Evening Headlines
Bloomberg:
- EU Blacklists Russian Oligarchs to Pressure Putin. Assets of Russian oligarchs Arkady Rotenberg and Yury Kovalchuk were frozen by the European Union
in its effort to pressure President Vladimir Putin to stop supporting rebels in eastern Ukraine.
Rotenberg, who helps control SMP Bank and InvestCapitalBank OAO, and
Kovalchuk, the biggest shareholder in OAO Bank Rossiya, were among eight
people that the EU added yesterday to its blacklist of individuals and
organizations being punished for the Ukrainian unrest. Three entities --
Russian National Commercial Bank, weapons maker Almaz-Antey and airline
Dobrolet -- also were added, according to the EU’s Official Journal. The
move marks the bloc’s first strike against business figures described
by European leaders as Putin’s “cronies,” and it aligns EU policy more
with that of the U.S.
- Samsung Profit Misses Estimates on Phone Slowdown. Samsung
Electronics Co. (005930) posted second-quarter profit that missed
analysts’ estimates on increased marketing for its cheaper smartphones
as it tries to fend off competition from Apple Inc. and Chinese
producers. Net income, excluding minority interests, was 6.18
trillion won ($6 billion) in the three months ended June, the Suwon,
South Korea-based company said in a filing today. That compares with the
6.83 trillion-won average of 17 analyst estimates compiled by
Bloomberg. The shares fell.
- Asian Stocks Poised for Third Monthly Gain After U.S. GDP.
Asian stocks rose, with the regional index poised to cap a third
monthly gain, as the U.S. economy grew faster than forecast and Federal
Reserve comments on the jobs market added to the case for keeping
interest rates low. Mitsubishi Motors Corp. gained 3.3 percent in Tokyo
after the carmaker posted profit that beat analyst estimates. Casio
Computer Co. jumped 9 percent after the Japanese electronics
manufacturer raised its earnings forecasts for the first half. Samsung
Electronics Co. fell 2.1 percent in Seoul after the world’s biggest
maker of smartphones posted net income that fell short of expectations
amid increased competition from Apple Inc. and Chinese producers. The MSCI Asia Pacific Index (MXAP) added 0.2 percent to 149.78 as
of 9:25 a.m. in Tokyo, with almost three stocks rising for each
that fell.
- Investment Bank Job Cuts Loom as Cost Drop Trails Revenue. The
largest global investment banks face further cost reductions, like the
job cuts JPMorgan Chase & Co. (JPM) began this month, after a drop
in first-half expenses failed to match a decline in revenue. Pretax profit at the banking and trading units at seven of
the nine largest firms fell in the first six months as costs for
the group decreased less than 1 percent from the same period a
year earlier, according to data compiled by Bloomberg. Revenue
dropped 5 percent, driven by the worst first-half trading
results since the financial crisis.
Wall Street Journal:
- Growth Rebound Stokes Fed Debate. Economy Bounces Back After Weak Start to Year, but Central Bank Signals Patience as Questions Linger. Federal Reserve officials delivered a modestly more upbeat
assessment of the economy Wednesday amid a second-quarter growth rebound
and deepening debate inside the central bank about when to start
raising interest rates. U.S. gross domestic product, a broad
measure of the nation's output of goods and services, advanced at a
seasonally adjusted annual rate of 4.0% in the second quarter, the
Commerce Department said Wednesday, a...
- Winds of War, Again. One wishes Barack Obama and John Kerry more luck in Ukraine and the Middle East than Neville Chamberlain had in Munich.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
- Global QE ends as China opens second front in bond tapering. China's central bank, and others, have become "major players on world
equity markets", effectively fuelling stock bubbles in much the same
way they previously fuelled credit bubbles. "There are major shifts going on global capital markets. People have been
lulled into a false sense of security by low volatility and they haven't
paid attention. We're not seeing any risk aversion in financial markets," he
said.
Evening Recommendations
Susquehanna:
- Rated (LULU) Positive, target $49.
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.5 -.25 basis point.
- Asia Pacific Sovereign CDS Index 71.0 -.5 basis point.
- NASDAQ 100 futures -.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- The Challenger Job Cuts report for July.
8:30 am EST
- The 2Q Employment Cost Index is estimated to rise +.5% versus a +.3% gain in 1Q.
- Initial Jobless Claims are estimated to rise to 300K versus 284K the prior week.
- Continuing Claims are estimated to fall to 2492K versus 2500K prior.
9:00 am EST
- ISM Milwaukee for July is estimated to rise to 61.0 versus 60.57 in June.
9:45 am EST
- Chicago Purchasing Manager for July is estimated at 63.0 versus 62.6 in June.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone CPI/Unemployment reports, China HSBC Manufacturing PMI, weekly
EIA natural gas inventory report, RBC Consumer Outlook Index, weekly
Bloomberg Consumer Comfort Index, (KORS) annual meeting and the (MLHR)
analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial 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.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 13.49 +1.66%
- Euro/Yen Carry Return Index 143.73 +.55%
- Emerging Markets Currency Volatility(VXY) 6.37 +4.43%
- S&P 500 Implied Correlation 55.16 -2.63%
- ISE Sentiment Index 99.0 -6.60%
- Total Put/Call .99 +19.28%
Credit Investor Angst:
- North American Investment Grade CDS Index 60.41 +.23%
- European Financial Sector CDS Index 68.0 -1.10%
- Western Europe Sovereign Debt CDS Index 34.09 +.92%
- Asia Pacific Sovereign Debt CDS Index 70.85 -1.01%
- Emerging Market CDS Index 262.32 +1.99%
- China Blended Corporate Spread Index 303.72 +1.27%
- 2-Year Swap Spread 18.0 +1.0 basis point
- TED Spread 20.50 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% +1.0 basis point
- Yield Curve 200.0 +8.0 basis points
- China Import Iron Ore Spot $95.90/Metric Tonne +.63%
- Citi US Economic Surprise Index -5.20 +12.8 points
- Citi Emerging Markets Economic Surprise Index -2.20 -1.6 points
- 10-Year TIPS Spread 2.27 unch.
Overseas Futures:
- Nikkei Futures: Indicating +104 open in Japan
- DAX Futures: Indicating +8 open in Germany
Portfolio:
- Higher: On gains in my retail/biotech/medical/tech sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Bloomberg:
- Russia May Aid Sanctioned Banks as MH17 Probe Stymied. Russia’s
central bank said it’s ready to help lenders targeted by the U.S. and
Europe in their latest round of sanctions, as Dutch experts again
abandoned an attempt to visit the crash site of Malaysian Air Flight 17.
European Union governments agreed yesterday on their most sweeping
sanctions against Russia to date, barring state-owned banks from selling
shares or bonds in Europe, restricting the export of equipment to
modernize the oil industry and barring the sale of technology with
military uses. The sanctions are an attempt to get President Vladimir
Putin to back down in Ukraine.
- Sanctions Fallout Seen Worsening as Russia Curve Inverts.
Bond investors are signaling the deepest concern for Russia’s economy
in at least two years as the U.S. and European Union toughen sanctions
because of the crisis with Ukraine. Russia’s five-year ruble notes yielded more than 10-year debt this week for the first time since June 2012, data compiled by Bloomberg show. Government
bonds headed for their worst monthly losses since May 2009, while the
Finance Ministry scrapped its weekly debt auction yesterday, the
first back-to-back cancellations since April. Bonds risk extending the
worst performance in emerging markets as harsher penalties over Russia’s
role in the fighting in eastern Ukraine amid rising interest rates
threaten to drive the economy into a recession. The inverted yield curve is signaling investors are expecting
relatively high rates in the short term, a headwind for growth, said
Fedor Bizikov at GHP Group in Moscow.
- Twin Strikes Claim 37 Lives in Gaza as Israel War Widens. Twin strikes on a United Nations school and the main public market in
Gaza City claimed the lives of 37 people, Palestinians said, as Israel
expanded its three-week-old offensive in the territory. The UN
Relief and Works Agency accused Israel of violating international law
with the attack on the school, which it said was sheltering 3,300 people
who had sought refuge there from the fighting. The Israeli army said
troops were responding to fire launched at them from the vicinity. It
also said it was looking into the report of an air strike on the market.
- European Stocks Fall as Earnings Misses Offset U.S. GDP. European stocks fell as worse-than-forecast earnings from companies including Schneider Electric SE and Holcim Ltd. outweighed a better-than-expected U.S. growth report, while the U.S. joined Europe in imposing new sanctions on Russia for its role in the insurgency in Ukraine. Schneider declined the most in more than two years after
first-half adjusted earnings missed analysts’ estimates. Holcim
Ltd. lost the most since November 2011 after the cement maker
posted lower-than-expected profit because of weak emerging-market currencies. Barclays Plc advanced 4.2 percent after
posting a return to profit for the second quarter. PSA Peugeot
Citroen rallied the most in five months after reporting its
first half-yearly profit since 2011. The Stoxx Europe 600 Index retreated 0.5 percent to 340.44
at the close of trading.
- Gross Says Investors Should Say ‘Good Evening’ to Asset Gains. Pacific Investment Management Co.’s Bill Gross said
investors should say “good evening” to the prospect of future capital
gains in asset markets as interest rates are set to rise while the
economy grows at a slow pace. “The global economy is left to
depend on economic growth for further advances and it is growth that is
now and has recently been historically deficient,” the manager of the
world’s biggest bond fund wrote in a commentary on Newport Beach,
California-based Pimco’s website. “As yields have bottomed and are now
expected by the markets to gradually rise, it’s down to growth, and
growth is a question mark.”
- ARMs Race Leaves Yellen Able to Raise Before Carney. Federal
Reserve Chair Janet Yellen still may beat Bank of England Governor Mark
Carney to the punch bowl. While investors bet the U.K. central bank
will raise its benchmark interest rate as soon as the end of this year,
with its U.S. counterpart following six months later, economists at
London-based Fathom Consulting aren’t so sure. They “would not be surprised” if monetary policy is
tightened first in the U.S., satisfying former Fed Chairman
William McChesney Martin’s edict that the job of the Fed is “to
take away the punch bowl just as the party gets going.”
Wall Street Journal:
MarketWatch.com:
CNBC:
- Fed tapers another $10 billion. (video) A second-quarter economic rebound did nothing to change the outlook
of the Federal Reserve, which stayed the course Wednesday with
ultra-easy monetary policy. While the U.S. central bank voted to cut its
monthly bond-buying program another $10 billion, it left its short-term
interest rate target near zero and expressed only tepid encouragement
about growth.
ZeroHedge:
Business Insider:
Re/code:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) HMOs -2.32% 2) Utilities -1.66% 3) Homebuilders -1.22%
Stocks Falling on Unusual Volume:
- BWLD, DWA, DEST, DORM, GRMN, NTRI, MGAM, MMSI, RBC, RGR, MW, HURN, BGFV, GNW, ROK, UIHC, ETN, IPGP, ACH, IACI, TOT, LFUS, CARA, CHMT, WIN, AET, THRM, CRS, VNR, CVD, AFL, HW, LGCY, NFX, HUM, IPGP, MMSI and GT
Stocks With Unusual Put Option Activity:
- 1) GNW 2) XLP 3) BWLD 4) AKAM 5) XLI
Stocks With Most Negative News Mentions:
- 1) GM 2) LVLT 3) ROK 4) KORS 5) ETN
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Biotech +.95% 2) Oil Tankers +.74% 3) Banks +.49%
Stocks Rising on Unusual Volume:
- ZLTQ, ASML, AEGR, TWTR, RUBI, YPF, PAM, X, BFR, PNRA, SODA, EXAM, TASR, GGAL, EW, ICLR, RNG, XPO, SRPT, NUVA, HPY, REGN, YELP, HSP, TMH, AMGN, SM, PBI, ARWR and SEE
Stocks With Unusual Call Option Activity:
- 1) BRCM 2) EA 3) PNRA 4) OREX 5) AEGR
Stocks With Most Positive News Mentions:
- 1) TWTR 2) AMGN 3) EW 4) YELP 5) NFLX
Charts:
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.
