Evening Headlines
Bloomberg:
- Bank of France Touts Securitization Plan as Template for ECB. The Bank of France wants to help
banks package loans to businesses into tradable securities with
the creation of a special-purpose vehicles, in what could become a template for the euro area.
As the European Central Bank looks for ways to improve the flow of
credit to small and medium-sized enterprises, or SMEs, the project
started by the French central bank in July last year
could provide one possible solution, the head of its markets
division, Alexandre Gautier, said in a telephone interview.
- Save Europe: Split the Euro. On
the eve of the American Civil War, Abraham Lincoln famously said that
“a house divided cannot stand.” Today, the European Union -- committed
for decades to the quest for “ever closer union” --
must confront an agonizing truth. Lincoln’s maxim must be inverted. For
the EU to survive, the euro must divide.
- Li Signals Reluctance on Stimulus to Boost China Growth. Chinese
Premier Li Keqiang signaled policy makers are reluctant to use stimulus
to counter a slowdown in the world’s second-largest economy because the
risks outweigh the benefits. “To achieve this year’s targets, the room
to rely on stimulus policies or government direct investment is not big
-- we must rely on market mechanisms,” Li said in a May 13 speech
broadcast to officials around the country, according to a transcript
published last night on the central government’s website. Relying on
government-led investment for growth “is not only difficult to sustain
but also creates new problems and risks,” he said. The comments indicate
China may be unlikely to boost government spending or follow central
banks across Asia in cutting interest rates as Li tries to pare the state’s role in
the economy.
- Hong Kong Home Prices at Record Gap to Sales. (graph)
The gap between Hong Kong home prices and sales is the widest on record
as new taxes, rising supply and the prospect of higher mortgage costs
deter buyers in the world’s most
expensive housing market.
- Asian Stocks Advances as Nikkei 225 Surges Above 15,000.
Asian stocks rose as Japan’s Nikkei 225 Stock Average climbed above
15,000 for the first time since January 2008 after the yen touched a 4
1/2-year low against the dollar, boosting the earnings outlook for
exporters. Sony Corp. surged 12 percent as billionaire Danie Loeb pushed
for the initial public offering of the Japanese electronics maker’s
entertainment business. Toyota Motor Corp. (7203), the world’s biggest
carmaker, climbed 2.6 percent in Tokyo. Neptune Orient Lines Ltd. rose
1.8 percent in Singapore after
Southeast Asia’s largest container-shipping company returned to
profit in the first quarter. The MSCI Asia Pacific Index gained 0.8 percent to 143.16 as
of 12:22 p.m. in Tokyo, with almost two shares rising for each
that fell.
- Rebar Falls With Iron Ore Prices Amid Concern China to Slow. Steel reinforcement-bar futures
declined a second day on concern that China’s growth is slowing and as iron-ore prices dropped.
Rebar for delivery in October on the Shanghai Futures Exchange fell as
much as 0.7 percent to 3,607 yuan ($587) a metric tonand was at 3,617 at
10:15 a.m. local time. The most-active contract has retreated 9.3 percent this year.
- Rubber Falls as Oil Drop Lowers Costs for Synthetic Alternative.
Rubber fell a second day after oil
dropped to the lowest level in almost two weeks, increasing
speculation that prices may weaken for synthetic products. Rubber for
delivery in October lost as much as 1.6 percent to 283 yen a kilogram
($2,768 a metric ton) and was at 285.9 yen on the Tokyo Commodity
Exchange at 10:44 a.m. Futures have lost
5.5 percent this year.
- Death Cross on Lumber Chart Signals Decline: Technical Analysis. (video)
Lumber prices, down 13 percent this
year, may extend the slump to the lowest since October after
moving averages formed a “death cross,” according to technical analysis
by Paul Kavanaugh at FuturePath Trading LLC. The attached chart shows
that on May 9, lumber’s 50-day moving average fell below the 100-day
measure, often considered a bearish indicator to traders who follow
price patterns. Yesterday, lumber futures for July delivery on the Chicago Mercantile Exchange tumbled 2.9 percent, the most in eight
months. The price settled at $327.70 per 1,000 board feet, below
the $329.10 close on Nov. 27, a key support, Kavanaugh said. “Lumber may be below $300 by the end of the month,”
Kavanaugh, the director of business development at FuturePath in
Chicago, said in a telephone interview. “The cross of the 50-and 100-day moving averages is validating the trend lower.”
- CFTC Said to Review Wall Street Banks for Off-Exchange Trades. The top U.S. derivatives regulator is
seeking documents from Wall Street banks about trades that
combine features of swaps and futures since the Dodd-Frank Act
became law, according to two people briefed on the matter. The
Commodity Futures Trading Commission made the request in a so-called
special call for data on energy and metals trades since July 2010, when
President Barack Obama enacted the rules overhaul including new
derivatives measures, according to the people, who asked not to be named
because the review isn’t public. The Financial Times, which reported
on the CFTC’s probe earlier, said banks that received requests included
JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and
Citigroup Inc. (C) Spokespeople for all three banks declined to comment.
- Iran-Based Hackers Traced to Cyber Attack on U.S. Company. A previously unknown hacking group
believed to be based in Iran has started cyber attacks inside
the U.S., according to Mandiant Corp., a security company that’s
linked China’s army to similar activity. The Iranian group emerged within the last six months and
has infiltrated the networks of at least one U.S. corporation,
Richard Bejtlich, Mandiant’s chief security officer, said in an
interview in Washington today. “You’re starting to see the Iranians get more active,”
Bejtlich said. “We’ve got at least one case where we think it’s
Iran, and we think what they are doing is trying to gain some
experience on a live network.”
Wall Street Journal:
- FBI Launches Probe of IRS. Treatment of Tea-Party Groups Eyed; Internal Review Blames Higher-Ups.
Attorney General Eric Holder said Tuesday the Justice Department has
opened a criminal probe of the Internal Revenue Service's treatment of
tea-party groups, while an investigative report blamed the agency's
managers for allowing the practices to continue for more than 18 months.
- SEC Eyes Charles Schwab Exec For Top Post.
Securities and Exchange Commission Chairman Mary Jo White is eyeing a
Charles Schwab Corp. executive for a top post overseeing trading firms
and stock exchanges, according to a person familiar with the talks. Ms.
White is considering tapping Jeff Brown, who runs Schwab's Washington
office, to potentially head the agency's trading and markets division,
this person said. The two met privately to discuss the position last
week. Mr. Brown declined to comment and an SEC spokesman declined to
comment. The SEC unit has broad responsibilities, including overseeing the
operations of stock exchanges, which are at the center of a debate over
whether the speed and complexity of stock trading poses risks to markets
more broadly.
- Your Next IRS Political Audit. The tax agency is getting vast new power in health care. Even as the politicized tax enforcement scandal expands, the Internal
Revenue Service continues to expand its political powers thanks to the
Affordable Care Act. A larger government always creates more openings
for abuse, as Americans will learn when the IRS starts auditing their
health care in addition to their 1040 next year.
Fox News:
- Lawmakers say IRS targeted dozens more conservative groups than initially believed. The IRS targeting of conservative groups is far broader than first
reported, with nearly 500 organizations singled out for additional
scrutiny, according to two lawmakers briefed by the agency. IRS officials claimed on Friday that roughly 300 groups received
additional scrutiny. Reps. Darrell Issa, R-Calif., and Jim Jordan,
R-Ohio, said Tuesday that the number has actually risen to 471. Further,
they said it is "unclear" whether Tea Party and other conservative
groups are being targeted to this day. The lawmakers disclosed the additional information in a letter
Tuesday to Lois Lerner, the IRS official who first disclosed the
inappropriate practice. They sent the letter as a highly anticipated
watchdog report was released, finding "inappropriate" action at the
IRS. The Republican congressmen also revealed that the IRS itself
determined their effort was biased against conservatives more than a
year ago.
MarketWatch.com:
CNBC:
- Nikkei Getting 'Bubbly,' Correction Coming: Mr Yen. (video) Japanese
equities have risen a "bit too fast" and appear to be
somewhat "bubbly," according to the former vice finance minister of
Japan, Eisuke Sakakibara, as the Nikkei crossed the key 15,000 level for
the first time since 2008 on Wednesday. "The movement of equity
prices seems to be somewhat bubbly - there will be some corrections in
the equity market in the months to come probably by the summer,"
Sakakibara told CNBC Asia's "Squawk Box" when asked about the negative
consequences of "Abenomics" - Prime
Minister Shinzo Abe's aggressive policies to reflate the economy.
- China’s Corporate Debt Market Set to Challenge US. China is forecast to surpass the U.S. as the world's largest
corporate debt market for non-financial companies in the next two years,
according to a report from Standard & Poor's. The
rating agency expects the debt needs of companies in China to reach
upwards of $18 trillion by the end of 2017, accounting for a third of
the forecast $53 trillion in new debt and refinancing needs of global
companies in the next five years. Debt includes bank loans and bonds and
is drawn from public information collated by S&P.
- Australia the Next Euro Zone? Maybe.
A higher than expected deficit figure revealed in Australia's budget on
Tuesday has raised concerns that the country could follow in the same
path as the highly indebted euro zone, said one expert. According to John Daley, CEO of the Australian think tank the Grattan
Institute, Australia's economy is facing a "very real danger" of
following down the same path as Europe and words like austerity have
come into the vocabulary of economic commentators.
Zero Hedge:
Business Insider:
The Blaze:
USA Today:
- IRS approved liberal groups while Tea Party in limbo. In February 2010, the Champaign Tea Party in Illinois received
approval of its tax-exempt status from the IRS in 90 days, no questions
asked. That was the month before the Internal Revenue Service
started singling out Tea Party groups for special treatment. There
wouldn't be another Tea Party application approved for 27 months. In that time, the IRS approved perhaps dozens of applications from
similar liberal and progressive groups, a USA TODAY review of IRS data
shows.
Reuters:
Financial Times:
- JPMorgan(JPM) investors take heat off Dimon. Some
of JPMorgan Chase’s largest shareholders are sparing Jamie Dimon but
voting against other directors in a contentious ballot on the board of
the largest US bank, according to people familiar with the matter.
DAF-German Investor Television:
- Ex-ECB's Issing
Says German Euro Exit 'No Alternative'. Former ECB Chief Economist
Otmar Issing said Germans need to be convinced that everything needs to
be done to remain in the euro, citing an interview.
Economic Information Daily:
- China
1H Power Use May Rise 5.5%-6.5% Y/Y. China's economy currently faces
"relatively large" downward pressure, citing Ouyang Changyu, deputy
secretary-general at the China Electricity Council.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.0 -.5 basis point.
- Asia Pacific Sovereign CDS Index 82.25 +.25 basis point.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Empire Manufacturing for May is estimated to rise to 4.0 versus 3.05 in April.
- The Producer Price Index for April is estimated to decline -.6% versus a -.6% decline in March.
- The PPI Ex Food & Energy for April is estimated to rise +.1% versus a +.2% gain in March.
9:00 am EST
- Net Long-Term TIC Flows for March are estimated at $35.0B versus -$17.8B in February.
9:15 am EST
- Industrial Production for April is estimated to fall by -.2% versus a +.4% gain in March.
- Capacity Utilization for April is estimated to fall to 78.3% versus 78.5% in March.
- Manufacturing Production for April is estimated to rise +.1% versus a -.1% decline in March.
10:00 am EST
- The NAHB Housing Market Index for May is estimated to rise to 43.0 versus 42.0 in April.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+450,000 barrels versus a +230,000 barrel gain the prior week. Gasoline
supplies are estimated to fall by -1,100,000 barrels versus a -910,000
barrel decline the prior week. Distillate inventories are
estimated to rise by +475.000 barrels versus a +1,812,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to rise by +.5% versus a +2.6% gain the prior week.
Upcoming Splits
Other Potential Market Movers
- The Eurozone GDP report, BoE inflation report, IAEA/Iran meeting, Japan GDP report, weekly MBA mortgage applications report and the BofA Merrill Transport Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- ISE Sentiment Index 99.0 +20.73%
- Total Put/Call .82 -4.65%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.35 -1.72%
- European Financial Sector CDS Index 140.44 +.29%
- Western Europe Sovereign Debt CDS Index 88.0 -.31%
- Emerging Market CDS Index 235.56 -.25%
- 2-Year Swap Spread 14.25 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -15.25 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $128.10/Metric Tonne -1.0%
- Citi US Economic Surprise Index -7.70 +.3 point
- 10-Year TIPS Spread 2.32 unch.
Overseas Futures:
- Nikkei Futures: Indicating +330 open in Japan
- DAX Futures: Indicating +11 open in Germany
Portfolio:
- Higher: On gains in my medical/biotech/tech/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- ECB Battles Germany on Pace of EU Plans to Handle Failing Banks. The
European Central Bank clashed with Germany over how the European Union
will handle struggling banks and whether to create a common agency and
fund to manage failures. ECB Executive Board member Joerg Asmussen
called for creating a central agency and an industry-funded common
backstop for handling failing banks by “the summer of next year,” when
the ECB takes up new supervisory duties. He set out the central
bank’s position before EU finance chiefs met in Brussels today. In a
public debate during the meeting, Finance Minister Wolfgang Schaeuble
held to Germany’s view that the EU shouldn’t try to create a single
resolution agency without amending current treaties.
- European Stocks Rise as Earnings Offset German Confidence. European
stocks advanced as companies
from ICAP (IAP) Plc to European Aeronautic Defence & Space Co.
rallied after reporting earnings, offsetting German investor sentiment
that gained less than forecast in May. ICAP Plc surged the most in
more than four years after posting full-year profit that exceeded its
previous forecast. EADS advanced 3 percent after earnings beat analysts’
projections. Anglo American Plc and Glencore Xstrata Plc each retreated
at least 1 percent as JPMorgan Chase & Co. cut its forecast for
China’s economic growth. The Stoxx Europe 600 Index added 0.4 percent to 305.66 at
the close of trading, its highest level since June 2008.
- Oil Shockwaves From U.S. Shale Boom Seen by IEA Ousting OPEC. The U.S. shale boom will send “shockwaves” through the
global oil trade over the next five years, benefiting the nation’s
refiners and displacing OPEC as the driver of supply growth, the IEA
said. North America will provide 40 percent of new supplies to
2018 through the development of light, tight oil and oil sands, while
the contribution from the Organization of Petroleum Exporting Countries
will slip to 30 percent, according to the International Energy Agency.
The IEA trimmed global fuel demand estimates for the next four years,
and predicted that consumption in emerging economies may overtake
developed nations this year.
- Commodity Holdings Tumble to Lowest in Four Years, BofA Says. Money managers are the most bearish
on commodities in more than four years as a majority expected a
weaker Chinese economy for the first time in 14 months, a Bank
of America Corp. survey showed. A net 29 percent of the fund managers surveyed were
underweight the asset class in May as their positions
“collapsed” to the lowest level since December 2008. One in
four now consider a “hard landing” in China as the biggest
risk to their investments. The bank surveyed professional
investors who together oversee $517 billion. “There has been a marked uptick” in concern about China,
said John Bilton, an investment strategist at Bank of America’s
Merrill Lynch unit, at a press conference in London today. “A
hard landing is not our core scenario, but certainly investors
are right to start thinking they should at least hedge some of
that tail risk.”
Wall Street Journal:
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Coal -1.11% 2) Steel -.95% 3) Gold & Silver -.56%
Stocks Falling on Unusual Volume:
- TSL, JKS, HBHC, YPF, EGY, SKM, CLMT, JBLU, WES, SPH, EOPN, TSLA, SCTY, YY, SDT, AMAP, CTRP, AL, BBRY, JOY, CVRR, SKX, TRMB and RATE
Stocks With Unusual Put Option Activity:
- 1) OCN 2) SCTY 3) VHC 4) EWJ 5) TSLA
Stocks With Most Negative News Mentions:
- 1) FCX 2) CREE 3) KBH 4) FB 5) EBIX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) I-Banks +1.62% 2) Biotech +1.39% 3) Gaming +1.20%
Stocks Rising on Unusual Volume:
- IOC, WPX, LMOS, MNST, CPA, GOL, SNE, TTWO, SSYS, SODA, CPA, XONE, DDD, ESI, GMCR, APOL, SFLY, ECYT, AXLL, LNKD, MYGN, CZR and EW
Stocks With Unusual Call Option Activity:
- 1) DNR 2) SSYS 3) CPRT 4) FXY 5) SCHW
Stocks With Most Positive News Mentions:
- 1) FDS 2) WY 3) AMAT 4) JEC 5) EW
Charts:
Evening Headlines
Bloomberg:
- Secret U.S. Trawl of AP Calls Decried by Press Groups. Media groups and government watchdogs
said the U.S. Justice Department interfered with press freedom
when it secretly collected telephone records from Associated
Press reporters and editors over a two-month period last year. The AP disclosed the government’s action in a letter
yesterday to Attorney General Eric Holder from Gary Pruitt, the
president and chief executive officer of the news service.
Pruitt called the collection of phone records at four locations
used by reporters a “massive and unprecedented intrusion” of
AP’s right to gather news under the U.S. Constitution. The Justice Department’s seizure of the Associated Press’s
phone records is “Nixonian,” said Danielle Brian, executive
director of the Project on Government Oversight. Holder “has
trampled a line meant to protect our free and independent
press.”
- IRS Focus on Tea Parties Stirs Dissent on Health Care Law.
A handful of Cincinnati-based
Internal Revenue Service employees have accomplished what no
bipartisan White House dinner ever could: uniting the U.S. Congress.
Capitol Hill lawmakers are now on a mission to dissect how the tax
agency wound up targeting Republican-friendly groups for extra scrutiny.
Republican Senate Leader Mitch McConnell called it a “travesty” and the
chamber’s majority leader, Democrat Harry Reid, termed the matter “very
troubling.” While the top tax collectors at the IRS face grillings in
Congress, the ramifications of the outrage are likely to ripple far
beyond them. Even as President Barack Obama yesterday labeled the IRS
action “outrageous,” the issue will complicate his ability to press
other initiatives, including implementing the health-care law, in which
the IRS plays an enforcement role, political scientists and
strategists from both parties said yesterday. “This was dirty, no
question, and it will do nothing to improve the tense relationship
between the Obama administration and Republican leaders,” said Kenneth
Warren, a political science professor at Saint Louis University in
Missouri.
- Cameron Gives Way to Tory Rebels in Backing EU-Referendum Bill. British
Prime Minister David Cameron ceded to the rebellion in his own
Conservative Party, offering to support a bill authorizing a referendum
by 2017 on the U.K.’s continued membership in the European Union.
The prime minister’s visit to the U.S., where he has been talking about
the conflict in Syria and his agenda for next month’s Group of Eight
summit, has been overshadowed by a growing number of Conservative
lawmakers saying they planned a
Parliamentary vote against his legislative program to protest
his failure to deliver such a bill.
- Tata Steel Flags $1.6 Billion Writedown on Weak Europe Demand. Tata
Steel Ltd. (TATA), India’s biggest producer, said it expects a $1.6
billion writedown in asset values because of a drop in steel demand in
Europe. Demand in Europe has fallen by almost 8 percent in the year
ended March 31, Mumbai-based Tata said yesterday in a statement. Weaker economic and market conditions in Europe are expected to
continue in the near and medium-term, leading to a cut in
expected cash flows and the valuation of the company’s European
business, Tata said.
