Evening Headlines
Bloomberg:
- Hong Kong Protesters Block Roads as Leaders Set Deadline. Tens of thousands of protesters filled streets in Hong Kong through
the night to press for open elections and the resignation of Chief
Executive Leung Chun-ying, as student leaders set an Oct. 1 deadline for
their demands to be met. While their numbers had thinned this
morning, demonstrators remained in the main protest area near government
headquarters in the Admiralty district, as well as in Causeway Bay and
Mong Kok. Main roads through the central business district remain closed
and some bus routes have been suspended, the government said in a
statement late yesterday.
- Islamic State Shells Hit Turkey Amid Syria Border Fight. Turkish
tanks deployed along the border with Syria as shells fired by Islamic
State militants landed inside Turkey, injuring five people including two
soldiers. One of the mortar shells hit near the border crossing of
Mursitpinar, close to a group of journalists and Turkish security
forces, CNN-Turk said. Another shell landed near a refugee camp, about a
kilometer inside
Turkey. Regular explosions and gunfire could be heard from Turkish
territory as Turkish troops returned fire, state-run Anadolu Agency
said.
- China Factory Gauge Falls From Initial Reading as Growth Slows. A Chinese manufacturing gauge fell from an initial reading a week ago
as a property slump weighs on the world’s second-largest economy. The
Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics
for September was at 50.2, lower than the flash reading of 50.5 and
unchanged from August. Numbers
above 50 signal expansion.
- Japan’s Output Unexpectedly Slumps as Retail Sales Rise. Japan’s
output unexpectedly fell while stronger retail sales and an improving
job market showed resilience in the world’s third-biggest economy as
Prime Minister Shinzo Abe weighs another sales-tax increase.
Industrial production declined 1.5 percent in August from July, compared
with the median estimate of 31 economists surveyed by Bloomberg News
for a 0.2 percent
gain. Retail sales increased 1.9 percent from the previous month, as the
jobless rate slid to 3.5 percent.
- Asian Stocks Slide on Hong Kong as Kiwi Drops With Crude.
Asian stocks fell, with the regional index headed for its biggest
monthly drop since May last year amid concern over tensions in Hong Kong
and after an unexpected decline in Japanese factory output. New
Zealand’s dollar dropped to near a one-year low as crude oil declined. The
MSCI Asia Pacific Index slipped 0.6 percent by 10:01 a.m. in Tokyo,
pushing it down 5.1 percent in September. Japan’s Topix (TPX) index lost
0.9 percent, trimming its quarterly gain.
- Iron Ore Heads for Record Run of Quarterly Losses as Glut Builds.
Iron ore will complete a third straight quarterly decline today to post
the longest losing run on record as a slowdown in China’s economy curbs
demand growth in the largest buyer and worsens a global surplus. Ore
with 62 percent content delivered to Qingdao, China lost 17 percent
this quarter to $77.97 a dry metric ton, the lowest price since
September 2009, according to data from Metal Bulletin Ltd. That follows a
19 percent drop between April and June and 13 percent retreat in the
first three months. Thesteel-making ingredient is headed for the longest
stretch of
quarterly losses since the data series began in 2009.
- Gluts Spur Investor Exit Signaling Prolonged Price Slumps. Investors are betting that the worst isn’t over for commodity prices that already are the lowest in five years. About
$873 billion was pulled from U.S. exchange-traded products backed by
raw materials this month, the most since April, data compiled by
Bloomberg show. Expanding surpluses, a surging dollar and slowing growth
in China helped send the Bloomberg Commodity Index to the lowest since
2009, reversing first-half gains fueled by a polar vortex and dead pigs
in the U.S., and escalating tensions in Ukraine and the Middle East.
Wall Street Journal:
- China President Xi Jinping Faces Stark Choices Over Hong Kong Protests. Beijing
Wary of Conjuring Memories of Tiananmen Square. Massive democracy
rallies in Hong Kong have offered Chinese President Xi Jinping stark
choices between concession and crackdown, either of which pose problems
for his government—and his own political standing. Throughout the
weekend and into Monday, protesters, mostly students, confronted police
and halted business activity in parts of Hong Kong, and as dawn broke
Tuesday remained spread along major thoroughfares. Police fired tear gas
and pepper spray to disperse the thousands of students gathered outside
government headquarters on Sunday, but the protesters regrouped and
re-emerged in greater numbers, choking off roadways in the heart of the
city.
