Evening Headlines
Bloomberg:
- Germany Calls for Ukraine Peace Efforts as Tensions Mount. German
Foreign Minister Frank-Walter Steinmeier said mounting tensions in
eastern Ukraine raised the risk of a “major military confrontation.”
Speaking after a day of shuttle diplomacy that took him to Moscow and
Kiev, Steinmeier said yesterday he used his meeting with Russian
President Vladimir Putin “for an exchange of views, which seriously
differ” on Ukraine.
- Medicine and Meat Out of Reach Amid Ukrainian Price Shock.
From Lviv, near the Polish border, to Kharkiv, 1,000
kilometers (650 miles) east in Russia’s shadow, Ukrainians are
grappling with the world’s worst-performing currency, inflation
that’s rocketed to 20 percent and the worst recession in five
years. The plight of Zhytomyr’s 270,000 residents shows how
bailout-mandated austerity and the strains of an eight-month
insurgency are playing out in everyday life.
- Distressed Debt in China? You Ain’t Seen Nothing Yet, Buyers Say. Bad
debts in China are well underestimated because authorities persist in
propping up weak companies and bailing out local investors, according to
DAC Management LLC. The Chicago-based asset management and advisory firm, which focuses on distressed credit and special situations in China,
says the worst is yet to come, and that means lots of
opportunities for the world’s biggest distressed debt traders.
- China Wages Policy Backfires as Costs Prompt Sock-City Blues. Wages
at Chen Fengying’s sock factory on China’s east coast have soared
almost sixfold in seven years. The 20 percent increase she expects in
2015 may
doom her seven-year-old company as profit and revenue fall. “If things go on like this, we’ll just close down,” said
Chen from Zhuji in Zhejiang province, the so-called Sock City
that produces 17 billion pairs annually, more than 35 percent of
global production. “Many factories have already died.”
- Asian Stocks Retreat on Fed Minutes; Japan Shares Climb on Yen. Asian
stocks fell a second day after Federal Reserve minutes showed some U.S.
policy makers were concerned about low inflation. Shares in Japan
gained as the yen weakened past 118 per dollar. The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 139.54 as of 9:04 a.m. in Tokyo after dropping 0.7 percent yesterday.
- Codelco Seen Trimming 2015 China Copper Premium Amid Surplus. Codelco,
the world’s biggest copper
producer, will reduce the fee it charges Chinese buyers by 4
percent next year amid waning demand and rising supplies,
according to an executive at the country’s largest non-state
trader of the metal. The charge for long-term supplies from the Chilean
miner added to prices for immediate delivery on the London Metal
Exchange will fall to $133 a metric ton from this year’s $138, Luo
Shengzhang, vice president of Maike Metals Group, said yesterday at a
conference in Shanghai. The spot premium for shipments to Shanghai,
including insurance and freight, is now
$60 a ton, compared with $135 in May and a record $210 in August
2013, according to data from SMM Information & Technology Co.
Wall Street Journal:
- Obama Sets Immigration Rollout for This Week. Moves, to Be Announced in Thursday Night Speech, Expected to Protect Millions From Deportation. President Barack Obama will lay out sweeping changes to the immigration
system in a speech Thursday night, offering new protections to millions
of people in the country illegally and sparking a bitter fight with
Republicans.
- As Yen Slides, Investors Shun Other Asian Currencies. Regional Officials Fear Weaker Japanese Currency Could Hurt Competitiveness of Their Economies. Investors are shedding holdings of Korean won, Singapore dollars and
other Asian currencies, in a bet the yen’s fall against the dollar will
reverberate through the region’s foreign-exchange markets.
- Obama: The Hangover. The Gruber technocracy is a green sludge consuming the Democratic Party. Who can forget the Obama acceptance speech in 2008 on a football field
in Denver, the nominee standing amid Greek columns and scrolling through
a long list of goals to 84,000 Democrats? That was the high. Six years
later, the Democrats get the hangover.
MarketWatch.com:
- Strains in Japan could put focus on debt. Naysayers
have long worried the whole “Abenomics” experiment would end in
tatters. And now Abe’s decision to delay the hike and call a snap
election following the Japanese economy’s fall back into recession in
the third
quarter, has some observers worried of a possible strain between Kuroda
and Abe.
CNBC:
- Goldman(GS) accused of exploiting aluminum storage rules. (video) In
a voluminous new report reflecting two years of research, an
influential Senate panel accuses Goldman Sachs of manipulating aluminum
storage rules in order to line its own pockets, even as manufacturers
and customers suffered.
Zero Hedge:
Business Insider:
NY Times:
- Arizona Sues G.M. for $3 Billion Over Recalls. The
attorney general of Arizona said on Wednesday that the state had filed
suit against General Motors, claiming that the automaker had defrauded
the state’s consumers of an estimated $3 billion.
Reuters:
- Salesforce(CRM) 2016 revenue forecast misses market estimates. Cloud
software company Salesforce.com Inc forecast revenue for the current
quarter and full year 2016 that fell short of market expectations, hurt
by a strong dollar. Shares of Salesforce, which gets about 30
percent of its revenue from outside Americas, were down 4.5 percent in
extended trading on Wednesday. The world's biggest maker of online sales
software said it
expected revenue of $6.45 billion to $6.5 billion for the year
ending January 2016, missing analysts' average estimate of $6.66
billion.
- More U.S. borrowers fall behind on their car loans in 3rd qtr. The amount of U.S. borrowers
that were at least two months behind on their car loan payments
jumped sharply in the third quarter, according to a report on
Wednesday from Experian Automotive. The 60-day delinquency rate for U.S. auto loans rose nearly
9 percent to 0.62 percent in the third quarter from the same
period in 2013.
Financial Times:
- China and Russia in naval co-operation vow.
China and Russia have vowed to strengthen bilateral military
co-operation and hold joint naval exercises to counter US influence in
the Asia-Pacific region as a growing chorus of voices warns of a looming
“new cold war”.
Shanghai Securities News:
- China Should Cut 'Excessive' Expansion of Investment. China
should reduce "excessive" expansion of investments and improve their
efficiency to ensure sustainable economic growth, according to an
article written by Xu Ce and Wang Yuan from the National Development and
Reform Commission. China should reform performance assessment of local
govts and reduce shadow banking, the article said.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.50 unch.
- Asia Pacific Sovereign CDS Index 64.5 +1.0 basis point.
- NASDAQ 100 futures -.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The CPI for October is estimated to fall -.1% versus a +.1% gain in September.
- The CPI Ex Food & Energy for October is estimated to rise +.1% versus a +.1% gain in September.
- Initial jobless Claims are estimated to fall to 284K versus 290K the prior week.
- Continuing Claims are estimated to fall to 2370K versus 2392K prior.
9:45 am EST
- Preliminary Markit US Manufacturing PMI for November is estimated to rise to 56.3 versus 55.9 in October.
10:00 am EST
- Philly Fed for November is estimated to fall to 18.5 versus 20.7 in October.
- Existing Home Sales for October are estimated to fall to 5.15M versus 5.17M in September.
- The Leading Index for October is estimated to rise +.6% versus a +.8% gain in September.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Williams speaking, Fed's Tarullo speaking, weekly EIA natural gas
inventory report, Bloomberg Economic Expectations Index for November,
weekly Bloomberg Consumer Comfort Index, Canaccord Medical
Tech/Diagnostics Forum, Goldman Emerging/SMID-Cap Growth Conference and
the (INTC) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial
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: Substantially Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.29 +3.1%
- Euro/Yen Carry Return Index 154.27 +.86%
- Emerging Markets Currency Volatility(VXY) 8.0 +.6%
- S&P 500 Implied Correlation 39.85 +7.69%
- ISE Sentiment Index 87.0 -17.14%
Credit Investor Angst:
- North American Investment Grade CDS Index 67.05 -.2%
- European Financial Sector CDS Index 67.58 -.5%
- Western Europe Sovereign Debt CDS Index 32.17 +4.38%
- Asia Pacific Sovereign Debt CDS Index 64.15 +.81%
- Emerging Market CDS Index 277.96 -2.35%
- China Blended Corporate Spread Index 325.50 +.65%
- 2-Year Swap Spread 21.25 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 unch.
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 183.0 +1.0 basis point
- China Import Iron Ore Spot $70.20/Metric Tonne -2.23%
- Citi US Economic Surprise Index 10.60 +.1 point
- Citi Eurozone Economic Surprise Index -15.0 +.7 point
- Citi Emerging Markets Economic Surprise Index -1.10 +1.1 points
- 10-Year TIPS Spread 1.84 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +115 open in Japan
- DAX Futures: Indicating +2 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail sector longs and index hedges
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Russia deflects Ukraine blame after Germany pushes for talks. Russia's foreign minister Wednesday blamed the conflict in Ukraine on
other countries' efforts to increase their security since the collapse
of the Soviet Union. A
day after Russia and Ukraine clashed over how to move toward a new
cease-fire agreement, Russian Foreign Minister Sergei Lavrov said the
United States and the European Union had repeatedly "torpedoed" peace
efforts. Ukraine, the European Union and the U.S. blame President
Vladimir Putin for supporting pro-Russian separatists and stoking a
conflict that has killed more than 4,100 people, according to United
Nations estimates. "Throughout the Ukrainian crisis our country
has consistently sought to help Ukraine to overcome this difficult
period in its history," Lavrov said in the Russian lower house of
parliament. "Russia can't stand by and watch what's happening in a
neighboring fraternal country."
- Iron Ore Extends Bear Market as Miner Says ‘We Are Price Takers’. Iron
ore tumbled to the lowest in more than five years as declining home
prices in China added to concern a slowdown in the top buyer will
deepen, exacerbating a glut. Producers’ shares fell in London, and
Australia’s BC Iron Ltd. (BCI) said that miners had to take the prices
on offer.
- European Stocks Are Little Changed as Miners Fall.
European stocks slipped from a seven-week high, with commodity
producers falling and Greek shares rising, before the release of minutes
from the Federal Reserve’s last policy meeting. The Stoxx Europe 600
Index slipped less than 0.1 percent to 339.15 at the close of trading,
after sliding as much as 0.3 percent and gaining 0.3 percent earlier.
Miners fell posted the biggest declines among 19 industry groups, while
Greece’s ASE
Index rallied 4.2 percent, the most in almost a month, for the
biggest increase among 18 western-European markets.
- Junk-Bond Banking Boom Peaks as Firms Drop off Deal List. The explosion of brokers plowing
into the lucrative junk-bond underwriting business may be
fading. The number of firms managing U.S. high-yield bond sales
isn’t growing for the first year since 2008, according to data
compiled by Bloomberg. The ranks will likely thin in upcoming years as
yields rise, making it more expensive for speculative-grade companies to
borrow, according to Charles Peabody, a banking analyst at research
firm Portales Partners LLC in New York. “You’re going to see fewer and fewer deals,” he said in a telephone interview. “Underwriting volumes are probably going
to decline from here and you’re going to see more of a
consolidation or exodus.”
Wall Street Journal:
- With Wary Eye on Global Tumult, Fed Opted to Stay on Policy Path for Now. Minutes Show Officials Conflicted Over Domestic Economic Improvement and Troubles Abroad. Federal Reserve officials were preoccupied at an October policy meeting
with tumult in financial markets, weak economic conditions abroad and
risks that low inflation could drift lower. But they forged ahead with a
decision to end the central bank’s bond-buying program because the
domestic economy and labor market appeared to be on course for further improvement.
ZeroHedge:
Business Insider:
Washington Examiner:
Newsweek:
Reuters:
- S&P sounds warning on Chinese property sector, Russian banks.
Credit rating
agency Standard and Poor's said on Wednesday that China's over-priced
and over-supplied property market and capital-starved Russian banks were
likely to face further downgrades in the coming years. In two new
emerging market-focused reports, S&P said Chinese property
ratings were likely to be hit more than other large markets in Asia,
while like in Russia banks in Turkey, South Africa and Brazil also faced
difficulties. S&P said in the property report that ratings in
Asia would have "a negative bias" next year because of an expected fall
in Chinese and Hong Kong house prices. The property sector accounts
for more than 15 percent of China's annual economic output, banks
provide much of the financing for building and buying, so a prolonged
downturn poses possibly the biggest risk to the world's second-largest
economy. "Continuing sluggish sales, rising financing cost, and
declining access to funding will hit smaller (Chinese) regional
players...as a result, we may see further downgrades, and even defaults, at the lower end of our rating spectrum," S&P said.
MNI:
- Chinese Govt Against Benchmark Interest Rate Cut. Government is
reluctant to cut rates, prefers to use current strategy of lowering
financing costs through "undercover" market operations, citing person
with knowledge of the matter. Leadership's policy tone is "targeted,"
aiming to maintain growth in reasonable range, the person said.
Style Underperformer:
Sector Underperformers:
- 1) HMOs -1.65% 2) Steel -1.58% 3) Computer Hardware -1.21%
Stocks Falling on Unusual Volume:
- CSTM, CLVS, LEJU, SNCR, VIPS, BHI, OME, BTE, HAL, DG, RCAP, INXN, VRTU, ICUI, KFY, MOV, SWIR, BBL, EZCH, CLD, GLT, IMOS, BBW, AEIS, BOKF and AEIS
Stocks With Unusual Put Option Activity:
- 1) KMX 2) DISH 3) MET 4) HYG 5) MCD
Stocks With Most Negative News Mentions:
- 1) BBRY 2) TOO 3) SNCR 4) TSLA 5) CLF
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Retail +.64% 2) Foods +.23% 3) Biotech +.18%
Stocks Rising on Unusual Volume:
- OPLK, DL, DISH, AGIO, SSI, TGT, SPLS, RCPT, MAC, Z, LOW, CLDX, RUBI, TGT, LZB, NGL, IPI, TRLA and RCPT
Stocks With Unusual Call Option Activity:
- 1) DGX 2) K 3) SIRI 4) MYL 5) MDLZ
Stocks With Most Positive News Mentions:
- 1) PETM 2) LOW 3) DSW 4) MOS 5) TGT
Charts:
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.
