Evening Headlines
Bloomberg:
- Iran Failure to Evade Sanctions Offers Russia Little Hope. Russian
companies from OAO Rosneft (ROSN) to OAO Sberbank (SBER) appealing to
European courts to circumvent sanctions on the country might want to
take their cue from Iran’s failed efforts and save on the legal bills. That’s because a series of hollow victories by Iranian
companies over sanctions for the Islamic nation’s nuclear
program have mostly failed to dislodge the European Union’s
economic reprisals, according to lawyers.
- Shanghai Stock Link Flows Plunge as CLSA Sees Ghost Train.
The flood of buy orders for Shanghai shares through the Hong Kong
exchange link has slowed to a trickle two days after the program’s
debut. Net purchases of mainland equities by global investors totaled
1.1 billion yuan ($180 million) at the midday break, down from 2.7
billion yuan at the same time yesterday and 10.6 billion yuan on Nov.
17. Hong Kong stock buying slowed 66 percent from yesterday to 117
million yuan. The Shanghai Composite Index (SHCOMP) slipped 0.2 percent
and shares of Hong Kong Exchanges & Clearing Ltd. (388) headed for
the biggest three-day drop
since 2012.
- Dollar Rises to 7-Year High Versus Yen; Oil, Gold Retreat.
The dollar climbed, reaching a
seven-year high against Japan’s yen after Prime Minister Shinzo Abe
called an early election and postponed a sales-tax increase. Asian
equity gauges were mixed, while gold retreated and oil extended its
slump. The Bloomberg Dollar Spot Index added 0.1 percent by 10:56 a.m.
in Tokyo, with the greenback climbing as high as 117.22
yen. Japan’s Topix index rose 0.4 percent while Hong Kong’s Hang
Seng Index was little changed after two days of losses.
- Mining’s $120 Billion Ore Bet Sours as Peak Steel Looms in China. Chinese President Xi Jinping
obviously wasn’t speaking for the world’s iron-ore producers
when he pronounced this month that the risks from his country’s
slowing growth “aren’t that scary.” The world’s mining giants
have wagered $120 billion that steel production in China won’t peak
until as late as 2030. Increasingly, it looks like they got that wrong, a
miscalculation that could have huge consequences for companies led
by BHP Billiton Ltd. (BHP) and Rio Tinto Group. “I’ve always taken the
view that the miners had the best intelligence on this as large
investment decisions are based on it,” Richard Knights, a mining analyst
at Liberum Capital Ltd. said by phone. “But if they get it wrong by a
just a small
margin, that has major implications for profitability and the
share price for years to come.”
Wall Street Journal:
- Congress Will Fight Obama’s Power Grab. The president’s amnesty plan for millions of unlawful immigrants clearly violates the Constitution. President Obama seems poised to announce one of the biggest executive
power grabs in American history. He is expected to declare unilaterally
that millions of unlawful immigrants can stay in the U.S. without facing
the consequences of violating immigration laws. Congress has not agreed
on how to reform the immigration system, but the president has decided
to ignore the Constitution and alter the law without new statutes.
Fox News:
- Keystone pipeline bill fails in Senate. (video) A bill to approve the Keystone XL oil pipeline failed in the Senate
on Tuesday by just one vote, in a setback not only for the energy
project but the politically imperiled Democratic senator who pushed the
legislation. The bill failed on a 59-41 vote. It needed 60 to pass.
CNBC:
Zero Hedge:
Business Insider:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.50 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 63.5 -.25 basis point.
- NASDAQ 100 futures -.06%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for October are estimated to rise to 1025K versus 1017K in September.
- Building Permits for October are estimated to rise to 1040K versus 1018K in September.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-872,730 barrels versus a -1,735,000 barrel decline the prior week.
Gasoline supplies are estimated to rise by +590,910 barrels versus a
+1,805,000 barrel increase the prior week. Distillate inventories are
estimated to fall by -1,636,630 barrels versus a -2,803,000 barrel
decline the prior week. Finally, Refinery Utilization is estimated to
rise +.64% versus a +1.7% gain the prior week.
2:00 pm EST
- Fed Minutes from Oct. 28-29 Meeting.
Upcoming Splits
Other Potential Market Movers
- The
weekly MBA mortgage applications report, Jefferies Healthcare
Conference, Goldman Sachs Metals/Mining/Steel Conference, (JBLU)
investor day, (QCOM) analyst meeting, (ROK) investor meeting and the
(BSX) investor event could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and real estate shares in the region. I expect US stocks to open mixed 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: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.56 -3.07%
- Euro/Yen Carry Return Index 153.03 +.93%
- Emerging Markets Currency Volatility(VXY) 7.96 -2.21%
- S&P 500 Implied Correlation 35.62 -7.48%
- ISE Sentiment Index 94.0 -17.54%
- Total Put/Call .94 +9.30%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.70 +.4%
- European Financial Sector CDS Index 68.06 +1.98%
- Western Europe Sovereign Debt CDS Index 30.92 -1.87%
- Asia Pacific Sovereign Debt CDS Index 63.64 -.33%
- Emerging Market CDS Index 283.88 -1.57%
- China Blended Corporate Spread Index 323.40 -.11%
- 2-Year Swap Spread 21.25 unch.
- TED Spread 21.75 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 unch.
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 182.0 -1.0 basis point
- China Import Iron Ore Spot $71.80/Metric Tonne -4.37%
- Citi US Economic Surprise Index 10.50 +2.1 points
- Citi Eurozone Economic Surprise Index -15.70 +8.3 points
- Citi Emerging Markets Economic Surprise Index -2.20 +.7 point
- 10-Year TIPS Spread 1.86 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +105 open in Japan
- DAX Futures: Indicating +23 open in Germany
Portfolio:
- Higher: On gains in my biotech/medical/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Russia, Ukraine Dispute Truce Format as NATO Sees Buildup. Ukraine
and Russia clashed over how to move toward a new cease-fire agreement,
after President Petro Poroshenko said his country is ready for “total
war” with Vladimir Putin’s forces. As NATO Secretary General Jens
Stoltenberg criticized Russia for staging a “serious military buildup”
and sending
troops and weapons across its western border, Ukrainian Prime
Minister Arseniy Yatsenyuk advocated new “Geneva format” talks
including the U.S. to de-escalate the crisis. Russia said that
framework, which followed April talks in the Swiss city that
excluded pro-Russian separatists, would skirt a process that led
to a Sept. 5 cease-fire in Minsk, Belarus.
- Russia Sees Recession Next Year If Oil Price Falls to $60. Russia’s
economy will sink into a recession next year if the price of oil slumps
to $60 a barrel and the U.S. and its allies tighten sanctions over the
conflict in Ukraine, Finance Minister Anton Siluanov said. The
economy of the world’s largest energy exporter won’t grow faster than 1
percent in 2015 even if oil prices hold steady and the severity of
sanctions remains unchanged, Siluanov said in an interview in Singapore
yesterday. The price of Brent has slumped by almost a third this year to
below $80 a barrel.
- Four Killed in Palestinian Attack at Jerusalem Synagogue. Palestinians
armed with butcher’s cleavers and a gun killed four worshipers at a
synagogue in Jerusalem in an attack that escalated months of violence in
the city. Three of the victims had dual U.S. and Israeli citizenship,
and the fourth
was an Israeli and British citizen. The two assailants, both from east
Jerusalem, were shot and killed, and a Palestinian group claimed
responsibility. Public Security Minister Yitzhak Aharonovitch urged
soldiers and security guards to start carrying their weapons even when
off-duty.
- ECB Plans ‘Intrusive’ Probe of Banks’ Risk-Weight Models. The
European Central Bank plans to clamp down on the complex models lenders
use to gauge the risk of their assets, as it works to restore trust in
the euro area’s financial system. The ECB, newly installed as the euro
area’s single supervisor, plans to scrutinize lenders’ models and
eliminate variations across the currency bloc, top policy makers
have said. The Frankfurt-based central bank didn’t look at the way banks
calculate asset risk in its year-long balance-sheet probe, completed
last month.
- ECB Must Weaken Euro to Aid France and Italy, Ex-BOE’s King Says. (video) Euro-area
stagnation poses the largest threat to the global economy
and Mario Draghi should weaken the euro to help boost the flagging
economies of France and Italy, according to former Bank of England
Governor Mervyn King. “The euro area is the biggest risk because I don’t
think the leaders in the euro area actually have a true vision of how
to cope with the problem,” King said in an interview yesterday with Bloomberg Television’s Olivia Sterns in Naples, Florida.
- Europe Stocks Advance as German Investor Confidence Gains. European stocks rose for a second day as a report showed German investor confidence advanced for
the first time this year.
The Stoxx Europe 600 Index climbed 0.6 percent to 339.3 at
the close of trading in London.
- Iron Ore Bear Market Deepens as China Home Prices Add to Concern. Iron ore
extended a tumble to the lowest level in more than five years as
declining home prices in China added to concern that an economic
slowdown in the biggest buyer will deepen, exacerbating an oversupply. Ore with 62 percent content delivered to Qingdao, China,
retreated 4.4 percent to $71.80 a dry ton, the lowest level
since June 2009, according to data from Metal Bulletin Ltd.
yesterday. It’s 47 percent lower this year, heading for the
biggest annual drop in data going back to 2009.
- Oil Drops as Investors Weigh Likelihood of OPEC Cutback.
WTI for December delivery fell $1.08, or 1.4 percent, to $74.56 a barrel at 12:58 p.m. on the New York Mercantile Exchange. The more-active January future slipped $1.12, or 1.5 percent, to $74.54. The volume of all contracts traded was 1.7
percent below the 100-day average for the time of day.
- Moody’s Joins Fitch Slamming Subprime Auto Bonds. The booming market for securities backed by subprime car loans is
riskier than their ratings imply, say two of the biggest assessors of bond credit quality.
Moody’s Investors Service (MCO) and Fitch Ratings analysts said in
interviews that the grades their competitors have assigned to a crop of
new issuers -- most of which are backed by private-equity firms -- are
too high. The lenders lack a track record in the bond market proving
their underwriting acumen and ability
to handle the specialized task of collecting on soured debt during a
downturn, according to the analysts.
ZeroHedge:
Business Insider:
Susan Lund:
- China credit bubble? It accounts for half of new private sector debt worldwide since 2007 - growth of $10T. (graph)
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Steel -1.40% 2) Social Media -1.03% 3) Computer Services -.86%
Stocks Falling on Unusual Volume:
- PF, OME, CQP, IPAR, URBN, TJX, MC, CLDX, SC, DKS, MTLS, A, KOF, KEX, CLF, TX, HD, YOKU, CEO, AGTC, LXFT, TSN, TDW, ESNT and LOGM
Stocks With Unusual Put Option Activity:
- 1) MPC 2) SMH 3) HD 4) JNK 5) XLE
Stocks With Most Negative News Mentions:
- 1) F 2) WFC 3) URBN 4) A 5) TJX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +2.29% 2) Hospitals +2.23% 3) Biotech +1.73%
Stocks Rising on Unusual Volume:
- ABGB, ACT, SUNE, TERP, POT, AMBA and GNRC
Stocks With Unusual Call Option Activity:
- 1) MOS 2) TJX 3) SUNE 4) AVP 5) DNKN
Stocks With Most Positive News Mentions:
- 1) REV 2) NOC 3) THOR 4) DISCA 5) MDT
Charts:
Evening Headlines
Bloomberg:
- EU Skips Wider Russia Sanctions While Targeting Rebels. European Union governments held off on further economic sanctions against the Kremlin for fomenting rebellion in eastern Ukraine, while agreeing to blacklist more pro-Russia separatists there. EU foreign ministers decided to impose additional travel
bans and asset freezes in response to the Nov. 2 elections in
the rebel-held regions of Donetsk and Luhansk. The names will be
released by the end of the month.
- Disappointment Becomes Norm for Global Growth as Japan Contracts. Group of 20 leaders pledged over the weekend to do everything they
can to boost the global recovery. Japan’s descent into a recession is
the latest reminder of how elusive that goal is proving to be. Less
than 24 hours after heads of state gathering in Brisbane, Australia,
agreed to take measures that would boost their economies by a collective
$2 trillion by 2018, the Cabinet Office delivered news in Tokyo that
Japan’s gross domestic product unexpectedly shrank an annualized 1.6
percent in the three months through September, the second straight
contraction.
- Abe Set to Call Election, Delay Tax Hike Amid Recession. Japanese Prime Minister Shinzo Abe
is set to call early elections as part of a trio of measures
today in a gambit to secure his political future and fortify the
“three arrows” of his economic policy after the nation sank
into recession. Abe will postpone an unpopular sales tax increase,
scheduled for October 2015, for 18 months, people familiar with
the discussions said last week. He’ll probably call an early
election for Dec. 14, according to people with knowledge of the
ruling party strategy. Abe will announce both steps at a press
conference today, public broadcaster NHK said, well as ordering
new stimulus measures.
- Beijing Home Prices Drop for First Time in 2 Years on Discounts.
Beijing home prices fell for the first time in almost two years as
China’s property slowdown deepened, prompting developers to offer
discounts to cut inventories. New-home prices dropped in October in 67
cities of 70
tracked by the government from a year earlier, and in 69 from
September, the National Bureau of Statistics said today. Prices
in Beijing declined 1.3 percent, the first annual decrease since
November 2012 and a reversal from the 14.7 percent jump in
January from the previous year.
- Lopsided Link Shows Chinese Rejection of Hong Kong Stocks. Chinese investors failed to show up
for some of Hong Kong’s foremost companies on the first day of
the exchange link with the mainland, confounding the predictions
of Deutsche Bank AG, BNP Paribas SA and Goldman Sachs Group Inc.
- China Stocks Drop for Fourth Day as Data Shows Home-Price Slump.
Chinese stocks dropped, with the benchmark index declining for a fourth
day, as falling home prices added to concerns that an economic slowdown
will deepen and enthusiasm toward an exchange link with Hong Kong
faded. Poly Real Estate Group Co. (600048) and China State Construction
Engineering Corp. slumped at least 1.8 percent. New-home prices
decreased in all but one city monitored by the government last month as
developers offered discounts to cut inventories. Hong Kong Exchanges and
Clearing Ltd. slid 2.8 percent, extending yesterday’s 4.5 percent drop,
as mainland investors used less than 4 percent of their 10.5 billion
yuan ($1.7 billion) quota in Hong Kong this morning. The Shanghai Composite Index (SHCOMP) fell 0.4 percent to 2,463.76
at the noon-time break, while the Hang Seng China Enterprises
Index slid 1 percent.
- Asian Stocks Rise as Abe Poised to Add Stimulus, Call Election.
Asian stocks rose as investors await a decision by Japanese Prime
Minister Shinzo Abe to put off a sales-tax increase, add stimulus and
call an election, after data yesterday showed the economy entered
recession. The MSCI Asia Pacific Index (MXAP) gained 0.4 percent to 140.29 as
of 9:00 a.m. in Tokyo, after slumping by the most in more than a
month yesterday.
- Goldman Cuts Copper Price Forecast on Rising Dollar, Falling Oil. Copper prices will fall next year as
a strengthening U.S. dollar and weaker oil prices push down
marginal production costs, according to Goldman Sachs Group Inc. The
bank lowered its 2015 price outlook to $6,217 a metric ton from $6,400,
analysts including Max Layton said in a report yesterday. Marginal
production cost will fall to between $5,600 and $6,300 a ton next year,
according to the report.
Wall Street Journal:
- President Orders Review of U.S. Hostage Policies. Move Follows Criticism Surrounding Beheading Cases In Syria. The Obama administration is undertaking a review of how it handles cases
of U.S. citizens held captive by extremists abroad, according to a
letter from a top Pentagon official made public Monday, a move that
follows criticism from some relatives of slain Americans.
- Small Towns Go to Bat for Wall Street Banks. Fed Bid to Limit Banks’ Commodities Activities Imperils Local Gas Contracts, Mayors Argue. A Federal Reserve plan that could stop big banks from owning oil
pipelines, metals warehouses and other physical-commodity assets is
sounding alarm bells hundreds of miles from Wall Street.
- Federal Private-Pension Safety Net Running $62 Billion Deficit. Pension
Benefit Guaranty Corp. Report Warns of Problems with Multiemployer
Pension Plans. The federal government’s safety-net program for private
pensions is
running a near $62 billion long-term deficit, largely due to
long-standing problems in a type of pension plan that is common in
transportation, construction and some other industries, according to a
new report. The problems are likely to bankrupt the federal
safety-net program for so-called multiemployer pension plans within the
next decade, perhaps in the next few...
Fox News:
- Controversial economist Gruber has earned millions from taxpayers at federal, state levels. (video) “My job was just to see if the numbers added up,” Dr. Jonathan
Gruber, the controversial architect of ObamaCare, told PBS two years
ago. And add up the numbers did – at least in terms of Gruber’s consulting
fees. A Fox News review of state and federal websites, as well as
published reports, finds the MIT economist and his firm have secured
millions in federal and state contracts stretching back over the last
fifteen years.
CNBC:
- Why a Santa rally might not be in the cards. (video) Many traders expect stocks to rally into the year-end, but the current
complacency may be signaling that a late year Santa rally is not in the
cards. "We're a little concerned by the fact that investors' memories have
become so short that volatility has just completely collapsed to
multiyear lows a month away from an incredibly frightening
roller-coaster ride. The bearish readings have slipped," said Julian
Emanuel, equity strategist at UBS.
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 +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.50 -.5 basis point.
- Asia Pacific Sovereign CDS Index 63.75 unch.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- PPI Final Demand for October is estimated to fall -.1% versus a -.1% decline in September.
- PPI Ex Food and Energy for October is estimated to rise +.1% versus unch. in September.
10:00 am EST
- The NAHB Housing Market Index for November is estimated to rise to 55.0 versus 54.0 in October..
Upcoming Splits
Other Potential Market Movers
- The
Fed's Kocherlakota speaking, UK CPI report, Net Long-Term TIC Flows for
September, US weekly retail sales reports, Stifel Healthcare
Conference, UBS Tech Conference, Morgan Stanley Consumer/Retail
Conference, (NOV) analyst day, (SYNA) investor meeting and the (ZTS)
investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial 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.
