Bloomberg:
- Ukraine to Block Russian Aid Trucks as It Tightens Noose Around Rebels. Ukraine
refused to let a convoy that Russia says is loaded with humanitarian
aid enter the country in its current form, arguing the mission doesn’t
adhere to international rules and must be led by the Red Cross. Russia’s Emergencies Ministry said 280
trucks with 2,000 metric tons of donated food, medicine and water left
Moscow for rebel-held eastern Ukraine today. Ukrainian military
spokesman Andriy Lysenko said they are carrying military gear in the
guise of aid. The Geneva-based International Committee of the Red Cross
said it’s not in charge of the convoy at the moment and has asked for
details of what it contains. The ICRC needs “some clarification first
regarding modalities, practical steps that have to be implemented prior
to launch such an operation,” Laurent Corbaz, its head of operations
for Europe, said in a video on the Red Cross website. “We seriously need
security guarantees, for example, and direct contact with all the
parties; this is not settled yet. We need as well to know
precisely what is inside the convoy, the size of this convoy, and the
various material that is going to be handed over.”
- Maliki Meets Commanders as Tensions Rise in Baghdad. Iraq’s Prime Minister Nouri al-Maliki met with military officers today in the latest sign he won’t hand power willingly to his designated successor,
as U.S. and Iraqi forces battled Islamist militants. Maliki
ordered his commanders to keep out of the political crisis that has
gripped Baghdad since President Fouad Masoum asked a rival Shiite
politician to form a government, according to footage of the meeting
shown on television. Earlier, militiamen and soldiers had fanned out
across the capital in a show of force. A car bomb killed six people in
the city.
- EON Emerging Markets Foray to Cut Profit as Russia Slows. Germany’s largest utility sought
relief from upheaval in the energy industry at home by investing in emerging markets.
It’s not gone to plan. EON SE (EOAN) reports first-half earnings
tomorrow and ventures in Brazil, Turkey and Russia are expected to
contribute to a 24 percent drop in profit from last year, according to
analysts including B. Metzler Seel Sohn & Co. KGaA. The company
has challenges in all three countries, picked because they were held to
offer better growth than Europe. In Brazil, investments earmarked for
utility Eneva SA (ENEV3) have risen almost fourfold as the business of
billionaire partner Eike Batista collapsed. Earnings at Turkish venture
Haci Omer Sabanci Holding AS (SAHOL) have been held back by a weak
currency, and Russia’s economy is slowing because of the Ukraine crisis.
- Weakest Oil Demand Growth Since ’12 Allays Supply Risk, IEA Says.
Global oil demand growth eased to
its weakest since 2012 last quarter, calming world markets amid threats
to supplies in the Middle East and North Africa, according to the
International Energy Agency. The IEA cut estimates for oil demand growth this year and
next after the annual expansion in fuel consumption slowed to
700,000 barrels a day in the second quarter, the lowest level
since early 2012.
- India CPI Tops Estimate in Test for Rajan as Industry Moderates. India’s consumer-price inflation
quickened more than economists estimated, adding pressure on
central bank Governor Raghuram Rajan to keep interest rates
elevated even after factory output slowed. The consumer-price index rose 7.96 percent in July from a
year earlier, compared with a upwardly revised 7.46 percent in
June, the Statistics Ministry said in New Delhi today. The
median estimate in a Bloomberg News survey of 43 analysts was
for a 7.4 percent increase. Industrial production rose 3.4
percent in June compared with a 5.6 percent gain predicted in a
separate survey and a revised 5 percent in May.
- German Yields Falling Toward 1% Shows Japan-Style Risks Building.
Germany is on the brink of joining an exclusive club of nations able to
borrow for a decade at less than 1 percent. For strategists predicting
such a scenario, that’s because the European Central Bank isn’t doing
enough to
prevent a Japanese-style deflationary spiral from taking hold.
- European Stocks Decline as Investors Watch Ukraine Crisis.
European stocks fell, following their biggest rally since April, as
companies including Henkel AG and Hargreaves Lansdown Plc declined,
while a Russian aid convoy left for Ukraine. Henkel lost the most since
September 2011 after warning that earnings growth will slow amid
conflicts in Ukraine and the Middle East. Hargreaves Lansdown retreated
2.9 percent after UBS AG recommended selling the shares. Prudential Plc
gained 2.2 percent after reporting better-than-forecast first-half
profit. The Stoxx Europe 600 Index slipped 0.2 percent to 328.74 at the close of trading.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- German investor morale plunges on Ukraine, growth worries. German
analyst and
investor morale plunged in August to its lowest level in more
than 1-1/2 years as the crisis in Ukraine took its toll, a survey
showed, suggesting that Europe's largest economy is running out of steam.
Mannheim-based think tank ZEW's monthly survey of economic sentiment,
published on Tuesday, fell for an eighth consecutive month to 8.6 in
August, from 27.1 in July. That was its lowest
since December 2012, as tensions in Ukraine hit stock markets
and robbed firms of the confidence to invest at a time when
worries about German economic growth are gaining ground.
Style Underperformer:
Sector Underperformers:
- 1) Coal -2.02% 2) Alt Energy -1.43% 3) Disk Drives -1.40%
Stocks Falling on Unusual Volume:
- KATE, BPL, TCAP, HCLP, OCIP, TKMR, KMP, KMR, KMI, FLO, AEGR, CZR, FENG, JOBS, NDLS, NUAN, EPB, RAX, E, WAC, MCF, TOUR, CST, AMBC, SCAI and SBGI
Stocks With Unusual Put Option Activity:
- 1) NUAN 2) NTAP 3) MGM 4) COP 5) F
Stocks With Most Negative News Mentions:
- 1) KATE 2) FLO 3) CSX 4) NTES 5) GM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.82% 2) HMOs +.25% 3) Utilities +.11%
Stocks Rising on Unusual Volume:
- EXAS, ICPT, TRAK, MR, SA, INSY, MTZ and SGEN
Stocks With Unusual Call Option Activity:
- 1) DHR 2) KATE 3) EXAS 4) GALE 5) MNKD
Stocks With Most Positive News Mentions:
- 1) ICPT 2) TWTR 3) ANF 4) NEM 5) DF
Charts:
Evening Headlines
Bloomberg:
- Islamic State Funds Caliphate With Mosul Dam as Terror Spreads. Islamic
State militants who last week captured the Mosul Dam, Iraq’s largest,
had one demand for workers: Keep it going. Arriving in their Toyota
pickup trucks, armed with Kalashnikov assault rifles and wearing a
patchwork of military uniforms, robes and turbans,
jubilant militants from the al-Qaeda breakaway group told workers hiding
in management offices they would get their salaries as long as the dam
continued to produce electricity for the region under their control,
according to a technician who was at the dam when nearly 500 militants
drove off Kurdish troops. Islamic State’s rampage through
northern Iraq has inspired terror as stories spread of beheadings and
crucifixions. At the same time, its fighters are capturing the strategic
assets needed to fund the Islamic caliphate it announced in June and
strengthen its grip on the territory already captured.
- Ukraine Says It Is Near End of Operation to Surround Rebels. The Red Cross said it’s working on getting aid to rebel-held areas of
east Ukraine, where government forces have encircled major cities, as
the U.S. warned Russia not to use the mission to send in troops. The
situation in the city of Luhansk and other areas “is critical --
thousands of people are reported to be without access to water,
electricity and medical aid,” Laurent Corbaz, the head of the
International Committee of the Red Cross’s operations for Europe, said
in an e-mailed statement late yesterday. Still, “the practical details
of this operation need to be clarified
before this initiative can move forward.”
- China’s Trust Asset Growth Slows Amid Shadow Banking Crackdown.
China’s trust assets expanded at the slowest pace in two years as the
government cracks down on shadow banking and investors reassess the
risks of the high-yield investments. Trust companies had 12.5
trillion yuan ($2 trillion) of assets under management as of June 30, up
6.4 percent from three months earlier, the China Trustee Association
said in a
statement yesterday. That’s the slowest growth since the first
quarter of 2012.
- Asian Stocks Extend Gains With Dollar as Wheat Declines. Asian stocks rose, with the regional index extending gains after its biggest one-day jump since June, while the dollar climbed against the euro, Swiss franc and yen. Credit risk in the region declined with wheat.
The MSCI Asia Pacific Index added 0.3 percent by 10:45 a.m.
in Tokyo.
Wall Street Journal:
- Iraqi Political Leaders Clash Over Prime Minister Post. Figure From Prime Minister's Party Nominated to Succeed Him; Islamist Militants Clock New Gains. Iraq's president appointed a candidate to
replace Prime Minister
Nouri al-Maliki
but the longtime leader refused to step aside, setting up a
confrontation as the government struggles to combat a rapidly advancing
Sunni insurgency. President
Fuad Masum
designated
Haider al-Abadi,
a member of Mr. Maliki's Shiite Islamist Dawa party, to form the
next government. Mr. Maliki, who was vying for a third four-year term,
angrily rejected the nomination in two televised appearances on Monday
and vowed to challenge a decision he called a subversion of the
constitution and a betrayal of the public will.
Zero Hedge:
Reuters:
- Nuance(NUAN) 4th-qtr forecast misses expectations. Speech recognition software maker Nuance Communications Inc forecast current-quarter adjusted
revenue and profit below expectations as the company continues
to struggle from its transition to a subscription-based business
model.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 75.0 -1.75 basis points.
- NASDAQ 100 futures +.15%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- NFIB Small Business Optimism for July is estimated to rise to 96.0 versus 95.0 in June.
10:00 am EST
- JOLTS Job Openings for June are estimated to fall to 4600 versus 4635 in May.
2:00 pm EST
- The Monthly Budget Statement for June is estimated at -$96.0B.
Upcoming Splits
Other Potential Market Movers
- The German ZEW Index, BoJ Minutes, Japan GDP report, USDA's WASDE report, 3Y $27B T-Note auction, weekly US retail sales reports, (CRL) investor meeting, JPMorgan Auto Conference, Wedbush Life Sciences Conference and the Oppenheimer Tech/Internet/Communications Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial 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: Substantially Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.21 -9.89%
- Euro/Yen Carry Return Index 142.75 -.05%
- Emerging Markets Currency Volatility(VXY) 6.87 -2.0%
- S&P 500 Implied Correlation 54.55 -5.44%
- ISE Sentiment Index 104.0 +28.40%
- Total Put/Call .72 -32.71%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.62 -3.09%
- European Financial Sector CDS Index 71.62 -6.70%
- Western Europe Sovereign Debt CDS Index 36.84 -5.54%
- Asia Pacific Sovereign Debt CDS Index 75.08 -2.11%
- Emerging Market CDS Index 285.30 -3.34%
- China Blended Corporate Spread Index 322.18 +.08%
- 2-Year Swap Spread 23.5 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -12.5 -.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% +1.0 basis point
- Yield Curve 199.0 +1.0 basis point
- China Import Iron Ore Spot $95.30/Metric Tonne -.42%
- Citi US Economic Surprise Index 4.10 +1.1 points
- Citi Emerging Markets Economic Surprise Index 2.0 -.9 point
- 10-Year TIPS Spread 2.24 unch.
Overseas Futures:
- Nikkei Futures: Indicating +45 open in Japan
- DAX Futures: Indicating -10 open in Germany
Portfolio:
- Higher: On gains in my tech/medical/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Ukraine Says It Is Near End of Operation to Surround Rebels. Russia said it will go ahead with an aid mission to east Ukraine as the U.S. and Europe repeated warnings to President Vladimir Putin that such a convoy must not be used as a front for military action to support rebels. While Russia said it agreed with Ukraine on the details of extending humanitarian assistance to people in the mainly Russian-speaking Donetsk and Luhansk regions, there was no confirmation of a deal from Ukraine’s government or the Red Cross. The mission
may start soon under the aegis of the International Red Cross, a step
to which the Ukrainian government has also agreed, Russian Foreign
Minister Sergei Lavrov said today.
- Russian Economy Stalls as Putin Reprisal Risks Spillovers. Russia’s economic growth slumped to the weakest in five quarters, underlining the risks to a recovery in the region as President Vladimir Putin retaliates after penalties imposed over the deepening conflict in Ukraine. Gross domestic product advanced 0.8 percent in the second quarter from a year earlier after 0.9 percent growth in the first three months of the year, the Federal Statistics Service said today in an e-mailed statement, citing preliminary data. The Economy Ministry in Moscow had projected 1.1 percent expansion. GDP growth in Poland, Hungary and the Czech Republic probably slowed in the April-June period
on a quarterly basis, according to analysts surveyed by Bloomberg.
- Al-Abadi Asked to Form Iraq Government to Replace Maliki. Iraq’s President Fouad Masoum asked the deputy speaker of parliament to try to form a new cabinet and end a three-month political stalemate that’s
helped Islamist insurgents seize large swaths of the country. While the U.S. quickly backed Masoum’s designation of Haidar al-Abadi,
embattled Prime Minister Nouri al-Maliki rejected Masoum’s move, setting
the stage for further political deadlock and potentially a
confrontation after Maliki sent troops into the streets of Baghdad early
today.
- China Probes Threaten to Squeeze Foreign Profits. China’s
antitrust crackdown signals a new era of regulatory scrutiny in the
country and threatens to end the days when products from Audi sedans to
Starbucks lattes
generate fatter profits in Beijing than in London or New York.
- War Risks Slow Company Bond Sales to Least Since July ’13. Risks
from conflicts in the Middle
East and Ukraine are combining with concerns credit markets may
have become too frothy to curb corporate bond sales. Just $53.6 billion
of notes were sold globally in the first eight days of August, data
compiled by Bloomberg show. That’s the slowest start to a month since
July 2013 after then Federal Reserve Chairman Ben S. Bernanke
discussed a timetable for scaling back central bank stimulus, spurring
investors to sell riskier assets in an episode dubbed the taper tantrum.
- European Stocks Advance After Russia Calls End to Drills. European stocks rose the most in more than three months after a report that Russian war planes have finished military exercises near Ukraine. Balfour Beatty Plc added 2.5 percent after rejecting a revised merger proposal from Carillion Plc. Banco Popolare SC surged 8.2 percent after the Italian lender unexpectedly posted a profit in the second quarter. Bayerische Motoren Werke AG and
Daimler AG each rose more than 2 percent, contributing the most
to gains by a gauge of auto-related stocks.
The Stoxx Europe 600 Index rallied 1.4 percent to 329.36 at
the close as more than 15 stocks climbed for every one that
dropped.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
- This Stanford Economist Has Obama's Attention — And It's Causing A Wall Street Freak-Out. Her solution is to "make banks behave more like other companies by forcing them to reduce sharply their reliance on borrowed money," according to The Times article. She says "large banks should be required to raise at least 30 percent of their funding in the form of equity" — which is "six times more than the current
average for the largest American banks."