Evening Headlines
Bloomberg:
- PBOC Says No Longer in China’s ‘Favor’ to Boost Record Reserves.
The People’s Bank of China signaled
it no longer benefits China to increase its foreign currency
reserves that now exceed a record $3.7 trillion. “It’s no longer in
China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a
deputy governor with the
People’s Bank of China said in a speech organized by China
Economists 50 Forum at Tsinghua University yesterday. “The
marginal cost of accumulating foreign-exchange reserves has
exceeded the marginal gains.”
- China, India Push Rich Countries to Move First on Climate Change. China and India are stepping up pressure on "wealthy countries" to move first on fighting global warming, saying the earliest industrialized nations are the most to blame for rising temperatures.
Speaking at talks involving 190 nations that aim to forge a new treaty
to limit greenhouse gas emissions, the developing nations said their
richer counterparts should provide more details on a pledge to boost
climate aid to $100 billion a year and on how they will cut their own
emissions before the poorer countries are required to set their own
targets. “We think we are the weaker side,” said Xie Zhenhua, the head of China’s delegation at United Nations climate talks in
Warsaw. “They need to fulfill these commitments. They have to provide a
timetable and also the size of their contribution. They should have a
very clear signal to society.”
- China’s Stocks Fall Most in Week on Property Concern, Flash PMI.
China’s stocks fell the most in a week after a preliminary
manufacturing index trailed economists’ estimates and on speculation the
government will announce measures to restrain property-price gains.
China Vanke Co. and Poly Real Estate Group Co., the nation’s two biggest
developers, slid more than 3 percent. New China Life Insurance Co.
dropped the most since July. Shanghai Jahwa United Co. plunged 6 percent
to drag down a gauge of consumer-staples producers. Air China Ltd. led a
rally for airline companies for a second day. The Shanghai Composite
Index (SHCOMP) fell 1.1 percent to 2,183.50 at the 11:30 a.m. break,
poised for the biggest loss since Nov.
13.
- Asian Stocks Outside Japan Fall on Fed Concern, China PMI.
Asian stocks outside Japan fell after minutes from the Federal
Reserve’s last meeting signaled U.S. stimulus may be reduced in coming
months and a gauge of China manufacturing fell more than expected.
Samsung Electronics Co., a consumer electronics maker that gets 22
percent of its revenue in America, declined 2.1 percent in Seoul. Prince
Frog International Holdings Ltd., a maker of baby-care products
suspended after its accounting came under scrutiny by a short-seller,
tumbled 18 percent in Hong Kong as it resumed trading. Australand
Property Group fell 3.7 percent in Sydney, extending yesterday’s loss,
as CapitaLand Ltd. sells
part of its 59 percent stake in the developer. The MSCI Asia Pacific excluding Japan Index declined 1.1
percent to 469.86 as of 11:32 a.m. in Hong Kong as all 10
industry groups on the gauge dropped.
- Rebar Falls as China Manufacturing Data Signal Weak Demand.
Steel reinforcement-bar futures in Shanghai declined as a
lower-than-estimated manufacturing gauge for China signaled that demand
would weaken. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, fell as much as 0.6 percent to 3,623 yuan
($595) a metric ton and was at 3,626 yuan at 10:46 a.m.
local time. Prices rose 1.5 percent in the previous two days.
- Goldman(GS) Sees Significant Losses for Iron Ore, Gold in 2014. Iron
ore, gold, soybeans and copper
will probably drop at least 15 percent next year as commodities
face increased downside risks even as economic growth in the U.S.
accelerates, according to Goldman Sachs Group Inc. The risks are
strongest for iron ore, and follow increases in supplies, analysts including Jeffrey Currie wrote in a report
yesterday that identified the New York-based bank’s top 10
market themes for the coming year. Price pressures will mostly
become visible later in 2014, the analysts wrote, forecasting
that bullion, copper and soybeans will decline to the lowest
levels since 2010.
- CFTC’s Chilton Says He’d Vote Against Current Volcker Rule. The Volcker rule that U.S.
regulators are trying to complete this year doesn’t do enough to
limits banks’ ability to make speculative bets, said Bart Chilton, a member of the U.S. Commodity Futures Trading Commission. “There would be no sense even doing a final rule if what is currently being considered on hedging remains the same,”
said Chilton, referring to the rule banning proprietary trading,
in a telephone interview today. He said he is prepared to vote
against the rule as it’s currently drafted.
- EU Risks Violating Bank-Capital Pact, Basel Member Says. The European Union risks violating
international bank-capital standards and its implementing law
should face a rigorous review by global regulators, a Swedish
member of the Basel Committee on Banking Supervision warned.
- Wells Fargo’s(WFC) Stumpf Dislikes Fed Bond Buys That Punish Savers. John
Stumpf, chief executive officer at Wells Fargo & Co., said he
dislikes Federal Reserve monthly bond purchases at this point in the
economic cycle and that the policy has hurt savers. “I’m not a big fan
of QE this late in the recovery,” Stumpf said today at The Year Ahead: 2014, a two-day conference sponsored by Bloomberg LP in Chicago. He was referring to the
Fed’s bond purchases, known as quantitative easing. “QE, while
it’s helped borrowers, has really punished savers,” he said.
- Anxiety Over Asset Bubbles From Homes to Internet Rising in Poll. Asset bubbles are forming in
Internet and social media stocks as well as in the housing
markets of London and China, according to the latest Bloomberg
Global Poll. Eighty-two percent of the responding investors, analysts
and traders who are Bloomberg subscribers said Internet and
social media shares are either at or near unsustainable levels.
Seventy-three percent said the same of Chinese house prices and
69 percent identified London homes as already or almost frothy.
They were less concerned about U.S. housing, with 31 percent
seeing prices approaching or at excessive levels. “Liquidity is still plentiful and central banks are
reflating,” said Kenneth Broux, a strategist at Societe
Generale SA in London and a poll participant. “Property is the
obvious bubble candidate.”
Wall Street Journal:
- Fed Casts About for Endgame on Easy-Money Policy. Federal Reserve officials, mindful of a
still-fragile economy, are laboring to devise a strategy to avoid
another round of market turmoil when they pull back on one of their
signature easy-money programs in the months ahead. Central-bank
officials have been debating for months when to start paring the $85
billion-a-month bond-purchase program. They were surprised during the
summer when their discussions and public pronouncements on the potential
timing rocked markets, pushing interest rates higher and stock prices
down. Minutes of the Oct. 29-30 policy
meeting, released Wednesday, showed officials continued to look toward
ending the bond-buying program "in coming months." But they spent hours
game-planning how to handle unexpected developments and tailoring a
message to the public to soften the impact of the program's end.
- BMW, Cadillac Aim to Pull Plug on Tesla(TSLA) With Pricey New Cars. Tesla
Motors Inc. is about to get deep pocketed rivals in the luxury electric
luxury car market after largely having the business to itself since the
2012 launch of the Model S sedan. BMW AG, General Motors Co.'s
Cadillac and Volkswagen AG's Porsche and Audi brands are among the
luxury brands using this week's Los Angeles Auto Show to promote new
plug-in models aimed at affluent, eco-conscious
Californians who make up the heart of Tesla's buyers. While
models such as the BMW i3 and i8, the Cadillac ELR or Porsche's plug-in
Panamera sedan offer different propulsion technology from the Tesla
Model S and different body styles, they are all cars that get much of
their energy from the electric grid instead of a gasoline pump.
- Nicole Hopkins: ObamaCare Forced Mom Into Medicaid. My mother preferred to pay for her care rather than be on the government dole. Now she has no choice. My mother is not one to seek attention by complaining, so her recent woeful Facebook FB +0.15% post caught my eye: "The poor get poorer." It diverged from the more customary stream of inspirational quotes, recipes and snapshots
from her tiny cottage in Pierce County, Wash.
CNBC:
- Fed sends markets tapering message. The
Federal Reserve looks set to move sooner rather than later to taper
back its bond buying, once more surprising markets that have been
repeatedly confused about when the Fed will begin to step back from its
extraordinary easing policy.
- Are the cracks in the euro starting to show? (video) The
resilient euro may have bounced back from this month's interest rate
cut from the European Central Bank (ECB), but recovering from talk that
the ECB is
mulling negative deposit rates could be much harder, analysts say.
Zero Hedge:
Business Insider:
The Fiscal Times:
Reuters:
- U.S. could run out of cash in March under debt ceiling - CBO. The United States could start
missing payments on its obligations some time between March and
June if lawmakers don't raise a legal limit on borrowing by
early February, congressional analysts said on Wednesday.
The Obama administration was able to bump against the
government's debt ceiling for five months this year before it
came to the brink of default.
- Green Mountain(GMCR) sees strong revenue in second half of 2014. K-cup coffee pods maker Green Mountain
Coffee Roasters Inc said it expected stronger revenue
in the second half of its fiscal 2014 as it converts unlicensed
coffee pod makers to licensed partners. The company, however, gave a cautious current-quarter
forecast, citing a transition to a new brewing system and
weakness in U.S. consumer spending. Shares of Green Mountain, which also approved a share
repurchase program of up to $1 billion, were up 4 percent in
extended trading.
Telegraph:
FAZ:
- Schaeuble's
Advisers See Up to 1.8m German Jobs at Risk. Country's Finance Minister
Wolfgang Schaeuble's experts calculated combined effects of plans from
CDU, CSU and SPD amid coalition talks. Plans include pension programs
and minimum wage.
Yonhap News:
China Daily:
- China to Raise Taxes for Possessing Properties. China will
increase taxes for owning properties, Finance Minister Lou Jiwei said in
an interview. China will start levying consumption taxes for some
resources and high-end consumer goods, according to Lou.
Evening Recommendations
Deutsche Bank:
- Rated (RAD) Buy, target $7.
- Rated (MCK) Buy, target $181.
- Rated (WAG) Buy, target $73.
Night Trading
- Asian equity indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 104.25 +2.5 basis points.
- NASDAQ 100 futures -.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 335K versus 339K the prior week.
- Continuing Claims are estimated to fall to 2870K versus 2874K prior.
- The Producer Price Index for October is estimated to fall -.2% versus a -.1% decline in September.
- The PPI Ex Food and Energy for October is estimated to rise +.1% versus a +.1% gain in September.
8:58 am EST
- The Preliminary Markit US PMI for November is estimated at 52.3.
10:00 am EST
- The Philly Fed for November is estimated to fall to 15.0 versus 19.8 in October.
Upcoming Splits
Other Potential Market Movers
- The
Yellen confirmation vote, Fed's Lacker speaking, Fed's Bullard
speaking, Fed's Powell speaking, BoJ decision, Eurozone PMI, 10Y
Treasury TIPS auction, weekly EIA natural gas inventory report,
Bloomberg Economic Expectations Index for November, weekly Bloomberg
Consumer Comfort Index, (RIG) analyst day and the (INTC) investor
meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.41 +.15%
- Euro/Yen Carry Return Index 140.05 -.92%
- Emerging Markets Currency Volatility(VXY) 8.54 +.95%
- S&P 500 Implied Correlation 33.41 n/a
- ISE Sentiment Index 126.0 -18.18%
- Total Put/Call .96 +18.52%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.74 -.01%
- European Financial Sector CDS Index 106.16 -2.77%
- Western Europe Sovereign Debt CDS Index 62.33 -.26%
- Emerging Market CDS Index 298.67 +2.13%
- 2-Year Swap Spread 10.50 -.75 basis point
- TED Spread 16.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.75 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .08% +1 basis points
- Yield Curve 252.0 +10 basis points
- China Import Iron Ore Spot $136.40/Metric Tonne +.07%
- Citi US Economic Surprise Index 6.90 +1.7 points
- Citi Emerging Markets Economic Surprise Index -14.90 -1.0 point
- 10-Year TIPS Spread 2.17 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +96 open in Japan
- DAX Futures: Indicating -51 open in Germany
Portfolio:
- Higher: On gains in my biotech sector longs, emerging markets shorts and index hedges
- Market Exposure: 25% Net Long
Bloomberg:
- High-Yield Borrowing Costs Decline to Record Low of 5% in Europe. Borrowing costs for junk-rated
companies fell to a record in Europe as investors seek riskier debt amid
confidence central banks will keep benchmark rates at all-time lows. The average yield on speculative-grade corporate bonds in euros
dropped three basis points this week to 5 percent, Bank of America
Merrill Lynch index data show. The cost of insuring the securities
against losses fell to the lowest in six years, with the Markit iTraxx
Crossover index dropping as much as 5.4 basis points to 332 basis
points. The gauge was at 334 basis points at 1:53 p.m. in London. “There’s
tremendous demand for higher yielding product,” said Suki Mann, a
strategist at Societe Generale SA in London. “With the ECB and Fed in
dovish mood, it’s more of the same in the medium term.” Non-financial companies raised a record 65 billion euros ($88
billion) from junk bond sales in Europe this year, up from 31 billion
euros over the same period in 2012, according to data compiled by
Bloomberg.
- Europe Stocks Little Changed as Investors Weigh U.S. Data.
European stocks were little changed as investors weighed U.S. retail
and home-sales (ETSLTOTL) data, as well as comments from people familiar
with the debate saying the European Central Bank is considering a
smaller-than-normal cut
in the deposit rate if officials decide to take it negative. Metro AG
climbed 2.4 percent after Barclays Plc upgraded
its recommendation on the retailer. Diageo Plc dropped 1.2
percent after Chief Executive Officer Ivan Menezes said
uncertainties in the global economy will drag on sales. Alcatel-Lucent
slid 3.5 percent after announcing a capital increase. The Stoxx Europe 600 Index climbed 0.1 percent to 322.91 at
the close of trading.
- U.S. 10-Year Yields at Almost 2-Month High on Fed Taper Outlook. Treasury 10-year yields rose to
almost the highest level in two months as Federal Reserve
officials said they might reduce their $85 billion in monthly
bond purchases “in coming months” as the economy improves, minutes
of their last meeting show. Benchmark yields rose for a second day as
Fed Bank of St. Louis President James Bullard said a cutback in the
central bank’s purchase program is “on the table” for the December
meeting. Fed Chairman Ben S. Bernanke said yesterday interest rates will
probably stay low until long after policy makers end debt purchases.
Five percent of investors surveyed are looking
next month for a Fed decision to taper, according to the latest
Bloomberg Global Poll.
- Bullard Says Tapering Bond Buying Is ‘On the Table’ Next Month. Federal
Reserve Bank of St. Louis
President James Bullard, a voter on policy this year who has backed
record stimulus, said that a strong jobs report could increase the
chance of a reduction in bond purchases next month. “It’s definitely
on the table, but it’s going to depend on the data,” Bullard said in a
Bloomberg Television interview with Erik Schatzker. “A strong jobs
report, I think, would
increase the probability some for a December taper.”
- Taxpayer-Funded Technology Flops Plague U.S. Government. Almost
a decade before the Obamacare website’s failed debut, the Air Force
began work on a project to replace 240 outdated networks with a single
logistics system. After spending about $1 billion, the program led by
Computer Sciences Corp. collapsed last year. Senators Carl Levin and John McCain described it as “one of the most egregious examples of mismanagement in recent memory.” The
list of federal information-technology lapses and flops includes
systems to modernize air-traffic control and to secure the nation’s
border, and now even President Barack Obama is wondering why the
government can’t get it right.
- Wall Street Keeps Swagger in CMBS as Sales Surge: Credit Markets. With almost six weeks to go in 2013,
sales of commercial-mortgage bonds are already surpassing Wall
Street’s forecasts for the year, defying concern that rising
interest rates would stymie new deals. Issuance of the securities is poised to exceed $80 billion,
eclipsing the $60 billion that Barclays Plc predicted in
January, according to analysts at the bank. Lenders have
arranged $65.5 billion of offerings this year and another $14.5
billion is in the works, including a $3.5 billion deal tied to
Hilton Worldwide Inc. that will be the largest such offering
since before the credit crisis, Bank of America Corp. data show. The average cost to borrow in the CMBS market climbed to as
high as 5.38 percent in deals sold earlier this month after
dipping to as low as 3.9 percent in June, Bank of America data
show. The increase hasn’t discouraged landlords from seeking new
loans as had been anticipated, according to Alan Todd, a
commercial-mortgage debt analyst at Bank of America in New York. “A lot of borrowers are getting off the sidelines before
rates go up again,” he said.
Wall Street Journal:
- Fed Grappled With Policy Message. Bond Buying Likely to Be Pared 'in Coming Months,' but Low Rates Prove Vexing. Federal Reserve officials still expect to
start pulling back on the central bank's $85 billion-a-month bond-buying
program "in coming months," but they engaged in a wide-ranging
conversation at their October meeting about ways to reinforce their
plans to keep short-term interest rates low for a long time after the
program ends. Officials "generally
expected that the data would prove consistent with the [Fed's] outlook
for ongoing improvement in labor market conditions and would thus
warrant trimming the pace of purchases in coming months," minutes from
the Fed's Oct. 29-30 meeting said. The minutes were released Wednesday
after the customary three-week lag. Officials
also looked at different scenarios that could differ from their
expectations for how the economy or the bond-buying program would
evolve. One scenario they considered was if officials decided they
needed to roll back the program before it had fully achieved its goals
because they perceived its costs had started to outweigh the benefits. Two
considerations came up under such a view, according to the minutes.
First, the Fed would need to clearly communicate to the public the
reasons it was making the decision to pull back, some officials said.
Secondly, the Fed may want to find a different way to stimulate the
economy. "It might well be appropriate to offset the effects of reduced
purchases by undertaking alternative actions to provide accommodation at
the same time," the minutes said.
MarketWatch:
- Gold futures mark lowest close since mid-July. Prices fall further in electronic trade after the release of Fed meeting minutes. In electronic trading not long after the release of the minutes, prices traded even lower at $1,251.70 an ounce.
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
New York Times:
- Dozens Killed in Wave of Attacks in Baghdad. A wave of apparently coordinated bombings hit bakeries and public
markets in Baghdad on Wednesday, killing at least 37 people and wounding
more than 80, many of them as they rushed to shop during a break in
heavy rainstorms, according to the police, residents and medical
officials.
Time:
- ‘You Can Keep Your Doctor’: Obamacare’s Next Broken Promise? Barack
Obama’s broken promise that all Americans would be able to keep their
health care plans after the implementation of the Affordable Care Act
has infuriated people who took the President at his word and rattled
even his staunchest supporters. But for the President, the real
political pain may only be starting. Come 2014, the rest of the country
may learn that another high-profile pledge was untrue. “No matter
how we reform health care,” Obama said in 2009, “we will keep this
promise: if you like your doctor, you will be able to keep your doctor.
Period.” It’s not that simple. In order to participate in
health-insurance exchanges, insurers needed to find a way to tamp down
the high costs of premiums. As a result, many will narrow their
networks, shrinking the range of doctors that are available to patients
under their plan, experts say.
Washington Times:
- Obama’s 37% approval rating approaches Nixon’s second-term average. A
new CBS poll puts the President’s sinking approval rating at an abysmal
37%. Only 57% approve of President Obama’s job performance due, in
large part, to
the bungling of the Affordable Care Act roll out. For the President, it
is a stunning nine-point drop in a one month period.
ABC News:
- Exclusive: US May Have Let 'Dozens' of Terrorists Into Country As Refugees. (video) Several
dozen suspected terrorist bombmakers, including some believed to have
targeted American troops, may have mistakenly been allowed to move to
the United States as war refugees, according to FBI agents investigating the remnants of roadside bombs recovered from Iraq and Afghanistan.
Euromoney:
- Eurozone Banks' NPL Crisis Threatens to Derail Recovery. The
IMF warns that corporate loan losses for banks in Spain, Italy and
Portugal could hit 282 billion euros over the next two years,
highlighting the scale of the challenge for the ECB's asset-quality
review amid continued financial fragmentation.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.06% 2) Utilities -.82% 3) Agriculture -.64%
Stocks Falling on Unusual Volume:
- SSW, DWRE, ICLD, SJM, SPSC, SGMS, CHKR, CPB, DDD, LOW, HOLI, NHI, EBAY, PRLB, SFM, CHRW, BA, GTLS, SSYS, FF, FGP, HIBB, HPY, CHUY, SQM and AMRI
Stocks With Unusual Put Option Activity:
- 1) ADT 2) DE 3) ADSK 4) MNST 5) DKS
Stocks With Most Negative News Mentions:
- 1) CSCO 2) TSLA 3) SJM 4) LOW 5) CHRW
Charts:
Style Outperformer:
Sector Outperformers:
- 1) HMOs +1.62% 2) Biotech +1.58% 3) Hospitals +1.12%
Stocks Rising on Unusual Volume:
- LZB, ETE, BMRN, GTN, YPF, PVA, TSL and NQ
Stocks With Unusual Call Option Activity:
- 1) STSI 2) NFX 3) DE 4) OLN 5) ABC
Stocks With Most Positive News Mentions:
- 1) JCP 2) DVN 3) HD 4) QCOM 5) DDD
Charts:
Evening Headlines
Bloomberg:
- China Has ‘High’ Chance of Small Bank Failure, Official Says. One or two small Chinese banks may
fail next year as they face pressure from their reliance on
short-term borrowing, a Communist Party economic official said. Small banks get about 80 percent of their funding from
interbank markets and deposits in savings vehicles known as
wealth management products, Fang Xinghai, a bureau director at
the Central Leading Group for Financial and Economic Affairs,
said at a conference in Beijing today. They face risks from the
mismatch with their long-term loans to borrowers such as local-government financing vehicles, he said. “Sometime next year, there may be one or two small lenders
reporting a bank run or bankruptcies,” said Fang, a former head
of Shanghai’s municipal Financial Services Office, whose current
organization reports to the Central Committee of China’s ruling
party. “That possibility is very high.”
- Chinese Skeptics Deepening Biggest A-Share Discount in 3 Years. China’s
largest package of economic reforms since the 1990s is getting a bigger
vote of confidence from foreign investors than from the nation’s own
citizens. The benchmark index for Chinese stocks traded in Hong Kong
has jumped 6.2 percent, more than twice the Shanghai gauge, since
policy makers led by President Xi Jinping pledged to ease China’s
one-child policy and liberalize interest rates on Nov. 15. That left
mainland shares valued at a 5.8 percent discount, the most in three
years, according to the Hang Seng China AH Premium Index. In a year when Asian equities are up 10 percent and
American stocks are rising the most in a decade, China’s market
is getting little respect, even from its own citizens. The
Shanghai Composite index is down 3.4 percent, trailing its Hong
Kong counterpart by the most since 2010.
- Emerging-Market
Hedging Costs at Five-Year High to U.S.: Options. The cost of options
protecting against swings in emerging-market stocks has climbed to an
almost five-year high versus U.S. contracts as economic growth slows
from India to Brazil and foreign investors sell. Implied volatility on
the iShares MSCI Emerging Markets exchange-traded fund was 56% higher
than on an ETF tracking the Standard & Poor's 500 Index, according
to data compiled by Bloomberg on six-month contracts with an exercise
price near the shares. The measures of options prices for the
emerging-markets fund was 61% higher on Nov. 8, the most since January
2009, and up from a low of 18% in March.
- Singapore Property Boom Fuels Malaysia Spillover Bubble.
Chris Metcalf commutes for 45 minutes to Singapore each day from
Iskandar, a region just over the border in Malaysia, to work as a lawyer
at Clyde & Co LLP. “It’s too expensive to live in Singapore,” said
Metcalf, who moved across the Johor Strait in June after finding he
could no longer afford the island-state on a local salary and with
four children. “We’re selling a house in the U.K. and when we
do we’ll consider buying in Malaysia because it’s definitely
better value.”
- Asian Stocks Fall, Led by Australian Banks, WorleyParson.
Asian stocks fell for a second day after valuations on the regional
benchmark index reached the highest level since May and as Australian
banks declined and WorleyParsons Ltd. (WOR) cut its profit forecast.
Australia & New Zealand Banking Group Ltd. (ANZ) and Commonwealth
Bank of Australia dropped more than 0.6 percent. WorleyParsons slumped a
record 25 percent as Australia’s largest oil and gas engineering
company cut its profit estimate. Micronics Japan Co. surged 21 percent
in Tokyo after the electronics-component maker
raised its full-year earnings forecast. The MSCI Asia Pacific Index fell 0.2 percent to 142.49 as
of 12:44 p.m. in Hong Kong, with five stocks declining for every
four that rose.
- Rebar Gains as Inventory in China Drops to Lowest Since 2011. Steel reinforcement-bar futures in
Shanghai climbed as inventory in China fell to the lowest level
in more than two years. Rebar for May delivery, the most-active
contract on the Shanghai Futures Exchange, rose as much as 0.8 percent
to 3,651 yuan ($599) and traded at 3,646 yuan at 10:50 a.m. local time.
- Hollande’s Tax Rebels Underscore Mounting Opposition. Another
week, another round of
protests in France against President Francois Hollande’s tax increases.
Farmers have threatened to block roads into Paris tomorrow,
saying they’re “fed up.” Horse-riding centers are set to
protest this weekend against a higher sales tax, an issue
ambulance drivers demonstrated against earlier this week.
- Climate Rift Widens as Poor Nations Seek Clarity on Aid Pledges. A debate over climate aid is
widening the rift between richer and poorer nations at United
Nations climate talks in Warsaw, creating another obstacle in
the fight against global warming. Industrial nations have pledged to boost aid to $100
billion a year by 2020 for developing countries seeking to
reduce their own pollution and cope with more intense storms and
higher sea levels that come with higher temperatures. Poorer
countries are seeking a predictable funding schedule to help
them plan, and the richer states aren’t providing that.
Wall Street Journal:
Fox News:
- Solar firm linked to Obama donors could be 'next Solyndra,' top GOP Sen. warn. A California-based solar company backed by several Obama supporters
has been receiving millions in federal tax credits while losing $322
million since 2008, raising concerns about the company “becoming the
next Solyndra.” Among SolarCity Corp.’s(SCTY) biggest investors is Elon Musk -- the
high-profile donor and fundraiser who co-founded PayPal and whose
companies SpaceX and electric-car company Tesla Motors have received at
least $846 million in loans and startup money from the Obama
administration. Alabama Sen. Jeff Sessions, the top Republican on the Senate Budget
Committee, warned about SolarCity’s financial standing in a letter
Monday to the Treasury Department. “There is concern that SolarCity might become the next Solyndra -- a
company propped on the back of the taxpayers,” Sessions wrote.
MarketWatch.com:
- China hard landing is likely: Andy Xie. Commentary: Real reform may not come fast enough for bubble economy.
China’s asset bubble increasingly depends on financing from the shadow
banking system. The carry trade — borrowing dollar loans at low interest
rates offshore and converting the loans into yuan, either disguised as
foreign direct investment or export revenue, for lending at a high
interest rate — has become a significant source of funding in the shadow
banking system. The recent surge of land prices in big cities may be
due to it. The rising share of unstable financing for the country’s asset bubble
threatens a chaotic ending. If the bubble suffers a confidence crash or a
receding tide of liquidity, the unwinding of speculative holdings would
be chaos, causing a hard landing. The carry trade drove the property bubble in Southeast Asia before 1997.
The rising U.S. interest rate triggered its collapse. China is under
the influence of the same force but on a much larger scale. The Fed’s
massive quantitative easing has driven up China’s money supply, partly
through the carry trade. If the Fed unwinds the QE, China’s bubble will
burst.
CNBC:
- Obamacare bombshell: IT official says HealthCare.gov needs payment feature. (video) Another day, another big, bad black eye for HealthCare.gov. A
crucial system for making payments to insurers from people who enroll
in that federal Obamacare marketplace has yet to be built, a senior
government IT official admitted Tuesday. The official,
Henry Chao, visibly stunned Rep. Cory Gardner (R-Colo.) when he said
under questioning before a House subcommittee that a significant
fraction of HealthCare.gov—30 to 40 percent of it—has yet to be
constructed.
- Bernanke backs Yellen: Taper depends on economy. (video) Federal Reserve Chairman Ben Bernanke said on Tuesday the Fed would
maintain its ultra-easy U.S. monetary policy for as long as needed and
only begin to taper bond buying once it is assured that improvements in
the labor market would continue.
Zero Hedge:
Business Insider:
Washington Post:
- The Insiders: Obamacare shifts voters’ thinking. A
Gallup poll released yesterday says 56 percent of Americans do not
believe it is Washington’s responsibility to “make sure all Americans
have healthcare coverage,” while 42 percent believe the federal
government is responsible. Two years ago, it was a different story.
The same poll conducted by Gallup in 2011 showed that 46 percent of
Americans believed the federal government was not responsible for making
sure all Americans have healthcare coverage, and 50 percent said the
federal government was responsible.
Reuters:
Financial Times:
- U.S. Funds' Holding in Big Eurozone Banks Up 40% Since June.
Share value in 10 largest listed banks totals $33b, as number of shares
held rose by 10% over the same period, citing its own calculations. Big
investments made by groups including T Row Price, BlackRock, Waddell
& Reed. U.S. money market funds have also returned to the region,
with lending to eurozone banks up 89% over the past year, citing rating
co. Fitch.
Yonhap News:
- South Korea Concerned About Won's One-Sided Moves. South Korean
authorities are concerned the volatility in the currency has been
drastic and that the moves have been one-sided, citing a Bank of Korea
official. Biggest concern is there's only dollar sales and no purchases
in the market.
- S. Korea steps up defense on northwestern islands. South
Korea has beefed up its forces on a group of northwestern islands along
the tensely guarded maritime border with North Korea to counter
provocations from its archrival, military officials said Wednesday.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 103.75 +2.0 basis points.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance MoM for October are estimated to rise +.1% versus a -.1% decline in September.
- Retail Sales Ex Auto MoM for October are estimated to rise +.1% versus a +.4% gain in September.
- Retail Sales Ex Auto and Gas for October are estimated to rise +.3% versus a +.4% gain in September.
- The CPI MoM fore October is estimated unch. versus a +.2% gain in September.
- The CPI Ex Food and Energy MoM for October is estimated to rise +.1% versus a +.1% gain in September.
10:00 am EST
- Existing Home Sales for October are estimated to fall to 5.14M versus 5.29M in September.
- Business Inventories for September are estimated to rise +.3% versus a +.3% gain in August.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +412,000 barrels versus a +2,640,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +50,000 barrels versus
a -838,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -489,000 barrels versus a -481,000 barrel decline
the prior week. Finally, Refinery Utilization is estimated to rise +.64% versus a +1.9% gain the prior week.
2:00 pm EST
- FOMC minutes from Oct 29-30 meeting.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bullard speaking, Fed's Dudley speaking, BoE minutes, weekly MBA mortgage applications report, BofA Energy Conference, Morgan Stanley Tech/Media/Telecom Conference, Goldman Megtals/Mining/Steel Conference, Jefferies Healthcare Conference, (RRGB) investor day and the (QCOM) analyst meeting could also impact trading today.
BOTTOM LINE: Asian
indices are lower, weighed down 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 25% net long heading into the day.
