Broad Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- ISE Sentiment Index 80.0 -24.5%
- Total Put/Call .77 -13.48%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.50 -1.52%
- European Financial Sector CDS Index 131.04 -.42%
- Western Europe Sovereign Debt CDS Index 92.26 +1.82%
- Emerging Market CDS Index 230.15 -.64%
- 2-Year Swap Spread 14.5 +.5 bp
- TED Spread 24.50 +1.55 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -16.50 unch.
Economic Gauges:
- 3-Month T-Bill Yield .03% -2 bps
- China Import Iron Ore Spot $128.10/Metric Tonne unch.
- Citi US Economic Surprise Index -3.1 -3.4 points
- 10-Year TIPS Spread 2.31 +1 bp
Overseas Futures:
- Nikkei Futures: Indicating +545 open in Japan
- DAX Futures: Indicating +7 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/tech sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area Services Output Shrinks as Retail Sales Drop: Economy. Euro-area services and manufacturing
output shrank for a 15th straight month in April and retail
sales fell in March as the 17-nation economy struggled to emerge
from recession. A composite index based on a survey of purchasing managers
in the manufacturing and services industries increased to 46.9
last month from 46.5 in March, London-based Markit Economics
said in a report today. While above an initial estimate of 46.5
published on April 23, it was still below 50, indicating
contraction. Retail sales declined for a second month in March,
another report showed. The euro-area economy will shrink more than previously
estimated in 2013 as part of a two-year slump that has pushed
unemployment to a record high, the European Commission said on
May 3. “The financial markets appear to have survived (EUGNEMUQ) the government debt crisis, but the leading economic indicators have
recently declined,” said Joerg Kraemer, chief economist at
Commerzbank AG in Frankfurt. There is “a significant risk that,
contrary to analysts’ expectations, the economy will not pick up
in the spring,” he said.
- Draghi Says ECB Ready to Cut Interest Rates Again If Needed. European Central Bank President Mario Draghi said policy makers are ready to cut interest rates again
if needed after reducing them to a record low last week. “We will be looking at all the data that arrives from the
euro-area economy in the coming weeks and if necessary, we are ready to act again,” Draghi said in a speech in Rome today.
“Monetary policy will remain accommodative.”
- Euro Declines After Draghi Says ECB Prepared to Act.
The euro fell against the majority of its 16 most-traded peers as
European Central Bank President Mario Draghi said policy makers are
ready to cut interest rates again if needed after reducing them to a
record low last week. The 17-nation currency fell 0.3 percent to $1.3077
as of 2:37 p.m. New York time.
- Copper Futures Drop on Bets Demand Will Ebb on European Woes. Copper futures fell for the first time
in three sessions on concern that demand will slump in Europe as
global supplies increase. Euro-area services and manufacturing output shrank in April
for a 15th straight month, a report from London-based Markit
showed today. The European Commission said on May 3 that the
region’s economy will contract more than estimated. Copper
stockpiles monitored by the London Metal Exchange are close to
the highest since 2003. “All the data we’re seeing suggests no rebound in Europe,
as well as slowing in China and sub-par growth in the U.S.,”
Frank Lesh, a trader at FuturePath Trading in Chicago, said in a
telephone interview. “We’re still not seeing any inordinate
demand for copper, and supplies are adequate.”
- Rio(RIO) Said to Pursue $5 Billion Iron-Ore Expansion as Glut Looms. Rio Tinto Group (RIO), the world’s second-
biggest miner, will probably pursue a $5 billion expansion of
its iron-ore output in Australia, Chief Executive Office Sam Walsh said, according to two people present at a meeting with
investors and analysts. The board is expected to approve in the fourth quarter an
increase in annual production to 360 million metric tons from
290 million tons unless there are significant changes to the
global demand-supply situation, Walsh told the gathering, the
people said.
- Bain, Golden Gate Agree to Buy BMC(BMC) for $6.9 Billion.
Bain Capital LLC and Golden Gate
Capital agreed to acquire BMC Software Inc., a struggling technology
provider that failed to find a buyer last year, for $6.9 billion in the
third-largest private-equity deal of 2013.
- MBIA(MBI) Surges After Report Insurer Settled with Bank of America. MBIA Inc. surged as much as 57 percent
after Dow Jones Newswires reported Bank of America Corp. will
pay $1.6 billion of cash as part of a settlement with the bond
insurer of mortgage-bond litigation. MBIA was up 43 percent to $14.10 at 12:25 p.m. in New York
after earlier climbing to as high as $15.45. The intraday jump
is the most ever. The settlement includes a $500 million line of credit, Dow
Jones reported today, citing people familiar with the matter.
- Fed Loan Officer Survey Says Business Loans Lead Credit Thaw. U.S. banks eased standards and terms
on loans to businesses as commercial lending led a credit thaw,
according to a Federal Reserve survey.
Wall Street Journal:
Fox News:
- FBI arrests Minnesota man believed to be plotting terror attack. The
FBI has taken into custody a Minnesota man who was believed to be
plotting a terrorist attack. Buford Rogers, 24, of Montevideo, was
arrested Friday after
authorities searched his home and found guns and explosive devices,
according to an FBI news release. The Associated Press reports Molotov
cocktails, suspected pipe bombs and a Romanian AKM assault rifle were
among the weapons found. An affidavit said Rogers admitted firing the
weapon at a gun range in Granite Falls.
Zero Hedge:
Business Insider:
New York Times:
- New York to Sue Wells Fargo(WFC) and Bank of America(BAC) Over Settlement Violations.
New York’s top prosecutor plans to sue Bank of America and Wells Fargo
over claims that they violated terms of a $26 billion mortgage
settlement, his office said on Monday.
Eric T. Schneiderman,
New York’s attorney general, paved the way for a lawsuit against
both
banks over what he said was “repeatedly violating” the terms of the
National Mortgage Settlement, a sweeping pact brokered last year between
five of the nation’s biggest banks and 49 state attorneys general over
foreclosure abuses.
- Slovenia Falls From Economic Grace, Struggling to Avert a Bailout. As fears grow that Slovenia could follow Cyprus and become the sixth
euro zone country to seek a bailout, his rise and fall have come to
symbolize the way easy and cheap credit, combined with Balkan-style
crony capitalism and corporate mismanagement, fueled a banking crisis
that has unhinged a country previously praised as a regional model of
peaceful prosperity.
Washington Times:
- Senate Democrats fleeing ‘Obamacare’.
The exodus started quietly at first. Sen. Max Baucus said last month he
fears the president’s signature health care reform law is quickly
turning into a “train wreck.” How bad is it? The Montana Democrat, head
of the Senate Finance Committee and an author of the law, has decided
not to seek re-election. Why? Because Obamacare isn’t yet up and
running. The true effects won’t be felt until 2014 and beyond. So Mr.
Baucus will disappear into the night a hero, long before the nightmare
comes.
Reuters:
- Italy's Letta sees anti-EU surge if no answers to crisis. Europe risks a wave of anti-EU
votes in 2014 European parliamentary elections unless a June
summit of European Union leaders offers a concrete response to
economic crisis, Italian Prime Minister Enrico Letta said on
Monday.
"If the European summit in June... results in a
bureaucratic, routine, formal conclusion, with a great abstract
plan that needs two years to be implemented...we risk creating a
climate in Europe in which the winning parties will be
anti-European," Letta said.
- EMERGING MARKETS-Brazil stocks slip on China, euro zone data.
Financial Times:
Telegraph:
- Policy battle rages in China as slowdown feeds 'sense of crisis'. Pressure is building for yet another burst of easy credit, even though the "economic
efficiency" of debt is collapsing. The output gained from each extra
yuan of credit has fallen from a ratio of 0.8 to 0.35 since 2008, a warning
sign that the cycle has played out. Fitch downgraded China's debt in April, warning that credit has already jumped
from 125pc to 200pc of GDP in four years, much of it in shadow banking.
While another burst of loans may boost growth in the short run, it risks
storing up ever greater problems.
