Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.63 +12.19%
- Euro/Yen Carry Return Index 135.53 -.06%
- Emerging Markets Currency Volatility(VXY) 9.47 +1.28%
- S&P 500 Implied Correlation 52.31 +6.36%
- ISE Sentiment Index 85.0 -42.57%
- Total Put/Call .94 +17.5%
Credit Investor Angst:
- North American Investment Grade CDS Index 79.19 +4.92%
- European Financial Sector CDS Index 139.90 +4.53%
- Western Europe Sovereign Debt CDS Index 82.50 unch.
- Emerging Market CDS Index 308.90 +2.63%
- 2-Year Swap Spread 17.75 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -8.5 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- Yield Curve 243.0 +12 bps
- China Import Iron Ore Spot $141.20/Metric Tonne -1.12%
- Citi US Economic Surprise Index 40.60 +1.6 points
- Citi Emerging Markets Economic Surprise Index -29.70 -.5 point
- 10-Year TIPS Spread 2.18 -4 bps
Overseas Futures:
- Nikkei Futures: Indicating -197 open in Japan
- DAX Futures: Indicating -14 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Egypt Brotherhood Torches Building as Death Toll Rises. Hundreds of supporters of ousted Egyptian President Mohamed Mursi
torched government headquarters in Giza, as the death toll rose above
500 after a crackdown on Islamists calling for his reinstatement. Brotherhood
members attacked the building in Giza after hurling Molotov cocktails
and firing gunshots, governorate spokesman Amin Abdel-Moneam said by
phone. Televised footage showed flames and smoke billowing from the
site, and local media said police repelled the assailants.
- WTI Oil Rises a Fifth Day as Egypt Unrest Boosts Concern.
West Texas Intermediate crude rose
for a fifth day, the longest stretch of gains since April, as
worsening unrest in Egypt bolstered concern that Middle East supplies
may be cut. Brent oil climbed to a four-month high. Futures advanced as
much as 1 percent in New York after
Egypt declared a state of emergency and more than 500 people
were killed as security forces broke up sit-ins. The country
controls the Suez Canal, which is used by tankers carrying oil
to Europe and North America from the Arabian Peninsula. WTI
retreated and equities tumbled after falling U.S. jobless claims
raised concern that the Federal Reserve will trim stimulus. “Oil is
rallying on the eruption of violence in Egypt,”
said Bob Yawger, director of the futures division at Mizuho
Securities USA Inc. in New York. “Equities are getting pounded,
which is putting downward pressure on the market. WTI is caught
between these opposing forces.” WTI crude for September delivery increased 75 cents, or 0.7
percent, to $107.60 a barrel at 1 p.m. on the New York
Mercantile Exchange. Futures reached $107.87, the most since
Aug. 2. The volume of all futures traded was 0.5 percent above
the 100-day average.
- Treasury Yields Rise to Highest Since 2011 on Fed Policy Outlook. Treasuries fell, pushing yields on
10- and 30-year securities to the highest since August 2011, on
speculation stronger U.S. growth will prompt the Federal Reserve
to reduce its bond buying program as soon as next month.
Yields on 10-year notes, a benchmark for corporate and
consumer borrowing rates, climbed above 2.8 percent for the
first time in two years.
- Europe Stocks Drop the Most in Five Weeks on Fed Concern. European
stocks dropped the most in more than five weeks as better-than-forecast
U.S. jobless claims fueled speculation the Federal Reserve will taper
its bond-buying program this year. Zurich Insurance Group AG (ZURN)
lost 3.6 percent after second-quarter profit missed analysts’ estimates.
Hennes & Mauritz AB (HMB) declined the most in seven weeks as
Europe’s second-biggest clothing retailer reported worse-than-expected
sales. BG Group Plc, which derives 20 percent of its oil-and-gas
production from Egypt, slipped 2.4 percent as the death toll from
nationwide
violence in the most populous Arab country climbed above 500. The Stoxx Europe 600 Index slid 1.1 percent to 305.34 at
the close in London, its largest drop since July 5.
- Credit:
High Yield Index Rises Most in 7 Weeks on U.S. Yields, Citi Says.
iTraxx Crossover currently 20 bps wider at 415, heading for the biggest
daily increase since June 24, according to Bloomberg. Yields
breaking out of previous ceiling of 2.75% put pressure on Crossover
index, and other risk assets. As U.S. yields rise, total returns in
credit turn negative. In recent years a significant proportion of
inflows into credit have been from total-return-sensitive investors,
like retail, the note said.
- Homebuilder Confidence in U.S. Jumps to Highest Level Since 2005. The National Association of Home Builders/Wells Fargo index of builder confidence climbed to 59 from a revised 56 in July,
which was lower than previously reported, the Washington-based group
reported today. The median forecast in a Bloomberg survey of economists
called for the gauge to be 57.
- Consumer Comfort in U.S. Declines. The Bloomberg Consumer Comfort Index fell to minus 26.6 for
the period ended Aug. 11, its first drop in four weeks. “Rising
interest rates and a slower pace of job gains add
to concerns of households that are still facing, at best, restrained job
growth,” said Joseph Brusuelas, a senior economist at Bloomberg LP in
New York.
Wall Street Journal:
- Egypt Death Toll Passes 500 as Brotherhood Vows New Protests. Funerals, Rallies Likely to Inflame Tensions.
The death toll from Egypt's wave of violence on Wednesday climbed to at
least 525, fueling anger and deepening the political cleavages in the
Arab world's most populous nation. Cairo's streets were mostly calm Thursday morning in neighborhoods
not affected by the previous day's clashes, which were sparked when
Egypt's military regime brutally cleared Muslim Brotherhood protests in
Cairo. But later Thursday, Brotherhood leaders called on their
supporters to regroup in protest despite a military curfew set to go
into effect at dusk, fueling tensions over the possibility of renewed
conflict. An hour before the 7 p.m. curfew, Brotherhood supporters
continued to mass at the protest site, Imam Mosque in Cairo's Nasr City.
- Clock Ticks on Junior Bank CDS, Citi Warns. Traders
and investors should dump some contracts that protect against losses on
the riskiest of bank bonds, say credit analysts at Citigroup Stung by
the fallout from some previous restructurings of troubled European
banks, rule-setters in the credit default swaps market have gone back to
the drawing board. Next year, shiny new contracts will emerge,
giving holders of CDS on banks’ bonds, including junior debt (the stuff
that’s first in line for losses) better protection. The problem is, when
that happens, the old CDS contracts will lack natural buyers, say Citi analysts Abel Elizalde and Joseph M. Faith.
MarketWatch:
- Gold rallies on haven demand; silver up 5%. Gold futures rallied on Thursday as steep losses
for U.S. stocks and a decline in the U.S. dollar lured investors into
the perceived safety of the precious metal. Gold for December delivery GCZ3 +2.35%
rose $27.50, or 2%, to end at $1,360.90 an ounce on the Comex division
of the New York Mercantile Exchange, rebounding after touching lows
below $1,320.
CNBC:
- The really bad news behind the jobless claims drop. Less-publicized data Thursday showed that real weekly earnings tumbled 0.5 percent from June to July, according to the Bureau of Labor Statistics. The
figure is derived from a 0.2 percent drop in real average hourly
earnings, plus a 0.3 percent decrease in the average work week. What's
more, wages dropped an an annualized basis as well. The BLS said average
hourly earnings fell 0.1 percent from July 2012 to July 2013.
- New normal returns to DC this fall: Fiscal chaos. There's
nothing a Washington politician loves these days more than a crisis.
And while it's been awhile since Congress set the country on a crisis
course over the federal budget and debt, this fall is ripe with
opportunity for fiscal chaos. "This ratcheting up of the threat
level every time we go through this is a terrible way to do business,"
said Robert Bixby, executive director of The Concord Coalition, a
nonpartisan budget watchdog. "But it looks like were headed there again.
The new regular order is chaos."
Zero Hedge:
ValueWalk:
Business Insider:
- It Appears George Soros Has Made A Huge Bearish Bet. As
Marketwatch reporter Barbara Kollmeyer points out, one interesting
highlight from Soros' filing is that he bought a bunch of puts on the
SPDR S&P 500 ETF in Q2. It's his biggest holding in the filing.
New York Times:
- Arab Spring Countries Find Peace Is Harder Than Revolution. In Libya, armed militias have filled a void left by a revolution that
felled a dictator. In Syria, a popular uprising has morphed into a civil
war that has left more than 100,000 dead and provided a haven for
Islamic extremists. In Tunisia, increasingly bitter political divisions
have delayed the drafting of a new constitution. And now in Egypt, often considered the trendsetter of the Arab world,
the army and security forces, after having toppled the elected Islamist
president, have killed hundreds of his supporters, declared a state of
emergency and worsened a deep polarization.
NBC Philadelphia:
- Philadelphia to Borrow $50M to Open Schools on Time.
Philadelphia Mayor Michael Nutter says the city will borrow $50 million
to ensure that schools can open on time next month. "Today, as Mayor of
this great City, I’m here to say I WILL NOT RISK A CATASTROPHE. We WILL
avoid this disaster," Nutter said in a prepared press release.
Washington Post:
- Obama’s unconstitutional steps worse than Nixon’s. Explaining
his decision to unilaterally rewrite the Affordable Care Act (ACA), he
said: “I didn’t simply choose to” ignore the statutory
requirement for beginning in 2014 the employer mandate to provide
employees with health care. No, “this was in consultation with
businesses.”
Economist's View:
- Who Is Driving the Auto Lending Recovery? About 23 percent of new auto loans (calculated as a share of
aggregate loan balances originated) were issued to borrowers with credit
scores under 620 in 2013:Q2, well below the 25-30 percent shares that we
have seen historically. On the other end, the share of borrowers with credit
scores over 720 peaked at over 50 percent during the recession and is about
45 percent now.
Fertilizer Week:
- Potash
Trade Slows as Buyers Eye Price Cut. Indian importers may seek a
25%-30% cut on the current contract price when renegotiating, citing
people familiar with the matter. A 25% drop equals $320 per ton
including freight, from $427. Trading has 'ground to a halt' as some
companies have already taken the contracted quantities for year and
others have reserves for at least 2 months. Importers in Malaysia and
Indonesia say end-users are unwilling to pay more than $320-$340 even as
producers seek $440-$450.
Reuters:
- Wal-Mart(WMT) sales disappoint as shoppers worldwide curb spending. Wal-Mart
Stores Inc posted disappointing quarterly sales on Thursday after
shoppers worldwide proved cautious, prompting the discount retailer to
lower its revenue and profit forecasts for the year.
"The retail environment was
challenging across all of our markets," Chief Executive Officer Mike
Duke said in a recording. Shares of Wal-Mart fell 2.5 percent to $74.50
in premarket trading. Sales at
stores open at least a year fell 0.3 percent at Walmart U.S, the
company's biggest unit by far, while Wall Street analysts were expecting
a 1 percent gain, according to Thomson Reuters I/B/E/S. Wal-Mart
reported a 0.5 percent decline in the number of visits from its U.S.
customers, who are still reeling from higher payroll taxes and gas
prices as well as a shaky employment recovery. The
world's largest retailer expects little improvement going into the
fall. It forecast flat U.S. same-store sales in the current quarter,
which began on August 1 and includes the important back-to-school
season. Things were also difficult
outside the United States. International sales rose 2.9 percent, but
that was not enough to lift the division's operating profit. The company
said it had more work to do to control costs in those markets, which
include Mexico, China, India, Canada and Britain.
- Brazil real weakens past 2.35/dlr on Fed stimulus fears. The Brazilian real
weakened about 1 percent on Thursday, crossing the mark of 2.35
per U.S. dollar for the first time in more than four years, as
investors feared the Federal Reserve is about to cut down on
stimulus measures that have long supported appetite for emerging
market assets.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Networking -3.03% 2) Internet -2.66% 3) Hospitals -2.41%
Stocks Falling on Unusual Volume:
- IRE, BOFI, EQIX, CBS, MCP, CPL, CLF, MPW, LPLA, ONXX, OSIR, MLU, VIPS, CSCO, GPI, VTRB, CREE, PEB, BITA, AZN, ALDW, SWHC, WCC, PRGO, TRIP, CHKR, NQ, HMIN, YELP, STRA, ISG, LVB, MTZ, JDSU, WGO and PPC
Stocks With Unusual Put Option Activity:
- 1) MAS 2) JDSU 3) IYR 4) LOW 5) TOL
Stocks With Most Negative News Mentions:
- 1) BGC 2) OII 3) UPS 4) ONXX 5) N
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +.07% 2) Telecom -.20% 3) Oil Service -.52%
Stocks Rising on Unusual Volume:
- RCI, VLTR, SPEX, DDS, KSS and EL
Stocks With Unusual Call Option Activity:
- 1) HUN 2) SLM 3) SWHC 4) SPXU 5) BAX
Stocks With Most Positive News Mentions:
- 1) T 2) HRS 3) IART 4) MDCO 5) MMLP
Charts:
Evening Headlines
Bloomberg:
- India Fighting Worst Crisis Since ’91 Limits Capital Flows. India increased efforts to stem the
rupee’s plunge and stop capital outflows that are pushing the
economy towards its biggest crisis in more than two decades. The Reserve Bank of India, whose Governor Duvvuri Subbarao
steps down next month, cut the amount local companies can invest
overseas without seeking approval to 100 percent of their net
worth, from 400 percent, according to a statement late
yesterday. Residents can remit $75,000 a year versus the
previous $200,000 limit. Rupee forwards rose for the first time
in three days.
- Asian Stocks Fall Amid Mixed Earnings, Fed Concern.
Asian stocks fell, snapping the regional benchmark’s longest winning
streak in six weeks, amid mixed corporate earnings across the region and
after economists predicted the Federal Reserve will reduce stimulus
next month. Sony Corp., an electronics maker that gets about 68 percent
of sales from overseas, slid 1.6 percent, pacing declines among Japanese
exporters as the yen rose. Thai Beverage Pcl (THBEV), the brewer
controlled by billionaire Charoen Sirivadhanabhakdi, sank 6.1 percent in
Singapore after posting lower sales and profit.
Li & Fung Ltd. jumped 13 percent after saying business is
recovering, leading an advance in Hong Kong’s Hang Seng Index,
which briefly erased losses for the year. The MSCI Asia Pacific Index dropped 0.4 percent to 135.51 as of 11:49 a.m. in Tokyo, with five shares falling for every
two that rose.
- WTI Rises for Fifth Day on Egypt Crackdown, U.S. Oil Stockpiles.
West Texas Intermediate rose for a
fifth day as worsening violence in Egypt fanned concern over Middle East
oil supplies and U.S. crude stockpiles declined for a second week. Futures
climbed as much as 0.5 percent in New York, extending the longest
rising streak since April. Crude inventories fell by 2.8 million barrels
last week, Energy Information Administration data showed, almost double
a median
1.5 million drop forecast by analysts in a Bloomberg News
survey. Egypt declared a state of emergency and hundreds were
killed after security forces broke up sit-ins by protesters.
- Rubber Retreats From 11-Week High as Stronger Yen Cuts Appeal. Rubber fell from an 11-week high as
the Japanese currency strengthened after a U.S. Federal Reserve
official cautioned against excessive optimism over the economy. Rubber for delivery in January on the Tokyo Commodity
Exchange declined as much as 1.1 percent to 263.1 yen a kilogram
($2,693 a metric ton) and was at 265 yen at 11:25 a.m. Futures
settled at 265.9 yen yesterday, the highest close for a most-active contract since May 29. Rubber has lost to 13 percent this
year.
- European Recovery Means Little for Jobless Generation. Francisco Justicia Carrasco has been
sending off 50 resumes every Monday for more than three years.
He doesn’t expect a job for a long time to come yet. “The situation is screwed up,” said the 28-year-old who
lives in Ripollet, close to Barcelona, and has worked in a range
of jobs from shop cashier to packaging over the past decade. “I
don’t see any improvement at all from last year or even the year
before.”
- Henkel CEO Sees No Short-Term Catalyst for Europe Rebound. Henkel
AG Chief Executive Officer
Kasper Rorsted, whose company makes products from Right Guard deodorant
to Loctite adhesives, said he sees no short-term catalyst for
improvement in Europe’s economy. “The only economy that gives us worries
is the European economy,” with the region’s 28 million unemployed, he
said
yesterday in an interview at Bloomberg headquarters in New York.
- U.S. Re-Evaluating Egypt Assistance After Protest Crackdown. The Obama administration is
considering canceling planned military exercises with Egypt and
is re-evaluating other aid following the violent crackdown on
protesters by the country’s military-backed government,
according to a U.S. official. The U.S. and Egypt are scheduled to start the “Bright
Star” exercises next month. Other military assistance already
in the pipeline may also be held up to put pressure on Egypt’s
interim government, said the official, who asked for anonymity
to discuss internal deliberations.
- Cisco(CSCO) Cutting Jobs as Revenue Forecast Misses Estimates. Cisco
Systems Inc. (CSCO), the biggest maker of networking equipment, said
it’s cutting about 5 percent of its workforce after issuing a fiscal
first-quarter sales forecast that missed most analysts’ estimates. Cisco
is eliminating 4,000 jobs as weaker sales in Japan, China and Europe
weigh on revenue growth, Chief Executive Officer John Chambers said
on a conference call today. Revenue for the current quarter through
October will be $12.2 billion to $12.5 billion, the San Jose,
California-based company said in a statement. Analysts on average were
projecting sales of $12.5 billion for the current period. Chambers is
grappling with concerns that Cisco’s growth rate may slow as companies
and network operators postpone costly overhauls of their networks. The
results suggest the CEO is struggling to deliver on his turnaround plan
for the company, said Bill Kreher, an analyst at Edward Jones & Co.
in St. Louis, Missouri. “The guidance is below the long-term plan, which
can be concerning,” said Kreher, who has a hold rating on Cisco shares.
“Cisco has eliminated low-hanging fruit and has effectively managed their costs, but looking forward the company
must continually find ways to generate new sources of revenue.” Cisco fell as much as 11 percent in extended trading.
- Paulson Cuts SPDR Gold(GLD) Stake 53% as Soros Sells Out. Billionaire John Paulson, the biggest investor in the SPDR Gold
Trust, reduced his holdings by 53 percent as the metal plunged into a
bear market. George Soros sold his entire position. Paulson & Co.
reduced its stake to 10.2 million shares in the three months ended June
30 from 21.8 million at the end of the first quarter, and Soros Fund
Management LLC sold its 530,900 shares, Securities and
Exchange Commission filings showed today. The SPDR fund is the world’s
largest exchange-traded product backed by gold.
Wall Street Journal:
- Hundreds Dead in Egypt Crackdown. Security Forces' Efforts to Clear Cairo Sit-Ins Sparks Violence; At Least 278 People Killed Across Egypt. Egypt's military regime, aided by snipers and bulldozers, swept the
streets of Islamist protesters—setting off a day of violence that left
more than 278 people dead, the government fractured and ties with its
international partners in tatters. Muslim Brotherhood sympathizers stormed police stations, burned down
churches and battled with government supporters in several
neighborhoods, after police sweeps left scores of protesters dead at two
Cairo squares. The raid ended more than a month of sit-ins by thousands
of Brotherhood supporters—sometimes joined by families, and daring the
government to disperse them—who demanded the reinstatement of ousted
President Mohammed Morsi.
- Violence Draws Censure and Silence.
International reaction to the Egyptian military's crackdown against
protest camps Wednesday morning was swift and strident, with Turkish
leaders who are ideologically close to the ousted President Mohammed
Morsi calling the move a "massacre" and regional diplomats saying the
escalating violence was worrisome for Middle East stability.
- Chinese Banks Feel Strains After Long Credit Binge. Rapid Loan Growth Has Led to Serious Debt Problems at Local Governments. A cornerstone of China's financial edifice is beginning to show some cracks. The country's banking sector, a key part of a financial system that
has powered China through three decades of breakneck expansion, is
feeling the strain of years of rapid credit growth. Bank-fueled lending
to state enterprises and local governments has led to overcapacity;
serious debt problems for local governments, companies and lenders
alike; and numerous white-elephant projects, from nearly empty malls and
resorts to bridges to nowhere. Chinese banks now are trying to strengthen their balance sheets ahead
of an expected rise in bad loans coupled with slower earnings growth.
Raising capital will likely be expensive for the banks because
investors, who have sold off shares of banks, are worried about their
deteriorating health and China's slowing growth. "The problem [banks] face is that market sentiment is very bad," says
Mark Mobius, executive chairman of Templeton Emerging Markets Group, a
part of Franklin Templeton Investments, who manages more than $50
billion of emerging-market equities
- Many Health Insurers to Limit Choices of Doctors, Hospitals. Main Reason Behind These Limited Plans: Cost.
This fall, Indiana's new online health-insurance marketplace will
present some tough choices for consumers like John Nowak, who will be
able to pick a plan from his current insurer—or go for one that includes
his primary-care doctor. That is because Mr. Nowak's current insurer
won't include Indiana's
biggest health-care provider, 19-hospital Indiana University Health, in
the plans it sells on the consumer exchange. If Mr. Nowak buys a new
exchange plan from WellPoint Inc.'s WLP -0.41% Anthem Blue Cross and
Blue Shield, he will generally have to pay the cost out of his own pocket if he sees the system's doctors, because they
aren't in the network.
Fox News:
- DOJ, FBI admit they inflated claims about mortgage fraud crackdown last year. The Justice Department and FBI have quietly acknowledged they grossly
overstated the scope of a mortgage fraud crackdown, which the
administration heralded with much fanfare a few weeks before last year's
presidential election. According to a memo circulated by the FBI and a correction posted
online by the Justice Department, the number of defendants, the number
of victims and the size of the losses are, in reality, a fraction of
what officials claimed last October.
- Summertime Blues: Polls show ObamaCare support eroding amid roll-out problems. As problems continue to pile up over the implementation of the
Affordable Care Act, summertime polls from Fox News, Gallup and
Rasmussen signal that growing confusion over the complexities of the
law, how it will be rolled out and how much it will cost is eroding
public support. A majority of Americans say they believe the new health care law will
increase their medical costs and taxes, according to an Aug. 8 Fox News
poll. The survey found 57 percent of those polled felt the way
ObamaCare was being rolled out was "a joke." Overall, 63 percent of voters believe that the 2010 health care law
needs to be changed. That number is up from 58 percent of those asked
the question in July 2012.
Zero Hedge:
Business Insider:
New York Times:
USA Today:
Reuters:
- Cayman Islands, U.S. reach pact to fight tax evasion. The United States has cut a deal with the Cayman Islands that will
smooth implementation in the Caribbean island nation of a new U.S.
anti-tax evasion law, while pressuring other low-tax and no-tax countries to follow suit.
Criticized by President Barack Obama and others as a tax haven, the
Cayman Islands said it has agreed to cooperate with the Foreign Account
Tax Compliance Act (FATCA), enacted
in 2010 and set to take effect in July 2014.
- Japan govt spokesman: No truth PM Abe instructed corp tax cut. Japan's Chief Cabinet Secretary
Yoshihide Suga said on Thursday there is no truth to a report
that Prime Minister Shinzo Abe instructed ministers to consider
cutting the country's corporate tax rate.
The issue will be decided
after taking into account various
views from the business sector, Suga told a regular news conference.
Citing government sources, the Nikkei newspaper reported on Tuesday that
Abe could consider lowering the corporate tax rate to foster an
economic recovery.
- NetApp(NTAP) forecasts lackluster second-quarter, shares down.
Data storage equipment maker NetApp Inc forecast current-quarter
results largely below expectations, sending its shares down 4 percent in
extended trading. The company forecast second-quarter adjusted earnings
of 60 to 65 cents per share, while analysts on average were looking for
63 cents. The company expects revenue to be between $1.56 billion and
$1.66 billion, largely below the $1.63 billion Wall Street had
estimated according to Thomson Reuters I/B/E/S. Shares down 4 pct after market.
Financial Times:
- Indian Industrial Companies' Debt Rising as Economy Slows. Combined
gross debt of 10 most indebted industrial conglomerates rose 15% in
latest financial year, citing Credit Suisse research. Debt increased at 9 of the 10 cos. studied. The
stagnation in the nation’s industrial sector was driven home again on
Monday, as shares in state-run Bharat Heavy Electricals plunged 19 per
cent, after the country’s largest power equipment manufacturer by sales
released unexpectedly weak earnings. The group’s figures are only the latest in a series of
disappointing results from companies providing capital goods to India’s
power and infrastructure sectors, as well as those supplying other
struggling heavy industries, such as steel and car making.
Telegraph:
Xinhua:
- China
Xiamen Bans Govt Debt If Exceeds Fiscal Ability. Xiamen city in the
eastern Chinese province of Fujian starts new rules this month to
regulate local governments' borrowing in order to prevent risks, citing
the city's fiscal bureau. Govts' debt will not be approved if the source
for repayment is not clear, funds of the debt are used for projects
banned by the government, the borrowing is more than governments' fiscal
capability, citing the rules.
China Securities Journal:
- China Should Speed Up Fiscal, Tax Reform. China should speed up
fiscal, tax reform to reduce local governments' dependence on land sale
revenues, says a front-page commentary written by reporter Gu Xin. China
should also allow local governments to see bonds in order to guard
against the growth of "hidden" debt, the commentary said.
Economic Infomation Daily:
- China May Announce Long-Term Property Controls. China may this
year announce property control policies that have long-term effects,
citing Zhu Zhongyi, vice chairman of the China Real Estate Association.
Zhu made the comments at a real estate forum in Hainan province's Boao.
The nation will use more tax, credit and other economic measures to
control the property market, the report said, citing Zhu.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 136.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 108.0 +.75 basis point.
- NASDAQ 100 futures -.35%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 335K versus 333K the prior week.
- Continuing Claims are estimated to fall to 3000K versus 3018K prior.
- Empire Manufacturing for August is estimated to rise to 10.0 versus 9.46 in July.
- The Consumer Price Index for July is estimated to rise +.2% versus a +.5% gain in June.
- The CPI Ex Food and Energy for July is estimated to rise +.2% versus a +.2% gain in June.
9:00 am EST
- Net Long-Term TIC Flows for June are estimated at -$17.5B versus -$27.2B in May.
9:15 am EST
- Industrial Production for July is estimated to rise +.3% versus a +.3% gain in June.
- Capacity Utilization for July is estimated to rise to 77.9% versus 77.8% in June.
- Manufacturing Production for July is estimated to rise +.2% versus a +.3% gain in June.
10:00 am EST
- The NAHB Housing Market Index for August is estimated at 57.0 versus 57.0 in July.
- The Philly Fed for August is estimated to fall to 15.0 versus 19.8 in July.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bullard speaking, UK retail sales reports, weekly EIA natural gas
inventory report, weekly Bloomberg Consumer Comfort Index and the (F)
analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.
Click Here for Today's Market Take.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 12.89 +4.71%
- Euro/Yen Carry Return Index 135.60 -.17%
- Emerging Markets Currency Volatility(VXY) 9.38 +.32%
- S&P 500 Implied Correlation 49.14 +2.48%
- ISE Sentiment Index 148.0 +21.31%
- Total Put/Call .80 +5.26%
Credit Investor Angst:
- North American Investment Grade CDS Index 75.34 +.07%
- European Financial Sector CDS Index 133.83 -.29%
- Western Europe Sovereign Debt CDS Index 82.50 +.61%
- Emerging Market CDS Index 300.51 +2.50%
- 2-Year Swap Spread 17.75 -.5 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 $142.80/Metric Tonne +.71%
- Citi US Economic Surprise Index 39.0 -1.2 points
- Citi Emerging Markets Economic Surprise Index -29.20 +.4 point
- 10-Year TIPS Spread 2.22 -3 bps
Overseas Futures:
- Nikkei Futures: Indicating -130 open in Japan
- DAX Futures: Indicating +5 open in Germany
Portfolio:
- Slightly Lower: On losses in my retail/tech/medical/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
