Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.39 +.28%
- Euro/Yen Carry Return Index 134.66 -.11%
- Emerging Markets Currency Volatility(VXY) 10.57 +.09%
- S&P 500 Implied Correlation 51.73 +1.85%
- ISE Sentiment Index 67.0 -32.32%
Credit Investor Angst:
- North American Investment Grade CDS Index 82.15 +.52%
- European Financial Sector CDS Index 157.97 +2.69%
- Western Europe Sovereign Debt CDS Index 96.0 +1.05%
- Emerging Market CDS Index 337.67 +4.07%
- 2-Year Swap Spread 17.0 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .03% -1 bp
- China Import Iron Ore Spot $123.90/Metric Tonne +.16%
- Citi US Economic Surprise Index -10.20 +1.8 points
- Citi Emerging Markets Economic Surprise Index -33.70 -3.5 points
- 10-Year TIPS Spread 2.05 unch.
Overseas Futures:
- Nikkei Futures: Indicating -25 open in Japan
- DAX Futures: Indicating -10 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech and biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedge
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Junk Sales Halt as Morgan Stanley(MS) Recommends Hedge: China
Credit. The risk of a hard landing in China's economy has caused the
longest drought in dollar-denominated junk bond sales in a year and
encouraged Morgan Stanley to recommend buying credit-default protection.
Amid the nation's worst cash crunch on record, no Chinese
speculative-grade companies have marketed dollar notes since Central
China Real Estate Ltd. raised $400 million selling five-year securities
on May 22, according to Bloomberg. That is the longest stretch since the
market went quiet for 95 days through July 24 last year amid economic
concerns, according to Bloomberg. "The export data is another sign of a
slowdown in domestic demand," Nishant Sood, a Hong-Kong-based credit
strategist at Morgan Stanley said in a phone interview. Slowing orders
and falling producer prices "increase the risk of a bear-case outcome in
China and makes the case for a less optimistic view on Chinese credit."
- China Seen Widening Car-Purchase Limit to Fight Pollution. China, the biggest emitter of greenhouse gases, plans to widen the number of cities curbing auto purchases to fight pollution and congestion, threatening
vehicle sales, the government-backed car association said. Eight cities -- Chengdu, Chongqing, Hangzhou, Qingdao,
Shenzhen, Shijiazhuang, Tianjin and Wuhan -- will probably
introduce measures limiting auto purchases, Shi Jianhua, deputy
secretary general of the China Association of Automobile
Manufacturers, said in a briefing in Beijing today, without
being more specific about the timing.
- Italy’s Industrial Output Rises Less Than Forecast in May.
Italian industrial output rose less than expected in May, indicating
the country is struggling to emerge from its longest recession in more
than two decades. Production rose 0.1 percent from April, when it
fell 0.3 percent, national statistics office Istat said in Rome today.
Economists had forecast output to rise 0.3 percent, according to
the median of 11 estimates in a Bloomberg News survey.
- Italian, Spanish Bonds Fall After S&P Cuts Italy’s Credit Rating. Italian government bonds declined
for a second day after Standard & Poor’s cut the nation’s credit
rating, citing a weakening of the country’s economic prospects. The nation’s 10-year yield climbed the most in a week as
the New York-based rating company also referred to the nation’s
impaired financial system in its assessment released late
yesterday. Spanish 10-year bonds dropped for a fourth day, the
longest run of declines in almost two months. Italy’s cost of
borrowing for one year rose as it sold 9.5 billion euros ($12.2
billion) of bills due in 367 and 160 days. Germany auctioned
two-year notes. “It’s quite normal that when you get news like that it
puts immediate pressure on the market,” said Allan von Mehren,
chief analyst at Danske Bank A/S (DANSKE) in Copenhagen. “The rating
action reflects an overall picture, that things are still
looking weak.”
- Italy’s Baretta Says Budget Crunch May Require More From Rich.
Italian Finance Undersecretary Pier Paolo Baretta said the government
is considering shifting the tax burden to the wealthy in order to
satisfy demands for broad-based fiscal easing and meet its 2013 deficit
target. “The truth is we’ve got a real bottleneck of issues to deal
with” this year, Baretta said yesterday in an interview in his office in
Rome. In order to raise funds, Italy is seeking spending cuts and may
limit the tax deductions higher-income households take on medical visits
and other expenses, he said.
- OPEC Sees U.S. Shale Boom Eroding Demand for 2014 Crude. The Organization of Petroleum Exporting Countries forecast
the world will need less of its crude next year, even as global oil
demand growth rebounds to its strongest pace since 2010, amid competing
supply sources. Demand for OPEC’s crude will slip by 300,000
barrels a day next year to 29.6 million a day next year, or about 2.6
percent less than the 12-member group is pumping now, the organization
said in its first set of forecasts for 2014. The need for OPEC’s crude
will diminish even as global oil demand growth recovers to 1 million
barrels a day in 2014, from 800,000 a day this year, amid rising output
in the U.S. (DOETCRUD) and Canada. “The strong growth trend seen
in 2013 is expected to continue in 2014” for production from outside
OPEC, the organization’s Vienna-based secretariat said in its monthly
market report today.
- WTI Oil Surges to 15-Month High on U.S. Supply Decline. West Texas Intermediate crude rose
to a 15-month high after U.S. supplies tumbled for a second week
as refinery operating rates gained, boosting speculation that a
glut in the central part of the country is dissipating. Futures
climbed as much as 3 percent after the Energy
Information Administration said inventories dropped 9.87 million barrels
to 373.9 million, three times more than was forecast by analysts
surveyed by Bloomberg. Stockpiles at Cushing, Oklahoma, the delivery
point for WTI, fell the most since 2009 as refinery utilization
increased to the highest level this year. WTI has moved into
backwardation, with futures closest to expiration
becoming more expensive than those for later delivery.
- Gold Heads for Longest Rally in Two Months on Physical Purchases. Gold climbed for the third session,
heading for the longest rally since late April, as physical
purchases rose and the dollar’s decline increased demand for the
metal as an alternative investment. The dollar fell as much as 0.4 percent against a basket of
six major currencies, after reaching the highest since July 2010
yesterday.
- U.S. Banks Seen Freezing Payouts as Harsher Rules Loom. The biggest U.S. banks, after years of building equity, may
continue hoarding profits instead of boosting dividends as they face stricter capital rules than foreign competitors.
The eight largest firms, including JPMorgan Chase & Co.
(JPM:US) and Morgan Stanley (MS:US), would need to retain capital equal
to at least 5 percent of assets, while their banking units would have to
hold a minimum of 6 percent, U.S. regulators proposed yesterday. The
international equivalent,
ignoring the riskiness of assets, is 3 percent. The banks have until
2018 to fully comply. The U.S. plan goes beyond rules approved by
the Basel Committee on Banking Supervision to prevent a repeat of the
2008 crisis, which almost destroyed the financial system. The changes
would make lenders fund more assets with capital that can absorb losses
instead of using borrowed money. Bankers say this could trigger asset
sales and hurt their ability to lend, hamstringing the nation’s economic
recovery.
Wall Street Journal:
- Key Passages From Fed Minutes. A number of Fed officials wanted to end the central bank’s $85 billion per month bond-buying program late this year ….
- China’s Very Real Slowdown, Out in the Open. China’s
economy is slowing down. China reported that both exports and imports
fell in June, something that hadn’t happened since October 2009 during
the depths of the global recession.
Fox News:
- Egypt orders arrest of Muslim Brotherhood leader as group rejects cabinet offer. Egypt ordered the arrest of the Muslim Brotherhood's spiritual leader
and nine others for allegedly instigating violent clashes with the
military this week that left more than 50 Brotherhood supporters dead,
hours after the group rejected a plan to be part of the government's new
cabinet. The general prosecutor's office said in a statement Wednesday that it
issued arrest warrants for the general guide of the Muslim Brotherhood,
Mohammed Badie, as well as his deputy and strongman, Mahmoud Ezzat.
Eight other leading Islamists also were ordered to be taken into
custody. The prosecutor's office says the Islamist leaders are suspected of
inciting the violence outside the Republican Guard building in Cairo on
Monday that left 54 people dead.
CNBC:
- Fed Minutes: Some Participants Felt Fed Will Need to Explain QE Exit Relatively Soon. Federal Reserve officials expressed concern about how
well the
central bank was conveying its policy intentions to a jittery investing
public, according to minutes from the most recent meeting. The
June FOMC session was significant in that Chairman Ben Bernanke followed
it by telling the media that the Fed was prepared to start winding down
its bond-buying program by the end of 2013. The minutes indicated a clear concern from committee members, who
gave marching orders to Bernanke about what to say at the media
gathering. "At the conclusion of the discussion, most
participants thought that the Chairman, during his postmeeting press
conference, should describe a likely path for asset purchases in coming
quarters that was conditional on economic outcomes broadly in line with
the Committee's expectations," the minutes said. "In addition,
he would make clear that decisions about asset purchases and other
policy tools would continue to be dependent on the Committee's ongoing
assessment of the economic outlook." "A few stated their view that a prolonged period of low interest rates
would encourage investors to take on excessive credit or interest rate
risk and would distort some asset prices," the minutes said. "However,
others suggested that the recent rise in rates might have reduced such
incentives."
- Dire Predictions For Housing Recovery. (video) The housing recovery is in for a major pause due to higher mortgage
rates. It is not in the numbers now, and it won't be for a few months,
but it is coming, according to one noted analyst. The market has seen
rising rates before, but never so far so fast; there is no precedent for
a 45 percent spike in just six weeks. The spike is causing a sense of
urgency now, a rush to buy before rates go higher, but that will be
short term. Home sales and home prices will both come down if rates
don't return to their lows, and the expectation is that they will not. Where is the proof of this? We only need look to the $8,000 home buyer
tax credit that expired in 2010. The falloff was dramatic.
Zero Hedge:
Business Insider:
New York Times:
- Greek Unions Call Strike to Protest Cuts. Greek unions stepped up their opposition Wednesday to a new round of
austerity measures promised to the country’s foreign creditors, calling a
24-hour general strike for Tuesday while local government employees
occupied city buildings to protest plans for wage cuts and layoffs.
@RonnieSpence:
Reuters:
- Brazil's real hits weakest level since April 2009. The Brazilian real added
to losses on Wednesday afternoon, hitting its weakest level in
over four years, as investors feared the U.S. Federal Reserve
could signal later in the day that it is about to cut back on
its stimulus program.
The real lost 0.7 percent to
2.2781 per dollar, its weakest level since the beginning of April, 2009.
Investors fear that the withdrawal of U.S. stimulus may reduce the flow of dollars to emerging-market countries such as Brazil.
- U.S. wholesale inventories fall, likely drag on GDP growth. U.S. wholesale inventories
fell in May by the most in a year and a half, the second
straight monthly decline and a sign that restocking by
businesses could weigh against economic growth in the second
quarter. The Commerce Department said on Wednesday wholesale
inventories dropped 0.5 percent during the month, confounding
the expectations of analysts polled by Reuters, who expected an
increase.
- Brazil set for another steep interest rate rise to tame prices. Brazil
is expected to raise its benchmark interest rate by another 50 basis
points on Wednesday, maintaining the pace of monetary tightening to
prevent high inflation from hampering a slow-moving economic recovery. The Brazilian central bank, one of the first in the world to
tighten monetary policy, has raised its Selic rate
twice since April to 8 percent to battle high inflation that has
curbed consumption and industrial output.
The Tennessean:
CNN:
- Hedge funds can now advertise.
What it really means. The Securities and Exchange Commission today
voted 4-1 to end a
decades-old ban on "general solicitation" by many private issuers,
including hedge funds, private equity funds and start-up companies. The
recommendation to do so first appeared in the JOBS Act, a piece
of bi-partisan capital markets legislation that became law in March
2012. In short, this means that all sorts of private issuers soon will be
able to publicly discuss and advertise investment opportunities. They
also can do things like publicize past performance, which previously had
been prohibited.
Financial Times:
- Portugal’s political turmoil risks debt restructure. Portugal’s
government almost disintegrated last week but has now managed to shore
up its support, bringing some calm to the country’s bond market. But the
political chaos could still have far-reaching implications. Its
chances of regaining full market access now look much slimmer. That
means the country will need more money from its troika of international
lenders. But that could lead to a debt restructuring – potentially
upsetting the tentative peace that the
European Central Bank has brought to the continent’s bond markets.
Telegraph:
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
China National Radio:
- China Premier Says 2H Economic Situation Complicated. China
Premier Li Keqiang made comment on 2H economic situation after hearing
feedback from small companies during visit to the southern Chinese
province of Guangxi.
Xinhua:
- China Sets Timetable for Local Govt to Disclose Spending. China's
State Council issued timetable today for local governments to disclose
information on receptions, vehicles and overseas trips spending, citing a
State Council plan. Provincial governments should disclose their
spending on receptions, vehicles and overseas trips starting from 2013,
citing the plan. The municipal- and county-level governments should
strive to disclose similar information by 2015, according to the report.
State Council also identified nine categories of information that
should be disclosed to improve government transparency, including
subsidized housing, food and drug safety, environmental protection, land
appropriation and demolition, the report said.
Style Underperformer:
Sector Underperformers:
- 1) Coal -1.82% 2) Banks -1.51% 3) Homebuilders -.93%
Stocks Falling on Unusual Volume:
- ALJ, EVC, BAP, CRZO, HBAN, WFC, FMX, IMMU, TWTC, KYN, ADTN, FLY,
BRLI, PRAA, BTI, RAX, IPCM, FAST, NBR, GMCR, PNRA, OPEN, ALDW, P, CIB, AWAY, PRFT, YELP, NLSN, ZOLT, GMT, SXT and POT
Stocks With Unusual Put Option Activity:
- 1) MDY 2) FITB 3) KRE 4) INTC 5) AMAT
Stocks With Most Negative News Mentions:
- 1) NBR 2) CB 3) NSC 4) PNC 5) FAST
Charts:
Style Outperformer:
Sector Outperformers:
- Biotech +.54% 2) Drugs +.50% 3) Computer Services +.45%
Stocks Rising on Unusual Volume:
- PCYC, NIHD, EROC, PERI, NUS, FDO, MDRX, CTRP and AMAT
Stocks With Unusual Call Option Activity:
- 1) YELP 2) ADT 3) TAP 4)PEP 5) ISRG
Stocks With Most Positive News Mentions:
- 1) NOC 2) CXW 3) BEAT 4) FDO 5) PSX
Charts:
Evening Headlines
Bloomberg:
- China Exports Unexpectedly Drop With Imports in Drag on Economy.
China’s exports and imports both unexpectedly declined in June in a
sign that weakness in global and domestic demand will intensify the
slowdown in the world’s second-biggest economy. Overseas shipments fell 3.1 percent from a year earlier, the General Administration of Customs said in Beijing today,
compared with the median estimate of a 3.7 percent gain in a
Bloomberg News survey of 39 economists. Imports declined 0.7
percent after a 0.3 percent drop in May. The report follows May’s collapse in export gains after a
crackdown on fake invoices that inflated data in the first four
months of the year. “The story of China economic growth this year
has changed -- it’s no longer a story about modest recovery but about
where the government’s bottom line is,” Xu Gao, Beijing-based chief
economist with Everbright Securities Co. who previously worked for the
World Bank, said before the release. “Without
government support, China’s growth will continue to slide.”
- Ruble to Real Roiled With No Brick in BRICs’ $13.9 Billion Lost. Capital
flight from the BRICs,
Brazil, Russia, India and China, is sending their stocks, bonds and
currencies down in tandem for the first time since 2006 as the 10-year
love affair with the largest emerging markets ends. “Every decade,
there’s a theme that captures investors’ imagination -- the 1970s was
about gold, 1980s was all about Japan and 1990s was about technology
companies,” Ruchir Sharma, the New York-based head of emerging markets
at Morgan Stanley Investment Management, which oversees $341 billion,
said in a phone interview on July 8. “Last decade it was about the
BRICs. That theme has basically run its course.” Investors withdrew
$13.9 billion from equity mutual funds invested in the four countries
this year, or 27 percent of the inflows since 2005, according to EPFR
Global. The MSCI BRIC Index fell 12 percent last quarter while the
nations’ currencies sank 4.1 percent against the dollar and government
bonds lost an
average 0.6 percent, the only such correlation in data compiled
by Bloomberg going back seven years.
- Asian Stocks Pare Gains as Aussie Declines With Metals.
Asian stocks trimmed gains, and
commodity currencies declined with metals as China’s imports and exports
unexpectedly fell. The Dollar Index rose after touching a three-year
high as investors awaited minutes from the U.S. Federal Reserve’s
meeting last month. The MSCI Asia Pacific Index increased 0.5 percent by 12:41 p.m. in Tokyo, paring a 0.8 percent gain.
- Rebar Falls on Higher Output, Unexpected Drop in China’s Exports.
Steel reinforcement-bar futures in Shanghai fell for the third day amid
increased output from mills and after an unexpected drop in China’s
exports. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.5 percent to 3,579 yuan ($584) a
metric ton before trading at 3,588 yuan at 10:45 a.m. local
time.
- Rubber Declines as China’s Cash Crunch Spreads to Auto Dealers. Rubber declined to a one-week low as
a cash crunch in China, the biggest consumer, is spreading to the nation’s auto dealerships. Rubber for delivery in December on the Tokyo Commodity
Exchange fell as much as 3 percent to 234.3 yen a kilogram
($2,316 a metric ton), the lowest level for a most-active
contract since July 1. Futures traded at 236.8 yen at 10:37 a.m.
local time and have lost 22 percent this year.
- Copper Triangle Break Means Further 10% Drop: Technical Analysis. Copper futures, down 16 percent this
year, may fall by next month to the lowest since mid-2010, based
on technical analysis by Matt Zeman at Kingsview Financial LLC. The attached chart of monthly prices shows that copper on
the Comex in New York broke out of a triangle pattern formed by
a high in February 2011 of $4.6575 a pound and a low of $2.994
in October that year. Declines beneath the lower line of the
triangle in the past three months signal a 10 percent drop to
$2.75 by early August, Zeman said in a telephone interview. “The charts look bearish,” said Zeman, a strategist at
Kingsview in Chicago. “The inability to maintain any meaningful
rally is also a bearish factor. We could see a pretty quick
slide lower.”
- EU Unveils Bank-Failure Plan in Face of German Opposition.
The European Union’s executive arm
is heading for a showdown with Germany over its blueprint for shuttering
or restructuring failing banks, a plan intended to complement the
European Central Bank’s oversight of lenders. Michel Barnier, the EU’s financial-services chief, will unveil the European Commission’s proposal for a single bank
resolution mechanism today in Brussels, a day after German
Finance Minister Wolfgang Schaeuble urged restraint if the bloc
is to avoid conflicts with its basic laws. “I would strongly ask the commission in its proposal for
an SRM to be very careful, and to stick to the limited
interpretation of the given treaty,” Schaeuble said yesterday.
“We have to stick to the given legal basis, as otherwise we
risk major turbulence.”
- Lloyd’s Says Taxes, Regulation Burden European Firms. High
taxation and new regulation are among the most pressing concerns for
senior European company executives, according to a survey by Lloyd’s of
London. The Lloyd’s Risk Index survey also found executives were
worried about losing customers and the availability of credit, the
world’s oldest insurance market said in a statement today. “With business tax in the spotlight and rising up the
political agenda, executives are understandably concerned,”
Lloyd’s Chief Executive Officer Richard Ward said in the
statement. “The danger is that an emphasis on near-term,
operational issues comes at the expense of significant,
strategic decisions.”
- SEC Set to Lift 80-Year-Old Ban on Advertising by Hedge Funds. Hedge funds and other companies
seeking private investments would be freed to advertise publicly
for funding under a rule set for a vote tomorrow by the U.S.
Securities and Exchange Commission. The rule is the first of those required by last year’s
Jumpstart Our Business Startups Act to be approved by the SEC,
the vote coming more than a year after a deadline set by
Congress. The rule would lift an 80-year-old regulatory practice that
has restricted advertising outside of a public offering in an
effort to protect small investors from inappropriate risks.
Under the new rule, startups and other small companies would
also be able to use advertising to raise unlimited amounts of
money.
- Six Inconvenient Truths About Obamacare. The White House’s decision last week to delay part of its health-care
overhaul illustrates six truths about the law that its supporters can’t
easily acknowledge. First, important parts of it are badly designed.
Wall Street Journal:
- Plan Reins In Biggest Banks. Proposal
Requiring Extra Capital Would Force Firms to Be More Conservative or
Shrink. U.S. regulators took their first big swing at addressing fears
that
Wall Street's largest firms remain too risky five years after the
financial crisis, unveiling plans to require them to set aside far more
capital as protection against future disaster. The Federal Reserve, Office of the Comptroller of the Currency and
the Federal Deposit Insurance Corp. are effectively trying to force big
banks to become more conservative or to shrink. The first step, proposed Tuesday, would require banks to double the
amount of capital they hold as protection against every loan,
investment, building, security and other asset on their books—not just
the risky ones.
- U.S. Struggles to Meet Health-Law Deadline. Delay in Big-Employer Requirement Raises Questions About Administration's Ability to Implement Overall Policy. The
delay in the requirement that big employers offer health insurance to
workers has raised questions about the administration's ability to
implement the biggest domestic policy initiative in a generation.
- Egypt Names New Premier Amid Disarray. Ex-Finance Minister Is Chosen to Lead Interim Government as Arab Nations Pledge Billions, While Divisions Widen. A former finance minister was chosen as Egypt's interim premier under a
six-month timetable for elections, as the country's emerging post-coup
government drew pledges of $8 billion in assistance from Arab
supporters, in new attempts to bolster a democratic transition marked so
far by divisions and violence.
- Emerging Markets Hit by IMF Forecast. Lower Growth Prospects Further Rattle Developing Nations. Investor
fears that the end of easy money is at hand are ricocheting around the
globe. In the latest fallout, the International Monetary Fund on Tuesday
trimmed its global-growth forecast.
- Slowdown in China Dents Nickel. Metal's Price Reaches Four-Year Low as Demand Wanes and Output Increases. Nickel prices fell to a four-year low, in the latest fallout from slowing economic growth in China, the metal's biggest user. China's growing pains have translated into less demand for nickel,
which is mixed with iron ore to give stainless steel its rustproof
property in everything from table forks to kitchen sinks to skyscrapers.
- Alaska Unveils New Plan to Explore for Oil in Wilderness Area.
Alaska officials unveiled a new oil exploration proposal Tuesday for
the
Alaska National Wildlife Refuge, an area estimated to hold significant
oil
reserves that is also home to polar bears, caribou and other wildlife.
Alaska officials and some federal lawmakers have periodically pursued
federal
approval to explore and drill for oil and natural gas in the wildlife
area,
arguing that if the area has rich oil reserves, the nation should
consider
producing hydrocarbons there. Democratic lawmakers and environmental
groups have
opposed such efforts, arguing that the area is a crucial habitat for
wildlife
that could be harmed if oil drilling were allowed. Now, the state of Alaska is proposing to pay for underground seismic surveys
that would provide a clearer picture of how much oil is underneath the ground in
the wildlife refuge.
- Fukushima Watch: Tritium Levels Soar on Coast at Fukushima Plant.
More than two years after the devastating accident at Japan’s Fukushima
Daiichi nuclear plant, operator Tokyo Electric Power Co. 9501.TO -0.45%
is seeing levels soar of a radioactive element called tritium. The
problem spot is on the coastal side of the plant’s heavily damaged No. 2
reactor, one of the areas where Tepco regularly monitors groundwater to
check for radioactive elements that may have leeched from
the plant’s partly melted fuel cores and into the environment. In May,
Tepco found that tritium levels in the groundwater there had suddenly
risen to 17 times their December levels. Since then, Tepco has drilled
more monitoring holes and stepped up measurements. They’ve found tritium
levels are continuing to rise, with the latest readings, taken on July
5, some 20% higher than they were in May.
Fox News:
- FOIAed again: ‘Gun map’ newspaper seeks more info on firearms owners. The suburban New York newspaper that created a firestorm earlier this
year when it published the names and addresses of gun permit holders has
requested more data regarding legal owners of firearms, apparently to
determine if handgun ownership patterns have changed in the last six
months.
MarketWatch.com:
- Oil prices top $104 on sharp inventory decline. U.S.
benchmark crude-oil futures leapt above $104 a barrel on Wednesday
after weekly U.S. crude-oil supplies fell by more than twice the amount
anticipated by analysts. Crude oil for August delivery CLQ3 +0.74%
rose 85 cents, or 0.8%, to $104.38 a barrel in electronic trade.
CNBC:
Zero Hedge:
Business Insider:
Federal Reserve Bank of San Francisco:
Reuters:
- Dismal China trade data points to weaker Q2 GDP growth. China's exports to the United States - the country's biggest
export market, fell 5.4 percent in June from a year earlier, while export to the European Unison dropped 8.3 percent,
according to the customs. "The surprisingly weak June exports show
China's economy is facing increasing downward pressure on lacklustre
external demand," said Li Huiyong, an economist at Shenyin & Wanguo
Securities in Shanghai. "Exports are facing challenges in the second half of this
year. The appreciation of U.S. dollar and the Chinese
government's recent crackdown on speculative trade activities
also put pressure on exports."
- U.S. Senate to scrutinize Chinese purchase of pork producer Smithfield(SFD). Chinese plans to buy
America's Smithfield Foods - the world's biggest pork
producer - will face intense scrutiny on Wednesday when U.S.
senators question Smithfield's chief executive about food safety
and foreign ownership.
The proposed $4.7 billion purchase by Shuanghui
International would be the largest acquisition ever of a U.S.
company by a Chinese concern. Experts on the U.S. review process
expect the deal to be approved despite opposition from farmers,
food-safety groups and rural communities.
- U.S. risk council designates AIG, GE Capital for tougher oversight. The U.S. financial risk
council on Tuesday said it has designated American International
Group and GE Capital as systemically risky,
bringing them under stricter regulatory oversight. The Financial Stability Oversight Council's decision to name
its first set of "systemically important" non-bank firms had
been long expected by the financial services industry.
Financial Times:
Telegraph:
AsianInvestor:
- EM Hedgies, Asian Quants Struggle Through June. The
Eurkeahedge Greater China Hedge Fund Index is down -5.19% for June,
based on strategies that reported last month's returns as of early this
week, while the data provider's emerging markets index was down -2.94%.
Jiji:
- OECD Chief Says Japan Should Raise Consumption Tax to 10%. Japan
should immediately raise consumption tax to 10% to achieve early fiscal
reconstruction, Angel Gurria, Secretary-General of OECD, says in an
interview.
China Securities Journal:
- China Can't Rule Out Inflation Risks. China can't rule out
inflation risks in the coming half-year period or longer because
increasing home prices may push up consumer prices, according to a
front-page commentary written by reporters Wang Donglin and Ni Mingya.
Actual inflation level is higher than reported CPI data because property
prices are not included when calculating CPI, the commentary said.
Prices for furniture, building materials, home appliances and rent will
rise as a result of increasing property prices, according to the
commentary. China should regulate shadow banking and take differentiated
policies to curb some overheated industries and overcapacity, the
commentary says.
Securities Daily:
- China
Cash Crunch Hitting Auto Loan Approvals. Banks have become more
stringent in approving car loans after the cash crunch, citing
interviews with auto dealers. Loan approvals are now taking twice as
long, citing dealers. Mid-priced car sales hit the hardest, according to
the report.
Evening Recommendations
Citigroup:
- Rated (GOOG) Buy, target $1,100.
- Rated (AMZN) Buy, target $340.
- Rated (YHOO) Buy, target $30.
- Rated (EBAY) Buy, target $65.
- Rated (AOL) Buy, target $43.
Night Trading
- Asian equity indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 152.50 -5.5 basis points.
- Asia Pacific Sovereign CDS Index 114.0 -3.25 basis points.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Wholesale Inventories for May are estimated to rise +.3% versus a +.2% gain in April.
- Wholesale Sales for May are estimated to rise +.3% versus a +.5% gain in April.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory
decline of -3,200,000 barrels versus a -10,347,000 barrel decline the
prior week. Gasoline supplies are estimated to rise by +1,000,000
barrels versus a -1,719,000 barrel decline the prior week. Distillate
inventories are estimated to rise by +1,000,0000 barrels versus a
-2,418,000 barrel decline the prior week. Finally, Refinery Utilization
is estimated to rise by +.2% versus a +2.0% gain the prior week.
2:00 pm EST
- Fed releases minutes from June 18-19 FOMC meeting.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bernanke speaking, Italian 10Y bond auction, China New Loan/Trade
data, Germany CPI, Brazil rate decision, 10Y T-Note auction, weekly MBA
mortgage applications report and the (CVX) quarterly update could also
impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer staple shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 14.37 -2.77%
- Euro/Yen Carry Return Index 134.63 -.64%
- Emerging Markets Currency Volatility(VXY) 10.58 -1.76%
- S&P 500 Implied Correlation 50.31 -2.99%
- ISE Sentiment Index 94.0 -5.05%
- Total Put/Call .97 -5.83%
Credit Investor Angst:
- North American Investment Grade CDS Index 81.43 -2.24%
- European Financial Sector CDS Index 153.83 -4.13%
- Western Europe Sovereign Debt CDS Index 95.0 -1.04%
- Emerging Market CDS Index 325.07 -4.24%
- 2-Year Swap Spread 17.0 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 +.75 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $123.70/Metric Tonne +1.48%
- Citi US Economic Surprise Index -12.0 +.1 point
- Citi Emerging Markets Economic Surprise Index -30.20 +1.2 points
- 10-Year TIPS Spread 2.05 -3 bps
Overseas Futures:
- Nikkei Futures: Indicating +80 open in Japan
- DAX Futures: Indicating +13 open in Germany
Portfolio:
- Higher: On gains in my tech, biotech and retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