- Warren Buffett sees 'brutal' damage for savers from central bank money printing. Veteran investor Warren Buffett has warned that savers and bondholders are
suffering a "brutal" erosion of their money as the US Federal
Reserve and other central banks force yields to historic lows.
Expansion:
- Mirrlees Says Spain Still Needs to Exit Euro. Spain needs to return
to the peseta, print money, and dedicate it to public investments to
solve economic crisis, Nobel Laureate James Mirrlees said. "My fear is
that the improvement of the credit market is coming too late," he said.
Les Echos:
- Germany's Schaeuble Tells Les Echos Reforms Must Continue. France and Germany are working well together and have a particular duty to the rest of Europe, Schaeuble said in an interview. High public debts and loss of competitiveness are the reasons for the problems face by some EU states, he said.
Valor Economico:
- Brazil Central Bank Wants Holders to Bail Out
Banks. Central bank is preparing proposal for shareholders, bondholders
and depositors to bail out banks instead of using govt resources, citing director Sidnei Correa Marques.
Style Underperformer:
Sector Underperformers:
- 1) Utilities -1.26% 2) Drugs -1.08% 3) Computer Services -.76%
Stocks Falling on Unusual Volume:
- MNST, PM, LINE, BRY, BBEP, LNCO, TG, NRGM, TSN, SCL, ATHN, MTGE, GEOS, EC, CYNO, HGSH, GK, WCG, YELP, AWR, SYY, OIS, KOF, MSTR, QRE, HPY, REGN, TESO and RPXC
Stocks With Unusual Put Option Activity:
- 1) EA 2) MMM 3) BMC 4) XLP 5) GMCR
Stocks With Most Negative News Mentions:
- 1) OIS 2) PCAR 3) MNST 4) REGN 5) PCAR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +1.05% 2) Networking +.89% 3) Semis +.81%
Stocks Rising on Unusual Volume:
- QIHU, HIMX, DIOD, MXWL, PWRD, NRGY, GTE, ABFS, YRCW, AMAP, IMMR, AMBA, WDAY, ALK, MINI, FCS, CTB, INVN and WLK
Stocks With Unusual Call Option Activity:
- 1) NSM 2) SE 3) PXD 4) HTZ 5) TSN
Stocks With Most Positive News Mentions:
- 1) JKHY 2) PXD 3) ADI 4) DG 5) SWKS
Charts:
Weekend Headlines
Bloomberg:
- Spanish Pain Shows ECB Cut Means Nothing to Banks: Euro Credit.
Banks in Spain and Italy are hobbling European Central Bank efforts to
resuscitate growth as they ratchet up the interest rates on company
loans just as official borrowing costs move closer to zero. The increase
in what companies are paying for money underscores the conflict between
lenders bolstering their balance sheets, while central bankers try to
drive the euro-region economy out of recession using monetary policy.
- Japan Seeks to Boost Financial Ties With Asean Amid China Row. Japan said it will boost financial cooperation with Southeast Asian
nations, support their bond markets and make it easier for Japanese
companies to raise funds in local currencies. Asia’s second-largest
economy will also consider reviving emergency monetary arrangements with
Malaysia, Singapore and Thailand, the Japanese finance ministry said in
a statement after a meeting of finance ministers and central bankers
from Japan and the Association of Southeast Asian Nations, or Asean,
near New Delhi on May 3. Japan is strengthening ties with countries in
the region as it tries to revive growth and as tensions with China escalate over a territorial dispute.
- Gillard Says Aussie’s Strength Forces ‘Grave’ Budget Decisions. Prime Minister
Julia Gillard said a 50 percent rise in the value of the Australian
dollar is squeezing trade-exposed businesses and cutting tax revenue,
forcing her government to make “grave” budget decisions. The erosion of tax receipts played a part in the
government’s decision to raise health-care taxation by 0.5
percentage point to fund a national disability insurance
program, Gillard said in an interview with Australian
Broadcasting Corp. television today.
