Evening Headlines
Bloomberg:
- ECB Faces Roadblock to 2015 Start for EU Bank Bail-In Plans. The
European Central Bank and Germany met resistance from national
governments in their bid to bring forward the start date of EU rules
that would force losses on failing banks’ creditors. France and Spain
were among a large group of EU nations to weigh in against the proposal,
which would have seen the start date of the so-called bail-in rules
shunted forward to as early as 2015 from 2018, at a meeting of national
ambassadors today in Brussels, according to an EU official. Nations
were concerned that a faster timetable wouldn’t leave banks with enough
time to prepare, said the official, who couldn’t be named in line with
EU policy. The legislation, proposed last year by Michel Barnier, the
EU’s financial services chief, would require banks to issue minimum
amounts of
unsecured debt and other liabilities that regulators could write
down in a crisis.
- China Service Industries Expand at Slower Pace, Survey Shows.
China’s service industries expanded at a slower pace last month, adding
to the drag on growth in the world’s second-biggest economy after
manufacturing lost momentum. The non-manufacturing Purchasing Managers’ Index fell to 54.5 from 55.6 in March,
the National Bureau of Statistics and China Federation of Logistics and
Purchasing said in a statement
today in Beijing. Risks that include surging credit, overcapacity and an
overheating property market may limit the government’s room to
stimulate growth. “The PMI adds to downside risks for China and the
region,” said Dariusz Kowalczyk, senior economist and strategist at
Credit Agricole CIB in Hong Kong. “The reading suggests that growth
momentum will remain relatively soft” in
the second quarter, and that the economy “has shifted to a
weaker growth trajectory,” he said.
- India Says Inflation, Trade Gap Constrain Policy Scope: Economy.
The Reserve Bank of India said the space for monetary policy to support
economic growth remains constrained by elevated consumer-price
inflation and a record current-account deficit. “Monetary policy would
need to be calibrated recognizing
the very limited policy space available to ease further,” the
Reserve Bank said yesterday in an economic review before today’s
rate decision in Mumbai. It cited “significant” risks
including a “high” current-account gap and “inflation above
the threshold over which it becomes inimical to growth
sustainability.”
- Australia April Services Industry Gauge Drops by Most in a Year. A gauge of Australia’s services
industry dropped in April by the most in a year as sales, new
orders and employment declined amid weakening domestic demand. The
performance of services index fell to 44.1 from 49.6 in March, the
Australian Industry Group and Commonwealth Bank of Australia (CBA) said
in Sydney today. The 5.5 point drop was the biggest since April 2012 and
the gauge hasn’t been above 50, the
dividing line between expansion and contraction, since January
last year.
- Hong Kong Overheating Risk Seen by HKMA’s Chan on Surging Debt. Hong
Kong’s economy is at risk of overheating after household debt rose to a
record 61 percent of gross domestic product, said Norman Chan, chief
executive of the Hong Kong Monetary Authority. “Hong Kong’s consumption and personal-debt growth have
consistently outpaced overall economic growth,” Chan told
lawmakers today, citing risks to “macroeconomic stability.”
- U.S. Demands North Korea Free American Given Hard Labor. The
U.S. called for the immediate release of an American citizen after
North Korea sentenced the man, Pae Jun Ho, to 15 years’ hard labor for
unidentified “hostile acts” against the communist country. State Department spokesman Patrick Ventrell said yesterday that the U.S.
is urging North Korea “to grant him amnesty and to allow for his
immediate release.”
- Asian Stocks Rise With Metals; Dollar Weakens Before Jobs Data.
Asian stocks rose for the first time in three days as Macquarie Group
(MQG) Ltd. reported higher earnings and investors awaited the release of
U.S. jobs data. Metals gained, while the dollar weakened. The MSCI Asia
Pacific excluding Japan Index gained 0.3
percent at 10:27 a.m. in Hong Kong.
- Teradata's(TDC) Q1 profit down 35 percent. Data management company Teradata Corp. reported Thursday its
first-quarter profit dropped 35 percent as the company got off to what
its CEO acknowledged was a slow start to the year.
Wall Street Journal:
- U.S. Bulks Up to Combat Iran. The Pentagon has redesigned its biggest "bunker buster" bomb with more
advanced features intended to enable it to destroy Iran's most heavily
fortified and defended nuclear site.
- French Leader François Hollande's Woes Fan European Fears.
A new hurdle has popped up in Europe's race to save itself from
economic calamity: French President François Hollande, who built his
career on an ability to forge consensus, now finds himself in the
unaccustomed position of pleasing no one. Mr. Hollande's ruling
Socialist Party is in revolt. Party heavyweights are urging him to turn
up the heat on Germany's Chancellor Angela Merkel and defy her
prescription of austerity for resolving the euro-zone crisis. The French
press last week splashed a Socialist Party draft
paper that described Ms. Merkel as "selfish." Mr. Hollande's success or failure to reach consensus with Ms.
Merkel—without alienating his leftist majority in Parliament—is likely
to have profound repercussions on the euro zone's future. There are
widening concerns that France, Europe's second-largest economy behind
Germany, risks becoming the next problem child.
- SEC Zeroing In on 'Prime' Funds. Money Funds Viewed as Most Vulnerable to Flight by Anxious Investors Would Face Tighter Rules. U.S. securities regulators, under pressure to address risks posed by the
$2.6 trillion money-market-mutual fund industry, are considering a
scaled-back approach that would tighten rules for about half of the
sector that is seen as most vulnerable to investor runs, according to
people familiar with staff discussions.
Fox News:
- State Department's Benghazi review panel under investigation, Fox News confirms. The State Department's Office of Inspector General is investigating
the special internal panel that probed the Benghazi terror attack for
the State Department, Fox News has confirmed. The IG's office is said by well-placed sources to be seeking to
determine whether the Accountability Review Board, or ARB -- led by
former U.N. Ambassador Thomas Pickering and former Chairman of the Joint
Chiefs of Staff Adm. Mike Mullen -- failed to interview key witnesses
who had asked to provide their accounts of the Benghazi attacks to the
panel. The IG's office notified the department of the "special review" on
March 28, according to Doug Welty, the congressional and public affairs
officer of the IG's office.
MarketWatch.com:
CNBC:
- AIG(AIG) Earnings Top Expectations but Revenue Misses.
AIG on Thursday reported first-quarter earnings that beat market
expectations, driven primarily by higher operating income in its
property and casualty business.After the earnings announcement, the company's shares climbed in extended-hours trading.
Zero Hedge:
Business Insider:
Washington Post:
- India, China remain at odds over alleged border incursion.
Two weeks ago, Indian military officials announced that they had
discovered that a platoon of Chinese soldiers had crossed the de facto
border between the two countries and set up camp an unprecedented six
miles inside Indian-claimed territory, sparking a still-unresolved
standoff. China’s Foreign Ministry said last week that its troops were
patrolling on the Chinese side of the border and “never trespassed the
line.” Such disputes have a long history. But the latest incident, in a
previously uncontested area, involves the most serious accusations by
India in 25 years and is posing a challenge for the countries’ diplomats
ahead of a visit to New Delhi by China’s new premier, Li Keqiang, this
month.
New York Times:
- Vast Oil Reserve May Now Be Within Reach, and Battle Heats Up. Secure in this state’s history and mythology, the venerable
Midway-Sunset oil field near here keeps producing crude more than a
century after Southern California’s oil boom. Many of its bobbing pump
jacks are relatively short, a telltale sign of the shallowness of the
wells and the ease of extracting their prize. But away from this forest of pump jacks on a flat, brown landscape, a
road snakes up into nearby hills that are largely untouched — save for a
handful of exploratory wells pumping oil from depths many times those
of Midway-Sunset’s. These wells are tapping crude directly from what is
called the Monterey Shale, which could represent the future of
California’s oil industry — and a potential arena for conflict between
drillers and the state’s powerful environmental interests. Comprising two-thirds of the United States’s total estimated shale oil
reserves and covering 1,750 square miles from Southern to Central
California, the Monterey Shale could turn California into the nation’s
top oil-producing state and yield the kind of riches that far smaller
shale oil deposits have showered on North Dakota and Texas.
- A Rate Cut in Europe, and a Hint of Limits. The
European Central Bank cut its benchmark interest rate to a record low
on Thursday. But its president, Mario Draghi, indicated that his promise
last year to do “whatever it takes” to save the euro had limits.
- JPMorgan(JPM) Caught in Swirl of Regulatory Woes. Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power
plants into powerful profit centers,” and that one of its most senior
executives gave “false and misleading statements” under oath.
Reuters:
- U.S. sues owner of nation's biggest for-profit hospice chain. The
U.S. Justice Department is suing Chemed Corp(CHE) and its hospice
subsidiaries, including the biggest U.S. for-profit hospice chain,
alleging false billings for Medicare hospice services. The government
said on Thursday that its complaint accuses Chemed and its leading
hospice subsidiary, Vitas Hospice Services, of being involved in the
submission of false claims for crisis care services that proved to be
unnecessary, were never actually provided or failed to meet Medicare
requirements. The companies used aggressive marketing tactics and
pressured staff to increase the numbers of crisis care claims
submitted to Medicare, whether valid or not, according to the
Justice Department.
- U.S. Treasury chief to meet with Wall Street executives. The dinner meeting in New York includes JPMorgan Chase & Co
Chief Executive Jamie Dimon, hedge fund manager John
Paulson, Blackstone Group LP CEO Stephen Schwartzman and
others, according to a person attending.
Lew, 57, has spent his first few weeks as Treasury chief on
international travel, in congressional hearings and on other priorities.
