Style Underperformer:
Sector Underperformers:
- 1) Education -2.70% 2) Software -2.30% 3) Gaming -1.92%
Stocks Falling on Unusual Volume:
- ORCL, RBS, IOC, REN, C, STT, IRE, ELP, ENOC, SLF, CLMT, ING, TOT, ACRE, AHT, HLSS, AGN, KMR, KMX, PMC, LL, MGLN, VR, LZB, SGEN, BLK, SFI, WHR, C, CM, TLLP, TREX, CLFD, FBHS, WTR, PENN, CAR, DRI, WMGI, EAT, AB, ROC, MGLN, NSM, BGFV, TEX and AHT
Stocks With Unusual Put Option Activity:
- 1) AVP 2) WNR 3) WHR 4) ORCL 5) OIH
Stocks With Most Negative News Mentions:
- 1) AGN 2) ANF 3) WHR 4) SWK 5) ESI
Charts:
Style Outperformer:
Sector Outperformers:
- HMOs +.98% 2) Tobacco +.85% 3) Telecom +.41%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) WU 2) SVU 3) ATML 4) DFS 5) AMGN
Stocks With Most Positive News Mentions:
- 1) LMT 2) FRX 3) SO 4) BWA 5) MS
Charts:
Evening Headlines
Bloomberg:
- China Money-Market Turmoil Poses Test for New Leaders: Economy.
China’s cash squeeze over the past two weeks is testing the management
skills of new Communist Party leaders saddled with risks from a record
credit expansion under their predecessors. The one-day repurchase rate
touched an unprecedented high of 13.91 percent yesterday, prompting
speculation the central bank was forced to pump liquidity, before diving
today by the most since 2007. Premier Li Keqiang signaled determination
to stamp out speculation funded by cheap money with a June 19 State
Council statement saying banks must make better use of existing credit
and step up efforts to contain financial risks. Any prolonged
constriction of interbank liquidity risks triggering a broader credit
crunch, further depressing an economy that’s already slowing. The
dangers add to burdens on a global recovery contending with the prospect
of reduced Federal Reserve stimulus in coming months. “It’s really hard
to deflate these things in an orderly way,” said Michael Pettis, a
finance professor at Peking University in Beijing. “The problem is that
when debt levels
have got so high, and it’s more debt that keeps the existing
debt afloat, you absolutely have to stop the process but it’s
very difficult to stop the process in an orderly way.”
- Stress
Test for Banks Inflicting Collateral Damage: China Credit. China's
decision to tolerate the worst cash crunch on record is evolving from a
stress test of banks into a threat to the ability of companies to raise
funds. As their overnight borrowing costs neared 13%, banks switched
focus toward shoring up their own finances and slashed investments in
the bond market they dominate. The one-year yield on AAA corporate debt
jumped a record 121 basis points this month to 5.15%, ChinaBond indexes
show. Bond sales slumped to $26 billion in June, the least in 17 months
and down 57% from May, Bloomberg data show.
- China Grain
Policies Stock Imports, Inflation: Chart of the Day. China's effort to
boost grain output by raising guaranteed prices and stockpiling harvests
has inadvertently turned the world's biggest producer into a net
importer while fueling inflation, according to research by the Chinese
Academy of Social Sciences.
- China Funds Lose in Fifth Week of Asian Outflows, Citigroup Says. International
money managers pulled a combined $1.2 billion from Asian funds this
past week, a fifth straight week of outflows, according to Citigroup
Inc. (C) China funds posted the biggest losses with $558 million of net
withdrawals in the week ended June 19, followed by regional funds at
$521 million, Citigroup’s Hong-Kong based chief Asian strategist Markus Rosgen wrote in a note to clients today. Foreigners net sold Asia by $3.6 billion in the week, with South Korea and Taiwan taking up the largest shares, he wrote.
- Minsky
Moment Alarm Sounded in China by SocGen: Cutting Research. Credit
growth in the world's most populous country has outstripped economic
expansion for five quarters, raising the question of where the money has
gone, Societe Generale SA economist Yao Wei wrote in two recent
reports. In the first quarter, for example, bank loans, shadow banking
credit and corporate bonds together accelerated more than 20 percent
year-over-year, while gdp grew less than half that much. The gap has
been widening since early 2012. Yao says the answer to where the money
is going is a growing "debt snowball" which doesn't contribute to
economic activity. The result is both companies and the public sector
face burgeoning interest expenses. This fits with the theory first put
forward by economist Hyman Minsky of Washington University in St. Louis.
His financial instability hypothesis showed how markets create waves of
credit expansion and asset inflation, followed by periods of
contraction and deflation.
- Bond Auctions Fail From Russia to Korea as Brazil Protests Rage. Developing nations around the world
are scaling back or canceling billions of dollars of bond sales
as borrowing costs climb the most since 2008, just as spending
needs increase amid slowing economic growth. Romania’s Finance
Ministry rejected all bids at a seven-year bond sale yesterday because
of market volatility, while South Korea raised less than 10 percent of
the amount planned in an auction of inflation-linked bonds. Russia
scrapped a sale of 15-year ruble-denominated bonds June 19, the second
time it canceled an auction this month, and Colombia pared an offering
of 20-year peso debt by 40 percent. A cash shortage led to failures last
week of China Ministry of Finance debt sales. The tumble in bonds,
stocks and currencies, spurred by
investors’ biggest retreat from emerging markets in two years, is
tightening credit as the Federal Reserve says it may end cheap money
that had made investment plentiful. Yields on local-currency emerging
nation bonds surged 74 basis points this month to 6.5 percent, the
biggest increase in five years. In Turkey and Brazil, anti-government protests are challenging development plans that require additional funding.
- Asian Stocks Decline on Fed Stimulus, China Concerns. Asian
stocks fell, with the regional benchmark index heading for its biggest
two-day decline since September 2011, amid concern the Federal Reserve
will reduce stimulus and China’s economic slowdown may deepen as a cash
crunch worsens. Jiangxi Copper Co. (358), China’s biggest producer
of the metal, sank 2 percent in Hong Kong as copper futures fell.
Newcrest Mining Ltd., Australia’s No. 1 gold producer, slumped 6.7
percent as the bullion touched a September 2010 low. Mitsubishi UFJ
Financial Group. Inc., Japan’s largest lender, fell 2.6 percent after a
unit agreed to settle claims in New York that it
transferred billion of dollars for countries facing sanctions
including Iran, Sudan and Myanmar. The MSCI Asia Pacific Index slid 0.9 percent to 126.45 as of 11:02 a.m. in Tokyo, with about 12 shares falling for each
that rose.
- Rubber Tumbles to Nine-Month Low on Concern China Demand to Slow. Rubber declined to a nine-month low
amid concerns that an economic slowdown in China, the biggest buyer, will reduce demand for the commodity used in tires. The contract for delivery in November on the Tokyo
Commodity Exchange plunged as much as 4.2 percent to 228 yen a
kilogram ($2,345 a metric ton), the lowest level since September,
at 10:06 a.m. local time. Futures are heading for a sixth weekly
fall and have lost 24 percent this year.
- U.S. Said to Consider Doubling Leverage Standard for Big Banks. U.S. regulators are considering
doubling a minimum capital requirement for the largest banks,
which could force some of them to halt dividend payments. The standard would increase the amount of capital the
lenders must hold to 6 percent of total assets, regardless of
their risk, according to four people with knowledge of the
talks. That’s twice the level set by global banking supervisors. U.S. regulators last year proposed implementing the 3
percent international requirement for what’s known as the simple
leverage ratio. Now the Federal Reserve and Federal Deposit
Insurance Corp., under pressure from lawmakers, are weighing
increasing that figure for some of the biggest banks, according
to the people, who asked not to be identified because the
discussions are private. “The 3 percent was clearly inadequate, nothing really,”
said Simon Johnson, an economics professor at the Massachusetts
Institute of Technology and a former chief economist for the
International Monetary Fund. “Going up to five or six will make
the rule be worth something. Having a lot of capital is crucial
for banks to be sound. The leverage ratio is a good safety tool
because risk-weighting can be gamed by banks so easily.”
- Debt Sales Halted in U.S. as Companies Weigh Fed Taper Prospect. Corporate bond sales in the U.S.
have all but halted after the Federal Reserve said this week
that it’s prepared to taper its stimulus program later this
year, prompting the biggest increase in investment-grade yields
in 21 months. Solar Star Inc. was the only borrower said to be marketing
bonds yesterday, with a $1 billion issue, following $330 million
in offerings June 19. The slowdown is trimming a daily average
of $7 billion as of June 18 that put 2013 on pace for a record
year, according to data compiled by Bloomberg.
Wall Street Journal:
- Turmoil Exposes Global Risks. The turmoil exposed vulnerabilities in the financial markets and the
world economy that had been mostly ignored because central banks were
willing to ride to the rescue with huge amounts of money.
- Greece Faces Fresh Threats. Greece's shaky coalition government was hit Thursday with a double
blow as talks over the shutdown of the state broadcasting company
threatened to fracture the government and new worries over the financing
of the country's bailout program emerged. The breakdown in the talks sparked a threat from the junior partner
in the three-party coalition to withdraw its support from the
government, representing the coalition's gravest internal crisis to
date. "No agreement has been reached," Democratic Left's leader, Fotis
Kouvelis, said after a two-hour meeting—the third in a week—of the three
party chiefs. A meeting of his parliamentary deputies is scheduled for Friday
morning to decide the party's future in the coalition government.
- As Belts Tighten, Darden(DRI) Feels Squeeze.
Since the recession ended, Americans' disposable personal income has
risen by 3.1% at a compound annual rate. At the same point after the
previous two recessions ended in 1991 and 2001, annualized growth was
5.5% and 4.8%, respectively. The payroll-tax increase this year has
recently pushed year-over-year growth down to one of the lowest levels
of the expansion.
- John Kerry's ObamaCare Boondoggle. A backroom deal he cut for Massachusetts hospitals has caused a bipartisan uproar in Congress. A bipartisan backlash is growing against another section of President
Obama's health-care law. The president can blame this latest
embarrassment on none other than Secretary of State John Kerry.
CNBC:
- Oracle's(ORCL) Cloud Subscriptions Disappoint; Shares Dive.
Oracle missed expectations for software sales and subscriptions for the
second straight quarter, sending its shares plunging as investors
worried CEO
Larry Ellison may have trouble getting the technology giant back on
track. On Thursday, Oracle executives forecast new software
sales and subscriptions will rise 0 percent to 8 percent this quarter,
blaming weakness in the past quarter on disappointing sales in Asia and
Latin America.
Zero Hedge:
Business Insider:
New York Times:
- U.S. Approves a Label for Meat From Animals Fed a Diet Free of Gene-Modified Products. The
Agriculture Department has approved a label for meat and liquid egg
products that includes a claim about the absence of genetically
engineered products. It is the first time that the department, which
regulates meat and poultry processing, has approved a non-G.M.O. label
claim, which attests that meat certified by the Non-GMO Project came
from animals that never ate feed containing genetically engineered
ingredients like corn, soy and alfalfa.
ValueWalk:
AP:
- 1M Brazilians fill streets with protest, violence. More than a million Brazilians poured into the streets of at least 80
cities Thursday in this week's largest anti-government demonstrations
yet, protests that saw violent clashes break out in several cities as
people demanding improved public services and an end to corruption faced
tear gas, pepper spray and rubber bullets. In Rio de Janeiro, where an estimated 300,000 demonstrators swarmed
into the seaside city's central area, running clashes played out between
riot police and clusters of mostly young men, their T-shirts wrapped
around their faces. But several peaceful protesters were up in the
crackdown, too, as police fired tear gas canisters into their midst and
at times indiscriminately used pepper spray. Thundering booms echoed off stately colonial buildings as rubber bullets and the gas were fired at fleeing crowds.
At least 40 people were injured in Rio.
Reuters:
- Illinois' finances worst ever in FY 2012: auditor. Illinois'
finances sank deeper into the red in fiscal 2012, with the general
revenue fund deficit hitting a record $9.1 billion as increased spending
outran a jump in revenue, according to a report released on Thursday by
the state auditor general.
The deficit for the fiscal year
that ended June 30, 2012, was up $1.1 billion from fiscal 2011 when
measured by generally accepted accounting principles, according to the
comprehensive annual financial report. The
bigger deficit was driven by a nearly $4.7 billion increase in spending
that eclipsed revenue growth of $3.7 billion, the audit said.
- Euro bailout fund conditions complicate efforts to separate bad banks and sovereigns. Euro
zone finance ministers on Thursday agreed on how its bailout fund can
invest in troubled banks, but imposed so many conditions that they may
not completely succeed in their goal of separating problem banks from
their indebted home countries. The 500 billion-euro bailout fund was
originally set up to help struggling governments and was later expanded
to include banks in an effort to restore confidence in the financial
markets, ravaged by three years of debt and financial crisis.
- U.S. senators urge inclusion of food safety in Smithfield(SFD) review.
A bipartisan group of 15 U.S. senators urged the Obama administration
on Thursday to consider whether the proposed sale of Smithfield Foods
Inc to the Chinese meat company Shuanghui International posed a threat
to the U.S. food supply that could justify blocking the deal. "We believe that our food supply is critical infrastructure
that should be included in any reasonable person's definition of
national security," the senators said in a letter to Treasury
Secretary Jack Lew, whose department chairs the interagency
panel that reviews foreign investment for national security
threats.
- Pipeline foes say Obama's climate plan no tradeoff for Keystone. Foes of the proposed
Keystone XL pipeline, which would carry oil from Canada to
Texas, said on Thursday that an expected White House package of
proposals to combat climate change was not an adequate trade-off
for approval of the controversial project.
- U.S. Fed balance sheet grows in latest week. The U.S. Federal Reserve's
balance sheet grew in the latest week on increased holdings of
U.S. Treasuries and mortgage-backed securities, Fed data
released on Thursday showed.
The Fed's balance sheet liabilities, which is a broad gauge
of its lending to the financial system, stood at $3.427 trillion
on June 19, compared with $3.367 trillion on June 12.
Telegraph:
Financial News:
- PBOC Unlikely to Loosen Monetary Policy Greatly. PBOC may increase open market adjustments to keep "reasonable and stable" inter-bank liquidity, citing a market analyst. China's economic slowdown risks may rise in the short-term as policymakers may keep prudent policy to control financial risks.
South China Morning Post:
- Bad loans rise sharply in Shanghai bank sector.
Mid-sized lenders pressured amid slump as regulator urges tighter risk
controls. The Shanghai branches of several mid-sized mainland banks have
seen
rapid increases in bad loans this year as private companies feel the
pinch of the nationwide economic slowdown. At the Shanghai branch of
Beijing-headquartered China Citic Bank -
listed in Shanghai and Hong Kong - the non-performing loan (NPL) ratio
jumped to about 5 per cent of total outstanding loans this month, far
higher than the national average of about 1 per cent, according to
sources familiar with the matter. A 5 per cent NPL ratio translates into
about six billion yuan (HK$7.5 billion) of bad loans, the sources
added. "It's not just Citic Bank. Other banks' Shanghai branches are
also
facing trouble and could wind up with similarly huge bad loans on their
books," one of the sources said. Bad loans began to increase rapidly since the third quarter of last
year. It worsened in the first half of this year, in particular among
many small- and medium-sized enterprises in the wealthy Yangtze River
Delta economic zone in the east, including Shanghai city and Zhejiang
and Jiangsu provinces.
China Daily:
- State Researcher Says China 2H Growth to Slow From 1H. Chen Dongqi, deputy director of the National
Development and Reform Commission's Academy of Macro Economic Research,
says China's economic growth in the second half will be slower than the
first half.
Evening Recommendations
Wells Fargo:
Night Trading
- Asian equity indices are -2.25% to -.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 166.0 +7.0 basis points.
- Asia Pacific Sovereign CDS Index 134.25 +19.0 basis points.
- NASDAQ 100 futures +.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The BoJ's Kuorda speaking could also impact trading today.
BOTTOM LINE: Asian indices are sharply lower, weighed down by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 20.44 +22.8%
- Euro/Yen Carry Return Index 134.32 +.49%
- Emerging Markets Currency Volatility(VXY) 12.0 +8.70%
- S&P 500 Implied Correlation 60.87 +8.81%
- ISE Sentiment Index 42.0 -55.32%
- Total Put/Call 1.31 +20.18%
Credit Investor Angst:
- North American Investment Grade CDS Index 93.80 +9.44%
- European Financial Sector CDS Index 173.57 +13.10%
- Western Europe Sovereign Debt CDS Index 94.0 +4.44%
- Emerging Market CDS Index 378.18 +8.30%
- 2-Year Swap Spread 18.25 +2.25 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -12.50 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $120.60/Metric Tonne +.5%
- Citi US Economic Surprise Index -12.90 +1.2 points
- Citi Emerging Markets Economic Surprise Index -44.80 +.6 point
- 10-Year TIPS Spread 1.97 -7 bps
Overseas Futures:
- Nikkei Futures: Indicating -75 open in Japan
- DAX Futures: Indicating -41 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 25% Net Long
Bloomberg:
- Equity Volatility Surges Globally Amid Record Futures. Stock volatility jumped around the
world, with the U.S. benchmark gauge surging the most in two
months, after speculation the Federal Reserve will cut stimulus
sent futures trading to an all-time high. The Chicago Board Options
Exchange Volatility Index, which tracks options on the Standard
& Poor’s 500 Index, climbed 9.1 percent to 18.15 at 12:38 p.m.
in New York today. Europe’s VStoxx Index, a gauge of Euro Stoxx 50 Index
derivatives, gained 16 percent to 23.61, and Hong Kong’s HSI Volatility
Index, based on Hang Seng Index contracts, rose 7.7 percent to 22.72,
near a
one-year high. About 218,000 futures tracking the U.S. VIX
changed hands each day on average in June, 49 percent more than
the previous month, data compiled by Bloomberg show.
- Corporate Credit-Default Swap Indexes Rise in Europe. Markit
iTraxx Europe index rises 11 bps to 118, highest since April 4 and
biggest jump since Nov. 1, 2011. • Markit iTraxx Crossover index rises
44 bps to 487 bps, highest since March 27 • Markit iTraxx Senior
Financial index rises 17 bps to 170 bps • Markit iTraxx Sub Financial
index rises 24 bps to 250 bps.
- Dollar Debt in Asia at Risk of More Falls After Fed, Nomura Says.
Dollar-denominated bonds in Asia have room to drop further, Nomura
Holdings Inc. said, after Federal Reserve Chairman Ben S. Bernanke
discussed the prospect of phasing out unprecedented stimulus. The cost
of protecting Asian debt against default rose to a 10-month high.
Increasing losses in emerging markets combined with a worsening economic
outlook for the region may prompt institutional investors to pull money
out, spurring an additional widening of credit spreads for U.S.
currency debt in Asia, said Nomura analyst Pradeep Mohinani. "It's
certainly not a buying opportunity at the moment," said Mohinani, who
heads Nomura's corporate credit analysis for Asia excluding Japan.
- Rupee Plunge Prompts RBI Intervention; Bonds, Stocks Tumble.
India’s rupee tumbled to a record, prompting the central bank to
intervene to support the currency, after the U.S. signaled it will phase
out a stimulus program. Stocks and bonds plunged the most in at least a
year. “There will be pain due to the current-account deficit and
as leveraged investors are pulling money from Indian debt,”
said N. Srinivasan Venkatesh, Mumbai-based head of treasury at
IDBI Bank Ltd. “Policy makers will now have to put their heads
together to think about more structural, long-term fixes.” The rupee
weakened 1.4 percent to 59.5750 per dollar at the
5 p.m. close in Mumbai, after earlier dropping to an all-time
low of 59.9800, data compiled by Bloomberg show. The currency
has plunged 8.9 percent this quarter, Asia’s worst performance. The
S&P BSE Sensex (SENSEX) plunged 2.7 percent to 18,719.29, the
most since Sept. 22, 2011. Volume was 49 percent more than the
30-day average.
- Turkish Stocks Enter Bear Market as Lira Sinks to Record on Fed.
Turkey’s main stock index sank more than 20 percent from its May peak
into a so-called bear market while the lira tumbled to a record against
the dollar after the U.S. Federal Reserve signaled it may scale back
monetary
stimulus. Turkish bonds fell the most in emerging markets. The Borsa Istanbul National 100 index slumped 6.8 percent
to 73,461.89 at the close in Istanbul, down 21 percent from the
May 22 high. The lira depreciated for a fourth day, falling as
much as 1.8 percent to 1.9363 a dollar as the central bank held
six currency auctions to support it. The currency was at 1.9334
a dollar at 5:44 p.m. in Istanbul, taking this month’s drop to
2.9 percent.
- Egypt Violence Builds After Mursi Names Islamist Governors. Employees of an Egyptian tourism trade
group threatened to resign in protest amid renewed clashes in parts
of the country today over President Mohamed Mursi's latest
appointment of Islamists to key positions. Discontent with Mursi, who marks a year in power at the end
of the month, is building up as critics plan protests on June 30
to call for early elections. They accuse him of failing to
revive the economy while putting the interests of his Muslim
Brotherhood allies ahead of the nation’s good. Mursi’s appointment of eight Islamists as provincial
governors touched off a wave of protests, with violence erupting
earlier this week in some provinces. Tourism Minister Hisham Zaazou resigned because one of the new governors belongs to a
group linked to a deadly attack on a main tourist site.
- Emerging Markets Era of Outperformance Is Ending, Goldman Says. The decade-long outperformance of
developing-nation assets has ended, according to the Goldman
Sachs Group Inc. economist who predicted the rise of the biggest
emerging markets in 2003. The five trends that spurred outsized gains during the past
10 years -- surging growth in the so-called BRIC nations, higher
commodities, improved government finances, slower inflation and
lower U.S. bond yields -- are halting and in some cases
reversing, Dominic Wilson, the chief markets economist at New
York-based Goldman Sachs, wrote in a report dated yesterday.
- Emerging Markets Crack as $3.9 Trillion Funds Unwind: Currencies.
Investors are pulling money from emerging markets at the fastest pace
in two years as slowing economic growth and the prospect of less global
stimulus sink stocks, bonds and currencies from India to Brazil. More
than $19 billion left funds investing in developing-nation assets in
the three weeks to June 12, the most since 2011, according to EPFR
Global. Foreign investors dumped an unprecedented $5.6 billion of
Brazilian stocks and $3.2 billion of Indian bonds this month, exchange data show. JPMorgan Chase & Co.’s emerging-currency index is down 1.4 percent this quarter,
while the rupee and Turkish lira hit record lows and the real
reached its weakest level since 2009.
- Emerging-Market Stocks Fall Most Since 2011 as Currencies Tumble. Emerging-market stocks dropped the
most in almost 21 months, currencies weakened and government
borrowing costs rose after China’s cash crunch worsened and the
Federal Reserve said it may reduce monetary stimulus this year. The MSCI Emerging Markets Index slid 4 percent to 909.04 at
10:04 a.m. in New York, set for the biggest drop since September
2011. Turkey’s (XU100) benchmark stock index lost 5.6 percent, the most
among major developing nations, as the lira and India’s rupee
hit record lows. BYD Co. (1211) slumped 9.3 percent in Hong Kong, while
Brazil’s Ibovespa extended the worst decline among major
emerging-market stock benchmarks this year. Yields on South
Africa’s benchmark bonds jumped to the highest level in a year.
- Europe Stocks Sink Most in 18 Months on Stimulus Outlook.
European stocks sank the most in more than 18 months after Federal
Reserve Chairman Ben S. Bernanke said the central bank may end bond
purchases next year if the economy strengthens in line with forecasts.
Rio Tinto Group and Renault SA led mining and automobile companies lower
as a gauge of Chinese manufacturing fell. Swatch Group AG slid the most
in almost 21 months after Swiss watch exports declined. Eurotunnel
Group SA tumbled 12 percent after Les Echos reported the European
Commission will demand a reduction in tolls to use the Channel Tunnel. The
Stoxx Europe 600 Index (SXXP) plunged 3 percent to 283.68 at the close
of trading, the biggest retreat since Nov. 21, 2011. The benchmark
measure has declined 8.7
percent since May 22, when Bernanke indicated the central bank could
pare stimulus measures as the economy grows.
- Fed Seen Tapering QE to $65 Billion at September Meeting. Federal Reserve Chairman Ben S. Bernanke will cut the Fed’s $85
billion in monthly bond purchases by $20 billion at the Sept. 17-18
policy meeting, according to 44 percent of economists in a Bloomberg
survey. The survey of 54 economists followed Bernanke’s press
conference yesterday, in which he mapped out a timetable for an end to
one of the most aggressive easing strategies in Fed history. His remarks
prompted economists to predict a faster reduction in purchases: in a
June 4-5 survey, only 27 percent of economists forecast tapering would
start in September.
- U.S. Credit Swaps Surge by Most in Year on Fed Paring Statement. Investor confidence in U.S.
corporate credit is plunging the most in more than a year as
investors speculate the Federal Reserve is preparing to slow
down the pace of its bond purchases. The Markit CDX North American Investment Grade Index, a
credit-default swaps benchmark that investors use to hedge
against losses or to speculate on creditworthiness, increased
5.7 basis points to a mid-price of 91.4 basis points at 11:02
a.m. in New York, after yesterday climbing 3.9 basis points, according to prices compiled by Bloomberg. That’s the biggest two-day jump on a closing basis since the measure rose 8.8 in
the period ended May 14, 2012, excluding rolls into new series
of the benchmark.
- Commodities From Gold to Oil Slump on Fed Outlook, China Crunch. Commodities
tumbled by the most in
six weeks as everything from gold to crude oil and copper dropped on
concern that the Federal Reserve may phase out stimulus and as China’s
cash crunch worsened. The Standard & Poor’s GSCI Index of 24
raw materials lost as much as 2 percent to 622.91, the biggest intraday
loss since May 10, before reaching 625.31 as of 1:41 p.m. in London.
Gold
for immediate delivery fell below $1,300 an ounce to the lowest
in more than 2 1/2 years and silver plunged 7.8 percent. West
Texas Intermediate crude dropped 2.3 percent to $96 a barrel.
- Copper MACD, RSI Measures Signal 9% Drop: Technical Analysis.
Copper on the London Metal Exchange
will probably fall as much as 9 percent in the next two months,
according to technical analysis from TransGraph Consulting Pvt. Metal
for delivery in three months may decline to as low as $6,200 a metric
ton, analyst Saumendra Satapathy said in an e-mail today. Copper, which
entered a bear market in April, has slumped 14 percent to $6,827.75 a
ton this year.
Wall Street Journal:
- Signs of China Weakness Mount.
Mounting evidence of weakness in China's economy and increasing stress
in its financial system are testing the government's determination to
ride out a slowdown without resorting to stimulus measures.
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
ValueWalk:
- Brevan Howard EM Fund Slides 5 Percent In June. The sell off in emerging markets has taken its toll on the Brevan Howard Emerging Market Fund. The
world’s largest EM focused fund was not having a great year anyway, and
the added volatility in June beat what was left of the $2.6 billion
fund. In Tommy Wikes’ report for Reuters, the BH Emerging Markets
Strategies Master Fund declined 4.8 percent for
this month, taking the year to date performance to an abysmal -11.6
percent, as of June 14.
Reuters:
- Factories struggle in June, hiring slows: Markit. Manufacturing activity growth slowed slightly in June as the pace of
hiring and overseas demand weakened, making the second quarter the
weakest for the sector in the last four, a survey showed on Thursday. Financial data firm Markit said its "flash," or
preliminary, U.S. Manufacturing Purchasing Managers Index fell to 52.2
in June from 52.3. A reading above 50 indicates expansion. June's 52.2 reading was also the
average for the second quarter, behind the 54.9 average in the first
three months of the year and the worst showing since the third quarter
of 2012. Markit's output index rose to 53.9, a three-month high, from 52.7 in May
while the gauge of new orders also rose to its highest level since
March, offering some hope. But the pace of hiring slowed to 50.4 from
52.6, reflecting the weakest rate of job creation since January 2010. New export orders contracted for a second straight month, with overall
demand from customers abroad at its weakest since October 2012.
The Economist:
Financial Times:
- Echoes of Mao in China cash crunch. As
China’s credit crunch takes a turn for the worse, the question of why
the central bank has permitted market conditions to deteriorate so
suddenly and so sharply looms ever larger. Short-term money market
rates surged to more than 10 per cent on Thursday, a record high and
nearly triple their level just two weeks ago, after the central bank
refused to inject extra funds into the strained financial system.
China Daily:
- Moody's warns on China's local govt debt. Local government debt poses a key risk for Chinese banks, Moody's said Wednesday, the latest warning amid growing jitters of financial risks in the world's second largest economy. The rating agency said in a report that many local government financing vehicles (LGFVs) have seen their cash flow stagnate or decline, while their debt levels have risen. Among 388 city construction companies Moody's surveyed, only 53 percent of them
have sufficient cash to cover estimated debt and interest payments in
2013 without resorting to borrowing more. Meanwhile, the National
Audit Office said on June 10 that the debt of 36 local governments had
risen 12.9 percent to 3.85 trillion yuan ($627.93 billion) in the two
years to the end of 2012. "The direct exposures of Chinese banks to
LGFVs remain significant despite the central government's recent efforts
to limit the growth of LGFV borrowing," the report said, adding that
LGFV exposures accounted for 14 percent of total Chinese bank loans at
the end of 2012.
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -7.32% 2) Gold & Silver -6.32% 3) Gaming -3.35%
Stocks Falling on Unusual Volume:
- ANW, NGD, VIV, EVC, BSBR, IBN, STO, TOT, BCO, EBIX, MUE, CLFD, UNS, SLMBP, BGG, HYGS, GTU, RBA, NAV, BLK, BUD, IHS, LEN, EDD, PHM, FUN, AEH, ASA, DWRE, ESD, PNW, ACWI, VIPS, DHI, RYL, RGLD, WETF, LL, CTB, AB, TOL, UNS, ITB, KR, SBRA, CQP, BGG, AHT, SCS, AMT, CNK, PTY, AGNC, XHB, PIR, KMI, GGN, PAA, TRGP, EWZ, EPP, EDD, WYNN, BEN, LM, MU and TILE
Stocks With Unusual Put Option Activity:
- 1) XLB 2) LL 3) FXA 4) PHM 5) EWY
Stocks With Most Negative News Mentions:
- 1) DIS 2) AXP 3) CAT 4) PHM 5) FDX
Charts:
