Style Outperformer:
Sector Outperformers:
- Gold & Silver +4.1% 2) Hospitals +1.13% 3) Gaming +.16%
Stocks Rising on Unusual Volume:
- FST, ANV, RGLD, HCA, THC, NTLS, USM, SHFL, BYI, BLUE, XPO, POWI, WWAV, SFUN, MGAM, BIDU, MOVE and TDS
Stocks With Unusual Call Option Activity:
- 1) XLK 2) FST 3) CHRW 4) NIHD 5) EXPE
Stocks With Most Positive News Mentions:
- 1) JEC 2) TXN 3) OXY 4) WHR 5) CVX
Charts:
Evening Headlines
Bloomberg:
- Wealth Products Threaten China Banks on Ponzi-Scheme Risk.
Zhang Defa hurried into an Industrial & Commercial Bank of
China Ltd. branch in Shanghai on a sizzling July afternoon breathlessly
looking for the manager. The day before, Zhang had received a text
message saying the bank was selling a 37-day wealth-management product
with a 5 percent expected annualized return, principal guaranteed. He
was too late. The offer, requiring a minimum of 500,000 yuan ($81,000),
had sold out in less than
three hours. Zhang would have netted 2,534 yuan in just five weeks. “This
is crazy, but where else can I put my money without losing sleep these
days?” said Zhang, 61, a retired engineer who has been moving cash out
of his savings accounts into such investments for more than a year. “The
return is fairly decent, and more importantly, I know my money is safe
at a government-owned bank. Even if the bank runs out of the money, the
government won’t.”
- China Widens Drugmaker Probe as Glaxo Bribery Charges Outlined. China is investigating at least four
multinational drugmakers as it widens its probe of
GlaxoSmithKline Plc (GSK), according to a lawyer in Hong Kong whose
firm advises companies on cross-border anti-corruption. The investigations point to an increased targeting of the
pharmaceutical industry in corruption probes as the world’s most
populous country faces rising health-care costs and seeks to
lower drug prices. While the drugmakers are being examined by
local regulators, the results may draw added questions from
officials in Beijing and scrutiny by the U.S. government under
the Foreign Corrupt Practices Act.
- ADB Trims Developing Asia’s Growth Forecasts on China Slowdown. Growth
in developing Asia will be weaker than initially estimated this year
and next amid a slower expansion in China and lackluster export demand
from advanced nations, the Asian Development Bank said. The region’s gross domestic product will probably increase 6.3 percent in 2013 and 6.4 percent next year, the Manila-based
lender said in a report today. In April, it forecast expansion
of 6.6 percent this year and 6.7 percent in 2014.
- India joins Brazil to China as emerging markets cut liquidity. India stepped up efforts to help the rupee after its plunge to a
record low, raising two interest rates in a move that escalates a
tightening in liquidity across most of the biggest emerging markets. The Reserve Bank of India increased the marginal standing
facility and the bank rate to 10.25 per cent from 8.25 per cent, it said
in a statement on its website late yesterday.
- RBA Says Rate Appropriate After Aussie Drop; Currency Gains. Australia’s
central bank said the currency’s decline and past interest-rate cuts
meant its policy setting was appropriate even as it maintained room for
future reductions, according to minutes of its July 2 meeting. “Given the exchange rate adjustment that was occurring,
and with the substantial degree of monetary stimulus already in
place, members assessed the current stance of policy to be
appropriate,” the Reserve Bank of Australia said today in
Sydney in minutes of the meeting at which it held the cash rate
steady. The RBA said the inflation outlook was “slightly
higher” due to the Aussie’s recent drop.
- China’s Stocks Fall as Developers Slump on Tightening Concerns.
China’s stocks fell, led by real-estate developers, on concern the
government will introduce property curbs to stem increases in home
prices. Hangzhou Binjiang Real Estate Group Co. slid 2.4 percent
after the China Securities Journal said Hangzhou city may start a
property tax trial. Agricultural Bank of China Ltd. dropped
0.8 percent as 258.6 billion shares sold during its initial
public offering became tradable today.
- Asia Stocks Rise on Earnings Optimism as Rupee NDFs Jump.
Asian stocks rose, following U.S. equities higher, as Citigroup Inc.
(C)’s better-than-estimated results fueled optimism over company
earnings and investors weighed the outlook for China. The yen held at a
one-week low
versus the dollar, while corn futures rebounded.
The MSCI Asia Pacific Index of regional stocks added 0.4
percent by 10:24 a.m. in Tokyo, rising for the first time in
three days.
- Rubber Reaches One-Week Low as China’s Slowdown Reduces Demand. Rubber fell to a one-week low as
concerns grew that demand from China, the largest consumer, may
weaken after data showed the nation’s economy slowed for a
second quarter. Rubber for delivery in December on the Tokyo Commodity
Exchange lost as much as 2.1 percent to 233.5 yen a kilogram
($2,335 a metric ton) and was at 234.6 yen at 9:57 a.m. after a
holiday yesterday. Futures extended last week’s 2.7 percent loss,
the first weekly drop since the five days through June 14.
- Cintas(CTAS) 4Q net income rises but outlook disappoints. Uniform supplier Cintas Corp. said Monday that its fiscal
fourth-quarter net income rose 9 percent, but it gave a tepid outlook
for the current year due in part to the health care overhaul. Cintas
said the federal government's Affordable Care Act could cause some
customers to delay hiring decisions, which would affect demand for
uniforms. Cintas provides uniforms for a wide range of businesses in
North America, as well as other products like entrance mats, restroom
supplies, first aid and fire protection products.
Wall Street Journal:
- Mexico Captures Head of 'Zetas' Cartel. Arrest Marks an Important Victory for the New Administration of President Enrique Peña Nieto. The Mexican government Monday said its navy captured the leader of the
country's most violent drug-trafficking organization, an important
victory for the new administration of Mexican President Enrique Peña
Nieto.
- China Falters in Effort to Boost Consumption. Growth in Urban Households' Disposable Income Slows, Hindering Beijing's Plan to Cut Emphasis on Unreliable Exports. China's
push to get consumers to open their wallets more and refocus the
economy on domestic consumption is stalling, contributing to lower
growth in the second quarter.
- Mort Zuckerman: A Jobless Recovery Is a Phony Recovery. More people have left the workforce than got a new job during the recovery—by a factor of nearly three. In recent months, Americans have heard reports out of Washington and in
the media that the economy is looking up—that recovery from the Great
Recession is gathering steam. If only it were true. The longest and
worst recession since the end of World War II has been marked by the
weakest recovery from any U.S. recession in that same period.
Fox News:
- Senate heads for showdown as Reid demands GOP approve nominees -- or else. Senate Majority Leader Harry Reid issued an ultimatum to Republicans
on Monday to confirm at least seven presidential appointees or face a
controversial rule change that could drain their power. A late night
meeting attended by nearly every senator failed to produce an agreement
to resolve the dispute. After the hour-long session, Democratic Senate
leaders reaffirmed
that a key vote on the issue was scheduled for Tuesday morning.
Zero Hedge:
Business Insider:
- ZIMMERMAN JUROR: This Case Wasn't About Race. That juror pointed out that Martin was supposedly stopping, turning,
and "cutting through the back" yards of the gated community where the
teen's dad lived. She believes Zimmerman would have treated anybody who
acted that way in the same manner — regardless of that person's race. "I think he just profiled him because he was the neighborhood watch,
and he profiled anybody who came in and acted strange," she told Cooper.
Reuters:
Telegraph:
- On public finances, Britain is still living in cloud-cuckoo land. Asked at the Spring meeting of the International Monetary Fund whether he
thought austerity had gone too far, Anders Borg, Sweden’s finance minister,
said there was really only one way to avoid painful fiscal consolidation for
countries with very high debt and that was never to get yourself into such a
mess in the first place.
BBC:
AFR:
- Queensland Treasurer Warns of Ratings Downgrade. The Australian
state of Queensland may face a downgrade to its credit rating, citing
Treasurer Tim Nicholls. A downgrade may come if taxation revenue and
mining royalties don't recover, citing Nicholls.
China Daily:
- China June-July Daily Rail Cargo Volume Unchanged. China's daily
rail cargo volume was 8.36m tons on average in the month ended July 15,
citing China Railway Corp.
China Securities Journal:
- China Can Tolerate Slower Growth. China can tolerate slower
economic growth in order to implement structural adjustment and reforms,
according to a front-page editorial. The 7.5% y/y growth in 2Q is
obviously higher that the "lower limit," the editorial says. GDP growth
lower than 7% in a given quarter, or even year, won't affect China's
long-term goal, it said. China should promote interest rate
liberalization and income distribution reform. China should also push
forward long-term policies to curb the property market, according to the
editorial.
Apple Daily:
- China's Richest Village in Jiangsu May Fail. Huaxi village in
eastern Chinese province of Jiangsu, so-called the nation's richest
village, may fail as most of its factories are empty, citing its own
investigation.
Securities Times:
- GlaxoSmithKline(GSK)
is a victim of unspoken rules in china's medical industry that
drugmakers give money to increase the incomes of doctors and hospitals,
according to a front-page commentary.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 141.0 -6.0 basis points.
- Asia Pacific Sovereign CDS Index 107.75 -3.0 basis points.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The CPI for June is estimated to rise +.3% versus a +.1% gain in May.
- The CPI Ex Food & Energy for June is estimated to rise +.2% versus a +.2% gain in May.
9:00 am EST
- Net Long-term TIC Flows for May are estimated at -$25.0B versus -$37.3B in April.
9:15 am EST
- Industrial Production for June is estimated to rise +.3% versus unch. in May.
- Capacity Utilization for June is estimated to rise to 77.7% versus 77.6% in May.
- Manufacturing Production for June is estimated to rise +.2% versus a +.1% gain in May.
10:00 am EST
- The NAHB Housing Market Index for July is estimated to fall to 51 versus 52 in June.
Upcoming Splits
Other Potential Market Movers
- The
Fed's George speaking, Germany ZEW Econ Sentiment Index, Eurozone/UK
inflation data and the weekly retail sales reports could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.51 -2.38%
- Euro/Yen Carry Return Index 136.02 +.64%
- Emerging Markets Currency Volatility(VXY) 9.94 -3.12%
- S&P 500 Implied Correlation 51.53 -2.33%
- ISE Sentiment Index 112.0 +55.56%
- Total Put/Call .81 -8.99%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.85 -1.39%
- European Financial Sector CDS Index 157.90 -.49%
- Western Europe Sovereign Debt CDS Index 96.0 unch.
- Emerging Market CDS Index 299.0 -6.41%
- 2-Year Swap Spread 18.25 +1.0 bp
- TED Spread 24.75 +1.5 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -10.75 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% -2 bps
- China Import Iron Ore Spot $126.90/Metric Tonne +.08%
- Citi US Economic Surprise Index -15.0 -3.3 points
- Citi Emerging Markets Economic Surprise Index -36.20 +1.5 points
- 10-Year TIPS Spread 2.08 +3 bps
Overseas Futures:
- Nikkei Futures: Indicating +304 open in Japan
- DAX Futures: Indicating +11 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- EFSF Cut to AA+ by Fitch in Wake of France’s Loss of Top Rating. Europe’s
temporary rescue facility
lost its AAA rating in a move by Fitch Ratings to match it to
the level of France after the country lost its own top grade last week.
The European Financial Stability Facility was downgraded by
one level to AA+, Fitch said in a statement in London today. The
company attributed the decision as a consequence to its July 12
cut to the rating of Europe’s second-largest economy. “EFSF’s ratings rely on the irrevocable and unconditional
guarantees and over-guarantees provided by euro-area member
states,” Fitch said. After France’s downgrade, “the EFSF’s
long-term debt issues are not fully covered by AAA guarantees
and over-guarantees and, for debt issued before October 2011, by
the cash reserve.”
- Yuan Touches 2-Week Low as Economic Growth, Factory Output Slow.
China’s yuan touched a two-week low after data showed growth and
factory output slowed, adding to signs Asia’s biggest economy is
cooling. “Yuan appreciation has come to an end as the export growth
outlook remains grim,” said Shen Jianguang, chief Asia economist at
Mizuho Securities Asia Ltd. in Hong Kong. “The window for depreciation
from current levels has been opened given the U.S.-China talks are over.
It’s time to shift focus
back to fundamentals.”
- UBS’s Weber Sees Fed Tapering at Awkward Time for Euro Area. UBS Chairman and former European
Central Bank Governing Council member Axel Weber says the
Federal Reserve’s plan to reduce stimulus will have a negative
effect on the European economy. “The Fed is doing the right thing for the United States,”
Weber, who headed the German Bundesbank until 2011, said in an
interview with Bloomberg Television’s Mike McKee on July 12 at
the Rocky Mountain Economic Summit in Jackson Hole, Wyoming.
“That’s their mandate, but it’s undisputed that through
transaction and arbitrage it has spillover effects to other
constituencies. It’s coming for Europe at an awkward point in
time.”
- India Inflation Reaches Three-Month High as Rupee Fans Costs. Indian inflation accelerated to a
three-month high in June, threatening to curb scope for a
further interest-rate cut as rupee weakness stokes import costs. The
wholesale-price index rose 4.86 percent from a year earlier, exceeding
May’s 4.7 percent climb, a Commerce Ministry statement showed in New
Delhi today. The median estimate in a Bloomberg News survey of 30
analysts was 4.94 percent. The Reserve Bank of India’s threshold level is about 5 percent.
- WTI Gains as Empire State Manufacturing Index Advances. West Texas Intermediate crude
advanced as manufacturing in the New York region expanded at the fastest pace in five months.
Prices gained for the fourth time in five days as the Federal Reserve
Bank of New York’s general economic index for July climbed to 9.5, the
highest level since February. WTI for August delivery gained 33 cents to $106.28 a barrel at 2:23 p.m. on the New York Mercantile Exchange. The volume of
all futures traded was 13 percent below the 100-day average for
the time of day. The contract climbed $1.04 on July 12, capping
a 13 percent rally over three weeks.
- Copper Futures Decline as China’s GDP Expansion Eases.
Copper futures fell for the second
straight session on concern that demand will ebb after economic
growth slowed for the ninth time in 10 quarters in China, the world’s
biggest user of industrial metals. Gross domestic product expanded 7.5
percent in the second quarter from a year earlier, down from 7.7 percent
in the prior three months, the government said today. That matched the
median estimate in a Bloomberg survey of analysts. Industrial production
(CHVAIOY) slowed in June for the third time in four months. “The
base metals have started the week with a softer tone, coming under
pressure after a choppy start on the back of a weakening Chinese
economic data and a stronger dollar,” Leon Westgate, a London-based
analyst at Standard Bank Plc, said in a report today. “Concerns over the
trajectory of China’s economy continue to mount.” Copper futures for September delivery declined 0.8 percent to $3.13 a pound at 11:03 a.m. on the Comex in New York. On July
12, the price fell 0.7 percent.
- Bets on VIX Decline Reach 2-Year High. (video)
Fox News:
MarketWatch:
Zero Hedge:
Business Insider:
Washington Post:
- Zimmerman lawyer to move ‘asap’ against NBC News.
Last night’s not-guilty verdict in the George Zimmerman trial will
enable the neighborhood-watch volunteer to resume his case against NBC
News for the mis-editing of his widely distributed call to police. Back
in December, Zimmerman sued NBC Universal Media for defamation over the
botched editing, which depicted him as a hardened racial profiler.
Reuters:
- Citigroup(C) profit jumps 41 percent, possible potholes ahead. Citigroup
Inc posted a 41 percent increase in quarterly profit, as stronger home
prices reduced mortgage losses and bond trading revenue jumped,
underscoring the bank's recovery since the financial crisis.
Still, storm clouds lie ahead
for the third-largest U.S. bank by assets as rising bond yields in the
United States are expected to cut into debt underwriting volume, and
slowing growth in emerging markets may cut into profit from overseas.
About 58 percent of its revenue last year came from outside of North
America.
HedgeCo.Net:
- Hedge Funds, Super-Wealthy Leaving France. Following President Francois Hollande’s pledge to raise a top income tax
rate of 75% last year, a number of ultra wealthy individuals have
already reportedly exited the country to more liberal tax regimes,
according to a new whitepaper by ultra-high net-worth tracking firm
Wealth-X.
Gallup:
Reuters:
- Deepening Spanish credit crunch could hit banks, economy, says IMF. Spain's
economic problems could tempt its banks to cut lending further, but
they need to resist this and boost their capital ratios by cutting cash
dividends or issuing new shares instead, The International Monetary Fund
said. The IMF, which is monitoring Spain's banking reforms after a
European bailout last year, said in a report on Monday the lenders'
solvency had improved. But economic problems including record unemployment had left the sector mired in a deepening credit crunch. That pressure could push banks, whose profitswill likely suffer, to further cut lending as they shore
up capital, hitting growth and potentially forcing the government to
rethink its plans for restructuring the sector.
Financial Times:
- US outstrips Europe in crisis-era securities deals. The
US has widened its lead over Europe in the market for “slicing and
dicing” loans, raising questions over whether European banks and
businesses will miss out on a potentially important post-crisis source
of finance. In the year before the 2008 financial crisis US issuance of
asset-backed securities – financial instruments blamed by many for
sparking the crisis – totalled $1.5tn in the US and $440bn in Europe.
That gap has since widened to become a chasm.
BBC:
- Spain Barcenas scandal: Rajoy rejects resignation calls. Spain's prime minister
says he will not give in to "blackmail", amid calls for him to resign
over alleged links to a suspect in a payments scandal. Mariano
Rajoy said he would fulfil the mandate given by the Spanish people. The
calls came after a newspaper published text messages he
allegedly sent to the suspect, Luis Barcenas, ex-treasurer of his
Popular Party (PP). Meanwhile Mr Barcenas repeated in court allegations
that Mr Rajoy received payments from a slush fund.
China Securities Journal:
- China Hangzhou May Levy Property Tax on 2nd Homes. The eastern
Chinese city of Hangzhou may be the third city after Shanghai and
Chongqing to start property tax trial in China, citing people familiar
with the matter. Luxury homes may be taxed at 8%.
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -1.73% 2) Gold & Silver -.47% 3) Oil Service -.30%
Stocks Falling on Unusual Volume:
- ALXN, CHT, AMT, MBFI, INGR, BPT, ALNY, WBMD, FET, XONE, CAP, CROX, IBKR, MR and MELI
Stocks With Unusual Put Option Activity:
- 1) MMM 2) SKS 3) AKS 4) VZ 5) UTX
Stocks With Most Negative News Mentions:
- 1) DIS 2) CY 3) QLGC 4) UPS 5) HOG
Charts:
Style Outperformer:
Sector Outperformers:
- Alt Energy +2.40% 2) Steel +1.97% 3) Gaming +1.65%
Stocks Rising on Unusual Volume:
- TAYC, LEAP, IQNT, FLY, POWI, NTLS, AMCC, XPO, TDS, TSRX, JKS, ADVS and WNC
Stocks With Unusual Call Option Activity:
- 1) DECK 2) LEAP 3) MSI 4) ESRX 5) NTAP
Stocks With Most Positive News Mentions:
- 1) NATP 2) TIF 3) DECK 4) ARUN 5) POWI
Charts:
