Evening Headlines
Bloomberg:
- G-20 Draft Affirms Commitment to Avoid Competitive Devaluations. The Group of 20 economies will
affirm a commitment to avoid weakening their currencies to gain
an advantage for their exports, according to a draft statement
prepared for a meeting this week in Washington, Bloomberg BNA
reported. The draft statement, seen by a Bloomberg BNA reporter,
maintains a pledge made in February in Moscow to “move more
rapidly toward more market-determined exchange rate systems and
exchange-rate flexibility” and to refrain from competitive
devaluations. A first draft communique, prepared for meetings of finance
ministers and central bankers starting today, describes the
global outlook as “generally somewhat weaker and uneven” with
“unbalanced” recoveries between advanced economies and
emerging markets. The maintaining of the language on currencies suggests the
G-20 members will withhold direct criticism of Japan’s efforts
to rally its economy from 15 years of deflation so long as it
doesn’t seek to do so at their expense by driving the yen down.
- China Home Prices Rise in Almost All Cities on Mild Local Curbs. China’s new home prices rose in all
but two cities, led by major centers, as local governments
announced milder-than-expected property measures and targets. Prices in March climbed in 68 of the 70 cities the
government tracks from a year earlier, the National Bureau of
Statistics said in a statement today, the most since September
2011. The southern city of Guangzhou posted the biggest gain,
rising 11.1 percent from the same period last year. Beijing
prices jumped 8.6 percent, while they advanced 6.4 percent in
Shanghai, both the most since January 2011 when the government
changed its methodology for the data.
- China Bird-Flu Outbreak Seen Adding Risks as Growth Slows. China’s deadly bird-flu outbreak is
rippling through industries from restaurants to travel, adding
economic headwinds after last quarter’s unexpected slowdown. The disease “may suppress domestic consumption in the near
term,” Goldman Sachs Group Inc. said in a report this week.
Ding Shuang, a Citigroup Inc. economist in Hong Kong, sees a
danger of “short-term volatilities” in growth and inflation
and of bigger effects if found to transmit between humans. The outbreak, which has sickened at least 82 people and
killed 17 so far, threatens to extend the longest streak of
growth below 8 percent in at least 20 years in the world’s
second-largest economy. The 2003 global pandemic of severe acute
respiratory syndrome showed the risks associated with such
incidents, with Credit Suisse Group AG estimating China’s
expansion in the second quarter of that year was cut by about
2.4 percentage points after seasonal adjustments. “Consumption is likely to stay weak in the second quarter
because of the outbreak,” said Li Wei, a Shanghai-based
economist at Standard Chartered Plc. “We don’t know how the
bird flu is going to evolve.” The virus is affecting restaurant sales as people eat more
meals at home and having an impact on factory production through
the food industry, Li said without giving specific estimates.
- Moutai Profit Growth Slows Amid Xi Austerity Push. Kweichow
Moutai Co. (600519), China’s largest maker of baijiu liquor, said
first-quarter profit rose 21 percent, less than half the pace of the
year-earlier period
as President Xi Jinping pushes to curb extravagant spending by
government officials.
- Asian Stocks Decline, Led by Mining Companies on Growth. Asian
stocks fell, led by mining companies after commodity prices slumped on
concern a weaker outlook for global economic growth will crimp demand
for raw materials. BHP Billiton Ltd. (BHP), the world’s biggest
mining company, sank 3.3 percent in Sydney. LG Display Co., which
supplies touch screens for Apple Inc.’s iPhone and iPad, dropped 3.4
percent in Seoul after audio-chip maker Cirrus Logic Inc. reported an
inventory glut that suggests iPhone sales may fall short of analysts’
expectations. Softbank Corp., Japan’s third-largest wireless carrier,
lost 1.7 percent as a rival’s bid for Sprint Nextel Corp. gained
shareholder support. The MSCI Asia Pacific Index (MXAP) slipped 0.5 percent to 136.79 as of 11:57 a.m. in Tokyo, with about three shares falling for
every two that rose on the gauge.
- Brazil Raises Rate From Record Low as Inflation Saps Growth. Brazil’s central bank raised its
benchmark rate for the first time since July 2011, as policy
makers seek to slow inflation levels jeopardizing an economic
recovery. The bank’s board, led by President Alexandre Tombini, voted
6-to-2 to increase the Selic rate 25 basis points to 7.50
percent from a record low, matching the median forecast from 58
economists surveyed by Bloomberg. Policy makers said that “the high level of inflation” and
“resilience of inflation” required a response, which was
tempered by the central bank’s recognition that “external
uncertainties” also required “that monetary policy be managed with
caution,” according to the board’s statement posted on Banco Central do
Brasil’s website.
- Copper Below $7,000 for First Time in 18 Months as Metals Slide. Copper
in London fell below $7,000 for the first time in almost 18 months as
data from Europe to China, the biggest user, raised concern that demand
is faltering. Aluminum, nickel, zinc, tin and lead also retreated.
Copper for delivery in three months on the London Metal Exchange plunged
as much as 4 percent to $6,800 a metric ton, the lowest level since
October 2011, and was at $6,840.25 at 9:38 a.m. in Shanghai. Metal for
delivery in August was at 50,530 yuan ($8,175) a ton, declining by a daily limit, on the Shanghai Futures Exchange. The July futures contract on the Comex dropped 3.1 percent to $3.1035 per pound.
European car sales are sliding to a 20-year low as demand
plunged last month in Germany.
- Rebar Falls to Lowest Level in Four Months on China Economy. Steel
reinforcement-bar futures
declined to the lowest level in more than four months as slowing
economic growth in China, the biggest user, led to a slump in industrial
metals. The contract for October delivery on the Shanghai Futures
Exchange dropped as much as 2.7 percent to 3,598 yuan ($582) a
metric ton, the lowest level for a most-active futures since Dec. 7,
before trading at 3,665 yuan at 10:15 a.m. local time.
- Rubber Tumbles to Lowest Level in Five Months on Demand Concerns. Rubber slumped for a fifth day to
the lowest price in five months as a selloff in commodities from
crude oil to metals raised concern that global demand is waning. Rubber for delivery in September lost as much as 3.9
percent to 242.6 yen a kilogram ($2,474 a metric ton) on the
Tokyo Commodity Exchange, the lowest level for the most-active
contract since Nov. 14. Futures traded at 247.1 yen by 11:34 a.m.
- Kim Says World Bank Can’t Reject Coal If People Freeze. The World Bank, which has boosted
investment in renewable energy, cannot refuse to finance a coal-
fired plant in Kosovo if the alternative is having people there
“freeze to death,” the lender’s president said. As the Washington-based institution considers providing
partial guarantees for a lignite-fired power plant in the Balkan
country, World Bank President Jim Yong Kim said today he’s
looking for all possibilities to avoid investing in coal. If the
lack of energy became “a humanitarian issue” and the bank got
involved, it could at least make the project cleaner, he said. “I don’t think it’s fair to tell the people in Kosovo
‘While the rich countries continue to burn coal, you’re going to
have to freeze to death because it’s against our political
ideology to support you,’” Kim said on a panel discussion in
Washington today. “I can’t do that.”
Wall Street Journal:
- Video Provides Clues to Bomber. Federal investigators said Wednesday they are working to identify a
person in a video who appeared to leave a bag in the spot where one of
two bombs later exploded near the finish line of the Boston Marathon. Authorities also are trying to identify at least one other person
seen in videos of the crowd, according to people familiar with the
matter.
- Dark Pool Brawl Breaks Out.
A behind-the-scenes brawl has broken out between two market powers that
represent opposite ends of the stock-trading spectrum. In one corner is
NYSE Euronext, which claims to represent the good of the average
investor and transparent trading on public exchanges. In the other
corner: Credit Suisse Group AG, which runs the nation’s largest dark pool, Crossfinder.
- Rove: Steaming Toward the ObamaCare 'Train Wreck'. The implementation of this unpopular law is a story of missed deadlines and general bungling. In congressional testimony last week, Health and Human Services
Secretary Kathleen Sebelius blamed Republican governors for her
department's failure to create a "model exchange" where consumers could
shop for health-insurance coverage in states that don't set up their own
exchange. Nice try, but GOP governors aren't the problem. Team Obama's tendency
to blame someone else for its shortcomings is tiresome. The Affordable
Care Act requires HHS to operate exchanges in states that won't operate
their own. Since the act became law in March 2010, it has been
abundantly clear that the agency would have to deploy a model exchange.
It is Ms. Sebelius's fault there isn't one.
Fox News:
- FBI has images of two persons of interest in Boston bombings, source says. A federal law enforcement source told Fox News that investigators are
looking for two men that are persons of interest in Monday's Boston
Marathon terror attack and have distributed photos for “law enforcement
eyes only.” The FBI is not sharing the photos with the public. A Fox News reporter has seen the photos and called them “clear.”
- Background check plan defeated in Senate, Obama rips gun bill opponents. The Senate on Wednesday defeated a vital background check amendment seen
as the linchpin to Democrats' gun control bill, dealing a major setback
to President Obama -- who lashed out at opponents in unusually blunt
terms during remarks from the Rose Garden. The vote was 54-46, with supporters falling six votes short of the required 60-vote threshold.
Breaking News:
MarketWatch.com:
- Heading off a China-style subprime crisis. Warning of local governments’ high exposure to
bad debts, the credit agency Fitch recently downgraded China’s long-term
local-currency rating from AA– to A+. Officials should take note: the downgrade underlines how closely international markets are watching developments in the country.
CNBC:
- American Express(AXP) Earnings Beat; Revenue Falls Short. American Express reported first-quarter earnings that beat analysts' expectations on
Wednesday but revenue was light as cardmember spending growth remained
muted for the fourth time in a row. After the earnings announcement, the company's shares slipped in after-hours trading.
Zero Hedge:
Business Insider:
The Blaze:
Reuters:
- US regulator says banks still a risk for taxpayers. A top U.S. bank regulator
said on Wednesday the country must do more to protect taxpayers
from having to spend billions on bank bailouts, one of a growing
chorus of critics of the current rules. Tom Hoenig,
vice chairman of the Federal Deposit Insurance
Corp (FDIC), said in New York that the Volcker rule - which would bar
banks from betting their own money on financial markets but has not yet
been finalized by regulators - would not go far enough. Instead, Hoenig
wants to force banks to hive off risky activities such as trading and
creating derivatives and to eliminate any taxpayer subsidy for these
businesses.
- Vote on Italy president risks centre-left split. Italy's divided parliament begins
voting for a new state president on Thursday, with former Senate
Speaker Franco Marini the main candidate in a ballot that will
severely strain the unity of the centre-left alliance led by
Pier Luigi Bersani. The vote for a successor to President Giorgio Napolitano,
whose term ends on May 15, will be a crucial step towards
resolving the stalemate since the inconclusive election in
February left no party with enough support to form a government. Even by the tangled standards of Italian politics the
situation is complicated, but until the new president is
elected, the paralysis that has hobbled government more than 50
days after the election will continue.
- SanDisk(SNDK) sees brighter 2013 with higher NAND prices. SanDisk raised
its forecast for revenue this year and said it expects higher
prices for its NAND memory chips, which are used in smartphones
and tablets. Chief Financial Officer Judy Bruner's comments to analysts
on a quarterly conference call on Wednesday helped reverse
losses in SanDisk's stock after the company posted quarterly
results that disappointed some on Wall Street, despite beating
estimates.
- Investors sound alarm over AAA ratings on subprime auto bonds. While many new subprime auto bonds are
getting the highest Triple A ratings, the ratings agencies
themselves admit standards are loosening - and some in the
market say that needs to change soon. Skeptical investors are increasingly warning that ratings
for the white-hot asset class should become more conservative,
especially regarding smaller, second-tier lenders with no
long-term record in issuing asset-backed securities (ABS). The issue is particularly pressing, as subprime auto bond
issuance has skyrocketed over the past year. So far in 2013, nearly US$7.5bn of new subprime auto ABS has
been issued, roughly 32% higher than in the same period of 2012,
according to Deutsche Bank data. There was only US$18.5bn in issuance for all of 2012, and
just US$11.75bn the year before that. As supply expands, however, there is a marked difference in
the quality of issuers - even among those getting similar
ratings from the agencies.
- Risk assets slip on growth worries, gold tumbles. Risk assets slipped
broadly on Thursday, following the overnight drop in U.S. and European
equities on fears for global growth, and gold slid as money continued to
flow out of gold-backed exchange-traded funds.
Telegraph:
Sueddeutsche Zeitung:
- Audi's Stadler Warns German Consumer Uncertainty Growing. Audi Chairman
Rupert Stadler says increased insecurity driven by debt crisis in
southern Europe, citing interview. Says massive concern over reforms needed to cut debt in many European countries behind slump in sales of cars in Europe.
South China Morning Post:
- China's 'Golden Decade' for Coal Ended in 2011. Cleaner-burning
natural gas to develop rapidly in coming decade, citing Liu Xiangdong,
deputy director-general of China Electricity Council's dept of planning
and statistics. China's market for coal-fired electricity to suffer
"structural oversupply". Annual growth of coal fired-power to be less
than 5% in coming decade, compared with 11% in previous 10-year period.
Shanghai Securities News:
- China Investigates Fixed-Income Trades. Chinese regulators are investigating fixed-income transactions
in accounts typically used by senior traders at financial institutions.
The government has sent teams to inspect trading records at firms in
Shanghai, Beijing and Jiangsu province. A bond sold by a local
government financing vehicle is the key target of the probe, citing
people familiar with the situation.
- China Economic Growth May Slow in 4Q. China's economic growth may slow in 4Q, Li Zuojun, vice director of resources and environment at the State Council's development research center, wrote in an article. Fading stimulus effects started last May and new policies likely beginning in 2Q-3Q will contribute to slowing 4Q growth.
21st Century Business Herald:
- China
Shenzhen Firms May Have Falsified Trade Data. Some trading houses in
the southern Chinese city of Shenzhen may have falsified exports data to
bring in "hot money," citing government officials.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 115.50 +1 basis point.
- Asia Pacific Sovereign CDS Index 92.0 +1.25 basis points.
- NASDAQ 100 futures +.13%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 350K versus 346K the prior week.
- Continuing Claims are estimated to fall to 3075K versus 3079K prior.
10:00 am EST
- Philly Fed for April is estimated to rise to 3.0 versus 2.0 in March.
- Leading Indicators for March are estimated to rise +.1% versus a +.5% gain in February.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lacker speaking, Fed's Kocherlakota speaking, Fed's Raskin speaking, German/French auctions, 5Y TIPS auction, Bloomberg Economic Expectations Index for April, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open mixed and weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 88.0 +3.53%
- Total Put/Call 1.20 +36.36%
Credit Investor Angst:
- North American Investment Grade CDS Index 84.34 +3.01%
- European Financial Sector CDS Index 171.12 +2.52%
- Western Europe Sovereign Debt CDS Index 101.18 -1.78%
- Emerging Market CDS Index 234.24 +.67%
- 2-Year Swap Spread 14.25 +.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -18.0 -1.5 bps
Economic Gauges:
- 3-Month T-Bill Yield .05% -1 bp
- Yield Curve 147.0 -3 basis points
- China Import Iron Ore Spot $139.30/Metric Tonne -.07%
- Citi US Economic Surprise Index -3.70 +.4 point
- 10-Year TIPS Spread 2.37 -3 basis points
Overseas Futures:
- Nikkei Futures: Indicating -62 open in Japan
- DAX Futures: Indicating +25 open in Germany
Portfolio:
- Slightly Lower: On losses in my retail/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Schaeuble to Press G-20 for Debt Cuts Armed With German Example. German Chancellor Angela Merkel’s
Cabinet backed a spending plan that will yield budget surpluses
this year and next, strengthening the government’s hand as it
presses international partners to focus on cutting debt. Ministers meeting in Berlin today adopted the annual
Finance Ministry report to the European Commission in which they
agreed to cut Germany’s debt over the next four years. The German stance sets up a potential clash among finance
chiefs from the Group of 20 biggest economies when they gather
in Washington from tomorrow. Finance Minister Wolfgang Schaeuble
plans to press the group to sign up to similar “growth-
friendly,” deficit-reduction policies to those he pursues at
home, a government official told reporters in Berlin yesterday. “Germany is committed to complying with all the national
and European fiscal policy requirements,” the Finance Ministry
said in a statement after the Cabinet meeting. “Sound public
finances are a significant basis for effective government action
and on-going favorable growth conditions.”
- Italy May Need $9.2 Billion of Spending Cuts, Official Says. Italy
may need to make as much as 7 billion euros ($9.2 billion) in
additional spending cuts this year to cover jobless benefits and other
expenses, said Finance Undersecretary Gianfranco Polillo. “There are additional expenses worth 5 billion euros to 7
billion euros that need to be covered,” Polillo said in an
interview in Rome on April 15. These include as much as 600
million euros to finance military operations abroad and about
1.2 billion euros for unemployment programs, he said. Funding
the expenses through tax increases would aggravate Italy’s
fourth recession since 2001, he said.
- Europe Car Sales Heading for 20-Year Low on German Slide. European car sales are sliding to a 20-year low after German concerns
over the debt crisis sent demand plunging last month in the region’s
biggest economy and removed the main buffer protecting automakers. Registrations
in March fell 10 percent to 1.35 million vehicles, the 18th consecutive
decline, with Germany’s auto market plunging 17 percent, the Brussels-based European Automobile Manufacturers’ Association, or ACEA, said today. First-quarter deliveries in the region dropped 9.7 percent to a record-low 3.1 million cars.
- IMF Sees Some Corporate Debt Unsustainable in Parts of EU. As much as 20 percent of non-bank corporate debt in the
weakest euro-area economies is unsustainable and may force companies to
cut dividends and sell assets, dealing further blows to investor
confidence, the International Monetary Fund said. Businesses
(SXXP) in Italy, Spain and Portugal have the largest “debt overhang,”
according to the IMF’s Global Financial Stability Report released today,
which analyzed 1,500 publicly traded non-financial European firms.
Strains in the corporate sector may in turn hurt banks’ asset quality,
the report showed. “Firms in the euro-area periphery have built a
sizable debt overhang during the credit boom, on the back of high
profit expectations and easy credit conditions,” the IMF said. Now they
“face the challenge of reducing the debt overhang in an environment of
lower growth and higher interest rates, in part related to financial
fragmentation in the euro area.”
- Cyprus Finance Minister Sees Gold Sale Within Next Months. The
Cypriot government plans to
sell part of its gold reserves within the next months, a decision that
needs to be approved by the country’s central bank, Finance Minister
Haris Georgiades said. “The exact details of it will be formulated
in due course primarily by the board of the central bank,” Georgiades,
41, told Bloomberg TV’s Ryan Chilcote in an interview in Nicosia.
“Obviously it’s a big decision.”
- Former ECB Board Member Bini Smaghi Says Draghi Will Weaken Euro. Former European Central Bank Executive Board member Lorenzo
Bini Smaghi said policy makers led by President Mario Draghi will act to
weaken the euro. “They have to find ways to avoid that the euro
appreciates and actually try to make it depreciate,” Bini Smaghi said in
an interview on “Bloomberg Surveillance” with Sara Eisen and Tom Keene
today. “They will do something, I think that’s unavoidable.”
- Spanish Squatters Invoking Robin Hood Deter Investment. The proliferation of illegal tenants threatens to complicate efforts to
manage the bad bank, set up by Spain under the terms of a European
bailout for its financial system to absorb 37 billion euros of soured
real estate.
- Washington Gripped by Alarm as Ricin Poison Letters Found. Washington
went into terrorism alert mode as authorities reported preliminary
tests showed a letter sent to President Barack Obama contained the
poison ricin and suspicious packages triggered a lockdown in parts of
two Senate office buildings. With the capital already on edge
following the Boston Marathon bombing, alarm spread on both ends of
Pennsylvania Avenue as officials tried to determine the extent and
nature of the threats. There
is “no indication” the ricin mail is connected to the terrorist bombing
in Boston, the FBI said in a statement.
- Rosengren Says Banks With Broker-Dealer Units Need More Capital. Boston
Federal Reserve President Eric Rosengren said banks should hold more
capital if they own a broker-dealer unit because such businesses pose
greater risks during periods of financial stress. “Bank holding
companies with large broker-dealer affiliates should hold more capital
to reflect the reduced stability of their liabilities during times of
stress,” Rosengren said in prepared remarks for a speech today in New
York.
- Fed Says ‘Moderate’ Growth Across U.S. Was Led by Housing. The Federal Reserve said the U.S.
economic expansion remained “moderate” amid gains in
manufacturing, housing and autos that offset weakness in
defense-related industries in some regions.
- Crude Tumbles Amid Equity Selloff as U.S. Output Climbs. West Texas Intermediate oil fell to
a four-month low as equities declined and U.S. output rose to a
20-year high. Brent slid below a key technical level at $97.91. WTI dropped for the fourth time in five days as U.S. stocks
tumbled on disappointing corporate earnings and after the dollar
strengthened against the euro. Output was 7.2 million barrels a
day, the most since July 1992, and fuel use slid, according to
the Energy Information Administration, the Department of
Energy’s statistical arm. Brent breached the 23.6 percent
Fibonacci retracement level from 2012’s low to the year’s high.
- U.S. Amasses Big Data on 10 Million Consumers as Bankers Protest. The
new U.S. consumer finance watchdog is gearing up to monitor how
millions of Americans use credit cards, take out mortgages and overdraw
their checking accounts. Their bankers aren’t happy about it. The
Consumer Financial Protection Bureau is demanding records from the banks
and is buying anonymous information about at least 10 million consumers
from companies including Experian Plc. While the goal is to sharpen enforcement and rule-making, banking executives have questioned why the bureau is collecting so much without being more specific about the benefits.
“Do they need the reams and reams and reams of data we’re having to
provide to them?” Susan Faulkner, senior vice president at Bank of
America Corp., asked at a banking
conference in March. “Don’t we have to find a healthier balance here?”
- BofA(BAC) Slides Most Since November as Net Misses Estimates. Bank
of America Corp. led the Dow Jones Industrial Average lower today after
shortfalls in mortgage banking and trading marred first-quarter results
and slowed the company’s turnaround. While net income quadrupled to
$2.62 billion, or 20 cents a share, analysts surveyed by Bloomberg had
predicted 23 cents a share, and revenue dropped 8.4 percent on an
adjusted basis to $23.9 billion. Bank of America slid 6.7 percent to
$11.46 at 12:30 p.m. in New York, near its low for the day and the
biggest decline since November. Chief Executive Officer Brian T.
Moynihan, 53, has sold more than $60 billion in assets, settled more
than $40 billion in mortgage claims and repaired the bank’s balance
sheet since taking over in 2010. He’s now focused on trimming $8
billion in annual expenses and adding revenue. “It’s going to be very
hard for these banks to generate revenue, and mortgage is continuing to
shrink,” Chris Whalen, managing director at Carrington Investment
Services LLC, an asset manager in Greenwich, Connecticut, said in an
interview. “The regulatory environment for mortgage is so hostile.”
- Online Sales-Tax Bill Said to Be Primed for Senate Vote. A bill to let states collect taxes
on out-of-state sellers may get a vote in the U.S. Senate as
early as next week, said a Senate Democratic aide. The bill, backed by Wal-Mart Stores
Inc. (WMT) and Amazon.com Inc., would let states collect some of the
$24 billion in revenue they lose to untaxed sales made by retailers with
no physical presence in their states. EBay Inc. (EBAY) and anti-tax
groups
such as Americans for Tax Reform oppose the measure.
Wall Street Journal:
- FBI Says Suspect Identified in Boston Marathon Blasts.
The Federal Bureau of Investigation has isolated images of what it
believes to be a suspect in the Boston Marathon bombings, a government
official said Wednesday. Surveillance video and other images helped FBI agents identify a
suspicious person right around the moment one of the bags believed to
contain a bomb was deposited near the finish line of the race, the
official said. The FBI and the Boston police department said no arrests have been
made in the case. The Associated Press reported that a suspect was in
custody but later retracted the report.
- The Boston Bombings: Live Coverage.
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
The Hill:
- Leading Democrat Baucus warns of 'huge train wreck' enacting ObamaCare provisions. Sen. Max Baucus (D-Mont.) said Wednesday he fears a "train wreck" as the
Obama administration implements its signature healthcare law. Baucus, the chairman of the powerful Finance Committee and a key
architect of the healthcare law, said he fears people do not understand
how the law will work. "I just see a huge train wreck coming
down," Baucus told Health and Human Services Secretary Kathleen Sebelius
at a Wednesday hearing. "You and I have discussed this many times, and I
don't see any results yet."
Reuters:
- METALS-Copper drops as IMF report strengthens growth fears.
- IMF frets about U.S. corporate borrowing excesses. Easy monetary policy in the
United States has led to looser standards for corporate
borrowing as company debt continues to grow, posing a risk to
financial stability, the IMF warned on Wednesday. Pension funds and insurance companies may also be taking on
more risk than they should as they search for higher-yielding
assets to fill a funding gap, which for pension funds stood at
28 percent at the end of last year, the International Monetary
Fund said in its Global Financial Stability Report. All of this is happening while the United States is still
only one-third of the way through the current credit cycle, the
Washington-based global lender said. Usually looser borrowing
standards only emerge in the later parts of the cycle, as
happened in 2007, the IMF said.
Telegraph:
Euromoney:
- China must slow growth to tackle 'unsustainable' debt. China’s
new government must push through reforms to slow the country’s economic
growth within the next two to three years or its rapidly rising debt
levels will get out of control, a leading financial academic has told
RBS.
Digitimes:
The Australian:
- Russia's Growth Slows Drastically. RUSSIA
has reported a sharp slowdown in growth over the first three months of
the year to 1.1 per cent from 4.9 per cent in the same period of 2012,
amid growing alarm over the state of its economy amid a slew of poor
data and falling oil prices. Deputy Economy Minister Andrei Klepach
said the estimate came in after downward revisions for the figures for
January and February - a month in which the economy contracted by 0.4
per cent. But he added that a stronger March helped Russia's overall
performance in the first quarter. "By our estimate, GDP grew in March by
2.3 per cent in annual terms, and we confirm our estimate of 1.1 per
cent for the first quarter," the RIA Novosti news agency quoted Klepach
as saying. The estimate was released a week after Russia slashed its
2013 growth forecast to 2.4 from 3.6 per cent due to a slowdown in both
industrial output and consumer demand.
Xinhua:
- Beijing Home Sales Rise 80.7% Y/Y. Beijing's 1Q home sales total 3m square meters, citing the city's official statistics.
China Daily:
- Chinese Authorities test family infected by H7N9. China's
top health authority confirmed that a family infected by H7N9 in
Shanghai might involve human-to-human transmission of the new bird flu
strain. The family involves two brothers and their
87-year-old father, who died on March 4 and was reportedly China's first
human death from H7N9.
Style Underperformer:
Sector Underperformers:
- 1) Steel -4.02% 2) Coal -3.41% 3) Semis -3.23%
Stocks Falling on Unusual Volume:
- AAPL, FCX, GDP, SFY, PGI, FULT, FBP, PBR, TV, HES, BCO, RLD, SHLM, THO, INWK, EOPN, CRUS, TXT, BMI, PACW, APL, SI, BERY, WTFC, ACOR, CVE, FLTX, SLW, MAIN, BHLB, GNT, EC, GVA, WDR, ATW, FSL, FCS, AVGO, OIH, EWG, RRC, ADI, SNDK, ESC, KMX, LLTC, MAIN, UCO, RTI, WLT and ADNC
Stocks With Unusual Put Option Activity:
- 1) SCCO 2) FXI 3) UNP 4) BBT 5) FOSL
Stocks With Most Negative News Mentions:
- 1) DE 2) MCD 3) EQR 4) BK 5) TXT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Medical Equipment -.85% 2) Telecom -1.05% 3) Utilities -1.06%
Stocks Rising on Unusual Volume:
- MAT, ATLS, ALKS, ABMD and UNXL
Stocks With Unusual Call Option Activity:
- 1) LLY 2) DNR 3) OCR 4) SWKS 5) CRUS
Stocks With Most Positive News Mentions:
- 1) FTNT 2) MAT 3) NCR 4) ABT 5) NOC
Charts:
Evening Headlines
Bloomberg:
- Europe’s Future Central Bankers Confront Draghi’s Policy Dilemma. Europe’s central bankers of
tomorrow already know how hard Mario Draghi’s job is. High school students from across the euro area spent the
past six months analyzing the state of the 17-nation economy and
preparing proposals on how Draghi’s European Central Bank should
respond to the region’s debt crisis. The winners of the second
annual “Generation Euro Students’ Award” will attend an awards
ceremony hosted by Draghi in Frankfurt today. “There is no clear solution,” Alejandro Goffa Martinez, a
winning student at IES Josep Sureda i Blanes school in Palma de
Mallorca, Spain, said in an interview. “The lack of credit is
decisive because credit is the mechanism that is essential for
growth. Lowering interest rates even more wouldn’t really
help.”
- Cleaning ‘Toxic’ Assets Slovenia’s Primary Concern, Moody’s Says. Quickly cleaning up Slovenian banks
and transferring “toxic” assets to a new institution designed
to deal with them should be the government’s main goal, Moody’s
Investors Service said. Slovenia, the euro-area’s fourth-smallest economy, is
trying to avoid becoming the currency-region’s sixth member to
seek a bailout after international lenders agreed to help
Cyprus. The Cabinet is offering 500 million euros ($657 million)
in 18-month Treasury bills today as it tries to raise confidence
that it can recapitalize banks without seeking outside aid. While Slovenia’s situation isn’t as bad as Cyprus, the
“trends are certainly negative,” Jaime Reusche, a sovereign-
debt analyst at the ratings company, said in an April 15
interview in Prague.
- Monte Paschi Prosecutors Seek Seizure of $2.4 Billion. Prosecutors in Italy are seeking to seize 1.8 billion euros
($2.4 billion) of assets from Nomura Holdings Inc. (8604) as part of an
investigation into Banca Monte dei Paschi di Siena SpA’s use of
derivatives to hide losses. Sadeq Sayeed, Nomura’s former
European head, and Raffaele Ricci, a managing director in fixed-income
sales, are also being probed for colluding to obstruct regulators and
making false statements, prosecutors in Siena, where the bank is based,
said in a statement yesterday. They are also sequestering 14.4 million
euros of assets from three former Monte Paschi managers already under
investigation, including Chairman Giuseppe Mussari, General Manager
Antonio Vigni and finance chief Gianluca Baldassarri.
- China Set to Deepen N. Korea Ties as Yalu River Bridge Rises.
Across the Yalu River dividing China and North Korea, towers that will
support a sleek suspension bridge rise south of one that U.S. bombers
targeted during the Korean War to prevent China from supplying its ally.
The bridge into the northeastern Chinese city of Dandong, set to
open next year, is a bet that trade will swell even as the U.S.
pressures Communist Party leaders to exert economic leverage on the
North to abandon its nuclear program. Secretary of State John Kerry said
last week China needs to “put some
teeth” into restraining Kim Jong Un’s regime.
- Bird Flu Fears Mount in China as Herbal Remedies Run Out.
A popular herb called ban lan gen, or blue root, has been flying off
pharmacy shelves across China as local governments encourage people to
consider traditional remedies to ward off the latest bird flu virus. With scientists so far unable to pinpoint the H7N9 influenza virus’ animal
host, locals are preparing for a possible pandemic by stocking up on
popular plant remedies as well as face masks and hand sanitizers and
other over-the- counter remedies.
- China’s Stocks Drop, Led by Banks; Moutai Rises Before Earnings. Chinese stocks fell, led by banks,
on speculation new lending will slump this month. China Minsheng
Banking Corp. (600016), the nation’s first privately owned bank, slid
2.6 percent after the China Securities Journal said new lending may
slide to 800 billion yuan ($129.4 billion) this month. “China’s banks will suffer from falling demand for loans
as the old growth model of relying on investment cannot be
sustained,” said Wang Zheng, Shanghai-based chief investment
officer at Jingxi Investment Management Co., which manages $120
million.
- Asia Stocks Gain First Day in Three.
Asian stocks advanced for the first time in three days as new-home
construction in the U.S. jumped more than forecast, the International
Monetary Fund raised its forecast for Japanese growth and the yen
weakened.
- Hog Glut Gains as U.S. Exports Drop Most in Decade: Commodities. U.S. hog farmers are poised to
produce a record amount of pork at a time when exports are
slumping the most in more than a decade, prolonging a global
glut into a fifth consecutive year. The 10.66 million metric tons produced will be the most
since at least 1970, the U.S. Department of Agriculture
estimates. Exports fell 14 percent in the first two months, the
most for the period in government data since 2000. Futures may
drop 19 percent to 72 cents a pound by the end of the year on
the Chicago Mercantile Exchange, based on the median of nine
trader and analyst estimates compiled by Bloomberg.
- Rebar Near Lowest in Four Months as Iron Ore Price Declines. Steel reinforcement-bar futures
fell to near the lowest level in more than four months as the
price of iron ore, used to make the building material, fell. The contract for delivery in October on the Shanghai Futures Exchange dropped as much as 0.8 percent to 3,722 yuan ($603) a metric ton and traded at 3,727 yuan at 10:40 a.m. local
time.
- Rubber Heads for Five-Month Low as China Demand Seen Faltering.
Rubber declined for a fourth day,
heading for a five-month low reached yesterday, on concerns that a
slowing economy and rising inventories in China, the biggest buyer, will
reduce demand for the commodity used in tires. The contract for delivery in September lost as much as 1.2
percent to 254.5 yen a kilogram ($2,590 a metric ton) on the
Tokyo Commodity Exchange, before trading at 255.7 yen by 11:28
a.m. local time. Futures, which lost 7 percent in the past three
days, plunged to 247 yen yesterday, the lowest since Nov. 15.
- Reid: Letter to U.S. Senator Containing Ricin Found. Postal officials intercepted a letter sent to a U.S. senator
from Mississippi that contained poisonous ricin, with lawmakers
learning of the incident as they were being briefed on yesterday’s
bombings at the Boston Marathon. Investigators have identified a
suspect in the mailing, a person who “writes to a lot of members,”
Senator Claire McCaskill, a Missouri Democrat, told reporters. The
letter was postmarked from Memphis, Tennessee, and tested positive for
ricin, Senate Sergeant-at-Arms Terrance Gainer said in an e- mail.
Authorities have “no indication” of any other suspicious letters, he
said. Still, the timing of the letter’s discovery following the
Boston bombings evoked memories at the Capitol of anthrax mailings that
targeted lawmakers in 2001.
Wall Street Journal:
- Boston Bomb Clues Surface. Lethal Devices Believed Built From Pressure Cookers; Hotels, Rentals Canvassed. Authorities investigating the Boston Marathon blasts that killed three
and injured more than 175 believe the two bombs were assembled from
household pressure cookers, a crude but effective explosive that has
been thwarted before in U.S. terror plots. Investigators are exploring whether the bombs were assembled not far
from the scene of Monday's horrific explosions since transporting such
improvised devices over any significant distance could trigger a
premature detonation, according to a law-enforcement official with
knowledge of the matter.
- Firms Pinch Payments to Suppliers.
Procter & Gamble Co.(PG) is planning to add weeks to the amount of
time it takes to pay its suppliers, a shift that could free up as much
as $2 billion in cash for the consumer products giant, people familiar
with the matter said. P&G
could use that cash to fund investments in new factories overseas or to
help pay for stock buybacks. That added flexibility, however, will come
at the expense of the companies that supply P&G with materials or
services. The suppliers will have to tie up more of their own cash in
receivables or eat the interest costs charged by banks to bridge the gap
until P&G pays its bills.
- Reinhart-Rogoff Response to Critique. A new paper by Thomas Herndon, Michael Ash and Robert Pollin calls into question
research on public debt and its effects on growth by Harvard University
economists Carmen Reinhart and Kenneth Rogoff. This is their response:
Fox News:
- FBI, Boston police say range of suspects, motives remains 'wide open'. The FBI and state and local police are intensifying their probe into
Monday's bombing at the finish line of the Boston Marathon, vowing a
"worldwide investigation" and appealing to the public for tips and
cellphone pictures that might yield clues about who was behind the
horrific attack. "At this time there are no claims of responsibility," FBI officials
said in a press conference Tuesday. "The range of suspects and motives
remains wide open."
MarketWatch.com:
CNBC:
- China Local Authority Debt 'Out of Control'. A senior Chinese auditor has warned that local government debt is
"out of control" and could spark a bigger financial crisis than the U.S.
housing market crash. Zhang Ke said his accounting firm,
ShineWing, had all but stopped signing off on bond sales by local
governments as a result of his concerns. "We audited some local
government bond issues and found them very dangerous, so we pulled
out," said Mr. Zhang, who is also vice-chairman of China's accounting
association. "Most don't have strong debt servicing abilities. Things
could become very serious." The International Monetary Fund, rating agencies and investment banks
have all raised concerns about Chinese government debt. But it is rare
for a figure as established in the Chinese financial industry as Mr.
Zhang to issue such a stark warning.
Zero Hedge:
Business Insider:
IBD:
USA Today:
- Bond guru Gundlach calls for investors to get defensive. Jeffrey Gundlach is warning investors against joining the stampede of
euphoria overwhelming the stock market, making him a startling contrast
to the bulls pushing stocks markets higher. During a meeting
with money managers in the Los Angeles, the head of money management
firm DoubleLine Capital cautioned many bets investors are making based
on aggressive actions by central banks around the world may backfire.
Chasing stocks and avoiding relatively safe government bonds, an
increasingly popular trade, will likely not result in a happy ending.
Reuters:
- EU trade chief seeks backing to investigate China's Huawei, ZTE - diplomats. The European
Union's trade chief will seek the backing of EU states to investigate
Chinese telecoms equipment makers Huawei and ZTE, even without a
complaint from European manufacturers, EU diplomats said on Tuesday.
The European Commission, the
EU's executive body, has been collecting evidence to prepare a possible
case against Huawei and ZTE over state subsidies it says allows the
companies to undercut European firms.
- U.S. Republicans press Fed on when regulators can break up a bank. U.S.
Republican lawmakers on Tuesday pressed a Federal Reserve official on
how to tell if any banks pose a "grave threat" to the financial system, a
finding that would allow regulators to take drastic steps such as
forcing a bank to sell assets. The 2010 Dodd-Frank financial
oversight law gives the Federal Reserve authority to impose tough
restrictions on individual firms it feels could shatter the financial
system. But this authority could create uncertainty in financial markets if regulators do not explain what types of threats could
trigger the tougher oversight, Republican members of a U.S.
House of Representatives subcommittee said on Tuesday.
- Rate spike may lead to US muni 'Armageddon'-SEC member. Investors in the $3.7
trillion U.S. municipal bond market could soon face an
"Armageddon" if interest rates spike, a member of the Securities
and Exchange Commission said on Tuesday. Commissioner Dan Gallagher told a roundtable of market
participants hosted by the SEC that recent bankruptcies in
California pose the threat of losses to bondholders. "You tack that on to rising interest rates and we've got a
real Armageddon on our hands here," he said.
- CSX(CSX) profit rises despite coal struggles.
CSX Corp, the No. 2 U.S. railroad, said on Tuesday that quarterly
profit rose as it cut expenses and saw shipment volumes of some
merchandise rise, helping the company fight a still-weak coal business.
Telegraph:
Xinhua:
- China
Should Be Vigilant About Financial Overheating. Main challenge for the
Chinese economy is how to convert to sustainable and consumption-driven
growth, citing Jorg Decressin, the deputy director of the IMF's
research department, as saying. Emerging economies should prevent capital inflow risks, he said.
China Securities Journal:
- Foreign investors may continue to short Chinese banks, citing an unidentified person from PE industry in city of Chenzhen.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 114.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 90.75 -2.5 basis points.
- NASDAQ 100 futures -.28%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,200,000 barrels versus a +250,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -800,000 barrels versus a +1,699,000 barrel build the prior week. Distillate inventories are estimated to fall by -350,000 barrels versus a -169,000 barrel decline the prior week. Finally, Refinery Utilization is estimated unch. versus a +.5% gain the prior week.
2:00 pm EST
Upcoming Splits
Other Potential Market Movers
- The Fed's Stein speaking, Fed's Bullard speaking, Fed's Rosengren speaking, China property price data, Bank of Canada rate decision, weekly MBA mortgage applications report and the BoE minutes could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and automaker shares in the region. I expect US stocks to open mixed and weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