- China Stocks Fall Most in 3 Weeks on Economic, Property Concerns. China’s
stocks fell the most in three weeks on concern an economic slowdown is
deepening and the government is introducing more restrictions on the
property market to limit gains in housing prices. China Vanke Co., the
largest developer, dropped the most in three weeks after the 21st
Century Business Herald reported Beijing tightened rules for the
pre-sale of homes. China Eastern
Airlines Corp. slid to a one-month low after Credit Suisse Group
AG said Chinese airline traffic growth slowed last month. ZTE
Corp. slumped 4.4 percent after the Wall Street Journal reported
the European Union will seek to start a probe into alleged
unfair trade practices by the telecom company. The Shanghai Composite Index (SHCOMP) fell 1.6 percent to 2,206.52 at the 11:30 a.m. break, the most since April 23. The CSI 300
Index slid 2 percent to 2,480.
- Asian Shares Rise for Second Day as Yen Rebounds; Gold Advances. Asian shares rose for a second day,
led by Japanese utilities, as gold climbed after a three-day
decline lured buyers. Japan’s yen rallied from the lowest level in more than four years, while the Malaysian ringgit advanced.
The MSCI Asia Pacific Index added 0.4 percent at 11:09 a.m.
in Tokyo, while South Korea’s Kospi Index increased 0.8 percent.
- Rubber Snaps Five-Day Rally as Rebound in Yen Reduces Appeal. Rubber fell from a two-month high,
snapping a five-day winning streak, as a rebound in Japan’s currency against the dollar cut the appeal of yen-based futures. Rubber for delivery in October lost as much as 2 percent to 288 yen a kilogram ($2,837 a metric ton) on the Tokyo Commodity
Exchange and was at 289.8 yen at 10:18 a.m.
Wall Street Journal:
- EU Closer to China Telecom Probe. The
European Union's trade chief will ask for backing this week from
senior members of the bloc's executive arm to start investigations into
alleged unfair trade practices by Chinese network-equipment suppliers
Huawei Technologies Co. and ZTE Corp., an EU official said, amid concern
from European companies that such a probe could prompt a backlash
against their interests in China.
- Bank Bailout Blues Stall U.K. Recovery.
Five years after rescuing one of the world's biggest banks, the British
government still hasn't figured out what to do with it—a sign of the
country's struggle to put its banking woes behind it.
- The IRS Wants You. The scandal over politicized tax enforcement is growing. There is a pattern here. Oppose the Obama Administration or liberal priorities, and you too can become an IRS target.
Fox News:
- Justice Department secretly obtained AP phone records. The Justice Department secretly obtained two months of telephone
records of reporters and editors for The Associated Press in what the
news cooperative's top executive called a "massive and unprecedented
intrusion" into how news organizations gather the news. The records obtained by the Justice Department listed outgoing calls
for the work and personal phone numbers of individual reporters, for
general AP office numbers in New York, Washington and Hartford, Conn.,
and for the main number for the AP in the House of Representatives press
gallery, according to attorneys for the AP. It was not clear if the
records also included incoming calls or the duration of the calls. In
all, the government seized the records for more than 20 separate
telephone lines assigned to AP and its journalists in April and May of
2012. The exact number of journalists who used the phone lines during
that period is unknown, but more than 100 journalists work in the
offices where phone records were targeted, on a wide array of stories
about government and other matters.
- Republicans want new Clinton testimony on Benghazi, float possibility of subpoena. Calls are growing for former Secretary of State Hillary Clinton to
return to Capitol Hill -- under subpoena, if necessary -- to answer new
questions that have surfaced about her role in the response to the
Benghazi terror attack. “I believe she was disconnected and dispassionate about what was
happening,” House Oversight and Government Reform Committee Chairman
Darrell Issa told Fox News on Monday.
During the interview, Issa kept the option of forcing Clinton to testify on the table.
MarketWatch.com:
CNBC:
- CTFC Probes Over 1 Million US Swap Contracts. A top U.S. financial regulator has launched a broad inquiry into
the legitimacy of more than 1 million energy and metals transactions by
the biggest traders in commodities markets over the past two years. The Commodity Futures Trading Commission has issued a "special call"
asking Wall Street banks and other traders to provide documents that
would prove recent derivatives transactions known as "exchanges of
futures for swaps" were legal. Lawyers at the CFTC enforcement division
are also scrutinizing the trades for possible violations. "They are looking at a huge amount of trading," an industry lawyer said.
- Corn Crop Planting At Third Slowest Pace in Three Decades. Less
than a third of the corn crop in key planting states is in the ground,
the third lowest level for this time of year since 1980. The U.S. Department of Agriculture Monday reported that 28 percent of
the expected corn crop has been planted, and in key farm belt states,
like Iowa and Illinois, the levels are even lower.
Zero Hedge:
Business Insider:
New York Times:
- Grind of Euro Crisis Wears Down Support for Union, Poll Finds. Europeans
have never been wild about the European Union. With the region sapped
by the euro crisis, confidence in the institution and the benefits it
was supposed to provide is flagging faster and further than ever before,
according to an influential opinion survey released Monday. The
results of an annual survey by the Pew Research Center, a nonpartisan
organization based in Washington, show a deepening disillusionment with
the union in major member countries. The results of the survey suggest
that more citizens than ever could end
up opposing the transfer of more power to European Union institutions
that may be vital for transforming the euro into a viable currency over
the long term.
Reuters:
- U.S. banks push back on change in loan loss accounting. More than a dozen of the biggest U.S. banks have questioned a proposed
accounting change meant to boost reserves for risky loans, saying the
results would be vastly different from those of a similar rule being
developed by global standard-setters. A key reform
arising out of the 2007-08 global financial crisis, the proposal would
require banks to look ahead and reserve for expected losses on the day a
loan is made. Currently, banks do not have to reserve for risky loans until there are signs of a loss.
- SolarCity(SCTY) quarterly loss bigger than expected, shares drop.
SolarCity Corp on
Monday reported a larger-than-expected quarterly loss, reversing a
year-ago profit, due to higher costs related to its business that
installs solar panels on rooftops.
The company's shares slid 4.5 percent in after-hours trade
following the announcement.
Telegraph:
- EU bank proposals 'risk domino sequence of failures’. Proposed European Union rules governing how losses are imposed on creditors in
a failed bank pose the risk of a “domino effect” threatening financial
stability in Britain, George Osborne will warn on Tuesday.
The Standard:
- Lee & Man tips price declines. Lee & Man Paper Manufacturing (2314), the
second largest containerboard manufacturer by output in the mainland,
expects prices to weaken in the near term as costs for raw materials
fall. Paper products in the mainland now retail at 3,300 yuan
(HK$4,165) to 3,400 yuan per tonne, said executive director Edmond Lee
Man-bun yesterday after the company's annual general meeting.
China Securities Journal:
- State
Economist Says China Can't Cut Rates. China can't cut interest rates
due to abundant global liquidity, citing Zhu Baoliang, head of the State
Information Center's economic forecast department.
21st Century Business Herald:
- Beijing has tightened rules of pre-sales of homes, mandating
approval from the mayor's office in addition to regular housing bureau
approval. Pre-sales prices won't be allowed to be higher than current
housing prices in the same area. Beijing new housing inventory is 60,995
units, near a historical low, citing data from Netease.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.5 +1.5 basis points.
- Asia Pacific Sovereign CDS Index 82.0 -.25 basis point.
- NASDAQ 100 futures +.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- The NFIB Small Business Optimism Index for April is estimated to rise to 90.3 versus 89.5 in March.
8:30 am EST
- The Import Price Index for April is estimated to fall -.5% versus a -.5% decline in March.
Upcoming Splits
Other Potential Market Movers
- The Fed's Plosser speaking, German ZEW Index, German
inflation data, weekly retail sales data, BofA Merrill
Metals/Mining/Steel Conference, JPMorgan Tech/Media/Telecom Conference,
UBS Financial Services Conference and the Citi Power/Energy/Utilities
Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
