) Pay Running Into Hurdles at Checkout Counter, Survey Finds. Apple Inc.’s new mobile-payment system is
failing to capture all of its potential business, according to a
survey, with two-thirds of users reporting problems using the
service at the checkout counter. While 66 percent of iPhone 6 and 6 Plus owners surveyed had
signed up for Apple Pay, repeat usage is being hurt, the study
by Phoenix Marketing International said. Almost half of users
visited a store listed as an Apple Pay merchant only to find
they couldn’t use the service because the location wasn’t
actually accepting the system or wasn’t ready to do so,
according to the survey, which drew about 3,000 respondents.
- Here Comes a New Wave of Billion-Dollar Hedge Funds. Hedge fund investors aren’t giving up just
yet. At least six new hedge funds are on track to start with at
least $1 billion this year, according to data compiled by
Bloomberg, after eight firms started with a 10-figure sum last
year. The industry hasn’t seen this many mega-startups since
2005, when 13 funds raised a combined $19 billion. Frustrated with the mediocre performance of some of the
industry’s old guard, investors hoping for higher returns are
writing checks to a handful of new funds, including one run by
Brevan Howard Asset Management veteran Chris Rokos and another
headed by ex-Elliott Management Corp. star Didric Cederholm.
MarketWatch.com:
ZeroHedge:
Business Insider:
Contra Corner:
Reuters:
- Corn plunges after disappointing plantings report. U.S. farmers were seen cutting their corn plantings by less than
expected in 2015 even as supplies ballooned to the highest since 1987,
U.S. government data showed on Tuesday. The U.S. Agriculture Department, in its
closely watched prospective plantings report, also predicted that
farmers would devote a record 84.635 million acres of their fields to
soybeans this spring. But the soybean seedings outlook was below market
forecasts. Corn futures fell more than 3 percent after the report.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.76% 2) Computer Hardware -1.44% 3) Biotech -1.41%
Stocks Falling on Unusual Volume:
- ENH, LO, CLDN, SAIC, VRTV, ECHO, HMIN, OVAS, CBMG, BTI, KRFT, AYI, RPTP, ICPT, MSB, ICON, EDN, RDI, RAI, DIOD, TCK, TUP, CELG, CONE, AIR, CTSO, CELG, ICON, SAIC and CLDN
Stocks With Unusual Put Option Activity:
- 1) CONN 2) EMB 3) BRCM 4) CF 5) FXI
Stocks With Most Negative News Mentions:
- 1) HPQ 2) UNP 3) MS 4) X 5) ECHO
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +.86% 2) Retail +.63% 3) Utilities +.19%
Stocks Rising on Unusual Volume:
- MOV, LEVY, CHTR, CBG, ALJ, LBRDK and ESPR
Stocks With Unusual Call Option Activity:
- 1) ESRX 2) RAI 3) GIS 4) CTRX 5) OKE
Stocks With Most Positive News Mentions:
- 1) DHI 2) PCLN 3) BCRX 4) TJX 5) IMGN
Charts:
Evening Headlines
Bloomberg:
- Tsipras Seeks Greek Opposition Backing in Stalled Talks. Greek Prime Minister Alexis Tsipras sought
to rally a consensus in parliament for his effort to secure
bailout funds after his proposals to bolster the nation’s
finances failed to satisfy his European creditors. “I want to
address the political parties of the
opposition: Will you back the national negotiating strategy to
put an end to austerity?” Tsipras asked lawmakers in Athens on
Monday, in an extraordinary debate to discuss the country’s
stalled bailout review. Europe’s most-indebted state is locked in talks
with euro-area countries and the International Monetary Fund over the
terms attached to its 240 billion-euro ($260 billion) rescue.
The standoff, which has left Greece dependent upon European
Central Bank loans, risks leading to a default within weeks and its potential exit from the euro area.
