Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.23 -3.32%
- Euro/Yen Carry Return Index 146.68 -.75%
- Emerging Markets Currency Volatility(VXY) 7.34 -1.48%
- S&P 500 Implied Correlation 44.58 -1.0%
- ISE Sentiment Index 148.0 +20.33%
- Total Put/Call .88 -7.37%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.29 -2.49%
- European Financial Sector CDS Index 56.97 -5.56%
- Western Europe Sovereign Debt CDS Index 27.70 -1.77%
- Asia Pacific Sovereign Debt CDS Index 63.62 -1.23%
- Emerging Market CDS Index 262.15 +2.55%
- China Blended Corporate Spread Index 310.08 +.29%
- 2-Year Swap Spread 24.25 +.25 basis point
- TED Spread 22.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -10.25 +2.75 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- China Import Iron Ore Spot $83.0/Metric Tonne -1.43%
- Citi US Economic Surprise Index 19.80 -1.0 point
- Citi Emerging Markets Economic Surprise Index -21.60 +.3 basis point
- 10-Year TIPS Spread 2.03 -3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +108 open in Japan
- DAX Futures: Indicating -6 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/retail/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Scotland Votes as U.K.’s Future Hangs in the Balance. (video) Voters in Scotland are deciding whether to seek independence from the
U.K. in a ballot that may spell the end of a three-century-old union
that once dominated the world from America to Australia and trigger a
new era of self-determination across Europe. Polling stations
opened at 7 a.m. local time in schools, church halls, libraries and
community centers across Scotland for the country’s 4.3 million-strong
electorate, and will close at 10 p.m.
- Kurds Flee as Islamic State Captures Syrian Border Villages. Islamic State fighters backed by
tanks and artillery have captured 21 Kurdish villages in Syria
in the past 24 hours, triggering an exodus by residents, the
head of the U.K.-based Syrian Observatory for Human Rights said. The villages, around the town of Ayn al-Arab near the
Turkish border, were seized following fierce clashes that began
on Sept. 16 between the militant group and the Kurdish force
known as the People’s Protection Units, Rami Abdurrahman said by
phone.
- Banks in Italy and Spain Take More Than 45% of ECB Loans. Banks
in Italy and Spain were among the leading borrowers in the European
Central Bank’s first targeted-loan program, taking more than 45 percent
of the 82.6 billion euros ($106.5 billion) to trim funding costs.
UniCredit SpA (UCG), Italy’s biggest bank, said it raised 7.8 billion
euros, while Intesa Sanpaolo SpA (ISP), the second largest, took 4
billion euros. Banco Santander SA sought 3.6 billion euros, a person
familiar with the matter said, the most among Spanish banks whose
borrowings were disclosed. The top lenders in Germany and France didn’t
say how much they borrowed.
- European Stocks Gain as Bayer Rallies on Spinoff Plans.
European stocks rose for a second day, after Federal Reserve Chair
Janet Yellen indicated interest rates won’t increase anytime soon, and
Bayer AG rallied on plans to spin off its plastics unit. Bayer
contributed the most to the Stoxx Europe 600 Index’s gain. Sulzer AG
jumped the most in almost three years after saying it is in talks with
Dresser-Rand Group Inc. about a possible transaction. TUI Travel (TT/)
Plc rose 4.7 percent after Morgan Stanley upgraded the shares. EasyJet
Plc advanced after saying it will increase its dividend-payout ratio and
exercise purchase rights for 27 Airbus Group NV A320 planes.
The Stoxx 600 climbed 1 percent to 347.78 at the close of
trading, its highest level in two weeks.
- Crude Oil Falls as Rising Dollar Curbs Investment Appeal.
WTI for October delivery fell $1.03, or 1.1 percent, to $93.39 a barrel
at 2:01 p.m. on the New York Mercantile Exchange. The volume of all
futures traded was 3 percent above the 100-day average for this time of
day. Prices have decreased
5.1 percent this year.
- Copper Slumps as U.S., China Housing Demand Slowing.
Copper for December delivery retreated 1.6 percent to
settle at $3.094 a pound at 1:13 p.m. on the Comex in New York.
The loss was the biggest since Sept. 9.
- Fewest Americans Since October 2013 See U.S. Economy Improving. The fewest Americans in almost a year say the economy is getting
better as faster wage gains remain a missing element in the expansion. A measure tracking the economic outlook dropped to 41.5 this month, the weakest since October, from 45 in August, data from the Bloomberg Consumer Comfort Index showed today. The reading was the second-lowest since January 2012. Twenty
percent of those surveyed saw the economy improving, the smallest share
since October, when the partial shutdown of the federal government
rattled households.
CNBC:
ZeroHedge:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +1.99% 2) I-Banks +1.29% 3) Banks +1.12%
Stocks Rising on Unusual Volume:
- MSCI, AMBA, ERIC, CZR, MKTX, INVN, ZEN, ARCB and TCBI
Stocks With Unusual Call Option Activity:
- 1) ETP 2) PCG 3) EXC 4) PIR 5) NTAP
Stocks With Most Positive News Mentions:
- 1) BAC 2) PEP 3) SNDK 4) VVUS 5) KSS
Charts:
Evening Headlines
Bloomberg:
- Scotland Votes as U.K.’s Future Hangs in the Balance.
Voters in Scotland will today decide whether to seek independence from
the U.K. in a ballot that could spell the end of a three-century-old
union that once dominated the world from America to Australia and
trigger a new era of self-determination across Europe. Polling stations
are open from 7 a.m. to 10 p.m. local time
in schools, church halls, libraries and community centers across
Scotland for the country’s 4.3 million-strong electorate.
- China’s Slowdown Seen Yet to Bottom Even After PBOC Acts. China’s growth trajectory is still pointing down, even after an $81 billion liquidity injection.
The People’s Bank of China move to provide 500 billion yuan of
three-month funds to the nation’s five largest banks will help overcome
any pre-holiday cash crunch, though is unlikely to move the
needle on gross domestic product, according to economists at banks
including Barclays Plc.
- SouFun’s New China Homebuyer Incentive Sparks Stock Rout. SouFun Holdings Ltd. (SFUN) is posting the longest streak of losses since 2011 in U.S. trading on concern the new price incentives that the Chinese real estate website is offering homebuyers will erode profits.
The company’s American depositary receipts dropped 4.6
percent to $9.64 in New York yesterday, pushing the decline over
eight straight days of losses to 23 percent.
- China Home Price Drop Spreads to More Cities as Demand Weak.
China’s new-home prices fell in all but two cities monitored by the
government last month as tight credit prolonged a market downturn even
as local home-purchase restrictions were eased. Prices dropped in 68 of the 70 cities in August from July, the National Bureau of Statistics said in a statement today, the
most since January 2011 when the government changed the way it
compiles the data.
- Alibaba Bulls in ‘What, Me Worry?’ Mode as Global Roadshow Ends. “I was surprised how bullish investors were, given the
risks for Alibaba,” said Cyrus Mewawalla, a managing director
at CM Research in London who wrote a report on Alibaba. “In one
sense, this is a dominant company and this is the time for e-commerce. But on the other hand, there have been many warning
signals for this company.” “There’s not good governance in China,” said Rob Lutts at
Cabot Money Management Inc. in Salem, Mass., whose colleague
attended the roadshow in Boston. “Our analyst came back shocked
after finding out the moves Jack Ma made moving part of the
company into his personal ownership before going public. That’s
the kind of thing that makes you say, ‘Wow, really?’” Cabot won’t invest in the IPO, Lutts said.
- Chinese Hackers Infiltrate U.S. Military Contractors. Chinese-backed hackers infiltrated the computer networks of airline,
shipping and information technology companies responsible for
transporting personnel and weapons for the U.S. military, a Senate
investigation found.
- Asian Stocks Outside Japan Fall, Topix Surges After Fed.
Asian stocks outside Japan fell after the Federal Reserve raised its
estimates for interest rates. Japan’s Topix (TPX) index jumped toward a
six-year high on a weaker yen. Hyundai Motor Co. sank 7.6 percent after
South Korea’s largest carmaker led a group that bid for real estate with
an offer triple the property’s assessed value. Honda Motor Co., a
Japanese carmaker that gets 47 percent of sales in North America, rose
2.7 percent. Arrium Ltd. plunged 27 percent in Sydney after raising
capital. Sony Corp. dropped 8.1 percent as the Japanese
consumer-electronics maker widened its net loss forecast and said it
will suspend an annual dividend. The MSCI Asia Pacific excluding Japan Index lost 0.9 percent to 490.73 as of 11:54 a.m. in Hong Kong.
Wall Street Journal:
Fox News:
Zero Hedge:
Business Insider:
Reuters:
- Japan manufacturers' mood falls most in 2 yrs, weak bounce seen -Reuters Tankan. Confidence
at Japanese manufacturers fell the most in nearly two years in
September as a tax increase hit the economy harder than expected, a
Reuters poll showed, suggesting further difficulty for the struggling
recovery. The worsening sentiment in the monthly Reuters Tankan, with only a feeble improvement forecast for December, bodes ill for
the Bank of Japan's quarterly tankan survey, which had been
forecast to rebound in the third quarter. Service-sector sentiment edged up but was forecast to
decline again. The sentiment index for manufacturers fell to 10 in
September from 20 in August and down from 19 in June.
- Dollar rallies as markets latch onto 'hawkish' Fed projections. The
dollar rose to its highest
in over four years against a basket of currencies on Thursday after the
Federal Reserve's guidance on interest rates highlighted the diverging
pathways between the United States and
other rich nations. The dollar index surged to 84.814, reaching a high
not seen since July 2010, and bringing into view its 2010 peak
of 88.708. It last traded at 84.782.
Telegraph:
- Risky market bets putting global economy in jeopardy, warns IMF.
IMF warns investors could be hit by geopolitical tensions or a shift in
US
interest rate policy. The global economy faces a growing risk from big
financial market bets that
could quickly unravel if investors get spooked by geopolitical
tensions or a
shift in US interest rate policy, the International Monetary Fund has
said. The IMF said in a report it still expects economic growth to pick
up in the
second half of 2014 after a rough start to the year. But it also warned that financial market indicators suggested investor bets
funded with borrowed money looked "excessive" and that markets
could quickly deflate if there were surprises in US monetary policy or the
conflicts in Ukraine and the Middle East. As the IMF put it in its technical language: "New downside risks
associated with geopolitical tensions and increasing risk taking are arising."
Passauer Neue Presse:
- DIHK
Sees Risk of European Economic Fragmentation. Europe risks transforming
itself into a region of autonomous special economic zones, Volker
Treier, head of intl economy at Germany's DIHK commerce and industry
chamber says in interview. Says no one can desire that other regions,
for example in Spain, take Scotland as a model and abet the division of EU states.
Financial News:
- China Should Prevent Big Rises in Leverage Ratio. China may face
increased macro economic and financial risks if its already-high
leverage ratio rises more, PBOC economist Ma Jun said in a commentary.
Over-easing of monetary policy is likely to increase leverage for local
government financing vehicle and the real estate sector, Ma writes.
China should set more credible and clear control target and emphasize
low inflation in its monetary policy, Ma writes.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 91.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 64.50 -1.0 basis point.
- NASDAQ 100 futures +.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 305K versus 315K the prior week.
- Continuing Claims are estimated to fall to 2466K versus 2487K prior.
- Housing Starts for August are estimated to fall to 1037K versus 1093K in July.
- Building Permits for August are estimated to fall to 1040K versus 1052K in July.
10:00 am EST
- Philly Fed for September is estimated to fall to 23.0 versus 28.0 in August.
12:00 pm EST
- Household Change in Net Worth for 2Q.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Fisher speaking, Scotland Independence vote, Bloomberg Economic
Expectations Index for September, weekly Bloomberg Consumer Comfort
Index, weekly EIA natural gas inventory report, (NKE) general meeting,
(PRU) investor day and the (MYL) investor day could also impact trading
today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate
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.
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) 12.07 -5.18%
- Euro/Yen Carry Return Index 145.54 +.40%
- Emerging Markets Currency Volatility(VXY) 7.21 -2.57%
- S&P 500 Implied Correlation 43.49 -6.52%
- ISE Sentiment Index 135.0 +64.63%
- Total Put/Call .98 +11.36%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.29 -3.10%
- European Financial Sector CDS Index 58.60 -3.31%
- Western Europe Sovereign Debt CDS Index 28.20 -.60%
- Asia Pacific Sovereign Debt CDS Index 64.41 -1.52%
- Emerging Market CDS Index 247.67 +1.72%
- China Blended Corporate Spread Index 309.17 +.15%
- 2-Year Swap Spread 24.0 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -13.0 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +1.0 basis point
- Yield Curve 206.0 +1.0 basis point
- China Import Iron Ore Spot $84.20/Metric Tonne -.36%
- Citi US Economic Surprise Index 20.80 -11.0 points
- Citi Emerging Markets Economic Surprise Index -21.90 +.1 basis point
- 10-Year TIPS Spread 2.06 -6.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +97 open in Japan
- DAX Futures: Indicating +32 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Scots Campaigning Final Hours Marked by Emotional Appeals. (video) On the final day of campaigning over Scotland’s future, both sides
made emotional appeals to wavering voters to come to their side. Several
hundred supporters of independence massed on the steps of the Royal
Concert Hall on Buchanan Street in Glasgow today waving flags and
banners. “Yes we can! And we will!” they chanted. “Hope, not fear!”
- Russia Sees Positive Step in Law for Eastern Ukraine. Russia called the new law providing a special status for
war-torn eastern Ukraine “a step in the right direction” while the
government in Kiev cautioned that a drop in Russian natural gas supplies
could hobble the European Union during the peak heating season. A
shaky cease-fire held in Ukraine’s Donetsk and Luhansk regions, with
multiple violations reported since the truce took effect on Sept. 5. The
Ukrainian parliament yesterday approved a measure for limited self-rule
in the region.
- China’s Slowdown Seen Yet to Bottom Even After PBOC Acts.
China’s growth trajectory is still pointing down, even after an $81
billion liquidity injection. The People’s Bank of China move to provide
500 billion yuan of three-month funds to the nation’s five largest banks
will
help overcome any pre-holiday cash crunch, though is unlikely to
move the needle on gross domestic product, according to
economists at banks including Barclays Plc.
- Richemont Sales Miss Estimates on Asian Slowdown. Cie.
Financiere Richemont SA (CFR), the world’s largest jewelry maker,
posted the slowest start to a year since the global recession as
consumers held back on buying luxury goods in Hong Kong, halting Asian
growth.
- European Stocks Rebound From Two-Week Low Before Fed. European stocks rose for the first time in nine days as optimism that central bankers around the world will continue to support economic recovery helped the Stoxx Europe 600 Index rebound from a two-week low. Air France-KLM Group gained 3.6 percent after France’s prime minister asked its pilots to end a strike. DS Smith Plc advanced 5.1 percent after saying sales are increasing at a faster pace than last year. Daily Mail and General Trust Plc dropped to an 11-month low after saying a delayed release of its
risk-management-solutions product will result in an impairment
and higher costs. Cie. Financiere Richemont SA fell 4.1 percent
after five-month sales growth missed estimates.
The Stoxx Europe 600 Index climbed 0.5 percent to 344.39 at
the close of trading.
- Fed Keeps ‘Considerable Time’ Pledge as Growth Is ‘Moderate'. The
Federal Reserve said the economy is expanding at a moderate pace and
inflation is below its goal while maintaining a commitment to keep
interest rates near zero for a “considerable time” after asset purchases
are completed. “Labor market conditions improved somewhat further”
while “significant underutilization of labor resources” remains, the
Federal Open Market Committee said today in a statement in Washington.
“Inflation has been running below the committee’s longer-run
objective.” In July, the Fed said inflation was “somewhat closer” to its
goal.
Wall Street Journal:
- PBOC Struggles as Chinese Borrowers Hold Back. Lack of Loan Demand Hampers Efforts to Increase Growth. China's central bank so far has failed to lift the world's
second-largest economy out of its doldrums, and that is in part because
of businesspeople like Li Jun. Mr. Li runs a fish-farming
business in eastern China's Jiangsu province. The People's Bank of China
is pushing the country's big, state-owned banks to lend more money to
businesses like his. Instead of taking the cash, Mr. Li is cutting back.
"Banks are...
MarketWatch.com:
CNBC:
ZeroHedge:
Quartz:
- Is the Kremlin trying to grab another oligarch’s oil company? The Kremlin is being accused of a big new asset grab in a murky case against Russia’s largest mobile telephone operator.
Russian prosecutors yesterday ordered the house arrest of Vladimir Yevtushenkov, who controls MTS, Russia’s largest mobile
phone operator, and Bashneft, an oil company in the region of
Bashkortostan.
CNN:
