Evening Headlines
Bloomberg:
- U.S. Joining EU on Russian Curbs Sets Stage for Reprisal. The U.S. will join the European Union in stiffening sanctions on
Russia over Ukraine, prompting the government in Moscow to threaten
retaliation. The U.S. will “deepen and broaden” measures against
Russia’s financial, energy, and defense industries, President Barack
Obama said in a statement yesterday, hours after an announcement by the
EU. The latest round of economic restrictions from both the U.S. and the
EU will take effect today. European companies and taxpayers “will have
to pick up the costs” for the penalties, Dmitry Peskov, a spokesman for
Russian President Vladimir Putin, told Interfax.
- China Credit Gauge Misses Estimates as Growth Risks Escalate. China’s
broadest measure of new credit trailed analyst estimates in August,
adding to the government’s challenge to meet its economic growth target
amid a slumping property market and a pullback in manufacturing.
Aggregate financing was 957.4 billion yuan ($156 billion), the People’s
Bank of China said today in Beijing, compared with the 1.135 trillion
yuan median estimate of economists surveyed by Bloomberg. New
local-currency loans were 702.5 billion yuan,
and M2 money supply grew 12.8 percent from a year earlier.
- Most Asian Stocks Retreat on China Lending; Dollar Gains.
Most Asian stocks slipped with gold after Chinese lending data as wheat
dropped a fifth day. The dollar headed for its biggest weekly gain
versus major peers since November as investors assessed the U.S.-rates
outlook before the Federal Reserve meets next week. The MSCI Asia
Pacific Index (MXAP) lost 0.2 percent by 11:20 a.m. in Tokyo and is set
for its longest losing streak in four years.
- Treasury Is Weighing Action on Hedge-Fund Tax ‘Loophole’. The
U.S. Treasury Department said
it’s considering ways to end a “loophole” that allows hedge-fund
managers to avoid taxes by routing their investments through an
insurance company in low-tax countries like Bermuda. The Treasury,
in an Aug. 9 letter obtained by Bloomberg News today, told Senate
Finance Committee Chairman Ron Wyden that it’s concerned about such
arrangements and is weighing
legislative and administrative responses. Among the hedge-fund managers
who have set up Bermuda
insurance vehicles in recent years are John Paulson’s Paulson &
Co. and Steven A. Cohen’s SAC Capital Advisors LP. Cohen has
since cut ties with his insurer.
- Investors Pull $766 Million From Junk-Bond Funds, Lipper Says. Investors withdrew $766 million
from U.S. funds that buy high-yield bonds in the past week, the
second straight outflow, according to data provider Lipper. The pullback brings net outflows for the funds to $9.7
billion this year, the data show. Investors also pulled $342
million from U.S. leveraged loan funds, the ninth straight
weekly outflow, according to Lipper.
Wall Street Journal:
Fox News:
CNBC:
- Iron ore glut: Are shutdowns the only way out? Spot iron ore prices are at their lowest level since September 2009 amid
a flood of excess inventory and waning demand from China, the world's
largest iron ore consumer, and experts say small mine closures may be
the only catalyst for higher prices.
Zero Hedge:
Business Insider:
NY Times:
- Stressed Borrowers Rattle Resurgent Subprime Lending Industry. Subprime lenders have
surprised everyone in recent years by churning out billions of dollars
in loans that have not led to a pileup of bad debts. But this month,
some signs have appeared that suggest subprime lenders are pushing this
spree to the limit. The problems are occurring when they extend credit
to particularly risky borrowers or make loans that are harder to repay. The latest indicators are a reminder of the constraint that has always dogged subprime
lending: The number of stressed borrowers who can take on debt and repay
it with relative ease is often smaller than lenders believe. “We’re five years into
the new cycle, so you’ve got to imagine that there are excesses
cropping up,” said William Ryan, of Portales Partners, a research firm.
Reuters:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 91.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 63.50 unch.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for August are estimated to rise +.6% versus unch. in July.
- Retail Sales Ex Autos for August are estimated to rise +.3% versus a +.1% gain in July.
- Retail Sales Ex Autos and Gas for August are estimated to rise +.5% versus a +.1% gain in July.
- The Import Price Index for August is estimated to fall -1.0% versus a -.2% decline in July.
9:55 am EST
- Preliminary Univ. of Mich. Consumer Confidence for September is estimated to rise to 83.3 versus 82.5 in August.
10:00 am EST
- Business Inventories for July are estimated to rise +.4% versus a +.4% gain in June.
Upcoming Splits
Other Potential Market Movers
- The Eurozone Industrial Production data and (STX) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down 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: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.91 +.23%
- Euro/Yen Carry Return Index 144.43 +.22%
- Emerging Markets Currency Volatility(VXY) 6.98 -1.69%
- S&P 500 Implied Correlation 48.02 -1.58%
- ISE Sentiment Index 108.0 +12.5%
- Total Put/Call .96 +2.13%
Credit Investor Angst:
- North American Investment Grade CDS Index 59.10 +.80%
- European Financial Sector CDS Index 59.0 -.85%
- Western Europe Sovereign Debt CDS Index 28.80 +.81%
- Asia Pacific Sovereign Debt CDS Index 63.63 +.16%
- Emerging Market CDS Index 248.19 +.89%
- China Blended Corporate Spread Index 305.27 -.95%
- 2-Year Swap Spread 23.5 +.75 basis point
- TED Spread 22.0 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -15.55 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- Yield Curve 198.0 +1.0 basis point
- China Import Iron Ore Spot $81.90/Metric Tonne -.36%
- Citi US Economic Surprise Index 35.50 -2.9 points
- Citi Emerging Markets Economic Surprise Index -11.70 +.9 basis point
- 10-Year TIPS Spread 2.13 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -50 open in Japan
- DAX Futures: Indicating -6 open in Germany
Portfolio:
- Higher: On gains in my retail sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Bloomberg:
- Obama Says U.S. to Join EU in Tightening Russia Sanctions. The
U.S. joined the European Union in stiffening sanctions on Russia
over Ukraine, as the 28-member bloc offered to ease the restrictions
once the Kremlin makes a good-faith effort to end the conflict. The U.S.
will “deepen and broaden” measures against Russia’s financial, energy,
and defense industries, President Barack Obama said in a statement
today, adding that the sanctions will take effect tomorrow and details
will be released then. The EU said it would also enact its latest
round of economic restrictions tomorrow. Europe is acting against a
peaceful solution in Ukraine, the Russian Foreign Ministry said.
- China Auto Sales Grow at Slowest Pace in Five Months.
Passenger-vehicle sales in China rose at the slowest pace since March
as the economy slows and the government steps up anti-monopoly probes
into foreign carmakers in the world’s biggest auto market.
- Most European Stocks Decline as Investors Weigh Earnings.
Most European stocks fell for a fifth day as investors weighed mixed
earnings from companies including Ocado (OCDO) Group Plc and Next Plc,
while the European Union said that new sanctions against Russia will be
enacted tomorrow. Next slid the most since April after posting
first-half profit that missed analyst predictions. Ocado gained after
third-quarter sales grew more than analysts had estimated. Air
France-KLM Group added 1.9 percent after saying it plans to
increase earnings by as much as 10 percent a year between 2013
and 2017. The Stoxx Europe 600 Index fell 0.1 percent to 344.27 at
the close of trading, paring earlier losses of as much as 0.6
percent.
- Commodities Fall to 5-Year Low With Plenty of Supplies. Commodities fell to a five-year low
on speculation abundant supplies and slowing economic growth
outside of the U.S. will curb demand for raw materials. The Bloomberg
Commodity Index declined 1.2 percent by 5:06 p.m. in London to the
lowest since July 2009. Brent oil traded at the cheapest since 2012,
wheat, corn and soybeans retreated
to four-year lows and gold slumped to a seven-month low.
- Auto-Loan Boom in U.S. Bringing More Bad Debt: Chart of the Day.
Auto loans are in the midst of a
U.S. boom that is coming to “the end of the road,” according to Pierre
Lapointe, head of global strategy and research at Pavilion Global
Markets. The amount borrowed has climbed for 15 consecutive
quarters, the longest streak since 2005. The second quarter’s increase,
9.2 percent, was the biggest since 2002. “Credit quality is now
deteriorating” as historically low interest rates and competition
among lenders spur borrowing for car and truck purchases, Lapointe and a
colleague, Alex
Bellefleur, wrote in a report yesterday.
- Junk Blitz Making September Busiest Since 2008: Credit Markets. The
riskiest borrowers are leading the busiest September in at least six
years for speculative-grade bond sales in the U.S. as Moody’s Investors
Service warns that protections in the debt are declining. J.C.
Penney Co. (JCP), the retailer whose liquidity Goldman Sachs Group Inc.
warned a year ago was under strain, is among issuers that have sold or
are planning more than $17.5 billion in bonds this month, data compiled
by Bloomberg show. AK Steel Holding
Corp., which hasn’t posted an annual profit since 2008, is
selling $430 million of notes. Clear Channel Communications
Inc., the most leveraged U.S. broadcaster, raised $750 million.
Wall Street Journal:
- Wilbur Ross: Deflation, Not Inflation, Is the Bigger Concern. He argued that governments–which have seen financing costs
decline–have been the biggest beneficiary of QE, and not the private
sector. Central banks have tended to be more focused on the dangers of
inflation, he said, but with globalization, technology and a glut of
government debt, “maybe deflation is what we should be fearing the most
and combating the most.”
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Special Report: Scots warm to the power of Yes.
In late August, Gordon Brown and Alistair Darling shared the stage as
part of the push to keep Scotland in the United Kingdom. The two
Scotsmen, Britain’s prime minister and finance minister between 2007 and
2010, often fought each other in office. Darling once described his old
boss as “brutal and volcanic.” Brown
reportedly wanted to sack Darling during the financial crisis. But
now here was Brown waxing lyrical about Darling, who heads the “Better
Together” campaign that is trying to convince Scots to reject
independence.
Style Underperformer:
Sector Underperformers:
- 1) Biotech -1.51% 2) Gold & Silver -1.12% 3) Airlines -.94%
Stocks Falling on Unusual Volume:
- EOPN, INVE, VNET, MW, BRC, RH, PEIX, CROX, MBUU, GPRE, TRUE, BITA, USLA, SDRL, CCIH, MDVN, APD, REX, CBPX, ADS, CMRX, GPRO, MTDR, LEJU and MEP
Stocks With Unusual Put Option Activity:
- 1) NFX 2) S 3) RH 4) ULTA 5) IYR
Stocks With Most Negative News Mentions:
- 1) TSLA 2) VALE 3) ESRX 4) TIF 5) CROX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +1.67% 2) Gaming +1.36% 3) Retail +.57%
Stocks Rising on Unusual Volume:
- LULU, JDSU, WB, FNSR, AUXL, TIVO, GOGO, DGLY and LE
Stocks With Unusual Call Option Activity:
- 1) ADSK 2) KR 3) TIVO 4) OREX 5) IP
Stocks With Most Positive News Mentions:
- 1) LULU 2) BBRY 3) FB 4) HOG 5) JLL
Charts:
Evening Headlines
Bloomberg:
- Islamic State Talked of Entering U.S. Through Mexico. Islamic
State extremists have discussed infiltrating the U.S. through its
southern border with Mexico, a U.S. official said. Francis Taylor, under
secretary for intelligence and analysis at the Department of Homeland
Security, told a Senate committee today that the Sunni militants have been tracked discussing the idea on social-media sites such as Twitter Inc. (TWTR) “There
have been Twitter and social-media exchanges among ISIL adherents
across the globe speaking about that as a possibility,” Taylor said
in response to a question from Senator John McCain, an Arizona
Republican. Islamic State is also known by the acronyms ISIL and ISIS.
- British Business Leaders Join Last-Ditch Effort to Save the U.K. Some
of Britain’s best-known companies, including BP Plc (BP/), Standard
Life Plc and Kingfisher Plc (KGF), made their strongest intervention yet
in the battle against Scottish independence, lending support to the
efforts of Prime Minister David Cameron to save the union. Ian
Cheshire, chief executive officer of retailer Kingfisher, which employs
3,000 people in Scotland, urged voters not to make a mistake in a
“once-in-a-lifetime decision,”
arguing that independence would mean higher prices and lower investment.
He predicted that other chief executives will make similar statements
ahead of the vote on Sept. 18.
- EU Frets Over Russia Sanctions Amid Fragile Ukraine Truce. European
Union nations are struggling to agree on a trigger for extra sanctions
against Russia over its encroachment in Ukraine as a cease-fire and
troop withdrawal bolster the case for holding off. EU ambassadors are due to resume deliberations on the matter today in Brussels after failing to reach a verdict
yesterday. The 28-nation bloc on Sept. 8 put on hold for at
least a “few days” a second package of economic penalties to
assess the viability of the truce without risking further trade
retaliation by the Kremlin.
- Japan Leads Asian Stock Gains as Kiwi Retreats With Wheat.
Asian stocks rose, with Japan’s Topix (TPX) index extending a six-year
high as the yen held losses. New Zealand’s dollar fell after the central
bank said it was still unjustifiably strong, while wheat extended
declines. The MSCI Asia Pacific Index added 0.1 percent by 9:51 a.m. in Tokyo, with the Topix up 0.4 percent in a fourth day of
gains.
Wall Street Journal:
- U.S. Will Lead Coalition Against Islamic State, Obama Says. President Is Authorizing Start of Airstrikes in Syria, Expanding Bombing Campaign in Iraq. President Barack Obama is authorizing the start of airstrikes in
Syria and expanding the monthlong bombing campaign in Iraq to "degrade
and ultimately destroy" Islamist militants who recently beheaded two
Americans, he told the nation Wednesday evening. The decisions,
detailed in a prime-time address on the eve of the 13th anniversary of
the Sept. 11 terror attacks, would considerably deepen U.S. military
involvement in the Middle East and mark an acknowledgment by Mr. Obama
that the intensity of the...
- Regulators Weighing New Rules for Private Trading Venues. Regulators
Also Looking at Registration for Algorithmic Trading Developers. Market
regulators are considering imposing additional steps to
require greater transparency and disclosures by private trading
platforms and heightened oversight of computerized trading strategies. The
Financial Industry Regulatory Authority will weigh a new set of rules
at its Sept. 19 meeting, including a proposal that would require trading
platforms, including so-called dark pools, to provide additional
details about buy...
Fox News:
- Obama authorizing US airstrikes in Syria. President Obama is authorizing U.S. airstrikes in Syria, senior
administration officials say, as the president used a prime-time address
to the nation Wednesday to call for a comprehensive campaign to wipe
out Islamic State terrorists “wherever they exist.”
Zero Hedge:
Business Insider:
NY Times:
- Short-Seller Carson Block Says He’s Wary of Alibaba. In the world of the short-seller Carson Block, any Chinese company could be a fraud. Even Alibaba. “If Alibaba wanted to
defraud investors, it absolutely could,” Mr. Block, the founder of Muddy
Waters Research, told an audience of accounting students and aspiring
investors at Baruch College in Manhattan on Wednesday.
Financial Times:
- Majority in China expect war with Japan. China
and Japan are heading towards military conflict, according to a
majority of Chinese surveyed on ties between the Asian powers in a Sino-Japanese poll. The
Genron/China Daily survey found that 53 per cent of Chinese respondents
– and 29 per cent of the Japanese polled – expect their nations to go
to war. The poll was released ahead of the second anniversary of Japan’s
move to nationalise some of the contested Senkaku Islands in the East
China Sea.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 90.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 63.50 +.5 basis point.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 300K versus 302K the prior week.
- Continuing Claims are estimated to rise to 2490K versus 2464K prior.
2:00 pm EST
- The Monthly Budget Statement for August is estimated at -$130.0B.
Upcoming Splits
Other Potential Market Movers
- The
ECB bulletin, $13B 30Y T-Bond auction, USDA's WASDE report, weekly EIA
natural gas inventory report, Bloomberg Sept. US Economic Survey, weekly
Bloomberg Consumer Comfort Index, (ZU) analyst day, (BBT) investor day
and the (COO) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate 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.
