Evening Headlines
Bloomberg:
- Massive Aid Needed for Ebola Outbreak as Outlook Worsens. (video)
Massive amounts of supplies and additional health workers are still
needed in Liberia, Sierra Leone and Guinea to help control the Ebola
outbreak there that may grow to more than 1 million infections under one
worst-case scenario, according to aid agencies. Curbing the virus
will require 1,000 more international medical personnel as well as
20,000 local residents who know the area well and can work as doctors,
nurses, communication specialists, burial teams, contact tracers and
trainers, said Dan Epstein, a spokesman for the World Health
Organization.
- Ukrainian Unrest Eases as NATO Says Russia Cuts Presence. NATO
said Russia has embarked on a “significant” withdrawal of its forces
from Ukraine, adding to signs that a truce is taking hold between the
government in Kiev and separatist groups. “There has been a significant pullback of Russian
conventional forces from inside Ukraine,” Lieutenant-Colonel
Jay Janzen, chief of media operations at the North Atlantic
Treaty Organization, said in an e-mailed statement yesterday.
“Some Russian troops still remain.”
- China Stocks Drop After Goldman Sachs Cuts Growth Target. China’s stocks fell after Goldman Sachs Group Inc. cut its forecast for China’s economic growth and a logistics company said its unit defaulted. Wanhua Chemical Group Co. paced declines by industrial companies. Goldman Sachs reduced its 2015 target to 7.1 percent from 7.6 percent, while keeping this year’s estimate unchanged at 7.3 percent. Anhui Wanjiang Logistics Group Co. said its unit had debts of 2.1 billion yuan ($337 million) of debts due. Shares in the company are suspended. The Shanghai Composite Index (SHCOMP) lost 0.1 percent to 2,306.94
at 9:45 a.m., while the Hang Seng China Enterprises Index
climbed 0.3 percent from a two-month low.
- Asian Stocks Extend Losses Amid Yen Advance; Kiwi Rallies.
Asian stocks fell, with the regional index headed for its lowest close
in more than three months, as the yen rallied following a Japanese
holiday and after a selloff in U.S. equities. New Zealand’s dollar rose
from a one-year low amid a smaller-than-estimated trade deficit. The MSCI Asia Pacific Index lost 0.2 percent by 9:57 a.m. in Tokyo, dropping a third day as Japan’s Topix index retreated
0.3 percent from its Sept. 22 close.
- Iron Ore Price Outlook Cut Again by Australia on Supply Jump.
Australia’s state commodity forecaster cut its iron ore price estimates
for this year and 2015, pruning its outlook again as surging production
in the world’s largest supplier outpaces demand growth in China. The
commodity will average about $94 a metric ton this year from $105 a ton
forecast in June, the Bureau of Resources and Energy Economics said in a
quarterly report today. Prices may be
$94 a ton in 2015 from $97 estimated in June, it said.
- Cross-Border Swap Dispute Risks Trade War, CFTC’s Giancarlo Says. U.S. and European regulators risk a
permanent breakdown in financial markets if they can’t end a
dispute over transatlantic oversight of the $700 trillion swaps
industry, a Commodity Futures Trading Commission member said. J. Christopher Giancarlo, in his first speech since joining
the CFTC in June, said the U.S. agency should retract some of
its overseas policies to boost coordination with Europe and
prevent a trade war that would imperil economic growth.
Wall Street Journal:
- U.S. Reports Significant Damage in First Wave of Syria Strikes. American, Arab Warplanes Hit Targets Around Iraq-Syria Border. The first U.S.-led airstrikes on extremist groups in Syria hit
militant leaders, training camps and control centers, U.S. officials
said, promising this was only the start of a long campaign. The
attacks were conducted with the aid of Arab allies, but the U.S. carried
the bulk out of the raids. After the first wave of strikes, the U.S.
said it conducted follow-on attacks during the day Tuesday that hit two
Islamic State...
Fox News:
MarketWatch.com:
Zero Hedge:
Business Insider:
- CLIFF ASNESS: Hedge Funds Aren't Really 'Hedge' Funds. Asness said hedge funds aren't, "diversifying
as they should be... So I will tell you, I think hedge funds don't
hedge enough... They don't fully hedge, which makes them less of a
diversifier and less of a good deal."
Reuters:
Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.9Brazil cuts 2014 GDP growth forecast, keeps fiscal goal
Australian Financial Review:
- Fees on foreign property buyers could raise $400m. Hitting foreign property buyers with a modest application fee could
generate more than $400 million to fund a crackdown on illegal purchases
blamed for pricing locals out of the market. A government-dominated parliamentary committee is actively considering whether to impose fees of as much as $1500 per purchase. The Reserve Bank of Australia will publish its official six-monthly
financial stability review on Wednesday, which is expected to lay out
official concerns about the property market.
21st Century Business Herald:
- China Halts LGFV Private Bond Registration. Chinese regulator has
suspended registration for private placement of bonds from local
government financing vehicles, citing a person familiar with the matter.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 96.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 65.0 +1.5 basis points.
- NASDAQ 100 futures +.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- New Home Sales for August are estimated to rise to 430K versus 412K in July.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+470,000 barrels versus a +3,673,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -154,550 barrels versus a
-1,635,000 barrel decline the prior week. Distillate Supplies are
estimated to rise by +731,820 barrels versus a +279,000 barrel gain the
prior week. Finally, Refinery Utilization is estimated to fall by -.54%
versus a -.9% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Evans speaking, Fed's Loretta speaking, German IFO Business
Climate Index, weekly MBA Mortgage Applications report, $35B 5Y T-Note
auction and the (NWL) analyst day could also impact trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by real estate and technology
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: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.59 +6.57%
- Euro/Yen Carry Return Index 146.24 +.16%
- Emerging Markets Currency Volatility(VXY) 7.38 -.40%
- S&P 500 Implied Correlation 53.43 +5.16%
- ISE Sentiment Index 78.0 +32.20%
- Total Put/Call 1.07 +.94%
Credit Investor Angst:
- North American Investment Grade CDS Index 59.98 +2.04%
- European Financial Sector CDS Index 59.66 +3.11%
- Western Europe Sovereign Debt CDS Index 28.29 +6.65%
- Asia Pacific Sovereign Debt CDS Index 64.66 +1.94%
- Emerging Market CDS Index 258.13 +.11%
- China Blended Corporate Spread Index 307.85 +.86%
- 2-Year Swap Spread 24.75 +.25 basis point
- TED Spread 22.75 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -8.25 +2.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .00% unch.
- Yield Curve 200.0 -2.0 basis points
- China Import Iron Ore Spot $79.40/Metric Tonne -.50%
- Citi US Economic Surprise Index 21.10 +.1 point
- Citi Emerging Markets Economic Surprise Index -18.60 +3.2 points
- 10-Year TIPS Spread 2.02 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -105 open in Japan
- DAX Futures: Indicating -14 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- ‘Imminent Attack’ in U.S. Prompted Airstrikes on Khorasan.
Airstrikes in Syria against the extremist Khorasan group were prompted
by planning for an “imminent” terror attack on U.S. soil, the Pentagon
said. “We believe the individuals plotting and planning it were
eliminated” in the eight U.S. airstrikes overnight, Rear Admiral
John Kirby, the Pentagon spokesman, said today in an interview with
ABC’s “Good Morning America” program. Amid attention on the threat from
Islamic State in Iraq and Syria, Khorasan has emerged in recent weeks as
a more immediate peril in the view of the U.S. intelligence community
because it’s more focused on attacking America and Europe.
- U.S. Estimates 1.4 Million Ebola Cases in Worst Scenario. Without better containment of the Ebola outbreak, there may
be 550,000 to 1.4 million cases in Liberia and Sierra Leone by January,
according to a new estimate published today by the U.S. Centers for
Disease Control and Prevention. The range is based on how well
cases have been reported and identified, the Atlanta-based CDC said. It
also assumes a failure of public health efforts and a lack of additional
resources to control the outbreak, aspects governments and
international aid agencies are working to improve.
- German Factory Growth at 15-Month Low in Sign of Uneven Economy. German manufacturing expanded at
the slowest pace in 15 months in September as new orders fell, signaling uneven momentum in Europe’s largest economy. Markit
Economics said its Purchasing Managers Index fell to 50.3 from 51.4 in
August, the weakest since June 2013. Economists surveyed by Bloomberg
News predicted a drop to 51.2.
- Ready for Rate Riot? Emerging Markets Set to Follow Fed.
Investors bracing for higher interest rates from the Federal Reserve in
2015 need to expand their horizons or risk being caught off-guard. Bank
of America Merrill Lynch economists suggest 12 of the 16
inflation-targeting emerging-market central banks they monitor will
raise rates in the next year, and many will do so by more than markets
anticipate. Mexico, Thailand, Hungary, and Israel are among the most
likely to surprise, economists Marcos Buscaglia and Ana Madeira said in a
Sept. 12 report to clients. Following the Fed, even at the risk
of crimping growth, would represent an effort to prevent a spike of
inflation and keep attracting foreign cash.
- Europe Stocks Fall Most in 11 Weeks as AstraZeneca Drops. (video) European stocks fell the most in eleven weeks as health-care companies tumbled amid concern tougher American tax rules will erode their takeover appeal and as manufacturing growth slowed in the euro area. All the 19 industry groups on the Stoxx Europe 600 Index declined. Shire Plc and AstraZeneca Plc lost at least 2.5 percent after the U.S. made it harder for companies to move their tax base abroad. Raiffeisen Bank International AG (RBI), the foreign lender with most at risk in Ukraine and Russia, plunged the most since September 2011 after predicting an annual loss. Tate & Lyle Plc (TATE) tumbled the most in almost seven years after forecasting annual profit that missed analysts’ estimates. The Stoxx 600 slid 1.4 percent to 341.89, its biggest retreat since July 8.
- Iron Ore Falls Below $80 to Lowest Since 2009 on China.
Iron ore slumped below $80 a metric ton for the first time in five
years on speculation that China’s slowing economic growth will curb
demand in the world’s biggest user, exacerbating a global surplus. Ore
with 62 percent content delivered to Qingdao, China, fell 0.5 percent
to $79.69 a dry ton, the lowest level since Sept. 16, 2009, according to data from Metal Bulletin Ltd. The drop followed seven weeks of declines as the steelmaking raw
material had the longest run of losses since May.
- Gold Rebounds From Eight-Month Low Amid Syria Airstrikes.
Gold futures for December delivery added 0.3 percent to
settle at $1,222 an ounce at 1:37 p.m. on the Comex in New York.
Prices reached $1,208.80 yesterday, the lowest for a most-active
contract since Jan. 2, and ended 2013 at $1,202.30.
- Adding Off-Balance Sheet Leverage to Increase Loan Gains. It’s widely known that corporate-loan buyers want bigger returns.
What’s less known is that they’re increasingly using methods that may
mask the extra risk they’re assuming. An example can be found in
a suddenly popular creation called a senior secured loan program, which
allows a couple of investment firms to pool money to lend to
speculative-grade companies and then divvy up risk and return. The
firms involved range from small -- places like Solar Senior Capital
Ltd. and New Mountain Finance Corp. -- to giants like Pacific Investment
Management Co. and General Electric Co.’s GE Capital unit. The off-balance sheet facilities also effectively “distort leverage”
ratios reported by BDCs, according to a Fitch Ratings report published
yesterday. While these firms are restricted in how much they can borrow
directly, they can invest in structures such as these loan partnerships
that typically use leverage to enhance returns.
- Bullard Says ‘Natural’ to Drop Fed’s Rate Pledge Next Month.
Federal Reserve Bank of St. Louis President James Bullard said the
central bank may need to drop its pledge next month to keep interest
rates low as so-called quantitative easing is brought to a close. “I
thought it was premature to try to remove ‘considerable time’ from the
statement because QE hasn’t ended yet,” Bullard told reporters at a
conference in St. Louis, referring to the last meeting of the Federal
Open Market Committee on Sept. 16-17. “A more natural juncture would probably be the October
meeting” when “QE is projected to end.”
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- WTO cuts world trade growth forecasts for 2014 and 2015. Global goods trade will grow less than hoped this year and next, and
factors including regional conflicts and the Ebola outbreak are putting a
quick return to stronger growth at risk, the World Trade Organization
said on Tuesday. Trade in goods will grow by 3.1
percent this year, much less than the 4.7 percent the WTO forecast in
April. It cited "weaker-than expected GDP growth and muted import demand
in the first half," according to a statement. Trade was likely to grow 4.0 percent in 2015 rather than
the 5.3 percent expected previously, still far below the 20-year average
of 5.2 percent and "risks abound in the form of geopolitical tensions,
regional conflict and health crises (Ebola)".
Style Underperformer:
Sector Underperformers:
- 1) Oil Tankers -2.03% 2) Medical Equipment -1.52% 3) HMOs -1.51%
Stocks Falling on Unusual Volume:
- GEL, ASNA, CRR, KMX, TSRO, DFRG, HCLP, CLX, ABBV, EMES, TNET, VPRT, COV, SNN, MDT, AZN, AN, AVY, TRP, DL, SFL, UVV, GSK, VNOM, ORCL, AVNR, THOR and EMES
Stocks With Unusual Put Option Activity:
- 1) KMX 2) XLK 3) BBBY 4) AMAT 5) CSCO
Stocks With Most Negative News Mentions:
- 1) MDT 2) UPS 3) KMX 4) WHR 5) BID
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.39% 2) Gaming +.73% 3) Coal +.61%
Stocks Rising on Unusual Volume:
- CF, SLXP, TKMR, AMBA, GDP and SGMO
Stocks With Unusual Call Option Activity:
- 1) JWN 2) NLY 3) CF 4) CODE 5) CCL
Stocks With Most Positive News Mentions:
- 1) CCL 2) NFLX 3) BTU 4) AAPL 5) DDD
Charts:
Evening Headlines
Bloomberg:
- U.S. Conducts First Airstrikes in Syria on Islamic State. The
U.S. conducted its first airstrikes in Syria, a barrage of attacks
joined by partner nations in a major expansion of President Barack
Obama’s effort to “degrade and ultimately destroy” Islamic State. “U.S. military and partner nation forces are undertaking military action
against ISIL terrorists in Syria using a mix of fighter, bomber and
Tomahawk Land Attack Missiles,” Rear Admiral John Kirby, the Pentagon
press secretary, said tonight in an e-mailed statement. While Kirby said he couldn’t provide any details because “these
operations are ongoing,” the partner nations joining in the attacks were Saudi Arabia, Jordan, the United Arab Emirates and Bahrain, the Washington Post said, citing two U.S. defense officials it didn’t identify.
- China Beige Book Shows Economy Stuck in Low Gear. China’s economy remained stuck in
“low gear” this quarter, with struggling retail and
residential real-estate industries countering improvements in
manufacturing and transportation, a private survey showed. Growth in investment slowed further, borrowing costs rose
and the share of firms applying for and getting bank loans
remained at “rock bottom levels,” according to the China Beige
Book, a report published quarterly by New York-based China Beige
Book International. In contrast, hiring picked up and corporate
profit margins improved, suggesting widespread government
efforts to reignite growth are unlikely, it said.
- China Police Equipment Aids Rights Violations: Amnesty. More
than 130 Chinese companies are
making and selling equipment that can be used for torture, fueling
human-rights violations across Africa and Asia, according to a report by
Amnesty International and the Omega Research Foundation. The number of companies involved in the production and
trade of potentially dangerous law enforcement equipment has
risen from 28 a decade ago, according to the report, entitled
“China’s Trade in Tools of Torture and Repression.”
- Asia Stocks Pare Drop as Copper Rises on China Flash PMI.
Asian stocks pared declines, with a regional index near a four-month
low, and copper climbed as a preliminary gauge of Chinese manufacturing
unexpectedly climbed. The price of insuring Asian bonds against
default increased. The MSCI Asia Pacific excluding Japan Index was
little changed by 10:19 a.m. in Hong Kong, trimming a drop of as much
as 0.3 percent.
- Commodities Drop Signals Global Growth Concern: Chart of the Day. The slump in commodity prices to a
five-year low signals investors are cautious about the strength
of the global economy even as U.S. equities rise to a record. The
CHART OF THE DAY shows the Bloomberg Commodity Index of 22 raw materials
slipped 5.6 percent this year. Brent crude is down 12 percent and
touched a two-year low last week, while iron ore at the Qingdao port in
China plunged 41 percent to the
lowest since 2009.
Wall Street Journal:
- Obama Resists Linkage of Mideast Goals. U.S., Some Allies See Signs Tehran Seeking to Link Nuclear Talks and Combating Islamic State. The Obama administration's primary objectives in the Middle
East—containing the Islamic State militant group and countering Iran's
nuclear program—are coming into conflict with each other, U.S., European
and Arab officials say. The White House has insisted that the
two issues are entirely separate. But while the U.S. is seeking a role
for Iran in the fight against the Islamic extremists, Tehran is chafing
at what it...
- New Level of Smartphone Encryption Alarms Law Enforcement. Moves by Apple(AAPL) and Google(GOOG) Are Latest Fallout From Snowden's Disclosures. Moves by Apple Inc. and Google Inc. to put some smartphone data out
of the reach of police and the courts are raising alarms inside U.S.
law-enforcement agencies, current and former officials say. Several
officials in Washington said they were bracing for a confrontation with
Silicon Valley on the issue, the latest fallout from the revelations by
former National Security Agency contractor Edward Snowden about
government...
- A Pro-Family, Pro-Growth Tax Reform by Mike Lee and Marco Rubio. Two simple income-tax brackets: 15% and 35%. End the marriage penalty and increase the child tax credit. Too many Americans believe the American dream is slipping away for them
and their children. They see their cost of living rise while their
paychecks remain stagnant. They see an economy that benefits
stockbrokers but not stock clerks.
Fox News:
- US launches first wave of bombing strikes over Syria. The United States launched its first wave of bombing attacks over
Syria early Tuesday against an expected 20 to 25 Islamic State targets,
U.S. officials said. The operation, expected to last several hours, involved planes
launched from U.S.destroyers in the Persian Gulf and Red Sea. Planes
from five Arab countries also participated in the strikes. The first explosions from Tomahawk missiles were heard in northern
Syria. Targets were expected to include command and control centers,
training camps and weapons depots.
MarketWatch.com:
- The iron ore industry is headed for a brutal shakeout as prices collapse. A bloodbath in iron-ore prices could get much uglier before things turn around. And it’s not all China’s fault, either.
While Chinese demand, a major force in the market, has slowed, big iron
ore producers, including Brazil’s Vale, BHP Billiton, Rio Tinto and
Fortescue plan to boost production and shipments despite the glut. Australian
producers BHP Billiton, Rio Tinto and Fortescue aim to
boost output by 170 million tons this year, equal to around 7% of 2013
global supply and 11% of global production outside China, notes Capital
Economics. Vale and Anglo-American are also looking to increase output,
too. Why are they boosting production in the face of falling demand?
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.9Brazil cuts 2014 GDP growth forecast, keeps fiscal goal
China Securities Journal:
- China Should Cut Reliance on Property Sector. The country should
accept GDP growth of about 7-7.5%, citing IMF Deputy Managing Director
Zhu Min. To maintain sustainable growth, China shouldn't overly rely on
monetary or fiscal policies to boost economy.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 95.0 +4.5 basis points.
- Asia Pacific Sovereign CDS Index 63.50 +1.0 basis point.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (KMX)/.67
- (BBBY)/1.14
- (CPRT)/.41
- (SCS)/.23
- (AIR)/.38
- (CCL)/1.44
Economic Releases
9:00 am EST
- FHFA House Price Index for July is estimated to rise +.5% versus a +.4% gain in June.
9:45 am EST
- Preliminary Markit US Manufacturing PMI for September is estimated to rise to 58.0 versus 57.9 in August.
10:00 am EST
- The Richmond Fed Manufacturing Index for September is estimated to fall to 10 versus 12 in August.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bullard speaking, Fed's Powell speaking, Fed's George speaking,
Eurozone PMI, $29B 2Y T-Note auction, weekly US retail sales reports,
(URBN) investor day and the (NSC) analyst conference could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by retail and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