- The Obama-Military Divide. What should senior
officers do if experience tells them that the president's plan to defeat
ISIS is unworkable without U.S. combat troops?
CNBC:
Zero Hedge:
Business Insider:
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 101.50 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 73.25 +4.0 basis points.
- NASDAQ 100 futures -.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- ISM Milwaukee for September is estimated to rise to 61.0 versus 59.63 in August.
- S&P/CS 20 City MoM for July is estimated unch. versus a -.2% drop in June.
9:45 am EST
- Chicago Purchasing Manager for September is estimated to fall to 62.0 versus 64.3 in August.
10:00 am EST
- Consumer Confidence for September is estimated to rise to 92.5 versus 92.4 in August.
Upcoming Splits
Other Potential Market Movers
- The
China Manufacturing PMI, German Unemployment Change, weekly US retail
sales reports, (INTU) investor day, (MCO) investor day and the (TK)
investor day could also impact trading today.
BOTTOM LINE: Asian
indices are mostly lower, weighed down by industrial 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: Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.33 +9.97%
- Euro/Yen Carry Return Index 144.99 +.19%
- Emerging Markets Currency Volatility(VXY) 8.26 +6.44%
- S&P 500 Implied Correlation 56.62 +9.35%
- ISE Sentiment Index 79.0 -3.66%
- Total Put/Call .87 -22.32%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.75 +3.72%
- European Financial Sector CDS Index 67.08 +6.28%
- Western Europe Sovereign Debt CDS Index 30.44 +8.40%
- Asia Pacific Sovereign Debt CDS Index 71.99 +4.14%
- Emerging Market CDS Index 279.16 +5.93%
- China Blended Corporate Spread Index 311.26 +.13%
- 2-Year Swap Spread 24.75 +2.25 basis points
- TED Spread 22.75 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -10.0 -1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .00% unch.
- Yield Curve 192.0 -3.0 basis points
- China Import Iron Ore Spot $77.70/Metric Tonne -1.15%
- Citi US Economic Surprise Index 24.90 -2.0 basis points
- Citi Emerging Markets Economic Surprise Index -14.30 +2.9 points
- 10-Year TIPS Spread 1.95 -6.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -25 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- HK Protesters Vow More to Come Unless Leader Leung Quits. Pro-democracy protesters vowed to press ahead with demonstrations
unless Hong Kong’s top official steps down, with thousands of people
surrounding government offices after violent clashes paralyzed the city
center. Protesters dressed in black have gathered in the
Admiralty district to demand free elections, while blocking a main road
into the central business area. Rallies in the shopping neighborhoods of
Causeway Bay and Mong Kok are picking up after a lull in the morning,
leading banks to shut branches and deterring tourists.
- Merkel Says EU, U.S. May Be Facing Long Ukraine Crisis. Chancellor
Angela Merkel invoked the 40-year history of communist East Germany as
showing that the European Union and the U.S. may be in for a long haul
in their face-off with Russia over its actions in Ukraine. “I don’t see
any change at the moment regarding Russia’s position,” Merkel said
at a joint news conference with Finland’s Prime Minister Alexander Stubb
today in Berlin. “I’m from former East Germany. Weneeded 40 years to
overcome East
Germany. Sometimes in history one has to be prepared for the
long haul, and not ask after four months if it still makes sense
to keep up our demands.”
- Ukraine Army Sees Worst Day Since Truce as Battles Flare. Ukraine’s
army endured its deadliest day since signing a cease-fire with
pro-Russian militants 3 1/2 weeks ago, threatening to unravel a truce
that calmed the six-month conflict in the nation’s east. Nine Ukrainian servicemen were killed in attacks during the
last 24 hours, including an assault by a separatist tank on a
government armored personnel carrier near the airport of
Donetsk, the combat zone’s largest city, military spokesman
Andriy Lysenko said today. Twenty-seven soldiers were wounded as
troops repelled two “powerful” storming attempts by rebel
fighters, killing 50 militants, he said. The rebels do not
release casualty figures.
- Russia’s RTS Slides Into Bear Market as Sistema Tumbles.
Russia’s dollar-denominated RTS (RTSI$) Index entered a bear market as a
court ruling restricting AFK Sistema from receiving dividend payments
from its OAO Bashneft unit wiped a quarter off the holding’s value. The
RTS dropped 2.6 percent to 1,126.21 by the close in Moscow, the lowest
since April 25 and taking its decline from a June 24 high to 21 percent.
The benchmark Micex Index (INDEXCF) fell 1.8 percent to 1,408.28.
Sistema, controlled by the billionaire placed under house arrest in a
probe into alleged money laundering, tumbled 25 percent to 12.68 rubles.
The stock has lost 65 percent since Vladimir Evtushenkov’s Sept. 16
detention.
- Ibovespa Leads World Losses as Real Tumbles After Poll. The Ibovespa plunged the most among
global stock benchmarks while the real slumped to a 13-month low
after a poll showed increased support for President Dilma Rousseff’s re-election bid. The Ibovespa declined 3.4 percent to 55,283.69 at 12:52 p.m. in Sao Paulo, set for the biggest decline since July 2013.
State-controlled oil producer Petroleo Brasileiro SA contributed the
most to the gauge’s decline, tumbling as much as 8.9 percent. The real fell 1.1 percent to 2.4466 per U.S. dollar,
the most among 31 major currencies tracked by Bloomberg.
Traders are paring bets on the chances a new government
will be elected next month and jump-start economic growth after
the country fell into a recession in the first half of the year.
- Europe Stocks Fall as Banks Drop Amid Hong Kong Protests.
A decline in bank shares led European stocks lower, with HSBC Holdings
Plc weighing on the benchmark index amid pro-democracy protests in Hong
Kong. HSBC and Standard Chartered Plc slid more than 1.5 percent each as
they shuttered some Hong Kong branches as protesters stayed on the
streets after clashes with police. Commerzbank AG fell 4.2 percent after
a person with knowledge of the matter said the lender faces a U.S.
inquiry into whether it broke anti-money-laundering laws. Balfour Beatty
(BBY) Plc slid to its lowest price in more than 10 years after
signaling the outlook for construction earnings has worsened. The Stoxx Europe 600 Index slid 0.4 percent to 340.99 at the close of trading, paring losses of as much as 0.9 percent.
- Nickel Poised for Bear Market as Prices Head for Quarterly Loss.
Nickel was poised to fall into a bear market after prices tumbled this
quarter on signs an ore-export ban by the world’s biggest producer
hasn’t depleted supplies as fast as forecast. The metal in London retreated as much as 2.5 percent today and is down 12 percent this quarter.
Indonesia introduced restrictions on shipments in January, sending
prices to the highest in more than two years. Nickel has since plunged
as
analysts from Credit Suisse Group AG to Citigroup Inc. said the
shortfall will be less than expected. London Metal Exchange
stockpiles are at the highest in records going back to 1979.
- Bond Warnings Rise as ’94 Parallels Seen in Fed-CPI Split. For
bond investors who are
convinced a lack of inflation will keep the Federal Reserve from
upending Treasuries when it begins to raise interest rates, there’s one
parallel in history that suggests they still have cause for concern.
The last time consumer-price increases were slowing before the Fed
started increasing borrowing costs was in 1994 -- when Treasuries lost
3.3 percent in what was then the biggest selloff on record. At the time,
Fed Chairman Alan Greenspan shocked the
financial world by doubling the benchmark rate to 6 percent,
even though inflation was at a seven-year low of 2.5 percent.
- Hedge Funds Score With Small-Cap Shorts in Russell Drop. Hedge
funds are finally getting
something right in the equity market. Large speculators tracked by the
Commodity Futures Trading Commission have pushed short sales on the
Russell 2000 Index (RTY) of the smallest shares to the highest in more
than three years, just as the gauge is poised for its worst quarterly
return since 2011. Bearish bets rose since March in the index, whose companies have a median value that’s 4 percent the size of
Standard & Poor’s 500 Index stocks.
- California College Students Must Now Consent Before Sex. Colleges in California that receive state funding must bolster
policies on campus sexual assault under laws signed yesterday, the first
in the U.S. requiring students give consent before they have sex.
The bill, signed by Governor Jerry Brown, requires public universities
and private colleges that get financial grants to mandate students agree
verbally or through some other
affirmative signal before having sex.
CNBC:
ZeroHedge:
Business Insider:
Telegraph:
Nikkei:
- Keidanren Says Further Yen Weakening Would Hurt Japan. Sadayuki
Sakakibara, head of Japan's business lobby Keidanren, said further
weakening of the yen would have a negative impact on the Japanese
economy. Sakakibara said a weak yen would increase gasoline and raw
materials prices boosting costs for households and small businesses.
Style Underperformer:
Sector Underperformers:
- 1) Gaming -2.41% 2) Steel -1.92% 3) I-Banks -1.32%
Stocks Falling on Unusual Volume:
- CVEO, TXTR, PTY, JNS, ELGX, PGP, CMTL, ADHD, SBRA, POWL, ATW, SGEN, PBR, BHP, CSWC, MDP, CTRP, BGC, GDOT, CMCM, AVY, CM, PHI, INVN, AME, RUBI, WMS, RPTP and XLS
Stocks With Unusual Put Option Activity:
- 1) DHI 2) OPK 3) ADSK 4) TXN 5) ADBE
Stocks With Most Negative News Mentions:
- 1) MDC 2) AIG 3) WFC 4) TXTR 5) RDC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +.46% 2) Utilities +.24% 3) Biotech +.21%
Stocks Rising on Unusual Volume:
- BAGL, ATHL, TIBX, AMAG, DWA, AGIO, NI, CLVS, GPRO, CONN, AMBA and LPI
Stocks With Unusual Call Option Activity:
- 1) TSN 2) TIBX 3) RUSL 4) ARIA 5) AGN
Stocks With Most Positive News Mentions:
- 1) ECA 2) NI 3) ATHL 4) TIBX 5) DWA
Charts:
Weekend Headlines
Bloomberg:
- Netanyahu to Push Iran as Worse Threat Than Islamic State. Israeli
Prime Minister Benjamin Netanyahu will urge world leaders to keep up
the pressure on Iran over its nuclear program even as they confront the
threat of Islamic State militants in Iraq and Syria. Netanyahu,
addressing the United Nations General Assembly today, will expand on his
Sept. 22 remarks mocking “esteemed commentators in the West” who say
“the major powers need to go easy on Iran’s nuclear program so that Iran
will fight” Islamic
State, according to aides familiar with his speech. They asked
not to be identified because it hasn’t been delivered.
- Turkey Wants Secure Syria Zone as Militants Strike Kurds. Turkish
President Recep Tayyip Erdogan said setting up a “secure zone” inside
Syria is necessary to help refugees return after they fled Islamic
State’s onslaught against Kurdish areas into Turkey. Erdogan’s
remarks to the World Economic Forum in Istanbul may anger Kurdish
officials, who accuse him of siding with Islamic State against the Kurds
in Syria to justify creating a
buffer zone that would smother the autonomous region there. The
Turkish government denies supporting Islamic State or any
militant group.
- Ukraine Warns of Renegade Rebel Attacks Threatening Cease-Fire. Ukraine
warned that groups beyond the control of rebel leaders in the country’s
east were continuing attacks on government forces, undermining a truce
that has mostly held since it was signed this month. Two autonomous rebel units, “Zarya” and “Don,” fired
from long-range artillery at the Ukrainian army near Shchastya,
a town 15 kilometers north of Luhansk, regional Governor
Hennadiy Moskal said Sept. 27 on his website. Ukrainian troops
repelled an attack on the Donetsk airport yesterday, according
to military spokesman Andriy Lysenko.
- Commerzbank Said to Face U.S. Laundering Controls Probe.
Commerzbank AG (CBK), the German lender seeking to resolve a probe into
Iran sanctions violations, also faces a U.S. inquiry into whether it
broke anti-money-laundering laws, according to a person with knowledge
of the situation.
- Hong Kong Dollar, Stocks Slide Amid Protest Crackdown.
Hong Kong’s stocks fell to a two-month low, its currency dropped and
equity-market volatility surged amid the biggest police crackdown on
protesters since the city returned to Chinese rule. The benchmark
Hang Seng Index sank 1.3 percent as of 9:50 a.m. in Hong Kong to the
lowest intraday level since July 18 as developers and retailers tumbled.
The MSCI Hong Kong Index headed for its biggest drop in a year, while a
gauge of stock volatility jumped 15 percent, poised for the steepest
surge since February. The city’s currency slid 0.03 percent to
HK$7.7602 per greenback.
- Asia Stocks Fall, Led by Hong Kong, as Dollar Climbs.
Asian stocks dropped, led by a rout in Hong Kong, after clashes between
police and pro-democracy protesters in the Chinese city. The dollar
extended gains and the cost of insuring debt against default jumped
after U.S. economic data bolstered the outlook for higher interest
rates. The Hang Seng Index lost 2.3 percent by 11:22 a.m. in Tokyo, erasing its gain for the year and dragging the MSCI Asia
Pacific Index to a 0.7 percent decline.
- Iron Ore Seen Weak by Albanese as High-Cost Mines Face Pain. Iron
ore prices that fell to a
five-year low this month are seen staying weak for a sustained period as
supply exceeds demand and China’s economy slows, according to Tom
Albanese, former head of Rio Tinto Group. High-cost producers are
facing a “pain point” at prices of about $80 a metric ton, Albanese,
chief executive officer of London-based Vedanta Resources Plc (VED),
said in interviews with Bloomberg Television and a reporter today. While
low-cost
producers would still be able to make good money in iron ore,
there will be closures of higher-cost mines over time, he said.
- Nickel Poised to Enter Bear Market on Path to Quarterly Loss.
Nickel fell, heading for a bear market, on concern that demand will
slow in China, the biggest metals user, and after Philippine lawmakers
clarified last week they won’t seek an ore-export ban for at least seven
years. The metal in London retreated as much as 2.5 percent and is
down 13 percent this quarter. Profits at industrial companies in
China fell last month for the first time in two years as a
slowdown deepens, data showed Sept. 27.
- Hedge Funds Raise Bullish Cocoa Bets on Ebola Concerns.
Hedge funds raised bullish bets on cocoa before prices climbed to the
highest since 2011 on concern that the deadly Ebola disease will disrupt
supplies from West Africa, which produces 70 percent of global supply.
Money managers raised their net-long positions by the most
in 16 weeks.
- Warren Calls For Hearings on New York Fed Allegations. U.S.
Senator Elizabeth Warren called for a congressional investigation into
allegations that the Federal Reserve Bank of New York had been too
deferential to the institutions it regulated. “Congress must hold oversight hearings on the disturbing issues raised by today’s whistle-blower report when it returns
in November -- because it’s our job to make sure our financial
regulators are doing their jobs,” Warren, a Massachusetts
Democrat and member of the Senate Banking Committee, said in a
statement today.
- Fisher Says Fed Must Weigh Wage Pressures in Setting Rate Policy. The
Federal Reserve mustn’t “fall behind the curve” as it weighs when to
start raising interest rates, Dallas Fed President Richard Fisher said,
citing strengthening U.S. growth and building wage-price pressures.
Fisher, a vocal advocate for tighter monetary policy to
protect against inflation, also said today that two soon-to-be-released
economic reports from his Fed district would “knock
your socks off.”
Wall Street Journal:
Fox News:
- US 'understimated' rise of ISIS, Obama says. President Obama acknowledged Sunday that U.S. intelligence officials
"underestimated" the threat posed by the Islamic State and overestimated
the Iraqi army’s capacity to defeat the militant group.
CNBC:
Business Insider:
Reuters:
Wirtschaftswoche:
- Ifo's Sinn Urges Germany to Act Against ECB ABS Purchases.
Germany should take legal moves to oppose the European Central Bank's
purchase of asset-backed securities, Hans-Werner Sinn, head of the Ifo
economic institute, says in preview of guest editorial to be published
in the coming edition. ECB would exceed its treaty-restricted monetary
mandate with the planned purchases, Sinn said.
Night Trading
- Asian indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 99.0 +4.5 basis points.
- Asia Pacific Sovereign CDS Index 69.25 +4.0 basis points.
- NASDAQ 100 futures -.25%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for August is estimated to rise +.3% versus a +.2% gain in July.
- Personal Spending for August is estimated to rise +.4% versus a -.1% decline in July.
- The PCE Core for August is estimated unch. versus a +.1% gain in July.
10:00 am EST
- Pending Home Sales for August are estimated to fall -.5% versus a +3.3% gain in July.
10:30 am EST
- Dallas Fed Manufacturing Activity for September is estimated to rise to 10.5 versus 7.1 in August.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone Consumer Confidence report, China HSBC Manufacturing PMI,
Deutsche Bank Leveraged Finance Conference, Johnson Rice Energy
Conference, (NI) investor day and the (F) investor day could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity
and financial shares in the region. I expect US stocks to open
modestly lower and to maintain losses into the afternoon. The Portfolio
is 50% net long heading into the week.
