Evening Headlines
Bloomberg:
- Survivor of 150 Years of Turmoil Faces Being Buried by Abenomics. When Shigeo Aiba is worried about the survival of his company, it’s time to pay attention. Aiba
is president of Togo Seisakusyo Corp., a Japanese maker of industrial
springs that traces its roots back more than 150 years to when Jyouuemon
Aiba began repairing farm equipment among the rice fields of Chita
peninsula 270 kilometers (170 miles) southwest of Tokyo. The
business, which survived the effects of the Great Kanto Earthquake,
defeat in World War II, destruction by a typhoon and the collapse of the
asset bubble in the 1980s, is now struggling to survive Abenomics.
- China’s Major Cities Post Home-Price Gains as Curbs Kept. Home
prices in China’s four major cities rose the most since January 2011
last month, raising concerns that a lack of new property curbs is
allowing a bubble to form. New home prices climbed in 69 of the 70
cities the government tracked in September from a year earlier, led by
20 percent increases in the southern business hubs of Shenzhen and
Guangzhou, the National Bureau of Statistics said in a statement today. Prices
in Beijing rose 16 percent and advanced 17 percent in Shanghai, the
biggest gains since the government changed its methodology for the home
data in 2011.
- Asian Stocks Retreat as Ringgit Slips While Crude Slides.
Asia’s benchmark stock gauge fell from its highest level in five months
and emerging-market currencies slid before U.S. jobs data. Industrial
metals rose. The MSCI Asia Pacific Index dropped 0.3 percent at 11:03 a.m. in Tokyo.
- Rubber Climbs for Second Day as Yen Drops Before U.S. Jobs Data.
Rubber advanced for a second day as Japan’s currency extended a decline
before U.S. payrolls data, raising the appeal of yen-denominated
futures. The contract for March delivery gained as much as 1.1
percent and was 0.4 percent higher at 269.5 yen a kilogram ($2,742 a
metric ton) on the Tokyo Commodity Exchange at 11:36
a.m. local time. The increase pared losses to 11 percent this
year for a most-active contract.
- Rebar Swings on Concern China Home Price Gains May Spur Curbs. Steel reinforcement-bar futures in
Shanghai swung between gains and losses as China may introduce
measures to contain property prices after home prices climbed in
69 out of 70 cities last month.
Rebar for delivery in May on the Shanghai Futures Exchange
was little changed at 3,645 yuan ($598) a metric ton at 9:58 a.m.
local time, after gaining as much as 0.4 percent and losing as
much as 0.3 percent.
- Europe Breakup Forces Mount as Stalwarts Regret Losing Relevance. What the EU’s founders in the 1950s intended as “ever
closer union” now risks going in the opposite direction:
Britain is threatening to secede; the euro, battered by the
four-year debt crisis, remains at risk of splintering; anti-euro
forces are advancing in France, the EU’s heartland; separatists
are pushing to burst the U.K., Belgium and Spain. Economic lethargy combined with a deepening political
quagmire and mounting debt load as leaders struggle to tame the
legacy of the financial crisis risk condemning Europe to lag
further behind emerging powers like China. Europe’s global heft
is eroding: the euro zone’s share of global gross domestic
product has fallen to 13.1 percent from 18.3 percent when the
currency was forged in 1999, according to International Monetary
Fund data.
- Loan Safeguards Drop to Record Low in Risky Debt:
Credit Markets. Safeguards on speculative-grade debt are weakening at a
record pace as the neediest U.S. companies obtain financings that don't
offer typical lender protection.
- BofA(BAC) Said to Face Three More U.S. Probes of Mortgage-Bond Sales. Bank of America Corp.,
sued by U.S. attorneys in August over an $850 million mortgage bond,
faces three additional Justice Department civil probes over
mortgage-backed securities, according to two people with direct knowledge
of the situation. U.S. attorneys offices in Georgia and California are
examining potential violations tied to Countrywide Financial
Corp., the subprime lender Bank of America bought in 2008, said
the people, who asked not to be identified because the inquiries
aren’t public. U.S. attorneys in New Jersey are looking into
deals involving Merrill Lynch & Co., purchased by the firm in
2009, the people said.
- Fed Got in Trouble With Transparency, Ferguson Says. Roger W. Ferguson, a former U.S.
Federal Reserve vice chairman, said the Fed’s push for
transparency amid quantitative easing tripped up the central
bank this year. “They got themselves in trouble when they tried to be very
transparent, give us our forward guidance, promise things, and
then they don’t deliver,” Ferguson, head of insurer TIAA-CREF, said today in New York at a conference held by Limra, an
industry group.
Wall Street Journal:
- Spy Chief Distances Saudis From U.S. Prince Bandar's Move Raises Tensions Over Policies in Syria, Iran and Egypt. Saudi Arabia's intelligence chief told European diplomats this
weekend that he plans to scale back cooperating with the U.S. to arm and
train Syrian rebels in protest of Washington's policy in the region,
participants in the meeting said. Prince
Bandar Bin Sultan al-Saud's
move increases tensions in a growing dispute between the U.S. and
one of its closest Arab allies over Syria, Iran and Egypt policies. It
follows Saudi Arabia's surprise decision on Friday to renounce a seat on
the United Nations Security Council.
Fox News:
CNBC:
- Netflix(NFLX) shares soar as outlook blows past forecasts. Netflix
shares jumped more than 10 percent after the company said it gained
more subscribers than expected at home and abroad, helped by original
series like"Orange is the New Black," and predicted additional growth
this quarter.
Zero Hedge:
Business Insider:
National Journal:
Reuters:
- Illumina(ILMN) reports eighth beat in a row, raises profit forecast.
Gene sequencing products maker
Illumina Inc's results beat analysts' estimates for the eighth straight
quarter, and the company forecast higher-than-expected earnings for the
year. Illumina shares, which have almost doubled this year, were up 7
percent at $87.20 in extended trading on Monday.
- VMware(VMW) forecasts strong licensing revenue growth for 2014. Cloud
software maker VMware Inc reported a higher-than-expected quarterly
profit as it sold more licenses to enterprise customers and indicated
that strong licensing revenue growth would continue into next year.
VMware shares rose 9 percent in extended trading, while those of parent EMC Corp rose 5 percent, even though
VMware lowered the upper end of its full-year revenue forecast
range to $5.21 billion from $5.26 billion.
Financial Times:
- German city apartments overvalued, warns Bundesbank.
The Bundesbank has warned that apartment prices in Germany’s biggest
cities could be overvalued by as much as 20 per cent, stepping up its
concern about a
real estate boom in the powerhouse of the European economy. The warning will feed into German concern that the European
Central Bank’s monetary policy is far too loose for the country. The
bank’s main refinancing rate is 0.5 per cent, a record low.
Economic Daily News:
- Apple(AAPL) Preparing 55-Inch, 65-Inch TVs for 2014. LG Display
will be the major supplier of 4K2K panels with Sharp and Innolux also
getting orders. Assemblers have been told to prepare for production in
3Q next year.
China Daily:
- Shanghai Zone Free Yuan Float 'Impossible'. A freely floating and
convertible yuan in the Shanghai free-trade zone is "impossible" and
"ridiculous" for anyone with even a basic knowledge of economics, Mei
Xinyu, a researcher at the International Trade and Economic Cooperation
Institute of the Minister of Commerce, writes in a commentary.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 133.5 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 103.0 unch.
- NASDAQ 100 futures -.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for September is estimated to rise to 180K versus 169K in August.
- The Unemployment Rate for September is estimated at 7.3% versus 7.3% in August.
- Average Hourly Earnings for September is estimated to rise +.2% versus a +.2% gain in August.
9:00 am EST
- Net Long-term TIC Flows for August are estimated to fall to $31.0B versus $31.1B in September.
10:00 am EST
- Construction Spending for August is estimated to rise +.4% versus a +.6% gain in September.
- Richmond Fed Manufacturing Index for October is estimated at 0.0 versus 0.0 in September.
Upcoming Splits
Other Potential Market Movers
- The weekly retail sales reports, Chicago Fed National Activity Index for September and the Apple(AAPL) iPad event could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.32 +2.15%
- Euro/Yen Carry Return Index 140.08 +.36%
- Emerging Markets Currency Volatility(VXY) 8.45 +.84%
- S&P 500 Implied Correlation 36.43 +1.0%
- ISE Sentiment Index 124.0 +53.0%
- Total Put/Call .80 +17.65%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.38 +1.46%
- European Financial Sector CDS Index 122.08 +1.36%
- Western Europe Sovereign Debt CDS Index 70.99 -.46%
- Emerging Market CDS Index 260.05 +1.14%
- 2-Year Swap Spread 13.25 unch.
- TED Spread 21.25 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -6.5 unch.
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 229.0 +2 basis points
- China Import Iron Ore Spot $134.40/Metric Tonne unch.
- Citi US Economic Surprise Index 19.60 -3.6 points
- Citi Emerging Markets Economic Surprise Index -10.30 -.7 point
- 10-Year TIPS Spread 2.19 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +56 open in Japan
- DAX Futures: Indicating -3 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs
- Market Exposure: 75% Net Long
Bloomberg:
- European Stocks Rise for Eighth Day as Philips, Akzo Gain. European stocks gained for an eighth day as companies from Royal Philips NV to Akzo Nobel AG reported profit that beat estimates and investors speculated the Federal Reserve may maintain stimulus measures into next year.
Philips, the world’s biggest lighting manufacturer, and
Akzo Nobel, the Dutch maker of Dulux paint, jumped more than 5
percent. Actelion Ltd. rallied to a six-year high as its lung
drug Opsumit won U.S. approval. SAP AG added 4.8 percent after
the maker of business-management software posted increased
third-quarter earnings and reiterated its full-year forecast. The Stoxx Europe 600 Index advanced 0.3 percent to 319.54
at the close of trading, the highest level since June 2008.
- Nickel glut extends to fourth year on China supply. The global glut of nickel will extend into a fourth year in 2014 as new
technology lowers costs for Chinese furnaces producing record amounts of
a lower-grade substitute that helped drive prices into a bear market.
- Coffee Tumbles to Lowest Since March 2009 on Expanding Supplies. Coffee fell to the lowest in more
than four years as dry weather helps improve growing conditions in Brazil, the world’s largest producer and exporter. Most of Brazil’s growing areas will get sun this week, as
alternating periods of rain and dry weather allow farmers to
work in fields and spur crops that will be collected next season
to flower multiple times, Marcio Custodio, a forecasting
director at Sao Paulo-based Somar Meteorologia, said today in a
telephone interview. The beneficial conditions will boost
output, he said.
- WTI Crude Falls to $100; First Time Since July on Supply. West Texas Intermediate fell below
$100 a barrel for the first time since July amid forecasts that
crude stockpiles increased to a three-month high in the U.S.,
the world’s biggest oil consumer. Futures declined as much as 1.2 percent,
after losing 1.2 percent last week. U.S. crude inventories probably
climbed by 3 million barrels to 373.5 million in the week ended Oct. 11,
a Bloomberg News survey before a government report today showed. That
would be the highest level since July. A Nigerian rebel
group said it plans to escalate a violent campaign of disrupting
oil production by targeting offshore fields.
Wall Street Journal:
- Margin Debt Hits New High. Investors took a record level of debt out against their portfolios
last month, and borrowing made the biggest monthly jump since January. Last month, investors borrowed $401.2 billion against their
portfolios, exceeding April’s record of $384.4 billion, according to the
New York Stock Exchange. The Big Board’s member brokerage firms report
the level of borrowing, known as margin debt, held against client
accounts monthly. Debt rose 4.8% in September from the previous month, the biggest
single-month jump since January. That was larger than the corresponding
rise in the S&P 500, which gained 3% despite tensions in Washington
that led to the first partial U.S. government shutdown in 17 years this
month.
CNBC:
- More youth not in school, without jobs. Almost 6 million young people are neither in school nor working, according to a study released Monday. That's almost 15 percent of those aged 16 to 24 who have neither desk
nor job, according to The Opportunity Nation coalition, which wrote the
report.
Zero Hedge:
Business Insider:
- DRUCKENMILLER: 'I'm A 60-Year-Old Washed Up Money Manager'. It has become harder for me, because the importance of my skills is receding. Part of my advantage, is that my strength is economic forecasting, but that only works in free markets,
when markets are smarter than people....It's not predicting anything
the way it used to and that really makes me reconsider my ability to
generate superior returns. If the most important price in the most
important economy in the world is being rigged, and everything else is
priced off it, what am I supposed to read into other price movements?
New York Post:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -1.90% 2) Oil Tankers -1.38% 3) Biotech -1.15%
Stocks Falling on Unusual Volume:
- TTS, KALU, PETS, NOAH, MZOR, CGIX, OPK, CCI, RBS, YRCW, BGS, QCOR, GT, CHL, DQ, CLDX, CSTE, CECE, GIB, CZR, GCI, RLGY, RICK, FHN and TTS
Stocks With Unusual Put Option Activity:
- 1) TXN 2) GERN 3) APOL 4) BHI 5) COH
Stocks With Most Negative News Mentions:
- 1) JPM 2) JCP 3) FB 4) CL 5) BAX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.70% 2) Networking +.68% 3) Steel +.61%
Stocks Rising on Unusual Volume:
- XTXI, XTEX, HAS, ATHN, SAP, CHKP, VISN, FSLR, UPL, SCTY, VFC, AOS, CE, PHG, WBMD, BCC, VHC, DK, XOOM and CLNE
Stocks With Unusual Call Option Activity:
- 1) HAS 2) TIVO 3) GTAT 4) RLGY 5) COH
Stocks With Most Positive News Mentions:
- 1) VFC 2) SILC 3) NFLX 4) PCLN 5) SCTY
Charts:
Weekend Headlines
Bloomberg:
- Japan’s Export Growth Slows in Challenge for Abe: Economy.
Japan’s export growth slowed in September and the nation extended a
record run of trade deficits, underscoring the challenge for Prime
Minister Shinzo Abe in sustaining momentum in the world’s third-biggest
economy. Shipments increased 11.5 percent from a year earlier, the
weakest pace in three months, a finance ministry report showed
in Tokyo. That compared with a 14.6 percent gain in August and the 15.6 percent median forecast of 24 economists surveyed by Bloomberg News.
- Asia Stocks Advance on Outlook for Federal Stumulus.
Asian stocks rose, with the regional benchmark index extending its
advance from a five-month high, amid speculation the Federal Reserve
will delay stimulus cuts. Canon Inc., the world’s biggest camera maker,
gained 1.1 percent as a weaker yen boosted the earnings outlook for
Japanese exporters. Naver Corp. advanced 5 percent to a record in Seoul
after KB Investment & Securities Co. raised its price target for the
Internet company. Qantas Airways Ltd. slipped 4.6 percent, extending
losses for a second day, after Australia’s largest carrier said last
week it expects the lowest yields in
more than a decade for passenger flights. The MSCI Asia Pacific Index added 0.2 percent to 143.76 as
of 12:10 p.m. in Tokyo, with about five shares rising for every
three that fell.
- Rubber Declines to One-Week Low as Stockpiles in Shanghai Swell.
Rubber fell for a fourth day to the lowest level in almost a week after
data showed stockpiles in Shanghai swelled to the highest level since
January 2010. The contract for March delivery lost as much as 1.6
percent to 263.1 yen a kilogram ($2,685 a metric ton) on the Tokyo
Commodity Exchange, the lowest level since Oct. 15. Futures
traded at 265.2 yen at 10:27 a.m., expanding losses for a most-active
contract to 12 percent this year.
- Rebar Extends Weekly Drop as China Fixed Asset Investment Slows.
Steel reinforcement-bar futures in Shanghai extended a weekly drop as
China’s fixed asset investment dipped and industrial production slowed. Rebar for delivery in January on the Shanghai Futures
Exchange fell as much as 0.5 percent to 3,551 yuan ($582) a
metric ton and was at 3,559 yuan at 10:44 a.m. local time. The
most-active contract lost 0.9 percent last week, the first such
drop in three weeks.
- Draghi Says Bank-Aid Rules Must Be Flexible on Forced Losses. European
Central Bank President Mario Draghi said banks should be able to access
public aid without wiping out junior bondholders if regulators decide a
lender needs more capital and isn’t on the brink of failure.
Draghi urged the European Union to make clear when it will
allow exceptions to state-aid rules that require private-sector
creditors to take losses before government backstops can step
in.
- CN Train Carrying Crude Derails in Alberta, Sparking Fire. A
Canadian National Railway Co. (CNR) train carrying crude oil and
liquefied petroleum gas derailed west of Edmonton early today, causing
an explosion and fire. One car containing LPG, or propane, exploded and set two
other cars leaking the flammable substance on fire, said Carson
Mills, a spokesman for Parkland County, in a telephone
interview. Thirteen cars derailed, he said.
Wall Street Journal:
- Budget Discord Simmers Among Democrats. Some Liberal Groups, Lawmakers Worry About Cuts to Social Security, Other Entitlements. Cracks are showing in the Democratic coalition as the next round of
budget talks gets under way, hurting the chances for progress toward a
broad deal that changes the tax code and significantly narrows future
deficits.
- Sending a Bad Message to Big Banks. The feds' hypocrisy about J.P. Morgan's takeover of Bear Stearns will make other banks wary in the next crisis. The FDIC chairman said "little thought was given" to resolving the
big-bank crisis, and now equally little thought seems to have been given
to the pursuit of J.P. Morgan Chase over Bear Stearns. Once the
government proves itself to be an unreliable "partner" in resolving
failed institutions, it will find fewer banks willing to step in next
time there is systemic risk to the banking system.
Fox News:
CNBC:
- Some furloughed federal workers may double dip.
Some fortunate federal employees will likely get paid twice for not
working this month. Several states are expected to allow federal workers
who collected
unemployment insurance during the government shutdown to keep both those
benefits and the back pay they're set to receive, according to the
Labor Department.
Business Insider:
USA Today:
- U.S. quietly releasing $1.6B in Pakistan assistance. The U.S. has quietly decided to release more than $1.6 billion in
military and economic aid to Pakistan that was suspended when relations
between the two countries disintegrated over the covert raid that killed
Osama bin Laden and deadly U.S. airstrikes against Pakistani soldiers.
Financial Times:
- US housing regulators seek over $6B from Bank of America. U.S.
housing regulators are looking to fine Bank of America more than $6
billion for its role in misleading mortgage agencies during the housing
boom, compared with the $4 billion to be paid by JPMorgan Chase & Co
, the Financial Times reported on its
website, citing people familiar with the matter.
Telegraph:
Focus:
- Spain, Italy, Greece Don't Spend EU Money Well. Countries,
especially Spain, aren't using money according to plan, citing a study
by the EU Commission. Reasons are mistakes in tender procedures and
applying the wrong criteria for determining who is eligible for aid.
China Securities Journal:
- China Needs Market-Oriented Property Industry. China needs to
further promote market reform of the real estate market to solve
fundamental problems, according to a commentary by Xu Nuojin. China's
housing prices continue to rise after the country announced more than 40
measures to control the prices since 2003, Xu said. China should cancel
home buying restrictions for medium- and high-income earners and impose
taxes to cut demand, according to Xu. China should levy a property
vacancy tax for idle properties including unsold properties built by
developers, according to Xu.
Weekend Recommendations
Barron's:
- Bullish commentary on (OUTR), (ACN), (AET), (RTN), (WU), (MOS), (VLO), (MPC), (HFC), (WNR) and (T).
- Bearish commentary on (QCOR).
Night Trading
- Asian indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.50 -.25 basis point.
- Asia Pacific Sovereign CDS Index 103.0 +1.75 basis points.
- NASDAQ 100 futures +.18%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Existing Home Sales for September are estimated to fall to 5.3M versus 5.48M in August.
Upcoming Splits
Other Potential Market Movers
- The Fed's Evans speaking and German inflation data could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity 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 75% net long heading into the week.
