Bloomberg:
- Ukraine Fortifies Russian Border as Death Toll Climbs. Ukraine’s
government said it’s deploying heavy weaponry and armored vehicles to
strengthen its border with Russia and halt an influx of fighters after
skirmishes with separatists claimed another dozen lives. Authorities in Kiev are also moving personnel and equipment to the western border with Transnistria, the breakaway Moldovan
region where hundreds of Russian troops are stationed, State
Border Service chief Mykola Lytvyn told reporters in Kiev today,
without being more specific.
- Bond Yields Lowest Since Napoleon Are No Comfort to Europe Amid Deflation Fight.
Europe’s lowest government bond yields since the Napoleonic Wars are signaling investors want more action from Mario Draghi. Instead of a vote of confidence, the most pronounced rally in 200 years suggests the European Central Bank president needs to stave off the risks of stagnation and deflation. Austria, Belgium, France (GFRN10) and Germany can borrow at lower rates (GDBR10) than the U.S. as inflation less than half the ECB’s target stokes concern the euro zone will take many years to recover from its longest-ever recession.
- U.S. Rebuked by Israel for Continuing Palestinian Aid. The
U.S. said it will maintain financial aid to the Palestinian Authority
even under a new government backed by the Islamic Hamas movement,
earning a rebuke from Israel. Secretary of State John Kerry called
Israeli Prime Minister Benjamin Netanyahu yesterday to discuss
continuing U.S. support
for the Palestinian Authority, according to State Department
spokeswoman Jen Psaki.
- Brazil Debt Suffering Social-Spend Promises With Election. As
President Dilma Rousseff’s lead narrows in polls before October’s
election, she and her top opponent are courting voters with spending
promises that would
undermine the fiscal discipline investors say is needed to
restore confidence in the economy.
- Chinese Stocks Fall for Third Day as Property Developers Decline.
China’s stocks fell, with the benchmark index reversing gains in the
last minutes of trading, as property and consumer staple companies
declined. China Vanke Co. (000002), the nation’s biggest developer, slid
1.8 percent after SouFun Holdings Ltd. said the nation’s home prices
fell in May for the first time in two years. Inner Mongolia Yili
Industrial Group Co. plunged the most in six months to lead
declines by milk companies. SDIC Power Holdings Co Ltd. added
2.8 percent after gauges of manufacturing output increased and the
government took steps to boost lending at some banks. The Shanghai
Composite Index (SHCOMP) fell less than 0.1 percent to 2,038.31 at the
close, with about five stocks dropping for every
three that rose.
- European Stocks Fall as Investors Weigh ECB Rate Outlook. European stocks declined from a six-year high as a report showing lower-than-estimated inflation in the euro area prompted investors to weigh the outlook for interest rates before Thursday’s European Central Bank meeting. Pennon Group Plc lost 3 percent after saying pretax profit at its Viridor waste management unit fell about 20 percent. Eutelsat Communications SA slipped 3.7 percent as Abertis Infraestructuras SA sold its holding in the French satellite operator. Wolseley (WOS) Plc rose 1.6 percent after posting higher
sales on improved demand in the U.S. and Nordic region.
The Stoxx Europe 600 Index retreated 0.5 percent to 343.48
at the close of trading.
Wall Street Journal:
MarketWatch.com:
Fox News:
- Traded Taliban leaders free to roam in Middle East? Claim undercuts Obama assurance. President Obama's claim Tuesday that the U.S. would "be keeping eyes" on
five hardened Taliban leaders traded for Sgt. Bowe Bergdahl's freedom
was immediately challenged by a Middle East official quoted as saying
they'd actually be allowed to move freely -- and even "go back to
Afghanistan if they want to."
CNBC:
- Silicon Valley rents soar as tech gobbles space. Asking rents in Palo Alto now average $83 a square foot annually.
