Bloomberg:
- Russia Defies West’s Crimea Pleas as EU Offers Ukraine Aid. Russia defied pleas from the West to loosen its grip on Ukraine’s
southern Crimea region, as the European Union promised 1.6 billion euros
($2.2 billion) in emergency aid to help the Ukrainian government avert a default.
Russian Foreign Minister Sergei Lavrov said the western-backed
government in Kiev no longer rules over Crimea, saying control has
shifted to armed “self-defense” groups. U.S. Secretary of State John
Kerry warned Russia against violating “very clear legal obligations” to
uphold Ukraine’s unity.
- Moldova Warns of Contagion After Russia’s Intervention in Crimea. Moldovan Prime Minister Iurie Leanca
said Russia’s troop buildup in Crimea, an autonomous province of
Ukraine, could be replicated in other eastern European
countries. “It is just a very dangerous development,” Leanca said in
an interview at Bloomberg’s headquarters in New York today.
“It’s indeed very contagious.”
- China Bear Stearns Moment Seen by BofA in Solar Default Risk. A solar company’s potential default may be China’s
“Bear Stearns moment,” prompting investors to reassess credit risks as
they did after the U.S. lender was bailed out in 2008, according to Bank
of America Corp. “We doubt that the financial
system in China will experience a liquidity crunch immediately because
of this default but we think the chain reaction will probably start,”
Bank of America strategists David Cui, Tracy Tian and Katherine Tai
wrote in a note today. During the U.S. financial crisis, it took a year “to reach the Lehman stage” when investors began to panic and shadow
banking froze, the strategists added.
- EU Says Italy Faces a ‘Major Challenge’ in Reducing Debt.
Italy’s new government under Prime Minister Matteo Renzi faces a “major
challenge” in achieving strong growth and lowering its public debt, the
European Commission said today. “Italy has to address the very high level of public debt and weak external competitiveness,” the Brussels-based
commission said today in a report on the EU member countries’
economic imbalances. “Both are ultimately rooted in the
protracted sluggish productivity growth and demand urgent policy
attention.”
- European Stocks Little Changed After Data; Subsea Falls.
European stocks were little changed, after rallying yesterday by the
most in eight months, as data showed the region’s services output
expanded faster than estimated while U.S. hiring missed projections.
Subsea 7 SA tumbled the most since June after posting fourth-quarter
profit that missed analysts’ forecast. Melrose Industries Plc (MRO)
tumbled 7.8 percent after Numis Securities Ltd. advised investors to
sell the stock. Admiral Group (ADM) Plc rose 7.5 percent, for the
highest price in 2 1/2 years. The Stoxx Europe 600 Index slipped less than 0.1 percent to 337.06 at the close in London.
- WTI, Brent Oils Decline on U.S. Supply Report. West Texas Intermediate and Brent
crudes extended losses after a government report showed that
U.S. inventories advanced for a seventh week.
Futures fell as much as 1.8 percent in New York after the
Energy Information Administration said supplies rose by 1.43 million
barrels to 363.8 million last week. Refineries operated at 87.4 percent
of capacity, down 0.6 percentage points from the prior week. Refiners
are performing maintenance as they transition to summer from winter
fuels. Oil also slipped on speculation that Ukraine’s crisis won’t
disrupt shipments.
- Americans Shut Out of Home Market Threaten Recovery: Mortgages. Kirk
Rohrig is concerned he may soon join the growing ranks of Americans
shut out of the housing recovery and the financial benefits that spring
from it. Rohrig, who is unmarried, began hunting in November for his
first home in Portland, Oregon, where cash buyers are driving up
property prices. The software support
specialist earns about $55,000 a year, has a high credit score of 790
and can’t find anything worth buying for about $200,000.
Wall Street Journal:
Fox News:
- Russia May Confiscate US Assets if Sanctioned. Secretary of State John Kerry will meet with Russian Foreign Minister
Sergey Lavrov to discuss the crisis in Ukraine on Wednesday, a day
after the U.S. escalated a war of words with Russian President Vladimir
Putin over Moscow's military intervention in Crimea. Kerry and Lavrov are expected to meet on the sidelines of a
long-planned conference on Syrian refugees, which is likely to be
overshadowed by ongoing tensions in Ukraine.
ZeroHedge:
Business Insider:
StockTwits:
Reuters:
- Fed confirms bad weather hit to U.S. economy in early 2014. Severe weather across much
of the United States took a toll on shopping and consumer
spending in recent weeks, leading to slower economic growth or
outright contraction in some areas of the country, the Federal
Reserve said on Wednesday. The Fed, in its anecdotal Beige Book report, said economic
activity in January and February shrank slightly in two of its
12 districts, New York and Philadelphia, mostly due to
"unusually severe weather."
- Facebook(FB), Instagram crack down on gun sales on social networks. Facebook Inc and its photo sharing subsidiary, Instagram, will delete posts offering to buy or sell guns without background checks, Facebook
announced on Wednesday.
- Global economic growth eased in February -PMI. JPMorgan's Global All-Industry Output Index, produced with
Markit, fell to 53.0 from January's 54.0.
- EU warns Italy is in economic trouble, France to miss deficit targets. The
European Commission put Italy on Wednesday on its watch list because of
the country's very high public debt and weak competitiveness and warned
France that will miss agreed budget deficit reduction targets unless it
takes action.
Financial Times:
- Ukraine crisis: Splits emerge in west’s stance on Russia. The
west’s diplomatic efforts to counter Russia’s takeover of Crimea faced
setbacks on multiple fronts on Wednesday as the Kremlin refused to
engage with the new Ukrainian government and allies themselves were
at loggerheads over how tough a line to take with Moscow.
- China ramps up rhetoric battle with Japan. Chinese
Premier Li Keqiang has warned Japan that China would not allow any
country to “reverse the course of history”, as Beijing and Tokyo remain
locked in an increasingly tense dispute over contested islands in the
East China Sea.
Style Underperformer:
Sector Underperformers:
- 1) Coal -1.27% 2) Steel -1.14% 3) Hospitals -1.10%
Stocks Falling on Unusual Volume:
- NCLH, HCI, OAK, BOBE, VEEV, ACAD, LXFT, INXN, YY, CSIQ, NAV, PETM, ZU, UIL, CHEF, JBT, INSY, NSM, ETH, SJI, NUVA, FLT, FLTX, ENDP and ABM
Stocks With Unusual Put Option Activity:
- 1) KOG 2) END 3) CAM 4) NAV 5) EWA
Stocks With Most Negative News Mentions:
- 1) XOMA 2) PG 3) GTIV 4) NTRS 5) X
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.12% 2) Networking +1.06% 3) Agriculture +.64%
Stocks Rising on Unusual Volume:
- ARWR, SWHC, AVAV, DANG, THRM, GMED, FENG, XXIA, SFUN, SZYM, CYTK, RKUS, GOGO, INVN, OSIR, FEYE, THRM, MXWL, IRBT, CYTK and WAC
Stocks With Unusual Call Option Activity:
- 1) FCEL 2) SWC 3) SWHC 4) GNK 5) XOMA
Stocks With Most Positive News Mentions:
- 1) SWHC 2) IBM 3) HPT 4) MXWL 5) GMCR
Charts:
Evening Headlines
Bloomberg:
- Putin Says There’s No Need Yet for Russia to Invade Ukraine. Russian President
Vladimir Putin said he saw no immediate need to invade Ukraine while
leaving open the possibility of using force, as the U.S. weighed
sanctions on Russia and offered aid to the Ukrainian government. In
his first public remarks since Ukraine said its Crimean peninsula was
seized by Russian forces, Putin said yesterday he has a duty to defend
ethnic Russians in the region and reserved the right to military action.
U.S. President Barack Obama challenged Putin’s rationale for
intervening, as Secretary of State John Kerry unveiled $1 billion in
loan guarantees to
Ukraine’s cash-strapped government during a visit to Kiev.
- Crimea Crisis Haunted by Ghosts of Bungled World War I Diplomacy.
A century later, as Russian President Vladimir Putin menaces Ukraine, the world hasn’t banished the risks of the
miscommunications, clumsy judgments and botched intelligence
that blindsided Europe in 1914, said Max Hastings, a British
military historian.
- China Boosts Defense Spending as Xi Pushes for Stronger Military. China’s central government will
boost defense spending 12.2 percent this year as President Xi Jinping vows to create a strong military and the navy extends
its reach into neighboring waters. The defense budget is set to rise this year to 808.23
billion yuan ($131.6 billion), the Ministry of Finance said in a
report today. China has the second-biggest military budget in
the world after the U.S., though its spending remains at least
five times less.
- Chaori Solar Warns It May Miss 89.8 Million Yuan Bond Payment. A Chinese solar company warned it
may not be able to make an 89.8 million yuan ($14.6 million)
interest payment in full by the March 7 deadline, in what may be
the first default of an onshore bond. Shanghai Chaori Solar Energy Science & Technology Co. (002506), a
maker of cells to convert sunlight into power, plans to pay 4
million yuan to bondholders, the company said in a statement to
the Shenzhen stock exchange yesterday.
- China Value-Added Tax on Telecom Services May Cut Carrier Profit. Premier
Li Keqiang said China will impose a value-added tax on
telecommunication services, a move analysts said may cut earnings at the
country’s three major wireless carriers. The VAT will replace an existing business tax as part of a
national trial also applied to railway transportation and postal
services, Li said in a report delivered today at the start of
the annual meeting of China’s legislature, the National People’s
Congress. Li didn’t say when the VAT would start or offer other
details.
- Asian Stocks Rise as Wheat Drops on Receding War Threat. Asian stocks rose, with the regional
index climbing the most in a week, and credit risk fell to the
lowest level this year as the threat of war in Ukraine receded and China kept its growth target unchanged. Wheat dropped. The MSCI Asia Pacific Index climbed 0.9 percent by 10:46
a.m. in Tokyo, its biggest increase since Feb. 21, with most
major indexes in the region advancing.
- ECB May Repeat Japan Mistake That Triggered Lost Decade. The
central bank failed to sound a
deflation alert. “At present there is no reason to expect that overall
prices will drop sharply and exert deflationary pressure on the entire
economy,” policy makers wrote in their monthly report, signed off by the
governor.
- Subprime Auto Boom Besieged by Late-Payment
Jump: Credit Markets. A three-year lending boom to car buyers with
spotty credit that helped push auto sales to a six-year high is starting
to show signs of overheating. The percentage of loans packaged into
securities that are more than 30 days late rose 1.43 percentage points
to 7.59 percent in the 12 months ended September 30, according to
S&P. That's the highest in at least three years, the data released
last week by the NY-based ratings company show. "We're at this
inflection point," Amy Martin, an analyst at S&P, said by telephone.
"Now that they are opening the lending spigot, it's only natural that
losses are starting to rise."
- Benghazi Seen as Clinton’s Top Career Negative, Pew Poll Shows. Americans named “Benghazi” as the
most glaring negative on former U.S. Secretary of State Hillary Clinton’s political resume, while more than two-thirds approved
of her performance as America’s top diplomat, a poll shows. Fifteen percent of those surveyed identified the Sept. 11,
2012, killing of four Americans at a U.S. compound in Benghazi,
Libya, when asked to name the worst thing about the career of
Clinton, a possible 2016 Democratic presidential candidate, according to the Pew Research Center/USA Today poll released
today.
Wall Street Journal:
- Putin, Obama Talk Tough on Ukraine. Moscow Shows Little Sign of Backing Down; Russian Troops Fire Warning Shots Outside Air Base. The
U.S. kept up a war of words with Russian President Vladimir Putin while
hoping he will back down over Ukraine, but there was little evidence
Tuesday he would. Mr. Putin offered a full-throated defense of his use
of force in the restive region of Crimea, rejecting Western demands to
withdraw and
insisting sanctions would be counterproductive. Russian troops occupying
an air base there fired warning shots at Ukrainian counterparts,
seemingly underlining Moscow's determination.
Fox News:
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Financial Times:
- US considers sanctions on Russian banks. The
banking sanctions are one of a series of measures that the
administration has been discussing with Congress in recent days as it
seeks to find ways to isolate Moscow diplomatically and economically, according to congressional aides and officials.
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 129.0 -8.0 basis points.
- Asia Pacific Sovereign CDS Index 99.50 -4.0 basis points.
- NASDAQ 100 futures +.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:15 am EST
- The ADP Employment Change for February is estimated at 155K versus 175K in January.
10:00 am EST
- ISM Non-Manufacturing for February is estimated to fall to 53.5 versus 54.0 in January.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory gain of
+1,078,000 barrels versus a +68,000 barrel gain the prior week. Gasoline
supplies are estimated to fall by -878,000 barrels versus a -2,807,000
barrel decline the prior week. Distillate supplies are estimated to fall
by -1,033,000 barrels versus a +338,000 barrel gain the prior week.
Finally, Refinery Utilization is estimated to fall by -.34% versus a
+1.2% gain the prior week.
2:00 pm EST
Upcoming Splits
Other Potential Market Movers
- The
Fed's Fisher speaking, Fed's Williams speaking, Eurozone Services PMI,
Eurozone GDP, weekly MBA mortgage applications report, (XOM) analyst
meeting and the (HON) Investor Conference could also impact trading
today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 14.35 -10.31%
- Euro/Yen Carry Return Index 146.48 +.76%
- Emerging Markets Currency Volatility(VXY) 8.93 -2.19%
- S&P 500 Implied Correlation 53.60 -4.32%
- ISE Sentiment Index 132.0 +21.10%
- Total Put/Call .81 -10.0%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.82 -3.77%
- European Financial Sector CDS Index 88.39 -4.46%
- Western Europe Sovereign Debt CDS Index 51.67 +1.29%
- Asia Pacific Sovereign Debt CDS Index 99.50 -3.81%
- Emerging Market CDS Index 303.93 -5.27%
- China Blended Corporate Spread Index 366.77 +1.89%
- 2-Year Swap Spread 13.5 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -5.75 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- Yield Curve 236.0 +7.0 basis points
- China Import Iron Ore Spot $116.80/Metric Tonne -.76%
- Citi US Economic Surprise Index -18.70 -3.4 points
- Citi Emerging Markets Economic Surprise Index 12.40 -.3 point
- 10-Year TIPS Spread 2.19 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +244 open in Japan
- DAX Futures: Indicating -25 open in Germany
Portfolio:
- Slightly Lower: On losses in my index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added some back
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Putin Says No Immediate Need to Invade Eastern Ukraine, Leaves Threat Dangling.
Vladimir Putin said he sees no immediate need to invade eastern Ukraine as the Obama administration prepares $1 billion in loan guarantees for the cash-strapped nation and threatens sanctions against Russia. In his first public remarks since Ukraine said its Crimean peninsula had been taken over by Russian forces, President Putin said he reserved the right to use force to defend ethnic Russians while there’s “no such necessity” at present. U.S. Secretary of State John Kerry arrived in Kiev to offer an aid package to Ukraine’s interim government, as President Barack Obama challenged Putin’s rationale for intervening.
- Ukraine Crisis Threatens $8 Billion of Russian Company Loans.
Political and military tension in Ukraine is threatening to derail $8
billion of international loans sought by Russian companies. Billionaire
Mikhail Fridman’s VimpelCom Ltd. (VIP) is among at least 10 borrowers
negotiating loans with U.S., European and Japanese banks, according to data compiled by Bloomberg. Russia’s
currency, bond and stock markets rose after plunging when troops seized
control of the Black Sea region of Crimea. The cost of insuring the
country’s debt against losses is falling after the biggest increase
since June.
- U.S. Readying Russia Sanctions Within Days, Kerry Aides Say. The U.S. administration is preparing
sanctions to punish Russia for its military action in Crimea and
will announce an assistance package aimed at bolstering the
fledging Ukrainian government, officials said. As Secretary of State John Kerry arrived in the Ukrainian
capital, Kiev, today amid the worst standoff between Russia and
the West since the end of the Cold War, U.S. officials traveling
with him expressed concern over reports that Russian aircraft
had attempted incursions into airspace over mainland Ukraine
before being turned back by Ukrainian jets.
- European Stocks Rebound From Biggest Drop in Five Weeks.
European stocks rose, rallying the most in eight months, as investors
speculated that the military standoff in Ukraine will not lead to war.
Glencore Xstrata Plc advanced 1.7 percent after increasing its forecast
for cost savings following the acquisition of Xstrata Plc. Beiersdorf AG
added 2 percent as the maker of Nivea skin cream reported profit that
beat estimates and predicted sales will rise as much as 6 percent this
year. Ashtead Group Plc rallied the most since 2011 after saying
full-year earnings will exceed the company’s previous projections. The Stoxx Europe 600 Index rose 2.1 percent to 337.15 at
the close of trading.
- WTI Crude Falls From Five-Month High on Ukraine.
WTI for April delivery slid $1.85, or 1.8 percent, to $103.07 a barrel
at 1:21 p.m. on the New York Mercantile Exchange. The contract rose 2.3
percent to $104.92 yesterday, the highest settlement since Sept. 19. The
volume of all futures
traded was near the 100-day average.
- Insurers’ Obamacare Losses May Reach $5.5 Billion in 2015.
The money, outlined in President Barack Obama’s proposed budget for the fiscal year that begins in October, is
designated to help insurers who find the cost of the law higher than
expected, based on the percentage of older, sicker people who sign up
compared with younger enrollees.
Wall Street Journal:
MarketWatch:
CNBC:
ZeroHedge:
Business Insider:
Washington Post:
Libertyblitzkrieg:
- The Debt Bubble Expands as Auto Loan Amounts Hit a New Record. Is anyone surprised that the poorest and least credit worthy of
Americans are being saddled with piles of debt in order to buy new cars?
It’s not enough that a generation of our citizens will toil pointlessly
to pay off more than $1 trillion of student loans, we may as well add
some other form of debt burden on top of it.
It’s hard to even imagine this is happening so shortly after the last credit bubble train wreck, but happening it is.
Reuters:
- Global PC shipments to fall 6.1 percent in 2014: IDC. Global shipments of personal computers fell 9.8 percent last year, the worst contraction on record, and are likely to decline by 6.1 percent
in 2014 due to lackluster demand in developing countries,
according to market research firm IDC.
- Putin, China's Xi hold "close" views on Ukraine, Kremlin says. Russian President Vladimir Putin
and Chinese President Xi Jinping discussed the situation in
Ukraine by telephone on Tuesday and their positions on the issue
are "close", the Kremlin said.
It said the presidents of the veto-wielding U.N. Security
Council nation expressed hope that "the steps taken by the
Russian leadership will allow for the reduction of ... tension
and provide for the security of Russian-speaking citizens living
in Crimea and the eastern regions of Ukraine."
Telegraph:
