Evening Headlines
Bloomberg:
- Russia Tried to Disrupt Ukraine Vote, Senate Panel Told. Russia launched a major cyberattack
on the main database of Ukraine’s Central Election Commission
shortly before the country’s May 25 elections, according to a
former U.S. lawmaker and ambassador. A U.S. State Department official said Ukraine’s Security
Service announced hackers using servers in Russia orchestrated a
distributed denial-of-service attack against the election
commission website and posted false results. The official, who
wasn’t authorized to speak on the record and requested
anonymity, said hackers also jammed phone lines to prevent
regional election data from reaching the central facility.
- Abenomics Spurs Most Misery Since ’81 as Senior Scrimps: Economy.
Mieko Tatsunami finds Prime Minister Shinzo Abe’s drive to reflate
Japan’s economy hard to digest. “The price of everything we eat on a
daily basis is going up,” Tatsunami, 70, a retired kimono dresser, said
while shopping in Tokyo’s Sugamo area. “I’m making do by halving the
amount of meat I serve and adding more vegetables.” Tatsunami’s concerns
stem from the price of food soaring at the fastest pace in 23 years
after April’s sales-tax increase. Rising prices helped push the nation’s
misery index to the highest level since 1981, while wages adjusted for
inflation fell the most in more than four years.
- China's
Property Developers Face Record Wave of Maturing Debt. Chinese property
developers will need to tackle an eight-fold increase in maturing debt
next year, adding financial pressure on firms amid a deflating
real-estate bubble.
- Vietnam Says China Still Ramming Boats, Airs Sinking Video. Vietnam
accused China of continuing to ram its boats in disputed waters of the
South China Sea and aired video it said showed a Chinese vessel plowing
into one of its fishing boats before it sank on May 26. Chinese
ships have damaged 24 Vietnamese boats since Vietnam vessels began
challenging China’s installation of an oil rig in waters near the
Paracel Islands on May 2, and 12 Vietnamese fisheries officers have been
hurt, officials said. In one of the most recent incidents, a Vietnamese
Coast Guard boat suffered four holes after being hit on June 1, Ngo
Ngoc Thu, vice commander of Vietnam’s Coast Guard, said at a press
conference yesterday in Hanoi.
- Asian Stocks Climb With Ringgit, Nickel Before Payrolls.
Asian stocks rose, with the regional index headed for its highest close
since October, while emerging-market currencies climbed after new
European Central Bank stimulus burnished the global outlook. Nickel rose
and gold traded near a one-week high before U.S. payrolls data. The MSCI Asia Pacific Index added 0.2 percent by 9:59 a.m. in Tokyo, set for a fourth straight weekly gain.
Wall Street Journal:
- Credit Unions Ramp Up Risk. Lenders Loosen Lending Standards, Increase Exposure to Longer-Term Assets. Credit unions in search of higher returns are loosening lending
standards and piling into longer-term assets, exposing the firms to
potentially significant losses if interest rates rise and worrying
regulators in the process. Such moves are raising concerns at the
National Credit Union Administration, the sector's regulator, which
said a rise in interest rates could make loans and investments
unprofitable. Some analysts also said credit unions likely are unaware
of the risk they are taking on because they...
- BofA(BAC) in Talks to Pay At Least $12 Billion to Settle Probes. At Least $5 Billion Expected to Go to Consumer Relief. Bank of America Corp. is in talks to pay at least $12 billion to
settle civil probes by the Justice Department and a number of states
into the bank's alleged handling of shoddy mortgages, an amount that
could raise the government tab for the bank's precrisis conduct to more
than $18 billion, according to people familiar with the negotiations. At
least $5 billion of that amount is expected to go toward consumer
relief—consisting of help for homeowners in reducing principal amounts,
reducing monthly payments and paying for...
Fox News:
- EXCLUSIVE: Bergdahl declared jihad in captivity, secret documents show. U.S. Army Sgt. Bowe Bergdahl at one point during his captivity
converted to Islam, fraternized openly with his captors and declared
himself a "mujahid," or warrior for Islam, according to secret documents
prepared on the basis of a purported eyewitness account and obtained by
Fox News. The reports indicate that Bergdahl's relations with his Haqqani
captors morphed over time, from periods of hostility, where he was
treated very much like a hostage, to periods where, as one source told
Fox News, "he became much more of an accepted fellow" than is popularly
understood. He even reportedly was allowed to carry a gun at times.
Zero Hedge:
Business Insider:
NY Post:
Reuters:
- VeriFone(PAY) results beat as retailers upgrade card swipe machines. VeriFone Systems Inc, a maker of
credit card swipe machines, reported better-than-expected
results for the second quarter, mainly helped by customers in
Australia and retailers upgrading equipment with new security
features. VeriFone's shares rose about 4 percent in extended trading.
South China Morning Post:
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.0 -2.75 basis points.
- Asia Pacific Sovereign CDS Index 78.5 -.75 basis point.
- NASDAQ 100 futures +.21%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-Farm Payrolls for May is estimated to fall to 215K versus 288K in April.
- The Unemployment Rate for May is estimated to rise to 6.4% versus 6.3% in April.
- Average Hourly Earnings for May are estimated to rise +.2% versus unch. in April.
3:00 pm EST
- Consumer Credit for April is estimated to fall to $15.0B versus $17.529B in March.
Upcoming Splits
Other Potential Market Movers
- The Fed's Powell speaking, German Trade Balance and the (TRV) Investor Day could impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and commodity 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: Substantially Higher
- Sector Performance: Almost Every Sector Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 11.56 -4.30%
- Euro/Yen Carry Return Index 146.04 +.14%
- Emerging Markets Currency Volatility(VXY) 7.0 -3.45%
- S&P 500 Implied Correlation 49.73 -6.01%
- ISE Sentiment Index 100.0 +7.53%
- Total Put/Call .70 -5.41%
Credit Investor Angst:
- North American Investment Grade CDS Index 60.01 -3.31%
- European Financial Sector CDS Index 67.43 -5.69%
- Western Europe Sovereign Debt CDS Index 33.07 -4.53%
- Asia Pacific Sovereign Debt CDS Index 80.11 +.92%
- Emerging Market CDS Index 248.48 -2.78%
- China Blended Corporate Spread Index 317.09 -.54%
- 2-Year Swap Spread 14.50 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -11.50 -1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 220.0 -1.0 basis point
- China Import Iron Ore Spot $94.30/Metric Tonne -.32%
- Citi US Economic Surprise Index -14.10 -.4 point
- Citi Emerging Markets Economic Surprise Index -19.70 +1.9 points
- 10-Year TIPS Spread 2.18 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +80 open in Japan
- DAX Futures: Indicating +18 open in Germany
Portfolio:
- Higher: On gains in my biotech/medical/retail/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Draghi Unveils Historic Measures Against Deflation Threat. Mario
Draghi unveiled an unprecedented round of measures to help the European
Central Bank’s record-low interest rates feed through to an economy
threatened by deflation. The ECB today cut its deposit rate to minus
0.1 percent, becoming the first major central bank to take one of its
main rates negative. In a bid to
get credit flowing to parts of the economy that need it, the ECB also
opened a 400-billion-euro ($542 billion) liquidity channel tied to bank
lending and officials will start work on an asset-purchase plan. While
conceding that rates are at the lower bound “for all practical
purposes,” the ECB president signaled policy makers are willing to act
again. “We think it’s a significant package,” Draghi told reporters in Frankfurt. “Are we finished? The answer is no.”
- German ECB Critics Condemn Draghi Rate Cut as Pandering to South.
A senior member of German Chancellor Angela Merkel’s coalition joined
banks and insurers in denouncing the European Central Bank’s record-low
interest rates, saying the decision distracts from economic reforms.
While Merkel said the ECB is independent and she “will deal with” the
decision, critics of ECB President Mario Draghi said he is pandering
to weaker euro-region economies while expropriating German savers. “If
Mr. Draghi thinks he has to undertake selective economic policy for
certain parts of the euro area, that is simply not his responsibility,” Ralph Brinkhaus, the finance spokesman in parliament for Merkel’s Christian Democrats, said in ane-mailed statement. “The ECB has to watch out that it
doesn’t exceed the limits of its mandate.”
- Obama Says Putin Running Out of Time Over Ukraine. Vladimir Putin has just weeks to stop supporting a pro-Russian insurgency in Ukraine or face stiffer penalties,
U.S. President Barack Obama and U.K. Prime Minister David Cameron said.
“The G-7 nations are ready to impose additional costs on Russia” if
Putin doesn’t take concrete steps to help end the rebellion in Ukraine,
Obama told reporters after talks with Cameron today in
Brussels. “We will have a chance to see what Mr. Putin does over the
next two, three, four weeks.”
- China Should Resist Further Stimulus, IMF Says. China
should refrain from rolling out more stimulus to boost economic growth
and continue to implement changes to curb dangers from shadow banking
and local government debt, the International Monetary Fund said. “We
are not counseling stimulus at this point, we don’t think that there
are any sufficient signs to warrant that,” First Deputy Managing
Director David Lipton said at a briefing
in Beijing today.
- Brazil Signals Rate on Hold as Growth Outlook Worsens.
Brazil’s central bank signaled it will keep interest rates unchanged as
it weighs the delayed impact of a yearlong tightening cycle and a
slowing economy. Policy makers led by central bank President Alexandre Tombini voted unanimously last week to hold the benchmark Selic
rate at at 11 percent, halting the world’s longest tightening
cycle after nine previous boosts.
- Don’t Fight Money Train Say Emerging-Market Bond Buyers. Investors are so convinced that 2014
will continue to be the opposite of 2013 that they’re piling
back into emerging-markets wagers that were among last year’s
biggest losers. Buyers plowed $273.8 million two days ago into the biggest
exchange-traded fund focused on emerging-market debt, its
largest one-day inflow ever, according to data compiled by
Bloomberg. They’re also demanding about the least extra yield in a year
to own the debt of developing nations instead of benchmark securities.
Why? Easy money. Lots of it, all over the globe. “The technicals of this market are almost impossible to
fight,” said Karissa McDonough, the fixed-income strategist at
People’s United Wealth Management, which actively manages $5
billion.
- Europe Stocks Rise Near 6-Year High as ECB Adds Stimulus.
European stocks rose, trading near a
six-year high, and Germany’s DAX Index briefly topped 10,000 for the
first time after European Central Bank President Mario Draghi unveiled
new plans to stimulate the region’s economy. Banks posted some of the
biggest gains in the region, with Mediobanca SpA, Banco de Sabadell SA
and Commerzbank AG climbing more than 3 percent each. Smith &
Nephew Plc rose 2.3 percent as Medtronic Inc. was said to consider a
takeover of the U.K. company. Asos Plc (ASC) tumbled the most on record
after cutting its profitability forecast, dragging online retailers
lower. Deutsche Bank AG fell 3.8 percent after offering shareholders a
discount of more than 20 percent to buy new stock. The Stoxx Europe 600 Index added 0.4 percent to 344.99 at
the close of trading in London after rising as much as 1.2
percent.
- Gold Rallies While Commodities Hold Declines After ECB.
Gold climbed the most in three weeks
as commodities held declines, heading for the longest losing streak
since January, after the European Central Bank unveiled measures to spur
the economy and fight deflation. The Standard & Poor’s GSCI
gauge of 24 raw materials fell 0.4 percent for a fifth day of declines,
lead by soybeans and wheat. Gold rallied as much as 1.1 percent to
$1,257.73 an ounce in London, the biggest gain since May 14, as some traders closed
bets on falling prices. Copper also fell.
- Stay-at-Home Dads Double Since 1989 Amid Jobs Struggle. Fathers account for a growing share
of stay-at-home parents in the U.S., with almost a quarter of
the men reporting they’re at home because they can’t find a job. Dads represented 16 percent of all parents not working
outside the home in 2012, up from 10 percent in 1989, a report
released today by the Pew Research Center in Washington shows.
There are more than five times as many stay-at-home mothers. “The share of dads specifically there to care for those at
home has been growing steadily across time,” said Gretchen
Livingston, the report’s lead author. “We still see a steady
increase in this number.”
Wall Street Journal:
- Russian Prime Minister Medvedev Says Thousands Crossing Border to Flee Ukraine. Russia's prime minister said Thursday that a military operation in eastern
Ukraine to subdue a separatist rebellion has forced thousands of civilians to
flee across the border into Russia, but Ukrainian authorities responded that
there was no evidence of a refugee crisis. Russia has increasingly painted the fighting as a humanitarian issue,
proposing a resolution before the United Nations Security Council this week
calling for the creation of corridors allowing noncombatants to leave and
insisting that Ukraine cease what it calls military operations against
civilians. The West has reacted coolly to Russia's U.N. proposal and has been
skeptical of previous claims about asylum seekers.
- GM(GM) Fires 15 Employees Over Recall Failures. Auto Maker Says Report Found 'Disturbing' Pattern of Incompetence.
Fox News:
CNBC:
ZeroHedge:
ValueWalk:
Business Insider:
Time:
- Behind the Scenes of Bowe Bergdahl’s Release. TIME talks to Taliban commanders who were involved in the exchange. “We returned our valued guest to his people and in return, they freed our five heroes held in Guantanamo Bay since 2002.” Those close to the leadership and the detainees are feasting on “whole
goats cooked in rice”—a special meal usually reserved for celebrations. “This
is a historic moment for us. Today our enemy for the first time
officially recognized our status.” Asked whether the Taliban would be
inspired by the exchange to kidnap
others, he laughed. “Definitely,” he says. “It’s better to kidnap one
person like Bergdahl than kidnapping hundreds of useless people. It has
encouraged our people. Now everybody will work hard to capture such an
important bird.”
Style Underperformer:
Sector Underperformers:
- 1) Gaming -1.15% 2) Telecom -.86% 3) HMOs -.41%
Stocks Falling on Unusual Volume:
- RCAP, SNN, VRA, LTM, PVH, BNNY, DB, MRVL, FIVE, TDG, TMUS, MONT, HRTX, SUNE, BMY, VOYA, RH, MDT, TSL, KOF, ESV and MNKD
Stocks With Unusual Put Option Activity:
- 1) RDN 2) OREX 3) MDT 4) S 5) ZNGA
Stocks With Most Negative News Mentions:
- 1) PVH 2) IXYS 3) CYBX 4) GM 5) BNNY
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +3.05% 2) Gold & Silver +2.50% 3) Networking +2.20%
Stocks Rising on Unusual Volume:
- VRNT, CIEN, BRLI, VNCE, SSLT, SPR, ZUMZ, WWD, JOY, CLVS, SGMO, TTM, CLDX, ISIS, OLED, VRNT, ZUMZ, WWD, JOY, APWR, NCMI, ILMN, NYLD, TWTR, SPR, RLD and IILG
Stocks With Unusual Call Option Activity:
- 1) FIVE 2) MTW 3) TSO 4) CIEN 5) RDC
Stocks With Most Positive News Mentions:
- 1) BKS 2) VNCE 3) TWTR 4) BA 5) AMZN
Charts:
Evening Headlines
Bloomberg:
- G-7 Spares Russia New Sanctions Urging Ukraine Diplomacy. Group
of Seven leaders spared Russia further sanctions in favor of diplomatic
efforts to resolve the Ukraine crisis, giving the Kremlin another
chance to cut off support to pro-Moscow separatists seeking to break up
the country. The world’s leading industrial democracies urged Russia
to complete the pullback of its troops from Ukraine’s eastern border,
warning that “we stand ready to intensify targeted sanctions and to
implement significant additional restrictive measures” in the absence of
a peaceful settlement, according to a statement issued late yesterday
after the first session of a
two-day G-7 meeting in Brussels.
- China City Crash-Lands to Zero Growth on Coal Bust. Economic growth in the northern Chinese city of Taiyuan, Shanxi
province, has crashed to zero from 12 percent in one year. Yan
Xiaofeng’s coal-equipment business has gone down with it. Yan, 38,
said last week that he’s recorded 1 million yuan ($160,000) in sales so
far this year from supplying gear and parts to coal mines, down from
more than 10 million yuan a year in the boom times of 2009. “The economy
in Shanxi is very simple: It’s all about coal,” said Yan, who’s been in
business in the region for 15 years. “When the coal industry is in
decline, every other business follows.” Taiyuan’s hard landing shows how
China’s transition to slower growth from decades averaging 10 percent
expansion will be messy in some places, especially Shanxi, which is
suffering from anti-pollution policies aimed at curtailing coal use. The city’s
situation highlights the challenge for policy makers in coming up with
jobs and industries to replace manufacturing in regions dependent on
commodities with diminishing demand.
- Asia Stocks Trade Near 7-Month High Ahead of ECB Decision.
Asia’s benchmark stock index traded near a seven-month high after
better-than-forecast data on U.S. service industries and as investors
await a European Central Bank policy decision. Westpac Banking Corp.
(WBC) dropped 0.9 percent in Sydney, with financial shares the worst
performing of 10 industry groups on the regional gauge. LG Household
& Health Care Ltd. slumped 10 percent, the most in four months, in
Seoul after the company’s vice chairman sold shares. Samsung SDI Co.
advanced 4.8 percent after saying it will develop batteries with Ford
Motor Co. The MSCI Asia Pacific Index (MXAP) slid 0.1 percent to 142.66 as
of 10:36 a.m. in Hong Kong.
- Amazon(AMZN) Planning to Unveil Smartphone to Vie With Apple's(AAPL).
- Copper Near 3-Week Low Amid Reports of China Port Probe. Copper traded near a three-week low
as investors weighed shrinking stockpiles against reports of a
probe of metals warehousing at a Chinese port. The contract for delivery in three months on the London
Metal Exchange was little changed at $6,784.25 a metric ton by
11:15 a.m. in Tokyo after trading between $6,772 and $6,796.75.
The metal touched $6,760 yesterday, the lowest since May 12.
Inventories tracked by the LME have dropped 54 percent this
year to 168,475 tons, bourse data showed yesterday. Authorities
in Qingdao have blocked some shipments of metals due to
investigations into allegations that some metal consignments
have been pledged multiple times as loan collateral, according
to Reuters and Metal Bulletin reports.
Wall Street Journal:
Fox News:
Zero Hedge:
Business Insider:
Financial Times:
- Sliced and diced debt deals make roaring comeback. Certain
securitisation deals have roared back in the US. The European market
could soon come back to life after a prolonged hibernation. The Bank
of England and the European Central Bank are now arguing that
restarting parts of the securitisation market could help funnel credit
to the wider economy and help transfer risk away from still-struggling
banks.
Telegraph:
Evening Recommendations
Pacific Crest:
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 105.75 -.75 basis point.
- Asia Pacific Sovereign CDS Index 79.25 -.5 basis point.
- NASDAQ 100 futures -.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (SJM)/1.17
- (NAV)/-1.27
- (JOY)/.71
- (NX)/.00
- (CIEN)/.14
- (VRA)/.13
- (COO)/1.60
- (PAY)/.33
- (MW)/.67
- (ESI)/.71
- (TITN)/-.06
- (ZOES)/-.03
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 310K versus 300K the prior week.
- Continuing Claims are estimated to fall to 2625K versus 2631K prior.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Kocherlakota speaking, ECB rate decision, ECB's Draghi speaking,
BoE rate decision, 1Q Household Change Net Worth, Challenger Job Cuts
for May, RBC Consumer Outlook Index for June, weekly EIA natural gas
inventory report, weekly Bloomberg Consumer Comfort Index, (BSFT)
analyst day, (MDT) analyst meeting and the (ETR) analyst day could
impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
