Evening Headlines
Bloomberg:
- Scots Independence Campaigns Make Last Appeal for Victory. The
battle over Scotland’s future in the U.K. entered the final day of
campaigning with the pro-independence side saying it had the momentum to
win the ballot and the “no” camp urging voters not to use it as a
protest. Three polls last night showed the anti-independence Better
Together group backed by Prime Minister David Cameron and the main U.K.
parties leading the “yes” campaign by 52 percent to 48 percent,
excluding undecided voters. All the latest surveys
showed the gap was closing fast.
- Ukraine Truce Wobbles as Eastern Regions’ Power Expanded. The cease-fire in Ukraine showed
more signs of strain as rebels questioned further peace talks
with the government, even after lawmakers in Kiev approved
special status for the country’s two easternmost regions. Some separatist groups called for a renewed offensive and a
rebel leader accused the government of violating the terms of a
truce accord signed Sept. 5. Clashes continued yesterday near
Donetsk, the largest city in the conflict zone, where the
airport has been the site of some of the heaviest fighting.
- Russia Takes Double Punch as Vanishing Workers Fan Prices. The
aging workforce is packing a double punch for the Russian economy. The
unborn generation of the 1990s, a period of hyperinflation and
instability after the Soviet breakup, left the nation depleted of
younger workers. Unemployment is at a record low, putting pressure
on wages (RUMEREAL) and helping keep inflation near the fastest since
2011. The poor demographics are shaving 0.5 percentage point off
economic growth a year, according to
the Higher School of Economics in Moscow, which estimates the
working-age population will shrink by as many as 15 million
people, or more than the size of the Russian capital, by 2030.
- Data Flaws in China Cities With Worst Air Risk Xi Pledge. China’s efforts to name and shame its filthiest power stations and impose tough new emission
standards are the leading weapons in President Xi Jinping’s war
on pollution. The world shouldn’t hold its breath waiting for
him to declare victory.
- Sydney’s Hot Housing Speculators Spark RBA Alarm at Fallout Risk. A
16 percent jump in Sydney house prices in the past year is sparking
alarm at Australia’s central bank. Buyers shouldn’t be overly bullish in
property purchases, Reserve Bank of Australia Assistant Governor
Christopher Kent said at a Bloomberg Summit
in Sydney yesterday. An investor-led surge in prices may amplify any
subsequent fall and risk a drop in consumer spending, hurting the
economy, the bank said yesterday in minutes from its Sept. 2 board
meeting.
- Asian Stocks Rebound on China as Dollar Drops Before Fed.
Asian stocks climbed, halting the longest slump in the regional index
since 2002, while industrial metals jumped on a report China’s central
bank is boosting stimulus. The dollar weakened against emerging-market
currencies before the Federal Reserve reviews interest rates. The
MSCI Asia Pacific Index added 0.1 percent by 9:57 a.m. in Tokyo, rising
for the first time in 10 days as the Kospi index in Seoul climbed 0.6
percent and New Zealand shares rose.
Wall Street Journal:
- Ukraine Moves Reflect Moscow's Long Shadow. Parliament Ratifies Deal with Europe After Concessions, While Rebels Hedge on Autonomy Plan. Ukraine sought to draw a line under its
confrontation with Moscow by ratifying a landmark trade-and-political
deal with the European Union and approving limited autonomy for
territories now controlled by Russia-backed separatists. But
with full implementation of the EU deal postponed under Russian
pressure, and the rebels insisting on independence, the developments
illustrated Kiev's weakened position—almost a year after Moscow began
flexing its muscle to keep the ex-Soviet republic in its orbit.
- Credit Suisse Loans Draw Fed Scrutiny. Regulator Demands Bank to Address Problems With Leveraged Lending. Credit Suisse Group AG is under fire from U.S. regulators over
concerns the bank isn't heeding warnings to stop making loans regulators
see as risky, according to a person familiar with the matter. The
Swiss bank in recent weeks received a letter from the Federal Reserve
demanding the bank immediately address problems with its underwriting
and sale of leveraged loans, or high-interest-rate loans used by
private-equity firms and...
- Fed Dims Emerging Markets' Allure. Fears of higher U.S. interest rates are prompting fund managers to cut back on investments in emerging markets. For
now, investors still are moving into developing markets, though the
pace has moderated. Emerging-market stocks and bonds received $9 billion
from investors in August, compared with an average $38 billion a month
between May and July, according to the latest data from the Institute of
International Finance. But...
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Foreigners snub long-term US assets for 2nd month in July. Foreigners sold long-term U.S.
securities in July for a second straight month, led by outflows
in Treasuries, stocks, and corporate bonds, data from the U.S. Treasury Department showed on Tuesday. Net sales of long-term U.S. assets notched $18.6 billion in July after $18.7 billion the previous month. Including
short-dated assets such as bills, overseas investors bought
$57.7 billion in U.S. assets, recovering from outflows of $142
billion in June.
- Calpers exit could heap pressure on hedge fund fees. The California
Public Employees Retirement System handed fellow U.S. pension funds a
hefty club to beat down hedge fund fees and demand better returns this
week when it voted to pull out of hedge funds entirely, investors
said.
Xinhua:
- Calls For China Stimulus Suggest Lack of Faith. Calls for stimulus policies including interest rate cuts following negative economic
data suggest a lack of faith in China's reform efforts, an unsigned
commentary said. Hoping for stimulus policies in the face of increased
economic pressure is short-sighted and does no good to long-term
economic development. China has enough tolerance and policy tools to deal with economic slowdown.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 94.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 65.50 -1.0 basis point.
- NASDAQ 100 futures -.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The CPI for August is estimated unch. versus a +.1% gain in July.
- The CPI Ex Food and Energy for August is estimated to rise +.2% versus a +.1% gain in July.
- The Current Account Deficit for 2Q is estimated at -$113.4B versus -$111.2B in 1Q.
10:00 am EST
- The NAHB Housing Market Index for September is estimated to rise to 56.0 versus 55.0 in August.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-1,244,440 barrels versus a -972,000 barrel decline the prior week.
Gasoline supplies are estimated to fall by -105,000 barrels versus a
+2,381,000 barrel gain the prior week. Distillate inventories are
estimated to rise by +635,000 barrels versus a +4,094,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to fall by
-.52% versus a +.6% gain the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark Fed Funds Rate unch. at .25%.
- The Fed's pace of QE in September is estimated to fall to $15B versus $25B in August.
Upcoming Splits
Other Potential Market Movers
- The
Yellen Press Conference, UK GDP report, weekly MBA mortgage
applications report, BofA Merrill Healthcare Conference, (SYK) analyst
meeting, (AIG) investor day and the (VFC) investor meeting could also
impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial
and technology shares in the region. I expect US stocks to open
modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.83 -9.14%
- Euro/Yen Carry Return Index 144.97 +.10%
- Emerging Markets Currency Volatility(VXY) 7.35 unch.
- S&P 500 Implied Correlation 46.50 -8.16%
- ISE Sentiment Index 85.0 -30.33%
- Total Put/Call .85 +1.19%
Credit Investor Angst:
- North American Investment Grade CDS Index 59.88 -2.41%
- European Financial Sector CDS Index 60.31 -1.22%
- Western Europe Sovereign Debt CDS Index 28.45 +.07%
- Asia Pacific Sovereign Debt CDS Index 65.31 -1.72%
- Emerging Market CDS Index 247.67 -2.58%
- China Blended Corporate Spread Index 308.72 +.15%
- 2-Year Swap Spread 24.0 -.25 basis point
- TED Spread 22.50 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -13.25 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 205.0 +1.0 basis point
- China Import Iron Ore Spot $84.50/Metric Tonne -.82%
- Citi US Economic Surprise Index 31.80 +.1 point
- Citi Emerging Markets Economic Surprise Index -22.0 -2.4 basis points
- 10-Year TIPS Spread 2.12 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +39 open in Japan
- DAX Futures: Indicating +36 open in Germany
Portfolio:
- Higher: On gains in my tech/retail/biotech/medical sector longs
- Disclosed Trades: Covered some of my (IWM), (QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Ukraine Rebels Question Peace Talks. Ukraine’s pro-Russian separatists questioned further peace talks with
the government, citing violations of cease-fire terms, while lawmakers
in Kiev approved special status for the country’s two easternmost
regions. The government is failing to meet the terms of a
prisoner-swap agreement that was part of the truce accord signed Sept.
5, Alexander Zakharchenko, the premier of the self-proclaimed Donetsk
People’s Republic, said in a website statement today. The parliament in
Kiev, the capital, approved the special status bill and an amnesty law
envisaged in the cease-fire deal, Deputy Speaker Ruslan Koshulynskiy
said by phone today.
- Ukraine Crisis Seen Lasting for Years in Threat to Russia.
The conflict in Ukraine will take years to resolve, rattling Russia’s
investment climate and threatening to push its economy into recession at
the current level of sanctions, former Finance Minister Alexei Kudrin
said. “It’s no quick task to resolve the situation in the southeast of
Ukraine,”Kudrin said today at a conference
organized by the American Chamber of Commerce in Moscow. Finding
a solution will require two to three years “at a minimum”
under what he called an “optimistic scenario.”
- Scots Referendum Tension Spills Over as Miliband Jostled. The
Scottish nationalist trying to wave a flag behind Labour Party leader
Ed Miliband’s head found his path blocked by an elderly opponent of
independence. So with both hands, he shoved the man out of the way. The incident in an Edinburgh shopping mall happened during what was
supposed to be a walkabout for the English leader of the opposition
today. Within seconds of his arrival, it turned into a scrum, with
Miliband at one point forced to take shelter in a hairdresser’s while a
group of supporters and opponents tried to shout over each other.
- Iran Affirms Support for Assad as Foes to Get U.S. Funds. The
head of Iran’s Revolutionary Guards reaffirmed support for Syria’s
government, as the U.S. steps up aid for moderate rebel groups while
preparing airstrikes against Islamic State militants. Iran’s “support of the Syrian regime will continue” and
“we strongly condemn this move by the U.S. which we see as an
aggressive and bullying posture,” Major General Mohammad Ali Jafari said at a news conference in Tehran today.
- European Index Futures Climb After Two-Day Equities Drop. European stock-index futures
indicated stocks may rebound after reaching a two-week low amid
speculation about the timing of a U.S interest-rate increase and
this week’s vote on Scottish independence. Futures on the Euro Stoxx
50 Index expiring this week gained 0.1 percent to 3,235 at 5:49 p.m. in
London after the Stoxx Europe 600 Index retreated 0.3 percent today. The
broader gauge of equities pared losses of as much as 0.7 percent.
- Oil Rises as OPEC Sec-General Says Group May Cut Target.
WTI for October delivery rose $1.75, or 1.9 percent, to $94.67 a barrel
at 1:11 p.m. on the New York Mercantile Exchange. The contract touched
$94.88, the highest level since Sept. 5. The volume of all futures
traded was 26 percent above
the 100-day average for the time of day. Prices have decreased
3.8 percent this year.
ZeroHedge:
Business Insider:
Dana Lyon's Tumblr:
Nikkei:
- Japan to Lower Economic Assessment in Sept. Report. First lowering of assessment in 5 months. Report to be released Friday.
Style Underperformer:
Sector Underperformers:
- 1) Gaming -1.41% 2) Alt Energy -.34% 3) I-Banking -.08%
Stocks Falling on Unusual Volume:
- LGP, WPG, BBSI, AVNR, RLYP, MRTN, MPEL, ALR, SHLD, CPA, ALOG, TEN, LVS, CNW, BRC, AFSI, SGMS, WYNN, AFL, CHL, NFLX, VNET, AET, UVV and TSU
Stocks With Unusual Put Option Activity:
- 1) QEP 2) ADBE 3) HIG 4) CHK 5) CCL
Stocks With Most Negative News Mentions:
- 1) SHLD 2) WPG 3) IPGP 4) CNW 5) ACI
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +1.39% 2) Oil Service +1.32% 3) HMOs +1.29%
Stocks Rising on Unusual Volume:
- GRT, CBL, BBG, PEI, YY, WBAI, PBR, AMBA, CTRP and AEO
Stocks With Unusual Call Option Activity:
- 1) QEP 2) ADBE 3) KBH 4) FDX 5) JOY
Stocks With Most Positive News Mentions:
- 1) STI 2) HUM 3) BA 4) VZ 5) GOOG
Charts:
Evening Headlines
Bloomberg:
- Ukraine Truce Threatened by Clashes as NATO Holds Drills. Ukraine traded accusations with pro-Russian separatists over the biggest outbreak of hostilities since a truce was signed 11 days ago. The airport in Donetsk, the biggest city in the conflict zone, was shelled all day, with government troops attacked near 13 villages and towns, military spokesman Andriy Lysenko said at briefing in Kiev yesterday, adding that the Ukrainian army was observing the cease-fire. The assertions were contradicted by separatist authorities in Donetsk, which said their forces held fire while their positions were shelled more than 40 times during the past 24 hours, killing 20 people.
- Pro-Iraq Coalition Challenged to Turn Talk Into Action. The U.S. has assembled an unlikely coalition of more than 40 nations
with a shared stake in defeating Islamic State, an effort that’s
counting on Iraqi troops and moderate Syrian rebels to retake and hold
territory the extremists have seized. That’s something they haven’t done well in the recent past.
- China FDI Slides to Four-Year Low as Anti-Monopoly Probes Widen.
Foreign direct investment into China, a gauge of external confidence,
slumped to a four-year low amid widening antitrust probes into
multinational companies. Inbound investment was $7.2 billion in
August, down 14 percent from a year earlier, the Ministry of Commerce
said on its website today in Beijing after a 17 percent drop in July. It
was the first back-to-back decline of more than 10 percent since
2009, based on previously reported data compiled by Bloomberg.
- Bad Loans Could Bust China.
The risk of what Nobel laureate Paul Krugman calls "Japanification" -- a
semipermanent economic funk -- has haunted China for at least a couple
of years now. Last week a Bank of America Merrill Lynch report again
asked, "Will China Repeat Japan’s Experience?" Let's dispense with
the suspense: Yes, China very likely will. And the outcome will have far
more serious global implications than Krugman's main worry, which
focuses on the chances of stagnation in Europe.
- Default Risk Haunts Top 100 on Debt-Fueled Growth: Asean Credit.
Southeast Asia’s 100 largest publicly traded companies are becoming
more vulnerable to default as their debt surges and profitability
weakens. Debt-to-earnings ratios rose last year at the fastest pace
since 2011, as average return on capital at the biggest firms by
market value fell for the first time since 2008, according to
data compiled by Bloomberg. In the past four years, their debt
rose 89 percent to the equivalent of $501 billion.
- RBA Monitors House Price Risks as Rate Stability Reaffirmed. Australia’s
central bank said it will monitor risks from rising property prices as
policy makers reiterated a period of stability in record-low interest
rates. “Housing prices were continuing to increase in the larger
cities and members considered that the risks associated with this trend
warranted ongoing close observation,” the central bank said in minutes
today of its Sept. 2 meeting, where it kept the cash rate at 2.5
percent. “On the other hand, the exchange rate remained above most
estimates of its fundamental value, particularly given the declines in
key commodity prices.”
- Alibaba Boosts Possible IPO to $21.8 Billion Amid Demand.
Alibaba Group Holding Ltd. (BABA) raised the amount it’s seeking in its
initial public offering to as much as $21.8 billion, coming a step
closer to breaking a global
fundraising record after investors showed strong interest in the shares.
- Asia Stocks Fall Ninth Day; Dollar Slips, Bonds Climb.
Asian stocks fell, with the regional index headed for its longest
losing streak in a decade, the dollar weakened against most major peers
and government bonds climbed before the Federal Reserve reviews interest
rates. Metals rebounded. The MSCI Asia Pacific Index (MXAP) fell 0.2 percent by 12:37 p.m. in Tokyo, falling a ninth day.
Wall Street Journal:
Fox News:
- US launches first offensive strikes against ISIS in Iraq. (video) The U.S. military launched airstrikes against the Islamic State
militants in Iraq Monday in its first move in the newly broadened
mission authorized by President Obama to go on the offensive against the
terror group. The U.S. Central Command said in a press release that the strikes
were conducted to provide support for Iraqi security forces fighting
the militants southwest of Baghdad.
Zero Hedge:
Business Insider:
NY Times:
- ISIS Draws a Steady Stream of Recruits From Turkey. Having spent most of his youth as a drug addict in one of the poorest
neighborhoods of Turkey’s capital, Can did not think he had much to lose
when he was smuggled into Syria with 10 of his childhood friends to
join the world’s most extreme jihadist group.
Bild:
- German
Economists Warn Against Euro Devaluation. Clemens Fuest, president of
the Center for European Economic Research, or ZEW, says there is a risk
of a devaluation race with other central banks and a loss of purchasing
power. Fuest says it is "questionable" whether other central banks will
passively accept a further euro depreciation. Says effect of devaluation
often overestimated and more expensive imports will cut consumer
purchasing power. Allianz Chief Economist Michael Heise also warns of a
further euro depreciation, says "it's a dangerous way to lead the euro
zone out of the crisis and to ensure more growth."
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 95.0 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 66.50 +2.25 basis points.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- PPI Final Demand for August is estimated unch. versus a +.1% gain in July.
- PPI Ex Food and Energy for August is estimated to rise +.1% versus a +.2% gain in July.
4:00 pm EST
- Net Long-Term TIC Flows for July are estimated at $25.0B versus -$18.7B in June.
Upcoming Splits
Other Potential Market Movers
- The
German ZEW Index, UK CPI, weekly US retail sales reports, CSFB
Chemicals/Ag Science Conference, CSFB Small/Mid-Cap Conference, CSFB
Basic Materials Conference, RBC Financials Conference and the BofA
Media/Communications/Entertainment Conference could also impact trading
today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology 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.
