Bloomberg:
- Putin Meets Obama, Poroshenko Amid Talk of Cease-Fire. Russian
President Vladimir Putin met with U.S. President Barack Obama and held
his first talks with Ukraine’s new leader, Petro Poroshenko, as France
used D-Day commemorations to seek a breakthrough in the Ukraine crisis.
Obama and Putin had an “informal conversation” in northern France
today, during which the U.S. leader said that to defuse tensions Russia
must recognize Poroshenko as Ukraine’s head of government and end
support for rebels, Ben Rhodes, deputy White House national security
adviser, said.
- China’s Focus on Growth Goal Risks Reform Delay, World Bank Says.
China may fail to implement changes needed to put its economy on a more
sustainable path as weaker expansion pushes the government to roll out
stronger supportive policies to meet its growth target, the World Bank
said. “The government should have sufficient room for those policies,
but they may perpetuate China’s traditional growth model that relies on
government-led investment fueled by credit expansion,” the Washington-based lender said in a report today. “A policy focus on meeting growth targets could distract from
pushing through the structural reforms intended to put long-term growth
on a more stable footing.”
- European Stocks Gain as U.S. Jobs Report Beats Forecasts. European stocks advanced to a six-year high after a report showed the U.S. economy created more
jobs last month than forecast. Commerzbank AG climbed 4.1 percent after the lender’s chief
executive officer predicted that the European Central Bank would
find no problems during an audit. Italian and Irish banks
dragged the Stoxx Europe 600 Index higher as yields on the two
countries’ bonds fell to the lowest level since the introduction
of the euro. Banca Monte dei Paschi di Siena SpA retreated 2
percent after saying it will offer new shares to investors at a
35.5 percent discount in an attempt to rebuild capital. The Stoxx 600 rose 0.7 percent to 347.30 at the close of
trading. The benchmark has gained 0.9 percent this week as the
ECB lowered interest rates and unveiled a package of cheap loans
for the euro zone’s banks.
- Copper Futures Set for Biggest Weekly Loss Since March. Copper has dropped 3.8 percent in four days after the
inquiry was reported, extending a decline this year amid concern
that slowing global economic growth would crimp demand. China’s
finance deals use commodities from iron-ore to soybeans to
obtain credit and may tie up as much 1 million metric tons of
copper, Goldman Sachs Group Inc. estimated in a March report. “Worries
that the slowdown in demand from Chinese
financing deals after recent inventory fears in Qingdao Port are
still the driver here,” Steven Scacalossi, head of global
metals sales at TD Securities in Toronto, said in an e-mailed
report. “Momentum sellers are joining the fray.” Copper futures for July
delivery fell 1.3 percent to settle at $3.051 a pound at 1:13 p.m. on
the Comex in New York. On the London Metal Exchange, copper for delivery
in three months slid 1.4 percent to $6,688 a ton ($3.03 a pound).
- A Hawk Stirs as Weber’s UBS Sees U.S. Inflation Set to Take Off. Leave
it to Axel Weber to sound the
inflation alarm while most of the world is focused on the threat
of deflation. A stalwart advocate of tight money at the European Central
Bank, where he helped to set interest rates from 2004 to 2011, Weber
says U.S. price gains and the subsequent response of the Federal Reserve
will outpace investor expectations. “I see more potential ahead for
nervousness in the market,” Weber, chairman of UBS AG since 2012, told a
London conference of the Institute of International Finance yesterday. “The whole driver is going to be the inflation rate by the end
of the year in the U.S.”
- Gambler Linked to Icahn-Mickelson Faced $15 Million Loss.
William “Billy” Walters, the Las Vegas gambler who U.S. authorities are
said to be investigating in connection with possible insider trading in
2011 and 2012, was at the time facing a multimillion-dollar debt to the
government over a soured golf-course deal, according to court records.
- Uber Sets Valuation Record of $17 Billion in New Funding. Uber Technologies Inc. is creating a new category of hot startup: the $17 billion club. The
San Francisco-based transportation service, which lets people order
private town cars and other vehicles from their smartphone, said today
that it has raised $1.2 billion in a new financing led by Fidelity
Investments. The funding positions the company at the front of a pack of
Internet startups, with a valuation of about $17 billion, up from $3.5
billion in a financing last year.
Fox News:
- Photos purportedly show frantic, dangerous search for Bergdahl in 2009. (pics) Newly
obtained photographs purportedly depict the frantic search for
Sgt. Bowe Bergdahl in the initial days after he disappeared from his
post in eastern Afghanistan. The images were provided to Fox 5 DC by a
soldier from Bergdahl's Blackfoot Company who was at the base the day he
disappeared. The soldier, like several others who have spoken to
the media since the Obama administration announced Bergdahl had been
freed in exchange for five Taliban leaders, claimed Bergdahl had
deserted. The images purportedly show the lengths to which his fellow
soldiers went to find him.
CNBC:
ZeroHedge:
Business Insider:
Reuters:
Financial Times:
Telegraph:
Spiegel:
- Austrian
Central Bank Warns of Euro Area Recession on Russia. Euro area may
contract by as much as 2.3% through 2015 if conflict with Russia
escalates, citing Austrian central bank calculations. "High impact
scenario" in calculations assumes rise in energy prices, no gas
deliveries for 1.5 years.
Bild:
- Weidmann Says 'Absurd' to Herald Further ECB Measures. ECB
Governing Council member Jens Weidmann says it's "absurd to immediately
herald the next round" of easing measures, citing an interview. Says
"now we'll have to wait and see the effects" of yesterday's ECB
decisions. Says teh ECB must not become the bad bank of the euro area.
The Governing Council "wrestled hard" before deciding on the latest
package of measures, he said.
Kiev Post:
Style Underperformer:
Sector Underperformers:
- 1) Gaming -.63% 2) REITs -.50% 3) HMOs -.32%
Stocks Falling on Unusual Volume:
- LG, NBCB, DMND, VTNR, HTZ, HPTX, MVC, SHOS, BMRN, SNN, DB, LORL, NSTG, BRLI, THO, VRA, EBAY, ZUMZ, UL, HEP, NYLD, SAP, MPLX and KPTI
Stocks With Unusual Put Option Activity:
- 1) JNPR 2) FFIV 3) EBIX 4) NSM 5) QCOM
Stocks With Most Negative News Mentions:
- 1) GM 2) CCL 3) TSN 4) BTU 5) RLY
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +1.59% 2) Construction +1.49% 3) Airlines +1.43%
Stocks Rising on Unusual Volume:
- GWPH, PAY, ANGI, MW, VNDA, ETFC, SAIC and TRN
Stocks With Unusual Call Option Activity:
- 1) TPH 2) PAY 3) HTZ 4) DG 5) PVH
Stocks With Most Positive News Mentions:
- 1) UEPS 2) AGII 3) CMI 4) DFS 5) MS
Charts:
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.”
