Evening Headlines
Bloomberg:
- Singapore Shows Asia How To Crack Down on Housing Bubble. Singapore, the city-state that banned chewing gum to curb litter, is showing the rest of Asia how to cool a housing bubble.
The government this year ramped up efforts to bring down property
prices that surged to a record, adopting some of its strictest measures,
including a cap on debt at 60 percent of a borrower’s income, higher
stamp duties on home purchases and an increase in real-estate taxes. The
combination and
timing of the curbs is the most comprehensive among governments battling
housing bubbles, according to Vishnu Varathan, an economist at Mizuho
Bank Ltd.
- China’s Stocks Fall Most in Three Weeks on Economic Concerns. China’s
stocks fell the most in three weeks after JPMorgan Chase & Co.
advised reducing holdings and companies linked to Shanghai’s free-trade
zone tumbled on concern valuations are excessive. Shanghai
International Port (Group) Co. and Shanghai Waigaoqiao Free Trade Zone
Development Co. plunged more than 7 percent after more than doubling
since Aug. 22. Aluminum Corporation of China Ltd. and Jiangxi Copper
Co., the nation’s biggest producers of aluminum and copper, led declines
for metal producers. Cosco Shipping Co. and China Eastern Airlines
Corp. slumped at least 4 percent. The Shanghai Composite Index (SHCOMP) slid 1.6 percent to 2,196.94
at 10:46 a.m., heading for the biggest loss since Sept. 26.
- Asian Stocks Swing Between Gains, Losses on U.S. Impasse.
Asian stocks swung between gains and losses as U.S. lawmakers resumed
talks to avoid a default ahead of tomorrow’s deadline to raise the debt
ceiling. Li & Fung Ltd., a supplier of toys and clothes to
Wal-Mart Stores Inc., fell 0.9 percent in Hong Kong. Japan Tobacco Inc.,
Asia’s largest listed cigarette maker, dropped 3.1 percent on a report
it may raise prices after an increase in the nation’s sales tax. GungHo
Online Entertainment Inc. jumped 17 percent in Tokyo after the game
developer and its parent SoftBank Corp. agreed to buy 51 percent of
Finland’s Supercell Oy.
The MSCI Asia Pacific Index was little changed at 141.36 as
of 11:23 a.m. in Tokyo, after swing between gains and losses of
0.2 percent.
- Rebar Falls in Shanghai With Chinese Stocks on Economic Outlook.
Steel reinforcement-bar futures in Shanghai fell as Chinese stocks
dropped the most in three weeks on concern the nation’s economy is
losing momentum. Rebar for delivery in January on the Shanghai Futures Exchange fell by as much as 0.7 percent to 3,581 yuan ($587) a
metric ton before trading at 3,586 yuan at 10:35 a.m. local
time. Prices have dropped 10 percent this year.
- Rubber Drops from Two-Week High as U.S. Debt Deadline Looms. Rubber retreated from the highest
level in more than two weeks as the deadlined loomed for U.S.
lawmakers to reach a deal on raising the debt limit and avoiding
a default. The contract for March delivery dropped as much as 1.2
percent to 267.5 yen a kilogram ($2,715 a metric ton) on the Tokyo
Commodity Exchange and was at 268.6 yen at 11:09 a.m. in Tokyo. The most-active contract ended at 270.8 yen yesterday,
the highest settlement since Sept. 26. Prices have fallen 11
percent this year.
- Putin Builds North Korea Rail to Circumvent Suez Canal. Vladimir Putin is inching closer to his goal of turning Russia into a major transit route for trade between eastern Asia and Europe by prying open North Korea, a nuclear-capable dictatorship isolated for half a century.
- Draghi Turns Judge on Europe Banks as ECB Studies Balance Sheets. The
European Central Bank is sizing up just how tough it wants to get with
the region’s lenders. Policy makers at the Frankfurt-based ECB will this
week try to agree on the ground rules of its three-pronged probe into
the
health of the 130 banks it will start supervising next year. The
process will stress-test balance sheets for exposure to
sovereign debt as well as push institutions to admit to more of
their bad debt than they have before, according to three
officials who spoke on condition of anonymity.
- CME(CME) Boosts Rate Swap Margin 12%. “CME
Clearing is closely monitoring the developments
related to the U.S. reaching its debt ceiling,” the Chicago-based
company said in a notice to members posted on its website today.
“Anticipating possible market moves specific to this event, CME will
increase margin for all” over-the-counter
interest-rate swaps.
Wall Street Journal:
- House GOP Abandons Its Proposal. In Senate, Reid and McConnell Resume Their Talks. Last-minute protests from conservatives in the House created a day of
delay and confusion in Congress's efforts to avoid a U.S. debt default,
as Republican leaders failed to craft a GOP budget proposal that could
muster enough votes to pass.
- SunTrust(STI) Eliminating 800 Mortgage Employees in Next Several Months. SunTrust Banks Inc. will eliminate 800 mortgage employees as a
refinancing boom that boosted many banks' loan volumes comes to a screeching
halt amid rising interest rates. The Atlanta bank will cut the positions over the next several months and
expects attrition to account for some of the reductions, Sue Mallino, a SunTrust
spokeswoman, said in a statement on Tuesday. "Like many financial institutions, we are adjusting our staffing in the
mortgage business to reflect current market conditions, particularly the reduced
volume of mortgage loan refinancing," Ms. Mallino said.
Fox News:
- House cancels vote on budget, focus turns to Senate. House Republicans abruptly cancelled plans to take up a revised budget
proposal Tuesday evening after leaders struggled to round up votes,
leading Senate negotiators to resume bipartisan talks in hopes of
reaching a deal before Thursday's debt ceiling deadline.
- Fast-food CEO says Obama 'wrong,' health law is hurting job creation. Andy Puzder, the CEO of CKE Restaurants Inc. which is the parent company
of Carl’s Jr. and Hardee’s, told Megyn Kelly on “The Kelly File,” that
his company and others will choose to hire part-time employees instead
of full-time employees because of increased costs from the health care
law.
CNBC:
Zero Hedge:
Business Insider:
Washington Post:
- Visits to federal health-care Web site off 88%. The
number of visitors to the federal government’s HealthCare.gov Web site
dropped 88 percent between Oct. 1 and Oct. 13, according to a new
analysis of America’s online use, while less than half of 1 percent of
the site’s visitors successfully enrolled for health insurance the first
week. The new numbers on the new health-care law — released by
Kantar US Insights and based on an assessment conducted by the
nonpartisan research firm
Millward Brown Digital — provide a partial snapshot of how the federal
health-care exchange has fared since it launched at the start of the
month.
NY Times:
- Export Fair in China Loses Steam. With nearly as much floor space as five
McCormick Places in Chicago, the sprawling Canton Fair, which opened in
Guangzhou Tuesday morning, is a monument to China’s industrial
versatility and export prowess. But although the 12 million square feet of exhibits still offer products
as varied as wheelbarrows and Segway knockoffs, the autumn session of
the fair hints at the broader malaise now afflicting exporters across
China and other East Asian nations.
- Italian Prime Minister Calls Populism a Threat to Stability in Europe. With European parliamentary elections less than eight months away, Prime
Minister Enrico Letta of Italy on Monday warned that the rise of angry
populism poses the greatest threat to stability on the Continent and
could undermine critical efforts to build and strengthen the euro zone’s
political and financial institutions.
The Federalist:
Reuters:
- CSX(CSX) sees better 2013, posts higher profit.
CSX Corp posted a higher quarterly profit as its non-coal business did
well and the railroad increased prices. Jacksonville, Florida-based CSX,
the first of the big railroads to report quarterly results, earned $463
million or 46
cents a share, up from $455 million or 44 cents a share, last
year.
Telegraph:
Commercial Times:
- Formosa Epitaxy Sees Lower LED Chip Price Next Year. Industry
average selling price may drop -10% next year, following a similar
decline this year, citing Formosa Epitaxy Chairman Chien Feng-Jen.
Evening Recommendations
BMO Capital:
- Rated (WFM) Outperform, target $70.
- Rated (UNFI) Outperform, target $83.
- Rated (TFM) Outperform, target $60.
- Rated (SWY) Outperform, target $38.
- Rated (CASY) Underperform, target $66.
- Rated (SUSS) Outperform, target $60.
- Rated (FWM) Outperform, target $28.
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 136.0 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 106.5 -3.0 basis points.
- NASDAQ 100 futures +.35%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- The NAHB Housing Market Index for October is estimated to fall to 57 versus 58 in September.
2:00 pm EST
Upcoming Splits
Other Potential Market Movers
- The Fed's George speaking, Fed's Fisher speaking, Fed's Pianalto speaking, Eurozone CPI, UK Unemployment and the weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 17.89 +11.33%
- Euro/Yen Carry Return Index 138.69 -.54%
- Emerging Markets Currency Volatility(VXY) 8.88 -1.33%
- S&P 500 Implied Correlation 50.41 +12.25%
- ISE Sentiment Index 68.0 -26.88%
- Total Put/Call 1.01 +14.77%
Credit Investor Angst:
- North American Investment Grade CDS Index 77.35 +.74%
- European Financial Sector CDS Index 120.71 -5.77%
- Western Europe Sovereign Debt CDS Index 73.0 +.69%
- Emerging Market CDS Index 268.33 -2.62%
- 2-Year Swap Spread 12.75 -1.0 basis point
- TED Spread 14.75 -4.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -8.0 +1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .10% +4 basis points
- Yield Curve 237.0 +4 basis points
- China Import Iron Ore Spot $133.60/Metric Tonne n/a
- Citi US Economic Surprise Index 30.90 -1.7 points
- Citi Emerging Markets Economic Surprise Index -8.80 +1.4 points
- 10-Year TIPS Spread 2.21 unch.
Overseas Futures:
- Nikkei Futures: Indicating +7 open in Japan
- DAX Futures: Indicating -17 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Added to my my (IWM)/(QQQ) hedges
- Market Exposure: 25% Net Long
Bloomberg:
- Bodies Double as Cash Machines With U.S. Income Lagging: Economy. Hair, breast milk and eggs are
doubling as automated teller machines for some cash-strapped
Americans such as April Hare. Out of work for more than two years and facing eviction
from her home, Hare recalled Louisa May Alcott’s 19th-century
novel and took to her computer.
Wall Street Journal:
- Health Law Stirs Lending Worries for Small Business. Small businesses are griping that the new U.S. health-care law is
difficult to understand. Now some may have another complaint: If they
don’t have a handle on the law’s cost and impact, they may have a harder
time getting a loan.
Fox News:
- White House, Dems preemptively blast House GOP budget plan before it's introduced.
The White House and its Democratic allies in Congress moved to shoot
down an emerging House Republican budget proposal before it even left
the ground, blasting the late-breaking plan as a "partisan" product that
would imperil efforts to meet the looming debt-ceiling deadline. Senate Democratic Leader Harry Reid turned a deaf ear, declaring categorically that it "won't pass the Senate."
Zero Hedge:
Mish's Global Economic Trend Analysis:
9to5Google:
Reuters:
- Bank of Italy examines loan books of top two banks - sources. The Bank of Italy is examining the loan books of the country's top lenders UniCredit and Intesa
Sanpaolo, three banking sources said on Tuesday, in its push to
tidy their balance sheets before next year's sector check-up by
the European Central Bank (ECB).
Yonhap News:
- N. Korea ready to make another nuke test anytime: S. Korean envoy. North Korea has "very serious nuclear capabilities" and it is able to conduct
another round of nuclear tests "any time," South Korea's nuclear envoy said
Tuesday. The communist country has restarted a nuclear reactor at its Yongbyon nuclear
center, a provocative move that would provide Pyongyang with enough plutonium to
build one atomic bomb a year, according to Seoul's spy agency.
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -2.10% 2) Defense -1.96% 3) Networking -1.55%
Stocks Falling on Unusual Volume:
- TDC, FLIR, CVLT, IVZ, WCC, CZR, ATLS, DPZ, APL, MSTR, ETH, INFA, NVS, CTXS, QLIK, RL, APEI, VRNT, ORB, BRO, ZMH, UTEK, VFC, CHKP, ABG, APL and CZR
Stocks With Unusual Put Option Activity:
- 1) ANV 2) KMX 3) OPK 4) WFM 5) X
Stocks With Most Negative News Mentions:
- 1) BA 2) JCP 3) FLIR 4) TDC 5) JPM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +1.98% 2) Gaming +1.08% 3) Alt Energy +.92%
Stocks Rising on Unusual Volume:
- VISN, OPK, NOAH, INSM, SCHW, PXD, BBY, FDX, AMCC, ECYT, ESI, ATI, X, AMTD, DXCM and BBY
Stocks With Unusual Call Option Activity:
- 1) NUS 2) PXD 3) SYNA 4) RSH 5) FU
Stocks With Most Positive News Mentions:
- 1) SCHW 2) BA 3) JNJ 4) KBH 5) AAPL
Charts:
Evening Headlines
Bloomberg:
- Asian Stocks Rise Amid Signs U.S. May Broker Deal on Debt.
Asian stocks rose, with the regional index heading for a five-month
high, as Senate leaders said they’re optimistic they will forge a deal
to reopen the U.S. government and avoid a breach of the debt limit this
week. James Hardie Industries SE, a maker of building materials that
gets about 70 percent of sales from the U.S., increased 1.5 percent in
Sydney. Mazda Motor Corp. (7261) jumped 3.3 percent in Tokyo after
Macquarie Group Ltd. and BNP Paribas raised ratings on the carmaker.
Hankook Tire Co., South Korea’s No. 1 tiremaker, advance 1.8percent
after announcing plans to build its first
factory in the U.S. The MSCI Asia Pacific Index gained 0.5 percent to 141.57 as
of 11:07 a.m. in Tokyo, with almost three shares rising for each
that fell.
- Rebar Little Changed as Investors Weigh Steel Output, Iron Ore. Steel reinforcement-bar futures in
Shanghai were little changed as China’s steel output climbed and
iron ore prices increased. Rebar for delivery in January on the
Shanghai Futures Exchange was at 3,628 yuan ($594) a metric ton at 10:21
a.m. local time from 3,625 yuan yesterday.
- Coal Slump Leaves Australia Port Half-Used, Bank Lenders at Risk. Australia
& New Zealand Banking Group Ltd. (ANZ) and Westpac Banking Corp.
are among lenders risking losses on $3 billion of loans backing a coal
port in Australia that will be twice its required size. Wiggins
Island Coal Export Terminal Pty, the group comprising the unfinished
project’s owners, including Glencore Xstrata Plc (GLEN) and Wesfarmers
Ltd. (WES), in 2011 borrowed the debt from 19 banks, according to data
compiled by Bloomberg. When the port in the state of Queensland begins
shipping in early 2015, only about half of its 27 million metric tons of
initial annual export capacity will be used after a slump in coal
demand, forecaster Wood Mackenzie Ltd. estimates.
- China Challenges CME to SGX With Iron-Ore Futures Contract. China’s
Dalian Commodity Exchange
will start trading the country’s first iron-ore futures for physical
delivery this week, challenging index-backed contracts by CME Group Inc.
and Singapore Exchange Ltd. (SGX) Trading will begin Oct. 18 after
the securities regulator approved the plan last week, the bourse in the
northeastern port city said in a statement on its website yesterday. Chinese
steelmakers, the world’s biggest iron-ore buyers, earlier this year
questioned the reliability of a price index provided by Platts that became a benchmark after producers including Vale SA (VALE) and Rio Tinto (RIO) Group scrapped annual contract
price talks in 2010. China started its own spot-trading platform
last year, introducing a weighted average daily price in March.
- S&P Subpoenas Federal Reserve Board as Part of U.S. Suit. McGraw
Hill Financial Inc. (MHFI)’s Standard & Poor’s unit seeks
information from the board of governors of the Federal Reserve to
bolster its defense against U.S. claims it misled investors in
mortgage-backed securities. The credit rating company said it served
subpoenas on the Federal Reserve board as well as the Federal Open
Market Committee and the Federal Reserve Bank of New York, according to
a filing today in federal court in Santa Ana, California.
- Fed Gets Bigger in Markets as QE Prompts New Tools. The
Federal Reserve is getting more involved in debt markets as it tries to
compensate for the impact of its almost $4 trillion balance sheet on
short-term interest rates. Policy makers are testing a new tool intended to improve their control of near-term borrowing costs. The facility would
allow banks, broker-dealers, money-market funds and some
government-sponsored enterprises to lend the Fed unlimited
amounts of cash overnight at a fixed rate in exchange for
borrowing Treasuries in so-called reverse repo transactions.
- Saudi Aramco Plans ‘Massive’ Spending to Extend Field Life. Saudi Arabia, the world’s largest
crude exporter, is making “massive investments” as it seeks a
production buffer to guard against swings in global oil prices while addressing a decline in output from its older fields.
Saudi Arabian Oil Co., the state-owned producer known as Saudi Aramco,
plans to maintain spare output capacity of more than 2 million barrels a
day, according to Chief Executive Officer Khalid Al-Falih. The
Dhahran-based company raised its annual capital budget tenfold to $40
billion over the last decade and, in the past two years, has adjusted
its daily production by more than 1.5 million barrels, he said.
Wall Street Journal:
- Senate Leaders in Striking Distance of a Deal. White House Meeting Delayed to Give Talks More Time to Progress. Top Senate leaders said they were within striking distance of an
agreement Monday to reopen the federal government and defuse a looming
debt crisis just days before the U.S. could run out of money to pay its
bills.
Fox News:
MarketWatch.com:
- Teradata(TDC) shares fall after outlook cut.
Shares of Teradata fell 12% to $46.17 on heavy volume after the company
said it now expects adjusted full-year earnings of $2.70 to $2.80 a
share. Analysts surveyed by FactSet expect earnings of $2.85 a share.
CNBC:
- Nobel prize winner warns of 'bubbly' home prices. One of three American economists who won the 2013 economics Nobel
prize on Monday for research into market prices and asset bubbles
expressed alarm at the rapid rise in global housing prices. Robert
Shiller, who shared the 8 million Swedish crown ($1.25 million) prize
with fellow laureates Eugene Fama and Lars Peter Hansen, said the U.S.
Federal Reserve's economic stimulus and growing market speculation were
creating a "bubbly" property boom.
Zero Hedge:
Business Insider:
Washington Post:
- NSA collects millions of e-mail address books globally. The
National Security Agency is harvesting hundreds of millions of contact
lists from personal e-mail and instant messaging accounts around the
world, many of them belonging to Americans, according to senior intelligence officials and top secret documents provided by former NSA contractor Edward Snowden. The
collection program, which has not been disclosed before, intercepts
e-mail address books and “buddy lists” from instant messaging
services as they move across global data links.
Reuters:
- Brazil, worried over debt, to lend less to BNDES, states. Brazil
will inject less money next year into the country's development bank
BNDES, its leading source of long-term corporate loans, to focus more on
infrastructure financing as concerns mount over public debt. The National Treasury has a target of phasing out annual
capital injections into BNDES "within a few years," Finance
Minister Guido Mantega said on Monday.
China Securities Journal:
- China May Face Greater Inflation Pressure in 2014. China may face
greater inflationary pressures next year if global economic recovery
accelerates, according to a commentary published on its front page,
written by its reporter Gu Xin.
- China 2H Inflation May
Face More Upward Pressure. China may face greater upward inflationary
pressure in 2H, as compared with 1H, citing Hu Chi, researcher at the
State-owned Assets Supervision and Administration Commission's research
center.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 139.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 109.5 -.25 basis point.
- NASDAQ 100 futures +.18%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Empire Manufacturing for October is estimated to rise to 7.0 versus 6.29 in September.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Fed's Williams speaking, Fed's Dudley speaking, weekly retail sales reports, Germany ZEW Index, UK Inflation, (WMT) Investment Community Meeting and the (WWW) Investor Day could also impact trading today.
BOTTOM LINE: Asian
indices are higher, boosted by technology and commodity shares in
the region. I expect US stocks to open modestly higher and to
weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
