Evening Headlines
Bloomberg:
- China’s Debt Surge Pressures Xi-Li to Avert Lost Decade. A
Chinese lending spree of the
magnitude that tipped Asian nations into crisis in the late
1990s and preceded Japan’s lost decades is putting pressure on top
leaders to map out a strategy to tackle the threat. Half of the
economists in a Bloomberg News survey say non-performing
local-government and corporate debt will probably have a “significant
impact” on China’s credit and economic growth. The central
government will deal with bad loans at local governments in the next 18
months by expanding the municipal-bond market and letting localities
refinance with direct bond sales, respondents said. Avoiding a fate
akin to Japan’s growth collapse of the 1990s hinges on Chinese
officials’ ability to reduce debt and shift policy, JPMorgan Chase
& Co. says. President Xi Jinping and Premier Li Keqiang,
developing a reform strategy due at a Communist Party meeting later this
year, may get input from a State Council-ordered audit of government
borrowings and a World Bank-assisted study on urbanization. “The debt
ratio is absolutely dangerous, there is no question,” said Yao Wei,
China economist at Societe Generale SA in Hong Kong, ranked by Bloomberg
as the most accurate forecaster of the nation’s gross domestic product.
“There is a high risk that this debt issue will have significant
downside pressure on Chinese growth in the next few years.”
Local-government debt may have surged by as much as 50 percent since the
end of 2010.
- China’s Stocks Fall Most in Week as Property, Coal Shares Slump.
China’s stocks fell for the first time in six days, led by property
developers and coal producers, after the nation’s economic planning
agency signaled the
government would maintain property curbs and concern grew the
slowing economy will reduce demand for energy.
- Asian Stocks Drop on Concern Fed Will Reduce Stimulus.
Asian stocks fell for a second day as stronger growth in U.S. service
industries fueled speculation the Federal Reserve will soon be able to
reduce economic stimulus. HSBC Holdings Plc (5) slumped 4.5 percent in
Hong Kong after earnings at Europe’s biggest bank missed analysts’
estimates. Sony Corp. (6758) sank 5.5 percent in Tokyo after its board
rejected billionaire Daniel Loeb’s call to sell a portion of its
entertainment business, saying 100 percent ownership is crucial
to the company’s success. Fonterra Shareholders Fund climbed 2.6
percent in New Zealand, recouping some of yesterday’s record
decline after Russia and China halted imports of milk powder
amid concern about tainted ingredients in some products from
Fonterra Cooperative Group Ltd., the world’s largest dairy
exporter. The MSCI Asia Pacific Index sank 0.7 percent to 134.33 as
of 11:03 a.m. in Hong Kong, with four stocks falling for each
that rose.
- Rubber Futures Drop for Second Day as Stronger Yen Cuts Appeal.
Rubber declined for a second day as a
strengthening Japanese currency reduced the appeal of yen-based
contracts and amid speculation the Federal Reserve will soon be able to
cut stimulus. The contract for delivery in January dropped as much as 1
percent to 243.4 yen a kilogram ($2,484 a metric ton) on the
Tokyo Commodity Exchange, before trading at 244.4 yen at 11:28
a.m. Futures have fallen 19 percent this year.
- French Cross Rhine for Work to Escape 10% Unemployment. With unemployment in Alsace at about 10 percent and the
jobless rate in the German state of Baden-Wuerttemberg where
Kehl is located at about 4 percent, an increasing number of
French people are crossing the border for work. Their commutes
highlight how the euro region has one currency -- and 17
different labor markets.
- Obama Assertion of Vanquished Al-Qaeda Undercut by Terror Threat. The latest attack threat from an al-Qaeda offshoot creates a political challenge for President
Barack Obama, as Republicans accuse him of hyping claims to have
terrorists on the run and privacy advocates say the warning may
be used to justify greater government surveillance. While Obama’s critics applauded the administration’s
decision to temporarily shut down 22 U.S. embassies and
consulates in predominantly Muslim countries based on threats in
intercepted communications, White House press secretary Jay Carney today was forced to defend the president’s past
statements that al-Qaeda is “on the ropes.”
- Tanker-Rate Slump Signals Retreat in U.S. Oil Imports: Freight. The
biggest slump in tanker rates
since January is signaling weaker U.S. oil imports and spurring analysts
to predict a 15-year low for shares of Frontline Ltd. (FRO), whose
ships haul almost enough crude to meet daily world demand. Rates for the biggest crude carriers tumbled 68 percent in
the past two weeks, more than reversing their advance since the
end of June, according to Clarkson Plc. Earnings had risen after
oil cargoes to the U.S., the second-biggest source of demand for
supertankers, expanded for three months. Shares of Hamilton, Bermuda-based Frontline will plunge 43 percent in a year, the
average of 13 analyst estimates compiled by Bloomberg showed.
- Coal at Risk as Global Lenders Drop Financing on Climate. The
world’s richest nations, moving
to combat global warming, are cutting government support for new
coal-burning power plants in developing countries, dealing a blow to the
world’s dominant source of electricity. First it was President
Barack Obama pledging in June that the government would no longer
finance overseas coal plants through the U.S. Export-Import Bank. Next
it was the World Bank, then the European Investment Bank, dropping
support for coal
projects. Those banks have pumped more than $10 billion into
such initiatives in the past five years.
- IBM(IBM) Furloughs U.S. Hardware Employees to Reduce Costs.
International Business Machines Corp. (IBM) said it’s requiring the
majority of U.S. employees in its hardware division to take a week off
with reduced pay, cutting costs as demand slows for products such as
servers. U.S. hardware employees, including those involved in
development and procurement, will take a furlough week with one-third pay starting either Aug. 24 or 31, said Jay Cadmus, a
spokesman for the Systems and Technology Group. Executives in
the division will take no pay during the week.
Wall Street Journal:
- Bezos Buys Washington Post(WPO) for $250 Million. Amazon(AMZN) Chief's Deal Doesn't Involve Online Retailer but Shows Media Power Shift.
Amazon.com Inc. Chief Executive Jeff Bezos is buying the Washington
Post for $250 million in an out-of-the-blue deal that captures the
newspaper
industry's economic decline and the shift of power from old-media to
Silicon Valley.
- FBI Finds Holes in System Protecting Economic Data. FBI finds 'operational vulnerabilities' involving 'black boxes' used to control the release of sensitive economic data. The Federal Bureau of Investigation has discovered vulnerabilities in
the government's system for preventing market-moving economic reports
from leaking to traders before public release.
Law-enforcement officials found "a
number of operational vulnerabilities" involving "black boxes" used by
several departments to control the release of sensitive economic data
such as the monthly unemployment rate, according to a report by the
inspector general at the Commerce Department. The report said it was possible to subvert the system, which was
designed to prevent media companies from sending economic data to
traders early.
- Private-Equity Payout Debt Surges. Private-equity firms are adding debt to
companies they own to fund payouts to themselves at a record pace, as
fears mount that the window for these deals will close if interest rates
rise. So far this year, $47.4 billion of new loans and bonds have been sold by
companies to pay dividends to the private-equity firms that own them,
according to data provider S&P Capital IQ LCD. That is 62% more than
the same period last year, which wound up being the biggest year on
record, with $64.2 billion sold to fund private-equity payouts.
Zero Hedge:
Business Insider:
Reuters:
- Output in emerging market economies contract in July- HSBC. Business
activity across emerging economies contracted for the first time in
over four years in July, driven mainly by a drop in manufacturing while
services activity stagnated, a survey showed on Tuesday. It highlighted
the growing divergence between activity in the developed world and
emerging economies and cast doubt on prospects for a sustained global
economic recovery from the financial crisis. The composite HSBC Emerging
Markets index for services and
manufacturing fell to 49.4 in July from 50.6 in June and below
the 50 mark that separates growth from contraction. It was the
first sub-50 reading since April 2009.
- American Eagle(AEO) not happy with quarter, shares sink. American Eagle Outfitters Inc,
which makes clothes for teenagers and young adults, said on
Monday its second-quarter profit will likely be less than half
of what Wall Street was expecting, citing weak sales and lower
margins, sending its shares down 15 percent. "We are not at all happy with our second quarter results,"
Chief Executive Robert Hanson said in a statement, adding that
poor sales of women's items and weak traffic were largely to
blame. American Eagle's shares fell to $16.95 in after-hours
trading. They closed at $19.97 on the New York Stock Exchange on
Monday.
Financial Times:
- Regulation pushes banks on to a riskier path. Some bankers are said to be complacent about liquidity buffers. Can
regulation make banks less safe? What has happened in the past week
certainly seems to suggest so. Three large European banks – Barclays,
Deutsche Bank and Société Générale – moved to partly dismantle one of
their main bulwarks against another liquidity crisis: their massive cash
reserves.
Telegraph:
Evening Recommendations
William Blair:
- Cut (DE) to Underperform, target $75.
- Cut (TITN) to Underperform, target $15.
Night Trading
- Asian equity indices are -1.25% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 142.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 109.75 -3.5 basis points.
- NASDAQ 100 futures -.13%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Trade Deficit for June is estimated at -$43.5B versus -$45.0B in May.
10:00 am EST
- The IBD/TIPP Economic Optimism Index for August is estimated to rise to 47.5 versus 47.1 in July.
- JOLTs Job Openings for June are estimated to rise to 3895 versus 3828 in May.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Evans speaking, RBA rate decision, 3Y T-Note auction, UK 10Y bond
auction, weekly retail sales reports, Needham Software &
Services Conference and the (VPRT) investor day could also impact
trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial 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 50% net long heading into the day.
Click Here for Today's Market Take.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 11.96 -.17%
- Euro/Yen Carry Return Index 135.87 -.84%
- Emerging Markets Currency Volatility(VXY) 9.30 -2.92%
- S&P 500 Implied Correlation 46.05 -1.58%
- ISE Sentiment Index 95.0 -29.10%
- Total Put/Call .87 -1.14%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.74 +.01%
- European Financial Sector CDS Index 134.29 -.52%
- Western Europe Sovereign Debt CDS Index 83.13 -.54%
- Emerging Market CDS Index 300.96 +1.70%
- 2-Year Swap Spread 17.75 +.75 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -8.75 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- China Import Iron Ore Spot $130.20/Metric Tonne +.08%
- Citi US Economic Surprise Index 18.80 +7.9 points
- Citi Emerging Markets Economic Surprise Index -28.10 -2.7 points
- 10-Year TIPS Spread 2.23 +3 bps
Overseas Futures:
- Nikkei Futures: Indicating +39 open in Japan
- DAX Futures: Indicating +4 open in Germany
Portfolio:
- Higher: On gains in my tech sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Junk Yield Premiums Surge as Downgrades Flag Risk: China Credit.
The extra borrowing cost for China's riskiest companies is climbing at
the fastest pace in 18 months as record credit-rating downgrades
heighten concern the nation will experience its first bond default. The
yield gap on three-year AA- notes over AAA debt jumped 16 basis points
last month to 143 on July 31, the most since January 2012, Chinabond
indexes show.
- Goldman(GS) Loses Top Brazil Executives as Growth Plan Halted.
Goldman Sachs Group Inc. (GS), the U.S. bank that announced plans in
April to hire 50 people in Brazil, has reversed course after the economy
expanded less than analysts estimated and top executives left the
company. “The outlook for the economy and equity and
merger-and-acquisition deal volumes are worse than we expected,” Michael
DuVally, a spokesman for the New York-based bank, said in an
interview on Aug. 2.
- HSBC Falls After Earnings as Gulliver Says Markets Slow. HSBC Holdings Plc (HSBA), Europe’s largest bank, slid in London trading after its earnings missed analysts’ estimates and Chief
Executive Officer Stuart Gulliver said the lender’s fast-growing
emerging markets are slowing. The shares fell 4.3 percent, the steepest
daily decline since November 2011. HSBC, which operates in about 80 countries,
said the mainland Chinese market slowed unexpectedly in the
first quarter of 2013, while Latin American growth eased in the
first half on weak consumer consumption. HSBC also faces a
potentially “highly damaging impact” from planned European
Union restrictions on bonuses, the bank said today.
- EU Bank Calculations of Capital Vary Widely, EBA Says. The European Union’s top banking
regulator said it found inconsistencies in the way lenders
calculate how much capital to hold on their balance sheets
against potential losses, adding to the clamor from global
supervisors to increase transparency.
- European Stocks Rise for Sixth Day as Lloyds Climbs.
European stocks rose for a sixth day,
the longest winning streak this year, as services output shrank
at a slower pace than initially forecast, outweighing
worse-than-estimated earnings from HSBC Holdings Plc. Lloyds Banking
Group Plc climbed 2.7 percent on a report it
will pay as much as 70 percent of profit as dividend. Thomas
Cook Group Plc, Mediaset SpA and Drax (DRX) Group Plc advanced more than
2.5 percent as analysts upgraded the shares. HSBC, Europe’s largest
bank, sank the most in 20 months. PostNL NV, the biggest Dutch postal
operator, plunged the most in six months after
sales missed estimates. The Stoxx Europe 600 Index rose 0.2 percent to 304.74 at
the close, paring an earlier gain of as much as 0.6 percent.
- Fed Should Reverse Commodity Policy, CFTC’s Chilton Says. The
Federal Reserve should reverse a decade-old ruling that lets banks
trade physical commodities, Commodity Futures Trading Commission member
Bart Chilton said. “I don’t want a bank owning an electric service, or
cotton, corn or feedlots,” Chilton, a Democrat, said in remarks
prepared for delivery today at a conference of U.S. cotton
growers in Lake Tahoe, California. “I don’t want banks owning
warehouses, whether they have aluminum, gold, silver or anything
else in them.” The Fed “can and should reverse” the policy,
he said.
- Commodities Revenue of Top 10 Banks Fell 25% in First Half. Commodities revenue at the 10 largest
investment banks fell 25 percent in the first half, putting
those units on pace for the worst annual performance in more
than five years, according to analytics company Coalition Ltd. Revenue
fell to about $2.7 billion in the first six months
from $3.6 billion in the same period of 2012, Coalition said
today in an e-mail. Last year’s total of $6 billion was down 24 percent
from 2011 and was less than half that of 2008, when oil prices climbed
to a record.
- Copper Falls as Chinese Service Stagnation Fuels Demand Concern. Copper
fell in New York after three sessions of gains as a stagnant index of
service industries in China stoked concern about the outlook for demand
in the world’s largest consumer of the metal. A measure of Chinese
service industries released today by
HSBC Holdings Plc and Markit Economics was unchanged in July. A
manufacturing index for the nation published Aug. 1 by HSBC and
Markit fell from June. Factory shutdowns for summer holidays
curbed demand, according to RBC Capital Markets Ltd. “Base metals are mixed and directionless as the painful
reality of the August slowdown is upon us,” RBC said. Copper for delivery in September slid 0.6 percent to $3.153
a pound by 7:51 a.m. on the Comex in New York. Copper for
delivery in three months fell 0.6 percent to $6,962 a metric ton
on the London Metal Exchange.
- Port Hedland Iron Ore Exports Drop as Shipments to China Decline.
Iron ore shipments from Australia's Port Hedland, the world's biggest
bulk terminal, declined for a second month in July as exports to China
fell. Exports totaled 26.6 million metric tons from 27.7 million tons in
June, data on the Port Hedland Port Authority's website showed.
Shipments to China, the biggest buyer, were 20.4 million tons from 22.9
million tons in June, according to Bloomberg calculations. Total
shipments averaged 858,482 tons a day last month compared with 924,823
tons a day in June, according to Bloomberg calculations.
- Assad Says Syria Crisis Will Be Resolved on the Battlefield. Syria’s
President Bashar al-Assad said the nation’s two-year civil war that has
claimed more than 100,000 lives can only be decided on the battlefield. “All routes have been tried and there is only one option
left, which is to defend ourselves and our country with our own
hands, and in this case everybody looks naturally to the armed
forces,” Assad said yesterday at a banquet with social and
political figures, according to official news agency Sana.
Wall Street Journal:
Fox News:
- Army won’t suspend contracts with Al Qaeda-tied companies, citing 'due process rights'. In
a scathing passage of his latest report to Congress, Special Inspector
General John Sopko said his office has urged the Army to suspend or
debar 43 contractors over concerns about ties to the Afghanistan
insurgency, "including supporters of the Taliban, the
Haqqani network and al Qaeda." Sopko wrote that the Army "rejected"
every single case.
- GOP leader threatens to cut CNN, NBC from primary debates over Clinton specials. The
head of the Republican Party threatened Monday to cut out CNN and
NBC from the GOP presidential primary debates if the networks do not
shelve their plans to air lengthy features on Hillary Clinton -- who is
widely expected to be a Democratic candidate in the 2016 election.
Republican National Committee Chairman Reince Priebus accused both
networks of trying to put "a thumb on the scales" of the 2016 race with
programming he claimed would be tantamount to an "in-kind donation" to
the Clinton campaign. Last month, CNN Films announced it was
producing a documentary on
Clinton to premiere next year, first in theaters and then on CNN. NBC
also announced a four-hour "Hillary" miniseries starring Diane
Lane, on the life of the former secretary of state and first lady.
Priebus' statement on Monday marked the most aggressive challenge yet to
those plans.
MarketWatch:
- IDC cuts forecast for global IT spending for 2013. Market-research firm International Data Corp. cut its global
information-technology-spending growth forecast for this year due to the
economic slowdown in China. IDC expects global IT spending to grow 4.6% to $2 trillion this year,
down from its previous forecast for an increase of 4.9% and below growth
of 5.6% for 2012. Including telecom services, IT spending is forecast
to increase 3.8% to $3.6 trillion.
CNBC:
- US self-reported spending flat since May: Gallup. U.S. consumer spending has remained largely flat
for the last three months, Gallup reported on Monday, despite other
indicators that suggest consumers keep spending at a brisk clip. The polling agency found that "self-reported" daily consumer spending
was $89 in July, unchanged from the $90 of June and May. Based on a
series of tracking interviews with more than 14,000 Americans during
July, Gallup said that flat spending was perceptible across income
levels.
Zero Hedge:
Business Insider:
CNN:
- Your TV Might Be Watching You. Today's high-end televisions are almost all equipped with "smart"
PC-like features, including Internet connectivity, apps, microphones and
cameras. But a recently discovered security hole in some Samsung Smart
TVs shows that many of those bells and whistles aren't ready for prime
time. The flaws in Samsung Smart TVs, which have now been
patched, enabled hackers to remotely turn on the TVs' built-in cameras
without leaving any trace of it on the screen. While you're watching TV,
a hacker anywhere around the world could have been watching you.
Hackers also could have easily rerouted an unsuspecting user to a
malicious website to steal bank account information.
National Affairs:
Reuters:
- Exclusive: U.S. directs agents to cover up program used to investigate Americans. A secretive U.S.
Drug Enforcement Administration unit is funneling information from
intelligence intercepts, wiretaps, informants and a massive database of
telephone records to authorities across the nation to help them launch
criminal investigations of Americans.
Although these cases rarely
involve national security issues, documents reviewed by Reuters show
that law enforcement agents have been directed to conceal how such
investigations truly begin - not only from defense lawyers but also
sometimes from prosecutors and judges. The
undated documents show that federal agents are trained to "recreate"
the investigative trail to effectively cover up where the information
originated, a practice that some experts say violates a defendant's
Constitutional right to a fair trial. If defendants don't know how an
investigation began, they cannot know to ask to review potential sources
of exculpatory evidence - information that could reveal entrapment,
mistakes or biased witnesses.
- Ackman's Pershing Square lost 2.2 pct in July -source.
It was a tough July for hedge fund manager William Ackman, whose $12
billion Pershing Square Capital Management lost 2.2 percent during the
month, according to an investor. The fund got hit hard by its short
position in nutritional supplements company Herbalife Ltd, which saw its
share price rise more than 40 percent last month. Ackman's fund has
invested $1 billion on a bearish bet that Herbalife will be
unmasked by regulators as a pyramid scheme. A long position in retailer J.C. Penney Co Inc also
hurt the fund as the stock slid about 17 percent in July. Pershing Square remains up 3.8 percent year to date,
according to the investor.
- Euro zone retail sales back in decline in June. Retail sales in the euro zone fell across the board for the first time in three months in June, official data showed on Monday, highlighting the drag of depressed
household spending on the bloc's fragile recovery. For
the bloc as a whole the volume of retail trade fell broadly in line with expectations by 0.5 percent on the month. Shoppers
in the euro zone spent more on automotive fuel in June, but it was not
enough to offset a 0.6 percent drop in spending on food, drinks and
tobacco and a 0.2 percent decrease in purchases of non-food items such
as electronics, clothing and
else.
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
Il Messaggero:
- Bank of Italy governor is concerned govt turmoil may raise
borrowing costs and make it harder to enact legislation to stimulate
economy.
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -1.85% 2) Airlines -1.34% 3) Papers -1.16%
Stocks Falling on Unusual Volume:
- HBC, CHTR, RBS, CLMT, ZINC, GTS, UAM, MXWL, SSP, BAH, YELP, HTS,
FOSL, IDCC, RP, CNH, DTLK, XPO, POR, ANIK, UAN, PVR, OPEN, SFLY,
WC, OSIR, CHUY, MHK, GTS, TG, CBOE and IMGN
Stocks With Unusual Put Option Activity:
- 1) SD 2) ADM 3) COG 4) Z 5) GPS
Stocks With Most Negative News Mentions:
- 1) AGU 2) JEC 3) CBOE 4) GS 5) GM
Charts:
Style Outperformer:
Sector Outperformers:
- Tobacco +1.44% 2) Education +1.28% 3) HMOs +.72%
Stocks Rising on Unusual Volume:
- SNCR, CLF, SCTY, YY, TEAR, CSIQ, TRLA and Z
Stocks With Unusual Call Option Activity:
- 1) BBY 2) BZH 3) P 4) AOL 5) ZIOP
Stocks With Most Positive News Mentions:
- 1) RVBD 2) SHOO 3) WFM 4) TSN 5) JAZZ
Charts:
Weekend Headlines
Bloomberg:
- Berlusconi Shockwaves in Italy Pose Threat to Euro-Crisis Lull. The instability of the Italian
government following the tax-fraud conviction of former Prime
Minister Silvio Berlusconi threatens to end a lull in the
European debt crisis and derail a nascent economic recovery. Berlusconi’s party has rallied around its leader, possibly
seeking a presidential pardon and threatening a mass resignation
of deputies in parliament, a move that could bring down Prime
Minister Enrico Letta’s government. Letta has told allies that
he would quit before being pushed out if support in the chamber
dwindles, Italian daily la Repubblica reported on Aug. 3. “If we decide together to do it, then I’m ready,” Lucio
Malan, a senator with Berlusconi’s People of Liberty party, or
PDL, said on Aug. 2 of a parliamentary walkout.
- China Services Growth Picks Up. The non-manufacturing Purchasing Managers’ Index (CPMINMAN) rose to 54.1 in July from 53.9 in June, the Beijing-based National
Bureau of Statistics and China Federation of Logistics and
Purchasing said yesterday.
- Botulism Scare Halts Fonterra Milk-Powder Sales to China, Russia. China
and Russia halted imports of milk powder from Fonterra Cooperative
Group Ltd. after the world’s largest dairy exporter warned of a
contaminated ingredient. The kiwi dollar fell to an almost one-month
low. Russia temporarily suspended purchases of New Zealand dairy
products, Scott Gallacher, acting director-general at the
Ministry for Primary Industries, said today in Wellington.
- Stagnant South Korea Property Drags on Growth Rebound: Economy. South
Korea’s worst property-market slowdown since 2004 threatens to limit
the economy’s rebound, as the government’s stop-go policies to stimulate
the housing market fail to secure any sustained revival. Apartment
transactions in Seoul plunged 80 percent in July from June, when
temporary acquisition tax cuts expired,
according to data on the city’s website. National home prices
were flat or fell for 14 straight months through July, according
to Kookmin Bank, the nation’s largest mortgage lender.
- Japan Drives Asian Stocks Lower as Bonds Gain.
Asian stocks fell as Japanese shares
led the regional index to its first retreat in three days after
U.S. jobs data missed estimates. Bonds in Australia and Japan rallied,
while New Zealand’s dollar weakened after China banned some milk-powder
imports. Copper dropped. The MSCI Asia Pacific Index lost 0.5 percent by 11:21 a.m. in Tokyo.
- Rubber Falls From One-Week High on Concern Demand Will Weaken. Rubber retreated from a one-week high
after U.S. jobs data missed estimates and on concern that
slowing growth in China, the biggest buyer, may cut demand for the commodity used in tires. The
contract for delivery in January fell as much as 2.8 percent to 241.1
yen a kilogram ($2,433 a metric ton) on the Tokyo Commodity Exchange,
before trading at 246.1 yen at 10:38 a.m. local time. Futures on Aug. 2 settled at the highest level
since July 26.
- Gold Bulls Cut Wagers on Signs U.S. Growth Quickens: Commodities.
Hedge funds lowered bullish gold bets for the first time in five weeks
as signs of accelerating U.S. growth contributed to the longest retreat
in prices in a month. Money managers cut their net-long position by
6.5 percent to 65,517 futures and options by July 30, U.S. Commodity
Futures Trading Commission data show. Holdings of short contracts rose
6.8 percent, the biggest increase in six weeks. Net-bullish bets across
18 U.S.-traded commodities contracted 15 percent as investors cut wagers
on higher crude prices for the first time
in a month and more than doubled bearish bets on copper.
- Goldman Sachs(GS), London Exchange Sued Over Aluminum Supply. Goldman
Sachs Group Inc. (GS) and the London Metal Exchange are restraining
aluminum supplies and driving up the metal’s price in violation of
federal antitrust law, according to a lawsuit. The suit, for which
the aluminum products company Superior Extrusion seeks class-action
status, was filed Aug. 1 in federal
court in Detroit. “Through an interconnected series of agreements in
unreasonable restraint of trade, Goldman and LME restrained
approximately 1.5 million tons of aluminum in LME Detroit
warehousing,” causing delays of as long as 16 months between
customer orders and corresponding deliveries, Gwinn, Michigan-based
Superior alleged.
- BP(BP) Says Loss on Spill Claims Appeals Could Scuttle Settlement. The
settlement BP Plc (BP/) reached last year with most private parties
over the 2010 Gulf of Mexico oil spill could be scuttled if a U.S.
appeals court doesn’t throw
out the interpretation of payments being used by the claims
administrator, the company said.
- New York Times(NYT) Sells Boston Globe to John Henry for $70M. New
York Times Co., which put its Boston Globe newspaper up for sale this
year, agreed to sell the publication to John Henry, owner of the Boston
Red Sox baseball team, for $70 million in cash. The deal is $40 million
short of the $110 million in
pension liabilities said to be owed by the Globe properties
collectively known as the New England Media Group, and is
expected to close in 30 to 60 days. The sale also includes the
Globe website, the Boston.com site, the Worcester Telegram &
Gazette, a 49 percent stake in Metro Boston, and the direct-mail
marketing company GlobeDirect, the New York Times said in a
statement yesterday.
- IPhone Reprieve Seen Aiding Apple(AAPL) Sales, Hurting Samsung. The
U.S. decision to overturn an import ban on Apple Inc. (AAPL)’s older
iPhones and iPads may help short-term sales and hobble Samsung
Electronics Co. (005930) in any settlement talks in the companies’
patent fight. President Barack Obama’s administration, in issuing
the reprieve to Apple Aug. 3, lets the company continue selling the
iPhone 4, which is priced lower than newer models, said Brian Marshall,
an analyst at ISI Group. Less expensive smartphones are selling more
quickly than higher-priced models, he said.
Wall Street Journal:
- Fukushima Watch: Russia Claims Continued Used Car Contamination. The fallout from Japan’s Fukushima Daiichi nuclear power plant disaster is still
being felt in Russia, where customs officials say they continue to detect
radiation on second-hand Japanese cars and auto parts being shipped in for sale
in Russia’s Far East.
- Congress's ObamaCare Exemption. The President intervenes to give Members and staff a break. To adapt H.L. Mencken, nobody ever went broke underestimating the
cynicism and self-dealing of the American political class. Witness their
ad-libbed decision, at the 11th hour and on the basis of no legal
authority, to create a special exemption for themselves from the
ObamaCare health coverage that everybody else is mandated to buy.
Marketwatch.com:
- China county in deep hole as mining bubble pops. A financial crisis triggered by falling coal prices is brewing in Shenmu County, in the northwestern province of Shaanxi. Construction projects have been halted, universal health care has run
into payment problems and many private bankers have disappeared in the
last few months, all indications that another story of legendary
development is now just a bubble bursting.
Fox News:
- House Republican leaders outline agenda for immigration, ObamaCare, budget talks. House Republican leaders on Sunday outlined their caucus game plan
for a critical next few months and beyond, suggesting a potential
compromise on the sequester before an October deadline and a final vote
on immigration reform. House Majority Leader Eric Cantor suggested that congressional
Republicans are open to a compromise to end the deep, undiscerning cuts
to the federal budget known as sequester but said the deal would require
Democrats agreeing to entitlement cuts.
CNBC:
- US equity funds see highest-ever inflows in July.
U.S. equity funds saw a record inflow of $40.3 billion in July,
according to data from TrimTabs, as the S&P 500 and Dow scale new
heights in what some are calling an "invincible summer" for the
country's stocks.
- Teens and Social Media. (video)
When a group of teenagers says Facebook "confuses and scares" them and
makes their eyes hurt, there may be a problem. Though Facebook is still
considered the most popular social network among teens, their enthusiasm
seems to be waning. Some of them blame it on the ads and the games, but they also say it's become too popular with their parents.
Business Insider:
Washington Post:
- Rare interview with Egyptian Gen. Abdel Fatah al-Sissi. In his first interview since the overthrow of President Mohamed Morsi
last month, Egypt’s commanding general sharply criticized the U.S.
response, accusing the Obama administration of disregarding the Egyptian
popular will and of providing insufficient support amid threats of a
civil war.
Quartz:
Real News:
- Greece Won't Get Loan Tranches Without Public-Sector Cuts. If
Greece doesn't proceed with public-sector job cuts, the country won't
get its next international loan tranches, citing an interview with
Finance Minister Yannis Stournaras.
Xinhua:
- China
to Expand Individual Property Tax Trial. China will expand individuals'
property tax reform trial to prepare for its nationwide introduction,
citing the Ministry of Finance. The ministry will also study including
some high-end consumer goods, high-resource use and polluting goods into
its consumption tax.
Economic Information Daily:
- China Steel Industry May Incur Annual Losses. China's steel
industry may incur annual losses for a "relatively long period," citing
Baoshan Iron & Steel's Chairman Xu Lejiang as saying. Xu made the
comments in a meeting that was attended by almost 100 Chinese steel
companies, the report said. China will not see high growth of steel
demand in 2H, citing Xu.
China Daily:
- China
May See Downslide in 4Q, State Researcher Says. A downslide in 4Q is a
possibility, State Information Center researcher Qi Jingmei writes in a
commentary. The Chinese govt will stick to economic restructuring and
won't introduce new regulatory policies to "bail out or support the
market," Qi writes. Govt to seek steady growth by improving market
economy and exploring a new type of urbanization, he said. The Govt is
determined to reduce the real estate bubble, Qi wrote.
Financial News:
- PBOC Won't Cut RRR in Short Term. People's Bank of China has
basically no likelihood of cutting banks' reserve requirement in the
short-term, says front page commentary written by Xu Shaofeng today.
Liquidity in China's banking system is still delicately balanced and
economy is deleveraging, he said.
Weekend Recommendations
Barron's:
- Bullish commentary on (CMCSA), (VIA), (BEN), (POT), (UBNK), (ISBC) and (FOXA).
- Bearish commentary on (GMCR) and (JE).
Night Trading
- Asian indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 143.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 113.25 +2.25 basis points.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- ISM Non-Manufacturing for July is estimated to rise to 53.1 versus 52.2 in June.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Eurozone Services PMI report and the Australia trade balance could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.
