Broad Equity Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.25 -3.47%
- Euro/Yen Carry Return Index 137.69 +.18%
- Emerging Markets Currency Volatility(VXY) 10.73 -2.63%
- S&P 500 Implied Correlation 49.27 -1.26%
- ISE Sentiment Index 108.0 +17.39%
- Total Put/Call .78 -2.50%
Credit Investor Angst:
- North American Investment Grade CDS Index 79.12 -1.83%
- European Financial Sector CDS Index 140.57 -2.41%
- Western Europe Sovereign Debt CDS Index 85.50 unch.
- Emerging Market CDS Index 322.66 -1.67%
- 2-Year Swap Spread 19.50 +.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -9.5 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $138.60/Metric Tonne +.65%
- Citi US Economic Surprise Index 28.50 -5.8 points
- Citi Emerging Markets Economic Surprise Index -24.60 +1.8 points
- 10-Year TIPS Spread 2.14 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +65 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Blasts Hit Sunni Mosques in Lebanon, Killing at Least 29. Explosions near two Sunni Muslim
mosques in Lebanon’s northern city of Tripoli during Friday
prayers killed at least 29 people and wounded more than 500, the
official National News Agency said. One blast targeted Al Taqwa Mosque where radical Sunni
cleric Sheikh Salem al-Rafei leads prayers. He wasn’t harmed,
NNA said. The second hit near the entrance of the Salam mosque,
not far from the house of caretaker Prime Minister Najib Miqati,
who wasn’t in Tripoli at the time, according to NNA.
- UN Says One-Millionth Child Refugee Flees Syrian Conflict. The
number of children among
refugees who have fled Syria’s civil war has reached 1 million, the
United Nations said today. An additional 2 million children inside Syria
have been
forced from their homes by fighting between President Bashar al-Assad’s troops and rebel forces, according to a statement from
the United Nations Children’s Fund, known as Unicef, and the UN
High Commissioner for Refugees.
- Oil Gains as U.S. Home Data Eases Concern on Stimulus. “The
market rebounded after the release of the pretty-horrific July home
numbers,” said Kyle Cooper, director of commodities research at IAF
Advisors in Houston. “The housing data appears to have put fears of a
quick end of stimulus to rest. Housing has been one of the stronger
sectors of the economy recently.” WTI crude for October delivery
increased $1.78, or 1.7 percent, to $106.81 a barrel at 1:39 p.m. on the
New York Mercantile Exchange. Prices are down 0.6 percent this week.
The volume of all futures traded was about 12 percent below the 100-day
average.
Brent oil for October settlement advanced $1.28, or 1.2
percent, to $111.18 a barrel on the London-based ICE Futures
Europe exchange. Trading of futures was 6.5 percent above the
100-day average.
- Reinhart Says Emerging Markets Could Get ‘Ugly’ as Outflows Grow. Carmen
Reinhart, a Harvard University economist and co-author of a history of
debt crises, said emerging markets are deteriorating as the U.S.
recovers and may worsen as global interest rates begin to increase.
“It could get very ugly,” Reinhart said today in a Bloomberg Television
interview with Sara Eisen from the Federal Reserve’s annual conference
in Jackson Hole, Wyoming. “Emerging markets had a capital flow bonanza
lasting several years, the
golden boom years, and the probability of a banking crisis, the
probability of a currency crash, the probability of a default,
all increase afterward.”
- India’s Rupee Set for Worst Week Since 1993 on Fed Stimulus Risk.
India’s rupee plunged 4.4 percent to a record this week in its worst
performance since 1993 on signs the U.S. is getting closer to reducing
stimulus that fueled demand for emerging-market assets. Federal
Reserve policy makers were “broadly comfortable” with Chairman Ben S.
Bernanke’s plan to start reducing bond purchases later this year if the
economy improves, with a few saying tapering might be needed soon,
according to the minutes of their July meeting released Aug. 21. Global
funds cut holdings of Indian debt by $9.9 billion since Bernanke first
flagged possible paring on May 22, leaving the rupee vulnerable
to the nation’s record current-account deficit.
- Record Bank Rally in Southern Europe May End on Economy. The
longest rally in southern Europe’s banking stocks since the sovereign
debt crisis began may prove unsustainable as the region’s economies lag
behind a recovery in Germany and France. Economic woes in Italy and
Spain persist, meaning banks will probably be forced to set aside more
provisions as consumers and businesses fall into default. After a
six-week increase in the shares of Italian banks, they are trading at
20.7 times projected earnings yesterday, up from
10.3 times profit a year ago, according to data compiled by Bloomberg.
- Junk Bonds Snap Seven-Week Winning Streak in Europe on Tapering.
Junk (BEUH) debt investors lost money for the first time since June in
Europe this week as bondholders anticipate the Federal Reserve slowing
stimulus. High-yield notes from companies including Italian carmaker
Fiat SpA and Portugal Telecom SGPS SA, the country’s biggest
telecommunications company, lost investors an average 0.3 percent over
the period, paring a 2.6 percent gain in the longest winning streak
since Jan. 11, according to Bloomberg bond index data. Investment-grade
(BERC) bonds also forfeited 0.3
percent, a second week of losses.
- Fed’s Lockhart Says He Wouldn’t Rule Out September Tapering. Federal
Reserve Bank of Atlanta
President Dennis Lockhart said he wouldn’t rule out a September move by
the central bank to start tapering its bond-buying program as long as
the economy’s performance justifies it. “I’m looking at the data as
whether they are denying or undermining the outlook I have in my head”
for moderate growth, Lockhart said in an interview today on Bloomberg
Television with Michael McKee from Jackson Hole, Wyoming, where the
Kansas City
Fed is hosting a conference. “You can take a cautious first
step,” which the Fed could conceivably do, he said.
- Economists in Jackson Hole Say QE Less Potent Than Fed Believes. The U.S. central bank’s bond buying
is a less potent tool for stimulating growth than policy makers
believe, two economists said in a paper released today at a
Federal Reserve conference. The paper scrutinizes the stance of some Fed officials that
so-called quantitative easing works through a “portfolio-balance channel” in which Fed asset purchases induce investors
to rebalance their investments to boost a wide range of
financial assets. The research was presented at an annual Kansas
City Fed symposium in Jackson Hole, Wyoming.
- College Leaders Wary of Obama Plan Linking College Aid to Rank.
President Barack Obama’s proposal to tie federal student aid to college
tuition and outcomes, intended to control costs and support low-income
students, may have the opposite effect, some education leaders said. Colleges may be discouraged from accepting and giving aid
to students from low-income families because of the risk that
they might hurt the school’s rankings, which would include
graduation rates, debt levels and future earnings, the officials
said. Obama’s proposal, which is subject to congressional
approval, is likely to encounter strong opposition from colleges
whose students rely on federal financial aid to help cover their
costs, educators said.
- NSA Analysts Intentionally Abused Spying Powers Multiple Times. Some National Security Agency analysts deliberately ignored restrictions
on their authority to spy on Americans multiple times in the past
decade, contradicting Obama administration officials’ and lawmakers’
statements that no willful violations occurred.
- U.S. to Review Claims Oil Companies Undercut Renewables. The U.S. Federal Trade Commission
said it will examine allegations that oil companies may be undermining efforts to distribute renewable fuels.
The FTC will “evaluate” concerns that oil companies are blocking the
distribution of renewable fuels by requiring retailers to carry premium
gasoline, commission chairwoman Edith Ramirez said in a letter released
today by two U.S. lawmakers
who had called for an inquiry.
Wall Street Journal:
- Bats, Direct Edge in Talks to Merge. Deal Would Create Second-Largest U.S. Stock-Market Operator. Electronic-exchange group BATS Global Markets Inc. is in advanced
discussions to merge with rival stock-exchange company Direct Edge
Holdings LLC, people familiar with the matter said, in a deal that would
create the second-biggest U.S. stock-market operator ahead of Nasdaq OMX Group Inc. NDAQ +1.31%.
Fox News:
- Team involved in tracking Benghazi suspects pulling out, sources say. Two weeks after the Obama administration announced charges against
suspects in the Benghazi attack, a large portion of the U.S. team that
hunted the suspects and trained Libyans to help capture or kill them is
leaving Libya permanently. Special operators in the region tell Fox News that while Benghazi
targets have been identified for months, officials in Washington could
"never pull the trigger." In fact, one source insists that much of the
information on Benghazi suspects had been passed along to the White
House after being vetted by the Department of Defense and the State
Department -- and at least one recommendation for direct action on a
Benghazi suspect was given to President Obama as recently as Aug. 7.
MarketWatch:
Zero Hedge:
Business Insider:
Reuters:
- Exxon(XOM) selling Iraqi oilfield stakes to Petro China, Pertamina: Iraq minister. Exxon
Mobil is selling stakes it controls in Iraq's West Qurna-1 oilfield to
China's Petro China and Indonesia's Pertamina, the country's oil
minister confirmed on Friday. "25 percent to Petro China and 10
percent to Pertamina," Abdul Kareem Luaibi told Reuters on the sidelines
of a ministerial meeting here. He added that the deal would be done
"maybe after two to three weeks". Exxon Mobil has a 60 percent stake
currently in the giant oilfield and is the operator. Company and
industry sources said on Thursday that China and Indonesia were set to
join Exxon Mobil's $50 billion project to develop the field.
- Brazil current account deficit swells in July; FDI falls. Brazil's current account
deficit more than doubled in July from a year ago, central bank
data showed on Friday, with the country increasingly unlikely to
cover that gap this year with slackening direct investment from
abroad.
- Adding uncertainty, U.S. Fed set for new cast of characters. A new chairman is just the
beginning of what could be a big leadership change at the
Federal Reserve next year, giving investors yet another reason
to second-guess the U.S. central bank's plan to scale back its
support for the economy.
Financial Times:
- Lagarde calls for more crisis ‘lines of defence’. The
world needs to build “further lines of defence” against a possible
emerging markets crisis but the International Monetary Fund stands ready
to provide financial support if needed, its managing director Christine
Lagarde declared on Friday. Ms Lagarde’s remarks to the Kansas City
Fed’s annual gathering in Jackson Hole, Wyoming, are a sign of growing
concern among international policy makers about market turmoil in
countries such as Brazil, India and Indonesia.
Boersen-Zeitung:
- UBS
Chairman Says Europe Hasn't Solved Problems. UBS AG Chairman Axel Weber
says structural reforms in euro area needed to foster growth. Planned
European banking union in danger of being developed with too much haste,
Weber said.
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -2.48% 2) Banks -.43% 3) Biotech -.42%
Stocks Falling on Unusual Volume:
- GDP,
TRST, TKC, MNKD, HA, LOW, DLLR, HIBB, KAMN, P, NDSN, MRVL, GES, FL,
DKS, RYL, MTH, SFUN, SCSC, SHPG, EMES, PNRA, VVI, GEVA, VSI, PETM, KBH, MDT, TOL and TECD
Stocks With Unusual Put Option Activity:
- 1) NFX 2) MSFT 3) ARO 4) ARUN 5) ACAS
Stocks With Most Negative News Mentions:
- 1) DLLR 2) GES 3) DKS 4) GS 5) C
Charts:
Style Outperformer:
Sector Outperformers:
- Gold & Silver +2.23% 2) Softwate +1.86% 3) Energy +1.03%
Stocks Rising on Unusual Volume:
- ADSK, MSFT, PRAN, INSM, SKYW, UEPS, EXPE, MENT, AFOP, FTK, DAR, FB and TNGO
Stocks With Unusual Call Option Activity:
- 1) ADSK 2) IP 3) CERN 4) ARO 5) HAL
Stocks With Most Positive News Mentions:
- 1) VMW 2) PLCE 3) SPG 4) UNH 5) PG
Charts:
Evening Headlines
Bloomberg:
- Islamists Call New Rallies in Fraught Climate of Mubarak Release. An alliance of Islamist groups
backing Mohamed Mursi called for its first mass marches in days
to demand the ousted president’s return, even as authorities
were rounding up their leaders and putting them behind bars. The
rallies are to take place against a political backdrop
made even more fraught by the release of longtime autocrat Hosni Mubarak
from prison yesterday. It was a stunning development for
many who took part in the 2011 uprising that toppled him, and
some critics say Egypt’s current leadership, installed by the
military, is out to reprise the police state Mubarak once led. Mubarak, said to be ailing, was wheeled on a gurney
yesterday to a helicopter that flew him to a nearby military
hospital at a time when the country he once led is reeling over
the army’s removal of the Muslim Brotherhood’s Mursi. About
1,000 people died in clashes touched off when security forces
stormed two pro-Mursi protest camps on Aug. 14, and Mubarak’s
release threatens to inflame the political crisis.
- ICBC to Lead China’s Biggest Banks in Posting Slower Profit Gain.
Industrial & Commercial Bank of China Ltd., the world’s most
profitable lender, and its three largest local rivals are set to post
the slowest earnings growth since 2010 as China’s economy falters and
bad loans jump. The four banks, among the world’s nine biggest by market value, will probably report combined second-quarter net income
of 207 billion yuan ($34 billion), an increase of 10 percent
from a year earlier, according to the median estimate of 11
analysts surveyed by Bloomberg News. Profit at the four largest
U.S. banks climbed 35 percent to $20.2 billion.
- Fukushima Clouds Abe’s Bid to Start Nukes for Recovery: Economy. Radiation
spreading from Japan’s crippled Fukushima plant threatens to derail
Prime Minister Shinzo Abe’s efforts to revive nuclear power and deliver
the lower energy prices needed to power his economic reforms. As Abe
prepares for a trip tomorrow to the Middle East where he will promote
sales of nuclear technology, the atomic industry at home is reeling.
Japan’s nuclear regulator said this week that a new radioactive water
leak was the most serious
incident at the Fukushima Dai-Ichi plant since the March 2011
accident that devastated the site.
- Asian Stocks Rise, Paring Weekly Slide, on Economic Data.
Asian stocks rose, paring the benchmark equity gauge’s biggest weekly
decline in two months, after reports from Europe to the U.S. boosted
confidence in the economic recovery and the yen weakened against the
dollar. Asia’s largest carmaker Toyota Motor Corp. (7203), which gets
about 75 percent of sales outside Japan, climbed 3.6 percent as the yen
touched its lowest level in nearly three weeks against the dollar. BHP
Billiton Ltd. (BHP) rose 1.1 percent in Sydney after
copper jumped overnight. Amada Co., a Japanese maker of metal-cutting
machines, jumped 5.1 percent after a report that its
operating profit will rise by 150 percent. The MSCI Asia Pacific Index advanced 1.3 percent to 131.33
as of 9:48 a.m. in Hong Kong as nine of the 10 industry groups
on the gauge climbed.
- Ford(F) Says U.S. Loses as Yen Lets Japan Keep Excess Capacity. Ford Motor Co., stepping up
criticism of Japan’s auto industry, said a weaker yen lets
carmakers led by Toyota Motor Corp. (7203) keep open plants that are
producing a vehicle glut and threatening U.S. job growth. Production for automakers including Ford is constrained in
North America as U.S. sales rise, Joe Hinrichs, Ford’s president
of operations in the region, said in an interview. At the same
time, the weaker yen is supporting exports from Japan, which IHS
Automotive estimates has 2 million vehicles of excess capacity. “The industry is growing and capacities are a little tight
in North America,” Hinrichs said from Dearborn, Michigan, where
Ford is based. “Where is the extra available capacity going to
come from? If Japan’s one of those places, in lieu of more
manufacturing in the U.S., the American worker does lose in that
proposition.” His comments build on remarks by Chief Executive Officer
Alan Mulally, who in June said Japan was manipulating its
currency, and reflect a threat that Ford sees to continuing its
recent growth in the U.S.
- Rubber Climbs to 3-Month High on Weaker Yen. Rubber
for delivery in January on Tokyo Commodity Exchange gained as much as
2.0 percent to 271.2 yen a kilogram ($2,741 a metric ton), the highest
level for a most-active since May 29.
Futures traded at 270.8 yen at 11:40 a.m., heading for the third
weekly advance.
- Rebar Rises. Rebar for January delivery gained as much as 1.4 percent to 3,820 yuan ($624) a metric ton before trading at 3,813 yuan at
10:30 a.m. local time. The contract fell by 1.1 percent this
week before today.
- Moody’s Mulls Downgrade of Biggest Banks as U.S. Support Wanes. Moody’s Investors Service may cut
debt ratings on at least four of the six largest U.S. banks
because the government could be less likely to ensure their
survival in a crisis. Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan
Stanley and Wells Fargo & Co. may be downgraded, Moody’s said
today in a statement. Bank of America Corp. and Citigroup Inc.
are under review, with the direction of any rating change
uncertain, Moody’s said. Bank of New York Mellon Corp. and State
Street Corp. were already under review, Moody’s said.
- Pentagon Weighs Firing Thousands Under 2014 Spending Cuts. The Defense Department may have to
fire at least 6,272 civilian employees if automatic cuts known
as sequestration slice $52 billion from its fiscal 2014 budget,
according to a Pentagon planning document. Additional budget analysis is “likely to produce further reductions” as the services focus on shrinking their contract
labor forces, according to a Pentagon “execution plan”
obtained by Bloomberg News. The job cuts, although less than 1
percent of the non-uniformed workforce, would mark an escalation
from the unpaid leave mandated under sequestration in the
current fiscal year.
- JPMorgan(JPM) Sub-New Normal Growth
Seen Confronting Next Fed Chief. The next chairman of the Federal
Reserve faces an alarming possibility: the new normal for the economy is
even worse than advertised. The long-run potential growth rate for GDP
has slid to around 1 3/4 percent per year, from an average rise in GDP
of 2 1/2 percent since 1990, according to economists at JPMorgan Chase
& Co., the largest U.S. bank by assets. That would be the lowest
level since World War II and below the 2 percent mark that PIMCO pegged
as the new normal for the economy.
Wall Street Journal:
- GOP Plans Spending Bill to Avoid Shutdown. Sidestepping Conservatives' Call to Cut Health-Law Funding, House Leaders Set Up Debt-Limit Fight for Later This Year.
House Speaker John Boehner said Thursday GOP leaders were crafting a
strategy that could avert a September showdown with Democrats over
government funding levels by
deferring the toughest budget issues to later in the fall, when
lawmakers face a deadline to raise the debt ceiling.
- U.S. Weighs Plans to Punish Assad. Possible Military Responses Are Refined After Poison Gas Claims. The U.S. began refining its military options for possible strikes in
Syria, officials said, and initiated diplomatic efforts to craft an
international response to allegations that Syria's government killed
over 1,100 civilians with chemical weapons.
- Doctors Face New Scrutiny Over Gifts. New Health Law Calls for Increased Disclosures. U.S. doctors are bracing for increased public scrutiny of the payments
and gifts they receive from pharmaceutical and medical-device companies
as a result of the new health law.
- CFTC Moves to Rein In High-Speed Traders. Regulator Aims to Increase Oversight of Computer Trading. Federal commodities regulators are preparing to take their first big
step toward reining in high-speed computer trading and subjecting it to
tougher oversight.
- Central-Bank Moves Blur the View. Emerging Markets' Efforts to Defend Their Currencies Stokes Confusion. Central banks from Indonesia to Turkey to Brazil are stepping up efforts
to fight steep declines in their currencies and protect vulnerable
economies as investors pull cash from emerging markets. The escalating role policy makers are playing in the foreign-exchange
market injects new uncertainty into financial markets. Investors already
are struggling to absorb a rapidly changing outlook for global economic
growth and the potentially imminent end to the Federal Reserve's
easy-money policies. These measures to support local markets are a sharp
reversal from much of the past two years, when some of these same
emerging-market central banks were trying to tame excessive currency
appreciation.
Fox News:
- Education bus tour pulls Obama away from Mideast crises. President Obama’s two-day bus tour touting his revamped education
plan has raised questions about his priorities as the Middle East
convulses with violence and political upheaval. On the same morning Obama traveled to address students at the
University of Buffalo, Egypt’s deposed former leader Hosni Mubarak was
released from jail, four rockets were fired near Israel and global
powers bickered at the U.N. over how to respond to an alleged deadly
chemical gas attack in Syria. Sen. John McCain, R-Ariz., issued a
blistering statement Thursday
morning in response to the latest violence in Syria. "American
credibility in the Middle East has never been lower," he said. The
Republican National Committee, meanwhile, derisively dubbed the Obama
trip the "lame duck" bus tour.
- Muslim Brotherhood's bid to scapegoat Christians failing, say Egyptians. As their nation descends into violent chaos, Egyptians are
increasingly blaming the Muslim Brotherhood, despite attempts by the
Islamist group to scapegoat Christians and the military, according to
several sources who spoke to FoxNews.com from Cairo. “The Muslim Brotherhood has lost all sympathy with their points due
to their violence,” said a Long Island, N.Y., Egyptian-American, who is
in a Cairo suburb for a family wedding.
MarketWatch.com:
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
New York Times:
LA Times:
- Why get off welfare? Poor people aren't stupid. If they can get more from the government than they can from a job, they aren't going to work.
The Week:
- Is the Fed setting the stage for another financial crisis — in Asia? The side effects of quantitative easing are coming to the fore.
Central bankers "always knew it was extremely risky," says The
Guardian's Heather Stewart, "but judged that the price of a prolonged
slump across the rich world was greater than the threat of inflating
unsustainable bubbles in the world's financial markets." But bubbles
are what appear to have formed, with a lot of that new, easy money
finding its way to higher-yielding bonds in emerging nations."If you are
tired of earning a piddling 2 percent on your U.S. Treasury bonds,"
explains Neil Irwin of The Washington Post, "a rate pushed low by the
fact that the Fed has been buying them, then making 5 percent on your
money in Indonesian bonds or 7 percent from Indian bonds looks pretty
good, even with the greater risk attached."
Reuters:
- Brazil central bank launches $60 bln currency intervention. Brazil's central bank
announced a currency-intervention program on Thursday that will
provide $60 billion worth of cash and insurance to the
foreign-exchange market by year-end, a move aimed at bolstering
the country's currency, the real, as it slips to near
five-year lows against the dollar.
- Crashing markets spell trouble for India's privatisation plans. The collapse of the rupee is
derailing India's hopes of raising more than $6 billion from the
sale of stakes in state-run firms, jeopardising a key plank of
Finance Minister P.Chidambaram's blueprint to reverse the
country's economic malaise. Investor
confidence has evaporated amid fears over the rising cost of funding
India's gaping current account deficit, prompting New Delhi to delay
plans to raise much-needed funds through partial privatisations, finance
ministry sources said.
- Autodesk(ADSK) forecasts disappointing 3rd qtr, shares fall. Autodesk
Inc forecast third-quarter results below analysts' estimates as it
anticipates lower demand for its computer-aided design (CAD) software
used in construction, manufacturing and engineering industries. The company's shares fell as much as 5.6 percent in extended
trading.
- Aeropostale(ARO) forecasts another loss, to speed up store closings. Teen
apparel retailer Aeropostale Inc on Thursday forecast a deep third
quarter loss, and said the highly promotional environment that has led
it to cut prices and decimated earnings would continue in the back-to-school shopping period. Shares were down 8.2 percent at $10.07 in after-hours
trading. They closed down 1.6 percent on Thursday.
Financial Times:
- Emerging markets central banks’ emergency reserves drop by $81bn. Central banks in the developing world have lost $81bn of emergency reserves through capital outflows and currency market interventions since early May, even before renewed turmoil in emerging markets. The figure, which excludes China, is equal to roughly 2 per cent of all developing country central bank reserves, according to
Morgan Stanley analysts, who compiled the data from central bank filings
for May, June and July.
Telegraph:
- Emerging market rout threatens wider global economy. The $9 trillion (£5.8 trillion) accumulation of foreign bonds by the
rising powers of Asia, Latin America and the emerging world risks going into
reverse as one country after another is forced to liquidate holdings to
shore up its currency, threatening to inflict a credit shock on the global
economy.
Brazilian Bubble:
- “Brazil close to experience its own Subprime,” says IMF economist in interview. According
to Pedro Videla, a consultant to the IMF, the World Bank and a
professor at the Iese School of Economics and Business, in Spain, Brazil
failed miserably to make structural changes to increase productivity at
a time of strong economic growth, and now, he says, the country may pay
the price for its mistake. “Now, everyone is very concerned that there is a Brazilian subprime” he said in an interview to Estado de Sao Paulo.
China Daily:
- China Researcher Warns of Liquidity Problems in 2H. China's
high-leveraged economy may have increasing liquidity problems if a
slowdown in outstanding funds gets worse in 2H, citing Liu Yuhui, a
researcher at the Chinese Academy of Social Sciences. China is becoming
more vulnerable to an external shock given its heightened debt and signs
of faltering productivity, citing Liu.
China Securities Journal:
- China should conduct antitrust investigations into auto and
petroleum industries because of monopoly behavior, reporter Wang
Yingchun said in a front-page commentary.
Shanghai Securities News:
- China 2H Industrial Output Faces Downward Pressure. China's 2H
industrial output may grow about 9%, according to a joint report by
China Development Bank, NDRC's State Information Center and Shanghai
Securities News published by the newspaper.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 162.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 131.5 -.25 basis point.
- NASDAQ 100 futures +.23%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- New Home Sales for July are estimated to fall to 487K versus 497K in June.
Upcoming Splits
Other Potential Market Movers
- The Final German Q2 gdp report, Canadian inflation report and the Fed Jackson Hole Day 2 could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.82 -7.03%
- Euro/Yen Carry Return Index 137.15 +.80%
- Emerging Markets Currency Volatility(VXY) 11.24 +.09%
- S&P 500 Implied Correlation 48.73 -9.50%
- ISE Sentiment Index 96.0 +21.62%
- Total Put/Call .80 -17.53%
Credit Investor Angst:
- North American Investment Grade CDS Index 81.47 -3.40%
- European Financial Sector CDS Index 144.06 -3.90%
- Western Europe Sovereign Debt CDS Index 85.50 +.80%
- Emerging Market CDS Index 334.31 -2.23%
- 2-Year Swap Spread 19.0 +.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% -1 bp
- China Import Iron Ore Spot $137.70/Metric Tonne -.07%
- Citi US Economic Surprise Index 34.30 -.4 point
- Citi Emerging Markets Economic Surprise Index -26.40 +5.9 points
- 10-Year TIPS Spread 2.12 -4 bps
Overseas Futures:
- Nikkei Futures: Indicating +220 open in Japan
- DAX Futures: Indicating +8 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/tech/medical/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
