Evening Headlines
Bloomberg:
- Ukraine Gains Against Rebels as Diplomacy Intensifies. The Ukrainian government said its forces took control of one of four
districts in the pro-Russian separatist stronghold of Luhansk and are
fighting in the city center as diplomatic efforts to end the conflict intensified.
German Chancellor Angela Merkel will visit Kiev on Aug. 23 for talks
with President Petro Poroshenko. Russian President Vladimir Putin will
take part in an Aug. 26 Customs Union meeting in Minsk attended by
Poroshenko, the Kremlin said in a statement. Poroshenko is due to join
an Aug. 30 European Union summit in Brussels and a Sept. 4 NATO summit
in the U.K.
- More Russia Sanctions Are Needed, Ukraine Ambassador Says. Tougher
U.S. and European sanctions
on finance, military sales and energy are needed to stop Russia arming
and supporting separatists and end the conflict in Ukraine, the
country’s ambassador to the U.S. said today. At a Bloomberg
Government lunch today in Washington, Olexander Motsyk ruled out a
unilateral cease-fire by Ukrainian forces and questioned a purported
humanitarian aid convoy from
Russia. He said stronger sanctions are needed, even if that
would restrict the energy exports on on which Ukraine and other
European countries depend.
- Heartbleed Flaw Said Used by Chinese in Hospital Hacking.
Chinese hackers exploited the Heartbleed Internet security flaw to
steal data on 4.5 million patients of Community Health Systems Inc.
(CYH), the first known breach of a company by use of the vulnerability,
said a
person involved in the investigation who wasn’t authorized to comment
publicly.
- China Levies Record Antitrust Fine on Japanese Firms. China
found 12 Japanese auto-parts makers guilty of price fixing and doled
out a record 1.24 billion yuan ($200 million) in fines amid one of the
broadest investigations since the nation’s antitrust law came into
effect six years ago. Eight Japanese auto-parts makers and four
bearings manufacturers were found guilty of collusive behavior, with
Sumitomo Electric Industries Ltd. (5802) and Yazaki Corp. drawing the
heaviest fines, according to the National Development and Reform
Commission, China’s main economic planner, in a statement on its
website.
- China Coal Port Seen as Economic Barometer Set for Record Supply. Qinhuangdao, home to China’s largest
coal port that’s been called an indicator of Asia’s biggest
economy, is set for record commodity deliveries over the next
three years as urbanization boosts demand for the fuel. Shipments of
mainly coal and ores via the port, also a
popular resort where the late Chairman Mao Zedong holidayed, may rise by
20 million to 30 million metric tons by 2017, Xing Luzhen, the chairman
of Qinhuangdao Port Co. (3369), said on Aug. 14.
Supplies hit a record high of 279 million tons in 2011.
- Australia Review Chills $20 Billion Clean-Energy Industry. Australia is frightening developers
away from renewable energy even before the government decides on
whether to overhaul targets for the industry’s growth. Prime Minister Tony Abbott’s decision to take advice on
renewable energy targets from a skeptic about the causes of
global warming prompted at least two developers to reconsider
plans for wind and solar farms. Earlier this week, the company
planning a giant solar plant in Mildura pulled out of the
project citing the risk the government will rework its policy.
- Asia Stocks Little Changed Near 6-Year High; BHP Slumps.
Asian stocks were little changed, with the benchmark regional index
trading near a six-year high, after data showed the U.S. economy is
strengthening and inflation is running below the Federal Reserve’s
target. BHP Billiton Ltd. (BHP) slumped. QBE Insurance Group Ltd. (QBE)
surged 3.6 percent in Sydney as it completed a A$650 million ($604
million) capital raising. Hitachi Metals Ltd. added 3.2 percent in Tokyo
after unveiling plans to acquire Waupaca Foundry Inc. BHP, the world’s
largest miner, tumbled 4.3 percent in Sydney after announcing a spinoff
and refraining from a share buyback expected by some investors. The MSCI Asia Pacific Index traded at 148.76 as of 9:34 a.m. in Tokyo, before markets open in Hong Kong and China.
Wall Street Journal:
- Iraqi Military Launches Offensive to Reclaim Tikrit. Campaign Is the Second Attempt by Iraqi Forces to Retake City From Islamic State. The Iraqi military launched a major air and
ground offensive early Tuesday to reclaim Tikrit from Islamist
militants, who had taken control of the city best known as the hometown
of former dictator Saddam Hussein, officials said. Tuesday's
campaign marked the second attempt since July by Iraqi forces to retake
Tikrit, which fell to Islamic State fighters—supported by former allies
of Mr. Hussein—in early June.
- Putin Meeting Leaves Kiev With Tough Choices. Encounter Would Be First Since June, Comes Amid Diplomatic Push.
Russian President Vladimir Putin and his Ukrainian counterpart will
meet next week for the first time in two months, officials in both
countries said, intensifying a diplomatic push that could force Kiev to
choose between continuing its military campaign against pro-Russia
separatists or making concessions to Moscow to stop the bloodshed. Calls
for a cease-fire from both Russia and Europe are growing louder amid a
deepening...
- The Medical Innovation Threat. The attack on a near-cure for Hepatitis C is a prelude to price controls. An invasive species has been introduced into the U.S. health
innovation ecosystem, with a growing danger of permanent damage to the
development of specialty drugs. The relentless assault on the price of
Sovaldi is becoming a threat to the 30-year political balance that has
energized the biomedical revolution. Sovaldi is the kind of
medicine that the drug scolds claim to want—a true scientific advance
with a near-perfect cure rate for Hepatitis C, the liver-destroying
virus that infects one of every 100 Americans and some...
Fox News:
- White House meddling in records requests? Suit claims agencies locked down documents. A government watchdog group has sued 12 federal agencies for
allegedly withholding emails and other documents, in the latest episode
in which the Obama administration is being challenged over its
transparency.
- Holder takes on Ferguson: AG ‘flooding the zone’ with investigators, heads to Missouri. Attorney General Eric Holder, one of President Obama’s longest-serving
and most controversial deputies, is taking the lead in the federal
government’s response to the roiling tensions in a St. Louis suburb over
the police shooting of an unarmed man.
CNBC:
Zero Hedge:
Business Insider:
Evening Recommendations
ISI:
- Raised (FFIV) to Strong Buy.
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 100.5 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 69.25 -1.25 basis points.
- NASDAQ 100 futures -.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (HAIN)/.89
- (TGT)/.78
- (PETM)/.94
- (SJM)/1.37
- (EV)/.62
- (IRF)/.29
- (LB)/.62
- (HPQ)/.89
- (SNPS)/.60
- (CRMT)/.60
- (SPLS)/.12
- (LOW)/1.03
- (AEO)/.00
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-1,140,000 barrels versus a +1,401,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -1,390,000 barrels versus a
-1,160,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -360,000 barrels versus a -2,421,000 barrel decline
the prior week. Finally, Refinery Utilization is estimated to fall by
-.38% versus a -.8% decline the prior week.
2:00 pm EST
- Fed Releases Minutes from July 29-30 FOMC Meeting.
Upcoming Splits
Other Potential Market Movers
- The
China Manufacturing PMI, BoE Minutes, weekly MBA Mortgage Applications
report and the (MON) investor event could also impact trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by technology and commodity
shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.11 -1.70%
- Euro/Yen Carry Return Index 143.10 +.01%
- Emerging Markets Currency Volatility(VXY) 6.67 -1.48%
- S&P 500 Implied Correlation 48.43 -1.08%
- ISE Sentiment Index 139.0 +37.62%
- Total Put/Call .88 -1.12%
Credit Investor Angst:
- North American Investment Grade CDS Index 57.0 -.14%
- European Financial Sector CDS Index 64.12 -2.60%
- Western Europe Sovereign Debt CDS Index 31.92 -6.12%
- Asia Pacific Sovereign Debt CDS Index 69.35 -1.58%
- Emerging Market CDS Index 266.39 -1.05%
- China Blended Corporate Spread Index 312.36 -1.17%
- 2-Year Swap Spread 23.0 -.25 basis point
- TED Spread 21.25 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.25 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% -1.0 basis point
- China Import Iron Ore Spot $93.0/Metric Tonne -.32%
- Citi US Economic Surprise Index -1.80 +.2 point
- Citi Emerging Markets Economic Surprise Index -12.30 unch.
- 10-Year TIPS Spread 2.18 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +55 open in Japan
- DAX Futures: Indicating +7 open in Germany
Portfolio:
- Higher: On gains in my biotech/tech/medical/retail sector longs
- Market Exposure: 75% Net Long
Bloomberg:
- Ukraine Says It Makes Gains Against Rebels in Luhansk. The
Ukrainian government said its forces took control of one of four
districts in the pro-Russian separatist stronghold of Luhansk and are
fighting in the city center as diplomatic efforts to end the conflict
intensified. German Chancellor Angela Merkel will visit Kiev on Aug.
23 for talks with President Petro Poroshenko. Russian President
Vladimir Putin will take part in an Aug. 26 Customs Union meeting in
Minsk attended by Poroshenko, the Kremlin said in a statement today.
Poroshenko is due to
join an Aug. 30 European Union summit in Brussels and a Sept. 4 NATO
summit in the U.K.
- Gaza Rockets Rupture Truce, Triggering Israeli Air Strikes. Renewed
rocket fire at Israel from the Gaza Strip ruptured a shaky cease-fire,
triggering Israeli military strikes across the Hamas-controlled
territory and the yanking of Israel’s negotiators from truce talks. No group in Gaza took responsibility for the
attack today, just hours before a 24-hour truce extension was to expire.
The army said three rockets fell in open areas near the southern city
of Beersheba without causing injuries or damage. The attack came as
Israeli and Palestinian negotiators in Cairo were trying to reach a more
enduring cease-fire. A government official, speaking on condition of
anonymity because he wasn’t authorized to discuss the issue, said the
Israeli team was ordered to return home.
- Bank of China Doubles Money for Bad Loans as Growth Slows. Bank
of China Ltd. more than doubled its money set aside for bad loans as
profit growth cooled to the slowest pace in five quarters on weakness in
the economy. Provisions for potential soured debt climbed to 12.7
billion yuan ($2.1 billion) in the second quarter, up 116 percent from a
year earlier, based on half-year figures released
by the Beijing-based company yesterday. Net income rose 8.5
percent to 44.4 billion yuan, the earnings statement showed.
- European Stocks Rise as Maersk, Imperial Tobacco Advance.
European stocks advanced for a second day as A.P. Moeller-Maersk A/S
and Imperial Tobacco Group Plc climbed after posting earnings. Maersk
jumped 4.9 percent after the world’s biggest container-shipping line
raised its full-year profit forecast. Imperial Tobacco added 2.3 percent
after reporting a smaller sales decline than analysts had predicted.
Balfour Beatty Plc gained 3.2 percent as Carillion Plc increased its
offer for the builder. BHP Billiton Ltd. dropped 4.9 percent after the
mining company posted annual profit that missed analysts’ estimates. The
Stoxx Europe 600 Index gained 0.6 percent to 335.49 at the close of
trading, extending the rebound from its Aug. 8 low to 3.3 percent.
- Credit Swaps Polished in $19 Trillion Derivative Overhaul.
The biggest overhaul to the $19
trillion credit derivatives market in more than a decade will
seek to solve flaws that have stopped some contracts paying out
as buyers anticipated. “The fact that the new contract will afford more
protection will mean it will cost more as well,”said Sean Boland, a money manager at Cheyne Capital in London, which
manages about $6.5 billion. “The past few precedents haven’t
been too favorable. It’s extremely positive that as the market
environment and regulatory environment changes, the CDS
contracts are changing as well.”
CNBC:
ZeroHedge:
Business Insider:
China Economic Weekly:
- China
Local Govt Debt May Exceed 30t Yuan. China local government debt may be
more than 30t yuan because of hidden debt missed by last year's audit,
citing Yin Zhongqing, deputy head of the National People's Congress
finance and economic affairs committee.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -.60% 2) I-Banks -.45% 3) Telecom -.42%
Stocks Falling on Unusual Volume:
- RDEN, TLLP, CMRE, BBL, JMEI, PWRD, BITA, FEYE, BHP, AFSI, ICE, ATLS, MNK, LGP, XRS, LCI, RIO, YY, PBYI, GTLS, NLNK, TKMR, CRTO, HAIN, BIO and AFSI
Stocks With Unusual Put Option Activity:
- 1) HTZ 2) CNP 3) ACI 4) BBY 5) LOW
Stocks With Most Negative News Mentions:
- 1) RDEN 2) DUK 3) BKS 4) BA 5) AGU
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +1.67% 2) Retail +1.48% 3) Oil Service +.89%
Stocks Rising on Unusual Volume:
- DEPO, CMCM, SWIR, URBN, HD, TJX, RAX and TRN
Stocks With Unusual Call Option Activity:
- 1) AEO 2) GNRC 3) TJX 4) HOV 5) DKS
Stocks With Most Positive News Mentions:
- 1) HD 2) ESV 3) TJX 4) AAPL 5) MCD
Charts:
Evening Headlines
Bloomberg:
- Red Cross Says Russian Convoy Details Expected Soon. The
international Red Cross is close to working out the details of a
safe-passage plan for a Russian aid convoy intended for war-torn
southeastern Ukraine, while four-way talks on a halt to the fighting
reached an impasse in Berlin. The crisis, in which Ukrainian
government troops have been battling pro-Russian separatists for months,
can only be stemmed once the government in Kiev calls off its army as
part of an unconditional cease-fire, Russian Foreign Minister Sergei
Lavrov said yesterday in the German capital. Ukraine says it will
declare a cease-fire if the pro-Russian rebels lay down their arms and
Russia stops supplying them with weapons.
- Why Would Chinese Hackers Steal Millions of Medical Records?
A group of sophisticated Chinese hackers known for its high-stakes
corporate espionage has a history of stealing medical-device blueprints,
prescription-drug formulas and other valuable intellectual property
from large health-care companies.
- China to Cut ‘Overly High’ Income of State-Owned Firm Executives. Chinese
President Xi Jinping plans to regulate income distribution in
state-owned companies, cutting the top salaries, as part of the nation’s
anti-extravagance and anti-corruption campaigns. “Unreasonably high
income will be adjusted,” and top managers can’t have excessive
spending beyond what’s stipulated by government regulations or
companies’ financial policies, according to a statement posted on the
central government’s website, citing Xi. Leaders of
central-government-controlled enterprises should actively support the
changes, Xi was cited as saying in a meeting of the Communist Party’s
reform group yesterday.
- RBA Sees Uncertain Growth Outlook as Rate Pause Reaffirmed. Australia’s central bank said the nation’s economic outlook remains
uncertain because of the conflicting forces at play and reiterated that interest rates are set to remain on hold.
Members “noted the significant uncertainties around the growth forecast
and the importance of considering the risks to the forecast as well as
the
central projection,” the Reserve Bank of Australia said in minutes
released today of its Aug. 5 meeting, where it kept the cash rate
unchanged at a record-low 2.5 percent. “GDP growth was likely to have
slowed to a more moderate pace in the June quarter.”
- Asian Stocks Rise as U.S. Homebuilder Sentiment Improves.
Asian stocks rose after confidence in the U.S. housing industry climbed
to the highest level in seven months and tensions eased over global
political conflicts. Amcor Ltd. (AMC) climbed 4.4 percent in Sydney as
the packaging firm posted earnings that topped analyst estimates. Terumo
Corp. advanced 3.2 percent after Credit Suisse Group AG advised buying
shares of the Japanese medical-equipment maker. Don Quijote Holdings Co.
(7532) sank 4.4 percent in Tokyo after the discount-store owner
forecast little change in profits. The MSCI Asia Pacific Index (MXAP) gained 0.5 percent to 148.76 as
of 9:41 a.m. in Hong Kong, with all of its 10 industry groups
rising.
Wall Street Journal:
- Ukrainian Refugees Caught in Crossfire. Report of Deadly Rebel Attack on Fleeing Non-Combatants Highlights Civilian Toll. Ukraine accused pro-Russian separatists of killing dozens of
civilians by firing on a refugee convoy, the latest example of residents
caught in the line of fire of a four-month-old war that has caused more
than 2,000 deaths. Rebels denied any role in the attack, or that
an attack had taken place. The U.S. State Department condemned the
"shelling and rocketing" of the convoy but said it couldn't confirm who
was responsible....
MarketWatch.com:
CNBC:
- NY Fed: Firms 'widely' see Obamacare boosting health costs. Many
businesses said Obamacare is jacking up their employee health coverage
costs, and they expect it to do so even more next year, two new surveys
of businesses by the Federal Reserve Bank of New York have found. As a result, consumers in the areas covered by the bank could be paying more next year—and some workers at the firms might
need to look for a new job, the surveys found.
Zero Hedge:
Business Insider:
Reuters:
- Russian oil prices fall below $100/barrel, straining budget. Russian Urals crude weakened for
an eight straight trading day on Monday due to weak European
refining demand, falling well below $100 a barrel for the first
time in a year in a move to increase the pain for Russian state
finances amid Western sanctions.
Evening Recommendations
Night Trading
- Asian equity indices are +.25 to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 70.5 -.75 basis point.
- NASDAQ 100 futures +.15%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The CPI for July is estimated to rise +.1% versus a +.3% gain in June.
- The CPI Ex Food & Energy for July is estimated to rise +.2% versus a +.1% gain in June.
- Housing Starts for July are estimated to rise to 966K versus 893K in June.
- Building Permits for July are estimated to rise to 1000K versus 963K in June.
Upcoming Splits
Other Potential Market Movers
- The UK inflation data and the weekly US retail sales reports could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
