Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 88.0 -22.1%
- Total Put/Call .95 +5.56%
Credit Investor Angst:
- North American Investment Grade CDS Index 82.95 +3.22%
- European Financial Sector CDS Index 162.13 +6.45%
- Western Europe Sovereign Debt CDS Index 101.0 +.39%
- Emerging Market CDS Index 246.07 +1.7%
- 2-Year Swap Spread 18.0 +3.0 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -21.25 -2.25 bps
Economic Gauges:
- 3-Month T-Bill Yield .06% -1 bp
- China Import Iron Ore Spot $134.40/Metric Tonne -.15%
- Citi US Economic Surprise Index 26.90 +5.9 points
- 10-Year TIPS Spread 2.52 -2 bps
Overseas Futures:
- Nikkei Futures: Indicating -33 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- Cyprus Rejects Deposit Levy in Blow to European Bailout Plan. Cyprus’s parliament rejected an
unprecedented levy on bank deposits, dealing a blow to European plans to force savers to shoulder part of the country’s bailout
in a standoff that risks renewed tumult in the euro area. Cypriot legislators in the capital Nicosia voted 36 against
the proposal with none in favor in a show of hands today. There
were 19 abstentions. Hammered out by euro-area finance chiefs at
the weekend, the deal had sought to raise 5.8 billion euros
($7.5 billion) by drawing funds from Cyprus bank accounts in
return for 10 billion euros in international aid. “There is no
precedent for what would happen if Cyprus
rejected the conditions,” Holger Schmieding, chief economist at
Berenberg Bank in London, wrote in a note before the vote. “Our best
guess is that Europe would give Cyprus a brief and final chance to
rethink and vote again.”
- European Car-Sales Drop Accelerates on Decline in Germany. Europe’s car-sales contraction
accelerated in February as a steepening decline in Germany, the
region’s biggest market, hurt previously resilient Volkswagen AG (VOW), Bayerische Motoren Werke AG and Daimler AG. Registrations dropped 10 percent to 829,359 vehicles last month from 923,553 a year earlier, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today in a
statement. Two-month sales fell 9.3 percent to 1.75 million
cars. The decline in January amounted to 8.5 percent.
- Cyprus Deposit Raid Stokes Senior Bond Concerns. Europe’s unprecedented tax on
Cyprus bank deposits is raising concern among holders of senior
bank bonds that they’ll be made to take losses should another
country need rescuing. The Markit iTraxx Financial Index of credit-default swaps
insuring senior debt of 25 banks and insurers rose as much as 19
basis points to 162 basis points yesterday, according to prices
compiled by Bloomberg. That’s the biggest jump since Aug. 2,
before the European Central Bank steadied markets by announcing
its bond-buying program, and the gauge is now at the highest in
almost three weeks.
- Irish Foreclosure Wave Risks Housing Recovery: Mortgages. Irish bankers preparing for the biggest wave of foreclosures
in the nation’s history are struggling with how to dispose of the homes
as the central bank pressures them to go after owners of investment
properties. Ireland, which had the biggest real estate crash in
Europe with a 50 percent plunge in residential prices since 2007, is
only now contemplating significant repossessions. The focus is on the
so-called buy-to-let market, or properties bought to rent, which jumped
during Ireland’s decade-long real estate boom, and now account for more
than a fifth of the 142 billion- euro ($184 billion) mortgage market.
- Euro at Almost Three-Month Low as Cyprus Delays Vote. “The
uncertainty regarding the vote is helping the market
try to challenge a very key support at $1.2872, $1.2874 and
$1.2876, which are absolutely key levels for euro-dollar,” said
Sebastien Galy, a foreign-exchange strategist in New York at Societe
Generale SA, said in a telephone interview. The euro’s
drop reflects “deeper uncertainty regarding the outcome of the
vote, the timing of the vote for that matter, and the general
willingness to buy the dollar as a hedge.” The euro fell 0.5 percent to $1.2899 as of 11:51 a.m. in
New York, touching the weakest since Nov. 23.
- European Stocks Fall on Concern Cyprus to Reject Bank Tax. National
Bank of Greece SA led a gauge of lenders to the lowest close this year.
Rio Tinto Group (RIO) sank the most since 2011 as Goldman Sachs Group
Inc. downgraded the shares. ThyssenKrupp AG fell the most in a year
after a report the German steelmaker
is considering raising capital. Cie. Financiere Richemont SA
slid the most in almost two months as an investor sold a stake
in the luxury-goods company.
- Japan Vows Foreign-Policy Response to Territorial Incursions. Japanese
Prime Minister Shinzo Abe signaled he will implement a more robust
foreign policy in the midst of disputes with Russia and China that
underscore his push
to boost defense spending. Japan yesterday said two Russian fighter jets intruded on
its airspace, which Russia’s Defense Ministry denied. The
alleged incursion followed accusations that Chinese ships used
weapons-targeting radar on a Japanese destroyer and helicopter
last month near islands claimed by both countries. China today
issued a denial and accused Japan of spreading falsehoods, while
the Foreign Ministry in Tokyo summoned the Chinese ambassador. “When our sovereignty and national interests are
threatened we must change our foreign policy to firmly express
our point of view,” Abe told parliament today.
- Vale(VALE) Slumps to Six-Month Low as Goldman Cuts Iron Ore Forecast. Vale
SA (VALE5), the world’s biggest iron- ore producer, fell to a six-month
low after Goldman Sachs Group Inc. cut its price estimate for the
commodity this year. The shares slumped 3.5 percent to 32.51 reais at
1:05 p.m. in Sao Paulo. A close at that level would be the lowest since
Sept. 4. The stock contributed the most to the benchmark Bovespa index
(IBOV)’s 1.4 percent drop today. “The two key drivers of this more subdued outlook are the
growing role of scrap in Chinese steel production, and ongoing
investment in Chinese domestic iron-ore production,” the
Goldman Sachs analysts wrote.
Wall Street Journal:
- Workers Saving Too Little to Retire. Workers and employers in the U.S. are bracing for a retirement
crisis, even as the stock market sits near highs and the economy shows
signs of improvement.
New data show that powerful financial
and demographic forces are combining to squeeze individuals and
companies that are trying to save for the future and make their money
last.
Fifty-seven percent of U.S. workers surveyed reported less than
$25,000 in total household savings and investments excluding their
homes, according to a report to be released Tuesday by the Employee
Benefit Research Institute. Only 49% reported having so little money
saved in 2008. The survey also found that 28% of
Americans have no confidence they will have enough money to retire
comfortably—the highest level in the study's 23-year history.
- U.S. Probes Microsoft, Partners Over Bribery Claims.
Federal regulators are investigating Microsoft Corp.'s relationship with
business partners that allegedly bribed foreign government officials in
return for software contracts, according to people familiar with the matter. Lawyers from the Justice
Department and the Securities and Exchange Commission are examining
kickback allegations made by a former Microsoft representative in China,
as well as the company's relationship with certain resellers and
consultants in Romania and Italy, these people said.
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
CNN:
- Syrian regime, rebels blame each other for chemical attacks. The specter of chemical weapons attacks in the Syrian civil war
emerged Tuesday, with the government and rebels each blaming the other
for using such munitions. The embattled government
of President Bashar al-Assad accused rebels of a deadly chemical weapons
missile attack. At least 25 people died and dozens more were injured
Tuesday in the town of Khan al-Asal in Aleppo province, Syrian state
media said, quoting government figures. Rebels rebuffed the claims and
blamed the regime.
Reuters:
- PIMCO cuts euro exposure as investors decry Cyprus bailout plan. A
demand that Cyprus seize money from depositors to help rescue the
island's banks is a wake-up call for those who believed the euro zone
crisis was solved, institutional investors and hedge funds said. One of the world's biggest money managers, PIMCO, has
already reduced its euro currency allocations in response to the
planned levy unveiled at the weekend, a senior executive told
Reuters on Tuesday.
Telegraph:
- Cyprus bailout - live. Eurozone governments are "essentially blackmailing" Cyprus, said
Anthanasios Orphanides, former governor of the Cypriot central bank, as he
warned against the "slow death of the European project".
Style Underperformer:
Sector Underperformers:
- 1) Coal -3.75% 2) Oil Service -3.13% 3) Steel -2.65%
Stocks Falling on Unusual Volume:
- CLF, LRE, CMLP, HEP, LRE, HPT, WAC, DSW, CAH, LULU, PIKE, CHL, GRFS, EA, TRLA, MCK, FF, ROSE, CBF, NSM, FDS, RNF, RIO, OCN, TCK, CLF, ASPS, SHOO, PCRX, SDT and JNPR
Stocks With Unusual Put Option Activity:
- 1) CAH 2) DKS 3) HOV 4) OXY 5) SMH
Stocks With Most Negative News Mentions:
- 1) RIG 2) C 3) JNPR 4) DE 5) CAH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +1.17% 2) Homebuilders +.65% 3) Drugs +.63%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) EA 2) WAG 3) RSX 4) DG 5) MON
Stocks With Most Positive News Mentions:
- 1) TOL 2) HAIN 3) LSCC 4) MINI 5) RFIL
Charts:
Evening Headlines
Bloomberg:
- EU Keeps 5.8 Bln-Euro Revenue Goal for Cyprus Bank Tax. Euro-area finance ministers told Cyprus to raise 5.8 billion euros
($7.5 billion) from bank depositors to unlock emergency loans,
maintaining the revenue target while suggesting sparing small-scale
savers. The finance chiefs from the 17 euro countries kept the
pressure on Cyprus as they signaled flexibility in applying the tax
announced three days ago. The levy sparked outrage in the island nation
and concern among investors about setting a precedent by breaking the
taboo against raiding bank accounts. “Cypriot authorities will introduce more progressivity in the one-off
levy compared to what was agreed on March 16, provided that it continues
yielding the targeted reduction of the financing envelope and, hence,
not impact the overall amount of financial assistance,” the ministers
said in a statement following a teleconference late yesterday.
- Deauville Zombie Strikes as Cyprus Tax Inflames Crisis.
The Deauville zombie is back. Europe’s aid package for Cyprus brought
back memories of the German-French deal at the English Channel resort of
Deauville in October 2010 that made bond writedowns part of the
debt-crisis management toolkit. Investors responded then by pushing Ireland and Portugal to follow Greece into bailouts.
Only 14 months later did European leaders decide that
imposing losses on creditors wasn’t such a good idea after all. Now
Germany has broken another taboo, forcing Cyprus to siphon money
out of bank accounts to earn its 10 billion-euro ($13 billion) rescue.
The markets’ snap reaction was the same, turning the Mediterranean
island into the latest threat to the stability of the euro area. “It
looks like a botched and improvised job, and unprofessional -- groping
in the dark without much consideration of what sort of signal it sends,”
said Alessandro Leipold, a former International Monetary Fund official
who is now chief economist at the Lisbon Council research group in
Brussels. “That’s no way to really run a crisis.”
- Cyprus Deposit Raid Stokes Senior Bond Concerns: Credit Markets.
Europe's unprecedented tax on Cyprus bank deposits is raising concern
among holders of senior bank bonds that they will be made to take losses
should another country need rescuing. The Markit iTraxx Financial Index
of credit-default swaps insuring senior debt of 25 banks and insurers
rose as much as 19 basis points to 162 basis points after Cyprus's
announcement. That's the biggest jump since Aug. 2. "This sets a
precedent," said Robert Kendrick, an analyst in London at Legal
& General Investment Management, which oversees about $585
billion. "If the authorities are prepared to impose losses on
depositors, then presumably they wouldn't think twice about impairing
senior bondholders."
- RBA’s Lowe Calls Cyprus Tax on Deposits a ‘Step Back’ for Europe. Reserve Bank of Australia Deputy
Governor Philip Lowe said the European Union’s decision to force
Cypriot savers into a bailout was a “step back” for the region
and could increase instability in the financial system. “The fact that this approach of haircutting depositors has
been sanctioned could lead the public to think it could happen
again,” Lowe said in response to audience questions following a
speech in Sydney. “It could make the system more susceptible to
bank runs and that’s something that the authorities in Europe
will have to watch very, very carefully.”
- China’s Stocks Rise on Valuation After Biggest Drop in Two Weeks. “It’s a rebound for stocks and the market is still on a
downward trend amid uncertainty of the economy,” said Wei Wei,
an analyst at West China Securities Co. in Shanghai. “Today’s
data don’t say much about the general picture of the economy and are
distorted by the Chinese new year factor.” The Shanghai Composite Index
(SHCOMP) added 0.2 percent to 2,244.79 as of 10:20 a.m. local time. It
dropped 1.7 percent yesterday.
Wall Street Journal:
- Syria Strife Spills Over Into Lebanon.
Syria fired rockets into Lebanon in what Washington called a
"significant escalation" of the war, as Syria's main opposition group
picked a naturalized U.S. citizen as its first prime minister to lead an
interim government that aims to rule over rebel-held territory. Also on Monday, Secretary of State John Kerry offered a green light
for other Western powers, including Britain and France, to provide arms
to rebels fighting Syrian President Bashar al-Assad, as the two nations
push the European Union to permit shipments of such lethal aid.
- Fisker Sales Talks Fall Apart. Chinese Bidders for Luxury Hybrid Car Maker Disagree Over Government Loan. Chinese auto makers have pulled back from talks to buy Fisker
Automotive Inc. over a disagreement on whether to revive a loan
agreement with the U.S., leaving the Anaheim, Calif., company's future
uncertain ahead of an April loan payment. Fisker management had
proposed to the Chinese that as part of any
sale it tap the remaining portion of a $529 million U.S. loan, a move
that would commit a new owner to building Fisker cars at a former
General Motors Co. auto factory in Delaware, a person familiar with the
situation said on Monday.
- Gleacher Notes 'Serious Decline'. Gleacher & Co. disclosed in a securities filing Monday that it had recently experienced "several adverse events" that resulted in a "serious
decline" in its financial results. In its annual filing with the
Securities and Exchange Commission, the advisory and trading firm said,
"We have experienced a significant decline in revenue in the first
quarter of 2013, and we cannot predict when or if we will be able to
reduce or reverse this decline and associated losses."
Fox News:
- Senate Dems' budget accused of double-counting spending cuts. Senate Democrats' budget plan is coming under increasing criticism from
Republicans, who say it effectively pats itself on the back twice for
savings that were only achieved once -- and even then, promises another
$7.3 trillion in debt over the next decade.
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Cyprus bank deposit tax sets "dangerous precedent": IIF chief. A
proposal to impose a tax on bank deposits in Cyprus sets an "incredibly
dangerous precedent" and undermines confidence built up in recent
months over Europe's handling of its debt crisis, the head of a global
banking association said on Monday. Tim Adams, managing director of
the Institute of International Finance, said a weekend announcement that
Cyprus would impose a one-off tax on bank accounts as part of a 10
billion euro bailout by the European Union had reignited concerns over
the euro zone crisis. Adams told Reuters the announcement broke with
practices that depositors' savings were guaranteed. Cyprus will vote on
the decision on Tuesday. "Crossing the Rubicon of addressing insured deposits and undermining the explicit guarantee - you can call
it a tax or whatever you want - but essentially the broken guarantee
opens up lots of different possibilities for destabilizing effects in
the short term, medium term and long term," Adams said in an interview. "The next time there is a crisis in any one of these countries,
depositors are going to ask themselves, why am I going to stick around
to see if the same set of rules are applied or not? I do think it is
an
incredibly dangerous precedent, without question," he added. The IIF is
the world's largest international lobbying group for financial firms,
with more than 450 members. He warned that savers in other larger
European countries could become nervous and start withdrawing their
money. "It is the medium term that is concerning. What happens if
we're back at Spain, Portugal or Italy at some point six months from
now, and the same set of issues arise?" he said. "There is less
confidence and greater probability of instability because of this," added Adams.
- We're no populist scaremongers, says German anti-euro party. Leaders
of Germany's new
anti-euro party took their nascent campaign to Berlin on Monday,
keen to reassure potential voters that they are neither populist nor
extremist and have come up with a considered plan to bring back the
Deutschmark. The "Alternative for Germany" has been denounced by the
country's mainstream parties as an irrational group of scaremongers,
keen to profit from anxiety over the growing cost of euro zone bailouts
in Europe's paymaster. But the leaders of the new movement, headed by
economist Bernd Lucke who until 2011 was a member of Chancellor Angela
Merkel's Christian Democrats (CDU), tried to present a more
sober face and distance themselves from other parties in Europe
that mix their euroscepticism with unabashed populism and
anti-immigration platforms.
Financial Times:
- Levy plan ‘bleak day for banking union’. The
weekend decision to strip €5.8bn from the savings accounts of Cypriot
banking customers has blown a hole in the EU’s ambitious reforms billed
as the route out of the eurozone crisis, while potentially undermining a
growing reliance at banks around the world on
funding their operations with customer deposits. “This is a totally crazy decision,” said one European bank chief.
“This is the biggest policy mistake that the [European Central Bank] has
subscribed to.”
Telegraph:
- Cyprus: investors slam 'crazy' bailout. The botched bail-out of Cyprus has been labelled as “crazy” by investors after
the apparent tearing up of Europe’s deposit guarantees plunged markets into
uncertainty.
China Securities Journal:
- Beijing May Issue Detailed Property Curbs End-March. The city of
Beijing may issue detailed property curbs around end-March, citing a
person familiar with the situation. The city may lift the floor for tax
calculations on existing home transactions, the person said. The policy
will raise transaction costs and curb the overheated market, according
to the report.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.50 -4.5 basis points.
- Asia Pacific Sovereign CDS Index 83.5 +3.0 basis points.
- NASDAQ 100 futures +.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for February are estimated to rise to 915K versus 890K in January.
- Building Permits for February are estimated at 925K versus 925K in January.
Upcoming Splits
Other Potential Market Movers
- The German ZEW Index, UK CPI, weekly retail sales reports, Morgan
Stanely European Financials Conference and the (KLIC) investor day could
also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 80.0 -37.98%
- Total Put/Call .87 +2.35%
Credit Investor Angst:
- North American Investment Grade CDS Index 80.27 +1.98%
- European Financial Sector CDS Index 152.38 +6.65%
- Western Europe Sovereign Debt CDS Index 100.61 +3.24%
- Emerging Market CDS Index 242.09 +1.0%
- 2-Year Swap Spread 15.0 +1.5 bps
- TED Spread 21.0 +1.25 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -19.0 -2.5 bps
Economic Gauges:
- 3-Month T-Bill Yield .07% -1 bp
- China Import Iron Ore Spot $134.60/Metric Tonne unch.
- Citi US Economic Surprise Index 21.0 -6.0 points
- 10-Year TIPS Spread 2.56 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating +155 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail sector longs, index hedges and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 50% Net Long