- Australia Retail Sales Fall in March as Households Turn Cautious. Australian retail sales unexpectedly
declined in March for the first time this year as consumers
spent less on household goods, clothing and footwear in an
economy grappling with a weaker outlook. Sales dropped 0.4 percent to A$21.9 billion ($22.5 billion)
from a month earlier, when they rose 1.3 percent, the Bureau of
Statistics said in Sydney today. The result compares with the
median forecast in a Bloomberg News survey of 22 economists for
a 0.1 percent gain.
- N. Korea Says Won’t Invite Anyone From U.S. to Discuss Detainee.
North Korea said it has no plans to invite anyone from the U.S. to
discuss the case of Pae Jun Ho, the American citizen sentenced to 15
years’ hard labor
for unidentified “hostile acts” against the communist country. Pae
was arrested for “many different acts of crime” including plotting to
overthrow the North Korean regime, an unidentified Foreign Ministry
spokesman was cited as saying by the official Korean Central News
Agency. “We have no plans to invite anyone from the U.S. over the problem of
Pae,” the spokesman said, vowing that North Korea will “sternly respond
to illegal acts of U.S. citizens.”
- Indonesia Bulls Brace for Drop as Stocks Collide With Inflation. Money
managers who profited most from Indonesia’s 57 percent stock-market
rally are preparing for a temporary retreat as valuations climb to
record highs and inflation accelerates. The MSCI Indonesia Index is
poised to drop as much as 10 percent before resuming the advance that
sent it to a record on May 1, say Samsung Asset Management and Panin
Asset Management,
whose stock picks in Asia’s sixth-largest economy helped their
funds beat 97 percent of peers since May 2010.
- Algorithms Seen by Marex Driving More Than Half of LME Trading. So-called algorithmic traders may
account for more than half of activity on the London Metal
Exchange, the world’s biggest marketplace for metals, according
to Marex Spectron Group. “Algo-driven trading is probably in the north of 50
percent of LME trading,” Simon Van Den Born, global head of
metals at Marex Spectron, said in an interview in London last
week. He was referring to so-called “outright” trades that
don’t involve borrowing or lending on the exchange.
- WTI Crude Advances a Third Day as Syria Says Attacked by Israel. West Texas Intermediate crude gained
for a third day amid concern that an attack on Syria will raise tension in the Middle East and disrupt supplies.
London-traded Brent also advanced. WTI futures climbed as much as 1.4
percent in New York after Syria’s state news agency said Israeli
aircraft attacked a military research center on the outskirts of
Damascus yesterday. The strikes were a “declaration of war,” Faisal
al-Mekdad, Syria’s Deputy Foreign Minister Faisal, told CNN.
- Rio Tinto(RIO) Says ‘Tough’ Energy, Aluminum Units Need Cost Cutting. Rio Tinto Group (RIO) needs to cut costs to
remain competitive amid ‘very tough times’ for its aluminum,
coal and uranium businesses, Chief Executive Officer Sam Walsh
said. China’s economy dipped in the first three months of the
year and the world economy remains volatile, the head of the
London-based company said today in an interview with Nine
Entertainment Co. television. Waning global demand for commodities is prompting Rio and
rival miners of commodities from gold to coal to trim assets and
staff as they are squeezed by unfavorable foreign exchange
rates, falling prices and rising costs. Iron ore, which accounts
for 91 percent of Rio Tinto’s net income, fell 4.5 percent last
week to its lowest level this year. Cost cutting “is not easy, this is a process that is very,
very tough, but we need to get on top of it because we need to
have a business that will be competitive,” Walsh said. “When I
look at both our energy and our aluminum business, they’re going
through very tough times.”
- JPMorgan(JPM) Should Name Chairman to Watch CEO, ISS Tells Investors. JPMorgan
Chase & Co. (JPM), the biggest U.S. bank, should separate the
roles of chairman and chief executive officer that are both held by
Jamie Dimon, according to advisory firm Institutional Shareholder
Services. Stockholders should vote in favor of a proposal to name an
independent chairman at New York-based JPMorgan’s annual meeting May
21, ISS said yesterday in a report. ISS, a unit of New York- based MSCI
Inc. (MSCI), advises investors on proxy voting and corporate governance.
It also endorsed the proposal for an independent
board chairman last year.
Wall Street Journal:
- Chinese Protest Plans for Industrial Plants. Environmental Fears Are Fueling Opposition Against New Projects That Officials Say Are Needed for Economic Growth. Tension is bubbling in two western Chinese cities as opposition grows
against planned industrial facilities, the latest examples of growing
public environmental concern threatening to derail projects that
officials say are needed for economic growth. In the southwest city of Kunming, capital of Yunnan province, at
least several hundred people flooded downtown streets on Saturday,
demonstrating against an oil refinery and petrochemical processing plant
planned nearby.
Local organizers and the state-run Xinhua news agency confirmed the
protest. Photos posted to China's Sina Weibo microblogging service
showed crowds of perhaps more than 1,000 gathering in downtown Kunming.
Fox News:
- Clinton sought end-run around counter-terrorism bureau on night of Benghazi attack, witness will say.
On the night of Sept. 11, as the Obama administration scrambled to
respond to the Benghazi terror attacks, then-Secretary of State Hillary
Clinton and a key aide effectively tried to cut the department's own
counterterrorism bureau out of the chain of reporting and
decision-making, according to a "whistle-blower" witness from that
bureau who will soon testify to the charge before Congress, Fox News has
learned. That witness is Mark I. Thompson, a former Marine and now
the deputy coordinator for operations in the agency’s counterterrorism
bureau. Sources tell Fox News Thompson will level the allegation against
Clinton during testimony on Wednesday before the House Oversight and
Government Reform Committee, chaired by Rep. Darrell Issa, R-Calif. Fox
News has also learned that another official from the counterterrorism
bureau -- independently of Thompson -- voiced the same complaint about
Clinton and Under Secretary for Management Patrick Kennedy to trusted national security colleagues back in October.
CNBC:
- Tens of Thousands of French Protesters Reject Austerity. Ten of thousands of far-left French protesters marched to denounce
economic austerity on Sunday to mark the end of President Francois
Hollande's first year in office. The march, organised by
the Left Front coalition, drew a range of left-wingers from greens to
trade unionists to the symbolic venue of Bastille Square, site of a
Paris prison that was stormed during the French Revolution of 1789.
Zero Hedge:
- Niall Ferguson – The Great Degeneration. The core message of his presentation was clear: the party of the
last 20 years is now over and the longer we fail to address the real
issues the bigger the hangover will be in the future.
Business Insider:
ValueWalk:
- Hedge fund Leverage Hits an All-Time High: BAML. Hedge fund
leverage has been on the rise over the past few months. We have already
covered the topic several times in 2013. According to the latest data the trend has continued and is close to the peak reached in 2007.
BAML is out with its latest weekly hedge fund monitor (although they
skipped last week). In the report issued on Sunday the 5th of May, BAML
notes that hedge fund leverage is now at $380 billion, which is only $1
billion short of the high reached in 2007. For all intents and purposes,
hedge fund leverage is basically at an all time high.
Reuters:
- China HSBC April services PMI falls to lowest in nearly two years.
Growth in China's services sector slowed sharply in April to its lowest
point since August 2011, a private sector survey showed on Monday, in
fresh evidence that economic revival will remain modest and may be
facing wider risks. The HSBC services Purchasing Managers' Index
(PMI) fell to 51.1 in April from 54.3 in March, with new order expansion
the slowest in 20 months and staffing levels in the service sector
decreasing for the first time since January 2009. The HSBC services
PMI follows a similar survey by China's National Bureau of Statistics,
which found non-manufacturing activity eased to 54.5. In the latest
survey, the sub-index measuring new business orders dropped sharply to a
20-month low of 51.5 in April, with only 15 percent of survey
respondents reporting an increased volume of new orders that month, HSBC
said.
AFP:
- French Finance Minister Stays Firm on Reducing Deficit. French
government won't "loosen in any way" its deficit-reduction measures,
French Finance Minister Pierre Moscovici is cited as saying in an
interview.
Financial Times:
Telegraph:
- Threat to the eurozone is as strong as ever. The eurozone economy has contracted every single quarter since the end of
2011. During the first three months of 2013, the region's GDP shrank by a
punishing 0.6pc, having fallen at a similar pace the quarter before.
Welt:
- German 2013 Tax Revenue May Be Less Than Forecast. German tax
estimator sees tax revenue at EU4bn-EU5bn less than forecast in October.
Would be the first time in 3 yrs estimator cut forecast.
- Barroso Defends Merkel Against Critics of Austerity. It isn't
Angela Merkel's or Germany's mistake for what happens in France or
Portugal, everyone needs to do his homework, Jose Manuel Barroso said in
an interview. Says crisis isn't "result of German politics or mistakes
by the EU". Says Merkel is one of the people, if not the person, who
understands best what happens in Europe.
- SMT Scharf Sees Slower Growth as Boom Fades. Growth will be
"flatter" over next three to five years as volatile commodity markets
slow demand, citing CEO Christian Dreyer in interview.
- EU's
Barroso Warns Germany Against Reform Complacency. EU Commission
President Jose Manuel Barroso warns Germany not to be content with
results of past reforms, saying "complacency" would be "dangerous,"
citing him in an interview.
WirtschaftsWoche:
- Magna to Cut Jobs in Europe, US on Market Downturn. Magna
examining which parts have to be produced close to clients in Europe and
which can be delivered from elsewhere, citing CEO Donald Walker in an
interview. Co. to cut US jobs as well, Walks said.
Bild am Sonntag:
- Giving
Spain, France more time to improve their budgets is compliant with
enforced stability and growth pact, Germany Finance Minister Wolfgang Schaeuble said in an interview. Says EU Commission, German govt agree not to let reform process abate.
Business Recorder:
- EU’s Barnier urges France to economic reforms. European Union Internal Market Commissioner Michel
Barnier, the EU's top financial regulator, called on the French
government to pursue its planned reforms despite the Commission allowing
two more years to meet its budget deficit target. Olli
Rehn, the European monetary affairs commissioner, said on Friday France
badly needed to unlock its growth potential and create jobs, adding
Spain, Italy and the Netherlands as well as France - four of the euro
zone's five largest economies - would remain in recession this year. "It's a moment of truth for the government which needs to have the
political courage to carry out those reforms which will sometimes not be
understood, and require effort," he told French radio Europe 1 in an
interview.
El Economista:
- State-owned bank rescue fund FROB may increase capital injections
in banks it has aided and provide capital to more banks, citing sources
familiar with the matter who are in the financial industry. Spain
so-called bad bank Sareb to require all EU2.5b of European aid planned
for it. Increasing capital needs linked to economic recession, new rules
on bad loans provisioning.
The Fiscal Times:
MEMRI:
- In Advance Of Orthodox Easter In Egypt, Muslim Brotherhood And Salafis Issue Fatwas Forbidding Greeting Copts On Their Holidays. In advance of Orthodox Easter, which will be celebrated by Egypt's
Copts in early May 2013, fatwas have been issued by a Muslim Brotherhood
(MB) official and by officials in Egypt's Salafi stream forbidding
Muslims from greeting Christians on their religious holidays. It should
be mentioned that these fatwas are a departure from the practice of past
MB leaders, who sent greeting cards to the Patriarch and Coptic figures
on their holidays, including Easter, and dispatched representatives to
greet Copts in churches.
Weekend Recommendations
Barron's:
- Bullish commentary on (AAWW) and (CAT).
- Bearish commentary on (FB).
Night Trading
- Asian indices are +.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 84.0 -1.25 basis points.
- NASDAQ 100 futures +.22%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The ECB's Draghi speaking, Eurozone Services PMI, Eurozone Retails Sales data, Spanish Unemployment Rate, RBA rate decision, (QSII) analyst day, (CELG) analyst meeting, (AZPN) investor day and the Value Investing Congress could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by commodity 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 week.
U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as rising global growth fears, more Mideast unrest, Eurozone debt angst and earnings worries offset short-covering, central bank hopes and investor performance angst. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.
