Bloomberg:
- Nasdaq Halts Trading in Stocks, Options Amid ‘Issue’.
Computer errors shook American equity markets again today as
malfunctioning software that feeds data between exchanges prompted
Nasdaq Stock Market to halt trading in thousands of stocks and options.
Nasdaq said in alerts posted on its website that trading in shares it
lists had been stopped amid issues at its Securities Information
Processor, the feed that disseminates stock quotes. The
second-biggest stock market operator in the U.S. halted transactions in
what it calls Tape C, which comprises all Nasdaq-listed securities.
Buying and selling in many of the country’s most heavily traded shares
from Apple Inc. to Intel Corp. and Facebook Inc. ground to a virtual
halt as brokers were unable to execute customer orders. As of 1:45 p.m.
in New York, the Nasdaq 100 equity index hadn’t moved in almost 90
minutes, according to data compiled by Bloomberg.
- Political mess leaves Manmohan Singh hamstrung on rupee drop. Prospects of an indecisive 2014 election is eroding confidence among investors that govt can stop rupee’s decline. The prospect of an indecisive 2014 election in India is
eroding confidence among global investors that the government can stop
the rupee’s worst drop in more than two decades. “The $1.8 trillion
economy needs radical reforms neither Prime Minister Manmohan Singh’s
administration nor the next government can undertake,” said Lutz
Roehmeyer, a fund manager at Landesbank Berlin Investment. Fisch
Asset Management Ltd treats the nation’s bonds as junk because of the
mess created by politics. Legg Mason Inc. is concerned the nation’s
leaders will be hamstrung by compromises needed to stay in power. “They
need to provide confidence to international investors, particularly with
an election coming up,” Amanda Stitt, investment director at Legg Mason
Global Asset Management, which oversees about $436 billion of debt,
said in a telephone interview from
London. “The government understands the problems. It’s just whether they
have the political ability to deal with them.”
- India’s Richest Man Loses $5.6 Billion as Rupee Stumbles.
Mukesh Ambani, India’s richest man, is the biggest loser among the
country’s billionaires as the rupee’s slump to record lows erased 24
percent of his fortune. The chairman of Reliance Industries Ltd.
(RIL), operator of the world’s biggest oil refinery complex, has lost
$5.6 billion of his wealth since May 1, as the rupee’s plunge
accelerated. The 56-year-old is left with a net worth of $17.5 billion, according to the Bloomberg Billionaires Index.
- Brazilian Swap Rates Climb on Fuel Price Prospects; Real Gains.
Brazil’s swap rates rose to the highest in almost two years after a
newspaper reported that the government may raise fuel prices, adding to
speculation that the central bank will step up increases in borrowing
costs. Swap rates on the contract due in January 2016 climbed 13 basis
points, or 0.13 percentage point, to 11.54 percent at 10:14 a.m. in Sao
Paulo, the highest level on a closing basis since September 2011.
The real appreciated 0.4 percent to 2.4435 per U.S. dollar after
tumbling 2.5 percent yesterday to the weakest since December 2008.
Brazil will authorize price increases for diesel and
gasoline, O Estado de S. Paulo reported today, without saying
where it got the information.
- Emerging-Market Noose Closes In on Ruble Bonds: Russia Credit. A selloff in emerging-market assets
is showing no signs of abating as Russia failed to place all of its shortest-dated bonds at an auction yesterday.
The Finance Ministry sold 6.37 billion rubles ($193 million) of May
2016 OFZs, according to a website statement yesterday, the first time
Russia hasn’t sold out a 10-billion ruble offering of the notes since
their June debut. At 6.32 percent, the average yield was 175 basis
points above that of similar maturity debt sold by fellow oil producer
Mexico, rated the same at Moody’s Investors Service. Bonds and
currencies are tumbling from Jakarta to Johannesburg as
developing-market economies founder and looming U.S. stimulus cuts drive
investors from riskier assets. The ruble weakened 6.8 percent to the central bank’s basket of dollars and euros as of 6 p.m. in Moscow yesterday since May 22, when Federal Reserve Chairman Ben S. Bernanke said he could
scale back debt purchases.
- China’s Stocks Fall to 2-Week Low as Fed Concern Overshadows PMI. China’s
stocks fell to a two-week low as concern the Federal Reserve will pare
stimulus overshadowed a better-than-estimated manufacturing report.
Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. and Yanzhou Coal
Mining Co. led declines for material and energy companies with losses of
at least 2.1 percent. Yunnan Baiyao Group Co., a traditional Chinese
medicine company, soared 5.7 percent after first-half profit rose 30
percent. ZTE Corp. (000063) advanced 1 percent after its net income
jumped 27 percent. The Shanghai Composite Index (SHCOMP) dropped 0.3 percent to 2,067.12 at the close.
- Berlusconi Ally Says Government to Collapse If Ex-Premier Ousted.
Italian Prime Minister Enrico Letta’s government will collapse if his
Democratic Party votes to end Silvio Berlusconi’s mandate as senator, a
senior ally of the three-time premier said. “If in a private company, a partner reports another one or tries to get rid
of him, the business doesn’t exist anymore,” Renato Brunetta, chief
whip of Berlusconi’s People of Liberty party in the parliament’s lower
house, said in a phone interview today. The PD “would provoke the
government’s fall,” he said.
- Merkel Warns SPD Tax Plans Could Upend Germany’s Labor Market. Chancellor
Angela Merkel warned that plans by the opposition Social Democrats to
raise taxes will upend Germany’s robust labor market as she campaigned
for a third term in the formerly communist east. Speaking to a crowd
of several hundred in the town of Wernigerode at the foot of the Harz
mountains, Merkel dismissed the notion that the government must create
jobs. She instead touted her Christian Democratic Union’s alliance with
the
business community.
- European Stocks Advance on German Manufacturing Report.
European stocks climbed the most in three weeks as a report showed
Germany’s manufacturing and services industries expanded at a
faster-than-expected pace. Royal Ahold NV rallied the most since May
2009 after the Dutch owner of the Stop & Shop supermarket chain
reported second-quarter underlying operating income that exceeded
analysts’ estimates. IMI Plc (IMI) rose to its highest price since at
least 1988 after posting first-half adjusted pretax profit that
beat analysts’ estimates. The Stoxx Europe 600 Index added 1 percent to 303.55 at the
close of trading as more than five shares rose for every one
that fell.
- Commodities May Decline 11% on Fibonacci: Technical Analysis. Commodities may fall 11 percent by
the second quarter next year as the biggest rally in 11 months
runs “out of steam,” according to technical analysis by
Commerzbank AG. The Standard & Poor’s GSCI Total Return
Index of 24 raw
materials will first slide toward its 200-week moving average at
4,781.68 before testing 4,442.35, the 50 percent Fibonacci retracement
of its advance between 2009 and 2011, Axel Rudolph, a London-based
technical analyst at Commerzbank, said in an Aug. 20 report. The decline
is forecast by the second quarter next
year, he said by e-mail today.
- Record Nickel Stockpiles Set to Climb as China Ships More Metal.
Record nickel stockpiles in warehouses monitored by the LME are poised
to climb as top producer China delivers more metal, according to Jim
Lennon, commodities consultant to Macquarie Group Ltd. Nickel
inventories in LME warehouses climbed 50% to a record 209,868 metric
tons this year, according to bourse data today. Stockpiles in Johor,
Malaysia have more than doubled in that time. The amount of metal
shipped from China almost tripled in the second quarter from the first,
with exports reaching a three-year high in June, customs data show. LME
stocks may rise by another 10,000 tons to 20,000 tons, Lennon said.
There are more than 100,000 tons of nickel inventories in China,
estimates Lennon. Global output of nickel will exceed demand by 95,000
tons this year with China accounting for about 35% of supplies,
according to Barclays Plc.
- Crude Rises From Two-Week Low. WTI for October delivery rose 72 cents, or 0.7 percent, to $104.57 a barrel at 1:47 p.m. on the New York Mercantile
Exchange. The volume of all futures traded was 25 percent below
the 100-day average. The contract fell to $103.85 yesterday, the
lowest close since Aug. 8.
- Treasury 5-Year Inflation Debt Sold at Highest Yield Since 2010. The government’s $16 billion sale of
five-year inflation-linked notes sold at the highest yield since
2010 amid bets that the economic recovery is strong enough for
the Federal Reserve to begin withdrawing monetary stimulus. The
Treasury Inflation Protected Securities yielded negative 0.127 percent,
highest yield since April, 2010, with investors wary of paying a premium
to guard against the threat of rising consumer prices. The last
sale, an $18 billion offering on April 18, drew a yield of negative
1.311 percent, the second-lowest on record, after the securities sold at
a
record negative 1.496 percent in December 2012.
- Fisher Says ‘Super-Easy’ Fed Can’t Alone Boost Manufacturing.
Federal Reserve Bank of Dallas
President Richard Fisher, one of the most vocal critics of bond
purchases by the central bank, said record Fed stimulus can’t revive
U.S. manufacturers from a two-year slump caused by ambiguity in
regulation and fiscal policy. “They have been given abundant,
super-cheap monetary fuel needed to stoke up their production engines
and expand their businesses,” Fisher, who doesn’t vote on monetary
policy this year, said today in a speech in Orlando, Florida. “What is
holding us back” is “fiscal and regulatory policy of the gang
that can’t shoot straight in Washington.”
- Mortgage Rates in U.S. Jump to Highest Level in Two Years. Mortgage rates in the U.S. jumped to
a two-year high, increasing borrowing costs for homebuyers as
sales accelerate. The average rate for a 30-year fixed mortgage rose to 4.58
percent this week from 4.4 percent, Freddie Mac said in a
statement today. The average 15-year rate climbed to 3.6 percent
from 3.44 percent, the McLean, Virginia-based mortgage-finance
company said. Both were the highest since July 2011.
- Consumer Comfort in U.S. Declined Last Week to Two-Month Low. (graph) Consumer confidence fell last week to the lowest level in two months as Americans’ views on the economy deteriorated.
The Bloomberg Consumer Comfort Index (COMFCOMF) fell to minus 28.8 for
the period ended Aug. 18 from minus 26.6. The two-week decrease from a
more than five-year high reached in early August has been the steepest
in a year. The monthly Bloomberg consumer economic expectations gauge
held in August at minus 5, a five-month low. The measure on current views on the economy declined to
minus 52.6 from minus 47.2, the biggest one-week drop since May
2012. The monthly expectations gauge showed 33 percent of
consumers reporting the economy getting worse and 28 percent
saying it’s improving.
- Subprime Squeezed as Auto-Lender Costs Increase: Credit Markets. Borrowing costs are rising for
subprime auto lenders in the asset-backed bond market, squeezing profit margins and pressuring firms to make even riskier loans. A General Motors Co. (GM) unit that makes car loans to people with blemished or limited credit sold top-rated securities
backed by the debt to yield 45 basis points more than the
benchmark swap rate on Aug. 7, almost double the spread it paid
on similar notes in April, according to a person with knowledge
of the transactions. American Credit Acceptance Corp., the
Spartanburg, South Carolina-based buyer of “deep subprime”
loans, paid 225 basis points over benchmarks to sell A rated
debt on July 31, up from 165 in March.
- Abercrombie(ANF) Falls After Profit Trails Analysts’ Estimates.
Abercrombie & Fitch Co. (ANF) plunged the most in more than 21
months after forecasting profit for the current quarter that was less
than analysts estimated amid declining traffic at its stores. The shares slid 17 percent to $38.71 at 11:13 a.m. in New
York and earlier fell as much as 21 percent for the biggest
intraday drop since Nov. 3, 2011. Third-quarter profit will be
as much as 45 cents a share, the company said today in a
statement, while declining to forecast earnings beyond then.
Analysts estimated $1.07, on average.
Wall Street Journal:
- Syria Opposition Calls on U.N. Rebels pledge to respond to alleged chemical attack with force as airstrikes continue. Syria opposition groups called on Thursday for United Nations
investigators to immediately visit the suburbs of Damascus where a day
earlier a suspected chemical attack killed over 1,000 civilians, many of
them children. Syrian opposition groups and residents in the area blame the Syrian
regime for using poison gas in shells targeting their towns as part of a
military offensive to regain territory from rebels.
- Obama to Propose College Ratings System on Bus Tour. President
Barack Obama on Thursday will announce proposals aimed at combating
rising college costs by creating a new ratings system and eventually
tying federal
student aid to institutions’ performance.
Fox News:
CNBC:
- All Nasdaq markets halting trading due to processor issue. Traders waited nervously Thursday for the Nasdaq to begin trading after its largest intra-day shut in recent memory.
"When everyone comes back online at the same time that's when even
more dangerous things can happen in the marketplace," said Sal Arnuk,
the co-founder of Themis Trading.
- Is the rupee ‘out of control’? As
the battered rupee slumped to yet another lifetime low of 64.56 to the
dollar on Wednesday, analysts say the selling is getting out of hand and
the
currency could fall to 70 in the coming months.
- Report: Household income below end-of-recession. The average American household is earning less than when the Great
Recession ended four years ago, according to a report released
Wednesday. U.S. median household income, once adjusted for
inflation, has
fallen 4.4 percent in that time, according to the report from Sentier
Research. The report is based on an analysis of Census Bureau data.
The median, or midpoint, income in June 2013 was $52,098. That's down
from $54,478 in June 2009, when the recession officially ended. And it's
below the $55,480 that the median household took in when the recession
began in December 2007.
Zero Hedge:
Business Insider:
USA Today:
- Sears(SHLD) struggles ongoing, stock dives. Sears' sales continued to fall last quarter and its loss widened, despite improving results from its frequent shopper program. Sears
Holdings on Thursday reported a net loss of $194 million, or $1.83 a
share, compared to a loss of $132 million, or $1.25 a share, for the
same period last year. Its stock was down more than 8% in afternoon
trading.
Reuters:
- Indian Rupee Extends Slump, Falls to New Record Low Against US Dollar. The Indian rupee fell past 65 to the dollar to a record low on Thursday,
after Federal Reserve minutes hinted that the U.S. was on course to
begin tapering stimulus as early as next month and as foreign investors
become sellers of Indian stocks. In an ominous sign for Asia's
worst-performing currency this year,
overseas investors who had been net buyers of Indian stocks so far in
2013 headed for the exits this week, selling a net $500 million worth of
shares in the four sessions through Wednesday. Foreigners have also
sold a net $1.3 billion of Indian government and corporate bonds so far
this month.
- CME(CME) says 'technical issue' affected CBOT soy data. The
CME Group on Thursday said it was monitoring a "technical issue" that
affected the display of some market data in its Chicago Board of Trade
soy futures complex but had no impact on trade. Traders noted suspect data in CBOT soybean and soymeal futures on CME's Globex electronic trading platform, where some
bids appeared higher than offers, the reverse of normal.
- Fitch sends rating warning shot to India and Indonesia.
India and Indonesia are not at immediate risk of credit rating
downgrades, Fitch said on Thursday, but it warned it could act if the
countries' governments fail to calm the current financial market
tensions. Fitch rates both India and Indonesia BBB- with a stable
outlook but the recent sharp sell-off in emerging markets, sparked by
worries of a scaling back of cheap U.S. financial stimulus, has put the
countries in the spotlight. The rating agency said that with currency
reserves still ample despite the downward trajectory, and both
governments
trying to mend economic imbalances, the market turbulence was
not "a trigger for rating action at this point."
- U.S. Fed may need to drain up to $2 trln - Barclays. The U.S. Federal Reserve may
need to drain up to $2 trillion from the financial system when
it decides to normalize short-term interest rates, according to
Joseph Abate, Barclays' money market strategist. This huge sum of liquidity reduction would be needed for the
central bank to achieve its rate target due to the high level of
reserves banks have now, which has curbed their demand to borrow from the federal funds market, Abate said in a research note
released on Thursday.
Telegraph:
- German data buoys eurozone as France falters. Strong German data cemented the country’s status as the eurozone’s powerhouse
on Thursday, while France faltered, leaving a “big question mark” over the
country’s ability to return to sustained growth.
WirtschaftsWoche:
- Schaeuble Rules Out Another Greek Debt Cut. German Finance
Minister Wolfgang Schaeuble says there won't be another debt cut for
Greece. Schaeuble says there are not secret plans for the time after the
Sept. 22 German election and no decisions in Europe will be postponed
because of the election. Schaeuble says debate over a second debt cut is
misleading and dangerous for confidence in the euro region.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Correio:
- Brazil will allow allow gasoline price increases of up to 10%.
China Securities Journal:
- PBOC Adviser Warns on Competitive Currency Weakening. Competitive
currency depreciation between nations is a "dead end," and negotiation
should be used to ease the risk of sovereign debt and the risk of
disorderly cross-border capital flows, citing Chen Yulu, a Chinese
central bank's adviser, at a seminar yesterday.
Style Underperformer:
Sector Underperformers:
- 1) Computer -1.46% 2) Telecom -.13% 3) Retail +.04%
Stocks Falling on Unusual Volume:
- ANF, HPQ, SSI, LXK, INFN, PTR, PCG, PUK, NOAH, BONT, SHLD, SWI, DMND, CXW, PDCO, CYBX, GEO, TGT, INCY, EXPR, BKE, YY, SMRT, LTD, ENB, CCU, ANN, PERY and ARO
Stocks With Unusual Put Option Activity:
- 1) A 2) HAL 3) GPS 4) HPQ 5) EWZ
Stocks With Most Negative News Mentions:
- 1) TGT 2) FUL 3) TGT 4) CATO 5) ORCL
Charts:
Style Outperformer:
Sector Outperformers:
- Steel +2.14% 2) Gold & Silver +1.82% 3) Alt Energy +1.74%
Stocks Rising on Unusual Volume:
- IRE, PLCE, HAIN, GME and CLDX
Stocks With Unusual Call Option Activity:
- 1) CLDX 2) SUNE 3) HPQ 4) EA 5) ANF
Stocks With Most Positive News Mentions:
- 1) MRO 2) BWS 3) AXP 4) PCP 5) GRMN
Charts:
Evening Headlines
Bloomberg:
- Court Orders Mubarak Release as Islamist Leaders Arrested. Egypt’s
longtime autocrat Hosni Mubarak moved closer to possible freedom after a
court ordered him released from prison, a move that would aggravate
frictions in a nation reeling from the toppling of his elected successor. While Mubarak is unlikely to find a place in the country’s new political order, his release would inject more tension into the violent standoff
between the Muslim Brotherhood and the government the military
installed after deposing Islamist President Mohamed Mursi last month.
Freedom for Mubarak would also provide ammunition to those who accuse
Egypt’s new leaders of seeking to restore the kind of police state
Mubarak led before he was overthrown in 2011 in a popular revolt. The
military “promised the the clock wouldn’t be turned back, yet it’s 2010
all over again. Mursi is in jail and Mubarak is free,” read a posting
yesterday on the Twitter account of the main alliance backing Mursi,
after the court ruled.
- Marketfield Bets on Sensex Falling as India Small Caps Drop. India’s smallest companies are
trailing its biggest corporations by the most since 2008 in the
stock market, feeding pessimism about the central bank’s ability
to boost economic growth from the weakest pace in a decade. The
S&P BSE Small-Cap Index has dropped 30 percent this
year as earnings sank to a record low. The gauge of companies
with a median market value of $68 million lagged behind the benchmark
S&P BSE Sensex (SENSEX) index, where stocks have a median value of
$14 billion, by 22 percentage points. The only other times small-cap
shares trailed this much were during an economic
slowdown in 2004 and the global financial crisis in 2008, when
the Sensex fell at least 12 percent in three months.
- A Fool’s Errand in China to Reinvent Good Government. Forget Client No. 9. If you want to understand the future of world politics, it’s Document No. 9 you need to know.
This semisecret directive from the senior members of the Chinese
Communist Party tells you how President Xi Jinping plans to manage
pro-democracy voices in China: by shutting them down. The sharp
repudiation of constitutional government, human rights, civic
participation and free speech -- not to mention truly free markets --
guarantees that the ideological struggle
between China and the West will continue well into the future.
- Philippine Stocks Tumble Most in Five Years as Trading Resumes.
Philippine stocks tumbled, with the benchmark index posting its biggest
intraday retreat since October 2008, as local markets resumed trading
after a three-day closure. The peso weakened to a two-month low and
bonds dropped. The Philippine Stock Exchange Index (PCOMP) declined
as much as 6.9 percent before paring losses to 5.5 percent at 11:03 a.m.
local time. The gauge sank to 6,164.18, heading for the lowest
level since June 26. Philippine Long Distance Telephone Co. (TEL), the
nation’s largest phone company, fell 4.1 percent. SM Investments Corp.
(SM), owner of the biggest shopping-mall operator, slid 7.3 percent. The
peso
weakened 1 percent to 44.12 per dollar, while government bond yields
rose to a one-month high. The country’s stock exchange has been closed
and trading of currencies
and debt was halted this week because of floods in Manila and a public
holiday yesterday. The MSCI Southeast Asia Index tumbled 5.5 percent during the period to the lowest level since July 2012, while Indonesia’s rupiah fell 3.7 percent and the Thai baht dropped 1.9 percent.
- Malaysia Cuts 2013 Growth Forecast as Expansion Misses Estimates.
Malaysia cut its forecast for growth this year after second-quarter
expansion missed economists’ estimates, adding pressure on policy makers
to bolster
confidence as the ringgit weakens.
The economy may expand 4.5 percent to 5 percent in 2013,
from a previous prediction of as much as 6 percent, the central
bank said in Kuala Lumpur today.
- Radioactive Leaks in Japan Prompt Call for Overseas Help. The crippled nuclear plant at
Fukushima is losing its two-year battle to contain radioactive
water leaks and its owner emphasized for the first time it
needs overseas expertise to help contain the disaster. Tokyo
Electric Power Co. (9501) is grappling with the worst spill of
contaminated water since the March 2011 earthquake and tsunami caused a
meltdown at the Fukushima Dai-Ichi plant. The call for help from Zengo
Aizawa, a vice president at the
utility, follows a leak of 300 metric tons of irradiated water.
Japan’s nuclear regulator labeled the incident “serious” and
questioned Tepco’s ability to deal with the crisis. Prime
Minister Shinzo Abe made similar comments earlier this month.
- Asian Stocks Drop as Fed Minutes Signal Tapering Support.
Mazda Motor Corp. (7261), a Japanese carmaker that gets 30 percent of
its revenue in North America, slumped 2.5 percent. Aboitiz Equity
Ventures Inc., which has investments in power and banks, tumbled 7.5
percent in Manila as the nation’s stock market resumed trading after a
three-day closure. Brambles Ltd. (BXB), an Australian container maker,
slid 4.5 percent after its profit missed estimates. China Shenhua Energy
Co., the nation’s top
coal miner by market value, rose 1.5 percent in Hong Kong after
the manufacturing report. The MSCI Asia Pacific Index dropped 0.8 percent to 129.55
as of 11:32 a.m. in Tokyo, after falling as much as 1.2 percent
and briefly wiping out this year’s gains. All 10 industry groups
fell on the measure.
- Gold Rout Seen Bottoming by Analysts as China Buys. The rout in gold that wiped out $56 billion of value this
year is spurring consumer demand in China and India, the biggest buyers,
and leading JPMorgan Chase & Co. and Bank of America Corp. to say
prices are bottoming. Sales of jewelry, coins and bars will reach
as much as 1,000 metric tons in India and China in 2013, valued at a
combined $87.6 billion, the World Gold Council estimates. Prices will
average $1,300 an ounce in the fourth quarter, or 5 percent less than
now, the median of 17 analyst estimates compiled by Bloomberg shows.
Bank of America is the most bullish, predicting a fourth-quarter average
of $1,495, and JPMorgan anticipates rising averages in every quarter
through the end of next year. While investors from John Paulson
to George Soros sold after the bear market began in April as some
investors lost their faith in gold as a store of value, the slump
boosted sales in Asia.
- Rubber Jumps as China’s Manufacturing Improves, Yen Weakens.
Rubber rallied as data showed China’s manufacturing expanded, boosting
prospects for demand from the world’s largest user, and a weaker
Japanese currency raised the appeal of the yen-denominated futures. Rubber for delivery in January on Tokyo Commodity Exchange
gained as much as 2.8 percent to 267.8 yen a kilogram ($2,724 a
metric ton) and traded at 266.2 yen at 11:18 a.m. The rally
pared losses for futures this year to 12 percent.
- German Trucker Shortage Swells Wage Costs for Companies: Freight. Freight companies are struggling to
raise the appeal of commanding a heavy truck along Germany’s
highways as an increasing shortage of drivers pushes up the cost
for transport in Europe’s biggest economy. The perks of the open road are fading fast as bureaucracy and regulation mount, journey times lengthen and inhabitants of
the world’s second-largest export nation prefer to pursue
careers outside the solitary confines of a 10-foot lorry cab.
- Credit Swaps in U.S. Climb as Fed Minutes Support Stimulus Cuts. The cost to protect against losses
on corporate bonds rose as minutes of the Federal Reserve’s last
meeting showed policy makers were “broadly comfortable” with
Chairman Ben S. Bernanke’s plan to start reducing bond buying later this year if the economy improves. The
Markit CDX North American Investment Grade Index of credit-default
swaps, which investors use to hedge against losses or to speculate on
creditworthiness, increased 2.2 basis points to a mid-price of 84.4
basis points as of 6:02 p.m. in New York, according to prices compiled
by Bloomberg. “The Fed appeared comfortable with its forecasts and
the ability of rising stock market prices to overcome the de facto
tightening that followed its early summer QE3 announcements,” Jim Vogel,
the head of agency-debt research at FTN Financial in Memphis,
Tennessee, said in an e-mail. The index, which typically rises as
investor confidence deteriorates and falls as it improves, increased 6.1
basis points last week, the largest advance since the period ended June
21. The risk premium on the Markit CDX North American High Yield Index,
a credit-swaps benchmark tied to speculative-gradebonds, added 9.5
basis points to 414, Bloomberg prices show.
- Subprime
Squeezed as Auto-Lender Costs Increases. Borrowing costs are rising for
subprime auto lenders in the asset-backed bond market, squeezing profit
margins and pressuring firms to make even riskier loans. A General
Motors Co. unit that makes car loans to people with blemished or limited
credit sold top-rated securities backed by the debt to yield 45 basis
points more than the benchmark swap rate on Aug. 7, almost double the
spread it paid on similar notes in April, according to a person with
knowledge of the transactions. American Credit Acceptance Corp., the
Spartanburg, South Carolina-based buyer of "deep subprime" loans, paid
225 basis points over benchmarks to sell A rated debt on July 31, up
from 165 in March. Subprime lenders lured into the market by low
financing costs during the past three years now face being pushed out as
rates reverse, according to Moody's Investors Service. Total sales of
securities linked to subprime car loans have surged 24.4% to $14.7
billion in 2013 from a year earlier, according to Deutsche Bank AG.
Issuance has climbed from $2.4 billion in 2009 and may approach the
$20.9 billion sold in 2007, Barclays Plc data show.
- Potash Rift Seen Enduring After Asia Sales Said to Rile Uralkali. A dispute between the former Soviet
Union’s two largest potash producers shows little sign of being
resolved quickly as predictions that the commodity’s price will plunge roil the $20 billion market.
A pact between Belarus’s Belaruskali and OAO Uralkali (URKA) in Russia
helped to buttress prices for eight years in the global market for
potash, a vital nutrient for corn and soybeans. That
partnership fell apart at the end of July when Uralkali accused
the other producer of undermining their sales accord.
- HP(HPQ) Profit Forecast Misses Some Estimates on PC Slump. Hewlett-Packard
Co. (HPQ) issued a forecast for fiscal fourth-quarter profit that
missed some analysts’ estimates, and Chief Executive Officer Meg Whitman
rescinded a projection for growth in fiscal 2014 as ebbing demand for
personal computers and lower business spending hamper her turnaround
efforts. The second-biggest PC maker and largest printer supplier
also unveiled a shake-up of its top ranks, naming Chief Operating
Officer Bill Veghte as head of its enterprise business, replacing Dave
Donatelli. Chief of Communications
Henry Gomez was promoted to chief marketing officer, replacing
Marty Homlish. Earnings excluding some items will be 98 cents to $1.02 a
share for the period which ends in October, the company said in a
statement today. Analysts predicted $1.01 on average, according to data
compiled by Bloomberg. For the 2013 fiscal year, earnings will be $3.53
to $3.57 a share, compared with the
company’s previous forecast of $3.50 to $3.60. In a conference call
with analysts, CEO Whitman cited a
“weak enterprise spending environment,” with sales challenged
in Europe and China. Pointing to difficulties in Hewlett-Packard’s
enterprise and PC businesses, she said she now projects “that total
company year-over-year revenue growth in fiscal 2014 is unlikely.”
Whitman had previously said she expects sales growth in the next fiscal
year, which begins in November. Shares fell as much as 6.4 percent to $23.75 in late trading after closing down 1.8 percent at $25.38 in New York.
- Wells Fargo(WFC) Said to Eliminate 2,300 Mortgage Jobs. Wells
Fargo & Co. (WFC), the biggest U.S. home lender, is cutting 2,300
jobs from its mortgage-production unit because higher interest rates are
reducing demand for refinancings, according to people with
knowledge of the matter. Other smaller cuts had been made in the past
few weeks around the country, according to the people, who asked not to
be
identified because the changes haven’t been publicly disclosed.
The cuts would equal about 20 percent of the 11,406 mortgage
loan officers employed by the San Francisco-based company at the
end of March, according to a presentation.
- Fed Tells Judge Swipe-Fee Rule Rejection Will Be Appealed. The
U.S. Federal Reserve will appeal a judge’s decision that its rules on
debit-card transaction fees and processing were illegal, a lawyer for
the central bank said. Visa Inc. (V), the world’s biggest payments
network, climbed 3 percent to $178.39 in New York, the most in almost a
month, as a successful appeal could help the company maintain its
market-share lead. Smaller rival MasterCard Inc. (MA) slid 0.5 percent
to
$619.31.
Wall Street Journal:
- U.S. Suspects Syria Used Gas. Rebels Say at Least 1,100 Killed by Chemical Weapons; U.N. Asks to Investigate. The U.S. sees "strong indications" that Syria's government used
chemical weapons in attacks early Wednesday that opposition groups
claimed killed more than 1,100 people—in what would be a significant
escalation of poison-gas use in the civil war.
Syrian authorities denied using
chemical weapons in their renewed offensive on Wednesday, accusing the
opposition of fabricating claims or staging gas attacks themselves.
"These claims are categorically false and completely baseless and are
part of the filthy media war waged by some countries against Syria," a
spokesman for Syria's armed forces said.
U.S. officials disagreed on Wednesday.
"There are strong indications there was a chemical weapons
attack—clearly by the government," a senior administration official
said. "But we do need to do our due diligence and get all the facts and
determine what steps need to be taken."
- Secret Court Faulted NSA for Collecting Domestic Data. Spy Agency Violated Constitution for Three Years, According to 2011 Ruling. The National Security Agency violated the Constitution for three
years by collecting tens of thousands of purely domestic communications
without sufficient privacy protection, according to a secret
national-security court ruling. In the strongly worded 2011 ruling, released Wednesday by the Obama
administration, the court criticized the NSA for misrepresenting its
practices to the court. It noted that the illegal collection was the
third instance in less than three years in which the government made a
"substantial misrepresentation regarding the scope of a major collection
program," specifically how the NSA collected Internet communications
and phone data. The court ruling includes estimates suggesting the NSA collected as many as 56,000 purely domestic communications a year.
- SEC Is Set to Propose New Rule on CEO Pay. Plan, Expected to Be Cleared as Early as September, Isn't Likely to Satisfy Critics. The Securities and Exchange Commission will soon thrust CEO
compensation back into the spotlight when it proposes a long-delayed
rule requiring companies to disclose the pay gap between chief executives and rank-and-file employees. The
requirement, a mandate of the 2010 Dodd-Frank financial law, could put
added pressure on corporate boards to slow pay increases for chief
executives at companies with significant or growing
gaps, proponents say.
Fox News:
MarketWatch.com:
- A vicious cycle: U.S. yields and emerging-market currencies. The
rise in U.S. yields and resulting pressure on emerging-market
currencies has been well documented. But record lows in these currencies
could also lead to further yield gains in a “self-reinforcing cycle,”
according to Bank of America Merrill Lynch.
- Build system to control China government debt, now. Among the ills afflicting China’s economy, a few
are particularly deadly: the ballooning local government debt is one of
them. No one knows for sure how massive it is, or how risky. The nationwide audit that began this month will help to shed some light
on these questions, but to stop risks growing past a tipping point, the
country must institute a system of debt control. This is the root cure,
and it is urgently needed.
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
@pensionpartners:
Real Clear Politics:
Reuters:
- China bird flu analysis finds more virus threats lurking. A
deadly new bird flu virus in China evolved from migratory birds via
waterfowl to poultry and into people, and there are other bird flu
viruses circulating that could follow the same path, scientists have
found. The study - an analysis of the
evolutionary history of the H7N9 bird flu that has so far killed 44
people - identified several other H7 flu viruses circulating in birds
that the researchers said "may pose threats beyond the current
outbreak".
- U.S. Republicans weigh using debt limit as leverage on Obamacare. U.S.
Republican lawmakers,
who staunchly oppose President Barack Obama's signature healthcare law,
are considering using a fall showdown over the country's borrowing limit
as leverage to try to delay the law's implementation. The idea is gaining traction among Republican leaders in the
House of Representatives, aides said on Wednesday. An aide to
House Majority Leader Eric Cantor said the debt limit is a "good
leverage point" to try to force some action on the healthcare
law known as "Obamacare."
- Brazil to cut 2014 growth forecast. The median growth forecast for Brazil's gross domestic
product (GDP) next year has fallen to 2.5 percent in this week's
Focus survey, from 4 percent in the survey a year earlier.
Financial Times:
- SEC scrutinises Goldman’s(GS) trading failure. US
regulators and enforcement officials are scrutinising the systems
malfunction at Goldman Sachs as part of a broad response to the latest
high-profile trading failure to damage investor confidence, say people familiar with the matter.
The Securities and Exchange Commission’s involvement comes as leading US
exchanges, including those run by NYSE Euronext, worked through the
night to determine whether to cancel, adjust or break erroneous trades
that could end up costing Goldman tens of
millions of dollars.
Telegraph:
Kyodo:
- 2% inflation target achievable even with tax hike: BOJ chief. The Bank of Japan will be able to achieve its 2 percent inflation
target even if the sales tax is raised as scheduled next April, as the
move is unlikely to stall the economy, BOJ Gov. Haruhiko Kuroda said
Tuesday. “Basically, a consumption tax hike will not let the economy stall to
prevent us from achieving a 2 percent price stability target,” Kuroda
said on an NHK program, suggesting the tax hike would have limited
impact on the economy.
Singapore Straits Times:
- Singapore Luxury Home Market Show Signs of Slowdown. Sales of
homes priced S$5m and above in first seven months of this yr down to
levels last seen in 2008. Only 183 units worth S$5m and above were sold
from January to July this yr, close to 187 moved in first seven months
of 2008, citing Urban Redevelopment Authority data. Corresponding period
in 2010 saw 444 transactions, 2011 saw 310, the newspaper said.
The Economic Times:
- India Cabinet May Clear Super-Rich Tax Increase Today. The government is proposing a 35% tax rate for those earning more than
Rs 10 crore in the Direct Taxes Code (DTC) that is likely to be tabled
in Parliament during the ongoing session. The Union Cabinet will
consider the code on Thursday. The direct taxes bill, once approved by
Parliament, will replace the current Income-Tax Act, which dates back to
1961. At present, taxable income in excess of Rs 10 lakh is
taxed at 30% while those earning more than Rs 1 crore have to pay a
surcharge of 10%. Further, since top earners receive substantial income
by way of dividends, the Direct Taxes Code incorporates a 10% tax on
dividend income in excess of 1 crore.
China Securities Journal:
- China Can Allow Local Govt Debt Securitization. China can allow
securitization of lending to local government projects to reduce risks,
citing reporter Ren Xiao in a front-page commentary. China should also
allow securitization of local government financial vehicles' assets, the
commentary said.
Evening Recommendations
Oppenheimer:
- Rated (VRTX) Outperform, target $105.
- Rated (REGN) Outperform, target $300.
Stifel:
Night Trading
- Asian equity indices are -2.0% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 166.0 +8.25 basis points.
- Asia Pacific Sovereign CDS Index 131.75 +9.0 basis points.
- NASDAQ 100 futures -.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 330K versus 320K the prior week.
- Continuing Claims are estimated to fall to 2963K versus 2969K prior.
8:58 am EST
- Preliminary Markit US PMI for August is estimated at 54.2.
9:00 am EST
- The House Price Index for June is estimated to rise +.6% versus a +.7% gain in May.
10:00 am EST
- The Leading Index for July is estimated to rise +.5% versus unch. in June.
11:00 am EST
- Kansas City Fed Manufacturing Activity for August is estimated at 6.0 versus 6.0 in July.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Jackson Hole Fed Conference, Eurozone PMI Manufacturing/Services reports, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for August and the Raymond James Bank Conference could also impact trading today.
BOTTOM LINE: Asian
indices are lower, weighed down by financial and technology shares
in the region. I expect US stocks to open mixed and to weaken into
the afternoon, finishing modestly lower. The Portfolio is 25% 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) 14.69 -1.48%
- Euro/Yen Carry Return Index 136.32 +.18%
- Emerging Markets Currency Volatility(VXY) 10.87 +5.64%
- S&P 500 Implied Correlation 49.62 -4.54%
- ISE Sentiment Index 82.0 -29.91%
- Total Put/Call .93 +3.33%
Credit Investor Angst:
- North American Investment Grade CDS Index 83.10 +1.12%
- European Financial Sector CDS Index 149.94 +2.53%
- Western Europe Sovereign Debt CDS Index 84.82 +1.58%
- Emerging Market CDS Index 338.08 +3.56%
- 2-Year Swap Spread 18.75 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 unch.
Economic Gauges:
- 3-Month T-Bill Yield .03% -1 bp
- China Import Iron Ore Spot $137.80/Metric Tonne -.86%
- Citi US Economic Surprise Index 34.70 +.5 point
- Citi Emerging Markets Economic Surprise Index -32.30 -.8 point
- 10-Year TIPS Spread 2.16 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating -24 open in Japan
- DAX Futures: Indicating +41 open in Germany
Portfolio:
- Higher: On gains in my biotech/tech/medical sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.11% 2) Steel -1.74% 3) Retail -1.64%
Stocks Falling on Unusual Volume:
- IBN,
BOFI, TKC, CVC, HBC, STO, DB, EPAY, CKSW, NGD, GDP, SPLS, AEO, KTCC,
TGT, IFN, NPO, MR, SNY, VNET, PETM, INDY, RRGB, ANGI, DTV, NTES, BOFI,
NTI, AVT, BBRG, ADI, TIF, OMX and CODE
Stocks With Unusual Put Option Activity:
- 1) GDXJ 2) KMI 3) TGT 4) AEO 5) ITB
Stocks With Most Negative News Mentions:
- 1) TUP 2) AGU 3) TGT 4) JPM 5) EEM
Charts:
