Evening Headlines
Bloomberg:
- Russia-Ukraine Crisis Shields EU Gas From Oil Price Rout. The
risk of disruptions to Russian
natural gas flows through Ukraine this winter is protecting European
prices from the rout that sent oil to a four-year low. U.K. gas for next
quarter fell 13 percent since mid-June, less than half the 28 percent
plunge in Brent crude over that time. While Brent is typically the
benchmark used to set the price on almost half the gas supply in Europe,
the Russia-Ukraine conflict, along with supply-and-demand fundamentals
in the market, is having a bigger impact on gas prices than the
decline in oil.
- Obama Syria Strategy Hit by Allies for Sparing Assad. France
is calling for the U.S.-led coalition against Islamic State to expand
its fight to prevent the fall of Aleppo, Syria’s largest city and a
rebel bastion under attack by both government forces and Islamic
extremists. Coming from a key ally, the push for increased
military support for Syria’s embattled civilians and rebels is a public
challenge to President Barack Obama’s policy, which limits military action in Syria to attacking Islamic State fighters
while avoiding direct confrontation with forces loyal to
President Bashar al-Assad.
- China Home Buyers Rushing Online to Finance Downpayments.
E-House is joining peer-to-peer lenders to finance down
payments for buyers struggling to scrape together a deposit
after home prices had tripled since 2000. Mortgage lending
remains tight, even after the central bank eased its policy in
September, as banks anticipate an extended property market
decline because of a high supply of housing, according to
Standard Chartered Plc.
- Australia Needs Stimulus to Avoid Recession, Morgan Stanley Says. Australia could face its first
recession in almost 25 years unless authorities further
stimulate the economy, Morgan Stanley (MS:US) said. The nation’s economy will expand just 1.9 percent in 2015,
with 1.5 percentage points of that coming from higher exports,
and unemployment will climb to 6.8 percent, Morgan Stanley
economists led by Daniel Blake said in a research report today.
They project the currency will fall to 76 U.S. cents by the end
of next year from 87.37 cents at 11:10 a.m. in Sydney.
- Kuroda Has Draghi in a Bind as Euro Soars Against Yen. Mario Draghi has something new to
worry about as he prepares for tomorrow’s European Central Bank policy meeting: the euro-yen exchange rate.
The yen approached a six-year low versus the shared European currency
after Bank of Japan Governor Haruhiko Kuroda surprised investors late
last week by adding to a record stimulus program. Kuroda’s actions
jeopardize the weaker euro
that analysts say Draghi needs to reflate the economy, heaping
pressure on him to come up with a policy response.
- Asia Stocks Slip as Brent Near 4-Year Low; Dollar Drops. Asian stocks slipped from a six-week high as commodity producers and SoftBank Corp. slumped. Brent
crude oil traded near a four-year low and the dollar weakened
against most major currencies.
The MSCI Asia Pacific Index lost 0.4 percent by 11:33 a.m.
in Tokyo. SoftBank tumbled 3.3 percent after projecting its
first profit decline in nine years.
- Saudis Go Back to the Future to Take on U.S. Shale Rivals. The
Saudi oil minister’s visit to Venezuela this week is also a trip
through time. Flash back to December 1998 when Saudi Arabia looked to
its
fellow OPEC member for help lifting oil prices from about $10 a
barrel.
- Silicon Valley Privacy Push Sets Up Arms Race With World’s Spies.
- Scrutiny of Fed Seen Intensifying in a Republican Senate. As
Janet Yellen was preparing to take over the Federal Reserve, she got
some advice from the departing chairman, Ben Bernanke: Keep in mind that
“Congress is our boss.” Yellen would do well to heed his words if the
Republican Party gains majority control of the Senate in today’s midterm
elections, giving fresh impetus to congressional efforts to constrain
the Fed’s powers to supervise the financial system and make monetary
policy. While any threat to the central bank’s independence would be
subject to a veto by President Barack Obama, Yellen, 68, is likely to
face pressure to hasten the Fed’s exit from the most aggressive stimulus
in its 100-year history.
- Oil Import Decline to U.S. Revealed by Louisiana as Truth. Things
are slowing down at the U.S.’s
largest oil-import hub. Just six years after importing more than 1
million barrels a day from countries including Saudi Arabia, Nigeria and
Iraq, the Louisiana Offshore Oil Port is receiving just half of that
from overseas, highlighting a nationwide trend at harbors from
Mississippi to Pennsylvania. What’s more, with U.S. output soaring to a
31-year high, neighboring Texas has become the port’s second-biggest
supplier.
Wall Street Journal:
Fox News:
Barron's:
CNBC:
- Feds move to close Obamacare hospital coverage loophole.
The federal government said Tuesday it will soon move to close a
loophole in Obamacare that could allow big
employers to refuse to cover employees' hospitalizations. That loophole
is significant because hospital-stay costs can quickly become high.
- T Boone Pickens: The real problem with oil. (video)
Many energy investors think there's a powerful force working against
them in the market. Investor T. Boone Pickens thinks they're right, but
the problem isn't what they think. Pickens says that the big issue in
the energy market isn't OPEC or the strong dollar; he says it's supply
and he also says domestic drillers are to blame.
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 rateTripAdvisor profit sags as costs jump; shares
slid
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 64.25 +1.0 basis point.
- NASDAQ 100 futures +.25%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (SMG)/-.22
- (CTSH)/.63
- (TWX)/.94
- (CHK)/.33
- (RDC)/.53
- (SSYS)/.58
- (DUK)/1.52
- (MDLZ)/.39
- (QCOM)/1.32
- (WBMD)/.24
- (NWSA)/.05
- (Z)/.09
- (PRU)/2.41
- (WFM)/.32
- (TSLA)/.00
- (SYMC)/.43
- (CF)/3.48
- (ANDE)/.76
- (DYN)/.00
- (CBS)/.73
- (SCTY)/-1.11
Economic Releases
8:15 am EST
- The ADP Employment Change for October is estimated to rise to 220K versus 213K in September.
9:45 am EST
- The Final US Markit Services PMI for October is estimated to fall to 57.1 versus a prior estimate of 57.3.
10:00 am EST
- The ISM Non-Manufacturing Composite for October is estimated to fall to 58.0 versus 58.6 in September.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+1,962,500 barrels versus a +2,061,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -455,560 barrels versus a
-1,236,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -2,055,560 barrels versus a -5,294,000 barrel
decline the prior week. Finally, Refinery Utilization is estimated to
rise by +.08% versus a -.1% decline prior.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Kocherlakota speaking, Fed's Rosengren speaking, Fed's Lacker
speaking, Eurozone Services PMI data, weekly MBA mortgage applications
report, (UNP) investor day, (VAR) investor meeting, (AGU) investor day,
(SBUX) guidance call and the (DGX) investor day could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and real estate 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: Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.11 +2.58%
- Euro/Yen Carry Return Index 148.89 +.19%
- Emerging Markets Currency Volatility(VXY) 7.97 +.25%
- S&P 500 Implied Correlation 54.53 +1.67%
- ISE Sentiment Index 116.0 +34.90%
- Total Put/Call .92 +10.84%
Credit Investor Angst:
- North American Investment Grade CDS Index 64.95 +1.12%
- European Financial Sector CDS Index 68.47 +2.32%
- Western Europe Sovereign Debt CDS Index 32.36 +1.54%
- Asia Pacific Sovereign Debt CDS Index 63.30 +2.15%
- Emerging Market CDS Index 252.39 +1.84%
- China Blended Corporate Spread Index 320.27 -.64%
- 2-Year Swap Spread 20.5 -.25 basis point
- TED Spread 22.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -11.0 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +2.0 basis points
- Yield Curve 182.0 -1.0 basis point
- China Import Iron Ore Spot $78.01/Metric Tonne -.79%
- Citi US Economic Surprise Index 16.40 -5.7 points
- Citi Eurozone Economic Surprise Index -28.0 +.8 point
- Citi Emerging Markets Economic Surprise Index -14.70 +.5 point
- 10-Year TIPS Spread 1.92 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +93 open in Japan
- DAX Futures: Indicating +37 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs and index hedges
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Merkel Says Ukraine Rebel Votes Illegal as Tensions Mount. German
Chancellor Angela Merkel condemned what she called “illegal” elections
in Ukraine’s separatist regions as President Petro Poroshenko threatened
to scrap a law on greater autonomy underpinning an increasingly fragile
cease-fire. Amid warnings that Russia is amassing military vehicles in
rebel-held areas, Poroshenko convenes a
meeting of Ukraine’s National Security and Defense Council at 5 p.m.
today to consider revoking the “special status” law that was part of the
truce accord struck Sept. 5 in the Belarusian capital, Minsk. Merkel
said she sees “no reason right now” to lift economic sanctions imposed
on Russia, which “isn’t contributing yet as much as we would like” to
resolve the crisis.
- Poroshenko Asks to End East Ukraine’s Autonomy After Vote. Ukrainian
President Petro Poroshenko
will ask parliament to revoke a law giving more autonomy to
regions occupied by pro-Russian separatists after the rebels
held elections condemned by the U.S. and the European Union. Ukraine is
sticking to a Sept. 5 cease-fire, Poroshenko said, even as the
government in Kiev accused insurgents of continuing to shell government
forces and Russia of massing troops and military vehicles in
rebel-occupied Luhansk and Donetsk. The results of Nov. 2 ballots in the two regions will
be annulled and the votes redone in government-condoned votes
slated for Dec. 7, Poroshenko said.
- EU Cuts Growth Outlook as Inflation Seen Below ECB Forecast. The European Commission cut its growth forecasts for the euro area as
the bloc’s largest economies struggle to put the ravages of the debt
crisis behind them after two recessions in six years. Gross domestic
product in the 18-nation region will rise by 0.8 percent this year and
1.1 percent in 2015, down from projections for 1.2 and 1.7 percent in
May, the Brussels-based commission said today. It lowered its
projections for Germany, Europe’s largest economy, and said inflation in
the euro area will be even weaker than the European Central Bank
predicts.
- EU Cuts Italy GDP Forecasts, Says Exports Needed.
The European Commission cut Italy’s economic forecasts for this year
and next, saying the country will need to rely on an increase in exports
to return to growth in 2015. The country’s economy will contract 0.4
percent in 2014 and expand 0.6 percent next year, the Brussels-based
executive arm of the European Union said today in its autumn economic
forecasts. That compares with a May forecast predicting a 0.6
percent expansion this year and a 1.2 percent increase next
year.
- European Stocks Decline as EU Cuts Forecasts, Oil Tumbles.
(video) European stocks declined for a second day, as officials
cut growth forecasts for the euro region, and oil companies plunged on
tumbling prices for the commodity. Hunting Plc and Seadrill Ltd.
retreated more than 5 percent as a gauge of oil-related companies fell
the most on the Stoxx Europe 600 Index. Hugo Boss AG slid 5 percent
after lowering its 2014 sales outlook. Securitas AB (SECUB) jumped to
the highest level in more than seven years after reporting third-quarter
net income that beat estimates. Royal DSM (DSM) NV advanced 1.6 percent
after posting quarterly results that beat projections. The Stoxx 600 slipped 1 percent to 330.88 at the close of trading, extending losses in late afternoon trading.
- U.S. Crude Futures Fall to 3-Year Low on Saudi Price Cut.
WTI for December delivery fell $1.97, or 2.5 percent, to $76.81 a
barrel at 1:37 p.m. on the New York Mercantile Exchange after touching
$75.84, the lowest intraday price since Oct. 4, 2011. The volume of all
futures traded was 54 percent above the 100-day
average for the time of day. Front-month WTI swung to a discount, or
contango, yesterday versus the second month for the first time since
April.
- Copper Falls Most in Three Weeks on EU Economic Outlook.
Copper futures for December delivery fell 1.5 percent to settle at
$3.0185 a pound at 1:13 p.m. on the Comex in New York, the biggest drop
for a most-active contract since Oct. 15. Earlier, the metal touched
$3.003, the lowest since Oct. 21.
- EU Next-Year Coal Falls to Record Low Close as Glut Grows. European thermal coal for delivery
next year fell to its lowest-ever close as Glencore Plc said it
boosted third-quarter production amid a glut of supply in the seaborne market. Next-year
coal for delivery to northwest Europe lost 1.1 percent to $70.35 a
metric ton at 5:19 p.m. in London, according to broker data on
Bloomberg. That’s the lowest close since at
least September 2007, when Bloomberg began compiling data for
the contract. Prices slid as low as $70.20 during the session.
ZeroHedge:
Business Insider:
NY Post:
- Hedgies Are Drying Up Like Fall Leaves. While the broader markets came back last week to post a positive October
and are up nearly 7 percent this year, many hedgies are still falling
behind.
Reuters:
- Exclusive: Central Bankers to Challenge Draghi on ECB Leadership Style. National central
bankers in the euro area plan to challenge European Central Bank chief
Mario Draghi on Wednesday over what they see as his secretive management
style and erratic communication and will urge him to act more
collegially, ECB sources said.
The bankers are
particularly angered that Draghi effectively set a target for increasing
the ECB's balance sheet immediately after the policy-making governing
council explicitly agreed not to make any figure public, the sources
said. "This created
exactly the expectations we wanted to avoid," an ECB insider said. "Now
everything we do is measured against the aim of increasing the balance
sheet by a trillion (euros)... He created a rod for our own backs."
International Business Times:
- Ukraine Crisis: President Poroshenko Orders Troops to Key Cities to Prevent Possible Rebel Offensive. Ukrainian President Petro Poroshenko has revealed
that he has ordered his military leaders to deploy further army units
to prevent a potential offensive by Russian-supported separatists in
eastern and southern cities, according to Interfax news agency. In a statement after a meeting with security chiefs, Poroshenko confirmed that the units were to be deployed to protect Mariupol, Berdyansk, Kharkiv, and northern Luhansk. "Several new [military] units and groups have been
formed which will allow immediately for a possible offensive on
Mariupol, Berdyansk, Kharkiv and northern Luhansk," Poroshenko said at a
meeting of the Ukrainian national security and defence council.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -5.01% 2) Oil Tankers -4.71% 3) Gaming -3.33%
Stocks Falling on Unusual Volume:
- SALE, HLT, UMPQ, RCAP, STRP, KORS, DGX, HLF, MR, DL, PCLN, EPAM, SGY, NWE, NMM, EXH, FL, BHLB, THC, ACHN, VSI, RESI, ELLI, DISCA, SC, SGNT, DGX, HTA, ZBRA, CBS, EL, EPAM, GDOT, FL, MRC, LINE, HAL, SPN, EXP, REGN, NOG, KPTI, RES, EMES, ACXM, DNR, LNCO, CYH, OAS, WLK, SC, ROSE, TESO and EXH
Stocks With Unusual Put Option Activity:
- 1) FOXA 2) A 3) CTSH 4) PAYX 5) EWJ
Stocks With Most Negative News Mentions:
- 1) DISCA 2) S 3) LL 4) JPM 5) UPL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +2.28% 2) HMOs +.98% 3) Restaurants +.61%
Stocks Rising on Unusual Volume:
- NCMI, BLMN, TXRH, AFSI, RRGB, HNT and CLI
Stocks With Unusual Call Option Activity:
- 1) GERN 2) AFSI 3) DPS 4) SBUX 5) HLF
Stocks With Most Positive News Mentions:
- 1) DAL 2) YHOO 3) LB 4) TXRH 5) EMR
Charts:
Evening Headlines
Bloomberg:
- Ukraine Says Rebel Votes Undercut Truce as Tension Mount. Ukrainian President Petro Poroshenko
said rebel-held elections in the country’s east violate a two-month-old cease-fire, as he threatened to scrap the law granting
greater autonomy to the separatist regions. Calling the Nov. 2 ballots a “farce that jeopardizes the
entire peace process,” Poroshenko said Ukraine will never
recognize their results, according to a statement issued yesterday. Poroshenko is convening a meeting of Ukraine’s National Security and Defense Council today to consider revoking
the “special status” law that was part of the truce accord
struck Sept. 5 in the Belarus capital, Minsk.
- Saudis Lower Crude Prices to U.S. in December Amid Shale Boom. Saudi Arabian Oil Co. lowered the
cost of its crude to the U.S., where production is the highest
in three decades, deepening a selloff that sent prices to the
lowest in more two years. The state-owned producer, known as Saudi
Aramco, lowered the premium for Arab Light relative to U.S. Gulf Coast
benchmarks by 45 cents a barrel to the smallest since December. medium
and heavy grades were also down 45 cents and extra light oil 50 cents.
Aramco increased the cost to Asia and Europe.
- Oil Extends Slide on Saudi Price Cut as U.S. Supply Seen Rising. “It’s
now a game of chicken between OPEC members and the U.S. to fight for
market share” in the world’s biggest oil-consuming nation, Will Yun, a
commodities analyst at Hyundai Futures Inc. in Seoul, said by phone today. “Expanding crude stockpiles in the U.S. won’t be enough to make OPEC cut its
output unless prices significantly drop to below $75.”
- Japan Stocks Surge With JGBs on Stimulus; Won, Oil Slide.
Japanese stocks climbed to a six-year high on optimism central-bank
stimulus will boost earnings, while the country’s bonds surged. South
Korea’s won led emerging-market currencies lower and crude oil extended
declines. The Topix index jumped 3.3 percent by 11:06 a.m. in Tokyo,
spurring a 1.5 percent jump in the MSCI Asia Pacific Index. An MSCI gauge that excludes Japanese shares dropped as Standard & Poor’s 500 Index futures lost 0.2 percent.
- Senators Urge SEC to Fix Unequal Access to Market Data. The U.S. Securities and Exchange
Commission must ensure its system for distributing companies’
financial information doesn’t give unfair advantages to private-feed subscribers, two lawmakers said in a letter today. The SEC should explain what it’s doing in response to
findings that customers paying for direct feeds sometimes saw
market-moving disclosures 10 seconds before they were posted to
the agency’s website, Senators Tim Johnson and Mike Crapo wrote
in the letter to SEC Chairman Mary Jo White.
- Iron Ore Declining as APEC Curbs in China Seen Stunting Demand. Iron ore prices dropped to the lowest
level since September amid a lack of demand in China, with some
mills in the world’s largest buyer ordered to suspend production
before a summit of world leaders in Beijing. “Demand remains weak as Chinese buyers sit on the sidelines,
with many Beijing steel mills forced to halt production leading up to
the APEC meeting,” Australia & New Zealand Banking Group Ltd. said
in a daily report today. Prices
dropped yesterday with a lack of bids, the bank said.
Wall Street Journal:
- Sullen Voters Set to Deliver Another Demand for Change. If Republicans Win Control of Senate, It Would Be Fourth Such Control Switch in Less Than a Decade. Odds are good that the U.S. midterm elections will mark the fourth time
in less than a decade that voters oust a party from control of Congress
or the White House, a remarkable period of instability that has left
neither party with a firm grip on power.
- A Most Pivotal Election. Democratic candidates kept twisting away from Obama and changing the subject. Republicans didn’t cooperate. President Obama is famous for proclaiming a “pivot” to a new issue—to
the economy, to jobs, to Asia. By my count he has announced more than 20
pivots during his presidency, invariably to matters that bring
political benefits and away from those that don’t.
Fox News:
- Was Foley rescue delayed? (video) Administration had strong intelligence on hostages, location weeks before raid sign-off.
CNBC:
- Herbalife(HLF) shares tank 12% on disappointing outlook. Herbalife reported earnings that missed expectations and offered a sales outlook that was
well below Wall Street forecasts, sending shares plunging 13 percent. The company reported operating earnings of $1.45 per
share, against analysts' estimates of $1.51 per share. Revenue of $1.26
billion missed estimates of $1.32 billion, according to Thomson Reuters
data.
- JPM(JPM) estimates legal losses could total $5.9B. JPMorgan Chase & Co. confirmed in a regulatory filing that the Department of Justice is
conducting a criminal investigation into its foreign-exchange trading.
The company noted that its legal losses could total as much as $5.9
billion.
Zero Hedge:
Business Insider:
Financial Times:
- Living wills raise liquidity fears. US
and European banks fear they will be forced to boost their cash
reserves by tens of billions of dollars to win regulatory approval of
their “living wills”, which lay out how a failing institution could be
wound down in a crisis, according to people familiar with the matter.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.0 unch.
- Asia Pacific Sovereign CDS Index 63.25 -.25 basis point.
- NASDAQ 100 futures -.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Trade Deficit for September is estimated at -$40.2B versus -$40.1B in August.
9:45 am EST
- ISM New York for October is estimated to fall to 62.0 versus 63.7 in September.
10:00 am EST
- Factory Orders for September are estimated to fall -.6% versus a -10.1% decline in August.
- IDB/TIPP Economic Optimism for November is estimated to rise to 46.5 versus 45.2 in October.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone PPI, Eurozone Services PMI data, weekly US retail sales
reports, (AA) investor day and the (LB) investor meeting 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
