Evening Headlines
Bloomberg:
- Russia Link Said Suspected in White House Computer Attack. U.S. cybersecurity specialists
suspect that Russian government or criminal hackers were
responsible for an attack on an unclassified White House
computer system, according to two American officials. It’s not clear whether the attack was carried out by
Russian government agents or criminals, the officials said
today, speaking on condition of anonymity because they aren’t
authorized to speak to the media. The line between agents and
criminal hackers is sometimes non-existent, they said.
- Mosul’s Children Lured to Islamic State to Swell Ranks. The al-Qaeda breakaway group has lured and coerced hundreds of the
city’s youth into joining its ranks, according to an official from the
Nineveh province’s education department, who asked to be identified as
Abu Marwan for security reasons.
- Brazil Unexpectedly Lifts Rate on Rousseff Vow to Tame CPI. Brazil
unexpectedly raised its key rate for the first time since April, after
President Dilma Rousseff said she would vigorously fight inflation
(BZPIIPCY) in her second term. Policy makers, led by central bank
President Alexandre Tombini, voted 5-to-3 to raise the benchmark Selic
by a quarter-point to 11.25 percent, saying the move would reduce
the cost of ensuring a better inflation outlook in 2015 and 2016. One of
54 economists surveyed by Bloomberg correctly forecast the increase
while the remaining expected the rate to be left unchanged for the
fourth straight meeting.
- China’s Property Prices May Decline Up to 10%, SouFun Says. China property prices may decline as much as 10 percent this year and the slump may extend into 2015,
according to SouFun Holdings Ltd. “Chinese property prices are seeing
an adjustment after the rapid increase in the past two years,” Vincent
Mo, founder
of China’s biggest real estate information website, said in a
Bloomberg Television interview with Haslinda Amin in Singapore
yesterday. “Prices should stabilize by the middle of next
year.”
- ICBC Posts Biggest Jump in Bad Loans Since ’06 on Economy. Industrial
& Commercial Bank of China Ltd., the world’s largest lender by
assets, reported its biggest jump in bad loans since at least 2006 as
the property market slumped and the economy cooled. Nonperforming
loans rose 9 percent in the third quarter from the previous three
months, the Beijing-based bank said in anexchange filing yesterday. Net
income gained 7.7 percent from
a year earlier to 72.4 billion yuan ($11.8 billion), matching
the median analyst estimate in a Bloomberg News survey.
- Dollar Jumps as Fed Ends Bond Buying While Nickel, Crude Retreat.
The dollar climbed to a three-week high after the Federal Reserve
judged the U.S. economy strong enough to end its asset-purchase program.
Industrial metals and oil fell with Hong Kong stocks. The Bloomberg
Dollar Spot Index gained 0.1 percent by 11:01 a.m. in Tokyo, with the
yen weakening 0.2 percent and Indonesia’s rupiah leading emerging-market
currencies lower. Nickel retreated 1 percent and West
Texas Intermediate crude oil slid 0.4 percent. Hong Kong’s Hang Seng
Index dropped 0.3 percent after its biggest two-day rally in seven
months.
Wall Street Journal:
- Democrats Crash-Land the Planet. Republicans are hammering Democrats with the wrecked world their priorities created. Want to know how to really scare a Democratic candidate for Congress on
Halloween? Forget the Sarah Palin mask. Don’t say “Boo!” Just slip up
behind them and whisper, “national security.” They’ll jump from here
into next week’s election.
Fox News:
Zero Hedge:
Business Insider:
Reuters:
- NASA explosion fuels concerns about Russian engines, oversight. The explosion of an Orbital
Science Corp supply rocket over Virginia could
accelerate U.S. efforts to replace aging Russian space
technology with a pricey homegrown rocket engine.
Even before the crash on Tuesday, Orbital had planned to
switch to another engine for future launches, given the age of
Soviet-era motors now in use as well as uncertainty about future
supplies.
- U.S. prosecutors reopen probes against several big banks -NYT. U.S. prosecutors are reopening
investigations into big banks on suspicion they may have violated
agreements under which the institutions settled prior cases against
them, The New York Times reported, citing lawyers briefed with the
matter. With the settlements, the banks avoided criminal prosecution and instead paid fines and implemented reforms. Among the banks
named in the report were Standard Chartered Plc and
Bank of Tokyo-Mitsubishi UFJ.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 111.0 unch.
- Asia Pacific Sovereign CDS Index 64.25 -.5 basis point.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Initial Jobless Claims are estimated to rise to 285K versus 283K the prior week.
- Continuing Claims are estimated to rise to 2352K versus 2351K prior.
- 3Q GDP is estimated to rise 3.0% versus a +4.6% gain in 2Q.
- 3Q Personal Consumption is estimated to rise +1.9% versus a +2.5% gain in 2Q.
- 3Q GDP Price Index is estimated to rise +1.4% versus a +2.1% gain in 2Q.
- 3Q Core PCE QoQ is estimated to rise +1.4% versus a +2.0% gain in 2Q.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen speaking, Japan CPI, German unemployment data, $35B 7Y
T-Note auction, (JNPR) investor day, weekly Bloomberg Consumer Comfort
Index and the weekly EIA natural gas inventory report could also impact
trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 15.32 +6.46%
- Euro/Yen Carry Return Index 143.62 -.09%
- Emerging Markets Currency Volatility(VXY) 7.33 +.83%
- S&P 500 Implied Correlation 58.67 +3.87%
- ISE Sentiment Index 89.0 -3.26%
- Total Put/Call 1.0 +1.01%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.02 +2.43%
- European Financial Sector CDS Index 68.31 +2.10%
- Western Europe Sovereign Debt CDS Index 32.40 -1.49%
- Asia Pacific Sovereign Debt CDS Index 63.92 -1.35%
- Emerging Market CDS Index 251.43 +.87%
- China Blended Corporate Spread Index 330.78 -.86%
- 2-Year Swap Spread 21.5 -4.0 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -8.25 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 183.0 -7.0 basis points
- China Import Iron Ore Spot $79.09/Metric Tonne -.16%
- Citi US Economic Surprise Index 12.50 -.5 point
- Citi Eurozone Economic Surprise Index -37.3 +1.5 points
- Citi Emerging Markets Economic Surprise Index -16.80 +.2 point
- 10-Year TIPS Spread 1.92 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +71 open in Japan
- DAX Futures: Indicating -14 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Style Outperformer:
Sector Outperformers:
- 1) HMOs +1.52% 2) Energy +.95% 3) Oil Service +.69%
Stocks Rising on Unusual Volume:
- RGLS, SWI, AMED, EA, GT, NFX, MWA, CEB, GPRE, X, BAS, SN, TQNT, CJES and TSS
Stocks With Unusual Call Option Activity:
- 1) VRX 2) ARCP 3) ACAS 4) WMGI 5) INVN
Stocks With Most Positive News Mentions:
- 1) RL 2) HES 3) WLP 4) AMGN 5) COP
Charts:
Evening Headlines
Bloomberg:
- Ukraine Seeks Russia Gas Deal After Pro-Europe Poll Win. Ukraine
resumes talks with Russia on securing winter gas supplies after voters
in the war-torn country overwhelmingly elected pro-European parties to
power. Ukrainian Energy Minister Yuri Prodan is meeting his Russian
counterpart Alexander Novak in Brussels today in talks brokered by EU
Energy Commissioner Guenther Oettinger. Ukraine and the European Union
are seeking to avoid a repeat of 2006 and 2009, when disputes over
volumes and prices prompted Russian gas exporter OAO Gazprom (GAZP) to
cut flows, leading
to shortages across the continent amid freezing temperatures.
- China Shadow Banking Shifted to Insurers Alarms Moody’s. A
doubling in the trust holdings of China’s insurers has prompted ratings
companies to warn the industry may be taking on too much shadow banking
default-risk. Insurers held 281 billion yuan ($46 billion) of trust
products on June 30, surging from 144 billion yuan at the end of last
year, China Insurance Regulatory Commission data show. The
companies’ shadow bank assets, including wealth management products and
other financing kept off commercial lenders’ balance sheets, reached
1.14 trillion yuan, or 13 percent of their investments, Standard &
Poor’s estimated, adding that this made them “vulnerable in times of
stress.”
- Rajoy Apologizes as New Wave of Graft Allegations Roils Spain. Prime
Minister Mariano Rajoy apologized to the Spanish people yesterday amid
mounting public outrage at a new wave of corruption allegations against
officials from his party. All members of the governing People’s Party
among the 51 arrested this week on bribery allegations have had their
party membership suspended and will be expelled if the charges are
proved, Rajoy told the Senate in Madrid. “I understand and share fully the indignation of so many
Spaniards at the accumulation of scandals,” Rajoy said. “In
the name of the People’s Party I want to apologize to all
Spaniards for having appointed to positions for which they were
not worthy those who would seem to have abused them.”
- Asian Stocks Advance for Fourth Day After U.S. Rally.
Asian stocks rose for a fourth day, after the Standard & Poor’s 500
Index closed near a record, amid optimism about U.S. earnings and
economic data before a Federal Reserve policy announcement. The MSCI Asia Pacific Index (MXAP) gained 0.4 percent to 139.32 as
of 9:01 a.m. in Tokyo, before markets opened in China and Hong
Kong.
- Brown Plans Senate Hearing on ‘Disturbing’ New York Fed Tapes. U.S. Senator
Sherrod Brown plans to hold a hearing on Federal Reserve Bank of New
York oversight of financial firms after a former examiner alleged her
colleagues went too easy on firms including Goldman Sachs Group Inc. “That report raised enough questions that we want to know
the answers,” the Ohio Democrat said in an interview today in
Columbus. “I’m willing to say there’ll be a hearing.”
Wall Street Journal:
- Fast Traders Are Getting Data From SEC Seconds Early. Studies Show Lag in Posting to Website.
Hedge funds and other rapid-fire investors can get access to
market-moving documents ahead of other users of the Securities and
Exchange Commission’s system for distributing company filings, giving
them a potential edge on the rest of the market.
- Bank Regulator Warns of Lax Standards on Auto Loans. A major banking regulator is sounding the alarm about lax car lending
standards that are leading to a new round of losses for banks. There’s been a spike in the average size of car loans that banks and
other lenders are writing off as a loss following months of unpaid bills
by borrowers, an official of the Office of the Comptroller of the
Currency, a unit of the Treasury Department, said in a speech at a
collections-industry conference on Tuesday.
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 goaFed's Williams: Can't wait too long to raise rates
Telegraph:
Economic Information Daily:
- Chinese Provinces Say Slowdown Pressure Increases. Eight Chinese
provinces including Shandong, Jiangsu and Sichuan are asking officials
to intensify efforts in 4Q and seek to meet the full-year economic
target, citing provincial govt. records. China should still keep
monetary policy prudent in 2H, says Zheng Liansheng, researcher at
Chinese Academy of Social Sciences.
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 111.0 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 64.75 -2.25 basis points.
- NASDAQ 100 futures -.37%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+3,130,000 barrels versus a +7,111,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -663,640 barrels versus a
-1,299,000 barrel decline the prior week. Distillate supplies are
estimated to fall by -763,640 barrels versus a +1,049,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to rise +.17%
versus a -1.4% decline the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark Fed Funds rate at .25%.
- The Fed's QE3 pace for October is estimated to fall to $0B versus $15B in September.
Upcoming Splits
Other Potential Market Movers
- The
$35B 5Y T-Note auction, weekly MBA mortgage applications report, (KSS)
investor conference and the (GCI) investor meeting could also impact
trading today.
BOTTOM LINE: Asian indices are 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 mixed. The Portfolio is 50%
net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 15.07 -6.05%
- Euro/Yen Carry Return Index 143.75 +.55%
- Emerging Markets Currency Volatility(VXY) 7.25 -1.89%
- S&P 500 Implied Correlation 58.78 -6.40%
- ISE Sentiment Index 98.0 -22.22%
- Total Put/Call .98 +2.08%
Credit Investor Angst:
- North American Investment Grade CDS Index 64.57 -.65%
- European Financial Sector CDS Index 66.81 -.80%
- Western Europe Sovereign Debt CDS Index 32.60 -.31%
- Asia Pacific Sovereign Debt CDS Index 65.31 -2.57%
- Emerging Market CDS Index 250.33 -3.37%
- China Blended Corporate Spread Index 333.67 +.55%
- 2-Year Swap Spread 25.5 -.75 basis point
- TED Spread 22.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -7.75 -.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +2.0 basis points
- Yield Curve 190.0 +2.0 basis points
- China Import Iron Ore Spot $79.22/Metric Tonne -.38%
- Citi US Economic Surprise Index 13.0 +1.0 point
- Citi Eurozone Economic Surprise Index -38.8 +2.5 points
- Citi Emerging Markets Economic Surprise Index -17.0 +.3 point
- 10-Year TIPS Spread 1.91 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +110 open in Japan
- DAX Futures: Indicating +20 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/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 Leader Says Rebel Vote Plan a Threat to Peace. Ukrainian President Petro Poroshenko, in talks to form a coalition government after
weekend elections, said Russia-backed rebels are threatening a
fragile truce by planning to hold their own polls. “The quasi-elections announced by the Donetsk and Luhansk
People’s Republics don’t comply with the Minsk protocol and
contradict its spirit,” Poroshenko said in a statement on his website today. “They’re threatening the entire peace process.”
- Ruble Weakens to Record on Concern Russia to Expedite Free Float.
The ruble weakened to a record for
the fifth day on concern Russia will quicken its move to a free float
after more than $20 billion of interventions this month failed to halt
the depreciation. The currency slid 0.6 percent to 47.7112 against the central bank’s target dollar-euro basket by 6 p.m. in Moscow,
bringing this year’s decline to 19 percent. Ten-year government
bond yields approached five-year highs as the Finance Ministry
said it was scrapping its third straight debt auction.
- Goldman Sachs Says China Developers Still ‘Riskiest'.
Goldman Sachs Group Inc. says
investors should avoid Chinese developer notes because they’re
still the riskiest part of Asia’s bond market even as the debt
recovers from the biggest selloff in 15 months.
- Euro Outflows at Record Pace as ECB Promotes Exodus. For
European Central Bank President Mario Draghi, the price of a weaker
euro to boost the economy and stave off deflation is a record exodus
from the continent’s financial assets. Domestic and foreign investors
spurred 187.7 billion euros ($239 billion) of fixed-income outflows from
the euro area in the six months through August, the most in ECB data
going back
to the currency’s debut in 1999. That’s helped push the euro
down 2.6 percent versus a basket of nine developed-market peers
tracked by Bloomberg Correlation-Weighted Indexes this year, the
biggest decline since 2010, when the euro-region debt crisis was
taking hold.
- Europe’s Glacial Growth Lowers Prospects for Job Seekers. Unemployment across the 18-nation region has barely budged from its
high as companies questioning the durability of the recovery now find
themselves hitting headwinds from weakening global trade. Confidence
(EUESEMU) in the economy slipped to the lowest in almost a year this
month and the unemployment rate remained at 11.5 percent in September,
economists said before data due later this week.
- Honda Cuts Profit Forecasts as Japan, China Demand Slumps. Honda Motor Co. (7267), Japan’s third-largest automaker, forecast its first profit decline in three
years as deliveries to China and Japan weakened. Net income will drop 1.6 percent in the year ending in
March to 565 billion yen ($5.2 billion), the Tokyo-based company
said in a statement today. That compares with the 600 billion
yen the automaker forecast in April and would mark the first
annual profit decline since the fiscal year ended March 2012.
- Europe Stocks Gain First Time in Three Days as UBS Jumps. European
stocks rose, snapping a two-day drop, as Novartis AG and UBS (UBSN) AG
rallied after posting financial updates and as U.S. consumer confidence
surged to a seven-year high. The benchmark Stoxx Europe 600 Index gained 1 percent to
328.25 at the close of trading as 18 of its 19 industry groups
rose.
Wall Street Journal:
MarketWatch.com:
CNBC:
ZeroHedge:
Business Insider:
Interpreter Magazine:
- Putin’s Next Moves in Ukraine Won’t Be Pretty. Having failed to disrupt the Ukrainian elections, to gain support for
pro-Russian candidates, or to provoke Ukrainians into voting for
national extremists that Moscow could use to discredit Ukraine in the
West, Vladimir Putin will be tempted to stir up more violence in Ukraine
to keep that country from pursuing its European course.
Financial Times:
- China’s ‘new normal’ for consumption. While
multinationals have been bleating about tumbling sales in China,
official retail data from the world’s second-biggest economy tells a
more robust story. What gives?
RIA Novosti:
- Russia
to Build 13 Airfields, 10 Radars in Arctic. "Russia will build 13
airfields and 10 radars in Arctic to safeguard national security in the
region," Russian military comments in Twitter post.
Austrian Press Agency:
- Nowotny Says Europe Should Prepare for 'Japanese Scenario'. ECB
Governing Council Member Ewald Nowotny doesn't see growth rates of 3%-4%
soon, citing comments. One should probably prepare for "Japanese
scenario" with longer-term stagnation, Nowotny said. It's not exactly
foreseeable when there'll be normal times for European economy again.
