Bloomberg:
- China’s Largest Banks Post Biggest Surge in Bad Loans Since 2010. China’s top four banks posted their
biggest increase in soured loans since at least 2010 as a five-year credit spree left companies with excess manufacturing
capacity and slower profit growth amid an economic slowdown. The rise in defaults adds to concerns bank profitability
may decline as policy makers seek to trim production at cement
makers to paper manufacturers that have gorged on credit since
2008, while urging lenders to build buffers to cover loan
losses. China’s biggest state-run banks are trading near record-low valuations as investors brace for a surge in bad debts and
slower credit growth. “Against the backdrop of a slowing economy and
overcapacity problems in some industries, some loans are
gradually going bad,” said May Yan, a Hong Kong-based analyst
at Barclays Plc. “We will see more bad loans forming because of
the legacy of over expansion."
- European Stocks Are Little Changed as Volkswagen Advances.
European stocks were little changed at a one-week high as companies
from Eni SpA (ENI) to Volkswagen AG posted profit that exceeded
estimates, while a gauge of telecommunications companies retreated. Eni,
Italy’s biggest oil company, climbed 1.3 percent. Volkswagen posted its
biggest gain in 15 months as Europe’s
largest carmaker said cost cutting contributed to higher
earnings. TomTom NV added 3.4 percent after the Dutch maker of
navigation systems raised its forecast for 2013. Belgacom SA
dropped 5.3 percent as a competitor cut the price of its mobile-phone
plans. The Stoxx Europe 600 Index added less than 0.1 percent to
320.8 at the close of trading, after earlier climbing as much as
0.7 percent.
- WTI Crude Decreases as U.S. Stockpiles Climb. WTI for December delivery declined $1.18, or 1.2 percent, to $97.02 a barrel at 1:31 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 5.2 percent lower than the 100-day average. Prices are down 5.2 percent this month
after losing 4.9 percent in September.
- Obama Health Vow Won’t Shield Millions From Cancellation. Obama administration officials knew by June 2010 that as many as 10
million people with individual insurance probably would be thrown off
existing plans. That didn’t stop Obama from coming back to the line over and over,
saying as recently as June 2012, “If you’re one of the more than 250
million Americans who already have health insurance, you will keep your
health insurance.” Republican congressional leaders yesterday seized on reports that
hundreds of thousands of Americans received insurance cancellation
notices, questioning the president’s credibility and renewing calls to
delay provisions of the health-care law. As many as 80 percent of
people currently on individual health plans may have to find new health
insurance for next year, said Robert Laszewski, an insurance-industry
consultant in Arlington, Virginia. He estimates that 19 million people
currently hold such policies. “If the president knew that these
letters were coming and still indicated that you could keep your health
care plan if you liked it, now that raises some serious questions about
the sales job of Obamacare,” Cantor said as he emerged from a party
leadership meeting. Obama has been using the line about people keeping
their insurance for years, dating back to his 2008 campaign for
president, including at a presidential debate with Republican John
McCain, an Arizona senator.
- Options Market Hit With Data Disruptions as VIX Lurches. Data transmission was snarled in parts of the options market today as
one of the biggest U.S. venues, International Securities Exchange LLC,
reported issues disseminating prices and the industry’s benchmark gauge
twice swung erratically.
Wall Street Journal:
- Federal Reserve Holds Bond Purchases Steady. The Federal Reserve on Wednesday held steady on its signature $85
billion per-month bond-buying program and gave very few new signals on
when officials expect to pull back on the program or how they see the
economic outlook changing. The Fed's policy-making committee showed itself to be effectively in a
wait-and-see mode on the bond program, leaving investors in a continued
guessing game about the path of a Fed policy which has been an
important driver of asset prices and interest rates. In June Fed chairman Ben Bernanke said he expected the Fed to start
pulling back this year, but with only one more Fed policy meeting in
December before year-end, that now looks less certain. "[T]he Committee decided to await more evidence that progress will be
sustained before adjusting the pace of its purchases," the Fed said in
its statement Wednesday, repeating language it used in September. The Fed made very few changes to its description of current economic
conditions. It said that the economy "continued to expand at a moderate
pace," and labor markets "have shown some further improvement." The Fed
acknowledged that the "recovery in the housing sector slowed somewhat in
recent months," one of the most notables change it made in its
statement.
- Three Takeaways on the Fed’s Policy Statement – December Taper Not Off the Table by Jon Hilsenrath.
- The Outrage Arrives. You can't keep your insurance because Democrats don't want you to control your own health-care spending. The White House has issued a clarification. When the president said
if you like your insurance plan you can keep it, what he meant was you
can keep it if he likes it. Hundreds of thousands of
Americans who are getting policy cancellation notices this month can't
be as surprised as they pretend to be. President Obama made it clear at
his 2010 health care summit what he thought of their taste in insurance. "It's the equivalent of Acme Insurance that I had for my car. .
. . It's basically not health insurance," he explained. "It's house
insurance. . . .
Fox News:
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
The Star Online:
- China GDP figures wrong by US$610bil: report.
China's economy would be at least 3.7 trillion yuan (US$610bil)
bigger than Beijing thinks if the country's local government statistics
were to be believed, state media reported Wednesday. The Economic Information Daily tallied up gross domestic
product (GDP) data from 28 of mainland China's 31 provincial-level
authorities, and arrived at 42.4 trillion yuan for the first nine months
of the year. But the figure for the whole country, already announced by Beijing, is 3.7 trillion yuan lower. The discrepancy – which has been in place for more than two decades – has been widening rapidly in recent years, the Economic Information Daily said. The reliability of Chinese economic data has long been in doubt as
local officials tend to massage the figures upwards in pursuit of
promotion and the newspaper, which is run by the official Xinhua news
agency, pointed to the same problem. "Some regions may have inflated the statistics due to their distorted
perception of achievements, given the fact that the performance
assessment of local governments is often linked with GDP growth," the
report quoted an unnamed National Bureau of Statistics official as
saying.
Style Underperformer:
Sector Underperformers:
- 1) Alternative Energy -1.84% 2) Biotech -1.52% 3) Airlines -1.44%
Stocks Falling on Unusual Volume:
- PCL, TEVA, PRXL, IACI, WU, SFLY, DLR, CHKR, QCOR, PLT, INVN, AVG, CRUS, CLFD, SODA, MX, LGND, INGR, LNKD, MSM, EW, DFT, AIT, PKT, CBG, TNGO, HES, X, TTWO, WWWW, AFL, HTS, YELP, EGN, SAIA, DFT, AEGR, SAVE, BOFI, INGR, FNSR, WBMD, BCOR, WNC and INVN
Stocks With Unusual Put Option Activity:
- 1) EXC 2) GRA 3) HES 4) ETFC 5) WU
Stocks With Most Negative News Mentions:
- 1) CBG 2) IACI 3) JPM 4) SOHU 5) CRUS
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.39% 2) HMOs +.64% 3) Restaurants +.44%
Stocks Rising on Unusual Volume:
- NUVA, MZOR, DWA, LOCK, NQ, BWLD, CCJ, RPXC, SM, LVLT, TASR, EA, AZPN, RRC, TRLA, GM, DBD, LOPE, RPXC, SEE, WLT and GILD
Stocks With Unusual Call Option Activity:
- 1) IACI 2) WU 3) BWLD 4) AOL 5) TASR
Stocks With Most Positive News Mentions:
- 1) BA 2) CCJ 3) GOOG 4) GRMN 5) LNKD
Charts:
Evening Headlines
Bloomberg:
- Moody’s Discussed Stripping New Zealand of Its Last AAA Rating. Moody’s
Investors Service considered
stripping New Zealand of its sole remaining top credit rating amid
concern the nation’s current-account deficit is exacerbating its
vulnerability to external shocks. New Zealand’s reliance on overseas
investors means it can face difficulties when crises such as the
Christchurch earthquakes and Fonterra Cooperative Group Ltd.’s
contaminated milk scare occur, Steven Hess, Senior Vice President at
Moody’s in New York, said in an interview in Wellington today. Moody’s
confirmed its stable Aaa rating for the nation on Sept. 2.
