Evening Headlines
Bloomberg:
- Moody’s Sees Local Default as $21 Billion Matures: China Credit. Local-government financing vehicles
need to repay a record amount of debt this year, prompting
Moody’s Investors Service to warn Premier Li Keqiang may set an example by allowing China’s first onshore bond default.
Some 127 billion yuan ($21 billion) of so-called LGFV notes expire in
the second half, according to Everbright Securities Co., the most in its
data going back to 2000 and more than double the 62.7 billion yuan that
matured in the first six months. The yield premium over top-rated notes
for one-year AA debt, the most common rating for LGFVs, widened to 67
basis points yesterday, the highest level since Jan. 16, Chinabond data
show. The comparable gap in India is 47. “With bonds approaching maturity, the weaker ones will
have some problems as cash flows that they generate are very
weak,” said Christine Kuo, a Moody’s analyst in Hong Kong. “I
wouldn’t rule out the possibility of the government showcasing
some companies to go under.”
- China to Cut Manufacturing Capacity as Li Reshapes Economy. China
ordered more than 1,400
companies in 19 industries to cut excess production capacity
this year, part of efforts to shift toward slower, more-sustainable
economic growth. Steel, ferroalloys, electrolytic aluminum, copper
smelting,
cement and paper are among areas affected, the Ministry of
Industry and Information Technology said in a statement
yesterday. Excess capacity must be idled by September and
eliminated by year-end, the ministry said, identifying the
production lines to be shut within factories. China’s extra production
has helped drive down industrial-goods prices and put companies’ profits
at risk, while a survey
this week showed manufacturing weakening further in July.
Premier Li Keqiang has pledged to curb overcapacity as part of
efforts to restructure the economy as growth this year is poised
for the weakest pace since 1990. “This detailed list shows the government is serious in its
efforts to restructure the economy and is prepared to tolerate
the necessary pain,” Zhang Zhiwei, chief China economist at
Nomura Holdings Inc. (8604) in Hong Kong, wrote in an e-mailed research
note late yesterday.
- Inter-Korean Talks Break Down With ‘Pushing and Shoving’. Talks between the two Koreas aimed
at reopening the jointly-operated Gaeseong factory park broke
down yesterday, with negotiators from both sides “pushing and
shoving” and no agreement for dialogue to resume. The scuffle broke out when North Korea’s chief negotiator
Pak Chol Su and about 20 officials entered a room of South
Korean journalists to explain their position, according to a
pool report distributed yesterday by the South’s Unification
Ministry. “There was some pushing and shoving” after about 10
South Korean officials tried to break up the briefing, according
to the report.
- Singapore Home Prices Climb to Record as Loan Curbs Imposed. Singapore home prices climbed to a
record in the second quarter as gains in suburban housing values
accelerated, prompting the government to implement new measures
on property loans. The island-state’s private residential property
price index rose 1 percent to 215.4 points in the three months ended
June 30, extending a 0.6 percent increase in the first quarter,
according to revised figures released by the Urban Redevelopment
Authority today. The pace of gains in prices in the suburbs more
than doubled from the previous three months.
- Rebar Set for First Weekly Loss in Eight as China Output to Gain.
Steel reinforcement-bar futures in Shanghai were poised for the first
weekly drop in eight on concern that a rally this month may spur more
output in China. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 0.5 percent to 3,665 yuan ($598) a
metric ton and was at 3,674 yuan at 11:10 a.m. The contract lost
0.5 percent this week, the first such drop since May.
- Chinese Stocks Fall, Led by Technology, Consumer Companies.
Chinese stocks fell for a third day,
led by technology and consumer-staples companies. Cement
producers and drugmakers advanced. BOE Technology Group Co. slumped for a
second day after the
maker of flat-screen television panels said it planned a share sale that
may be China’s largest private placement. Kweichow Moutai Co. led
losses for consumer-staples producers after the industry group jumped
the most in the CSI 300 Index yesterday.
Anhui Conch Cement Co. rose 4 percent as BNP Paribas SA said the
biggest cement producer will benefit from an order from the
government to cut production capacity in 19 industries.
The Shanghai Composite slipped 0.4 percent to 2,012.39 at
10:41 a.m. local time.
- Asian Stocks Fall as Topix Slides on Earnings; Gas Climbs.
Asian stocks fell, with the regional benchmark index trimming a fifth
weekly advance, as Japanese shares dropped amid disappointing earnings.
The yen and South Korea’s won climbed, while gasoline rebounded. The MSCI Asia Pacific Index dropped 0.3 percent to 135.77 as of 11:45 a.m. in Tokyo, reducing its climb in the week to 0.6
percent. Japan’s Topix index headed for its biggest drop since
mid-June as chip-testing equipment maker Advantest Corp.
reported a wider-than-estimated loss.
- Russian Growth Forecasts Trimmed as Recession Risks Rise. Russia’s economy will probably grow
less than previously forecast from April to September as risks
mount of a recession in the world’s largest energy exporter. Gross domestic product will advance 3 percent from a year
earlier in the third quarter compared with 2 percent in the
second, the median of 15 estimates in a Bloomberg survey showed.
That’s down from 3.1 percent and 2.1 percent in June’s poll.
There’s a 30 percent chance of a recession next year, up from 20
percent a month ago, according to a survey of 13 economists.
- Gold Set for Best Weekly Run Since March on Outlook for Stimulus. Gold headed for the longest weekly
rally since March as U.S. economic data backed the case for
sustained monetary stimulus. Russia and Kazakhstan added bullion
to reserves for a ninth month in June.
Spot gold gained as much as 0.3 percent to $1,338.50 an
ounce, and traded at $1,334.55 at 8:30 a.m. in Singapore. Prices
are 3 percent higher this week after advancing to a one-month
high of $1,348.65 on July 24.
- Senate Democrats Said to Circulate Letter Backing Yellen For Fed. A
group of Senate Democrats is
rallying behind Federal Reserve Board Vice Chairman Janet Yellen to
succeed Chairman Ben S. Bernanke, circulating a letter to colleagues in
support of her potential candidacy, according to a Senate aide. The
letter has been signed by several Democrats and was originally drafted
by SenatorSherrod Brown, an Ohio Democrat, said the aide, who asked for
anonymity to discuss the document,
which hasn’t been made public. The exact number of signers
remained unknown to Senate staff, the aide said.
- White House Protects U.S. Aid to Egypt By Avoiding Talk of Coup. The Obama administration, in a move
that may protect U.S. aid to Egypt, has concluded that it
doesn’t have to make a formal determination on whether the
ouster of President Mohamed Mursi was a coup, according to an
administration official. Making such a determination, which potentially would have
required cutting off aid, wouldn’t be in the U.S. national
interest, said the official, who asked not to be identified.
Egypt is a stabilizing force in the region, and it’s to the
U.S.’s advantage to continue providing aid, the official said.
Wall Street Journal:
- Holder Targets Texas in New Voting-Rights Push. Justice Department Wants to Scrutinize State for Potential Discrimination. The Obama administration moved to retain some oversight of the way
states conduct elections after the Supreme Court invalidated part of the
landmark 1965 Voting Rights Act, setting up a new fight with Republican
governors.
- U.S. Eases Bite of Penalties Against Iran. White House, Seeking to Improve Ties With New Leader in Tehran, Lifts Curbs on Medical Supplies, Agricultural Products. The Treasury Department's announcement Thursday was viewed by many
Iran-watchers as a gesture of good will from Washington as it seeks to
restart talks with Tehran over its nuclear program once Mr. Rouhani
enters office next month. However, the White House is clashing with Congress, where a bilateral
group of lawmakers is seeking to tighten the sanctions, say U.S.
officials and Capitol Hill staffers. Their proposed legislation would
significantly toughen financial penalties on Iran by targeting the
country's oil exports, ships and banks by October, in an effort to
convince Tehran to halt its nuclear program.
- Jindal and Walker: Unworkable ObamaCare. Opaque rules, big delays and rising costs: The chaos is mounting. Remember when President Obama famously promised that if you like your
health-care plan, you'll be able to keep your health-care plan? It was a
brilliantly crafted political sound bite. Turns out, the statement is
untrue.
Barron's:
Fox News:
- EXCLUSIVE: Benghazi hero fought alongside fallen SEALs, still recovering at Walter Reed. One of the most severely wounded survivors of the Benghazi terror
attack, Diplomatic Security agent David Ubben, risked his life to help
save his fellow Americans, and is still being treated at Walter Reed
medical center to this day, Fox News has learned. Fox News is the first news organization to make direct contact with
Ubben -- who has had multiple surgeries at Walter Reed to save his right
leg, which was badly wounded in the Sept. 11 attack. Fox News has also learned new details about Ubben's heroic actions on
the night of the attack, including fighting alongside the former Navy
SEALs who were later killed.
MarketWatch.com:
- China money-market funds see big outflows: Fitch. Assets under management at Chinese open-ended money-market funds dropped
nearly 40% in the quarter ended June on heavy redemptions by both retail and institutional investors,
according to calculations made by Fitch Ratings. The outflows were
"unprecedented in the market's relatively short history," the credit
ratings agency said.
CNBC:
- Goldman(GS) CEO on risk: The worst 'absolutely will happen'. Investors should always prepare for the most extreme risk scenario
because it will happen, Goldman Sachs CEO Lloyd Blankfein told the
Australian Institute of Company Directors at a breakfast briefing on
Friday. Blankfein has headed up Goldman Sachs since 2006,
steering it through the fallout of the global financial crisis of
2007-2008. He said the experience had taught him to accept the reality
that the worst thing you can imagine will inevitably happen. "Most risk management is really just advanced contingency planning and
disciplining yourself to realize that, given enough time, very low
probability events not only can happen, but they absolutely will
happen," said Blankfein. "The definition of infinity is that you wait long enough, everything happens," he added.
- Prosecutors seek 'any and all' SAC assets in sweeping complaint. If federal prosecutors are successful in their case against SAC
Capital, the firm and its multi-billionaire founder Steve Cohen could be
left virtually penniless. That is because in addition to the
five-count criminal indictment against the firm unsealed today, U.S.
Attorney Preet Bharara unveiled a separate civil complaint targeting
"any and all assets" of SAC and its funds. The complaint does
not specify the amount the government is seeking, but notes that at
their peak, the firm and its funds were worth $15 billion. Forbes has
listed Cohen's personal net worth at $9.3 billion as of March—virtually
all of it tied to the hedge fund business he founded.
Zero Hedge:
Business Insider:
New York Times:
Reuters:
- Mobile growth dip takes shine off Samsung Elec Q2 profit record. Samsung
Electronics Co Ltd is under mounting pressure to produce eye-catching
new smartphones after its mobile business shrank 3.5 percent in the
second quarter, taking the gloss off a record $8.5 billion operating
profit. The South Korean IT giant on Friday said April-June
operating profit increased 47.5 percent from a year ago to 9.53 trillion
won ($8.54 billion), in line with its estimate. Profits at its mobile
division, the biggest earnings generator, jumped 52 percent to 6.28
trillion won from a year ago but fell 3.5 percent from the previous
quarter. The reporting period included the launch of its flagship Galaxy
S4 in April, backed by a massive advertising campaign, in Samsung's
biggest assault yet on arch rival Apple Inc's
iPhone.
- SolarWinds(SWI) revenue misses estimates on weak license sales.
Network management software maker SolarWinds Inc reported
lower-than-expected quarterly revenue due to a shortfall in license
sales and forecast current-quarter results below Wall Street estimates. SolarWinds shares fell 17.5 percent in extended trading.
- Turmoil hits Tunisia after secular politician slain. Tunisian
opposition politician Mohamed Brahmi was shot dead on Thursday in the
second such assassination this year, setting off violent protests
against the Islamist-led government in the capital and elsewhere.
"This criminal gang has killed
the free voice of Brahmi," his widow, Mbarka Brahmi, told Reuters,
without specifying who she thought was behind the shooting outside their
home in Tunis.
- Nikkei falls to 2-week low on stronger yen, weak earnings. Japan's Nikkei
share average fell to a two-week low on Friday morning, as selling
accelerated on the back of a firmer yen and disappointing quarterly
earnings from the likes of Canon Inc and Advantest Corp.
The Nikkei fell 1.9 percent to
14,288.92 in mid-morning trade after slipping to a low of 14,236.46
earlier, the lowest level since July 9.
Asian Investor:
South China Morning Post:
US dollar loan rise triggers warning for Hong Kong. Sharp
growth in greenback funding spurs Monetary Authority to raise risk
alert and order banks to tighten credit controls. Hong Kong banks are
building up a potentially dangerous exposure to
foreign currency loans after an explosion in US dollar loans in May. That lending surge triggered moves by the Hong Kong Monetary
Authority to rein in over-aggressive lending, forcing banks to step up
credit controls to manage the risks. Bank loans in May increased 40 per cent from April, followed by a 20
per cent growth in June. Of the amount, 60 per cent was in US dollars. The growth over the two-month period is higher than the average of 19 per cent for the first six months. "It is quite a worrying sign as the growth rate is substantial," a HKMA
spokesman said. "The HKMA is contacting all banks to understand why
there is such a strong growth in US dollar loans, and whether such a
trend will continue."
China Daily:
- PBOC's Zhou Reiterates Prudent Monetary Policy. People's Bank of China Governor Zhou Xiaochuan reiterates that the nation will continue a prudent monetary policy and keep a "reasonable" amont of money supply and credit, according to an article written by Zhou. Zhou also said that downward pressure on the economy is "relatively big," according to the article.
- Researcher
Says China Won't Have 'Hard Landing'. China's economy won't have a
"hard landing" and will stabilize, Zhang Liqun, a researcher with the
State Council's Development Research Center, writes in an article.
- China
Researcher Says Large Fiscal Stimulus Unnecessary. China doesn't need
to roll out large-scale fiscal stimulus on infrastructure, citing Jia
Kang, director of the Finance Ministry's fiscal science research center.
- China
1H Vehicle Imports Drop for 1st Time Since 2006. China's imports of
vehicles fell -10.7% in 1H to 526,000 units, the 1st half-year drop
since 2006 when the Asian nation cut tariffs, citing customs data.
Dealers are trying to ease high inventory pressure as imported vehicle
sales are still rising, the report cites Wang Cun, a manager at the
country's largest vehicle importer, China Automobile Trading Co., as
saying.
China Securities Journal:
- China Shouldn't Eagerly Introduce Policies Now. China shouldn't
be too eager in introducing economic policies now as they come with
costs, Li Hongxia, a researcher at the Ministry of Finance's fiscal
science research center, writes in a commentary. China shouldn't judge
how the economy is doing based solely on the GDP figure, Li writes.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 142.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 109.75 +5.5 basis points.
- NASDAQ 100 futures +.21%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for July is estimated to rise to 84.0 versus a prior estimate of 83.9.
Upcoming Splits
Other Potential Market Movers
- The German import price data could also impact trading today.
BOTTOM LINE: Asian indices are mostly 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 mixed. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.03 -1.14%
- Euro/Yen Carry Return Index 137.47 -.38%
- Emerging Markets Currency Volatility(VXY) 9.23 +1.43%
- S&P 500 Implied Correlation 50.93 -3.01%
- ISE Sentiment Index 101.0 +16.0%
- Total Put/Call .93 -4.12%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.71 +.46%
- European Financial Sector CDS Index 148.64 +3.78%
- Western Europe Sovereign Debt CDS Index 89.0 -2.20%
- Emerging Market CDS Index 294.91 +.64%
- 2-Year Swap Spread 15.0 -.75 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $132.10/Metric Tonne unch.
- Citi US Economic Surprise Index -4.70 +2.8 points
- Citi Emerging Markets Economic Surprise Index -29.80 +1.0 point
- 10-Year TIPS Spread 2.15 unch.
Overseas Futures:
- Nikkei Futures: Indicating -132 open in Japan
- DAX Futures: Indicating +31 open in Germany
Portfolio:
- Higher: On gains in my biotech/retail/medical/tech 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:
- Asia-Pacific Bond Risk Rises, Credit-Default Swap Prices Show. The cost of insuring corporate and
sovereign bonds in the Asia-Pacific region against non-payment
rose, according to traders of credit-default swaps. The Markit iTraxx
Asia index of 40 investment-grade
borrowers outside Japan jumped 7 basis points to 141 basis points as of
8:46 a.m. in Singapore, Westpac Banking Corp. (WBC) prices show. The
gauge is set for its third straight day of increases, the longest
stretch in more than a month, according to data provider CMA. The Markit iTraxx Australia index climbed 3 basis points to 118 basis points as of 10:47 a.m. in Sydney, according to National Australia Bank Ltd. prices. The Markit iTraxx Japan index rose 1.5 basis points to 95.5 basis points as of 9:19 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is heading for its highest close since
July 11, CMA data show.
- Jobless Parisians Mean Fewer Peugeots in Slumping France.
Marie-Estelle Cevatheean dreams of a new car that would be better
suited to her growing family after having a baby late last year.
Instead, with no work, the 31-year-old Parisian can’t afford to replace
her seven-year-old Citroen (UG) C3 subcompact. “We don’t have the money
yet to buy a new car,” Cevatheean said. “I need to find a job first.” With
unemployment in France rising and consumer confidence at a record low,
auto sales in the country have tumbled more than any other major
European market this year. That portends more pain for French automakers
Renault SA (RNO) and especially cash-strapped PSA Peugeot Citroen.
- French Auto Suppliers Post Profit Drop on Europe Slump. Michelin
& Cie (ML) and Faurecia SA reported a drop of more than 10
percent in first-half profit as automakers pushed prices lower on
slumping demand in Europe. Michelin, Europe’s largest tiremaker,
said operating profit excluding one-time items declined 13 percent to
1.15 billion euros ($1.52 billion). Faurecia, the region’s biggest maker
of
car interiors, posted a 16 percent decrease in operating profit
to 256 million euros.
- European Stocks Decline Amid Earnings Reports; BASF Falls. European
stocks declined from an almost eight-week high as companies from BASF
SE to ABB Ltd. reported earnings that missed analysts’ estimates.
BASF fell to a three-month low after also saying that full-year targets
now look more challenging. ABB tumbled the most in three months as its
first profit increase in six quarters trailed forecasts and its order
book shrank. Siemens AG plunged the most since August 2011 after saying
it won’t reach its profit-margin goal for the 2014 fiscal year. Michelin
(ML)& Cie.
lost 1.4 percent after posting a 13 percent slide in first-half
earnings. The Stoxx Europe 600 Index dropped 0.5 percent to 299.63 at
the close of trading, after earlier falling as much as 1.1
percent.
- Egypt Islamists Call for ‘Freedom’ Rally Amid Army Pressure. The Muslim Brotherhood’s leader
urged Egyptians to rally for “freedom,” setting the Islamists
on a collision course with an army that’s signaled it’s losing
patience with protests in support of ousted President Mohamed Mursi. The appeal by Mohammed Badie, the Brotherhood’s supreme
guide, came a day after military chief Abdelfatah al-Seesi urged
Egyptians to take to the streets tomorrow to give the military
and police a broad mandate to combat “violence” and
“terrorism.” The military issued a further statement on its
Facebook page today, giving a 48-hour ultimatum and warning that
its tactics in dealing with violence and terrorism would change
after tomorrow.
- Soybeans Drop to 17-Month Low on Slack Demand; Corn, Wheat Fall. Soybeans fell to the lowest in 17
months on signs of declining demand for the oilseed and its
products and amid favorable weather in the U.S. Midwest. Corn
and wheat also dropped.
Soybean exports in the week through July 18 fell 32 percent
to 82,231 metric tons, the U.S. Department of Agriculture data
said in a report today. Soybean-meal and -oil exports fell to
marketing-year lows.
- Gold Rises as Jobless Claims Bolster Outlook for Stimulus.
Gold gained for the first time in three days after a report showed more
Americans filed for unemployment benefits, boosting prospects that the
Federal Reserve will maintain stimulus measures to spur economic growth.
Gold futures for December delivery rose 0.2 percent to
$1,323.10 an ounce at 10:35 a.m. on the Comex in New York.
Trading was 30 percent higher than the average for the past 100
days for this time of day, according to data compiled by
Bloomberg.
- Palm Drops to Lowest in More Than Three Years on Supplies. Palm tumbled to the lowest level in
more than three years as global supplies of the world’s most-consumed cooking oil climb the most since 1999 and demand
expands at the slowest pace in more than a decade.
Futures slumped as much as 3.2 percent to 2,151 ringgit
($672) a metric ton in intraday trading on the Bursa Malaysia Derivatives in Kuala Lumpur, a level not seen since October
2009, before closing at 2,170 ringgit.
- PulteGroup, Horton Tumble on Lower-Than-Expected Home Orders. PulteGroup
Inc. (PHM:US) and D.R. Horton Inc. (DHI:US), the largest U.S.
homebuilders, tumbled after reporting lower-than-expected orders, adding
to concerns that higher mortgage rates will hamper the nation’s housing
recovery. PulteGroup, based in Bloomfield Hills, Michigan, said
second-quarter orders fell 12 percent on a lower community
count. D.R. Horton said orders increased 12 percent, which was
below analysts’ forecast for 28 percent growth, according to
Adam Rudiger, an analyst at Wells Fargo & Co. in Boston.
- SAC Capital Indicted in Six-Year U.S. Insider Probe. SAC Capital Advisors LP, the
$14 billion hedge fund founded by Steven A. Cohen, was indicted
for perpetrating what prosecutors called an unprecedented
insider trading scheme that was revealed as part of the
government’s six-year crackdown on Wall Street crime. The insider
trading case against the Stamford, Connecticut-based firm is the most
significant to be brought by the U.S. since former Goldman Sachs Group
Inc. (GS) director Rajat Gupta was charged in October 2011. Gupta,
convicted in New York federal
court last year, was sentenced to two years in prison.
- Obama Ambassadors Gave At Least $13.6 Million in Campaign Money. When it comes to job benefits, Matthew Barzun is about to enjoy some
of the best. As the new U.S. ambassador to the U.K., he’ll live in
Winfield House, a London mansion set on 12 acres with gardens second
only to those in Buckingham Palace in size. He’ll be able to borrow art
from museums for free and host the president as an overnight guest when
he’s in town. Barzun, a 42-year-old technology entrepreneur
nominated this month to the Court of St. James’s, earned those perks: He
raised at least $1.2 million as finance chairman for President Barack
Obama’s re-election campaign.
Wall Street Journal:
- Unworkable ObamaCare. Opaque rules, delays and inconsistent guidance from Washington: The chaos is mounting.
Zero Hedge:
Business Insider:
Mortgage Daily:
Forbes:
Reuters:
Telegraph:
AFR:
Xinhua:
-
China Hasn't Seen 'Massive' Capital Outflow. There is no trend of
"massive" foreign capital outflow, citing Cao Hongying, an official with
the foreign investment department of the Ministry of Commerce.
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -5.92% 2) Gaming -1.23% 3) HMOs -1.17%
Stocks Falling on Unusual Volume:
- TBBK, SI, SUSQ, ABB, F, NFX, WRLD, INFN, CCI, CPSS, ARII, TOWR, BCC, CROX, RDWR, CLFD, CAM, GRA, SLAB, TER, POT, CAKE, STRA, SRPT, MHO, VNTV, PDH, BLUE, CDNS, TWI, PHM, DNKN, PCP, EQIX, FBHS, DFT, TOL, DO, HNT, LEN, TSCO, PTEN, UAL, BRP, WDC, GRA, TKR, MNRO, RYL, DHI and ANGI
Stocks With Unusual Put Option Activity:
- 1) FB 2) XLI 3) AKAM 4) RCL 5) ITB
Stocks With Most Negative News Mentions:
- 1) RKT 2) PTEN 3) MCO 4) SCHW 5) SUSQ
Charts:
Style Outperformer:
Sector Outperformers:
- Coal +1.88% 2) Gold & Silver +1.68% 3) Tobacco +1.19%
Stocks Rising on Unusual Volume:
- V, COG, RRC, RALY, FLTX, FB, USU, OKE, SPR, BIDU, IMAX, TEAR, APD, FFIV, AMCC, BSX, UA, ETFC, TRIP, ORLY, ITMN, BC, GNC, MJN, IM and CMO
Stocks With Unusual Call Option Activity:
- 1) NRG 2) TRIP 3) SAI 4) CROX 5) BSX
Stocks With Most Positive News Mentions:
- 1) CCE 2) NOC 3) UTX 4) STX 5) POT
Charts:
Evening Headlines
Bloomberg:
- China Wrings Price Cuts in Public Campaign on Graft-to-Collusion. Behind
China’s expanding anti-corruption probe of international drugmakers is a
populist campaign to drive down drug prices as China, like the U.S.,
seeks to expand health care to the poor and uninsured. The pressure on
multinationals comes as the country faces a slowing economy that
threatens its promise to deliver rising living standards and as
President Xi Jinping has made affordable health care a key part of the
Communist Party’s agenda.
- Beijing Sells Residential Land at Record on Luxury Home Demand. Beijing sold a high-end residential
land parcel for a record price as developers sought to tap
rising demand for luxury homes even as the government maintains
its property curbs. The number of apartments sold for more than 10 million yuan
in the Chinese capital jumped 81 percent to 1,388 in the first
half from a year earlier, as wealthy buyers favored bigger
properties under the government’s purchase restrictions, Bacic &
5i5j said. China’s new home prices rose in all but one city in
June, official data showed this month, underscoring Premier Li
Keqiang’s struggle to make housing affordable even as the
economy cools.
- Japan Seen Needing $50 Billion to Cushion Sales-Tax Rise. Japanese Prime Minister Shinzo Abe,
now sitting on the biggest parliamentary majority in six years,
faces the threat of political dissent within months as a planned sales-tax rise threatens to arrest an economic rebound. The
world’s third-largest economy has 30 percent odds of tipping into the
fourth recession since 2008 should Abe bump the consumption levy to 8
percent in April from 5 percent, according
to the median of 23 estimates in a Bloomberg News survey.
- China Stocks Fall as Technology, Small Companies Drop; CSR Gains.
Chinese stocks fell as technology and small-company shares slumped
after a three-day rally, overshadowing gains for industrial companies.
BOE Technology Group Co. slid 4.6 percent, sending a
measure of technology shares to the biggest loss among the 10
industries in the CSI 300 Index. CSR Corp., the nation’s biggest
trainmaker, and China Railway Construction Corp. jumped more
than 5 percent. The government yesterday announced measures to
accelerate railway construction, cut taxes for small companies
and support exporters by reducing administrative fees. The Shanghai Composite Index (SHCOMP) fell 0.1 percent to 2,031.75
at 10:49 a.m. local time.
- Asian Stocks to Won Slip on Stimulus Bets; Kiwi Gains.
Asian stocks fell the most in more than two weeks and emerging-market
currencies weakened as investors weighed the withdrawal of Federal
Reserve stimulus. Metals and oil retreated, while New Zealand’s dollar
rallied. The MSCI Asia Pacific Index lost 0.7 percent to 135.99 as of 12:15 p.m. in Tokyo, the most since July 8. South Korea’s won and Thai baht weakened at least 0.4 percent, while New Zealand’s dollar gained 0.6 percent.
- Spanish Train Crash Kills 77, Biggest Toll Since Madrid Bombing. A
train derailment near the
northwestern Spanish city of Santiago de Compostela killed at least 77
people, the highest death toll in a rail incident since the 2004 Madrid
bombing. The number of fatalities may increase because parts of the wreckage are difficult to access, said a spokeswoman for the
high court of the region of Galicia. She requested anonymity
citing the policy of the court, which is involved in the legal
procedures surrounding the crash.
Wall Street Journal:
- Stalled Project Shows Why China's Economy Is Wobbling. The $91 Billion Caofeidian Industrial Zone Is Mired in Debt and Unfulfilled Promise. A $91 billion industrial project here, mired in debt and unfulfilled
promise, suggests part of the reason why China's economy is wobbling –
and why it will be hard to turn around. The steel mill at the heart of Caofeidian, which is outside the city
of Tangshan, about 225 kilometers (140 miles) southeast of Beijing, is
losing money. Nearby, an office park planned to be finished in 2010 is a mass of steel
frames and unfinished buildings. Work on a residential complex was
halted last Christmas, after workers completed the concrete frames.
There is even a Bridge to Nowhere: a six-lane span abandoned after 10
support pylons were erected. "You only need to look around to see how things are going," said Zhao
Jianjun, a worker at a plant that hasn't produced its steel-reinforced
plastic pipes for months. "Look north, west, east," he said, gesturing
to empty buildings. Chen Gong, chairman of Beijing Anbound Information, a
Chinese think tank, says Caofeidian shows the flaws of the Chinese
economic-growth model, in which the government plans investment and
companies are expected to follow suit, regardless of market conditions.
Chinese local governments are "driven by the blind pursuit of GDP," said
Mr. Chen.
- Bond Investors Turn to Cash. Investors are cashing out of bonds but remain hesitant to plunge into stocks. Investors are cashing out of bonds but remain hesitant to plunge into
stocks, preferring instead to buy money-market mutual funds despite
their low returns. The surprise move highlights persistent investor
anxiety with equities even as stock indexes reach new highs.
CNBC:
- Facebook(FB) earnings beat; shares jump 20%.
Facebook reported second-quarter earnings and revenue that beat Wall
Street forecasts on a growing mobile ad business, sending shares surging
in
late trading. The social media giant reported revenue of $1.81 billion,
up 53 percent from $1.18 billion a year earlier.
- 'Neighbor vs. neighbor' in US cities, Whitney says. Meredith Whitney painted a dire picture in a CNBC interview Wednesday of
cities slashing services and communities battling for mere survival. The financial advisor and analyst said the financial woes facing
bankrupt Detroit will become common around the country as local
governments do whatever they can to escape onerous debt burdens.
- Overseas wealthy slow purchases of US real estate. Foreign purchases of real estate in the U.S. dropped 17 percent in
the 12 months ended in March compared with the same period a year ago,
according to the National Association of Realtors. The high end of the
market felt the brunt of it. Sales of homes priced at $1
million or more to overseas buyers dropped to about 6.5 percent of sales
from 10 percent—the sharpest drop in any price category.
Zero Hedge:
Business Insider:
LA Times:
- Kaiser's rising premiums spark employer backlash. State bill would force HMO to reveal details on rates, spending. Some of Kaiser's biggest customers are complaining that the company is
no longer a bargain and, even worse, standing in the way of controlling
healthcare costs. Critics say the company is so entrenched in the
workplace that it refuses to negotiate rates or to fully explain why its
premiums keep rising.
CBS News:
- CBS News poll finds more Americans than ever want Obamacare repealed. According to the poll, 36 percent of Americans want Congress to expand
or keep the health care law while 39 percent want Congress to repeal it -
the highest percentage seen in CBS News polls. The poll also found a
majority of Americans - 54 percent - disapprove of the health care law,
36 percent of Americans approve of it and 10 percent said they don't
know about it.
Market News International:
- Time for China RRR Cut 'Isn't Here Yet:' MNI Cites PBOC Source.
Any move to cut banks' reserve requirement ratio is way off, citing a
source close to the People's Bank of China. China's foreign exchange
position is likely to deteriorate in coming months as the beginning of
the Federal Reserve's tapering of its quantitative easing program nears,
the report citing people close the the State Administration of Foreign
Exchange as saying.
Reuters:
- Is China's debt nightmare a province called Jiangsu? The nightmare
scenario for China's leaders as they try to wean the country off a diet
of easy credit and breakneck expansion is a local government buckling
under the weight of its own debt. Few provinces fit that bill quite like Jiangsu, home to China's most indebted local government.
Hefty borrowings through banks, investment trusts and the bond market
by Jiangsu's provincial, city and county governments have saddled the
province north of Shanghai with debt far higher than its peers, public
records show. Many of the province's mainstay industries, including
shipbuilding and the manufacturer of solar panels, are drowning
in overcapacity. Profits are dwindling, and the government's tax
growth is braking hard.
That leaves Jiangsu vulnerable as President Xi Jinping and Premier Li
Keqiang slow the country's giant economy to push through reforms aimed
at reducing its reliance on the massive investment that made the country
the factory to the world in favour of more services- and
consumption-led growth. As part of that, Beijing has ordered a clamp
down on
provincial government borrowing and land sales, the mainstay
income for many local administrations. But equally, Beijing
expects local governments to absorb much of the cost of
downsizing many industries, leaving provinces like Jiangsu
caught between a rock and a hard place.
- DOJ probes fracking market over antitrust -Baker Hughes(BHI). The Department of Justice is examining potential antitrust issues in the
market for pressure pumping services, which are used in hydraulic
fracturing, according to Baker Hughes Inc , owner of the third-largest pressure pumping fleet. The market for pressure pumping equipment has been
oversupplied for more than a year because a prolonged slump in natural
gas prices led to a slowdown in gas-directed drilling. But in 2011,
there was an industry-wide push to add capacity in response to a ramp-up
in fracking around the country.
- Japan finmin Aso: Need to take steps for fiscal consolidation. Japanese Finance Minister Taro
Aso said on Thursday that it is important to take steps to pare
down government debt and ensure that the country's public
finances are improving.
"We need to take steady steps toward fiscal consolidation.
We must maintain market confidence in Japan's fiscal
sustainability," Aso said at a seminar in Tokyo. Japan's public debt burden is the worst among major
countries at more than twice the size of its $5 trillion
economy. The government must decide by this autumn whether to raise
its sales tax, which is an important first step toward improving
public finances.
- U.S. IRS pursuing 'stateless income' tax enforcement -official. The U.S. Internal Revenue
Service is pursuing tax enforcement cases against companies over
the issue of "stateless income," a senior agency official said
on Wednesday in a reference to corporate profits that are not
taxed by any country. Erik Corwin, an IRS deputy chief counsel, said there were
international tax disputes with companies, "most involving
consequences of complex restructurings designed either to create
stateless income or to affect a tax efficient repatriation."
- Louisiana agency sues big oil firms for hurting wetlands. A Louisiana agency sued 97
oil companies - including BP Plc, Exxon Mobil Corp
, Chevron Corp and Royal Dutch Shell Plc
- in state court on Wednesday for allegedly damaging hundreds of
miles of sensitive wetlands by cutting through them with
pipelines and transportation canals. Governor Bobby Jindal quickly accused the agency of
overreach and said the filing should be withdrawn.
- Visa(V) raises outlook as card spending accelerates. Visa Inc's quarterly profit beat
estimates as people spent more using its cards, and the largest
credit and debit card network raised its full-year outlook for
revenue and earnings. Visa also authorized a $1.5 billion share buyback program,
sending its shares up about 3 percent in after-hours trading.
China Securities Journal:
- China Won't Ease Deposit Rate Limit in 2013, 2014. China won't
loosen the deposit rate cap through next year, citing Wu Xiaoling, a
former vice governor of the People's Bank of China.
Shanghai Securities News:
- China Steel, Ship Overcapacity Curb Plan Submitted. China's plan
to resolve overcapacity in the steel, cement, aluminum and shipping
industry has been submitted to the State Council and won't take long for
its official release, citing person close to National Development and
Reform Commission. China Petroleum and Chemical Industry Federation will
be holding meetings to study overcapacity in the petrochemical
industry, citing an unidentified researcher from the federation.
The Economic Observer:
- SMEs' Chronic Credit Crunch. With China’s economic slowdown, small- and medium-sized enterprises are
facing huge strains in finding the capital they need to stay afloat.
Banks are aggressively calling in loans and refusing to issue new loans
to these enterprises, leaving them with few places to turn.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 141.0 +11.5 basis points.
- Asia Pacific Sovereign CDS Index 104.25 +4.75 basis points.
- NASDAQ 100 futures +.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 340K versus 334K the prior week.
- Continuing Claims are estimated to fall to 3025K versus 3114K prior.
- Durable Goods Orders for June are estimated to rise +1.4% versus a +3.6% gain in May.
- Durables Ex Transports for June are estimated to rise +.5% versus a +.7% gain in May.
- Cap Goods Orders Non-defense Ex Air for June are estimated to rise +.6% versus a +1.1% gain in May.
11:00 am EST
- Kansas City Fed Manf. Activity for July is estimated to rise to 0.0 versus -5.0 in June.
Upcoming Splits
Other Potential Market Movers
- The UK gdp report, 7Y T-Note auction and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and commodity
shares in the region. I expect US stocks to open modestly higher
and to weaken into the afternoon, finishing mixed. The Portfolio is
50% net long heading into the day.
