Bloomberg:
- Lew Vow Not to Shift on Debt Frustrates Incredulous Republicans. He’s
“an implacable negotiator” who is “ideologically committed to
protecting every big-government gain,” Senator Jeff Sessions, an Alabama
Republican, said in an interview. Administration officials “can all go and play a round of golf, and they know he’s not going to agree to anything.” Lew’s approach to the debt limit has focused on a few basic ideas. He
has scrapped, temporarily, the traditional Treasury secretary role of
cheering up financial markets and is making it clear he thinks investors
should be worried about the possibility the U.S. won’t make all its payments on time.
“The calm out there,” he said in a discussion with Bloomberg View’s Al
Hunt on Sept. 24, “is a bit greater than it should be.” Senator Ron
Johnson, a Wisconsin Republican, said at an Oct. 11 Bloomberg breakfast
that the administration should try “to calm the markets, not scare
them.” “Responsible leadership wouldn’t be going out there going, ‘There’s going to be catastrophe coming,’” Johnson said, referring to comments by Obama and
Lew warning of dire consequences if the U.S. can’t make all its
payments.
- India Inflation Reaching Seven-Month High Adds Rate Pressure. Indian inflation unexpectedly
accelerated to a seven-month high in September, adding to the case for a further increase in the benchmark interest rate. The wholesale-price index rose 6.46 percent from a year earlier, compared with a 6.1 percent advance in August,
the Commerce Ministry said in New Delhi today. The median of 33
estimates in a Bloomberg News survey was for a 6 percent climb. Governor
Raghuram Rajan, who took over at the Reserve Bank of India last month,
raised the repurchase rate to 7.5 percent after vowing to tame
inflation, which was almost 10 percent in
September based on a separate gauge of consumer prices released
today. The cost of living is jumping even as economic growth
slows, stoked by food prices and weakness in the rupee that
makes imports more expensive.
- China-to-India Price Jump Risks Growth as World Outlook Dims. Higher food costs from China to
India are raising prices for a third of the world’s people,
adding to the challenge of sustaining the global economic
recovery as the growth outlook dims. Consumer prices in China rose 3.1 percent last month as food costs advanced the most since May 2012, statistics bureau
figures showed today in Beijing, while India’s Commerce Ministry
said inflation unexpectedly accelerated to a seven-month high.
Both gauges increased more than economists had estimated.
Wall Street Journal:
Fox News:
- Rollback of cuts fuels claims that government inflated impact of partial shutdown. Two weeks into the partial government shutdown, the Obama
administration is increasingly easing off some of its most painful cuts
-- fueling the perception among critics that the government initially
imposed visible, but ultimately unnecessary, cutbacks as a way to
pressure Republicans. The Department of the Interior late last week agreed to let states
use their own money to reopen some national parks. Defense Secretary
Chuck Hagel also determined football and other sports could continue at
service academies through October. Following outrage from military groups, the Pentagon contracted with a
charity to provide death benefits to the families of fallen soldiers,
before President Obama abruptly signed legislation to do just that.
Earlier, the Pentagon also announced most of its 350,000 furloughed
civilian military personnel would return to their jobs. And CIA Director
John Brennan said he would begin bringing back employees deemed
necessary to the agency's core missions.
CNBC:
- DC wants Dow to drop 1,000: Bove. Financial analyst Dick Bove thinks gridlocked politicians are asking for a market sell-off. "What do they think will convince the American public that they as our
leaders must act? It is becoming very clear that what they want is
panic in the equity markets. They want to see the Dow drop 1,000
points," Bove wrote in a note to Rafferty Capital Markets clients
Monday.
Zero Hedge:
Business Insider:
Reuters:
- Franco-German divisions cloud efforts to fix broken banks. The
euro zone debated on Monday how to prop up banks likely to be declared
unstable next year, but France's blunt criticism of Germany before the
meeting
laid bare the tensions surrounding the far-reaching financial reform. Bank health checks by the European Central Bank are a
critical step in establishing a single banking framework for the
euro zone, giving credibility to ECB supervision and paving the
way for the bloc to cooperate on saving bust banks.
Telegraph:
- Time to take bets on Frexit and the French franc? We have a minor earthquake in France. A party committed to withdrawal
from the euro, the restoration of French franc, and the complete
destruction of monetary union has just defeated the establishment in the
Brignoles run-off election. It is threatening Frexit as well, which rather alters the political chemistry of Britain's EU referendum.
Pais:
- Italy, France, Germany Push For Easier Bank Tests. Countries pushing to soften the criteria of ECB bank stress tests, citing people familiar with the matter. Germany and France are pressurizing ECB and other institutions so that the criteria of stress tests least damaging as possible for interests of their banks. Italy wants to avoid shareholders and junior debtholders being hit if a bank needs to be recapitalized with public funds, citing a minister in euro group.
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
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -1.51% 2) Utilities -1.21% 3) HMOs -.81%
Stocks Falling on Unusual Volume:
- EXPE, WHR, ACOR, ETH, SPN, FICO, WX, ARII, TXI, PMTC, ALNY, ONTX, PSMT, TEX, APO, USM, MAIN, ASML, STML, MRK, VIPS, MHK, LMCA, RYAAY, PETM and SGI
Stocks With Unusual Put Option Activity:
- 1) JPM 2) PETM 3) XLV 4) WHR 5) WFM
Stocks With Most Negative News Mentions:
- 1) FIC 2) EXPE 3) RL 4) JPM 5) RCL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Tobacco +.69% 2) Gold & Silver +.47% 3) Disk Drives +.06%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) STSI 2) EXPE 3) ATRS 4) CVS 5) BK
Stocks With Most Positive News Mentions:
- 1) BA 2) NFLX 3) SMG 4) PENN 5) LMT
Charts:
Weekend Headlines
Bloomberg:
- China Exports Unexpectedly Drop as Food Prices Stoke Inflation.
China’s exports unexpectedly fell in September and inflation jumped on
food prices, signaling constraints on the nation’s recovery as Premier
Li Keqiang seeks to sustain growth without adding monetary stimulus. Overseas shipments dropped 0.3 percent from a year earlier,
customs data showed on Oct. 12, trailing all 46 estimates in a
Bloomberg News survey, while imports rose a more-than-forecast
7.4 percent. Consumer prices rose 3.1 percent as food costs
advanced the most since May 2012, statistics bureau figures
showed today in Beijing.
- Asian Stocks Decline on U.S. Stalemate as Yen Rebounds.
Asian stocks and U.S. index futures fell, while the yen snapped a
four-day slump as American lawmakers struggled to reach an accord on
raising the nation’s debt limit and restoring government operations.
Metals dropped after Chinese exports unexpectedly decreased. The MSCI
Asia Pacific excluding Japan Index slid 0.3 percent by 9:54 a.m. in
Singapore, with markets in Japan and Hong Kong closed for holidays.
- Rebar Gains for Third Day. Steel reinforcement-bar futures in Shanghai rose for a third day on signs demand for the building material may be growing. Rebar
for delivery in January on the Shanghai Futures Exchange climbed as
much as 0.4 percent to 3,615 yuan ($591) a metric ton and traded 3,610
yuan a metric ton at 10:18 a.m. Beijing time. The most-active contract
gained 0.4 percent last
week, the most since the five days through Aug. 16.
- Copper Supply Glut Seen Tripling as Prices Sink 10%: Commodities. The worldwide glut of copper supply
is poised to almost triple in 2014, driving prices to the lowest
in at least three years at a time when the International Monetary Fund says economic growth will be weaker than forecast. The
surplus will reach a 13-year high of 272,000 metric tons, according to
data from Barclays Plc and the International Copper Study Group in
Lisbon. Codelco and Freeport-McMoRan Copper & Gold Inc., the
biggest producers, are among those scheduled to add supply next year. The metal will drop as low as
$6,450 a ton in 2014, or 10 percent less than last week's close,
the median of 22 analyst estimates compiled by Bloomberg shows.
- ECB Bank Check to Be Different From Previous Tests, Coeure Says. The European Central Bank’s upcoming
check of European bank balance sheets will cast “three pairs of
eyes” over lenders’ books to ensure credibility, Executive
Board member Benoit Coeure said. “The way we will do it next year
will be very different from the way that the previous two stress tests
were done,” Coeure said at an event in Washington yesterday. “Any number
provided by the banks will first be checked by the national supervisor,
then there will be a second check at the European
level, in Frankfurt. And then there will be a third check by
independent auditors.”
Wall Street Journal:
- Senate Democrats Press New Front in Budget Battle. Republicans Oppose Move to Reopen Sequester Cuts. Senate leaders attempting to avoid a U.S. debt default remained at
loggerheads Sunday and escalated the standoff by reopening the
contentious issue of automatic spending cuts, damping hopes that some of
Congress's most canny negotiators would break the impasse. As
the search for a way to end the partial federal shutdown and avoid a
debt crisis shifted to the Senate, Democrats made plain that one of
their top priorities was to diminish the next round of across-the-board
spending cuts, known as the sequester, due to take effect early next
year.
- Crovitz: ObamaCare's Serious Complications. For the IRS alone, implementing the law involves 47 different statutory provisions. The functional failures of the Affordable Care Act websites are
well-documented, but the fundamental flaw is the law's mind-numbing
complexity. The officials who planned ObamaCare blame their Web
engineers, but they're passing the buck. ObamaCare is a hugely
complicated approach to addressing problems in health care that have
simpler solutions.
Fox News:
- Fiscal deals now focus on sequester, amid little Capitol Hill optimism about quick fix. The gray clouds looming over Washington this holiday weekend appear
to be thickening on Capitol Hill, as lawmakers express little optimism
about reaching a deal before Monday night to fix the country’s fiscal
crisis. The Senate will return to the Hill on Columbus Day after
participating in essentially a pro forma session Sunday in which they
made floor speeches but took no votes, with House members expected to
stay home until Tuesday, the conclusion of a weekend of failed
negotiations. “We will see our way through this, but the last 24 hours have not
been good,” Tennessee Sen. Bob Corker told “Fox News Sunday.” “It’s not
clear how this will end.”
CNBC:
- Senate Leaders talk; GOP blames Obama for gridlock. Senate Republicans on Sunday kept up the drumbeat of blame against
President Obama for what they say is his failure to negotiate with them
on the fiscal crisis that will come to a head on Thursday, when the
government will run out of money to pay its bills. As the
Republicans pointed fingers at the White House, Senators Harry Reid and
Mitch McConnell met again on Sunday in an effort to come up with some
sort of agreement — even one that will kick the most pressing problems
down the road for a few weeks or months.
- Why this could be an awful week for earnings. (video) A huge week for earning is coming up, with companies as diverse as
Coca-Cola, Bank of America, Google and GE revealing how much they earned
in the third quarter. And some traders worry that the results won't be good.
ValueWalk:
Business Insider:
- New Chinese Economic Data Suggest Global Demand Is Crumbling. China's export growth fizzled in September to post a surprise fall as
sales to Southeast Asia tumbled, data showed, a disappointing break to a
recent run of indicators that had signaled its economy gaining
strength. China's exports dropped 0.3 percent in September from a year earlier,
the Customs Administration said on Saturday, sharply confounding market
expectations for a rise of 6 percent, and marking the worst performance
in three months.
McClatchy:
Financial Times:
- Bank exposure to EU states’ bonds on rise. Europe’s
financial institutions are more exposed to their domestic government
bonds than at any time since the eurozone crisis started, reigniting
concerns that the fates of sovereign states and their banks are too
closely intertwined. Despite official pledges by eurozone
authorities to break the “sovereign-bank nexus”, government bonds
accounted for more than a 10th of Italian banks’ total
assets at the end of August, the last month for which data are
available. That is up from 6.8 per cent at the beginning of 2012,
according to data from the European Central Bank.
- Hedge funds shun new European framework Hedge
funds are shunning a new European framework aimed at improving
protection for investors in alternative funds, due to the associated
cost and compliance hurdles. Just 11 fund managers have signed up to
the regime in the UK, which accounts for 74 per cent of European hedge
fund assets under management, since it went live in July. A UK-based
investment consultant, who did not want to be named, said she would have
expected “thousands” of alternative fund managers to have registered by
now.
FAZ:
- ECB to Demand Higher Capital Levels in Balance Sheet Checks. Europe's most important banks need extra buffer against another potential crisis, ECB board member Yves Mersch said
in an interview. Banks will probably require core capital ratio of at
least 7% in relation to RWAs, according to FAZ calculations based on
Mersch's comments.
21st Century Business Herald:
- China
Banking Regulator Mulls Capping Local Govt Debt. China's banking
regulator plans to set an upper debt limit for local govts. China's
auditing agency will submit a report on govt debt to the cabinet in
mid-Oct. after a 3-mo. nationwide audit.
China Securities Journl:
- China
to Start New Study of Property Market. China's housing ministry will
study property markets in cities such as Chengdu in the near term,
signaling acceleration of establishment of system for long-term property controls, citing people familiar with the matter. The long-term system may include property cos. financing policy, the report said.
Night Trading
- Asian indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 140.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 109.75 -1.0 basis point.
- NASDAQ 100 futures -.48%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The Fed's Bernanke speaking, Eurozone Industrial Production and Japan Industrial Production could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity
and technology shares in the region. I expect US stocks to open
modestly lower and to maintain losses into the afternoon. The
Portfolio is 50% net long heading into the week.
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as US debt ceiling/govt shutdown worries, global
growth fears and earnings concerns offset short-covering, technical
buying and bargain-hunting. My intermediate-term trading indicators are
giving neutral signals and the Portfolio is 50% net long heading into the week.
