Evening Headlines
Bloomberg:
- Russia Stands Fast on Crimea as Ukraine Drills Military. Russia
showed no signs of yielding in the Crimea standoff as Ukraine’s prime
minister prepared to meet U.S. President Barack Obama and western
nations threatened further repercussions if Russia failed to defuse
tensions. Ukraine is testing its military’s combat readiness, the
Defense Ministry said, while reiterating the government’s desire for a
peaceful solution. Russia, which has vowed to defend the ethnic Russians who dominate the Crimean peninsula, accuses
Ukraine of ignoring radicals in the nation’s east and said it
rejects the legitimacy of the western-backed leadership in Kiev.
- SoftBank’s Son Vows ‘Massive Price War’ If T-Mobile Deal Allowed. SoftBank
Corp. President Masayoshi Son will start a “massive price war” if U.S.
regulators allow him to purchase T-Mobile US Inc., he said in an
interview with PBS’s Charlie Rose. The billionaire, who bought
control of Sprint Corp. last year, said combining the third- and
fourth-largest U.S. mobile-phone carriers would give him enough scale to
compete against
the largest operators, AT&T Inc. and Verizon Communications Inc.
- Asia Stocks Climb as Investors Weigh China Credit, BOJ. Asian
stocks rose, after the regional benchmark index yesterday dropped the
most in two weeks, as investors weighed data showing China’s credit
growth trailed estimates in February and awaited the conclusion of the
Bank of Japan’s policy meeting. Taiheiyo Cement Corp., Japan’s biggest
maker of the product, jumped 4.4 percent on a report the company’s U.S.
unit will post its first profit in six years. Yamada Denki Co. added 1.8
percent after JPMorgan Chase & Co. raised its rating on the
electronics retailer. Fortescue Metals Group Ltd., Australia’s
third-largest producer of iron ore, lost 0.7 percent, extending a
two-day slump to 10 percent, after the raw material used to make steel
plunged by most since August 2009. The MSCI Asia Pacific Index gained
0.2 percent to 137.95 as of 10:03 a.m. in Tokyo.
- Copper Has Biggest Two-Day Drop in 28 Months on Economic Concern. Copper futures posted the biggest
two-session drop in 28 months on signs of faltering economic
growth from France to China, the world’s biggest consumer of
industrial metals. On the Comex in New York, copper dropped below $3 a pound
for the first time since June. French industrial production
production unexpectedly dropped in January for the second
straight month, and business confidence declined, separate
reports showed today. In China, exports slid in February by the
most since 2009, government data showed on March 8.
- Iron Ore Plunges Most Since August 2009 on China Concern.
Iron ore extended its decline into a bear market, slumping by the most
since August 2009, amid concern that demand in China is slowing just as
rising output signals a global glut. Ore with 62 percent content delivered to Tianjin fell 8.3 percent to $104.70 a dry ton, the lowest since October 2012 and
the biggest drop in more than four years, according to data from
The Steel Index Ltd. yesterday. The benchmark price lost 27
percent since Aug. 14, when it reached a five-month high of
$142.80. The raw material dropped into a bear market on March 7.
Wall Street Journal:
- Stolen Passports Used on Malaysia Airlines Flight Show Gaps in Air Security Around Globe. Investigation Shines Light on Thriving Market for Illicit Documents and Disparity in Aviation Security Around World.
The investigation into passengers aboard a missing Malaysia Airlines
3786.KU 0.00% flight who were traveling with stolen passports has drawn
attention to a thriving market for illicit documents and the disparity
in aviation security across the globe.
Fox News:
- Russians enter town north of Crimea, say Ukrainians. Ukrainians in the Kherson province just north of Crimea say Russian
operatives have moved into the territory, an incursion which, if true,
could show Vladimir Putin has more than just the Black Sea peninsula in
his sights. Residents of the village of Chonhar, in the Kherson region of
Ukraine, say Russian troops showed up last week in armored personnel
carriers, prompting the dispatch of Ukrainian troops and a standoff.
The suspected Russian troops pulled back and established a checkpoint on
a major road leading north from the Crimean capital of Simferopol.
MarketWatch.com:
CNBC:
- Corporate debt fever rises to new record in 2014. Corporate America's love affair with debt has intensified in 2014,
with record levels of borrowing happening as feared rate increases have
yet to materialize. This year was supposed to be the one where the
rock-bottom rates began to lift as the Federal Reserve eased its foot
off the stimulus pedal and economic growth pushed borrowing costs
higher.
Zero Hedge:
Business Insider:
Reuters:
- Urban Outfitters(URBN) warns on current-quarter results after sales miss.
Teen apparel retailer Urban Outfitters Inc reported lower-than-expected
quarterly sales, citing severe winter weather in the United States, and
said it was "very cautious" on its current-quarter performance.
Shares of the company, known for its Anthropologie, Free
People and Urban Outfitters brands, fell 3 percent in extended
trading.
Telegraph:
NHK:
- 55%
of Japanese to Cut Spending After Sales Tax Hike. 72% of interviewees
say they are worried about the economy after the increase.
China Youth Daily:
- People's Bank of China Governor Zhou Xiaochuan said yesterday
that restrictions against printing money are lacking, citing Zhou as
saying in a speech at a CPPCC meeting. Printing too much money will
cause asset bubbles or inflation, Zhou said.
Shanghai Securities News:
- Australia May Start Probe on Chinese Solar Imports. Australia may
start an anti-dumping and anti-subsidy investigation on Chinese solar
product imports, citing a person from China Chamber of Commerce for
Import and Export of Machinery and Electronic Products.
Evening Recommendations
Piper Jaffray:
- Rated (BLOX) Overweight, target $30.
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 128.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 94.0 - basis points.
- NASDAQ 100 futures -.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- The NFIB Small Business Optimism Index for February is estimated to fall to 93.8 versus 94.1 in January.
10:00 am EST
- JOLTs Job Openings for January are estimated to rise to 4015 versus 3990 in December.
- Wholesale Inventories for January are estimated to rise +.4% versus a +.3% gain in December.
- Wholesale Sales for January are estimated to rise +.2% versus a +.5% gain in December.
Upcoming Splits
Other Potential Market Movers
- The
German trade figues, $30B 3Y T-Note auction, weekly retail sales
reports, BofA Consumer/Retail Conference, Barclays Healthcare
Conference, Piper Jaffray Tech/Media/Telecom Conference, Pershing Square
(HLF) conference call, (CVX) analyst meeting, (MMC) investor day and
the (DLPH) investor update 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 mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.58 +3.33%
- Euro/Yen Carry Return Index 149.32 -.11%
- Emerging Markets Currency Volatility(VXY) 8.77 +1.15%
- S&P 500 Implied Correlation 54.67 +.98%
- ISE Sentiment Index 89.0 -26.45%
- Total Put/Call .88 +7.32%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.38 -.12%
- European Financial Sector CDS Index 87.27 +1.63%
- Western Europe Sovereign Debt CDS Index 48.28 -.82%
- Asia Pacific Sovereign Debt CDS Index 98.69 +2.74%
- Emerging Market CDS Index 312.45 +.68%
- China Blended Corporate Spread Index 354.99 -.13%
- 2-Year Swap Spread 13.75 unch.
- TED Spread 19.25 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.75 -2.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .04% -1.0 basis point
- China Import Iron Ore Spot $104.70/Metric Tonne -8.32%
- Citi US Economic Surprise Index -31.60 -.4 point
- Citi Emerging Markets Economic Surprise Index .9 -13.4 points
- 10-Year TIPS Spread 2.22 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +49 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Ukraine Starts Military Exercises as Russia Warns on East. Ukraine began military drills as Russian forces tightened their hold
on the Crimean peninsula and the Foreign Ministry in Moscow warned of
“lawlessness” in the former Soviet republic’s eastern provinces.
Ukraine’s armed forces are testing the combat-readiness of troops, the
Defense Ministry said today on its website, reiterating the government’s
desire for a peaceful end to the standoff in Crimea. Russia, which has
vowed to defend the ethnic Russians that dominate Crimea after an
uprising in Kiev, accused Ukraine of ignoring radicals in the nation’s east.
- China’s CSI 300 Sinks to 5-Year Low as Export Slump Weakens Yuan. China’s CSI 300 Index (SHSZ300) plunged to
the lowest level in five years and the yuan weakened as an
unexpected drop in exports spurred concern that the world’s
second-largest economy is slowing. The index of the largest Chinese stocks slid 3.3 percent to
2,097.79 at the close, the lowest since February 2009, while the
Shanghai Composite Index tumbled 2.9 percent, the most since
June. The yuan fell 0.2 percent to 6.1385 per dollar. Money-market rates slumped to a 21-month low amid speculation demand
for cash is diminishing as economic growth weakens.
- European Stocks Drop on Ukraine Concern as Miners Slump.
European stocks declined, following
their first weekly drop since January, on rising tensions over Ukraine’s
Crimea region and after an unexpected slump in Chinese exports
triggered a selloff in mining stocks. Aurubis AG and Fresnillo Plc lost
more than 3.4 percent each as commodity producers fell. Iliad SA surged
to its highest
price since its 2004 initial public offering after Bouygues SA
said it is in talks to sell some of its mobile-phone assets to
the operator of the Free brand. Rolls-Royce Holdings Plc rose
1.7 percent after Daimler AG said it will sell a 50 percent
stake in an engine joint venture to the British company. The Stoxx Europe 600 Index slipped 0.5 percent to 331.4 at the close of trading in London.
- Copper Futures Set for Biggest Two-Day Loss Since 2011. Copper prices, which reached an
eight-month low today, headed for the biggest two-session loss
since 2011 on demand concerns amid signs of slowing economic
growth from France to China, the world’s biggest consumer. French industrial production unexpectedly dropped for a second month in January and business confidence declined,
separate reports showed today. In China, exports slid in February by
the most since 2009, according to government data released March 8.
Copper stockpiles tracked by the Shanghai
Futures Exchange climbed for eight straight weeks, the longest
stretch since Feb. 2012.
Futures slumped 11 percent this year, the most among 34
commodities tracked by Bloomberg.
- McDonald’s(MCD) Sales Hurt by Fourth-Straight U.S. Drop. McDonald’s
Corp. (MCD), the world’s largest restaurant chain, said sales at stores
open at least 13 months fell 0.3 percent in February as its U.S.
business slumped for the fourth straight month amid harsh weather.
Analysts estimated a 0.1 percent decline, the average of 15 projections
from Consensus Metrix. Domestic same-store sales slid 1.4 percent, Oak
Brook, Illinois-based McDonald’s said in a statement today, while
analysts anticipated a drop of 0.6 percent in the U.S.
Wall Street Journal:
- Small Caps Flash Pricey Warning. Small-cap stocks come with big price tags these days. The Russell 2000
index of small-capitalization stocks has surged 251% off the March 2009
bear-market bottom, far outpacing the Dow, the S&P 500 and the
Nasdaq Composite. Over the past 30 years, there have been 40 weeks (or 2.5% of the time)
in which the Russell has traded at least 40% above its 200-week moving
average, Mr. Krinsky says. Six of those weeks have taken place over the
past three months. But in 32 of the 34 other occurrences, the Russell
traded down over the next three months, averaging a 7% drop.
Fox News:
MarketWatch:
CNBC:
ZeroHedge:
Wall Street All-Stars:
Business Insider:
Reuters:
Style Underperformer:
Sector Underperformers:
- 1) Steel -2.82% 2) Coal -2.43% 3) Gaming -2.21%
Stocks Falling on Unusual Volume:
- ACO, WPPGY, PSO, DANG, CRTO, UL, CAF, NCIT, VHC, AERI, DL, ZU, WUBA, HMC, SNP, MXWL, PTR, PWRD, NLNK, CSV, DB, BCS, ARII, BIB, FICO and OSIR
Stocks With Unusual Put Option Activity:
- 1) JRCC 2) JWN 3) AKS 4) URBN 5) IBB
Stocks With Most Negative News Mentions:
- 1) FCX 2) UAL 3) CLF 4) DHI 5) MTH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) HMOs -.13% 2) Gold & Silver -.20% 3) Biotech -.21%
Stocks Rising on Unusual Volume:
- HYGS, CQB, MONT, CACQ, FMC, EJ, VECO, HIMX, ALJ and ALXN
Stocks With Unusual Call Option Activity:
- 1) PLUG 2) FCEL 3) RBCN 4) NWBO 5) PVA
Stocks With Most Positive News Mentions:
- 1) ALXN 2) ADM 3) HLF 4) JBLU 5) BIG
Charts:
Weekend Headlines
Bloomberg:
- Pro-Russia Forces Occupy Ukraine as Separatist Vote Looms.
Pro-Russian forces advanced in Ukraine’s Crimean peninsula, ignoring
Western calls to halt a military takeover before the region’s separatist
referendum. Ukrainian Prime Minister Arseniy Yatsenyuk said today
he’d travel to Washington on March 12 as Russian President Vladimir
Putin defended the actions of Crimea’s local government, which
may use the March 16 vote to leave Ukraine and join the
country’s Soviet-era master. Russian troops detained Ukrainian
border guards at a base a day after gunmen fired warning shots
at international observers and barred them from Crimea.
- Crimea Takeover Builds to Expose Ukraine Escalation Risk. Russian
President Vladimir Putin is showing no signs of heeding Western calls
to ease the standoff in Crimea, where pro-Kremlin forces stepped up
their takeover of the Ukrainian region preparing for a separatist
referendum. Gunmen
fired warning shots as international observers tried to enter Crimea for
a third day and a Ukrainian border patrol plane came under fire that
didn’t cause injuries. TV5 reported that a military agency in the
regional capital Simferopol was captured, and 70 unidentified trucks
entered the city.
- Bank of China Supervisor Says Country Should Allow More Defaults. China
should allow companies to default on their bonds, an external
supervisor at the Bank of China said today, after a solar-cell maker
couldn’t repay full interest on its debt. “We need to be more
accepting and allow such defaults to happen,” Mei Xingbao told reporters
during a meeting of the Chinese People’s Consultative Conference in
Beijing. “The debtor must be responsible for his own debt. He must tell the
investors that there is risk involved in the product.” Mei’s remarks offer add to indications that China’s
Communist Party leaders will allow more debt to go bad rather
than intervening to bail out investors. The party agreed last
year to let markets to play a more decisive role in the economy.
- Li Target Challenged by China Exports, Producer Prices.
China’s biggest drop in exports since 2009 and deepening factory-gate
deflation highlight the challenges for Premier Li Keqiang in achieving
this year’s economic-growth target of 7.5 percent. Overseas shipments
unexpectedly declined 18.1 percent in February from a year earlier,
customs data showed March 8, compared with analysts’ median estimate for
a 7.5 percent increase. Producer prices fell 2 percent, the most since
July,
according to a statistics bureau report yesterday, extending the
longest decline since 1999.
- Developers Slump as Yuan Drop Closing Fund Window: China Credit.
Volatility in the yuan is raising dollar borrowing costs for Chinese
developers already choked by a domestic property-market crackdown and
slowing sales.
- China Pays Environmental Price for Growth, Minister Says. China
is paying a heavy environmental price for growth in gross domestic
product and leaders will only solve the pollution problem if they change
the country’s development model, a vice minister said. China’s
efforts to protect the environment have been weakened because power is
spread among too many departments, Vice Environmental Protection
Minister Wu Xiaoqing told a briefing. Seventy-one of 74 Chinese cities
last year failed to
meet air quality standards set for them, he said. Extremely
heavy pollution in late February affected 15 provinces, Wu said. “We are suffering in our pursuit of GDP growth,” Wu said
at the briefing today during the annual session of the National
People’s Congress in Beijing. “Our GDP needs to make a
contribution to solving our environmental pollution problems.”
- China Stocks Fall With Yuan After Exports Decline.
China’s stocks fell, sending the benchmark index to the lowest level in
seven weeks, and the yuan weakened as an unexpected plunge in exports
spurred concern that the world’s second-largest economy is slowing. The
Shanghai Composite Index (SHCOMP) slid 1.7 percent to 2,023.22 at the
11:30 a.m. break, set for the lowest close since Jan. 21, as Jiangxi
Copper Co. and China Southern Airlines Co. retreated.
The yuan fell as much as 0.5 percent against the dollar, which
would be the steepest decline on a closing basis since December
2008, before paring its drop to 0.2 percent. Money-market rates
slumped to a 21-month low amid speculation demand for cash is
diminishing as economic growth weakens.
- Copper Slips With Asian Stocks on China; Ringgit Weakens. Copper futures slid with Asian
stocks and emerging-market currencies as weaker-than-estimated
Chinese data stoked concern over the outlook for the world’s
second-largest economy. U.S. index futures dropped as crude oil
and corn fell while gold led a retreat in precious metals. Copper
futures on the Comex sank 1.9 percent by 9:59 a.m. in Tokyo to $3.0255 a
pound, after touching the lowest level since June. The MSCI Asia
Pacific Index dropped 0.4 percent as stock gauges from Japan to
Australia slipped.
- Coutts Adds Gold as Demand in China Climbs With Ukraine Risk. Coutts & Co. is adding gold for investors as rising wealth in
China and increasing political risks including in Ukraine spur demand,
helping prices rally from the biggest annual decline in more than three
decades. The private-banking division of Royal Bank of Scotland
Group Plc holds 3 percent to 4 percent in its portfolios, from 1 percent
to 2 percent last year, said Gary Dugan, chief investment officer for
Asia and the Middle East. Coutts had 29.7 billion pounds ($49.7 billion)
under management as of Dec. 31.
- Forward Guidance Risks Stoking Instability, BIS Says. Central banks employing forward
guidance risk creating financial instability by revising the
policy or keeping borrowing costs low for too long, according to
economists at the Bank for International Settlements. As they seek
to foster economic growth, the Federal Reserve, the European Central
Bank, the Bank of England and the Bank of Japan have pledged to hold
down interest rates to spur lending to households and businesses.
Evidence on the
effectiveness of the policies is mixed, meaning no firm
conclusions can be drawn about their ultimate value, Andrew
Filardo and Boris Hofmann argued in a paper published today in
the BIS Quarterly Review.
- ‘Mom, I’m Scared’ as Childhood Traumas Compound Syrian War Cost. At 4 years old, Edmond Michael
Abdel-Nour can distinguish the sound of a bullet from that of a
mortar hitting his Damascus neighborhood. A toddler when the conflict in Syria began, Abdel-Nour has
lived through war for most of his life, learning to correctly
identify an outgoing shell from an incoming one before he’s even
managed to master the alphabet.
Wall Street Journal:
MarketWatch.com:
Fox News:
- Malaysia Airlines Flight MH370 mystery: Jet's door may have been found, officials say.
Vietnamese aircraft spotted what they suspected was one of the doors
belonging to the ill-fated Malaysia Airlines Flight MH370 on Sunday, as
troubling questions emerged about how two passengers managed to board
the Boeing 777 using stolen passports. The discovery comes as officials
consider the possibility that the plane disintegrated mid-flight, a
senior source told Reuters.
CNBC:
- Perfect storm for inflation could rock the market. As investors cheer the good news for job growth that came with the
February employment report, they may be overlooking a troublesome
dynamic: A tightening jobs market, in combination with rising commodity
costs, could stir inflation, cutting into corporate profits and forcing
the Federal Reserve to become more hawkish.
Business Insider:
Forbes:
Reuters:
- Suicide bomber kills 45 in Iraqi city of Hilla. A suicide bomber
driving a minibus packed with explosives killed at least 45 people and
wounded 157 on Sunday in the southern Iraqi city of Hilla, police and
medical sources said.
The attacker
approached a main checkpoint at a northern entrance to the largely
Shi'ite Muslim city and detonated the minibus, a police officer said on
condition of anonymity.
Financial Times:
- Klarman warns of impending asset price bubble.
One
of the world’s most respected investors has raised the alarm over a
looming asset price bubble, calling out “nosebleed valuations” in
technology shares like Netflix and Tesla Motors and warning of the
potential for a brutal correction across financial markets. Seth
Klarman, the publicity shy head of the $27bn Baupost Group whose
investment opinions have attracted a near cult-like following, said
that investors were underplaying risk and were not prepared for an end
to central banks reversing a five-year experiment in ultra-loose money.
Telegraph:
Nikkei:
- Japan's
Taxation Panel May Raise Dividend Taxes. A taxation panel advising
Japan's government will consider raising the tax rate on dividends to
offset the cost of reducing corporate taxes. Panel also considering tax
increase on stock sales. Panel meeting scheduled for March 12.
Shanghai Morning Post:
People's Daily:
- China Congress Drafting Law for Property Taxes. Relevant agencies
in the National People's Congress and the State Council are drafting
legislation for a property tax, citing Kan Ke, deputy director of the
Commission for Legislative Affairs of the Standing Committee of the NPC.
China Securities Journal:
- China 2014 Growth Target Won't be Easy to Achieve. It won't be
easy for China to achieve the 7.5% economic growth target of this year,
according to a commentary written by reporter Gu Xin.
Weekend Recommendations
Barron's:
- Bullish commentary on (MET), (FAST) and (NVR).
- Bearish commentary on (DDD), (SSYS), (XONE) and (VJET).
Night Trading
- Asian indices are -1.50% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 127.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 96.0 +2.0 basis points.
- NASDAQ 100 futures -.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The
Fed's Evans speaking, Fed's Plosser speaking, BoJ decision, USDA WASDE
report, JPMorgan Aviation/Transport/Industrial Conference, CSFB Services
Conference, Deutsche Bank Media/Internet/Telecom Conference and the
(MT) investor day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon. The Portfolio is 25% net long heading into the week.
