Evening Headlines
Bloomberg:
- Steel Defaults Seen by S&P as Yuan Ruins Ore Loans: China Credit. The
Chinese steel industry’s ability to survive 1 billion yuan ($161
million) of losses per month without more defaults is under threat as a
slump in iron ore and the yuan undermines a key source of financing.
The currency has weakened 2.5 percent this year and a measure of
exchange-rate swings reached a record, prompting Goldman Sachs Group
Inc. to predict funding that uses the steelmaking ingredient as
collateral will drop over the next two years due to foreign-exchange
hedging costs. Iron ore prices fell 11 percent in the past five months
as cash shortages at
closely held mills prompted what Morgan Stanley says is panic
selling.
- China’s Overnight Rate in Longest Rising Streak Since October.
China’s overnight money-market rate climbed for a seventh day, the
longest stretch in five months, after the central bank drained more cash
from financial system. The overnight repurchase rate, a gauge of funding availability among banks, climbed eight basis points, or 0.08
percentage point, to 2.94 percent as of 10:35 a.m. in Shanghai,
according to a weighted average from the National Interbank
Funding Center. That’s the highest since March 20.
- Asian Stocks Rise Sixth Day as U.S. Manufacturing Expands.
Asian stocks rose, with the regional benchmark index extending its
winning streak to a sixth day, after an increase in U.S. manufacturing
boosted optimism about growth in the world’s biggest economy. Nissan
Motor Co., a Japanese carmaker that gets 34 percent of its revenue in
North America, added 2.3 percent. Consumer discretionary shares and
telecommunication services companies gained the most among the 10
industry groups on the regional index. Goodman Fielder Ltd., a food
supplier, slumped 18 percent in Sydney after it cut its fourth-quarter
earnings forecast. The MSCI Asia Pacific Index gained 0.3 percent to 138.72 as of 9:26 a.m. in Tokyo as two shares rose for each that fell.
- Virtu Said to Delay IPO Amid Furor Spurred by Michael Lewis Book. Virtu Financial Inc., the high-frequency trader that announced plans last month to sell shares,
has delayed the deal, two people with knowledge of the matter
said. Virtu’s bankers won’t start marketing the initial public
offering until after April 20, delaying the process from this
week, according to the people, who asked not to be named because
the decision is private.
Wall Street Journal:
CNBC:
- Massive 8.0 quake off Chile coast sparks tsunami. A major earthquake of magnitude 8.0 struck off the coast of Chile on
Tuesday, triggering a tsunami that hit the northern part of the country
and a tsunami warning for all of South and Central America's Pacific
coast.
Zero Hedge:
People's Daily:
- China Yuan Weakening May Trigger Foreign Debt Risk. Yuan exchange
rate depreciation and outflows of capital may trigger an "outbreak" of
foreign debt risk, Zhang Monan, a researcher at the China Center for
International Economic Exchanges, writes in a commentary. Chinese real
estate developers sold large volumes of bonds overseas last year and in
the first months of this year, Zhang writes in the newspaper.
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 121.75 -3.25 basis points.
- Asia Pacific Sovereign CDS Index 88.25 -4.5 basis points.
- NASDAQ 100 futures +.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:15 am EST
- The ADP Employment Change for March is estimated to rise to 195K versus 139K in February.
10:00 am EST
- Factory Orders for February are estimated to rise +1.2% versus a -.7% decline in January.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,422,220 barrels versus a +6,619,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,277,780 barrels versus a -5,101,000 barrel decline the prior week. Distillate inventories are estimated to rise by +177,780 barrels versus a +1,555,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise +.04% versus a +.4% gain the prior week.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bullard speaking, Fed's Lockhart speaking, China
Non-Manufacturing PMI, Brazil Central Bank decision, Eurozone PPI,
weekly MBA mortgage applications report, ISM New York for March, (GM)
Senate Panel Hearing and the (BWLD) analyst day could also impact
trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by industrial and real estate
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: Higher
- Sector Performance: Mixed
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 13.40 -3.46%
- Euro/Yen Carry Return Index 149.25 +.61%
- Emerging Markets Currency Volatility(VXY) 8.42 -1.05%
- S&P 500 Implied Correlation 53.31 -1.35%
- ISE Sentiment Index 97.0 +14.12%
Credit Investor Angst:
- North American Investment Grade CDS Index 67.71 -1.98%
- European Financial Sector CDS Index 88.27 -5.51%
- Western Europe Sovereign Debt CDS Index 46.02 +.24%
- Asia Pacific Sovereign Debt CDS Index 88.27 -1.69%
- Emerging Market CDS Index 286.19 -3.78%
- China Blended Corporate Spread Index 358.54 -1.16%
- 2-Year Swap Spread 12.0 -.75 basis point
- TED Spread 19.75 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.75 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 232.0 +2.0 basis points
- China Import Iron Ore Spot $117.60/Metric Tonne +.68%
- Citi US Economic Surprise Index -34.50 -1.9 points
- Citi Emerging Markets Economic Surprise Index -7.20 +1.5 points
- 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
- Nikkei Futures: Indicating +119 open in Japan
- DAX Futures: Indicating +23 open in Germany
Portfolio:
- Higher: On gains in my biotech/tech/medical/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- NATO Reassuring East Allies Amid No Sign of Russian Pullback. NATO said it will recommit to
defending frontline states in eastern Europe that have been
unsettled by the seizure of Crimea as the alliance reported no
signs of a Russian troop pullback from Ukraine’s borders. Secretary General Anders Fogh Rasmussen said allied
intelligence hasn’t picked up evidence of Russia scaling back
its “massive military buildup” and pledged to shore up the
alliance’s eastern defenses. “We are now considering all options to enhance our
collective defense, including an update and further development
of our defense plans, enhanced exercises and also appropriate
deployments,” Rasmussen told reporters at a meeting of North
Atlantic Treaty Organization foreign ministers in Brussels
today. The immediate crisis management focused on the 40,000
Russian troops that the U.S. estimates have taken positions near
the Ukrainian border, potentially poised to invade on the
pretext of protecting ethnic Russian inhabitants of eastern and
southern Ukraine. Rasmussen said “unfortunately” there are no signs of a
withdrawal.
- China Xuzhou Zhongsen Missed Bond Coupon Payment, Paper Says. A
privately held Chinese building
materials company failed to pay interest on high-yield bonds,
21st Century Business Herald reported today. Xuzhou Zhongsen Tonghao New
Board Co., based in the eastern province of Jiangsu, missed the 10
percent coupon payment due March 28 on the notes, which it sold 180
million yuan ($29 million) of last year in a private placement, the
report said, citing an unidentified person. This would be the first default
in China’s private-placement market for high-yield bonds from
small- and medium-sized enterprises that was started in 2012,
according to Yang Aibin, a general manager at Pengyang
Investment Management Co.
- China Burns Speculators as $5.5 Billion Lost on Yuan Bets. China
is succeeding in making its
currency less predictable. Investors are paying the price.
Clients of U.S. commercial banks have lost about $2 billion this year on
$332 billion of options betting the yuan would appreciate, while
Chinese companies lost $3.5 billion on $150 billion wagered on a
benchmark forwards contract, according to data compiled by Morgan Stanley and the Depository Trust & Clearing Corp. in Washington.
- Japan Corporate Sentiment Gains Seen Short-Lived as Tax Rises.
Sentiment among large Japanese manufacturers rose to the highest level
since 2007, a gain that may be short-lived as today’s sales-tax increase
weighs on consumption and confidence.
- Europe’s Recovery Diverges as Italy Jobless at Record. Europe’s two-speed economy was underscored in data today
showing strengthening in the German labor market just as Italy’s jobless
rate reached a record. Overall euro-area unemployment was at
11.9 percent in February, lower than the 12 percent median forecast of
32 economists in a Bloomberg News survey. In Italy it rose to 13
percent, while in Germany the locally defined jobless rate for March
stayed at the lowest in at least two decades. The divergence
between the region’s third-biggest and largest economies highlights the
challenge faced by the European Central Bank’s Governing Council as it
meets this week to assess the need for stimulus and gauge the risk of
deflation at a time when consumer prices are increasing at about a
quarter of the pace that officials would like.
- European Stocks Advance as U.S. Manufacturing Accelerates.
European stocks advanced, after the
Stoxx Europe 600 Index declined last month, as a report showed
manufacturing in the U.S. expanded at a faster pace in March. Alstom SA
jumped the most since January 2012 after agreeing
to sell a unit to Triton. Metso Oyj soared 19 percent after Weir Group
Plc proposed a merger with the Finnish maker of rock crushers. ICAP
(IAP) Plc rose 2.6 percent after the world’s largest broker of
transactions between banks forecast full-year profit
will meet analysts’ estimates, even as sales from its broking
unit continued to decline. The Stoxx 600 gained 0.6 percent to 336.35 at the close of
trading.
- WTI Crude Drops a Second Day on U.S. Inventories.
WTI for May delivery declined $1.91, or 1.9 percent, to $99.67 a barrel
at 2:08 p.m. on the New York Mercantile Exchange. The volume of all
futures traded was 8.5 percent below the 100-day average. Prices
decreased 1 percent in March.
- Yellen’s Real-Life Examples of Unemployed Omit Criminal Records.
In her first speech as Federal Reserve chair, Janet Yellen
told the stories of three people who had trouble finding work to
illustrate her concern about the unemployed -- omitting the fact that
two had criminal records that might have influenced employers’ decisions
on whether to hire them.
- GM(GM) recall woes worsen as CEO Mary Barra set to go before Congress. The news keeps getting worse for General Motors Co. With Chief
Executive Officer Mary Barra set to testify this afternoon before the
U.S. House, a top auto regulator signaled he would blame GM during the
hearings for not providing sufficient information to start an
investigation. Barra acknowledged she didn’t know why it took more than a
decade to recall 2.6 million vehicles linked to the deaths of 13
people. Meanwhile, GM announced a new recall of 1.5 million vehicles for
faulty power steering, doubling recall-related charges to $750 million.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
The Real Deal:
- Manhattan Residential prices shoot through roof.
Manhattan condo and co-op prices are finally seeing the impact of
chronically low residential inventory and a shift toward über luxury in
new development. The average sales price for a Manhattan apartment jumped by a shocking 30.9 percent year over year, according to a quarterly report compiled by appraisal firm Miller Samuel on behalf of brokerage Douglas Elliman. The average price per square foot increased by 23.6 percent year over year, to $1,363 in the first quarter of the year. “This is going to be widely talked about,” said Miller Samuel CEO Jonathan Miller, “and it made me nervous just because there was such ajump.” With pricing reaching historic highs, is there any anxiety in the market that another bubble could be inflating? “There is no fear that I’m sensing among some highly sophisticated individuals to enter the marketplace,” Appel said.
Reuters:
Style Underperformer:
Sector Underperformers:
- 1) Coal -1.11% 2) Utilities -.82% 3) Steel -.66%
Stocks Falling on Unusual Volume:
- MDCO, JGW, HAWK, GALT, NDAQ, AAOI, PRE, XON, EMES, OPHT, CIB, TFX, BT, CINF, CLH, ICE, POT, COV, DEPO, PJC, ENH, RJF, EVR and HPY
Stocks With Unusual Put Option Activity:
- 1) XRT 2) EWH 3) EWY 4) APC 5) AA
Stocks With Most Negative News Mentions:
- 1) GM 2) BBBY 3) HRB 4) ELI 5) ALK
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +1.95% 2) Homebuilders +1.89% 3) Biotech +1.73%
Stocks Rising on Unusual Volume:
- DRTX, ISRG, MXWL, RBCN, ARWR, ZU, PCYC, INFA, VRNT, CELG and NVDA
Stocks With Unusual Call Option Activity:
- 1) JCI 2) F 3) ISRG 4) APOL 5) LLY
Stocks With Most Positive News Mentions:
- 1) ISRG 2) F 3) NVDA 4) LVS 5) GOOG
Charts:
Evening Headlines
Bloomberg:
- Top China Banks Poised to Sell Preferred Stock to Buffer Capital. ICBC
(1398), China Construction Bank Corp. (939), Agricultural Bank of China
Ltd. (601288) and Bank of China Ltd. said in the past week they’re
preparing to sell the stock as they reported a combined 12
percent increase in 2013 profit, down from 15 percent a year
earlier. Preferred stock, available under a trial approved by
regulators last month, permits banks to raise capital without
selling dilutive common equity. The shares can be converted into
common stock if capital ratios fall below a certain level.
- Asian Stocks Fall First Time in 5 Days. Asian stocks fell, with the regional benchmark index on course for its first loss in five days, ahead
of Chinese manufacturing data expected to confirm growth is
slowing in the world’s second-largest economy.
The MSCI Asia Pacific Index lost 0.2 percent to 137.72 as
of 9:27 a.m. in Tokyo.
- Ebola’s Death Toll Reaches 80 in ‘Unprecedented’ Outbreak. The
Ebola outbreak in Guinea, where the death toll climbed to 80, is
“unprecedented,” international aid organization Doctors Without Borders
said. In neighboring Liberia, one of two confirmed cases has died,
while a second person who died with a suspected Ebola infection tested
negative for the virus, the World Health Organization said in a
statement.
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
Washington Examiner:
Financial Times:
- Alert on leveraged loan terms. One
of the biggest buyers of US leveraged loans is sounding the alarm over
unusual new terms being jammed into deals, increasing risk in one of the
hottest investment areas of recent years. Eaton Vance, the US fund management group, says company
owners are seeking – and increasingly being granted – extra freedom to
pile on more debt in the future without recourse to existing lenders.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 125.0 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 89.75 -3.0 basis points.
- NASDAQ 100 futures -.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:45 am EST
- Final March US Manufacturing PMI is estimated to rise to 56.0 versus a prior estimate of 55.5.
10:00 am EST
- ISM Manufacturing for March is estimated to rise to 54.0 versus 53.2 in February.
- ISM Prices Paid for March is estimated to fall to 59.5 versus 60.0 in February.
- Construction Spending for February is estimated to rise +.1% versus a +.1% gain in January.
- IBD/TIPP Economic Optimism for April is estimated to rise to 46.0 versus 45.1 in March.
Afternoon:
- Total Vehicle Sales for March are estimated to rise to 15.8M versus 15.27M in February.
Upcoming Splits
Other Potential Market Movers
- The Eurozone unemployment rate, Eurozone Manufacturing PMI and the weekly retail sales reports could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial
and real estate 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.