That's nearly triple the national average, according to Amber Schiada of
Jones Lang LaSalle, a real estate services company. In the last four years, commercial real estate prices are up 75 percent in Palo Alto and in nearby Sunnyvale and Mountain View, prices are up 68 percent and 115 percent, respectively.
ZeroHedge:
Business Insider:
USAToday:
Reuters:
Telegraph:
- Europe remains a jobless swamp, despite the Spanish miracle. Italy
lost 68,000 jobs in April, according to the country’s data agency
ISTAT. The total employed fell to 22,295,000. Italian unemployment rose
to 13.6pc. For youth it has climbed to a
modern-era high of 43.3pc, implying very serious damage to Italy’s
long-term economic dynamism due to labour hysteresis. The employment rate dropped to 55.2pc. Ageing workers are giving up
the search for jobs – chiefly in the Mezzogiorno – and returning to
their patches of land in impoverished early retirement.
Kommersant:
- Ukraine
May Confiscate Russian Assets After Crimea. Ukrainian Justice Ministry
proposed confiscating Russian companies' assets in Ukraine and abroad to
compensate for $92b losses from Crimea annexation, citing Minister
Pavlo Petrenko as speaking in Kiev.
Folha de S.Paulo:
- Brazil Vehicle Sales Fall 7% Y/Y in May.
Style Underperformer:
Sector Underperformers:
- 1) Gaming -3.72% 2) Alt Energy -1.83% 3) Road & Rail -1.42%
Stocks Falling on Unusual Volume:
- GOOD, CQP, WHZ, BAGL, KKD, CLVS, RCAP, PHH, AEIS, NRP, WAIR, TRI, IPCM, PKX, BERY, MNST, BITA, SAFM, FNHC, CNC, IPAR, TOUR, DXYN, HRS, MFRM, CBOE and TRN
Stocks With Unusual Put Option Activity:
- 1) JDSU 2) ACI 3) WLT 4) BRCM 5) XOM
Stocks With Most Negative News Mentions:
- 1) MNST 2) CLVS 3) CLF 4) AXP 5) TXI
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +1.06% 2) Semis +.49% 3) Utilities -.05%
Stocks Rising on Unusual Volume:
- IDCC, HSH, GWRE, ACHC, SWKS, AMAT and TFM
Stocks With Unusual Call Option Activity:
- 1) MRO 2) EXPR 3) TIBX 4) CVA 5) TSN
Stocks With Most Positive News Mentions:
- 1) DG 2) SWKS 3) DVN 4) AAPL 5) GD
Charts:
Evening Headlines
Bloomberg:
- East Ukraine Clashes Persist as Gas Talks Progress. Clashes in Ukraine’s eastern Luhansk province between separatists and the army left at least a dozen people dead, while the Ukrainian and Russian governments made progress in talks over their gas dispute. A blast in central
Luhansk killed seven people, the local health service said. Rebels
initially said it was an air strike, which the government denied.
Earlier yesterday, about 500 insurgents attacked the border guard
headquarters in Luhansk, and the guard service said five of its
personnel were killed as they fought back.
- D-Day Beach Warmth Belies Tensions in U.S.-France Ties.
France is selling weapons to Russia in defiance of American efforts
to isolate President Vladimir Putin. The U.S. is preparing to slap
France’s largest bank with a fine that could top $10 billion. French
government ministers have sought to derail General Electric Co. (GE)’s
bid for France’s
top energy-equipment maker.
- Vietnamese and Chinese Ships Clash Again. (video)
- Asian Stocks Extend Six-Month High on China Manufacturing.
Asian stocks rose, extending a six-month high, after a gauge for
China’s services industry increased amid optimism a separate report on
manufacturing will add to signs the world’s second-largest economy is
rebounding. Rio Tinto Group (RIO), the world’s second-biggest miner that
gets 31 percent of sales from China, added 1.3 percent in Sydney. KCC
Corp. jumped 10 percent in Seoul after unit Samsung Everland Inc.
announced plans for an initial public offering. Daio Paper Corp. slumped
5.9 percent in Tokyo as the maker of packaging
materials said it will raise as much as 22.4 billion yen in a
share sale.
The MSCI Asia Pacific Index gained 0.3 percent to 142.83 as
of 9:19 a.m. in Tokyo, before markets open in Hong Kong and
China.
- Europe’s Power Supply at Risk From Investment Dearth, IEA Says. Europe is in jeopardy of running
short of power because wholesale electricity prices are too low
to encourage spending on new thermal plants, according to the
International Energy Agency. The region needs more than $2 trillion in power-industry
investment by 2035 and about 100 gigawatts of new thermal
capacity in the decade to 2025, the Paris-based IEA said today
in its World Energy Investment Outlook. Electricity prices are
more than 20 percent below the level necessary to spur
investment, according to the adviser to 29 nations. One gigawatt
is enough to power about 2 million European homes.
Wall Street Journal:
- Hedge-Fund World's One-Man Cash Machine.
David Abrams Built His Fortune Effectively Going It Alone. In the Back
Bay neighborhood of Boston, one man is building a moneymaking machine
that rivals some of the hedge-fund industry's biggest names. Calls to
his office go unreturned even from those eager to fork over eight-figure
sums, potential investors say. One industry veteran referred to him as "a unicorn," as few people have ever seen him. The hedge-fund manager, David Abrams, has personally become a billionaire, and...
- Secondary Sales Squeeze Investors. Slide in Technology, Health-Care Stocks Has Cooled Demand for Follow-On Sales. A gold rush in public-company stock offerings has failed to pan out for many investors. The
recent collapse of highflying technology and health-care stocks has
stung buyers who paid steep prices for shares sold by the companies
earlier this year in a surge of deals known as follow-on offerings. That has cooled demand for the sales,...
- Hospitals' Prices for Common Services on the Rise. Vascular and Chest-Pain Treatments Show Some of Biggest Upticks. Federal data released Monday show an increase in the average price
hospitals charge to treat common conditions, with vascular procedures
and chest-pain treatment showing some of biggest upticks. The
numbers from the Centers for Medicare and Medicaid Services include 2012
prices at 3,376 hospitals for the 100 most-common inpatient stays by
Medicare patients. It is the second year the agency has released such
data, and it...
Fox News:
- Lawmakers raise eyebrows at Carney claim notifying Congress about Bergdahl swap 'not an option'. White House Press Secretary Jay Carney on Monday defended the
president's decision to green-light the controversial trade of five
Guantanamo prisoners for Army Sgt. Bowe Bergdahl without giving Congress
a heads-up, as lawmakers voiced concern the president broke the law.
Lawmakers have claimed the administration ignored the law by failing to
give a 30-day notice to Congress about moving detainees.
- Coal-state lawmakers rally against power plant emissions crackdown. Coal-state lawmakers, accusing President Obama of using a back door
to impose strict emissions limits on power plants, are rallying to slam
that door shut -- claiming the plan would cost jobs and jack up electric
bills. In Kentucky, West Virginia, and other states that rely on coal to
fuel their own economies -- and that help generate power for everybody
else -- officials vowed Monday to introduce legislation halting the
newly announced EPA plan.
Zero Hedge:
Business Insider:
Reuters:
- Obama creates task force on children who enter U.S. illegally.
President Barack Obama established an interagency group on Monday to
handle the growing influx of children coming to the United States
illegally without parents or relatives accompanying them.
In a memo that
describes an "urgent humanitarian situation," Obama has put the Federal
Emergency Management Agency in charge of coordinating humanitarian
relief to the children, including housing, care, medical treatment and
transportation. The Obama administration estimates that about 60,000 "unaccompanied minors" -
children under 18 - will enter the United States illegally this year. It
projects that number to grow to nearly 130,000 next year.
- U.S. commodity ETPs see net $4 bln outflow through May -Lipper data.
Telegraph:
FAZ:
- ECB Rate Cut Would Be 'Rather Cosmetic,' Stark
Writes. Possible interest rate cut by .1-.15 ppts would have little
impact as rate tool has been exhausted, former ECB chief economist
Juergen Stark writes. No investment decision would depend on such a small rate change, making the step "rather cosmetic in nature." Euro exchange rate is "certainly
not" a reason to further loosen monetary policy as FX rate is only
relevant to monetary policy if it has significant impact on price
developments. Euro-zone inflation of .7% "means price stability," all other interpretations are misleading. Monetary policy focused on medium term should ride out the current trough in inflation rather than stoke expectations of quantitative easing.
Hong Kong Oriental Daily:
- Carson Block Says Chinese Internet Stocks High Risks. Block is
most concerned with Chinese internet stocks among may industries, citing
an interview with the founder of Muddy Waters. Block says even if the
financials of Chinese internet stocks are accurate, the industry's
corporations do have bubbles and the VIE system contains potential risks.
Evening Recommendations
Jefferies:
- Rated (AMAT) Buy, target $28.
- Rated (LRCX) Buy, target $75.
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.50 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 79.0 +.25 basis point.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (DG)/.73
- (GIII)/-.15
- (ABM)/.40
- (MFRM)/.35
- (AMWD)/.40
Economic Releases
10:00 am EST
- Factory Orders for April are estimated to rise +.5% versus a +1.1% gain in March.
- IBD/TIPP Economic Optimism for June is estimated to rise to 46.8 from 45.8 in May.
Afternoon
- Total Vehicle Sales for May are estimated to rise to 16.1M versus 15.98M in April.
Upcoming Splits
- (FFIN) 2-for-1
- (AAPL) 7-for-1
Other Potential Market Movers
- The
Fed's George speaking, Australia gdp report, RBA rate decision, weekly
US retail sales reports, ISM New York, Stephens Investment Conference,
BofA Tech Conference and the Keefe Bruyette Mortgage Finance Conference
could impact trading today.
BOTTOM LINE: Asian indices are mostly lower, boosted by industrial and technology 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: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 11.74 +2.98%
- Euro/Yen Carry Return Index 145.40 +.41%
- Emerging Markets Currency Volatility(VXY) 7.09 +3.05%
- S&P 500 Implied Correlation 55.38 +.20%
- ISE Sentiment Index 98.0 -2.0%
- Total Put/Call .67 -25.26%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.27 +.39%
- European Financial Sector CDS Index 72.05 -1.01%
- Western Europe Sovereign Debt CDS Index 35.15 +.86%
- Asia Pacific Sovereign Debt CDS Index 78.50 -.38%
- Emerging Market CDS Index 250.76 +1.52%
- China Blended Corporate Spread Index 326.27 -.83%
- 2-Year Swap Spread 13.50 -.5 basis point
- TED Spread 20.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 214.0 +4.0 basis points
- China Import Iron Ore Spot $92.10/Metric Tonne +.33%
- Citi US Economic Surprise Index-3.20 +1.6 points
- Citi Emerging Markets Economic Surprise Index -22.10 -1.7 points
- 10-Year TIPS Spread 2.20 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +122 open in Japan
- DAX Futures: Indicating +2 open in Germany
Portfolio:
- Slightly Lower: On losses in my emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Networking -1.22% 2) Alt Energy -1.01% 3) Social Media -1.0%
Stocks Falling on Unusual Volume:
- MTZ, ACAT, PBYI, RCAP, FNHC, IHG, VTR, AFSI, MPAA, COMM, NRP, CLVS, DLX, NGVC, DY, RNA, BLOX, IEP, BBOX, UEIC, AVD, BNNY, IPAR, MHLD, SN and OIS
Stocks With Unusual Put Option Activity:
- 1) EWJ 2) DGX 3) FIO 4) KBR 5) DXJ
Stocks With Most Negative News Mentions:
- 1) CVX 2) IEP 3) Z 4) UEIC 5) ACAT
Charts:
