Evening Headlines
Bloomberg:
- China Files Protest as Japanese Ships Disrupt Military Exercises. China
lodged an official protest with Japan after its ships entered an area
in the west Pacific Ocean and disrupted military exercises being
conducted there, the
Chinese Defense Ministry said. The Chinese navy announced its scheduled training there
from Oct. 24 to Nov. 1, while the Japanese entered the area on
Oct. 25 and left three days later, the ministry said in a
statement on its website yesterday. Japan’s actions also
endangered the safe navigation of ships and planes, according to
the statement.
- Most Asia Stocks Drop on Tapering Concern; SoftBank Gains.
Most Asian stocks declined, with the regional benchmark index paring
its weekly advance, as speculation the Federal Reserve will reduce
stimulus in coming months overshadowed improving China manufacturing
data. Sony (6758) Corp. slumped 12 percent in Tokyo after the television
and digital camera maker unexpectedly lowered its full-year profit
forecast by 40 percent. Sydney Airport sank 3.1 percent
after its largest shareholder Macquarie Group Ltd. announced
plans to give some of its stake to its investors. Panasonic
Corp. surged 5.6 percent, a fifth day of gains, after doubling
its full-year profit forecast. The MSCI Asia Pacific Index slid 0.4 percent to 141.79 as
of 11:31 a.m. in Tokyo, as two shares declined for each that
rose.
- Rubber in Tokyo Pares Weekly Gain as Higher Yen Cuts Appeal. Rubber declined for a second day,
paring a weekly advance, as crude oil fell and a stronger
Japanese currency cut the appeal of yen-denominated futures. The contract for delivery in April on the Tokyo Commodity Exchange lost as much as 1.3 percent to 258.1 yen a kilogram
($2,626 a metric ton) and traded at 259.5 yen at 10:44 a.m. The
drop pared gains for the most-active contract to 1.1 percent
this week. Futures fell 1.5 percent last month.
- Rebar Climbs to Seven-Week High on China Manufacturing Growth. Steel reinforcement-bar futures in
Shanghai rose to the highest in seven weeks, after China’s
manufacturing rose more than estimated in October, underpinning
a recovery in the biggest steel user. Rebar for delivery in May, the
most-active contract by volume on the Shanghai Futures Exchange, rose as
much as 1.2 percent to 3,678 yuan ($604) a metric ton, the highest
intra-day level since Sept. 13. Futures traded at 3,671 yuan at 10:54
a.m.
local time, up 2.4 percent this week.
Wall Street Journal:
- Wanted: Entry Level Hedgies; $353,000 Salary.
Looking for a new start in finance? Hedge funds are hiring and even
their beginners are making bank. The hedge-fund industry ramped up
hiring for entry-level positions in
2013, according to a new report from Hedge Fund Research. The average
compensation for a mid-performing fund for those entry-level hires was a
total of $353,000, including bonuses, according to HFR and its study
partner Glocap.
MarketWatch.com:
- Container Store IPO prices at high end. The Container Store Inc., the retailer of storage and organizational
products, saw its initial public offering price at the high end of
recently raised expectations.
CNBC:
Zero Hedge:
Business Insider:
Washington Post:
- In first month, the vast majority of Obamacare sign-ups are in Medicaid. The first month of the new health law’s rollout reveals an unexpected
pattern in several states: a crush of people applying for an expansion
of Medicaid and a trickle of sign-ups for private insurance. This
early imbalance — in some places nine out of 10 enrollees are in
Medicaid — has taken some experts by surprise. The Affordable Care Act,
which expanded Medicaid to cover millions of the poorest Americans who
couldn’t otherwise afford coverage, envisions a more even split with an
expanded, robust private market. “When we first saw the numbers,
everyone’s eyes kind of bugged out,”
said Matt Salo, who runs the National Association of Medicaid Directors.
“Of the people walking through the door, 90 percent are on Medicaid.
We’re thinking, what planet is this happening on?” The yawning gap between public and private enrollment is handing
Republicans yet another line of criticism against President Obama’s
health overhaul — that the law is primarily becoming an expansion of a
costly entitlement program. If this trend continues, experts say it could prove costly for states
that will have to help pay for some of these new Medicaid enrollees. It
would further widen disparities between the states that opted to expand
the entitlement program and those that have not. Low enrollment in private insurance, meanwhile, could increase
premiums as it would likely indicate that only sick people, who really
need coverage, were signing up.
Reuters:
- Enrollment in Obamacare very small in first days: documents. Enrollment
in health insurance plans on the troubled Obamacare website was very
small in the first couple of days of operation, with just 248 Americans
signing up, according to documents released on Thursday by a U.S. House
of
Representatives committee.
The Obama administration has said it cannot provide enrollment figures from HealthCare.gov because it doesn't have the numbers.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 130.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 99.50 +.5 basis point.
- NASDAQ 100 futures +.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:58 am EST
- Final Markit US PMI for October is estimated at 51.1 versus a prior estimate of 51.1.
10:00 am EST
- ISM Manufacturing for October is estimated to fall to 55.0 versus 56.2 in September.
- ISM Prices Paid for October is estimated to fall to 55.0 versus 56.5 in September.
Afternoon
- Total Vehicle Sales for October are estimated to rise to 15.45M versus 15.21M in September.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bullard speaking, Fed's Lacker speaking, Fed's Kocherlakota speaking and Japanese car sales could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology 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 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.34 -2.27%
- Euro/Yen Carry Return Index 139.38 -1.22%
- Emerging Markets Currency Volatility(VXY) 8.11 +3.97%
- S&P 500 Implied Correlation 39.26 -3.71%
- ISE Sentiment Index 142.0 +56.04%
- Total Put/Call .89 -8.25%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.85 -.29%
- European Financial Sector CDS Index 117.94 -2.40%
- Western Europe Sovereign Debt CDS Index 70.0 +1.45%
- Emerging Market CDS Index 270.21 +.06%
- 2-Year Swap Spread 12.0 +.25 basis point
- TED Spread 20.5 -.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.0 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .04% +1 basis point
- Yield Curve 224.0 +3 basis points
- China Import Iron Ore Spot $131.90/Metric Tonne +.53%
- Citi US Economic Surprise Index 3.80 +5.9 points
- Citi Emerging Markets Economic Surprise Index -11.10 -2.0 points
- 10-Year TIPS Spread 2.17 -1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +128 open in Japan
- DAX Futures: Indicating +7 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Education -5.30% 2) Gold & Silver -3.61% 3) Homebuilders -1.63%
Stocks Falling on Unusual Volume:
- WTW, AAWW, DATA, TTS, AVP, EXLS, RATE, HGG, GTLS, STRA, RRTS, MDAS, JIVE, PRLB, SNE, SGI, CCMP, NSR, EPL, OTEX, VRX, STAA, JDSU, OSK, MW, NCMI, APOL, ITRI, MGM, SPWR, NSR, CROX, PRAA, RRTS, GTLS, MASI, CNW, JDSU, EPL, OSK, ROVI, HOS, JOSB, ESI, MOH, PDCE, EXAM, SNCR, DLR, NCMI, DV, INT, VOLC, GIMO, RKUS, Q, MUR and WMB
Stocks With Unusual Put Option Activity:
- 1) BYD 2) CIEN 3) WTW 4) JDSU 5) MGM
Stocks With Most Negative News Mentions:
- 1) AVP 2) JDSU 3) HLF 4) V 5) C
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +2.08% 2) Networking +1.43% 3) HMOs +1.17%
Stocks Rising on Unusual Volume:
- ZLTQ, CRR, CCK, SSNI, CAVM, ARRS, EXPE, THOR, MCHP, PRGO, ITT, HAR, PGTI, SHOO, FLT, CAR, DGI, DWA, SWKS, TRN, HBI, ISIL, CRUS, SHOO, CAH and CJES
Stocks With Unusual Call Option Activity:
- 1) APO 2) TWM 3) ACHN 4) WTW 5) BYD
Stocks With Most Positive News Mentions:
- 1) EL 2) EXPE 3) YHOO 4) CLX 5) AMZN
Charts:
Evening Headlines
Bloomberg:
- Japan Salaries Extend Fall as Abe Urges Companies to Raise Wages.
Japan’s salaries extended the longest slide since 2010, even as Prime
Minister Shinzo Abe urges companies to raise workers’ wages as part of
his bid to reflate the world’s third-largest economy. Regular wages
excluding overtime and bonuses fell 0.3 percent in September from a year
earlier, marking a 16th straight month of decline, according to labor ministry data released today.
- China’s Stocks Decline as Earnings Drag on Banks to Drugmakers. China’s stocks fell, heading for the first monthly loss since June, as earnings (SHCOMP) at banks and consumer staple producers disappointed investors. Developers rallied. China Minsheng Banking Corp. slid 2.3 percent after net income trailed estimates. Inner Mongolia Yili Industrial Group Co. and Guangzhou Baiyunshan Pharmaceutical Holdings Co. both slumped by the daily 10 percent limit after posting earnings. Poly Real Estate Group Co. led a gauge of property stocks to its
biggest gain in three weeks after President Xi Jinping said the
government will accelerate building public housing.
The Shanghai Composite Index retreated 0.7 percent to
2,145.72 at 11:30 a.m. local-time break.
- Asian Stocks Pare Monthly Gain as Fed Fuels Tapering Bets.
Asian stocks fell, trimming the best two-month rally for the regional
benchmark gauge since the start of 2012, after the Federal Reserve
fueled bets it may start paring stimulus sooner than previously
forecast. Alacer Gold Corp. sank 3.5 percent in Sydney as the price of
the precious metal declined. Honda Motor Co. (7267) lost 1.8 percent
after Japan’s third-largest carmaker reported second-quarter profit that
missed analysts’ estimates amid slowing motorcycle sales in Southeast
Asia. National Australia Bank Ltd. (NAB) retreated 2.3 percent as
expenses climbed at the country’s largest lender
by assets.
The MSCI Asia Pacific Index dropped 0.4 percent to 142.70
as of 9:37 a.m. in Hong Kong, with eight of the 10 industry
groups on the measure retreating.
- Rubber Poised for Second Monthly Drop Amid Fed Tapering Bets. Rubber declined for the first time
in four days as speculation the Federal Reserve may cut stimulus sooner than previously expected weighed on investor sentiment. The
contract for delivery in April, the most active by volume on the Tokyo
Commodity Exchange, lost as much as 1.3 percent to 261 yen a kilogram
($2,651 a metric ton) and was at
261.3 yen at 11:34 a.m. local time. Futures fallen 1.7 percent
this month.
- Rebar Set for Monthly Loss on China’s Weak Winter Demand Outlook. Steel reinforcement-bar futures in
Shanghai headed for a monthly loss amid concern that demand for
the building material will be weak in winter ahead. Rebar for
delivery in May, the most-active contract by volume on the Shanghai
Futures Exchange, fell as much as 0.4 percent to 3,630 yuan ($596) a
metric ton, before trading at
3,638 yuan at 10:16 a.m. local time. The contract lost 1.4
percent this month.
- Spying Disclosures Seen Undermining Exports of U.S. Technology. The disclosure of U.S. spying on
allies may temporarily undercut efforts by American companies to
sell technology overseas, according to a former official with
the Department of Homeland Security. “We are going to go through a period of substantial
skepticism abroad about any technology we’re selling people,”
Stewart Baker, a Washington lawyer who headed the department’s
policy directorate, said today at a forum on cybersecurity
hosted by Bloomberg Government and Symantec Corp.
- U.S. Weighs Scanning Social Media for Clues to Rogue Workers. The U.S. government is studying
whether it can scour social-media websites for clues about
potential threats from workers such as Edward Snowden and the
Washington Navy Yard shooter. Both Snowden, a former National Security Agency contractor
who leaked government secrets, and Aaron Alexis, who shot and
killed 12 people, had security clearances. The cases have
exposed a flawed system of vetting such employees, some of whom
are slipping through the cracks. The pilot studies, which looked at the feasibility of using
automated records checks as well as social-media websites, have
turned up “actionable information,” Brian Prioletti, an
assistant director in the Office of the National
Counterintelligence Executive, said in testimony prepared for a
congressional hearing tomorrow.
- BofA(BAC) Warns of More Legal Disputes Ahead as Potential Costs Surge. Bank of America Corp., the second-biggest U.S. lender, said the Department of Justice may file
another suit tied to mortgage bonds and raised its estimate of
possible added losses from legal and regulatory matters by 82
percent to $5.1 billion. A U.S. Attorney’s office intends to recommend civil action
against the Charlotte, North Carolina-based lender tied to the
bundling of home loans into securities, the firm said today in
its quarterly regulatory filing. The bank also said its eventual
legal costs could exceed even its revised estimates.
Wall Street Journal:
- McCain Threatens to Delay Confirmation of Yellen as Fed Chief. Republican Senator to Use Delaying Tactic in Bid to Obtain Information on Benghazi Attacks from Obama Administration.
GOP Sens. John McCain and Lindsey Graham will attempt to delay
confirmation of Janet Yellen to lead the Federal Reserve in a bid to
obtain information from the Obama administration about the attacks on
U.S. facilities in Benghazi, Libya, Mr. McCain said Wednesday. Ms.
Yellen, Mr. Obama's pick to become the first chairwoman of the central
bank, is expected to secure the support of nearly all Democrats, but a
handful of opponents among Senate Republicans have surfaced recently.
Sens. Graham, of South Carolina, and McCain, of Arizona, threatened this
week to put a "hold" on Ms. Yellen's nomination in an effort to press
the White House to release more information about the Benghazi attacks
on Sept. 11, 2012. "That's the only way we get their attention,"
Mr. McCain said in an interview Wednesday evening. "It's the only way
we get any response." Mr. Graham's office confirmed he would also hold
up Ms. Yellen's nomination to press for more information about the
Benghazi attacks.
- U.S. Seeks Chinese Coordination on Oil Reserves. Over the past five years, China has amassed hundreds of millions of barrels in strategic petroleum reserves. Now the U.S. wants China to work with it to coordinate releases of
those barrels when needed to help ensure oil market stability.
- U.S. General Decries Spiraling Iraq Violence. The top U.S. military commander in the Middle
East said Iraq has entered a downward spiral of violence that threatens
to drive the country's prime minister further into the hands of Iran.
- U.S. Blasts Germany's Economic Policies. Employing
unusually sharp language, the U.S. on Wednesday openly
criticized Germany's economic policies and blamed the euro-zone
powerhouse for dragging down its neighbors and the rest of the global
economy. In its semiannual currency report, the Treasury Department
identified Germany's export-led growth model as a major factor
responsible for the 17-nation currency bloc's weak
recovery. The U.S. identified Germany ahead of its traditional target,
China, and the most-recent perceived problem country, Japan, in the "key
findings" section of the report.
Fox News:
Bankrupt solar panel firm took stimulus money, left a toxic mess, says report. A Colorado-based solar company that got hundreds of millions of
dollars in federal loan guarantees before going belly-up didn't just
empty taxpayers' wallets - it left behind a toxic mess of carcinogens,
broken glass and contaminated water, according to a new report.
The Abound Solar plant, which got $400 million in federal loan
guarantees in 2010, when the Obama administration sought to use stimulus
funds to promote green energy, filed for bankruptcy two years later.
Now its Longmont, Colo., facility sits unoccupied, its 37,000 square
feet littered with hazardous waste, broken glass and contaminated water.
The Northern Colorado Business Report estimates it will cost up to $3.7 million to clean and repair the building so it can again be leased.
CNBC:
- Obamacare, shutdown hurt Obama's standing: NBC News/WSJ poll. The troubled rollout of the new health-care law and recent government shutdown have exacted a major toll on President Barack Obama's standing, a new NBC News/Wall Street Journal poll has found.
Obama's job approval rating has tumbled by 5 percentage points in less
than three weeks, the survey showed. In the weakest showing of his
five-year tenure, just 42 percent of Americans approve of the
president's job performance, while 51 disapprove.
Zero Hedge:
Business Insider:
The Blaze:
Reuters:
- Sins of past, present and future haunt banks. The
cost to banks of cleaning up past misdeeds has soared over $100 billion
and is leaving lenders running scared from areas that put them in
potential danger of upsetting regulators. This week alone, Deutsche Bank, UBS and
Lloyds revealed mounting legal bills and Dutch
agricultural specialist Rabobank became the latest lender to be
fined in a global scandal over interest rate rigging with a $1.1
billion penalty. Bankers fear that paying for the sins of the past and
preventing future misdemeanours could be the biggest headache
yet for an industry still trying to bulk up on capital and
liquidity reserves in the wake of the 2007-09 financial crisis.
- Starbucks(SBUX) 2014 profit forecast falls short, shares drop. Starbucks Corp conservatively
forecast 2014 profit below Wall Street's view, despite fourth
quarter profits that jumped 34 percent on strong traffic gains
and an increase in spending by its customers. Shares in the world's biggest coffee chain, one of the
economy-defying growth companies such as burrito chain Chipotle
Mexican Grill and upscale grocer Whole Foods Market Inc
, fell 2.5 percent after hours to $78.80.
- Visa(V) profit falls as U.S. consumer spending weakens.
Visa Inc, the world's largest credit and debit card company, reported a
28 percent fall in quarterly profit due to a higher income tax
provision and was slightly pessimistic about its outlook in the face of
soft U.S. consumer spending. Visa shares fell 3.1 percent to $197.50
in after-hours trade while those of rival MasterCard Inc fell 1 percent,
ahead of its results on Thursday.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 131.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 99.0 -.25 basis point.
- NASDAQ 100 futures -.55%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 338K versus 350K the prior week.
- Continuing Claims are estimated to fall to 2870K versus 2874K prior.
9:00 am EST
- ISM Milwaukee for October is estimated to fall to 53.0 versus 55.0 in September.
9:45 pm EST
- Chicago Purchasing Manager for October is estimated to fall to 55.0 versus 55.7 in September.
Upcoming Splits
Other Potential Market Movers
- The BoJ rate decision, German Retail Sales, Eurozone Unemployment/CPI, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, RBC Consumer Outlook Index for November and the (EW) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial 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 day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.79 +2.76%
- Euro/Yen Carry Return Index 141.15 +.31%
- Emerging Markets Currency Volatility(VXY) 7.82 +.77%
- S&P 500 Implied Correlation 41.84 +3.65%
- ISE Sentiment Index 87.0 -28.69%
- Total Put/Call .98 +36.1%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.93 +2.48%
- European Financial Sector CDS Index 120.85 +2.45%
- Western Europe Sovereign Debt CDS Index 69.0 -1.43%
- Emerging Market CDS Index 270.53 +2.50%
- 2-Year Swap Spread 11.75 unch.
- TED Spread 21.25 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.0 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% -1 basis point
- Yield Curve 221.0 +1 basis point
- China Import Iron Ore Spot $131.20/Metric Tonne -.08%
- Citi US Economic Surprise Index -2.1 -7.1 points
- Citi Emerging Markets Economic Surprise Index -9.10 -4.7 points
- 10-Year TIPS Spread 2.18 -1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +68 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
