Evening Headlines
Bloomberg:
- Ukraine to Block Russian Aid Trucks as It Tightens Noose Around Rebels. A
convoy Russia says is loaded with humanitarian assistance for
rebel-held areas of Ukraine headed for the border, as the government in
Kiev set conditions for letting the aid in and the Red Cross demanded
more details. Russia’s
government said 280 trucks with 2,000 metric tons of donated food,
medicine and water left Moscow yesterday and would proceed into Ukraine
under the auspices of the Geneva-based International Committee of the
Red Cross. Ukraine expressed fears the convoy is carrying military
equipment to aid the pro-Russian separatists.
- Iran Joins U.S. in Backing Replacement for Iraq’s Maliki. Iran
endorsed premier-designate Haidar al-Abadi to lead neighboring Iraq,
leaving current Prime Minister Nouri al-Maliki without his strongest
international backer as he continued to defy calls to step down. Ali Shamkhani, secretary of Iran’s Supreme National Council, said
yesterday in Tehran that he congratulates Abadi on his selection as the
next prime minister, the Islamic Republic News Agency reported. The explicit embrace of Abadi was a step beyond an earlier
Iranian statement approving of Iraq’s “political process.”
- China Credit Gauge Plunges as Expansion in Money Supply Slows. China’s
broadest measure of new credit unexpectedly plunged to the lowest level
since the global financial crisis, adding risks to economic growth
already headed for the weakest annual pace in 24 years. Aggregate
financing was 273.1 billion yuan ($44.3 billion) in July, the People’s
Bank of China said today in Beijing, compared with the 1.5 trillion yuan
median estimate of analysts surveyed by Bloomberg News. New
local-currency loans of 385.2 billion yuan were half of projections,
while M2 money supply grew a less-than-anticipated 13.5 percent from a
year earlier.
- Asia Stocks Fluctuate on Earnings, Japan Economic Data.
Asian stocks swung between gains and losses as investors weighed
earnings reports and data showing Japan’s economy shrank the most since
2011. Trend Micro Inc. fell 1.1 percent in Tokyo after the maker of
anti-virus software reported results. CSL Ltd., the world’s
second-biggest maker of blood-derived therapies, rose 2.8 percent in
Sydney after reporting an increase in annual profit. Bank of Queensland
Ltd. slid 1.3 percent after the Australian lender said its chief
executive officer resigned. The MSCI Asia Pacific Index (MXAP) was little changed at 146.59 as
of 9:44 a.m. in Tokyo after rising as much as 0.1 percent and
falling 0.2 percent.
- JPMorgan(JPM) Joins Goldman(GS) in Designing Derivatives for a New Generation. Derivatives that helped inflate the 2007 credit bubble are being remade for a new generation. JPMorgan
Chase & Co. is offering a swap contract tied to a speculative-grade
loan index that makes it easier for investors to wager on the debt.
Goldman Sachs Group Inc. is planning as much as 10 billion euros ($13.4
billion) of structured investments that bundle debt into top-rated
securities, while ProShares last week started offering exchange-traded
funds backed by credit-default swaps on company debt. Wall
Street is starting to return to the financial innovation that helped
extend the debt rally seven years ago before exacerbating the worst
financial crisis since the Great Depression.
Wall Street Journal:
- U.S. Weighs Military Rescue Mission for Yazidi Refugees. Proposal
Under Development Could Put Americans in Direct Confrontation with
Islamic State Militants. The U.S. is weighing a military mission in Iraq
to rescue thousands
of Yazidi refugees, a move that risks putting American forces in direct
confrontation with Sunni fighters for the Islamic State. The
proposal is still under development and hasn't been approved by
President Barack Obama. U.S. officials said the rescue mission is one of
many options the U.S. military is weighing after dropping food and
water to dying...
Fox News:
- Kurdish fighters hold off Islamic State, await more help from US, Baghdad. Kurdish fighters in northern Iraq are desperate for arms from Baghdad
or even the U.S. to help fend off an onslaught from Islamic militants
that may be aimed at creating a corridor for jihadist reinforcements
from Turkey. Despite U.S. air strikes aimed at fighters from Islamic State, the
militant group formerly known as ISIS, Kurdish fighters known as
Peshmerga say they remain under sustained attack on multiple fronts.
Rumors of weapons and ammo en route from Baghdad and the U.S. are rife,
yet a number of sources confirm they have not yet been seen.
CNBC:
- White House loosens restrictions on lobbyists. President
Barack Obama is loosening restrictions on lobbyists who want to serve
on federal advisory boards, a White House official said on Tuesday, a
setback to the president's efforts to tamp down special interest
influence in
Washington. Obama came to office pledging to curtail the sway
of lobbyists and banned lobbyists from serving on such panels, which
guide government policy on a range of topics ranging from cancer to
towing safety.
Zero Hedge:
Business Insider:
Reuters:
Shanghai Securities News:
- China Should Move on Property Tax, PBOC Academic Writes. China
should adopt a property tax as soon as possible, Wang Yong, professor at
PBOC's Zhengzhou training institute, writes in an article.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -.5 basis point.
- Asia Pacific Sovereign CDS Index 75.0 -1.0 basis point.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for July are estimated to rise +.2% versus a +.2% gain in June.
- Retail Sales Ex Auto for July are estimated to rise +.4% versus a +.4% gain in June.
- Retail Sales Ex Auto and Gas for July are estimated to rise +.4% versus a +.4% gain in June.
10:00 am EST
- Business Inventories for June are estimated to rise +.4% versus a +.5% gain in May.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-1,577,780 barrels versus a -1,756,000 barrel decline the prior week.
Gasoline supplies are estimated to fall by -1,044,440 barrels versus a
-4,387,000 barrel decline the prior week. Distillate Supplies are
estimated to rise by +88,890 barrels versus a -1,798,000 barrel decline
the prior week. Finally, Refinery Utilization is estimated to fall by
-.55% versus a -1.1% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Dudley speaking, Fed's Rosengren speaking, Eurozone Industrial
Production report, China Retail Sales/Industrial Production, 10Y $24B
T-Note Auction, weekly MBA Mortgage Applications report and the
Canaccord Growth Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer
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 Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.53 +2.11%
- Euro/Yen Carry Return Index 142.67 -.07%
- Emerging Markets Currency Volatility(VXY) 6.89 +.15%
- S&P 500 Implied Correlation 56.71 +2.38%
- ISE Sentiment Index 113.0 +13.0%
- Total Put/Call 1.04 +40.54%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.22 +.16%
- European Financial Sector CDS Index 72.49 +.75%
- Western Europe Sovereign Debt CDS Index 36.12 -1.95%
- Asia Pacific Sovereign Debt CDS Index 73.67 -1.87%
- Emerging Market CDS Index 283.70 -.59%
- China Blended Corporate Spread Index 319.08 -.96%
- 2-Year Swap Spread 23.0 -.5 basis point
- TED Spread 21.0 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -13.25 -.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 200.0 +1.0 basis point
- China Import Iron Ore Spot $94.0/Metric Tonne -1.36%
- Citi US Economic Surprise Index 3.30 -.8 point
- Citi Emerging Markets Economic Surprise Index -2.0 -4.0 points
- 10-Year TIPS Spread 2.23 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -62 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedge
- Market Exposure: Moved to 25% Net Long
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.
