Evening Headlines
Bloomberg:
- Abe Threatens Ministries With Power Shift Rivaling MacArthur Era. The bureaucracy that oversaw Japan’s postwar economic boom and a
two-decade stagnation faces the biggest threat to its power since the
U.S. occupation as Prime Minister Shinzo Abe seeks to seize control of ministries’ most senior appointments.
Chief Cabinet Secretary Yoshihide Suga, 64, is leading the initiative,
years after he got an education in civil servants’ sway when they
frustrated his move as internal affairs minister to shift revenue
between regions. The proposal in debate in the ruling Liberal Democratic
Party would give the Cabinet Secretariat oversight of top bureaucrats’
promotions.
- Australia Business Sentiment Slumps as Budget Blowout Confirmed.
Australian business confidence slumped to an eight-month low and
Treasury confirmed a blow out in the fiscal deficit, complicating Prime
Minister Kevin Rudd’s bid for re-election based on an economic
management pitch. The confidence index for July fell to minus 3,
according to a National Australia Bank Ltd. survey released today of
more than 400 companies taken July 25-31. Sentiment remained “extremely
poor” in the key mining industry as interest-rate cuts and a weaker
currency failed to encourage companies, NAB Chief Economist Alan Oster
said. Treasury, in its pre-election economic and fiscal outlook released
today, predicted a budget deficit of A$30.1 billion ($27.4 billion) in
the year to June 30 as the economy slows and unemployment rises. It said
mining investment is likely to peak at a lower level because of
“increased uncertainty about global growth prospects, particularly in
China and India.”
- India Plans Import Curbs to Steady Rupee as Factory Output Drops. India plans curbs on some imports to pare a record current-account
deficit and another push for capital inflows to stem the rupee’s slide,
as a drop in factory output underscores the risks facing Asia’s No. 3
economy. The nation intends to compress imports of gold, silver and
some non-essential items, as well as demand for crude oil, Finance
Minister Palaniappan Chidambaram said in parliament in New Delhi
yesterday. Industrial production fell 2.2 percent in June from a year
earlier, while consumer prices rose 9.64
percent year-on-year in July, government reports showed.
- Asia Stocks Rise for Fourth Day as Japan’s Topix Advances.
Asian stocks rose for a fourth day as Japanese shares gained after the
yen weakened as a report showed machinery orders beat estimates and amid
a report Prime Minister Shinzo Abe is considering a corporate-tax cut.
Honda Motor Co., which gets 83 percent of sales from overseas, increased
1.2 percent, pacing gains among Japanese exporters. Sony Financial
Holdings Inc., the financial services unit of electronics maker Sony
Corp., jumped 3.3 percent in Tokyo after proposing a higher dividend.
Newcrest Mining Ltd. slipped 3.1 percent as Australia’s biggest gold
producer reported a wider-than-expected loss. The MSCI Asia Pacific Index added 0.2 percent to 134.37 as
of 10:48 a.m. in Tokyo, with about three shares rising for each
that fell.
- Rubber Retreats After Touching Highest in More Than Two Months. Rubber fell as some investors sold
the commodity used to make tires after prices touched the
highest level since May 29 and as stockpiles in China, the
biggest user, remained near the highest level in three years. Rubber for delivery in January on the Tokyo Commodity
Exchange fell as much as 1.7 percent to 260.8 yen a kilogram
($2,683 a metric ton) and was at 264.4 yen at 11:26 a.m. The
most-active contract has lost 13 percent this year.
- Iron Ore Gluts Seen Through 2017 on Record Supply: Commodities. The seaborne iron ore market is
poised for at least four years of expanding gluts as producers
from Rio Tinto Group to Vale SA increase supply to a record just
as growth in China drops to the slowest pace in a generation. The surplus will reach 82 million metric tons in 2014, the
most since at least 2008, and the glut will keep growing through
2017, according to Goldman Sachs Group Inc. Australia will
account for about 66 percent of the supply gains next year,
Morgan Stanley says. Iron ore will average $115 a ton in 2014,
17 percent less than now and the least since 2009, according to
the median of 10 analyst estimates compiled by Bloomberg.
- Italy
Banks Buying Sovereign Debt Curb Lending: Chart of the Day. Italian
banks are increasingly using liquidity to buy more profitable sovereign
debt, reducing loans to companies and households, as Italy's longest
recession in 20 years makes lending more risky. Italian banks increased
their holdings of the country's debt by almost 100 billion euros in the
12 months ended June 30 to a record 402 billion euros. In the same
period, loans decreased by 55 billion euros, or 3.3%, to 1.63 trillion
euros. "There's a crowding-out effect," said Carlo Alberto Carnevale
Maffe, professor of business strategy at Milan's Bocconi University.
"The public debt is soaking up resources from the private sector,
offering higher yields on capital and a lower investment risk, at a time
in which companies and families are struggling to repay their debt."
- Blackstone(BX) Said to Acquire GE Apartments for $2.7 Billion. Blackstone
Group LP, the largest manager of private-equity real estate funds,
agreed to buy 80 U.S. apartment properties from General Electric Co. for
about $2.7 billion, a person with knowledge of the deal said. The firm is acquiring the properties from the conglomerate’s GE Capital unit, said the person, who asked not
to be identified because the transaction isn’t public. GE has
been paring its real estate holdings as part of a strategy to
shrink its finance division.
Wall Street Journal:
- Fed's Yellen Says Stance on Banks Hardened. Contender
for Fed Chairman Says Crisis Made Her Rethink Views on Regulation.
Janet Yellen, a top contender to lead the Federal Reserve, has
evolved—in her own words—from a slightly "docile" regional bank
regulator into a proponent of hard and clear rules designed to make
banks less risky. The change was prompted by her six years as president of the Federal
Reserve Bank of San Francisco during a torrid period in financial
history. As part of that job, which she held through 2010, Ms. Yellen
oversaw scores of banks, some of which failed as the housing market
collapsed. An examination of her record suggests she pre-emptively warned
colleagues about problems in the real-estate market but didn't take
aggressive action to address them. While some bankers overseen by Ms.
Yellen describe her as a determined regulator, critics note that she had
a front-row seat for some of the turbulence that sent the economy into a
tailspin and could have done more to prevent rampant real-estate
speculation.
- Fidelity Boosts Hedge-Fund Offerings for Retail Clients.
Fidelity has invested about $1 billion in Blackstone Group LPBX
-0.35%’s first mutual fund, which launched last week and gives money to
11 hedge-fund firms to invest. Those firms include Cerberus Capital
Management LP and Two Sigma Advisers LLC, and Blackstone itself can
invest some of the fund’s assets.
- Cairo Sit-Ins Swell, Protesters Gird. Extension of Morsi's Detention Could Buy Time, Official Says; Day Passes Without Crackdown. Two central Cairo protest sites swelled in size on the day Egypt's
government said it could begin cracking down on Muslim Brotherhood
sit-ins there, with new arrivals setting up tents and others donning
helmets and building makeshift battlements.
As of Monday evening, police hadn't
erected their promised blockade of Nahda and Raba'a al Adiwiya squares,
deferring the fears of many Egyptians that a government move against
supporters of ousted President Mohammed Morsi would unleash a wave of
violence.
- David J. Bobb: Howard Zinn and the Art of Anti-Americanism. Hollywood and the academic left have made the late Marxist historian more influential than ever. Upon the death of the Marxist-inspired historian Howard Zinn in 2010,
eulogies rang out from coast to coast calling him a heroic champion of
the unsung masses. In Indiana, then-Gov. Mitch Daniels refused to join
the chorus and instead sent emails to his staff wondering if the
historian's "execrable" books were being force-fed to Hoosier students.
The recent revelation of these emails provoked an angry backlash.
Fox News:
- California Gov. Brown signs transgender-student bill. California Gov. Jerry Brown signed a controversial bill into law
Monday afternoon allowing the state’s transgender public school students
to choose which bathrooms they use and whether they participate in boy
or girl sports. The law would cover the state’s 6.2 million
elementary and high school kids in public schools. Opponents of the bill
say allowing students of one gender to use
facilities intended for the other could invade the other students'
privacy. Randy Thomasson, of savecalifornia.com, says the law would
“damage” kids. "This radical bill warps the gender expectations of children by
forcing all California public schools to permit biological boys in girls
restrooms, showers, clubs and on girls sports teams and biological
girls in boys restrooms, showers, clubs and sports teams," Thomasson
said. "This is insanity."
- Proposed new federal rule could put 'big brother' in your driver's seat. A proposed federal rule that would require black boxes or event data
recorders (EDRs) in every U.S. automobile may mean “Big Brother” could
be in your passenger seat for every drive. The National Highway Traffic Safety Administration rule requires all
light passenger vehicles be equipped with an EDR by Sep.1, 2014.
Ninety-six percent of new cars already have them - measuring such inputs
as speed, lateral acceleration, pedal effort, seat belt use, wheel
spin, steering wheel turn and direction.
MarketWatch.com:
- Revisiting China’s property bubble: Andy Xie. The market is speculating that the central
government is about to loosen up financing for the property sector. What
this really means is that the banks may increase lending to developers
for land purchases. Property developers are beholden to local governments. If they get
loans, they will buy land to boost local government revenues.
Essentially, bank loans would turn into local government revenue. When
the local governments spend the money, it becomes a form of fiscal
stimulus.
CNBC:
Zero Hedge:
Business Insider:
New York Times:
- In One Bundle of Mortgages, the Subprime Crisis Reverberates.
A subprime deal came back to haunt Fabrice Tourre, a former Goldman
Sachs trader, when a federal jury in Manhattan found him liable for
civil securities fraud. He is not the only one feeling the pain of a subprime transaction six years on. Hundreds of thousands of subprime borrowers are still struggling. Some
of their mortgages ended up in another Goldman deal that was done at the
same time as Mr. Tourre was working on his own financial alchemy.
Reuters:
- Japan June core machinery orders fall 2.7 pct mth/mth. Japan's core machinery orders fell
2.7 percent in June from the previous month, government data
showed on Tuesday, a sign that the government's reflationary
policies have yet to encourage companies to boost capital
spending. The fall in core orders, which excludes those of ships and
electric power utilities, compared with economists' median
projection for a 7.2 percent decline and followed a 10.5 percent
jump in the previous month, the Cabinet Office data showed.
- Yum's(YUM) July China restaurant sales drop more than expected. KFC parent Yum Brands Inc on Monday reported a steeper-than-expected 13 percent drop in July sales at established restaurants in China after back-to-back blows from a food safety scare and a bird flu outbreak in its most important market. The Chinese sales fall was something of a setback for
Louisville, Kentucky-based Yum, which in recent months had seen
same-restaurant sales declines ease. Shares in Yum fell $2.86, or 3.8 percent, to $71.61 in
after-hours trading.
- Swaps clients plan US bank exodus. US banks are at risk of losing overseas swaps market share as European clients have begun making every effort to avoid getting caught up in costly
cross-border derivatives rules that were finalised by the CFTC
last month, and come into effect this October.
Telegraph:
China Daily:
- China Can Reach GDP, Income Goal With 6.9%-7.1% Growth. China can
reach its goal of doubling the 2010 GDP and per capita income growth by
2020 if the average economic growth rate is 6.9% to 7.1% over the next 8
years, Sun Lin, a researcher with the Party School of the Central
Committee of the Chinese Communist Party, wrote in a commentary.
Economic Information Daily:
- China Audits New Forms of Local Govt Debt: China's latest audit
of local debt to include new forms of borrowing including finance
leasing, Build Transfer and payment on deferred terms, citing people who
are involved in the national audit.
Financial News:
- China's Banks Must Prevent Risks From Property Loans. China's
large banks "must" increase their ability to prevent and control risks
from their lending to the property sector, Financial News says in a
commentary by reporter Zhang Modong. The large banks must adjust their
credit policies for the property sector, the article said. China's
property prices will be under control as the current policies will be
strengthened, the article said.
Securities Daily:
- China Researcher Sees Rate Cut Chance Slight. Possibility of
interest rate cut in the near term is "relatively slight," citing Liu
Yuhui, a researcher at the Chinese Academy of Social Sciences. China's
monetary policy in the short term will limit areas of lending and ensure
that funds go to the real economy such as small cos., Liu said.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 140.50 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 108.75 -1.5 basis points.
- NASDAQ 100 futures +.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- The NFIB Small Business Optimism Index for July is estimated to rise to 94.5 versus 93.5 in June.
8:30 am EST
- The Import Price Index for July is estimated to rise +.8% versus a -.2% decline in June.
- Advance Retail Sales for July are estimated to rise +.3% versus a +.4% gain in June.
- Retail Sales Ex Autos for July are estimated to rise +.4% versus unch. in June.
- Retail Sales Ex Autos and Gas for July are estimated to rise +.4% versus a -.1% decline in June.
10:00 am EST
- Business Inventories for June are estimated to rise +.2% versus a +.1% gain in May.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lockhart speaking, Eurozone Industrial Production data, Germany ZEW Index, Germany CPI, weekly retail sales reports, Oppenheimer Tech/Internet/Communications Conference and the Wedbush Life Sciences Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 13.03 -2.83%
- Euro/Yen Carry Return Index 134.13 +.20%
- Emerging Markets Currency Volatility(VXY) 9.0 +.11%
- S&P 500 Implied Correlation 49.65 -2.61%
- ISE Sentiment Index 133.0 +52.87%
- Total Put/Call .78 -13.33%
Credit Investor Angst:
- North American Investment Grade CDS Index 75.79 +.52%
- European Financial Sector CDS Index 136.51 -.10%
- Western Europe Sovereign Debt CDS Index 83.0 -.29%
- Emerging Market CDS Index 293.18 -1.18%
- 2-Year Swap Spread 17.0 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -8.75 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $138.70/Metric Tonne +4.2%
- Citi US Economic Surprise Index 38.0 +1.1 points
- Citi Emerging Markets Economic Surprise Index -29.80 unch.
- 10-Year TIPS Spread 2.25 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating +86 open in Japan
- DAX Futures: Indicating -2 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/tech sector longs
- Disclosed Trades: None
- Market Exposure: 75% Net Long
Bloomberg:
- Recovery Belied by Slowest Debt Sales in 17 Months: China Credit.
Optimism that the world's second-largest economy is stabilizing isn't
shared by the treasurers of riskier Chinese companies, judging by the
weakest debt sales by non-AAA issuers in 17 months. Offerings by
corporates rated at AA+ or below by Dabong Global Credit Rating Co. fell
to $1.3 billion in July, the least since February 2012, Bloomberg data
show. Global issuance of all ratings rose to $257 billion from $205
billion the previous month.
- State Bank of India Profit Drops on Rising Bad Loans. State
Bank of India, the country’s largest by assets, posted first-quarter
profit that dropped more than analysts estimated as bad loans climbed
amid a slowdown in Asia’s third-largest economy. Net income fell 14
percent to 32.4 billion rupees ($534 million), or 47.38 rupees a share,
for the three months ended June 30, from 37.5 billion rupees, or 55.91
rupees, a year earlier, the Mumbai-based lender said in an exchange
filing today. That compared with the 34.2 billion-rupee average of 42
estimates compiled by Bloomberg.
- Germany Trims Planned Bond Sales Amid Spending Cuts. German
Chancellor Angela Merkel’s government expects to cut planned 2014 bond
sales, predicting increased tax collections and reduced spending will
help keep
its budget balanced, a draft federal spending plan shows.
- European Stocks Close Little Changed at a 10-Week High. European stocks closed little changed at a 10-week high as a rally in mining companies offset slower-than-forecast economic growth in Japan. Fresnillo Plc soared 6.6 percent to a two-month high as precious metals gained. Prudential Plc climbed to the highest in more than two decades after posting a 22 percent jump in profit. Telekom Austria AG dropped 1.6 percent after reporting second-quarter earnings that missed analysts’ projections. Ladbrokes Plc slid 2.6 percent as JPMorgan Chase & Co. downgraded the U.K.
gambling company. The Stoxx Europe 600 Index increased less than 0.1 percent to 306.08 at the close of trading, having earlier risen as much
as 0.2 percent ad declined 0.6 percent.
- Gold Futures Gain Most in Three Weeks on Higher Chinese Demand. Gold
futures advanced the most in
three weeks as demand surged in China, the world’s biggest consumer of
the precious metal after India. Silver rallied to a seven-week high. Domestic purchases of gold jumped 54 percent to 706.4 metric tons in the first half of 2013, compared with a year
earlier, the China Gold Association said today. Buying of gold-bar purchases surged 87 percent and jewelry demand increased 44
percent. Last month, gold prices jumped 7.3 percent, partly on
increased physical buying. Gold futures for December delivery rose 2.1 percent to
$1,339.70 an ounce on the Comex in New York at 10:18 a.m.,
heading for the biggest gain for a most-active contract since
July 22. Earlier, prices touched $1,343.70, the highest since
July 24.
- Bond Hubris Overwhelms Fed in Riskiest Credit-Market Sectors. Bond
investors trying to divine when
the Federal Reserve will reduce its unprecedented monetary stimulus are
increasingly looking to the riskiest parts of the debt market, which are
booming like before the financial crisis. The amount of loans made this
year that lack standard
protections for lenders exceed the all-time high set in 2007,
and only one other time have investors pumped more money into
funds that buy lower-rated loans than they did last week. Bonds
rated in the lowest category of junk accounted for the greatest
percentage of speculative-grade offerings last month since 2011.
- N.Y. Subpoenas Bitcoin Firms in Probe on Criminal Risk. New York’s top banking regulator
sent subpoenas to 22 digital-currency companies, including
BitInstant LLC and Dwolla Corp., to determine whether new
regulations should be adopted to govern the emerging industry,
according to a person familiar with the matter.
Fox News:
MarketWatch:
CNBC:
- SAC-linked Parameter fund closes as shrinkage sets in. An affiliated fund of Steven A. Cohen's SAC Capital Advisors has shut
down as the $14 billion hedge fund begins to shrink in the wake of a
criminal indictment filed against it in July, according to two people
familiar with the unit's closure.
- Tech rebound drives housing frenzy in Silicon Valley. For
the last four months, the average price of a single-family home in
Santa Clara County—the heart of Silicon Valley—has been more than $1
million, according to recent data from MLS Listings, a service for real
estate agents.
Zero Hedge:
Business Insider:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) REITs -1.10% 2) Biotech -.89% 3) Utilities -.81%
Stocks Falling on Unusual Volume:
- LPI, FBP, LGCY, CLMT, OMER, MNST, BEAM, BCS, STON, RDA, PERI, SYY, COL, DXM, YELP, NGG, SNTS, DBD, AL, ISIS, YOKU and CVE
Stocks With Unusual Put Option Activity:
- 1) MON 2) SYY 3) ETR 4) VICL 5) EWA
Stocks With Most Negative News Mentions:
- 1) JNPR 2) CXO 3) VSI 4) COL 5) DIS
Charts:
Style Outperformer:
Sector Outperformers:
- Gold & Silver +5.20% 2) Steel +1.92% 3) Homebuilders +1.29%
Stocks Rising on Unusual Volume:
- NIHD, BAP, LFC, NGD, PUK, CLDX, NPSP, DOLE, NOAH, OLED, SFUN, BBRY, EMES, NPSP, YRCW, CLF, JWN, UEIC, DANG, INVN, SA, SSYS, RGLD, KKD and PF
Stocks With Unusual Call Option Activity:
- 1) TWX 2) NPSP 3) OLED 4) FXY 5) OXY
Stocks With Most Positive News Mentions:
- 1) FFIV 2) KKD 3) NTAP 4) WBMD 5) OSK
Charts:
Weekend Headlines
Bloomberg:
- Japan’s Below-Forecast Growth Fuels Sales-Tax Debate: Economy.
Japan’s economy slowed more than forecast in the second quarter as
businesses cut investment, undermining gains in consumer and government
spending that helped reduce deflationary pressures. Gross domestic
product rose an annualized 2.6 percent from the three months through
March, when it rose 3.8 percent, the Cabinet Office reported today in
Tokyo. The median of 32 estimates was for a 3.6 percent gain. Unadjusted for price changes, nominal GDP (SGDPQOQ) growth accelerated to 2.9 percent. The
report adds to the debate on whether Japan is strong enough to sustain a
planned 3 percentage point bump in the sales tax in April, with Prime
Minister Shinzo Abe deciding in coming
months on whether to proceed. While consumers continue to propel Japan’s rebound, companies have yet to commit to the Abenomics project, paring capital spending for a sixth straight quarter.
- China Urbanization Push to Hit Roadblocks Amid Local Opposition. China’s
plan to encourage hundreds of millions of rural residents to settle in
cities to boost growth faces opposition from local governments,
according to Li Tie, an official with the country’s top economic
planning agency. Li spoke at an urbanization forum in Beijing where
officials, researchers and company executives highlighted
challenges. They cited the strain on local-government finances,
the dangers of overbuilding and the cost of scrapping the hukou,
or residence permit, system that denies migrants the welfare,
health and education benefits of city dwellers.
- China Poised to Gain Control as Shipyard Shakeout Looms: Freight.
China grew into the world’s leading shipbuilder over the last decade as
hundreds of private yards opened to compete with state-run companies.
Now, the government is poised to regain control as the industry heads
for
consolidation. The number of shipyards in China has swollen to 1,647,
contributing to a global capacity glut. To stabilize the
industry, one third to a half of the yards will probably have to
disappear through acquisitions and closings, according to
executives and analysts.
- Singapore Cuts Export Forecast as China Slowdown Damps Recovery.
Singapore lowered its forecast for exports this year as a slowing
expansion in China crimps demand for the nation’s goods, even as
services helped the economy grow more than initially estimated last
quarter. Non-oil domestic exports may be unchanged or rise 1 percent
this year, compared with a previous forecast of 2 percent to 4 percent,
the trade promotion agency said in a statement today.
- Auckland’s New York House Prices Prompt Lending Curbs: Mortgages. When it comes to buying a house, New Zealander Ginny Braun is finding
that her home town of Auckland is rapidly catching up to New York City. “The market feels crazy, it feels like it’s out of control,”
said the 40-year-old associate professor of psychology at the University
of Auckland, who’s been looking for a house for more than three years.
“I’ve heard people say it’s cheaper to buy in New York than in Auckland.
Having lived in New York, that doesn’t seem an outrageous claim.”
- Indian
Banks to Drop on Record Yield Inversion: Chart of the Day. India's
banking stocks may extend their 26% plunge since mid-May as short-term
bond yields exceed long-term rates for the longest period since 2008. The inversion of the bond gauge since May 22 is also the steepest since 2001, when Bloomberg began compiling the data. If the pattern from five years ago repeats, the share index will extend its retreat from the 2013 peak even after the yield curve's inversion ends.
- Asian Stocks Gain as Investors Buy ‘Cheap’ China Shares.
Asian stocks rose, reversing earlier declines on the regional
benchmark, as investors snapped up shares in China, now at the cheapest
valuation of the world’s top 10 stock markets. Commodities companies
climbed. Raw-materials suppliers led gains on the regional equities
index, with BHP Billiton Ltd. (BHP), the world’s biggest miner, jumping
2.7 percent in Sydney. Bridgestone Corp. (5108), Japan’s No. 1
tiremaker, advanced 4.9 percent after raising its full-year profit
forecast. GCL-Poly Energy Holdings Ltd. fell 2 percent in Hong Kong
after the world’s largest producer of polysilicon forecast a wider loss.
The MSCI Asia Pacific Index advanced 0.4 percent to 134.39 as of 10:59 a.m. in Hong Kong as seven of the 10 industry groups
on the gauge rose.
- Rubber Gains to Highest in More Than Two Months on China Demand.
Rubber rallied to the highest level
in more than two months on optimism that China’s stabilizing economy
would lead to higher demand from the top consumer of the commodity used
in tires. Rubber for delivery in January on the Tokyo Commodity
Exchange rose as much as 1.9 percent to 266.3 yen a kilogram ($2,769 a
metric ton), the highest level for the most-active contract since May 29.
- Rebar Advances to Highest in Four Months on China Demand Outlook.
Steel reinforcement-bar futures in Shanghai rose for a ninth day to a
four-month high on optimism that demand will pick up in China, the
world’s largest producer and consumer. Rebar for January delivery on
the Shanghai Futures Exchange climbed as much as 0.5 percent to 3,773
yuan ($617) a metric ton, the highest level for a most-active contract
since April 17, and
was at 3,766 yuan at 10:56 a.m. local time.
- Hedge Funds Trim Gold Bets on Stimulus Speculation: Commodities.
Hedge funds cut bullish gold bets by the most since June amid
speculation about whether the Federal Reserve will begin trimming its
monthly bond purchases. Money managers cut their net-long position by
27 percent to 48,103 futures and options by Aug. 6, U.S. Commodity
Futures Trading Commission data show. Holdings of short contracts rose
26 percent. Net-bullish bets across 18 U.S.-traded raw materials
dropped 19 percent to the lowest since March and a measure of
wagers across agricultural commodities turned negative for the
first time on record.
- Gold Advances to Highest Level This Month as SPDR Assets Expand. Bullion for immediate delivery rallied as much as 1.5
percent to $1,333.94 an ounce, the highest price since July 31,
and traded at $1,329.92 at 11:16 a.m. in Singapore. Gold for
December delivery climbed as much as 1.6 percent to $1,333 an
ounce on the Comex in New York and was at $1,328.90.
- Spurning
193% Credit Card Rates Undermines Growth: Brazil Credit. Brazilian
consumers are taking out a record amount of salary-deductible loans to
pay down costlier debt such as credit cards and check overdrafts,
undermining government efforts to spur the economy by boosting spending.
So-called payroll loans, which allow banks to deduct payments directly
from paychecks and charge an average interest rate of 24.2%, rose 10.8%
this year through June to an unprecedented $92 billion, almost double
the 6% increase for standard consumer loans, according to the most
recent data from the central bank. In the same span, purchases with
credit cards, which carry the highest rates in Latin America at 193%,
fell 1%.
- Obama Begins Vacation Golfing With Wall Street Supporter Wolf. U.S.
President Barack Obama began his first full day of a vacation on
Martha’s Vineyard in Massachusetts with a round of golf with Robert
Wolf, a friend and top Wall Street backer of his 2012 re-election
campaign. Obama is playing a midday round at Farm Neck Golf Club in Oak Bluffs with Wolf and presidential aide Marvin Nicholson and
White House chef Sam Kass. Wolf, 51, the chief executive officer of 32 Advisors LLC
and former UBS Americas chairman who served on the president’s
jobs council, has been one of Obama’s chief Wall Street allies.
Obama in June appointed Wolf to his Export Council.
- Two Ex-JPMorgan Traders Facing Arrest in London, NYT Says.
Authorities plan to arrest two
former JPMorgan Chase & Co. (JPM) employees on fraud charges
related to their role in a trading loss last year, the New York Times
reported, citing people briefed on the matter. Javier Martin-Artajo and Julien Grout, who worked in the
bank’s London office, will probably be taken into custody in
coming days, the newspaper reported. They are natives of other
European countries and British authorities may not be able to
locate them, according to the report.
Wall Street Journal:
- Emerging World Loses Growth Lead. Global-Trade Decline Dulls Developing Markets as Outlook Brightens in More-Established Economies. Momentum in the global economy is shifting to the developed world,
away from the emerging economies that had led growth since the financial
crisis. For the first time since mid-2007, the advanced economies, including
Japan, the U.S. and Europe, together are contributing more to growth in
the $74 trillion global economy than the emerging nations, including
China, India and Brazil, according to an estimate by investment firm
Bridgewater Associates LP.
- U.S. Probes Use of Antipsychotic Drugs on Children. Federal health officials are reviewing antipsychotic drug use on children in the Medicaid system. Federal health officials have launched a probe into the use of
antipsychotic drugs on children in the Medicaid system, amid concern
that the medications are being prescribed too often to treat behavioral
problems in the very young.
- Deutsche Börse's News Service for Traders Draws Scrutiny of Investigators. A look at Need To Know News sheds light on growing concerns about data releases. Several times a month, the Labor Department invites news reporters to a
sealed room for an early look at soon-to-be-released reports such as the
unemployment rate. One organization attending in recent years stands
out from the rest.
- The Dark Side of Higher Yields. Income-hungry investors have flocked to
energy-focused master limited partnerships and MLP funds this year. Yet
risks are rising, and taxes can be hazardous.
- Economists See Just Enough Growth for Fed to Pull Back. Analysts
Don't See Much Chance of Recession or Above-Average Economic
Performance. The U.S. economic growth outlook has been upgraded to
decent from
lousy—which, while some distance from good, is likely good enough for
the Federal Reserve to pull back on its stimulus later this year.
Fox News:
- IRS scandal hits 3 month mark -- where's the accountability, Mr. Obama? In the past three months, we have learned that the Obama administration
repeatedly tried to downplay this unlawful targeting scheme which is an
unprecedented breach of the public’s trust by the IRS. We also know that the scandal continues to expand. And we know that the
Obama administration is doing very little to get to the bottom of what
happened, despite the president's promise to the American people that
the administration would “hold the responsible parties accountable.”
CNBC:
Business Insider:
New York Times:
- Prosecutors Investigate JPMorgan Over Trading Losses.
As federal authorities prepare to charge criminally two former JPMorgan
Chase employees suspected of misrepresenting a multibillion-dollar
trading loss last year, prosecutors in Manhattan are separately
exploring ways
to penalize the bank over the trading blowup that has come to be known
as the “London Whale.”
- With I.P.O.’s on the Rise, Analysts Get New Scrutiny. The market for initial public offerings has made a comeback, surging to
levels not seen since before the financial crisis. At the same time,
concerns have resurfaced over the role of Wall Street research analysts
in these lucrative deals.
Reuters:
- GM(GM) plans gradual pullout of S.Korea as labor costs surge. General Motors Co. has begun gradually cutting its presence in South Korea after mounting labor costs and militant unionism triggered a rethink of
its reliance on the country for a fifth of its global production, three
individuals familiar with GM's thinking said.
USA Today:
- Wave of bombings in Iraq during holiday kills 69.
This year's Ramadan was the most violent since 2007, with 671 people
killed. A wave of car bombings targeting those celebrating the end of
Ramadan
across Iraq killed 69 people Saturday, a bloody reminder of the
inability of Iraqi authorities to stop violence threatening to spiral
out of control.
Telegraph:
- European banks need to sell £2.8 trillion of assets. Banks in Europe will need to slash €3.2 trillion (£2.8tn) of assets from their
balance sheets over the next five years to meet new regulations designed to
minimise the risk of further banking collapses in future.
Expansion:
- Roche Sees No Growth in South Europe in 2H. Roche doesn't
forecast growth from its southern European business for the rest of the
year or a big decline, and "in general" will meet predictions, CFO Alan
Hippe says in interview. Roche still faces payment delays from Spanish
public health system.
Xinhua:
- Chinese official warns of excessive "empty cities". Reckless
expansion of cities in China has left many of them empty, according to a
Chinese economic planning official. Qiao Runling, deputy director of
the China Center for Urban
Development under the National Development and Reform Commission, said
local governments had relied on quick urbanization to stimulate economic
growth and generate fiscal revenue. "Nearly every big or medium-sized
city across China has plans to
erect a new town," Qiao said, quoting the result of his research at a
forum on urban development held in Jiangxi Province this week. According
to the official, new towns are usually bigger than old ones and many cities are left empty as a result. "China now has an oversupply of cities, given the number of new urban
districts that we have," Qiao said, adding that the excess of new urban
districts are especially serious in medium and small-sized cities in
central and western parts of the country. Qiao warned that China's modern urbanization should no longer be
bolstered by investment or construction projects but focus on structural
reform. Official statistics showed that land used for urban construction rose
by 83.41 percent from 2000 to 2010, while the urban population saw an
increase of 45.12 percent in the period.
China Securities Journal:
- Some Chinese Banks Raise Time-Deposit Rates. Some banks in
Beijing and Guangzhou, including China Everbright Bank, Ping An Bank and
Bank of Beijing, have raised 2-year, 3-year and 5-year timed-deposit
rates to ceiling after similar moves by some banks in Shanghai, citing
an investigation.
- China's Economy Rebound 'Too Early to
Call'. A Chinese economic rebound is "too early to call," according to a
front-page commentary written by reporter Ren Xiao. Expansion of total
demand is weak, the commentary said. Outlook of capital outflow impact
isn't optimistic, according to the commentary.
- China
Should Start Property Tax in Small Cities. China should start property
taxes in small cities and towns to bolster their "weak" fiscal revenue
for development, citing Zhao Hui, an official at the Ministry of Housing and Urban-Rural Development.
Weekend Recommendations
Barron's:
- Bullish commentary on (HDS), (OUTR), (WPO) and (MON).
- Bearish commentary on (ISIS).
Night Trading
- Asian indices are -.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 142.0 -3.5 basis points.
- Asia Pacific Sovereign CDS Index 110.25 -.25 basis point.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
2:00 pm EST
- The Monthly Budget Deficit for July is estimated to widen to -$94.5B versus -$69.6B in June.
Upcoming Splits
Other Potential Market Movers
- The USDA Crop report, BoJ Meeting Minutes and the Jefferies Industrials conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by mining/metal and real estate shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the week.
