Evening Headlines
Bloomberg:
- NATO Jets Intercept Russia Military Plane Over Baltics. Two Dutch F-16 fighter jets on a NATO mission intercepted a Russian
aircraft in the Baltics after it approached Estonian and Lithuanian
airspace. The F-16s intercepted an Ilyushin transport plane that
hadn’t announced a flight plan yesterday near the two countries and
escorted it out of the area, the Dutch Defense Ministry said on its
website. The plane flew in the direction of the Russian Baltic Sea
exclave of Kaliningrad, the ministry said. Increased Russian
aerial activity coincides with rising tension pitting Russia against the
U.S. and the European Union over Ukraine. The North Atlantic Treaty
Organization detected and tracked Russian military aircraft including
fighter jets, long-range bombers and tankers over the Baltic region, the
North Sea and the Atlantic Ocean for three days in late October.
- World Outlook Darkening as 89% in Poll See Europe Deflation Risk.
The world economy is in its worst shape in two years, with the euro
area and emerging markets deteriorating and the danger of deflation
rising, according to a Bloomberg Global Poll of international investors.
A plurality of 38 percent of those surveyed this week described the
global economy as worsening, more than double the number who said that
in the last poll in July and the most since September 2012, when Europe
was mired in a recession. Much of the concern is again focused
on the euro area: Almost two-thirds of those polled said its economy was
weakening while 89 percent saw disinflation or deflation as a greater
threat there than inflation over the next year.
- Eastern European Recovery Falters as Euro Area Woes Sap Demand. A recovery in the European Union’s
eastern nations faltered in the third quarter, derailed by the euro region’s slowdown and deadly fighting in Ukraine.
Poland’s $518 billion economy, the largest in the EU’s east, grew 2.7
percent from a year earlier, down from 3.3 percent in the previous three
months, according to the median estimate of 29 economists in a
Bloomberg survey. Hungary’s expansion slowed to 2.9 percent from 3.9
percent, a separate survey showed. The two countries, along with the
Czech Republic, Slovakia, Romania and Bulgaria report growth figures
today.
- Beef Bowl Costs Rise as Japan Imports Priciest Since Mad Cow. The
cost of U.S. beef for Japanese
meat eaters doubled in the past year to the highest in a decade,
eroding earnings as the yen weakened and global prices soared. The
wholesale price of frozen short-plate, the meat used for beef bowls in
Japanese fast-food restaurants such as Yoshinoya Holdings Co. (9861),
rose to 1,081 yen ($9.36) a kilogram last month from 555 yen a year ago,
according to Tokyo-based Agriculture & Livestock Industries Corp.
It’s the highest since 2004, after Japan banned American beef imports
because of mad-cow disease.
- Military Chief Weighs Frontline Role for U.S. Troops in Iraq.
President Barack Obama’s top military adviser said more U.S. troops may
be needed in Iraq for a “long and difficult” fight against Islamic
State, as military planners assess the shortcomings of Iraqi forces. Army General Martin Dempsey, chairman of the Joint Chiefs of Staff, told lawmakers today that more complex operations in
Iraq, such as efforts to retake Mosul or secure the Syrian
border, may require deploying a limited number of additional
American military advisers in action with Iraqi soldiers.
- Most Asian Stocks Advance as Japan’s Topix Extends Six-Year High.
Most Asian stocks rose for a sixth day as Japanese shares extended a
six-year high in Tokyo after the Dow Jones Industrial Average climbed to
a record. The MSCI Asia Pacific Index (MXAP) added less than 0.1 percent to
141.72 as of 9:12 a.m. in Tokyo, with two shares rising for each
that fell.
- Copper Set for Weekly Drop on Slowing Global Demand. Copper fell for a third day and was set for the first weekly drop in
almost a month after weaker-than-expected Chinese manufacturing stoked
speculation that slowing global growth will temper demand. The world
economy is in its worst shape in two years, with the euro area and
emerging markets deteriorating and the danger of deflation rising,
according to a Bloomberg Global Poll of international investors. China’s
industrial output in October increased 7.7 percent from a year earlier,
trailing the 8 percent median estimate in a survey, government data
showed yesterday.
The dollar rose for a fourth day against a basket of 10 currencies,
eroding the investment appeal of commodities.
Wall Street Journal:
MarketWatch.com:
CNBC:
- Hedge fund Lonestar shutting down. Lonestar
Capital Management, a $1 billion hedge fund based in San Francisco, is
shutting down, according to The Wall Street Journal.
Zero Hedge:
Business Insider:
Reuters:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.50 -.5 basis point.
- Asia Pacific Sovereign CDS Index 63.75 -.75 basis point.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for October are estimated to rise +.2% versus a -.3% decline in September.
- Retail Sales Ex Autos for October are estimated to rise +.2% versus a -.2% decline in September.
- Retail Sales Ex Autos and Gas for October are estimated to rise +.4% versus a -.1% decline in September.
- The Import Price Index for October is estimated to fall -1.5% versus a -.5% decline in September.
9:55 am EST
- Preliminary Univ. of Mich. Consumer Confidence for November is estimated to rise to 87.5 versus 86.9 in October.
10:00 am EST
- Business Inventories for September are estimated to rise +.2% versus a +.2% gain in August.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Powell speaking, Fed's Bullard speaking, 3Q US Mortgage
Delinquencies/Mortgage Foreclosures reports and the German gdp report
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.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.96 +7.22%
- Euro/Yen Carry Return Index 150.90 +.59%
- Emerging Markets Currency Volatility(VXY) 8.08 +.62%
- S&P 500 Implied Correlation 44.65 +6.23%
- ISE Sentiment Index 74.0 -42.64%
- Total Put/Call .94 +17.50%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.21 +1.27%
- European Financial Sector CDS Index 65.26 +3.58%
- Western Europe Sovereign Debt CDS Index 31.29 +1.96%
- Asia Pacific Sovereign Debt CDS Index 64.74 +.47%
- Emerging Market CDS Index 280.98 +1.08%
- China Blended Corporate Spread Index 324.52 +.99%
- 2-Year Swap Spread 22.0 +.75 basis point
- TED Spread 22.25 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -10.25 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- Yield Curve 183.0 +1.0 basis point
- China Import Iron Ore Spot $75.98/Metric Tonne -.29%
- Citi US Economic Surprise Index 13.30 -2.4 points
- Citi Eurozone Economic Surprise Index -29.10 +.6 point
- Citi Emerging Markets Economic Surprise Index -7.3 +.7 point
- 10-Year TIPS Spread 1.90 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +68 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Higher: On gains in my tech/medical sector longs and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- Ukraine Tensions Rise as U.S., EU Weigh More Sanctions.
The European Union and the U.S. will weigh further sanctions against
Russia’s economy and Ukrainian separatists, after the reported movement
of tanks, artillery and combat troops into eastern Ukraine. Representatives
of the EU’s 28 member states and the U.S. are meeting today in Brussels
to discuss imposing new penalties on individuals or on the Russian
economy for the country’s interference in Ukraine, according to
diplomats close to the talks. While no consensus has been
reached yet, officials will prepare options for an EU foreign ministers
meeting in Brussels on Nov. 17, when the group could move to expand
penalties, said the diplomats, who spoke on condition of anonymity
because they weren’t authorized to be quoted.
- U.S. Envoy Sees Risk of Ukraine Spinning Out of Control. The
crisis in Ukraine is at risk of spinning out of control, a top U.S.
diplomat said, as European leaders remained split over imposing deeper
sanctions on Russia for backing a rebellion that’s killed thousands of
people. Russia must stop violating a Sept. 5 cease-fire agreement
signed in Minsk, Belarus, Samantha Power, U.S. Ambassador to the United
Nations, told
journalists today, citing a growing number of military convoys in
Ukraine’s rebel-held regions and increased shelling of the Donetsk
airport.
- Putin’s Looming Warships Not About ‘Shirtfronting,’ Abbott Says.
A group of Russian warships approaching Australia before the start of a
Group of 20 summit meeting isn’t likely a response to Prime Minister
Tony Abbott’s pledge to “shirtfront” Russian President Vladimir Putin
over the downing of flight MH17, Abbott said. “It takes weeks, if not
months to deploy warships thousands of miles from your bases,’ Abbott
said today on the sidelines of the East Asia Summit
in Naypyidaw, Myanmar. ‘‘So, this Russian deployment into Pacific waters
is something that has been a long, long time in preparation.’’
- Russia Threat Prompts Nordic Governments to Prepare for Worst. Governments in the Nordic and Baltic
region are stepping up their defense preparedness in response to
repeated Russian incursions into their territories. “What we are doing is what is to be expected from a
military and political alliance: We are preparing ourselves for
what we hope will not happen, we are preparing ourselves for the
worst,” Norway’s Defense Minister Ine Eriksen Soereide said
today in Oslo. “That’s our obligation, that’s an important step
in preventing something from happening.”
- Ukraine Bonds Sink as Risk of War in East Stokes Default Concern. Ukrainian bonds slumped the most
since March as the threat of open war in the nation’s east
deepened concern the government will struggle to repay debt. The yield on Ukraine’s $2.6 billion of bonds due July 2017
soared 154 basis points to a record 17.67 percent at 7:14 p.m.
in Kiev, bringing the eight-day increase to 428 basis points,
or 4.28 percentage points.
- Ruble Slides Most in Emerging Markets on Sanctions, Brent.
The ruble slumped the most among emerging markets as Brent crude slid to
a four-year low and the U.S. and European Union weighed new sanctions
against Russia. The
ruble weakened 1.4 percent to 46.5885 per dollar by 4:19 p.m. in
Moscow, the biggest drop among 24 developing-nation currencies tracked
by Bloomberg.
- Ruble Defense Extends Russian Reserves Slide.
Russia’s international reserves extended their slide to the longest
since 2008, declining by a fifth from last year’s peak as the central
bank attempts to smooth the ruble’s decline. The value of the stockpile has declined for 12 consecutive
weeks, losing $7.2 billion in the seven days through Nov. 7 to
$421.4 billion, the central bank said today. That compares with
a $10.5 billion drop the previous week.
- China Slowdown Deepens as Leaders Said to Mull Target Cut. China’s
slowdown deepened in October as policy makers refrained from
economy-wide stimulus, with industrial output and investment trailing
estimates. Factory production rose 7.7 percent from a year earlier, the
second weakest pace since 2009, a government report showed today.
Investment in fixed assets such as machinery expanded the least since
2001 from January through October, and retail sales gains also missed
economists’ forecasts last month.
- China’s Zhu Says Divergent Global Monetary Policies Create Risks. China is concerned about the risks
from a “divergence” in monetary policies among developed
economies, including the U.S, Europe and Japan, Vice Finance Minister Zhu Guangyao said. “It
will create new risks and uncertainties for the global economy,” Zhu
said in an interview today on board a plane headed for Brisbane,
Australia, where Group of 20 leaders meet this weekend. “China is
concerned about the spillover effects. We want to see a stable international monetary environment.”
- Islamic State Mints Coins as Jihadis Develop Trappings of Power. After seizing oil refineries to fund its self-declared caliphate, Islamic State militants will mint their own money. The
group plans to issue gold, silver and copper coins, according to a
statement released by its Beit al Mal, or treasury, and posted on
websites used by jihadist movements. The currency aims to replace the
existing “tyrannic monetary system” that has contributed to poverty, it
said.
- European Stocks Rebound From Biggest Drop in Four Weeks. Ericsson AB’s cost-cutting plan and
KBC Groep NV’s better-than-estimated earnings helped European
stocks rebound from an intraday drop led by energy producers and
utilities. The Stoxx Europe 600 Index gained 0.2 percent to 335.86 at
the close of trading, after rising as much as 0.6 percent and
falling as much as 0.4 percent. The gauge tumbled 1.1 percent
yesterday, the biggest slide in four weeks, as banks retreated
amid concern that prosecutions and penalties will widen in a
probe into the rigging of exchange-rate benchmarks.
- Brent Extends Drop to 4-Year Low as OPEC Seen Resisting.
Brent for December settlement, which expires today, dropped
$1.62, or 2 percent, to $78.76 a barrel at 11:26 a.m. New York
time on the London-based ICE Futures Europe exchange. The more
active January contract was down $1.72 at $79.40. The volume of
all futures traded was about 1 percent below the 100-day average
for the time of day.
Fox News:
ZeroHedge:
Business Insider:
Reuters:
- Weak October hurts retailer Kohl's(KSS) profit, revenue. Department store operator Kohl's Corp's
quarterly profit and revenue missed estimates as
same-store sales dipped below the company's own estimate, in
sharp contrast to Wal-Mart Stores Inc, which posted its
first rise in U.S. same-store sales in seven quarters.
Style Underperformer:
Sector Underperformers:
- 1) Oil Service -3.54% 2) Coal -2.52% 3) Energy -2.22%
Stocks Falling on Unusual Volume:
- RVNC, MRD, AME, VOYA, RXN, TCBI, JGW, SPWR, HAS, CLFD, LJPC, RESI, NTAP, BRSS, CSIQ, HP, HTHT, DQ, YY, RGLS, OPWR, NNBR, KNDI, SNY, SJM, FSLR, WWE, ADT, WNR, ACHN, RGLS and CSH
Stocks With Unusual Put Option Activity:
- 1) DDS 2) OIH 3) AMAT 4) XLY 5) BHI
Stocks With Most Negative News Mentions:
- 1) JCP 2) HP 3) AMWD 4) KSS 5) ASPS
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +1.45% 2) Gold & Silver +.67% 3) HMOs +.54%
Stocks Rising on Unusual Volume:
- FUEL, DWA, CSH, CZR, KING, TSEM, SWI, DDS, TWTR, VIAB and AKRX
Stocks With Unusual Call Option Activity:
- 1) BYD 2) ESRX 3) PEP 4) BSX 5) TSN
Stocks With Most Positive News Mentions:
- 1) AEM 2) WMT 3) AAPL 4) MRK 5) DGX
Charts:
Evening Headlines
Bloomberg:
- Russia to Fly Bombers to U.S. Gulf as Ukraine Escalates. Russia
plans to extend long-range bomber patrols as far as the Gulf of Mexico
and the eastern Pacific Ocean, its defense minister said, as NATO
accused Vladimir Putin’s government of sending more troops into Ukraine.
With Ukraine warning its conflict is close to returning to open war,
Russian Defense Minister SergeyShoigu said his country’s military will
start
conducting regular long-range bomber patrols along Russia’s borders and
over the Arctic Ocean.
- Abe Testing Water for Sales Tax Delay Boosts Risk: Japan Credit.
Japan’s sovereign debt risk climbed as ruling party members started
laying the groundwork for a possible delay in a sales tax increase. The
cost to protect sovereign bonds against non-payment for five years has
risen 16 basis points over the past two months to 48 basis points
yesterday. Benchmark 10-year yields gained to the highest since
September after Liberal Democratic Party
lawmakers said Prime Minister Shinzo Abe’s administration favors
delaying the levy boost by 18 months and started preparing an
election to win a mandate for the move.
- Abe Poised to Gamble Political Future on Snap Election. Japanese Prime Minister Shinzo Abe
is poised to gamble his political future on a plan to call a snap election next month, halfway into his current term. “It’s
always risky to dissolve the house when you’re the prime minister,”
said Robert Dujarric, director of the Institute of Contemporary Asian
Studies at Temple University in Tokyo. “Unless you win a crushing
victory, you have nowhere to go but down.” Abe is likely to go the
people on Dec. 14 after postponing an unpopular sales-tax increase slated for October 2015,
according to people with knowledge of his plan, who asked not to
be identified because they aren’t authorized to speak.
- China Small-Cap Stocks Fall as Investors Shift Funds Before Link.
China’s small-company stocks slumped to the lowest level since August
as investors shifted funds into large caps before the start of an
exchange link with Hong Kong next week. Technology and health-care
companies led declines. Beijing Originwater Technology Co., which has
the third-largest weighting in the ChiNext Index, slumped 1.8 percent.
Bluefocus Communication Group Co. plunged 4.7 percent. Yanzhou Coal
Mining Co. and Jiangxi Copper Co. paced declines for coal and metal
stocks before industrial production data today. Hong Yuan Securities Co.
led a rally for financial shares. The ChiNext dropped 2 percent to
1,447.04 at 10:14 a.m., extending losses to 7.4 percent since reaching
this year’s high on Oct. 9. The Shanghai Composite Index fell 0.2
percent today.
- Most Asian Stocks Gain; Oil, Gold Slide With Aussie.
Most Asian stocks rose before data on Chinese industrial output and
retail sales, while Australia’s dollar fell as a central bank official
said it hasn’t ruled out intervention to weaken the currency. Brent
crude oil extended its decline below $80 a barrel and gold dropped. About
four stocks gained for every three that fell on the MSCI Asia Pacific
Index (MXAP) by 11:41 a.m. in Tokyo. The Hang Seng Index fluctuated as
Tencent Holdings Ltd. (700), China’s biggest
online messaging operator, fell after missing earnings
estimates.
- Italians Say No to Risk as Slump Takes Toll on Startups. As a three-year long economic contraction shows little sign of ending, Italians are losing the impulse to take chances.
The number of businesses created in the third quarter was the lowest on
record for that period, while the rate of companies collapsing shows no
signs of slowing down, reports show. That’s the fallout from a recession
which has undermined confidence, making banks and venture capitalists
reluctant to
take risks.
Wall Street Journal:
- NATO Sees ‘Significant Buildup’ of Russian Forces in Ukraine. Large Convoys Reported to be Moving Into the Region. Russia is sending fresh convoys of troops and tanks into eastern
Ukraine, NATO said, and threatening to dispatch warplanes on maneuvers
over the Gulf of Mexico, flexing its military muscles in a Cold
War-style escalation with the West.
- U.S.-China Accord Was Months in Making. Blueprint Forged by Beijing, Washington Hinges on Avoiding Sensitive Topics Such as Human Rights. The display of cooperation during President Barack Obama’s visit with
Chinese President Xi Jinping was the product of months of low-key
meetings between midlevel bureaucrats who were tasked with setting up a
new chapter in U.S.-China relations, according to senior U.S. and
defense officials.
- Obama Faces Obstacles to Emissions Deal With China. Other Nations, Republicans and Environmentalists Present Hurdles to President’s Plan. President Barack Obama’s plan to curb greenhouse-gas emissions alongside
China sets the stage for lengthy confrontations with other nations
resistant to making cuts, Republicans who want to roll back regulations
and environmentalists pushing for bigger reductions.
- Green Leap Forward. Obama trades higher U.S. energy costs now for distant Chinese promises. The climate-change campaign against fossil fuels has been having a hard
time with democracy. Voters in the U.S. support fracking and the
Keystone XL pipeline, Australia repealed its carbon tax, and frustration
with green energy costs is rising across Europe. So perhaps it’s not
surprising that President Obama has turned to a dictatorship for help
with his anticarbon ambitions.
Fox News:
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Global banks entering higher-stake phase of forex probes. The $4.3 billion in civil settlements struck Wednesday between six global banks and U.S. and U.K. authorities over foreign exchange market
manipulation sets the stage for negotiations over related
ongoing probes that could bear much more severe consequences.
- Weak telecom spending, emerging markets weigh on Cisco(CSCO) forecast.
Network equipment maker Cisco Systems Inc forecast current-quarter
profit below analysts' average estimate, weighed down by capital budget
cuts at telecom service
providers and weak sales in emerging markets. Cisco's shares reversed course in extended trading following
the forecast and fell 1 percent.
- NetApp(NTAP) profit falls on lower sales to OEMs. Data storage equipment maker NetApp Inc reported a 4 percent fall in quarterly profit, hurt by lower sales to original equipment manufacturers, and forecast a
third-quarter profit below market estimate. The company's shares were down about 3 percent in extended
trading.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 unch.
- Asia Pacific Sovereign CDS Index 64.5 +.25 basis point.
- NASDAQ 100 futures +.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 280K versus 278K the prior week.
- Continuing Claims are estimated to fall to 2347K versus 2348K prior.
10:00 am EST
- JOLTS Job Openings for September are estimated to fall to 4800 versus 4835 in August.
11:00 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+744,440 barrels versus a +460,000 barrel gain the prior week. Gasoline
supplies are estimated to rise by +60,000 barrels versus a -1,378,000
barrel decline the prior week. Distillate inventories are estimated to
fall by -1,450,000 barrels versus a -724,000 barrel decline the prior
week. Finally, Refinery Utilization is estimated to rise +1.0% versus a
+1.8% gain the prior week.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen speaking, Fed's Plosser speaking, Chinese Industrial
Production/Retail Sales/Fixed Assets data, $16B 30Y T-Bond auction,
Bloomberg US Economic Survey for November, weekly Bloomberg Consumer
Comfort Index, UBS Building/Building Products Conference, (BBRY)
investor day, (FLR) investor day, (UPS) investor conference, (PG)
analyst day and the (FFIV) investor meeting 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 mixed and to
weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