Thursday's dinner comes ahead of Friday's release of unemployment data
for April. Topics for discussion might also touch on the global economy,
including Europe and China, and cyber security.
- Weak North American sales drag on Tempur-Pedic(TPX). Mattress maker Tempur-Pedic International
Inc's first-quarter revenue fell 11 percent, excluding
its recent Sealy's acquisition, hurt by a decline in sales at
its core North America business. Shares of Lexington, Kentucky-based Tempur-Pedic fell 2
percent in after-hours trading, after the company reported lower
earnings for the first quarter.
- Man dead after Houston airport shooting sparks panic. A man sparked a panic at a busy
Houston airport terminal on Thursday when he pulled out a gun
and shot at the ceiling, then either shot himself or was killed
by a security officer who confronted him. Houston police spokesman Kese Smith said the man who died
was 30 years old, but did not identify him. No other people were
injured or killed in the incident, he said. Smith said the man fired at least one shot at the ceiling.
He was then confronted by a Homeland Security officer nearby,
who fired his weapon. "The Homeland Security Officer and the suspect fired shots
simultaneously. The suspect was struck and (was) treated by
responding paramedics who pronounced him dead in an ambulance,"
Houston police said in a statement. It was not clear if the man died from a self-inflicted
gunshot or from one or more shots fired by the security officer.
AFP:
- 'No alternative to austerity' says IMF chief. IMF chief Christine Lagarde insisted Thursday there was no
alternative to the agenda of austerity being pushed across Europe, after
massive demonstrations in several countries demanded an end to the
policies. "There is no alternative to austerity," Lagarde told Swiss public broadcaster RTS. "The situation is difficult," she acknowledged, adding that countries
needed to simultaneously observe "budgetary discipline", "prefer
elements of growth" and promote "investment in employment".
Xinhua:
- China Must Control LGFV Loans. China Banking Regulatory Commission asks banks not to increase scale of loans to local government financing vehicles, according to a front-page commentary, citing an official at the regulator. The country will continue pushing forward risk control for LGFV bonds this year, he said.
Oriental Daily:
- Chinese Banks Face Growing Capital Shortfall. Capital
shortfall would reach 383.6b yuan next year should their earnings fall
30% from current level, citing People's Bank of China Deputy Governor
Liu Shiyu. Chinese banks face growing pressure to replenish capital as a result of balance sheet expansion. Chinese banks' business model build on balance sheet expansion not sustainable, he said. Five largest commercial banks may for the first time face 40.5b yuan of capital shortfall next year should they maintain current level of expansion. Big five's cumulative capital shortage may reach 1.7t yuan by 2017. Big five to have 2.8t yuan
of shortfall by 2017 should next year's profits fall 30% from current
level. Banks must build new internal capital replenishment system,
improve profitability and risk management to control capital pressure,
he said.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 85.25 -1.75 basis points.
- NASDAQ 100 futures +.06%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for April is estimated at 140K versus 88K in March.
- The Unemployment Rate for April is estimated at 7.6% versus 7.6% in March.
- Average Hourly Earnings for April are estimated to rise +.2% versus unch. in March.
10:00 am EST
- Factory Orders for March are estimated to fall -2.9% versus a +3.0% gain in February.
- The ISM Non-Manufacturing Composite for April is estimated to fall to 54.0 versus 54.4 in March.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lacker speaking, Fed's Tarullo speaking, Fed's Rosengren speaking, Eurozone PPI data, (PBI) investor meeting, (BX) investor day and (COV) guidance could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and financial shares in the region. I expect US stocks to open modestly lower and rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- ISE Sentiment Index 100.0 +21.95%
- Total Put/Call .89 -12.75%
Credit Investor Angst:
- North American Investment Grade CDS Index 74.22 -4.79%
- European Financial Sector CDS Index 139.09 -5.48%
- Western Europe Sovereign Debt CDS Index 93.57 -.81%
- Emerging Market CDS Index 228.85 -2.45%
- 2-Year Swap Spread 14.0 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -17.25 +.75 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $129.40/Metric Tonne -3.5%
- Citi US Economic Surprise Index 4.20 +8.0 points
- 10-Year TIPS Spread 2.28 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +216 open in Japan
- DAX Futures: Indicating +17 open in Germany
Portfolio:
- Higher: On gains in my retail/tech/medical/biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Draghi Leaves Door Open to Further Monetary Easing. European Central Bank President Mario Draghi opened a new front in the
battle against the debt crisis after cutting the benchmark interest rate
to a record low today. Speaking in Bratislava, Draghi signalled that officials may take the
unprecedented step of charging banks to park excess cash with the ECB
overnight and that another reduction in the main rate is possible.
“We
will look at all the incoming data and stand ready to act if needed,”
Draghi said at a press conference in the Slovakian capital after the ECB
cut its key rate by a quarter point to 0.5 percent. Asked if further action could include taking the deposit rate negative from its current level of zero,
he said: “We will look at this with an open mind.”
- Euro-Area Manufacturing Contracted for 21st Month in April. Euro-area manufacturing output
contracted for a 21st straight month in April, adding to
pressure on the European Central Bank to cut interest rates to spur lending and growth. A gauge of manufacturing in the 17-nation euro area declined to 46.7 last month from 46.8 in March,
London-based Markit Economics said today. That’s above an initial
estimate of 46.5 on April 23. A reading below 50 indicates contraction. “There
is nothing here to suggest that manufacturing will turn the corner and
stabilize any time soon, putting greater onus on policy makers to act
quickly to reinvigorate growth,” Chris Williamson, chief economist at
Markit, said in today’s
report.
- Euro Drops as Draghi Open to Negative Rates; Dollar Strengthens. The euro fell for the first time in
five days against the dollar after European Central Bank
President Mario Draghi said policy makers may take the unprecedented step of charging banks to hold excess reserves.
The single currency dropped against all except one of its
16 most-traded peers as the ECB cut its main refinancing rate
and Draghi said policy makers had an open mind on a negative
deposit rate.
- European Power Prices Slide to Record Low as
Coal Slumps on Surplus. European power prices dropped to records as
thermal coal slumped to the cheapest level in almost three years amid a
glut of the fuel. Germany's gross power use last year dropped 1.3% to
the lowest level since 2003. "The oversupply in the coal market is
driving prices down and power is following suit," said Thomas Randel, a
power trader at EnBW Energie Baden-Wuerttemberg AG. "The market is in
such a bearish mood, it's awful.
- Natural Gas Tumbles Most in Nine Months After Stockpile Increase. Natural gas futures dropped the most
in almost nine months after a government report showed that U.S.
stockpiles expanded by more than forecast. Gas in New York slid as much as 6.4 percent after the
Energy Information Administration said inventories rose 43
billion cubic feet in the week ended April 26 to 1.777 trillion
cubic feet. Analyst estimates compiled by Bloomberg showed a
gain of 29 billion.
- Crude Gains First Time in 3 Days. WTI for June delivery rose $2.23, or 2.5 percent, to $93.26
a barrel at 12:38 p.m. on the New York Mercantile Exchange. The
volume of all futures traded was 25 percent above the 100-day
average for the time of day. Prices fell the most since April 15
yesterday. Brent for June settlement gained $2.03, or 2 percent, to
$101.98 a barrel on the London-based ICE Futures Europe
exchange.
- Lumber Futures Fall, Head for Longest Slump Since at Least 1986.
The contract for July delivery fell .7% to $340.2 per 1,000 board feet
on the Chicago Mercantile Exchange, after touching $339, the lowest for a
most-active contract since Dec. 6. The price is headed for the 12th
straight decline, the longest slump since at least April 1986, when
Bloomberg data begins.
- VIX Clings to Stocks Like It’s 2007 as S&P 500 Peaks. Historical relationships between U.S. equity and options
prices have come under increasing strain in the past week, with the
record rally in the Standard & Poor’s 500 Index awakening demand
among both speculators and hedgers. The Chicago Board Options
Exchange Volatility Index (VIX) moved in the same direction as the
S&P 500 (SPX) for four straight days through April 29, including
three advances and one drop. That’s the longest stretch of lockstep
moves since February 2007, according to data compiled by Bloomberg. The
indexes swing in the opposite direction about 80 percent of the time.
- Suicide Rate Rises as Economy Stresses Middle-Age America. More middle-aged Americans are killing themselves, and the economy may be the reason, according to a government report. The annual suicide rate of people 35 to 64 years old rose 28 percent from 1999 to 2010, more than any other age group, the
U.S. Centers for Disease Control and Prevention said in the
report today. The working-age group probably is more affected by
the economic downturn in the past half-decade than the young or
old, and that may be driving suicide rates higher.
Wall Street Journal:
- U.S. Denounces North Korea Arrest.
The Obama administration lashed out Thursday at North Korea's leaders
after an American citizen was sentenced to 15 years of hard labor for
unspecified "hostile acts" against the country. The sentencing of Kenneth Bae, a 44-year-old tour operator from
Washington state, came after he was tried Tuesday by North Korea's
highest court, state news agency Korean Central News Agency reported in a
brief dispatch Thursday.
- China's Slowing Growth, Rising Credit. China's growth is slowing even as lending soars. Where's the money going? The latest signs on China's growth are depressing. The HSBC
purchasing managers' index for April came in at 50.4, down from 51.6 in
March and only fractionally above the 50 mark that separates growth from
contraction. Steel futures prices in Shanghai fell 7.6% over the month,
edging close to levels seen at the nadir of the financial crisis.
Fox News:
- Special ops called for military backup during Libya attack, sources say. On the night of the Benghazi terror attack, special operations put
out multiple calls for all available military and other assets to be
moved into position to help -- but the State Department and White House
never gave the military permission to cross into Libya, sources told Fox
News. The disconnect was one example of what sources described as a
communication breakdown that left those on the ground without outside
help. "When you are on the ground, you depend on each other -- we're gonna
get through this situation. But when you look up and then nothing
outside of the stratosphere is coming to help you or rescue you, that's a
bad feeling," one source said. Multiple sources spoke to Fox News about what they described as a
lack of action in Benghazi on Sept. 11 last year, when four Americans,
including Ambassador Chris Stevens, were killed. "They had no plan. They had no contingency plan for if this happens,
and that's the problem this is going to face in the future," one source
said. "They're dealing with more hostile regions, hostile countries.
This attack's going to happen again."
MarketWatch:
CNBC:
- Investment Banking Bonanza: Best Year Since '02. Despite regulatory pressure and the general
negative public stigma, big banks are getting still bigger, and big
American banks are doing even better against their global competitors. The latest evidence of reasons not to feel sorry for large financial
institutions comes from what they're doing on the investment banking
side.
- Mario Draghi Calls for Continued Austerity, Lower Taxes. European stock markets have rallied in the last few months as it has
become clear that bureaucrats in Brussels will be more lenient on
countries, giving them more time to reduce their deficits and debt
levels. It has led many market participants to herald "the end of
austerity" in Europe, thrilling holders of equities. But during a news conference Thursday, ECB President Mario Draghi made
clear more than once that "governments should not unravel efforts" to
contain spending. So is Draghi still pro-austerity? When a reporter
asked Draghi if he is "the last man standing" when it comes to a
commitment to austerity, he responded: "Fiscal consolidation is, and
I've said this since the very beginning of my tenure, is contractionary
in the short term and in the medium term as well. So you want to
mitigate this. You want to take action to mitigate the contractionary
effects.
Zero Hedge:
Business Insider:
NYPost:
- Lawsky Poised to Act on Ailing MBIA(MBI). Time has just about run out for MBIA Insurance Corp. — once one of the country’s most respected specialty insurers. New
York state regulators are poised — within “weeks or perhaps days” — to
seize the company’s money-losing mortgage insurance arm because it is
running out of cash, a source close to the situation said. The
company ran into trouble when it guaranteed billions in mortgage-backed
securities that Wall Street peddled to investors — bonds that blew up
when the housing bubble burst.
Reuters:
- Italy April Manufacturing PMI 45.5, MNI Says.
- France April Manufacturing PMI 44.4, MNI Says.
- Germany April Manufacturing PMI 48.1, MNI Says.
- Euro-Area Manufacturing PMI 46.7, MNI Says.
- French car sales decline slowed in April. France's car sales decline slowed
down in April to a 5.2 percent drop, data published on Thursday
showed, raising hopes that demand may be about to stabilise. April registrations fell to 157,859 cars last month, the
Paris-based CCFA industry association said, with sales for the
first four months down 12.3 percent. The slump in demand slowed from a 16.4 percent drop in
March.
- Italy new car sales fall 10.83 percent in April - ministry. New car sales in Italy, Europe's fourth-largest car market, fell 10.83 percent in April from the same month a year ago to 116,209 vehicles, Italy's Transport Ministry said on Thursday. In March, car sales in recession-hit Italy plunged 4.9
percent, adding to a decline for all of 2012 of 19.8 percent.
Telegraph:
Handelsblatt:
- An
interest-rate cut by the ECB would have a limited effect, Marcel
Fratzscher, head of the Berlin-based DIW economic institute, says in an interview. An ECB rate cut could have negative as well as positive consequences, he said.
Expansion:
- Spain to Collect EU3 Bln More in Corporate Tax. Spain aims to collect EU3b in tax from companies with revenue of more than EU20m. Spain won't raise rates of tax but will limit deductions for financial expenses, depreciation, compensation for losses, citing people in the budget ministry.
Qiushi:
- China should "appropriately" raise resource taxes and start levying environment taxes, Vice Premier Ma Kai writes.
Xinhua:
- CBRC to Push for Risk Control of LGFV Loans. China Banking Regulatory Commission to focus on controlling total amount of loans to local government financing vehicles, citing a CBRC official familiar with the situation. CBRC will strive to prevent large defaults. CBRC to ensure wealth mgmt products invested in areas in line with nation's macro, industrial policies. CBRC to closely monitor bank ops using money from wealth mgmt product sales, orders banks to fully disclose info on products.
- China Cracking Down on Online-Rumor Makers, Spreaders. State Internet Information Office says "extreme minority" of people have spread rumors, fabricated pictures, citing the govt agency. At least 11 peo0ple detained for up to 10 days for "fabricating" posts about H7N9 flu virus. Office to punish Internet cos. that fail to stop spread of rumors.
Style Underperformer:
Sector Underperformers:
- 1) Steel -1.74% 2) Education -1.56% 3) Papers -.94%
Stocks Falling on Unusual Volume:
- ANR, CTCM, BBEP, NRP, ROCK, TS, STO, HK, EROC, LNC, COT, EBIX, SAM, SHPG, NVDQ, KRA, DXPE, PBF, TGI, CYOU, SMA, HSH, CXO, CTRX, EVEP, PHH, IP and TS
Stocks With Unusual Put Option Activity:
- 1) EBIX 2) ABBV 3) DCTH 4) ANR 5) JDSU
Stocks With Most Negative News Mentions:
- 1) WPZ 2) DXPE 3) EXC 4) SSI 5) ANSS
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.28% 2) Hospitals +2.16% 3) Airlines +2.02%
Stocks Rising on Unusual Volume:
- IPHI, PRU, DLLR, MFC, TSO, SNI, PGTI, REGI, YELP, BZH, GNRC, APD, HOS, OIS, MGM, BKD, ABMD, V, STX, CNQR, HAR, DXCM, CNQR, NUS, PXD, AOL, ANGI, NCT, GM, SFY, BEAM and CI
Stocks With Unusual Call Option Activity:
- 1) SE 2) LBTYA 3) YELP 4) BZH 5) V
Stocks With Most Positive News Mentions:
- 1) TSCO 2) FLR 3) CNX 4) GILD 5) EMN
Charts:
Evening Headlines
Bloomberg:
- U.K. Steps Up Tax Crackdown With Caribbean Accord. The U.K. signed agreements with
territories including Anguilla, Bermuda and the British Virgin
Islands in the latest effort to fight tax evasion as the government
struggles to contain its borrowing. All the British overseas territories
with financial centers signed up to the government’s effort, “marking a
turning point in the fight against tax evasion and illicit finance,”
the Treasury said in a statement in London today. “This represents a
significant step forward in tackling illicit finance and sets the global
standard in the fight against tax evasion,” Chancellor of the Exchequer
George Osborne said in the statement. “I now hope others follow these
governments’ lead and enter into similar commitments to this new
level of transparency, removing the hiding places for those who
seek to evade tax and hide their assets.”
- GM(GM) Pulls Chevrolet Ad Including Song Decried as Racist. General
Motors Co. (GM), seeking to boost China sales 75 percent by 2015,
apologized for a Chevrolet ad that included a song referring to “the
land of Fu Manchu”
where all of the girls sing “ching, ching, chop-suey,” which
one Hong Kong newspaper called racist. “Our intent was not to offend anyone and we’re deeply
sorry if anyone was offended,” Ryndee Carney, a Detroit-based
GM spokeswoman, said yesterday in a telephone interview. “We’re
reviewing our advertising approval processes to make sure this
doesn’t happen again.” GM wants to expand sales in China and plans to spend $11
billion through 2016 on new plants and products in the country.
- China Cyberspies Outwit U.S. Stealing Defense Secrets. Among defense contractors, QinetiQ North America (QQ/) is
known for spy-world connections and an eye- popping product line. Its
contributions to national security include secret satellites, drones,
and software used by U.S. special forces in Afghanistan and the Middle
East. Former CIA Director George Tenet was a director of the
company from 2006 to 2008 and former Pentagon spy chief Stephen Cambone
heads a major division. Its U.K. parent was created as a spinoff of a
government weapons laboratory that inspired Q’s lab in Ian Fleming’s
James Bond thrillers, a connection QinetiQ (pronounced kin-EH-tic) still
touts. QinetiQ’s espionage expertise didn’t keep Chinese cyber-
spies from outwitting the company. In a three-year operation, hackers
linked to China’s military infiltrated QinetiQ’s computers and
compromised most if not all of the company’s research.
- Asian Stocks Fall After U.S. Payroll Growth Slows. Asian
stocks fell for a second day after weaker growth in U.S. payrolls and
manufacturing added to evidence of a slowdown in the world’s largest
economy and as the yen rose, curbing the earnings outlook for Japanese
exporters. BHP Billiton Ltd. (BHP), the world’s largest mining
company, lost 1 percent, leading raw-materials shares lower as metals
prices
declined. Toyota Motor Corp., the world’s biggest carmaker, slid
1.4 percent.
- China Rebar Drops to Five-Month Low on Iron Price, Mill Supplies.
Steel reinforcement-bar futures in Shanghai fell to the lowest level in
almost five months as a decline in the price of iron ore and
consistently high output from local mills pressured the market. The
contract for October delivery on the Shanghai Futures Exchange lost as
much as 1.9 percent to 3,533 yuan ($574) a metric ton today, the
cheapest since Dec. 3, and was at 3,551 yuan at 10:11 a.m. local time.
Futures, which reopened after a three-day holiday, lost 6.2 percent in
the previous two weeks. “The lower iron ore price is pressuring the market, while Chinese mills’ output remained at a high level,”
Li Meng, analyst at Huatai Changcheng Futures Co., said by phone from
Shanghai today. The average spot price for rebar was up 0.2 percent at
3,574 yuan a ton on April 26, according to the Beijing Antaike
Information Development Co.
- Rubber Drops to One-Week Low as U.S. Data Raise Demand Concerns.
Rubber declined to the lowest level in
more than a week as Japan’s currency advanced, cutting the appeal of the
yen-denominated futures, and reports showed a slower pace of growth in
U.S. manufacturing and payrolls. The contract for October delivery
lost as much as 3.4 percent to 250.8 yen a kilogram ($2,578 a metric
ton), the lowest most-active price since April 24. Futures traded at
253.7 yen on the Tokyo Commodity Exchange at 10:54 a.m., extending
this year’s losses to 16 percent.
- Boston Bomb Trail Leads Into Heart of Putin’s Own War on Terror.
Six blocks from the Caspian Sea, on Kotrova Street in central
Makhachkala, sits a mosque being watched by undercover Russian agents
charged with preventing acts of terror. As worshipers spill out into the
streets, American
investigators are watching now, too, as they try to reconstruct
the events that led to the most high-profile terrorist assault
in the U.S. since Sept. 11, 2001.
- Lehman Sues Intel(INTC) Alleging Breach of $1 Billion Swap Deal. Bankrupt
Lehman Brothers Holdings Inc. sued Intel Corp. (INTC), alleging the
world’s largest semiconductor maker breached a $1 billion swap agreement.
Under a 2008 accord, Intel gave $1 billion to Lehman’s over-the-counter
derivatives unit in August of that year in exchange for 50 million
shares of its stock, to be delivered on September 29, 2008, according to
a complaint filed today in U.S. Bankruptcy Court in Manhattan.
Wall Street Journal:
- Mining Woes Snag Financial Firms. Far from any mine shaft, the legions of bankers, consultants and
lawyers who benefited from a decadelong commodities boom are now
preparing to retrench as the market weakens. Global mining capitals such as Toronto, Johannesburg and London all
flourished amid lofty prices in recent years for everything from gold
and copper to potash. Mining companies have tended to flock to a
handful
of cities to list their shares, set up headquarters and raise cash. But
over the past year, the sector has been hit by a triple whammy of
falling prices, still-rising costs and waning investor interest. Most
mined commodities have fallen sharply since their 2011 highs. Gold is
23% off its highs, and copper closed at an 18-month low Wednesday. Gold
has fallen 14% since the start of this year to $1,446 a troy ounce. As a result, some of the world's biggest miners are slashing outlays,
shedding assets they bought at the top of the market just a few years
ago, and shaking up management teams that spearheaded several years' of
frenetic deal making and fundraising. That is having a spillover effect on the industries servicing miners.
Bankers and brokers involved in the sector are starting to see revenue
dry up, and some are already shedding staff.
- Japan's Nuclear Plan Unsettles U.S.
Japan is preparing to start up a massive nuclear-fuel reprocessing
plant over the objections of the Obama administration, which fears the
move may stoke a broader race for nuclear technologies and even weapons
in North Asia and the Middle East. The Rokkasho reprocessing facility, based in Japan's northern Aomori
prefecture, is capable of producing nine tons of weapons-usable
plutonium annually, said Japanese officials and nuclear-industry
experts, enough to build as many as 2,000 bombs, although Japanese
officials say their program is civilian.
- Clubby London Trading Scene Fostered Libor Rate-Fixing Scandal.
Neil Danziger's trades for Royal Bank of Scotland Group PLC generated
rich commissions for the brokers who handled them. In return, brokers at
London's Tullett Prebon took Mr. Danziger to London strip clubs and
spent long weekends with him in Las Vegas, according to people familiar
with the
relationship. Brokers at R.P. Martin Holdings Ltd., another London firm,
gave him early access to lucrative trades, these people say.
Fox News:
- North Korea reportedly sentences detained American to hard labor. North Korea says an American detained for nearly six months has been
sentenced to 15 years of "compulsory labor" for crimes against the
state. Pyongyang state media said Thursday that the trial took place Tuesday
but provided no other new details in announcing Kenneth Bae's
sentencing. Bae was tried in the Supreme Court on charges of
plotting to overthrow the government. He could've faced the death
penalty. The case further complicates already fraught relations between
Pyongyang and Washington following weeks of heightened rhetoric and
tensions.
MarketWatch.com:
CNBC:
- China April HSBC PMI Eases to 50.4 on Weak Demand. China's factory-sector growth eased in April as new export orders
fell for the first time this year, a private survey showed on Thursday,
suggesting the euro zone recession and sluggish U.S. demand may be
reining in China's economic recovery. The final HSBC
Purchasing Managers' Index (PMI) dropped to 50.4 in April from March's
51.6 and was largely in line with a flash reading last week of 50.5.
Fifty divides expansion from contraction on a monthly basis. China's official PMI on Wednesday painted a similar picture, falling to
50.6 in April from an 11-month high of 50.9 in March as new export
orders fell. "The slower growth of manufacturing activity in
April confirmed a fragile growth recovery of the Chinese economy as
external demand deteriorated and renewed destocking pressures built up,"
said Qu Hongbin, chief China economist at HSBC. A sub-index for new export orders dipped to 48.4, the first time it has
retreated below 50 this year and the lowest level since last October,
reinforcing concerns about the strength of the global economy.
- Visa(V) Earnings Beat, Supported by Strong Growth.
Visa said its net income slipped nearly 2 percent in the fiscal second
quarter from a year earlier, when the company benefited from an
adjustment to its income tax provision. But the
payments-processing company reported growth in service and data
processing revenue, as well as international transactions.
- Facebook(FB) Revenue Beats, but Earnings Miss.
Facebook posted revenue that surpassed Wall Street forecasts on
Wednesday, as the company's mobile ad revenues continued to rise. After
an initial
pop, Facebook shares are slightly higher in extended hours trading.
- US Presses China to Stop Growing Trade Secret Theft. The U.S. Trade Representative's office criticized China on
Wednesday for failing to stop the growing theft of American trade
secrets that are the lifeblood of U.S economic might, in the latest sign
of Washington's frustration with the problem. "Not only are
repeated thefts occurring inside China, but also outside of China for
the benefit of Chinese entities," USTR said in its annual report on
countries with the worst records of protecting U.S. intellectual
property rights. "The United States strongly urges the Chinese
Government take serious steps to put an end to these activities and to
deter further activity by rigorously investigating and prosecuting
thefts of trade secrets by both cyber and conventional means," the
report said.
Zero Hedge:
Business Insider:
CNN:
Pew Research Center:
Reuters:
- Japan PM's "stealth" constitution plan raises civil rights fears. Shinzo Abe makes no
secret of wanting to revise Japan's constitution, which was drafted by
the United States after World War Two, to formalize the country's right
to have a military - but critics say his plans go deeper and could
return Japan to its socially conservative, authoritarian past. Sweeping changes proposed by Abe's Liberal
Democratic Party (LDP) in a draft constitution would strike at the heart
of the charter with an assault on basic civil rights that could muzzle
the media, undermine gender equality and generally open the door to an
authoritarian state, activists and scholars say.
- BOJ April 3-4 minutes: some members wary of risks of bold easing. Some members of the Bank of Japan's
policy board expressed concerns that large-scale purchases of
government debt could actually impair lending and disturb the
functioning of financial markets, minutes of their April 3-4 meeting showed on Thursday. Members
raising concerns about expanded easing voted for the change in policy,
but their reservations could suggest that there are differing levels of
enthusiasm about the central bank's overhaul of monetary policy. Some
members also said the BOJ should allow for a range of six to eight years
for the average maturity of government debt purchased, as this could
lessen disruptions to financial markets.
- EU gives support to Italy's Letta, cautions on debt. European Council President
Herman Van Rompuy said on Wednesday that the European Union
supported efforts by new Italian prime minister Enrico Letta to grow Italy's economy, but public finances must be kept in order.
Telegraph:
China Securities Journal:
- Beijing April Used Home Transactions Plunge. Beijing's April used home transactions fell 48% year-on-year.
- China Should Watch for Rising "Hidden" Bad Loans. China's non-performing loan rate could be underestimated by "a large measure" because of "hidden" bad loans, Zhang Monan, a researcher with the State Information Center, wrote today. Chinese banks' growth has slowed and their non-performing loan ratios have increased this year because of a downward momentum in the economy, Xhang wrote. The debt-to-equity ratio at Chinese non-financial companies is "excessively" high, he wrote. New off-balance-sheet financing in some banks exceeds on-the-books credit growth, he said. Bad loans cold increase when asset prices drop, Zhang wrote.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 -.5 basis point.
- Asia Pacific Sovereign CDS Index 87.0 +.75 basis point.
- NASDAQ 100 futures +.28%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Trade Deficit for March is estimated at -$42.3B versus -$43.0B in February.
- Preliminary 1Q Non-farm Productivity is estimated to rise +1.0% versus a -1.9% decline in 4Q.
- Preliminary 1Q Unit Labor Costs are estimated to rise +.7% versus a +4.6% gain in 4Q.
- Initial Jobless Claims are estimated to rise to 345K versus 339K the prior week.
- Continuing Claims are estimated to rise to 3030K versus 3000K prior.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI Manufacturing, ECB rate decision, ECB's Draghi speaking, China Non-Manufacturing PMI, Challenger Job Cuts report for April, RBC Consumer Outlook Index for May, Australian inflation data, ISM New York for April, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, (DD) investor day and the (STRA) investor day 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 modestly higher and weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
