Evening Headlines
Bloomberg:
- Putin Urges Ukraine to Withdraw Troops as Unrest Persists. Russian President Vladimir Putin urged
Ukraine to withdraw forces from its easternmost regions as the
International Monetary Fund warned that extra financing may be
needed if control of the industrial heartland is lost. In a
telephone call yesterday with German Chancellor Angela Merkel, Putin
also demanded an end to violence gripping cities in southeastern
Ukraine, according to a Kremlin statement. The Ukrainian conflict will
top the agenda when Merkel and U.S. President Barack Obama meet today in
Washington, according to
White House spokesman Jay Carney.
- Sony Posts Loss Wider Than Forecast as Recovery Founders. Sony
Corp., the maker of Xperia
smartphones and PlayStation consoles, posted a loss wider than forecast
as Chief Executive Officer Kazuo Hirai’s turnaround founders amid
slumping consumer electronics sales. Sony posted a preliminary net
loss of 130 billion yen ($1.3 billion) in the 12 months ended March, the
Tokyo-based company said in earnings reported yesterday. That’s the
third downward revision after a February loss projection of 110billion
yen,
itself a reduction from a revised October forecast for profit of
30 billion yen. The shares fell.
- Most Asian Stocks Fall as Investors Await U.S. Payrolls.
Most Asian stocks fell as investors weighed corporate earnings before
the release of U.S. non-farm payrolls today. Sony Corp. lost 1.6 percent
in Tokyo after the maker of Xperia smartphones and PlayStation consoles
cut its earnings forecast for a third time in a year. Macquarie Group
Ltd. dropped 1.6 percent as Australia’s biggest investment bank
predicted flat profit growth this year. Treasury Wine Estates Ltd.
jumped 13 percent in Sydney after the Australian newspaper
reported that Pernod Ricard SA is interested in the U.S. assets
of the wine maker.
The MSCI Asia Pacific Index slipped 0.1 percent to 137.94
as of 9:49 a.m in Tokyo, with two stocks falling for each that
rose.
- Fed Lists 15 Firms to Get Extra Scrutiny at Special Unit. The
Federal Reserve released a list of 15 firms that merit an extra layer
of supervision because they pose heightened systemic risks, including
JPMorgan Chase & Co. and Bank of America Corp. The tally
published on the Fed’s website today listed the four largest U.S.
lenders, the biggest clearing and custody banks such as Bank of New York
Mellon Corp., and Wall Street firms Goldman Sachs Group Inc. and Morgan
Stanley. (MS) Other members are insurer American International Group
Inc., the General
Electric Capital Corp. and four of Europe’s largest financial
companies.
Wall Street Journal:
- German Businesses Urge Halt on Sanctions Against Russia. Vocal Opposition Has Helped Keep Merkel From Endorsing Broader Penalties on Moscow. Angela Merkel is carrying a clear message from Germany's business lobby to the White House: No more sanctions.
Several
of the biggest names in German business—including chemical giant BASF
SE, engineering group Siemens AG, Volkswagen AG, Adidas AG and Deutsche
Bank AG—have made their opposition to broader economic sanctions against
Russia clear in recent weeks, both in public and in private. As a result, Germany's...
- Entrusted Lending Raises Risks In Chinese Finance. Companies Turn to Other Firms, Not Banks, for Loans. With credit tight in China, companies in industries beset by
overcapacity are turning to an unconventional source for cash—other
companies—in a new rising risk for the country's financial system. These
company-to-company loans, known as entrusted lending, have emerged as
the fastest-growing part of China's shadow-banking system, which
provides credit outside of formal banking channels. Net outstanding
entrusted loans...
Fox News:
MarketWatch.com:
CNBC:
- For hedge funds, all aboard the bubble bandwagon. In
a letter issued Thursday, the prominent hedge fund Third Point used the
same charged word to describe certain stock-market sectors that rival
money manager Greenlight Capital had invoked the week before: "Bubble."
Zero Hedge:
Business Insider:
Reuters:
- LinkedIn's(LNKD) sales outlook again falls short. LinkedIn Corp forecast 2014 revenue below Wall Street's expectations on
Thursday, underscoring concerns about its ability to sustain its
rapid growth and helping to drag its shares more than 3 percent
lower.
Evening Recommendations
BMO Capital:
- Rated (MON) Outperform, target $130.
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 127.50 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 87.50 -.5 basis point.
- NASDAQ 100 futures +.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-Farm Payrolls for April is estimated at 218K versus 192K in March.
- The Unemployment Rate for April is estimated to fall to 6.6% versus 6.7% in March.
- Average Hourly Earnings for April are estimated to rise +.2% versus unch. in March.
9:45 am EST
- ISM New York of April is estimated to rise to 54.0 versus 52.0 in March.
10:00 am EST
- Factor Orders for March are estimated to rise +1.5% versus a +1.6% gain in February.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI and (SWFT) investor day could 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 higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.58 +1.27%
- Euro/Yen Carry Return Index 147.99 +.04%
- Emerging Markets Currency Volatility(VXY) 8.03 -.50%
- S&P 500 Implied Correlation 55.93 +2.12%
- ISE Sentiment Index 108.0 -10.0%
- Total Put/Call .79 +3.95%
Credit Investor Angst:
- North American Investment Grade CDS Index 64.45 +.25%
- European Financial Sector CDS Index 78.74 -.17%
- Western Europe Sovereign Debt CDS Index 34.44 +.39%
- Asia Pacific Sovereign Debt CDS Index 88.09 +.13%
- Emerging Market CDS Index 281.38 +1.03%
- China Blended Corporate Spread Index 351.80 +.72%
- 2-Year Swap Spread 12.5 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.25 unch.
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 220.0 -4.0 basis points
- China Import Iron Ore Spot $105.40/Metric Tonne n/a
- Citi US Economic Surprise Index -28.70 +3.8 points
- Citi Emerging Markets Economic Surprise Index -25.30 +1.7 points
- 10-Year TIPS Spread 2.19 unch.
Overseas Futures:
- Nikkei Futures: Indicating -25 open in Japan
- DAX Futures: Indicating n/a open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical sector longs and index hedges
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Ukraine’s East Unravels as IMF Warns on Financing. Ukraine’s easternmost regions are slipping from the government’s grasp as separatists take over more official buildings, with the International Monetary Fund warning extra financing may be needed if control of the industrial heartland is lost. Armed men stormed the Donetsk regional prosecutors’ office today, throwing stones and stun grenades. Pro-Russian rebels in nearby Slovyansk said
they’d begun talks to swap international monitors abducted last week,
the Interfax news service said. Acting Ukrainian President Oleksandr
Turchynov signed a decree backed by lawmakers last month to reinstate a
military draft, his office said on its website.
- Japan’s Worst Auto Sales in 16 Months Show Hangover Beginning. Call it Japan’s Great Hangover. Vehicle deliveries last month in Asia’s second-largest auto
market fell to the lowest since December 2012 after Japan raised
its consumption tax for the first time 17 years, according to
industry figures released yesterday. In the run-up to the levy
being increased 3 percentage points to 8 percent on April 1,
sales had surged for seven straight months.
- Xi Vows to Combat Terrorism After Blast Kills 3 in Xinjiang. President Xi Jinping vowed to combat
“violence and terrorism” after three people were killed in an
explosion and knife attack in the capital of northwestern
China’s Xinjiang region hours after he visited the city,
according to state-run Xinhua News Agency. “Knife-wielding mobs” slashed travelers and set off
explosives at the Urumqi’s south train station at about 7:10
p.m. local time yesterday, Xinhua said, citing the publicity
department of the ruling Communist Party’s regional committee.
The attack injured 79 people, four seriously, it reported.
- Junk Loans Pulled as Buyers Say No After Fed Raises Concern. The tide is turning in the market for
speculative-grade loans as investors refuse to buy some deals
deemed too risky. Rocket Software Inc. pulled $725 million of loans from the
market this week that would have refinanced debt and paid for a
dividend to its co-founders and private-equity firm Court Square
Capital Partners LP, according to data compiled by Bloomberg.
The deal is at least the third to be withdrawn in the last
month, with cable TV provider WideOpenWest Finance LLC canceling
$1.97 billion in loans and Dutch LLC, which does business as
women’s apparel company Joie, scrapping a $200 million debt
offering. The loan market is starting to show signs of tightening
more than six months after the Federal Reserve and Office of the
Comptroller of the Currency sent letters to banks telling them
to improve their deteriorating underwriting standards. Investors
are demanding better terms and pulled cash from leveraged-loan
funds the last two weeks, snapping an unprecedented 95 straight
weeks of inflows.
- Liquidity Trap Hitting AAA Bonds Has ATP CEO Sounding Alarm. Carsten Stendevad, chief executive
officer of Denmark’s biggest pension fund, says some of the
world’s biggest bond markets are becoming dangerously illiquid. Overseeing
$130 billion in assets, the 41-year-old former Citigroup Inc. (C)
banker is urging policy makers to take seriously evidence that even the
safest assets are getting harder to offload amid tighter regulatory
requirements. He says ATP struggled to find buyers for about 7
billion euros ($9.7 billion) in German government bonds at the end of
last year. “It was amazing,” Stendevad said in an interview in his
office north of Copenhagen. “One of the world’s biggest banks, which
before 2008 would have been able to trade any quantity of
German government bonds at any time of day, was not even willing
to offer a quote for a reasonable size.”
Stendevad says his biggest concern now is that regulatory
intervention will distort the markets he relies on to manage
pension savings.
Wall Street Journal:
Fox News:
CNBC:
ZeroHedge:
Business Insider:
Financial Times:
- Ukraine PM warns of ‘most dangerous 10 days’. Ukraine’s
interim prime minister said on Thursday his country was entering its
“most dangerous 10 days” since independence in 1991 and was struggling to counter pro-Russian separatists on the verge of taking over the industrialised eastern heartland.
Telegraph:
-
Speculative fever is back to 2008, with compound interest. We are in a colossal bubble once again. It is worse than 2008 on many
indicators, though the epicentre of risk is ever more concentrated in
sovereign debt, especially the debt of those countries without a central
bank (you all know who I mean). Unless you have a solution for all these problems – and you don’t –
you have to pick your poison: perma-slump and mass unemployment, or
perma-bubbles, champagne, and crossed-fingers, until a Black Swan comes
along and eliminates the spare capacity.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.40% 2) Computer Hardware -1.10% 3) Disk Drives -1.01%
Stocks Falling on Unusual Volume:
- ARI, STMP, JDSU, HOS, MASI, SGI, LBY, OPLK, AVP, ARII, GNRC, HAR, OCN, LOCK, ARG, BG, VPRT, SBH, CEVA, QLGC, BGC, CRL, HSNI, STRZA, ATW, TXT, MDAS, GWR, BYD, HF, NEWM, RRD, HSNI, WDC, CAH, ABMD, FCN, YRCW and SFY
Stocks With Unusual Put Option Activity:
- 1) MMM 2) BG 3) WDC 4) EXPE 5) JDSU
Stocks With Most Negative News Mentions:
- 1) YUM 2) AVP 3) JDSU 4) VPRT 5) TASR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.42% 2) Airlines +2.21% 3) Hospitals +1.7%
Stocks Rising on Unusual Volume:
- BURL, BBW, WTW, AAWW, YELP, CTRX, WB, MTOR, THRM, HOLX, WMGI, AFSI, CBG, ENDP, PFPT, IQNT, HTWR, DRIV, EGN, TMUS, CAVM, EIG, KEX, FEYE, CVRR, ELGX, IT, LOPE, NFLX, ICGE, DTV, ISIL, RKUS, ENDP, EXAS, NMBL, ANIK, VEEV, POWI, WDAY, PGTI, Q and MDC
Stocks With Unusual Call Option Activity:
- 1) WAG 2) DTV 3) MMM 4) DKS 5) BAX
Stocks With Most Positive News Mentions:
- 1) DTV 2) YELP 3) FB 4) LNKD 5) RAD
Charts:
Evening Headlines
Bloomberg:
- U.S. Signals Putin Not to Move Against New NATO Members. Unsure
of Russian President Vladimir Putin’s intentions, the Obama
administration is attempting to warn the Kremlin not to test the U.S.
commitment to defend its allies in eastern and central Europe. Jet
fighters from the U.K., Denmark, France and Poland will begin flying air
patrols over the Baltic states tomorrow “as part of collective defense
measures,” the North Atlantic Treaty Organization said in a
statement today. Canadian jets are deploying to Romania “as part of NATO
efforts to reassure allies” in Central and Eastern Europe, the alliance
said. Those measures and others, including deployments of U.S. troops
for military exercises, are part of an effort to
discourage any thoughts Putin may have about extending Russia’s
reach beyond Ukraine.
- BOJ Inflation Confidence Seen Cutting Chance of Stimulus. The
confidence Bank of Japan officials are demonstrating in achieving their
inflation target is lowering the chances of additional monetary easing
this year even as the economy weakens. Consumer prices, excluding
fresh food, will increase 1.9 percent in the fiscal year starting April
1, 2015, and 2.1 percent the next year, according to the median
estimates of BOJ board members in a quarterly outlook released
yesterday. Governor Haruhiko Kuroda said the timing on hitting
the BOJ’s 2 percent goal hasn’t been pushed back at all.
- China Steel Industry Facing Harshest Ever Operating Environment.
China’s steel industry, the world’s biggest, is facing the harshest
operating environment ever, Baoshan Iron & Steel Co. (600019) said,
as a credit squeeze and overcapacity weighs on the sector and economic
growth slows. “Some less-competitive mills will find it hard to
continue,” He Wenbo, chairman of China’s biggest publicly-traded
steelmaker, said today in a web cast. The environment is
“harsher than any years in the past,” he said.
- Japan Stocks Climb as Fed Sinks Gold; Crude Below $100.
Japanese stocks climbed and precious metals fell amid optimism the U.S.
economy is gaining momentum and as investors weighed company earnings.
Crude held below $100 barrel after a gauge of Chinese manufacturing
expanded less than predicted and U.S. stockpiles rose to a record. The
Topix Index rose 1.3 percent by 12:30 p.m. in Tokyo, after a fourth
straight monthly drop, with markets from China to South Korea closed for
the May Day holiday.
Wall Street Journal:
- Pro-Russian Separatists in Eastern Ukraine Seek Legitimacy Through Referendum. Strategy Appears to Be to Hold Vote, Claim Victory Regardless of Turnout. Apart from the sandbagged battle positions held by masked, pro-Russian
gunmen wearing camouflage in cities across eastern Ukraine, an equally
grave challenge for the country can be found here in a lightly guarded
mansion, known in Soviet days as the House of Political Enlightenment.
- Military Allies Caution U.S. Against Rupturing Putin’s Ties With West. Some
of Washington’s closest military allies, including Japan, Egypt and
Israel, are cautioning the Obama administration against taking steps
that could permanently rupture Russian President Vladimir Putin‘s ties
to the West, according to Asian and Middle East officials.
- Dozens Injured in Capital of China's Xinjiang Region. Three Killed in Explosion at Urumqi Train Station. Three
people were killed and dozens injured in what state media say
was a terrorist attack involving knives and explosives at a railway
station in the capital of western China's Xinjiang region on Wednesday,
hours after President Xi Jinping used a rare tour there to demonstrate
his government's commitment to combating terrorism. Assailants attacked
people with knives at the station exit, according to a report on the...
- AT&T(T) Has Approached DirecTV About Possible Acquisition.
- Airstrike on Syrian School Leaves at Least 47 Dead. Children Are the Main Victims of Strike in Aleppo That Activists Attribute to a Government Jet. A Syrian government fighter jet fired a missile at a school in the
northern city of Aleppo that killed as many as 47 people, mainly
children, as students were preparing an art exhibition to depict the
horrors of Syria's civil war, activists said.
- The Coming Two-Tier Health System. ObamaCare is already creating one class of care for the poor and middle class and another for the affluent.
With the unveiling of the Affordable Care Act's website, the public
experienced a painful reminder of the consequences of the government's
new authority over health care. While millions signed up for insurance,
millions of others abruptly lost their existing coverage and access to
their doctors because that coverage didn't fit new ObamaCare
definitions.
- The Missing Benghazi Email. New evidence that Ben Rhodes told Susan Rice and Hillary Clinton to blame the video. Most of the media refuses to cover what happened in Benghazi in 2012,
and Congressional Republicans have been less than skillful in their
probes. But the story isn't going away despite the best efforts of the
Obama
Administration and the Hillary for President campaign.
Fox News:
CNBC:
- China plans crackdown on iron ore import loans. China plans to get tougher on loans for iron ore imports as concerns
grow that steel mills are using import loans to stay afloat in defiance
of policies to reduce overcapacity in heavily polluting and lossmaking
industries.
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 126.50 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 88.0 -.5 basis point.
- NASDAQ 100 futures +.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (BZH)/-.19
- (COP)/1.55
- (CAH)/1.00
- (VIA/B)/1.05
- (ARG)/1.20
- (MA)/.72
- (BDX)/1.50
- (CME)/.83
- (CLX)/1.08
- (MDC)/.22
- (AVP)/.21
- (BWA)/.80
- (HST)/.30
- (PWR)/.40
- (CI)/1.54
- (ITT)/.52
- (AMT)/1.04
- (DPZ)/.67
- (XOM)/1.88
- (K)/.97
- (BG)/1.40
- (KFT)/.76
- (WYNN)/2.07
- (AKAM)/.53
- (LNKD)/.34
- (OPEN)/.42
- (EXPE)/.15
- (FLR)/.97
- (MHK)/1.18
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 320K versus 329K the prior week.
- Continuing Claims are estimated to rise to 2700K versus 2680K prior.
- Personal Income for March is estimated to rise +.4% versus a +.3% gain in February.
- Personal Spending for March is estimated to rise +.6% versus a +.3% gain in February.
- PCE Core for March is estimated to rise +.2% versus a +.1% gain in February.
9:45 am EST
- The Final Markit US Manufacturing PMI for April is estimated at 55.4 versus a prior estimate of 55.4.
10:00 am EST
- ISM Manufacturing for April is estimated to rise to 54.3 versus 53.7 in March.
- ISM Prices Paid for April is estimated to rise to 59.5 versus 59.0 in March.
- Construction Spending for March is estimated to rise +.5% versus a +.1% gain in February.
Afternoon:
- Total Vehicle Sales for April are estimated to fall to 16.2M versus 16.33M in March.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen speaking, UK mortgage data, Challenger Job Cuts report for
April, RBC Consumer Outlook Index for May, weekly EIA natural gas
inventory report, weekly Bloomberg Consumer Comfort Index and the (CBRL)
investor day could impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by consumer and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.
