Evening Headlines
Bloomberg:
- Euro Remains Lower Before Region’s PMI Data. The euro remained lower against the
yen before data today forecast to show European services and
manufacturing contracted, adding to evidence that the region’s
debt crisis is sapping growth. “We think at these levels, euro is a sell” because of the
state of the European economy, said Joseph Capurso, a strategist
at Commonwealth Bank of Australia (CBA) in Sydney. “The lessons of
the last decade have shown that the Bank of Japan’s asset
purchases are simply not enough to change the trajectory of the
Japanese economy or the currency.” “The economy is going to get worse before it gets better
in Europe,” Commonwealth Bank’s Capurso said.
- Japan’s Exports Slide a Third Month on Weakness in Global Demand. Japan’s exports fell 5.8 percent
in August from a year earlier, the third straight decline, as a
territorial dispute with China and weak global demand cloud the
outlook for shipments. Imports slid 5.4 percent, leaving a trade deficit of 754.1
billion yen ($9.6 billion), the Finance Ministry said in Tokyo
today. Median forecasts in Bloomberg News surveys of analysts
were for a 7.5 percent export decline and an 829.3 billion yen
trade gap. Tensions over islands in the East China Sea are a risk for
bilateral trade in goods from rice to tractors that has tripled
in the past decade to more than $340 billion. Strength in the
yen will weigh on exports even after the Bank of Japan (8301)’s
surprise decision yesterday to expand monetary easing, with the
currency up about 7 percent against the dollar since mid-March. “We have to price in further developments in territorial
issues, which could damp export numbers,” Junko Nishioka, chief
economist at RBS Securities Japan Ltd. in Tokyo and a former
central bank official, said before the report.
- Sword-Bearing Islamist Signals Peril for Arab Spring Democracies. Days after publishing an article on
Salafi Muslims displacing moderate clerics from hundreds of
Tunisia’s mosques, Walid Mejri found a sword against his neck. Stopped on the street by religious extremists in
Ghardimaou, 180 kilometers (112 miles) north of Tunis, he was
accused of “apostasy and atheism, fighting against Islam and
sowing discord among them,” Mejri, a writer and journalist
recalled in an interview. “One of them lifted a sword to my face, intending to kill
me,” said Mejri, who’d recently written the “Battle of the
Mosques” in the Assarih newspaper, in which he chronicled the
installation by militants of favored clerics. “A soldier
stepped in and saved me.” The incident is part of a simmering battle between
ultraconservative Islamists and moderate new governments in
Tunisia, Libya and Egypt.
- Turkey Rocked by Wave of Attacks as Syria Fallout Emboldens PKK. Turkey’s war with Kurdish militants
has entered its bloodiest phase in more than a decade, with
attacks on soldiers and police almost every day and a breakdown
in ties with neighbors that had helped to contain the threat. On Sept. 18, a convoy of conscripts in the largely Kurdish
southeast was ambushed with rocket launchers, leaving 10 dead.
Two days earlier, eight police were killed when a mine blew up
their minibus, and the day before four soldiers died in a
similar blast. The army has killed 500 members of the Kurdistan
Workers’ Party or PKK since February, Prime Minister Recep Tayyip Erdogan said this week. Turkey’s fraying ties with Syria, Iran and Iraq, neighbors
with their own Kurdish minorities that have collaborated against
the PKK, offers new openings for the group. Erdogan, who had
vowed to end the Kurdish conflict, now risks presiding over an
escalation that could undermine the $800 billion economy and
encourage a backlash by Turkish nationalists.
- China Expresses ‘Regret’ for Attack on U.S. Ambassador’s Car. China expressed “regret” over an
incident in which demonstrators in Beijing caused minor damage
to the official vehicle of U.S. Ambassador Gary Locke on Sept.
18, a State Department spokeswoman said. Locke was unharmed and Chinese police stationed outside of
the embassy cleared the demonstrators from the scene after they
surrounded the vehicle, State Department spokeswoman Victoria
Nuland said at a press briefing in Washington yesterday.
- Bush-Era Tax Cuts May Expire as Step to Budget Deal, Tyson Says. Bush-era tax cuts may be allowed to expire at the end of the year as a prelude to an agreement on the budget, according to Laura Tyson, an economics professor who advises President Barack Obama on the labor market. An expiration “is the major scenario right now,” Tyson, a professor at the University of California-Berkeley
and a member of Obama’s jobs advisory board, said in an interview today
with Bloomberg News editors and reporters in Washington. Tyson
played down the impact of such a step on the economy, saying the tax
cuts could be reinstated later and made retroactive to the start of
2013. The expiration though might help “force” through a deal on the
budget, she said.
- Fed Stimulus Fading as Forecasters Say Best Is Over: Commodities. The biggest advances in commodities
this year may be over because of mounting concern that policy
makers aren’t doing enough to bolster economic growth at a time
when producers are expanding supply. Commodity assets under management reached $406 billion at
the end of July, from $399 billion at the start of the year,
based on Barclays’ estimates of money tied to exchange-traded
products, medium-term notes and indexes. Assets reached a record
$451 billion in April 2011. Open interest, or contracts
outstanding, across the members of the S&P GSCI rose 16 percent
this year, data compiled by Bloomberg show. Morgan Stanley is forecasting supply surpluses in aluminum,
nickel, zinc and thermal coal in 2013 and Barclays expects a
glut in lead for at least a third consecutive year. The rally in
aluminum and zinc makes production cuts in China less likely,
prolonging excessive production, Macquarie Group Ltd. said in a
report Sept. 17.
- Adobe(ADBE) Forecast Misses Amid Move to Subscriptions. Adobe Systems Inc. forecast fiscal
fourth-quarter sales and profit that missed analysts’ estimates
as the company offered a lower-priced subscription version of
its flagship Creative Suite software.
Wall Street Journal:
- Fed's Fisher: Fed Blundered in Opting for New Bond Buying. A veteran central banker attacked Wednesday the Federal Reserve's
decision to provide new monetary policy stimulus, while blasting
Congress for its own set of failures. In a speech in New York, Federal Reserve Bank of Dallas President
Richard Fisher argued, as he has in a series of media interviews over
recent days, that the Fed's decision to launch opened-ended mortgage
bond buying, in a bid to speed up growth, was a mistake. Mr. Fisher doesn't have a voting role on the monetary policy setting
Federal Open Market Committee. He has for some time been a very vocal
and persistent opponent of giving the economy additional stimulus,
believing the Fed has already done enough. "Why would the Fed provision to shovel billions in additional
liquidity into the economy's boiler when so much is presently lying
fallow?" Fisher asked in a speech delivered before an audience at the
Harvard Club. "I did not argue in favor of additional monetary accommodation during
our meetings last week," the official said, adding "I have repeatedly
made it clear" the Fed is venturing into unknown territory with its bond
buying and other stimulus efforts.
- Bank of America(BAC) Ramps Up Job Cuts.
- Incomes Fell or Stagnated in Most States Last Year.
- Derivatives Rule Changes in Europe to Roil Bourses. Stock exchanges are facing a shake-up in Europe over the next few
years, as continental lawmakers establish new rules to boost competition
in the profitable derivatives-trading sector. Currently,
European derivatives trading is led by Deutsche Börse AG and NYSE
Euronext. The sector contributes more than 36% of Deutsche Börse's
revenue and about 25% of NYSE Euronext's, but their dominance could be
threatened by proposed European Union legislation.
- Bed Bath & Beyond(BBBY) Net Falls 2.2% in Takeover-Jumbled Quarter. Bed Bath & Beyond Inc.'s (BBBY) fiscal second-quarter income fell
2.2% in results muddled by its first acquisitions in nearly half a
decade, which hoisted sales but sank the bottom line.
Shares dropped 4.4% to $65.80 after hours as the company posted its
first decline in quarterly profit in more than three years.
- Regulators Try to Beat Clock in LIBOR Probe.
- High-Speed Trading in the Spotlight. Former Trader to Testify on Hill About Techniques He Says Put Ordinary Investors at a Disadvantage.
- Debt Investors Aren't Just Waiting For the Next Downgrades in Europe.
- Cartoons Prompt French Closures. France said it would close its embassies as well as French schools in 20
countries on Friday, amid fears of backlash after a magazine published a
series of caricatures of the Prophet Muhammad.
- Welfare Reform as We Knew It. Inside the Obama work waiver: It's worse than Romney says.
Fox News:
- Al Qaeda, ex-Gitmo detainee involved in consulate attack, intelligence sources say. Intelligence sources tell Fox News they are convinced the deadly
attack on the U.S. Consulate in Benghazi, Libya, was directly tied to Al
Qaeda -- with a former Guantanamo detainee involved. That
revelation comes on the same day a top Obama administration official
called last week's deadly assault a "terrorist attack" -- the first time
the attack has been described that way by the administration after
claims it had been a "spontaneous" act. "Yes, they were killed
in the course of a terrorist attack on our embassy," Matt Olsen,
director of the National Counterterrorism Center, said during a Senate
hearing Wednesday. Olsen echoed administration colleagues in
saying U.S. officials have no specific intelligence about "significant
advanced planning or coordination" for the attack. However, his
statement goes beyond White House Press Secretary Jay Carney and Susan
Rice, the U.S. ambassador to the United Nations, saying the Sept. 11
attack on the consulate was spontaneous. He is the first top
administration official to call the strike an act of terrorism.
Barron's:
- Railroads Decline on Norfolk Southern(NSC) Warning. Railroad stocks fell after hours following an announcement by Norfolk Southern (NSC)
that it is lowering its earnings outlook because of weak coal and
merchandise shipments and lower revenue from fuel surcharges. NSC reduced its expectations for Q3 EPS to $1.18-$1.25, well below analysts’ expectations for $1.64. “Decreased coal and merchandise shipments, offset in part by growth
in intermodal volumes, are together expected to reduce revenues by
approximately $120 million compared with third quarter 2011.” Earlier on Wednesday, UBS analyst Kevin Crissey cut his ratings on railroad companies on continuing weak macro factors, particularly in coal. “Rails have some good commodity trends but were hit by a massive drop
in coal volumes as natural gas prices plunged and now face a weak
harvest and soft met coal trends.” He cut Union Pacific (UNP), CSX (CSX) and NSC to Neutral and Kansas City Southern (KSU) to Sell. NSC was off 5.4% in after-hours trading.
MarketWatch:
- Bernanke, lawmakers talk fiscal cliff scenarios. Federal Reserve Board Chairman Ben Bernanke warned members of the Senate
Finance Committee that the so-called fiscal cliff could damage the U.S.
economy, Senators who attended the closed-door meeting said Wednesday.
Higher taxes and deep cuts in federal spending are slated to take effect
Jan. 1 unless Democrats and Republicans agree to change the current
law. Bernanke said the fiscal cliff "would be a severe, negative shock
to the economy," said Sen. Chuck Grassley, a Republican from Iowa, in a
statement.
CNBC:
Zero Hedge:
Business Insider:
IBD:
Washington Post:
- HUD paid over $1B in false claims. The U.S. government may have paid hundreds of millions of dollars in
mortgage aid to struggling homeowners who did not qualify for that help,
a new report found.
The Blaze:
Rasmussen Reports:
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Wednesday
shows Mitt Romney attracting support from 47% of voters nationwide,
while President Obama earns 46% of the vote. Three percent (3%) prefer
some other candidate, and four percent (4%) are undecided.
Reuters:
- Japan manuf sentiment cools as China slows -Reuters Tankan. Japanese manufacturers' sentiment
hit its lowest since February and is expected to stay negative
in the coming months, a Reuters poll showed, with the global
slowdown and friction with China clouding the outlook for the
export-reliant economy.
- Nike(NKE) approves $8 bln share repurchase program.
- Google(GOOG) seen taking Facebook's(FB) crown in U.S. display ads. Google Inc is
set to become the biggest earner in U.S. display ads this year,
taking the No. 1 rank away from Facebook Inc and
cementing its dominant presence in online advertising.
- New picture emerging of 'terrorist attack' in Benghazi. The U.S. Consulate in
Benghazi apparently was not troubled at first by a smattering of
protesters on the anniversary of the Sept. 11 attacks last week,
but that changed abruptly at 9:35 p.m. when it sent a message
that the building was under heavy assault, U.S. government
sources said. New information emerging a week after attackers launched
rocket-propelled grenades and mortars and killed four Americans,
including U.S. Ambassador to Libya Christopher Stevens, suggests
that the protests at the outset were so small and unthreatening
as to attract little notice. While many questions remain, the latest accounts differ from
the initial information provided by the Obama administration,
which had suggested that protests in front of the consulate over
an anti-Islamic film had played a major role in precipitating
the subsequent violent attack. A senior U.S. counterterrorism official on Wednesday branded
the assault in which the four Americans died a "terrorist
attack."
- Ads criticizing "Jihad" bound for New York City subway stations. As Muslim countries
reverberate with fierce protests over a film mocking the Prophet
Mohammad, an ad equating Islamic jihad with savagery is due to
appear next week in 10 New York City subway stations despite
transit officials' efforts to block it. The city's Metropolitan Transportation Authority had refused
the ads, citing a policy against demeaning language. The
American Freedom Defense Initiative, which is behind the ad
campaign, then sued and won a favorable ruling from a U.S. judge
in Manhattan. According to court documents, the ad reads: "In any war
between the civilized man and the savage, support the civilized
man. Support Israel/Defeat Jihad."
Telegraph:
China Daily:
- China
Should Be Prepared for Conflict, Naval Researcher Writes. China should
make all possible preparations in regard to its territorial dispute with
Japan over islands in the East China Sea, including for military
conflict and "even war," Wang Xiaoxuan, director of the Naval Research
Institute of the People's Liberation Army, writes in the China Daily.
The Japanese government's stance on the islands has come amid "renewed
militarism" in Japan, Wang said. China is a "peace-loving" nation and
the Chinese people are opposed to the use of war to resolve disputes,
Wang wrote. However, that doesn't mean they lack "the courage to stand
up for ourselves," Wang said. Japan should not mistake China's "patience
and tolerance" as an opportunity to press for more "concessions," Wang
wrote. The U.S. is "large responsible" for the island dispute as it has
favored Japan and allowed Japanese officials to claim the security
treaty between the nations is applicable to the islands, Wang said.
China will not back down "an inch" on issues related to its sovereignty,
Wang wrote.
- U.S. Failed in Role to Reform Japan. The
U.S. failed in its role to reform Japan into a "normal" country, citing
Zhong Sheng. The U.S. needs to be "wise" on issues concerning China's
core interests in order to establish a new kind of relationship with
China, the commentary said.
China Securities Journal:
- Dual-Listed
China Companies Have Internal Control Flaw. 49, or 73.1% of, Chinese
dual-listed cos. have internal control problems, citing a report from
the Ministry of Finance and China Securities Regulatory Commission.
Evening Recommendations
Night Trading
- Asian equity indices are -1.50% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 131.0 new series.
- Asia Pacific Sovereign CDS Index 112.5 new series.
- FTSE-100 futures -.55%.
- S&P 500 futures -.28%.
- NASDAQ 100 futures -.17%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (IHS)/1.00
- (CAG)/.35
- (KMX)/.51
- (JEF)/.26
- (ORCL)/.53
- (TIBX)/.27
- (CTAS)/.58
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 375K versus 382K the prior week.
- Continuing Claims are estimated to rise to 3300K versus 3283K prior.
8:58 am EST
- Preliminary Markit US PMI for September is estimated at 51.5.
10:00 am EST
- Philly Fed for September is estimated to rise to -4.5 versus -7.1 in August.
- Leading Indicators for August are estimated to fall -.1% versus a +.4% gain in July.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bullard speaking, Fed's Pianalto speaking, Fed's Kocherlakota
speaking, Fed's Lockhart speaking, Fed's Rosengren speaking, Eurozone
PMI data, Eurozone Consumer Confidence, Spain's 10Y bond auction, ECB's
Draghi speaking, Rajoy/Monti meeting, weekly Bloomberg Consumer Comfort
Index, Bloomberg Economic Expectations Index for September, CSFB
Smid-Cap Conference and the (MA) investment community meeting could also
impact trading today.
BOTTOM LINE: Asian
indices are lower, weighed down by technology and financial 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.