- Debt Could Derail China's Ambitions. China's
Xi Jinping made a lot of grand promises over the weekend, pledging a
new order where China and Chinese-led institutions such as the new Asian
Infrastructure Investment Bank would promote prosperity across the
region. But he was on shaky ground -- literally. The Boao Forum where Xi
spoke took place in Haikou, capital of China's island province of in
Hainan, whose local government, it seems, may not be able to pay its
debt this year.
- China Rongsheng Reports Negative Sales on Order Cancellations. China Rongsheng Heavy Industries Group
Holdings Ltd., once the country’s largest private shipbuilder
and now quickly running out of cash, reported negative revenue
last year as it prepares to sell its shipbuilding business and
buyers cancel orders. Sales fell 3.8 billion yuan ($612 million) into the red
last year, compared with a positive 1.3 billion yuan in revenue
the previous year. Net losses narrowed to 7.75 billion yuan,
down from 8.69 billion yuan in 2013.
- Asian Stocks Set for Best Quarter Since 2012; Oil Slumps. Asian stocks headed for their biggest
quarterly advance since 2012 and the dollar strengthened against
most peers amid speculation that central bank stimulus globally
will continue to support asset prices. Crude oil fell for a
third day.
The MSCI Asia Pacific Index rose 0.5 percent by 11:16 a.m.
in Tokyo.
- Oil Set for Third Quarterly Drop as Deadline in Iran Talks Looms. Oil headed for a third quarterly loss as
Iranian and Western diplomats worked toward a nuclear deal that
may lead to the OPEC member increasing crude exports and
worsening a global supply glut. Futures dropped as much as 1.7 percent in New York, falling
for a third day. Russian Foreign Minister Sergei Lavrov left the
talks in Switzerland and will only return if an agreement is in
sight, signaling negotiations may continue into the final hours
leading to Tuesday’s deadline. U.S. crude stockpiles probably
expanded further from a record last week, a Bloomberg survey
showed before government data Wednesday.
- Cheap Oil Unlikely to Slow Growth of Renewables, Citigroup Says.
- Iron Ore Sinks to 10-Year Low as Rio Rebuts Fortescue’s Cap Call. Iron ore is headed for the biggest quarterly
loss since at least 2009 as surging low-cost supplies from
Australia and Brazil swamp the global market, spurring a glut as
demand from China slows. Ore with 62 percent content at Qingdao, China, sank 26
percent since the start of the year, according to daily data
from Metal Bulletin Ltd. The raw material retreated to $52.69 a
dry metric ton on Monday. That’s the lowest since 2004-2005,
based on data from Metal Bulletin and annual benchmarks compiled
by Clarkson Plc, the world’s largest shipbroker.
- Fed’s Fischer Says Regulators Must Keep Watch on Shadow Banking. Regulators must better monitor and consider
new rules for the growing proportion of lending being done by
non-bank financial firms, the Federal Reserve’s second highest
official said on Monday. “Non-bank firms and activities can pose the same key
vulnerabilities as banks, including high leverage, excessive
maturity transformation, and complexity, all of which can lead
to financial instability,” Fed Vice Chairman Stanley Fischer
said in the text of remarks prepared for delivery at a financial
markets conference in Stone Mountain, Georgia.
Wall Street Journal:
Fox News:
MarketWatch.com:
Zero Hedge:
Business Insider:
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.5 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 60.5 -.75 basis poi5nt.
- NASDAQ 100 futures -.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (CONN)/.64
- (MOV)/.20
- (DCO)/.29
Economic Releases
9:00 am EST
- ISM Milwaukee for March is estimated to rise to 51.5 versus 50.32 in Febuary.
- S&P/CS 20 City MoM SA in January is estimated to rise +.65% versus a +.87% gain in December.
9:45 am EST
- The Chicago Purchasing Manager for March is estimated to rise to 51.8 versus 45.8 in February.
10:00 am EST
- Consumer Confidence for March is estimated at 96.4 versus 96.4 in February.
Upcoming Splits
Other Potential Market Movers
- The
Fed's George speaking, Fed's Lacker speaking, Fed's Mester speaking,
German retail sales report, weekly US retail sales reports, (APD)
investor day and the (MOS) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
