Evening Headlines
Bloomberg:
- Putin Jeopardizes Russian Firms’ Access to $600 Billion. Escalating European Union and U.S.
sanctions jeopardize access to funding for Russian companies,
threatening to cut them off from international capital markets
that have provided at least $600 billion in debt and equity
financing since the country emerged from its 1998 default. Russian businesses have about $165 billion in dollar- and
European-currency denominated bonds and more than $100 billion
in offshore syndicated loans currently outstanding, according to
data compiled by Bloomberg. They’ve also raised more than $40
billion selling American and global depositary receipts abroad
over the past 15 years. Banks based in China, which remains
friendly with President Vladimir Putin’s government, won’t be
able to fill the breach, said Ian Hague, founding partner of New
York-based Firebird Management LLC.
- Siemens to BP Prepare for Downward Russia Business Spiral. BP Plc (BP/), Siemens AG (SIE) and Renault SA (RNO) are among European companies preparing for a downward turn in
their Russian business following the European Union’s decision
to impose its widest-ranging sanctions yet over President
Vladimir Putin’s involvement in eastern Ukraine.
- Nomura Profit Fall Signals End of Brokers’ Abenomics Boom. Nomura Holdings Inc. (8604)’s lowest profit in seven quarters signals the boost from Prime Minister Shinzo Abe’s economic stimulus policies for Japanese brokerages is over. Shares of Japan’s largest securities firm sank the most in almost three weeks after the company yesterday posted a 70 percent drop in net income to 19.9 billion yen ($195 million) in the three months ended June, missing analysts’ estimates for 26 billion yen. Smaller Daiwa Securities Group Inc. (8601) also reported the second straight decrease in quarterly profit.
- Asian Stocks Rise, Extending Six-Year High Ahead of Fed.
Asian stocks rose for a fourth day, with the regional benchmark index
extending a six-year high, before the Federal Reserve updates markets on
monetary policy today and as the U.S. and European Union strengthened
sanctions against Russia. Honda Motor Co. climbed 3.3 percent in Tokyo
after the carmaker raised its profit forecast to the highest in seven
years. Oversea-Chinese Banking Corp. gained 1.5 percent after saying it
now owns 97.5 percent of Wing Hang Bank Ltd., allowing the Singapore
lender to take its Hong Kong target private. Hyundai Heavy Industries
Co. tumbled 8 percent after South Korea’s biggest shipbuilder reported a
wider-than-expected
second-quarter loss.
The MSCI Asia Pacific Index added 0.3 percent to 149.92 as
of 9:53 a.m. in Hong Kong, with eight of its 10 industry groups
rising.
Wall Street Journal:
- Europe, U.S. Significantly Expand Sanctions Against Russian Economy. Many Western Officials Don't Expect Putin to Withdraw Support of Pro-Russia Rebels in Ukraine.
The U.S. and the European Union adopted sweeping economic sanctions
against Russia on Tuesday to punish Moscow's unbending stance in the
Ukraine conflict. The question for the West now is whether the move will
make Russian
President Vladimir Putin more cooperative or prompt him to dig in. The
trade and investment restrictions that EU governments, after much
agonizing, agreed upon mark a major escalation of sanctions against...
- Israel Bombards Hamas Symbols, Power Plant in Gaza. Aims to Force Islamist Group to Accept Cease-fire Demand to Disarm. Israeli forces pounded Hamas symbols of
control and Gaza's only power plant in one of the heaviest bombardments
in the three-week conflict, trying to raise pressure on the Islamist
group to accept Israel's terms for a cease-fire. A
strike early Tuesday engulfed the power plant in flames, forcing it to
shut down and leaving many of the Palestinian territory's 1.8 million
people without electricity. To Gazans, the attack on such a vital
lifeline seemed aimed at weakening Palestinian support for the extended
conflict both sides say they are ready to fight.
- Liberals Love the 'One Percent'. The left has a strange affection for Federal Reserve policy that has turbocharged inequality. Federal Reserve Chair Janet Yellen has said the central bank's goal
is "to help Main Street not Wall Street," and many liberal commentators
seem convinced that she is advancing that goal. But talk to anyone on
Wall Street. If they are being frank, they'll admit that the Fed's loose
monetary policy has been one of the biggest contributors to their
returns over the past five years. Unwittingly, it seems, liberals who
support the Fed are defending policies that boost the wealth of the
wealthy but do nothing to reduce...
MarketWatch.com:
- UPS(UPS) shares deliver a Dow Theory warning for stocks.
The transport sector is taking another beating Tuesday, this time led
by a selloff in United Parcel Service shares. Based on one of the basic
premises of the century-old Dow Theory of market analysis, that could
bode badly for the broader market.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- AmEx(AXP) profit rises 9 pct as card holders spend more. American Express Co reported a 9
percent rise in second-quarter profit as more customers used its
credit cards in a recovering U.S. economy. Card member spending rose 9 percent globally to $258 billion, after adjusting for foreign currency, compared to 7
percent growth in the preceding quarter and 8 percent growth in
the second quarter last year.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.75 +1.75 basis points.
- Asia Pacific Sovereign CDS Index 71.5 +.75 basis point.
- NASDAQ 100 futures +.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:15 am EST
- The ADP Employment Change for July is estimated at 230K versus 281K in June.
8:30 am EST
- Advance 2Q GDP is estimated to rise +3.0% versus a -2.9% drop in 1Q.
- Advance 2Q Personal Consumption is estimated to rise +1.9% versus a +1.0% gain in 1Q.
- Advance 2Q GDP Price Index is estimated to rise +1.8% versus a +1.3% gain in 1Q.
- Advance 2Q Core PCE is estimated to rise +1.9% versus a +1.2% gain in 1Q.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-800,000 barrels versus a -3,969,000 barrel decline the prior week.
Gasoline supplies are estimated to rise by +900,000 barrels versus a
+3,379,000 barrel gain the prior week. Distillate inventories are
estimated to rise by +1,370,000 barrels versus a +1,636,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to fall by
-.2% versus unch. the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark Fed Funds rate at .25%.
- Fed QE3 Pace for July is estimated to fall to $25B versus $35B in June.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone Industrial Confidence data, $29B 7Y T-Note auction, Argentina
default deadline and the weekly MBA mortgage applications report could
also 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 lower
and to rally into the afternoon, finishing mixed. The Portfolio is 50%
net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.92 +2.87%
- Euro/Yen Carry Return Index 142.97 +.05%
- Emerging Markets Currency Volatility(VXY) 6.05 +1.17%
- S&P 500 Implied Correlation 55.59 +1.02%
- ISE Sentiment Index 109.0 +6.86%
- Total Put/Call .83 -10.75%
Credit Investor Angst:
- North American Investment Grade CDS Index 59.86 +.62%
- European Financial Sector CDS Index 67.64 +1.66%
- Western Europe Sovereign Debt CDS Index 33.78 +1.78%
- Asia Pacific Sovereign Debt CDS Index 71.26 +.71%
- Emerging Market CDS Index 257.23 +.56%
- China Blended Corporate Spread Index 299.91 -.77%
- 2-Year Swap Spread 17.0 -3.75 basis points
- TED Spread 21.50 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -8.25 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% -1.0 basis point
- Yield Curve 192.0 -6.0 basis points
- China Import Iron Ore Spot $95.30/Metric Tonne +1.06%
- Citi US Economic Surprise Index -18.0 +2.7 points
- Citi Emerging Markets Economic Surprise Index -.6 -.1 point
- 10-Year TIPS Spread 2.27 unch.
Overseas Futures:
- Nikkei Futures: Indicating +42 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Higher: On gains in my retail/biotech/medical sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- EU Aims at Russian Banks, Technology in Widest Sanctions. The European Union curbed Russia’s access to bank financing
and advanced technology in its widest-ranging sanctions yet over
President Vladimir Putin’s backing of the rebellion in eastern Ukraine. EU
governments agreed today in Brussels to bar state-owned banks from
selling shares or bonds in Europe and restricted the export of equipment
to modernize the oil industry, a key prop for Russia’s economy, two EU
officials told reporters. New contracts to sell arms to Russia and the
export of machinery, electronics and other civilian products with
military uses will also be banned. “The political implications of
the escalation in tensions are likely to cast a further chill over
relations between Russia and the West,” Citigroup Inc. (C:US) analysts
including Eric Lee and Tina Fordham said in a note to clients before the
EU decision. “Economic costs are starting to bite, but it
could be a while before the economic consequences bear domestic
political costs for Russia.”
- Germany Inc. Says Time’s Finally Up for Putin After Crash. Germany’s
business and political leaders are lining up to support a tougher
stance on Russia, giving Chancellor Angela Merkel critical backing as
she pushes her European Union counterparts to expand sanctions. Industry
group chiefs and lawmakers from Merkel’s governing coalition are
expressing the need for deeper measures targeting Russia’s economy
following the downing of Malaysia Air (MAS) Flight 17. Public opinion
has also shifted, with a majority of Germans now favoring wider actions
against Russia. “This
shooting down of a plane is really a turning point,” Martin Wansleben,
head of the Association of German Chambers of Commerce and Industry,
said in an interview. “It’s such an outrageous act that one must give a
clear response.”
- Gaza Violence Intensifies as Netanyahu Seeks Disarmament. Israeli aircraft, warships and artillery intensified their attacks on
the Gaza Strip, after Prime Minister Benjamin Netanyahu told his
country to brace for an extended campaign. The army said it has
struck more than 70 sites across the Hamas-controlled coastal strip
since late yesterday, with targets including Hamas’s Al-Aqsa broadcast
stations and the home of Hamas Gaza leader Ismail Haniyeh. Haniyeh, like
other Hamas leaders, has gone into hiding and no casualties were
reported from that strike.
- German Bund Record Shows All Is Not Right in Euro Area. Europe’s debt crisis is a fading
memory, its most-indebted nations have never been able to borrow
so cheaply and growth is returning, yet German bonds, a key
gauge of economic malaise, are setting the sort of records
usually reserved for times of turmoil. Bunds have joined a rally that’s swept borrowing costs to
record lows across the euro area. The last time their yields
plumbed such levels was when the region was in the grip of a
downturn that threatened the euro’s existence. That they’ve
dropped further reflects concern that the European Central
Bank’s plan to stave off deflation and boost growth can’t work
without further stimulus.
- China Trade Numbers Still Don’t Add Up Post-Fake Exports. China’s trade numbers still don’t add up. A discrepancy
between Hong Kong and Chinese figures for bilateral trade remains even
after a crackdown last year on Chinese companies’ use of fake
export-invoicing to evade limits on importing foreign currency. China
recorded $1.31 of exports to Hong Kong in June for every $1 in imports
Hong Kong tallied from China, for a $6.4 billion difference, based on
government data compiled by Bloomberg News.
- Goldman(GS) Says China Growth Must Slow Below 7% to Meet Goal.
China should allow economic growth to slow to below 7 percent to reduce
reliance on investment spending, according to Goldman Sachs Group
Inc.’s Ha Jiming. Achieving Premier Li Keqiang’s target of 7.5 percent gross
domestic product growth for this year could further aggravate
imbalances and a rate “below 7 percent” is roughly what China
needs, said Ha, the Hong Kong-based vice chairman and chief
investment strategist at Goldman’s investment management
division for China. Next year, “I hope the target could be
lowered to reflect the need for economic rebalance,” he said.
- Geopolitical Risk Rises for Global Investors.
Since the start of the year, conflicts in Syria, Gaza and Iraq have
escalated, China has become more assertive in pursuing territorial
claims against Japan, Thailand reverted to military rule, Russia annexed
Crimea and separatists in Ukraine downed a civilian airliner. These
crises have had little lasting impact on major financial markets in the
U.S., Europe and in Asia. Now Raj Hindocha, a managing director with
Deutsche Bank Research in London, is warning that investors and money
managers could be in for a rude awakening later this year. “It’s the abundant liquidity that has numbed the markets,” he said in a
telephone interview yesterday. “Nobody wants to bet against that
firepower.”
- Europe Stocks Climb After Two-Day Drop as Ferrovial Gains. European stocks climbed, following a two-day decline, as companies including Ferrovial SA and Next Plc reported better-than-expected results. Ferrovial rose 1.2 percent after the Spanish construction company posted first-half profit that exceeded projections and said it will buy back
shares. Next advanced 2.6 percent after the retailer increased its
annual profit and sales forecasts. BP Plc, which owns a stake in OAO
Rosneft, declined 2.5 percent. Renault SA slid the most in four months
as the French carmaker revealed that it is consuming more cash than it
did a year ago. The Stoxx Europe 600 Index added 0.3 percent to
342.27 at the close of trading, paring gains in the final half an hour
of trading as the European Union agreed to impose new sanctions on
Russia for its role in the insurgency in eastern Ukraine.
- Million-Dollar U.S. Housing Loans Surge to Record Level.
Banks are handing out mortgages of as much as $10 million to the
wealthy in record numbers while first-time homebuyers struggle to get
loans. Erin Gorman, managing director at Bank of New York Mellon Corp.,
said she’s fielding more requests for home loans of at least $2 million
than ever before. The number of loans from $1 million to $10 million to buy single-family
homes in the 100 largest metropolitan areas surged to more than 15,000
in the second quarter, the highest ever, according to property data firm
CoreLogic.
CNBC:
- Paul Singer: US stocks 'frothy' by 'all measures'. Billionaire investor Paul Singer thinks stocks are way overvalued. "By all measures, the U.S. stock market is currently
frothy," the founder of $24.8 billion hedge fund firm Elliott
Management wrote in a letter to investors Monday. Singer repeated his long-held view that central banks are creating asset bubbles through their market stimulus programs.
ZeroHedge:
Business Insider:
The Daily Beast:
- ISIS’s Black Flags Are Flying in Europe. The symbol of the murderous
Islamic State is waving in The Hague. ‘Death to the Jews,’ shout the
demonstrators. Yet the Dutch government authorized the protests. “Death
to the Jews” chanted the crowd waving the black flags of the Islamic
State, or ISIS as it used to be known. They were looking for new
supporters for their cause, the creation of a worldwide caliphate
answering to the man who now calls himself Ibrahim: a zealot too radical
even for Al Qaeda who has stormed through Syria and Iraq carrying out
mass executions, crucifying rivals, beheading enemies. But these
marchers were not in Syria or Iraq; they were in The Hague in The
Netherlands. And their message was one tailored to the disaffected young
descendants of Muslim immigrants in Europe.
Reuters:
- Police shoot dead dozens of attackers in attack in China's Xinjiang: Xinhua. Chinese police
shot dead dozens of knife-wielding attackers on Monday morning after
they staged assaults on two towns in the westerly Xinjiang region, the
official Xinhua news agency said on Tuesday, citing local police.
It said a gang armed with
knives had first attacked a police station and government offices in the
town of Elixku, in Shache county, and some then moved on to the nearby
town of Huangdi, attacking civilians and smashing and setting fire to
vehicles. Xinjiang, home to many
Turkic-speaking Uighurs, has for years been beset by violence, which the
government blames on Islamist militants or separatists who it says are
bent on establishing an independent state called East Turkestan.
Telegraph:
- European bond yields enter the death zone. European bond yields are once again on depression alert – and this time
it is not just German bunds which are signalling an economic contraction
to come. The Spanish ten year bond yield has fallen to its lowest level
since the French revolution in 1789; it's a similar story elsewhere in
the eurozone.
Izvestia:
- Russia May Introduce Term 'Country-Aggressor' in Laws. State Duma
may introduce term "country-aggressor" in national legislation,
referring to countries that impose sanctions against Russian citizens,
cos., citing draft law. Proposal is to ban cos. registered in states
defined as "country-agressor" from providing audit, consulting, legal
services in Russia. If implemented, this may refer to Deloitte, KPMG,
Ernst & Young, PriceWaterhouseCoopers, Boston Consulting Group,
McKinsey & Co., citing lawmaker Evgeny Fedorov.
Xinhua:
- State Economist Says China Faces Downward Pressure in 2H. China
still faces relatively large downward pressure in 2H, says Zhang Liqun, a
researcher with the State Council's Development Research Center,
according to a report. Downward pressure lies in property market
adjustment, overcapacity reduction and risks in local government debt,
Zhang said.
Style Underperformer:
Sector Underperformers:
- 1) HMOs -2.02% 2) Homebuilders -.76% 3) Road & Rail -.65%
Stocks Falling on Unusual Volume:
- TCPC, MW, IPXL, OSK, LJPC, AFOP, OMI, EMN, HLF, SSW, ETN, HRS, UPS, AGCO, FELE, ENTG, TUP, GLW, IRBT, MRH, TRLA, CE, BPT, CBI, PTR, UPS, CE, AET, GTAT, ENTG, OMI, MGAM, ETN, NYT, EMN and AFOP
Stocks With Unusual Put Option Activity:
- 1) GLW 2) ETN 3) IBB 4) UPS 5) AKAM
Stocks With Most Negative News Mentions:
- 1) IPXL 2) HLF 3) MW 4) SSW 5) TRLA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Telecom +3.54% 2) Gaming +1.87% 3) Hospitals +.95%
Stocks Rising on Unusual Volume:
- WIN, CTL, CGNX, SNCR, IPGP, GHL, CVLT, MDSO, IDTI, PCYC, LVLT, ARWR, UTHR, GHL, MAS, HLS, CVC, TWTC and IRBT
Stocks With Unusual Call Option Activity:
- 1) ETFC 2) DD 3) DLTR 4) ODP 5) MHR
Stocks With Most Positive News Mentions:
- 1) WM 2) DRI 3) MLM 4) T 5) TWTR
Charts:
Evening Headlines
Bloomberg:
- New Sanctions Readied by U.S., EU as Russia Prepares. The
U.S. and European Union may move as soon as today to impose tougher
sanctions against Russia as Vladimir Putin’s government sought
replacements for defense imports and considered restrictions on some
agriculture products from America and its allies. The new sanctions are aimed at “key sectors” of Russia’s
economy -- finance, defense and energy -- and are being imposed
in the face of Putin “doubling down” in support of separatists
battling the government of Ukraine, U.S. Deputy National
Security Adviser Tony Blinken said yesterday. “The longer this goes on, there is the risk of further
outrageous actions by the separatists or by Russia that deepen
the international crisis,” Blinken said. “So there’s a need to
take further action now to convince Russia to change course.”
- Russia Eyes Banning U.S. Chicken And Some European Fruit. Facing
tougher sanctions over its incursion into Ukraine, Russia announced
today that it may ban imports of chicken from the U.S. and fruit from
Europe and is investigating McDonald’s Corp. (MCD) cheese for safety.
While Russia and the U.S. have long sparred over agricultural trade,
today’s actions fueled speculation they could be retaliatory. The
28-nation European Union and the U.S. plan to announce as soon as this
week additional actions to punish Russian President Vladimir Putin’s
government.
- Asian Stocks Gain as Bonds Drop Before Fed; Oil Declines.
Asian stocks rose, with the regional index advancing a third day to
extend its six-year high, while bonds followed U.S. Treasuries lower
before the Federal Reserve starts meeting today. Oil fell as soybeans
climbed. The MSCI Asia Pacific Index added 0.1 percent by 9:53 a.m. in Tokyo, as Japan’s Topix (TPX) index and the Kospi in Seoul climbed
at least 0.2 percent.
Wall Street Journal:
- Setbacks Complicate Putin's Ukraine Strategy. Pro-Russia Rebels Suffer Setbacks as West Readies Tougher Sanctions; Kremlin Prepares for Deeper International Isolation. Pro-Russia
rebels in eastern Ukraine saw some of their worst
battlefield setbacks in weeks Monday as the West agreed on tougher
sanctions aimed at forcing Moscow to cut support for the militias—posing
fresh challenges on two fronts for Russian President Vladimir Putin.
Ukrainian forces were advancing from the north and south in an effort
to cut off Donetsk, one of two remaining separatist strongholds, from
fellow rebels in the...
- Israel Says It Is Escalating Gaza Campaign. Defies International Pressure for Immediate Cease-fire. Israel's leaders said they were escalating
the military campaign in Gaza and told the country to prepare for a
prolonged operation, defying international demands for an immediate
cease-fire after Hamas militants broke a Muslim holiday lull. The
military chief of staff, Lt. Gen.
Benny Gantz,
said Israel's assault on Gaza's Hamas rulers was being
"intensified" after three weeks of fighting that have cost more than
1,100 lives.
Fox News:
- US, Israel clash over criticism of Kerry. The State Department publicly battled a barrage of Israeli criticism
on Monday over Secretary of State John Kerry’s efforts to secure a
cease-fire with Hamas, in the latest signs of strain between the Obama
administration and Israeli Prime Minister Benjamin Netanyahu’s
government. Administration officials spoke in unusually blunt terms in defending
Kerry, accusing some in Israel of launching a "misinformation campaign"
against the top American diplomat.
CNBC:
Zero Hedge:
Business Insider:
Telegraph:
21st Century Business Herald:
- China to Start Nationwide Audit on Land Incomes. National Audit Office will start audit on land transfer incomes in 2008-2013 soon, citing a person close to the office. The audit will focus on local governments' non-compliant issues related to land incomes. The audit may bring pressure to property development or govt financing. The audit may affect trust, asset management and PE products related to property development or local government financing vehicles due to local governments' reliance on land incomes.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 70.75 +.75 basis point.
- NASDAQ 100 futures -.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The S&P/CS 20 City MoM SA for May is estimated to rise +.3% versus a +.19% gain in April.
10:00 am EST
- The Consumer Confidence Index for July is estimated to rise to 85.5 versus 85.2 in June.
Upcoming Splits
Other Potential Market Movers
- The
Japan Industrial Production report, $35B 5Y T-Note auction, US weekly
retail sales reports, Keefe Bruyette Community Bank Conference and the
(MW) analyst day could also 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 lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
