Evening Headlines
Bloomberg:
- Whither China Seen in Australia as RBA Notes Slowdown: Economy.
From his Manhattan office, Steven Englander looks to commentary from
policy makers and executives
in Sydney, not Beijing, for the best take on China’s economy. “They get a
direct, immediate view of China demand for highly cyclical products and
have an incentive to give it a close read, so if they are sensing an
extended slowdown I would take their views seriously,” said Englander,
58, head of Group of 10 currency strategy at Citigroup Inc. “It may
be better to have an accurate view of a limited but important segment of
Chinese demand, than an uncertain view of aggregate demand.” Doubts
over the accuracy of Chinese data focus attention on readings and
statements more than 3,500 miles south of Beijing, to Australia, China’s
biggest iron-ore supplier. The Reserve Bank of Australia said Aug. 9
China’s growth isn’t likely to “pick up much, if at all, in coming
quarters,” while Prime Minister Kevin Rudd has flagged the danger of a
Chinese credit
crunch in a re-election pitch based on economic management.
- Japan Studies Ice Wall to Halt Radioactive Water Leaks. Turning soil into virtual permafrost with refrigerated coolant piped
through the earth was first used in the 1860s to shore up coal mines.
One hundred and fifty years on, it’s the newest idea for containing the
Fukushima nuclear disaster.
- Indian Submarine Sinks After Explosion With 18 Sailors Aboard. An Indian submarine sank at a navy
facility near Mumbai with 18 sailors trapped on board after an
internal explosion triggered a fire. The cause of the blast and the sailors’ condition wasn’t
yet known, the Indian Navy said in an e-mailed statement. The
explosion occurred shortly after midnight and the submarine is
partially submerged in a navy dock, the navy said.
- Dollar Strengthens as Commodities Fall; Asia Stocks Mixed.
The dollar strengthened and most
commodities declined, while Asian stocks swung between gains and
losses. Bonds fell in Asia after the 30-year Treasury yield
approached a two-year high on signs of faster U.S. growth. The Bloomberg
Dollar Index advanced for a third day, the
longest winning streak since June. South Korea’s won slid 0.4 percent
versus the greenback as of 11:50 a.m. in Tokyo, Brent crude fell 0.4
percent and Aluminum dropped 0.5 percent. The MSCI Asia Pacific Index rose less than 0.1 percent
as a storm delayed trading in Hong Kong. Australia’s 10-year bond yield
climbed to a one-month high after the 30-year Treasury yield
added 13 basis points in the last two days.
- Rebar Snaps 10-Day Rally in Shanghai as Steel Mills Sell Futures.
Steel reinforcement-bar futures in Shanghai fell for the first time in
11 days as steel mills and investors sold to take advantage of prices at
the highest level in four months. Rebar for January delivery on the
Shanghai Futures Exchange fell 0.6 percent to 3,815 yuan ($623) a metric
ton at 10:33 a.m. local time. The contract closed at 3,838 yuan yesterday, the highest close for a most-active contract since April 12.
- Rubber Climbs to Highest in 11 Weeks as Weaker Yen Boosts Appeal. Rubber advanced to the highest level
in 11 weeks as a weakening Japanese currency made yen-based
contracts more attractive and data yesterday added to signs the
global economy is improving. Rubber for delivery in January on the Tokyo Commodity
Exchange rose as much as 1.5 percent to 269 yen a kilogram
($2,739 a metric ton), the highest level for a most-active
contract since May 29. Futures traded at 266.6 yen at 10:54 a.m.
and have lost 12 percent this year.
- Mexico Plans Oil Reserve Sweetener to Lure Exxon(XOM), Chevron(CVX). Mexico
has come up with an
inducement for private companies such as Exxon Mobil Corp. (XOM) to bid
on contracts that would end a 75-year state energy monopoly. Though the government will retain ownership of oil, President Enrique Pena Nieto plans to lift restrictions on
companies registering the value of contracts with the U.S.
Securities and Exchange Commission, Deputy Energy Minister
Enrique Ochoa said in an interview today. Those values could
then be converted into volume and recognized on balance sheets.
- Merkel Blasts Tax Increases as ‘Poison’ as She Starts Campaign. German
Chancellor Angela Merkel blasted tax increases as “poison” as she waded
into the German election campaign vowing to remain in office for the
full four-year legislative period if she wins a third term. Speaking
in Berlin after returning from a two-week vacation, Merkel rebuffed the
charge that her election effort is excessively cautious. She cited
“very clear” differences with the opposition Social Democrats over
taxes, which SPD chancellor candidate Peer Steinbrueck has pledged to
raise.
- Fed Seen Slowing QE in September by 65% of Economists in Survey. Sixty-five percent of economists in
a Bloomberg survey said Federal Reserve Chairman Ben S. Bernanke
will probably reduce the central bank’s $85 billion in monthly
bond purchases in September. The Federal Open Market Committee’s first step will
probably be small, with monthly purchases tapered by $10 billion
to a $75 billion pace, according to the median estimate in a
survey of 48 economists conducted Aug. 9-13. The Fed will end
the buying by the middle of 2014, they said. In a survey last
month, half of economists predicted a Fed reduction in bond
buying at the next scheduled meeting Sept. 17-18.
Wall Street Journal:
- U.S. Agrees Not to Prosecute 'London Whale'. Criminal Charges Against Two Others Could Come as Early as Wednesday.
The J.P. Morgan Chase & Co. trader known as the "London whale"
has reached an agreement with federal authorities to avoid criminal
prosecution over a $6 billion
trading loss, but two former colleagues are expected to be charged as
soon as Wednesday, according to people close to the case.
- Buyers Tackle a Fear of Debt.
After Selloff in May and June, Money Is Pouring Back Into Corporate
Bonds. Investors aren't afraid of the bond market anymore. After a broad
selloff in May and June, investors are pouring money
back into corporate bonds and riskier types of debt, some with complex
structures and favorable terms for issuers. Pension funds, insurance
companies, mutual funds and hedge funds are resuming a hunt for higher
yields that petered out earlier this spring when the Federal Reserve
said it may begin to wind down its $85 billion-a-month bond-buying
program, known as quantitative easing.
- Strassel: Behind an Ethanol Special Favor. An Alon USA Energy refinery in Louisiana was the only one—out of 143—exempted from an EPA mandate. Why? Why does the public demand transparency in government? Read on.
- Problems With Authority. Lawless regulators and the White House earn a judicial rebuke. President Obama asserted the unilateral power to "tweak" inconvenient
laws in last Friday's news conference, underscoring his Administration's
increasingly cavalier notions about law enforcement. So it's good that
the judiciary—a coequal branch of government, in case the Administration
forgot—is starting to check the White House.
MarketWatch.com:
CNBC:
- As bears growl, fund managers' optimism shoots up. Global fund managers are more upbeat about the world economy, and
optimism about the euro zone doubled in the last month to a nine-year
high, according to a new survey. The Bank of America Merrill
Lynch monthly global fund manager survey showed more fund managers were
upbeat in August than at any time since December 2009. A net 72 percent
of managers were optimistic that the world's economy would pick up over
the next 12 months, up 20 percent from July.
Zero Hedge:
- US Treasury Finally Admits The Truth: It's All POMO. So, thanks to the US Treasury, we know that between January 2009
and April 2013, on days in which the Fed POMO was more than $5 billion,
the stock market rose a total of 570 points, on days in which the POMO
was less than $5 billion, the cumulative stock market gain was "only"
141 points, and when there was no POMO, the S&P gained... -51 points.
Business Insider:
New York Times:
- Few Clues to Regulatory Goals of Fed Rivals. Lawrence H. Summers, as Treasury secretary, presided over the group of
senior Clinton administration officials who reached the fateful decision
in the late 1990s that there was no need to regulate a new family of
financial transactions known as over-the-counter derivatives. Janet
Yellen attended some of those meetings, too, as chairwoman of President
Clinton’s Council of Economic Advisers. But she did not speak.
Reuters:
- Textron Systems(TXT) eyes rising foreign demand for drones, weapons. Textron
Systems, a unit of Textron Inc , says strong demand from the Middle
East and Asia for unmanned systems, ground vehicles and smart weapons
will help expand foreign sales to about half of the division's total
revenues in coming years. Ellen Lord, president and
chief executive officer of Textron Systems, said international sales
had already grown to about 35 percent of total revenues from less than
10 percent in 2009, and would continue to expand toward a 50-50 split in
coming years.
- China investigating carmakers over pricing: industry body. A Chinese automotive
association is collecting data on the price of all foreign cars
sold in the country for a government agency that has fined
companies for price-fixing in sectors ranging from milk powder
to jewellery, officials at the industry body said.
- Euro zone may exit from recession yet give little to cheer about.
The euro zone economy may learn later on Wednesday that it has moved
out of its longest recession, needing seven quarters to dig up modest
growth in the three months to June. Data is expected to show growth in
the quarter - but just 0.2 percent, according to economists polled by
Reuters. In the first quarter it shrank by that amount. The overall
picture is expected to be mixed. Peripheral countries, such as Spain,
Greece and Portugal are struggling with high double-digit unemployment,
on-and-off political rows and painful austerity. By contrast, the
bloc's largest economy, Germany, is expected to have gathered speed.
France, the bloc's second-largest economy, and Germany release
second-quarter data early. They will be followed by overall euro zone
figures at 0900
GMT.
Financial Times:
- Tarnished outlook for Brazil steelmakers. Stagnant
demand for scrap metal, the raw material used in about 30 per cent of
Brazil’s steel production, according to the industry body Inesfa, is one
of the many signs that the long-awaited recovery of the country’s
steelmakers is yet to materialise.
Kyodo:
- Panel
to Propose Japan Defend Allies Under Attack. A Japanese govt panel on
security issues will propose that Japan help defend U.S. and other
allied nations when under attack by exercising its right to collective
self-defense, citing an interview with Shinichi Kitaoka, acting chairman
of the panel.
Shanghai Securities News:
- China 2H Fixed Asset Investment May Grow 19%-20%. China's 2H
fixed asset investment growth may be about 19%-20%, according to a
research report. China can't greatly expand fixed asset investment in
short-term because the government doesn't have much room in terms of
fiscal and monetary policy, the report said. Investment growth in
manufacturing and infrastructure will continue to slow, while real
estate may remain stable, according to the report.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 138.0 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 107.25 -1.5 basis points.
- NASDAQ 100 futures -.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Producer Price Index for July is estimated to rise +.3% versus a +.8% gain in June.
- The PPI Ex Food and Energy for July is estimated to rise +.2% versus a +.2% gain in June.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-1,500,000 barrels versus a -1,320,000 barrel decline the prior week.
Gasoline supplies are estimated to fall by -1,600,000 barrels versus a
+135,000 barrel gain the prior week. Distillate inventories are
estimated to rise by +1,000,000 barrels versus a +469,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to fall by
-.2% versus a -.4% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bullard speaking, China FDI data, Eurozone gdp report, German gdp
report, BoE minutes, NY Fed Household Debt/Credit report, weekly MBA
mortgage applications report and the Canaccord Growth Conference could
also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and commodity 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.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.49 -2.50%
- Euro/Yen Carry Return Index 135.71 +.98%
- Emerging Markets Currency Volatility(VXY) 9.25 +1.31%
- S&P 500 Implied Correlation 47.64 -3.33%
- ISE Sentiment Index 122.0 -2.40%
- Total Put/Call .75 -1.32%
Credit Investor Angst:
- North American Investment Grade CDS Index 75.48 -.17%
- European Financial Sector CDS Index 134.23 -1.67%
- Western Europe Sovereign Debt CDS Index 82.0 -1.20%
- Emerging Market CDS Index 292.17 -.18%
- 2-Year Swap Spread 18.25 +1.25 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -8.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $141.80/Metric Tonne +2.24%
- Citi US Economic Surprise Index 40.20 +2.2 points
- Citi Emerging Markets Economic Surprise Index -29.60 +.2 point
- 10-Year TIPS Spread 2.25 unch.
Overseas Futures:
- Nikkei Futures: Indicating +120 open in Japan
- DAX Futures: Indicating +23 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/tech/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Euro-Area Industrial Production Expands Less Than Estimated.
Euro-area industrial output expanded less than economists estimated in
June as the currency bloc’s economy struggles to emerge from a
record-long recession. Factory production in the 17-nation euro area
rose 0.7 percent from May, when it decreased a revised 0.2 percent, the
European Union’s statistics office in Luxembourg said today.
That was less than the gain of 1 percent projected by
economists, according to the median of 37 forecasts in a
Bloomberg News survey. June production rose 0.3 percent from the
year-earlier month, the first annual increase in 20 months.
- European Stocks Climb as German Confidence Rises.
European stocks gained for a fourth day, extending a 10-week high, as
companies posted better-than-estimated earnings and German investor
confidence climbed. EON SE rose the most in six weeks after Germany’s
biggest utility posted first-half profit that exceeded analysts’
projections. GAM Holding AG, a Swiss asset manager, surged the
most in four years as earnings more than tripled. Banca Monte
dei Paschi di Siena SpA led Italian banks higher as the nation’s
10-year yield premium over benchmark German bunds shrank to the
lowest in two years. The Stoxx Europe 600 Index climbed 0.6 percent to 307.79 at the close of trading, the highest level since May 28.
- Dollar Gains as Increase in Retail Sales Boosts Fed-Taper Bets. The Bloomberg U.S. Dollar Index added 0.6 percent to
1,026.25 at 2:42 p.m. New York time after rising 0.7 percent,
the biggest intraday gain since Aug. 1.
- WTI Trades Near One-Week High on U.S. Supply, Mideast. WTI for September delivery advanced as much as $1.09 to
$107.20 a barrel in electronic trading on the New York Mercantile Exchange and was at $106.38 as of 12:52 p.m. London
time. The volume of all futures traded was 8 percent above the
100-day average. Prices have climbed 16 percent this year.
- Copper Rises for 3rd Session in 4 on Signs of Demand Gain. Copper futures for delivery in September rose 0.4 percent
to settle at $3.317 a pound at 1:15 p.m. on the Comex in New
York, after earlier climbing to $3.343, the highest for a most-active contract since June 7. Prices gained 4.2 percent last
week, the most since September.
- Li & Fung Profit Misses Estimates on Weaker U.S. Demand. Li & Fung Ltd., the world’s largest supplier of clothes and toys to retailers, reported first-half profit that missed analyst estimates amid sluggish demand from
U.S. retail customers.
- Nigerian Islamist Leader Vows Attacks as 56 People Killed. At least 56 people died in two
attacks in the northeastern Nigerian state of Borno, as the
leader of the militant Islamist Boko Haram group vowed to
continue its fight against the country’s military.
- Novartis Is Said to Be Out of Bidding for Onyx(ONXX). Novartis AG is out of the bidding
for Onyx Pharmaceuticals Inc., according to a person familiar
with the situation. Onyx’s current valuation made it too expensive for
Novartis, said the person, who declined to be identified because
the matter is private. Lori Melancon, a spokeswoman for Onyx,
said the company wouldn’t comment on rumors and speculation.
Novartis spokesman Eric Althoff also declined to comment.
Wall Street Journal:
Fox News:
CNBC:
- A limit on consumer costs is delayed in health care law. In another setback for President Obama's health care initiative, the
administration has delayed until 2015 a significant consumer protection
in the law that limits how much people may have to spend on their own
health care.
- Too early to lay out asset-buying exit: Fed's Lockhart. U.S.
economic performance remains too mixed for Federal Reserve policymakers
to lay out a detailed path for reducing and eventually halting their
asset-purchase stimulus plan at their September meeting, a
top Fed official said on Tuesday.
Zero Hedge:
Business Insider:
NY Post:
- Ripe for picking. BlackBerry(BBRY) looking to sell out to white knight. BlackBerry is searching for a strategic white knight with a big bankroll. The
struggling smartphone company put itself on the sales block yesterday
and hired JPMorgan to advise it, sending the shares up more than 10
percent. The Canadian firm is aiming ideally for a “Google-like” investor rather than a private-equity firm, The Post has learned.
Reuters:
Telegraph:
LiveMint.com:
- Jim Rogers: Why I’m shorting India. The hedge fund manager on the financial
crisis, his bets for the future and his decision to be extremely
negative about India in his just-released book.
Xinhua:
- China to Punish Extravagant Spending in Official Galas. All
government departments should encourage frugal event planning, citing a
government notice. No government funds should be used to invite
high-cost entertainers. Those who create waster will be severely
punished, the report said.
Style Underperformer:
Sector Underperformers:
- 1) Airlines -3.97% 2) Gold & Silver -2.31% 3) Oil Tankers -2.22%
Stocks Falling on Unusual Volume:
- CATY, NRG, FBP, CPN, IOC, NGD, LPI, LCC, ACMP, LVB, MAIN, OWW, UAL, DAL, NOAH, VAL, VIPS, ALK, IHS, SOHU, SA, NS and SAVE
Stocks With Unusual Put Option Activity:
- 1) DAL 2) YUM 3) NKE 4) JNK 5) ITB
Stocks With Most Negative News Mentions:
- 1) NAT 2) UPL 3) ATHN 4) MSFT 5) BBY
Charts:
Style Outperformer:
Sector Outperformers:
- Oil Service +.58% 2) I-Banks +.52% 3) Semis +.47%
Stocks Rising on Unusual Volume:
- OSIR, DGIT, NQ, VC, BBRY and TTM
Stocks With Unusual Call Option Activity:
- 1) DGIT 2) VRX 3) JBLU 4) MRO 5) LCC
Stocks With Most Positive News Mentions:
- 1) MRVL 2) ALV 3) CSCO 4) RGR 5) IHS
Charts:
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.