- Japan Regulator Widens Probe Into Crime Loans by Big Banks. Japan’s
financial regulator plans to inspect the nation’s three largest
lenders, widening a probe into credit given to gangsters to include
Mitsubishi UFJ Financial Group Inc. (8306) and Sumitomo Mitsui Financial
Group Inc. (8316) The inspections are to determine whether their
banking units are complying with rules including those meant to curb
transactions with criminal organizations, Hiroki Kato, an official at
the Financial Services Agency, said by telephone yesterday. The reviews
will start Nov. 5, another FSA official said, declining to be identified
because of the agency’s policy.
- Japan Industrial Output Rises Less Than Forecast in September.
Japan’s industrial output rose less than forecast in September,
underlining the challenge for Prime Minister Shinzo Abe as he tries to
stoke a sustained expansion in the world’s third-biggest economy. Production
increased 1.5 percent from the previous month, the trade ministry said
in Tokyo today, below the median estimate for a gain of 1.8 percent in a
Bloomberg News survey of 30 economists.
- Japan Tobacco to Cut Workers and Shut Four Plants, NHK Reports. Japan Tobacco Inc. (2914)’s parent company plans to cut 1,600 workers, or about 20 percent of its
workforce, and close four of its nine plants in the country, NHK
reported, citing people familiar with the situation. Japan Tobacco, seller of the Mevius brand, faces a decline
in demand in its home market amid a shrinking population.
- Asian Stocks Climb While Silver Slips as Oil Extends Drop.
Asian stocks rose, with the benchmark index heading for a monthly gain,
and bond risk fell before the conclusion of the Federal Reserve’s
two-day policy meeting. Emerging currencies weakened and oil dropped. The MSCI Asia Pacific Index advanced 0.6 percent at 1 p.m. in Tokyo.
- Rebar Advances as Concern China Will Tighten Policy Dissipates.
Steel reinforcement-bar futures in Shanghai climbed as concern that
China’s central bank would start tightening monetary policy abated. Rebar for delivery in May, the most-active contract by
volume on the Shanghai Futures Exchange, rose as much as 0.4
percent to 3,622 yuan ($595) a metric ton and was at 3,614 yuan
at 10:41 a.m. local time.
- Rubber Climbs for Third Day on Weaker Yen Before Fed Decision. Rubber advanced for a third day as
Japan’s currency weakened against the dollar, raising the appeal
of yen-denominated futures, amid expectations the Federal Reserve will maintain economic stimulus. The contract for delivery in April, the most active by volume on the Tokyo Commodity Exchange, advanced as much as 1.4
percent to 264.8 yen a kilogram ($2,697 a metric ton) and traded
at 263.8 yen at 10:20 a.m. The yen weakened to 98.27 per dollar
today before trading little changed. It dropped the previous
three sessions.
- Italian Bank Foundations Under Siege as Visco Seeks Overhaul. Italy’s banking foundations, the
biggest shareholders in the country’s financial industry, are
under siege as their leaders gather in Rome today. Bank of Italy
Governor Ignazio Visco wants them to loosen their grip on management.
The International Monetary Fund has urged an overhaul of an ownership
structure vulnerable to cronyism. In the last 12 months, their
appointees at the banks
were ousted in Genoa and probed by prosecutors in Siena.
Wall Street Journal:
- Canceled Policies Heat Up Health Fight. Concerns Extend Beyond Troubled Insurance Website. Problems
surrounding the launch of the federal health-care law broadened, as
concerns that thousands of Americans are getting insurance-cancellation
notices bubbled over at a hearing on Capitol Hill.
- IMF Asia Head: Don't See Need for Further BOJ Easing. The International Monetary Fund doesn't think the Bank of Japan needs to expand
its already ultra-loose monetary policy, the multilateral lender's Asia head
said Wednesday, calling instead for concrete action on Prime Minister Shinzo
Abe's much-touted growth strategy. "We currently don't see a need for further monetary easing," said Anoop
Singh, director of the IMF's Asia and Pacific Department, in a media roundtable.
"Rather, the priority now is to advance growth reforms. For Abenomics to work,
Japan's long-term economic problems need to be tackled."
- The ObamaCare Awakening. Americans are losing their coverage by political design. For all of the Affordable Care Act's technical problems, at least one
part is working on schedule. The law is systematically dismantling the
individual insurance market, as its architects intended from the start. The
millions of Americans who are receiving termination notices because
their current coverage does not conform to Health and Human Services
Department rules may not realize this is by design. Maybe they trusted
President
Obama's
repeated falsehood that people who liked their health plans could
keep them. But Americans should understand that this month's mass
cancellation wave has been the President's political goal since 2008.
Liberals believe they must destroy the market in order to save it.
Barron's:
- A Negative View From The 'Skew'. The latest record run for U.S. stocks is sending up
caution flags in two corners of the options market that rack investor
sentiment.
The latest record run for U.S. stocks is sending up caution flags in
two corners of the options market that track investor sentiment. Hefty demand for options that would benefit from a further rise in
stock prices recently sent a measure called "skew" to its fifth-lowest
reading of 2013. A lower skew ratio shows relatively high prices for
calls, options that convey the right to buy shares at a certain price.
Some investors say the reading, which reflects the ratio of bearish
option prices to bullish ones, points to excessive optimism in the
market. The move put the gauge on the brink of crossing a level that twice
this year has preceded stock-market declines of at least 4%, options
watchers said. At the same time, the markets' fear gauge rose Tuesday even as the
S&P 500-stock index rallied to its third consecutive record close,
rising 9.84 to 1771.95. The Chicago Board Options Exchange's Volatility
Index typically falls when stocks rise and vice versa. The divergence is
unusual and shows that new highs aren't being met with the typical
investor calm, investors said.
While the options readings alone are hardly enough to provoke worry
among stock-market strategists, skeptical investors are picking up on
numerous signs of what they term froth in the stock market.
Fox News:
- Exec at HealthCare.gov contractor went to school with first lady, donated to Obama campaign. As the problems pile up for HealthCare.gov, attention is now turning
to the relationship between the Canadian company largely responsible for
the website and the Obama administration. Top officials at CGI Federal, a lead contractor tasked with
developing the site, have a three-decade link to the Obamas. Toni
Townes-Whitley, a senior vice president at CGI Federal, is also a
Princeton University classmate of first lady Michelle Obama -- and a
political donor.
MarketWatch.com:
CNBC:
- Reid: No budget deal without new revenues. President
Barack Obama's top ally on Capitol Hill says he won't support any
attempt this year to ease across-the-board spending cuts hitting the
Pentagon and domestic agencies if it fails to include new revenues.
- Aetna(AET) CEO: Why insurance will be costing more. (video) The fact that many current health-care plans do not offer all the
benefits required under Obamacare means that many premiums are likely to
jump dramatically, Aetna CEO Mark Bertolini told CNBC.
Zero Hedge:
ValueWalk:
Business Insider:
Pittsburgh Business Times:
- U.S. Steel(X) to close Hamilton iron and steel operations.
United States Steel Corp. will permanently discontinue its iron and
steel making at Hamilton Works in Ontario, Canada, on Dec. 31, CEO Mario
Longhi said Tuesday in a conference call. "Decisions like this are
always difficult, but they are necessary to
improve the cost structure of our Canadian operations," he said.
The Blaze:
Telegraph:
China Daily:
- China
Needs More Local AMCs to Handle Growing Bad Assets. China needs more
asset management companies at the provincial level to help handle their
growing non-performing assets, citing Zhao Quanhou, a researcher at the
Fiscal Science Research Center affiliated with the finance ministry.
Caixin:
- Shanghai Party Chief Han Says City Should Slow GDP.
China Securities Journal:
- China 4Q Liquidity May Be 'Tight, Balanced'. Liquidity may remain
"tight, balanced" in 4Q and the nation may mainly adopt short-term
adjustments in its monetary policy, according to a front page commentary.
- China
Wenzhou Home Prices May Continue Fall. Home prices in the eastern
Chinese city of Wenzhou may continue to fall, citing local real estate
agents. Housing prices in the city are now more than 50% lower than they
were in 2012, the agents said. Continued increasing pressure from
inventories and a deleveraging of small and medium-sized developers have
pushed down prices, which have dropped for 25 straight months, the
report said.
- CDB Researcher Says Local Debt Growing Fast.
Problems shown in China's economy in the first 9 months of 2013 include
a "relatively fast" increase in local government debt, and that the
economic recovery was driven mainly by government-led investment and
state-owned enterprises, according to a commentary published by Guo Lian
from the research institute at China Development Bank.
China Business News:
- China May Expand Property Tax Reform at Plenum. China includes
expansion of property tax trial in draft of a statement to be submitted
to the third plenum of the Communist Party's 18th Central Committee,
which will be held Nov. 9-12, citing a person familiar with the matter.
Evening Recommendations
BTIG:
- Raised (FB) to Buy, target $68.
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 133.0 unch.
- Asia Pacific Sovereign CDS Index 99.25 -1.0 basis point.
- NASDAQ 100 futures +.17%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:15am EST
- The ADP Employment Change for October is estimated to fall to 150K versus 166K in September.
8:30 am EST
- The Consumer Price Index for September is estimated to rise +.2% versus a +.1% gain in August.
- The CPI Ex Food and Energy for September is estimated to rise +.2% versus a +.1% gain in August.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+1,995,000 barrels versus a +5,246,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +23,000 barrels versus a
-1,805,000 barrel decline the prior week. Distillate supplies are
estimated to fall by -545,000 barrels versus a +1,537,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to rise by +.27% versus a -.3% decline the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
- The Fed Pace of MBS Purchases for October is estimated at $40B versus $40B prior.
- The Fed pace of Treasury purchases for October is estimated at $45B versus $45B prior.
Upcoming Splits
Other Potential Market Movers
- The German Unemployment rate, Spain GDP, German CPI, Eurozone Industrial Confidence, 7-Year T-Note auction, weekly MBA mortgage applications report, (JBL) analyst meeting and the (TGT) Financial Community Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial 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.
Broad Equity Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.29 -.15%
- Euro/Yen Carry Return Index 140.73 +.24%
- Emerging Markets Currency Volatility(VXY) 7.70 -1.28%
- S&P 500 Implied Correlation 38.86 +3.41%
- ISE Sentiment Index 142.0 -17.44%
- Total Put/Call .66 -16.38%
Credit Investor Angst:
- North American Investment Grade CDS Index 71.56 -.36%
- European Financial Sector CDS Index 117.85 -3.69%
- Western Europe Sovereign Debt CDS Index 70.0 +.97%
- Emerging Market CDS Index 263.70 +1.24%
- 2-Year Swap Spread 11.75 -1.0 basis point
- TED Spread 20.25 -1.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.75 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .04% +2 basis points
- Yield Curve 220.0 -1 basis point
- China Import Iron Ore Spot $131.30/Metric Tonne -.38%
- Citi US Economic Surprise Index 5.4 -6.0 points
- Citi Emerging Markets Economic Surprise Index -4.40 +.3 point
- 10-Year TIPS Spread 2.19 unch.
Overseas Futures:
- Nikkei Futures: Indicating +148 open in Japan
- DAX Futures: Indicating -8 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical/retail/tech sector longs
- Market Exposure: 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Papers -1.84% 2) Coal -1.52% 3) REITs -1.0%
Stocks Falling on Unusual Volume:
- BKU, VOLC, CLNY, IPHS, FNB, DAN, CVLT, BTH, SANM, DCO, CHE, CMI, ISSI, AGNC, WPP, CYNO, UBS, GT, MWV, SLG, ALSN, N, TNGO, ST, MR, TXRH, ATVI, PCAR, SHO, HTS, PAG, ALSN, NLY, SCHN, OFG, VSH, AGCO, N, IVR and DAN
Stocks With Unusual Put Option Activity:
- 1) PLCM 2) S 3) DELL 4) AEO 5) JOY
Stocks With Most Negative News Mentions:
- 1) CMI 2) ACI 3) YELP 4) VOLC 5) YRCW
Charts:
