Evening Headlines
Bloomberg:
- King Abdullah, Saudi Monarch Who Modernized Economy, Dies. King Abdullah, the monarch who oversaw a fivefold increase in the
size of the Arab world’s biggest economy and met the Arab Spring with a
mixture of force and largesse, has died after almost a decade on the
throne. He was born in 1924. Crown Prince Salman bin Abdulaziz, Abdullah’s half-brother, will succeed him,
state television announced early on Friday in Riyadh. Abdullah had been
in hospital in the Saudi capital since last month, receiving treatment
for pneumonia. He became Saudi Arabia’s sixth king
in August 2005, after years as de facto ruler since 1996 when King Fahd
was incapacitated by a stroke.
- Saudi Arabia’s New King Seen Sticking With Oil Production. King
Salman, Saudi Arabia’s new ruler, probably will stick to the oil policy
of his predecessor, the late King Abdullah, maintaining production
levels to preserve market share even at the cost of depressing prices. A
key indicator will be whether Salman, 79, retains the oil minister, Ali
al-Naimi, who has driven decision-making since 1995. Naimi, who turns
80 this year, has said he’d like to devote more time to his other job,
chairman of the science and technology university named after the late
sovereign. “The Saudi leadership has already taken the tough decision to
live with lower oil prices,” Florence Eid-Oakden, chief economist at
London-based consultants Arabia Monitor, said by phone. “Naimi is well established, he is respected and there
shouldn’t be a change as long as the current cabinet is in
place.”
- Putin Said to Shrink Inner Circle as Ukraine Hawks Trump Tycoons. Vladimir Putin isn’t just angering leaders
from Berlin to Washington. He’s irking some of his richest
friends, too, by snubbing their pleas to end the conflict in
Ukraine and ostracizing all but a handful of hardliners. The ruble’s plunge has heightened opposition to Putin’s
backing of the rebellion in Ukraine among his wealthiest allies,
prompting the president to shrink his inner circle from dozens
of confidants to a small group of security officials united by
their support for the separatists, two longtime associates said. Putin is increasingly suspicious of men who owe their
wealth to their ties to him and who are being hurt the most by
U.S. and European sanctions, according to the people, who spoke
on condition of anonymity to avoid reprisal. The 21 most
affluent people in the country lost a total of $61 billion last
year, a quarter of their combined fortune, according to the
Bloomberg Billionaires Index.
- Clock Ticks for Samaras as Greek Election Campaign Enters Climax. The
fight for power in Greece enters its final hours, with Prime Minister
Antonis Samaras making a last-ditch appeal to voters as he tries to defy
opinion polls showing a victory for his anti-austerity opponent. The
monthlong election campaign wraps up on Friday when
Samaras addresses a rally of his New Democracy party at 6 p.m.
in Athens. Alexis Tsipras, who leads the opposition Syriza
group, will speak on the island of Crete in the evening.
- China Bank Bad-Loan Ratio Jumps Most in at Least a Decade. Chinese
banks’ bad-loan ratio jumped the most in at least a decade in the
fourth quarter as a property-market slump and an economic slowdown
constrained borrowers’ repayment ability. Nonperforming loans accounted
for 1.29 percent of commercial banks’ total advances as of Dec. 31, up
from 1.16 percent three months earlier, the China Banking Regulatory Commission said in a statement today. The bad-loan ratio for all
banking institutions, including policy banks, stood at 1.64
percent at the end of last year, according to the CBRC.
Bad loans may swell to 1.6 percent this year as economic
growth weakens, adding pressure on Chinese banks to boost
provisions, Bank of Communications Co. estimated last week.
- Everyone Wants to Be China's LendingClub. That Sounds Risky. China’s booming online lending industry will have more failures as it
matures beyond a fad, said Soul Htite, whose venture in the nation just
sold a stake to Tiger Global Management, the U.S. investment firm run
by Chase Coleman. A rush by Internet firms into financial
services is a repeat of the mimicry that saw Chinese ventures rise and
fall after styling themselves on U.S. discount company Groupon Inc.,
Htite, 41, said in an interview in Shanghai this week.
- Korean Economy Grows at Slowest Pace in More Than Two Years.
South Korea’s economy expanded at the slowest pace in more than two
years, underscoring the challenge facing the Park administration and the
central bank to spur growth. Gross domestic product grew 0.4 percent
in the three months through December from the previous quarter, the
Bank of Korea said Friday in Seoul. That matched the median estimate in a
Bloomberg News survey and was the weakest gain since the third
quarter of 2012. The economy expanded 2.7 percent from a year
earlier, compared with expectations for a 2.8 percent gain.
- Euro Set for 6th Weekly Loss on ECB; Aussie Falls Below 80 Cents. The
euro headed for a sixth weekly decline
against the dollar after an expansion in the European Central Bank’s
bond-buying program pared yields on German bunds relative to U.S.
Treasuries. Australia’s currency held a four-day drop after monetary
easing by the ECB and Bank of Canada this week spurred
speculation the Reserve Bank of Australia will lower borrowing
costs.
- Asian Stocks Gain on ECB; Oil Jumps After Saudi King Dies.
Asian shares rose, with the regional benchmark index heading for a
seven-week high, while the euro traded near an 11-year low after the
European Central Bank expanded its asset-buying program. Oil jumped
after Saudi Arabia’s King Abdullah died. The MSCI Asia Pacific Index climbed 0.7 percent by 11:58 a.m. in Tokyo, heading for the highest close since Dec. 4.
- Copper Heads for Sixth Weekly Drop as China Manufacturing Slows. Copper headed for a sixth weekly loss after
data showed manufacturing contracted in China, the world’s
biggest consumer. The metal in London fell as much as 0.8 percent.
The preliminary Purchasing Managers’ Index (BCOM) from HSBC Holdings Plc
and Markit Economics was at 49.8 in January compared with 49.6 last
month. Numbers below 50 indicate contraction. A similar measure for the
U.S. on Friday will signal further expansion, according to a survey of
economists by Bloomberg News. “The PMI was still low even if it was a
little bit better than the previous month,” said Tetsu Emori, a senior
fund manager at Astmax Asset Management Inc. “The Chinese market is
still slowing.” Copper for delivery in three months on the London Metal Exchange slipped 0.8 percent to $5,622.50 a metric ton ($2.55 a
pound). The metal fell 1.8 percent to $5,665 a ton on Thursday,
the lowest since Jan. 15. It’s down 1.7 percent this week.
- Skyrocketing Cancer Drug Prices Are Express Scripts’(ESRX) Target. Express
Scripts Holding Co. (ESRX), which this year forced price concessions
from makers of $1,000-a-day hepatitis C medicines, has set its sights on
$37 billion in U.S. spending on cancer medications. Its goal is to
start influencing the
drugs’ costs as soon as next year.
Wall Street Journal:
- U.S., Iraq, Prepare Offensive to Retake Mosul From Islamic State. Half of Islamic State Leadership Removed in Strikes. The U.S. and Iraq have begun preparations for an assault by summer to
retake Mosul, selecting and training military units and cutting supply
lines to Islamic State militants who control Iraq’s second-largest city,
the top American commander in the Middle East said.
Fox News:
MarketWatch.com:
CNBC:
- Currency expert: Euro going ‘well below parity’. "The divergence between the ECB, the [Bank of Japan] easing policy more,
and the Federal Reserve—even if you don't fully accept my view that the
Fed raises rates in the middle of this year, no matter how you slice
it, the Federal Reserve will raise rates well before the ECB and the
BOJ—I think that this pushes the euro well below parity next year," he said Thursday on CNBC's "Futures Now."
Zero Hedge:
Business Insider:
- The ECB Can't Save The Eurozone Economy. Unless governments make structural reforms to address the root
causes of deflation, any economic boost Europe gets from the ECB's
actions this week will likely be temporary.
RTTNews:
Reuters:
Telegraph:
- Mario Draghi's QE blitz may save southern Europe, but at the risk of losing Germany. The ECB has put German political consent for the euro project at risk. Nobody should have any illusions about the implications of such defiance.
What is at stake is German political consent for the euro project. Bernd
Lucke, the leader of the AfD anti-euro party, called today's decision an "act
of desperation and the introduction of eurobonds by the back door" by
the ECB. The Bavarian Social Christians (CSU) are also furious. "With this
decision, the ECB has crossed the Rubicon," said Angelika Niebler, the
party's parliamentary leader. The Bavarian finance minister, Markus Soder,
said: "unlimited purchases of sovereign bonds threaten to bring down
the whole system." On the Left, Die Linke lashed out at the decision, calling it a gift for
insiders. It plunders the savings of the poor to make the "super-rich
even richer" by driving up asset prices.
Rheinische Post:
- German
exports to Russia dropped by 18% or EU6b last year, Eckhard Cordes,
head of committee on Eastern European Economic Relations, said in an
interview. Says 2015 may be even worse if crisis isn't solved soon. Says
permanent 20% drop in exports to Russia may translate into 60,000 jobs
lost in Germany.
Evening Recommendations
Night Trading
- Asian equity indices are +.75% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 68.5 -3.0 basis points.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Chicago Fed National Activity Index for December is estimated to fall to .48 versus .73 in November.
9:45 am EST
- The Preliminary Markit US Manufacturing PMI for January is estimated to rise to 54.0 versus 53.9 in December.
10:00 am EST
- Existing Home Sales for December are estimated to rise to 5.08M versus 4.93M in November.
- The Leading Index for December is estimated to rise +.4% versus a +.6% gain in November.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI and UK retail sales reports could also impact trading today.
BOTTOM LINE: Asian
indices are higher, boosted by industrial and commodity shares in
the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 16.53 -12.31%
- Euro/Yen Carry Return Index 140.52 -1.79%
- Emerging Markets Currency Volatility(VXY) 10.58 -2.76%
- S&P 500 Implied Correlation 63.17 -3.08%
- ISE Sentiment Index 210.0 +176.32%
- Total Put/Call .93 -13.08%
Credit Investor Angst:
- North American Investment Grade CDS Index 67.96 -2.80%
- America Energy Sector High-Yield CDS Index 737.0 -.26%
- European Financial Sector CDS Index 59.98 -3.85%
- Western Europe Sovereign Debt CDS Index 24.87 -4.24%
- Asia Pacific Sovereign Debt CDS Index 70.08 -1.93%
- Emerging Market CDS Index 394.29 -.60%
- China Blended Corporate Spread Index n/a
- 2-Year Swap Spread 24.75 +.5 basis point
- TED Spread 23.75 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -12.5 +2.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 138.0 +2.0 basis points
- China Import Iron Ore Spot $66.79/Metric Tonne -1.5%
- Citi US Economic Surprise Index 4.0 -1.5 points
- Citi Eurozone Economic Surprise Index -3.6 -.2 point
- Citi Emerging Markets Economic Surprise Index -12.10 +.1 point
- 10-Year TIPS Spread 1.64 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +276 open in Japan
- DAX Futures: Indicating +81 open in Germany
Portfolio:
- Higher: On gains in my medical/retail/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Draghi Commits to Trillion-Euro QE in Deflation Fight. (video)
Mario Draghi led the European Central Bank into a new era, pledging to
buy government bonds in an asset-purchase program worth at least 1.1
trillion euros ($1.3 trillion) to counter the threat of a deflationary
spiral. The ECB president unveiled a quantitative-easing plan of 60
billion euros per month until at least the end of September 2016 in a
once-and-for-all push to put more cash into circulation and revive
inflation. The region’s 19 national central banks were handed
responsibility for 80
percent of the additional purchases and put on the hook for their own
losses, a move intended to assuage critics.
- German Officials at ECB Led Opposition to Draghi’s QE. The two German members of the European
Central Bank’s Governing Council led opposition to the expanded
asset-purchase program that President Mario Draghi announced today, according to euro-area central-bank officials. Bundesbank President Jens Weidmann and Executive Board member Sabine Lautenschlaeger were against implementing the plan now, said the people, who asked not to be identified because the deliberations were private. Klaas
Knot of the Netherlands, Ewald Nowotny of Austria and Estonia’s Ardo
Hansson also expressed reservations against starting the program at this
time, the people said. An ECB spokesman declined to comment.
- Merkel Cool on ECB Plan as Germans Reject ‘Sweet Poison’. Chancellor
Angela Merkel left her allies in Germany to voice outrage over the
European Central Bank’s bond-buying program and instead issued an
indirect warning over its potential risks. “The world is amply supplied
with liquidity right now,” and governments should seize the moment to
reduce debt, Merkel said at the World Economic Forum in Switzerland.
“This liquidity supply is such that you can’t really precisely see who
is competitive or who isn’t quite there yet.” Merkel’s comments
highlighting the risk of undermining
economic reforms were her most detailed critique of the $1.3
trillion asset-buying plan.
- Ukrainian Deaths Surge as Merkel Sharpens Rhetoric on Russia. German
Chancellor Angela Merkel slammed Russia for undermining neighboring
Ukraine’s sovereignty and cited “many setbacks” in peace efforts as the
death toll in the conflict jumped. As Ukraine’s army suffered its worst casualties in two
weeks, an attack Thursday in Donetsk killed eight civilians and the
government accused its pro-Russian adversaries of ignoring a diplomatic
push to withdraw heavy weaponry. Merkel said Russia’s annexation of
Crimea can’t be allowed to pass and sanctions should remain. NATO said
violence is at pre-truce levels.
- Latin American Default Wave Just Getting Started: Credit Markets. Latin America is turning into the world leader in corporate-bond defaults. Four
companies in the region have skipped dollar-denominated debt payments
this month, the most of any other area and almost half the total in all
of 2014. In a sign bond investors are increasingly concerned about Latin American companies’ ability to repay debt, borrowers
led by Mexico’s oil-rig operators have pushed the amount of the
region’s bonds trading at distressed prices to $58 billion, about a
third of all emerging-market debt trading at such levels. The
strains that have investors from Prudential Financial Inc. to Hartford
Investment Management Co. bracing for more defaults are showing few
signs of abating. An oil-led collapse in commodities prices has
persisted, growth is flagging in economies from Mexico to Colombia, and
the biggest corruption scandal in Brazil’s history is spreading. That
raises the risk of even bigger losses for investors saddled with the
worst returns in emerging-markets this year. “The defaults will come in
Latin America,” Jennifer Gorgoll, who helps manage $4.1 billion of
emerging-market debt at Neuberger Berman Group LLC, said by telephone
from Atlanta.
“Some of these are slow-moving train wrecks. You have to be
able to determine which companies are survivors and which are
not.”
- China Provinces Cut 2015 Growth Targets as ‘New Normal’ Spreads.
China’s regions are setting lower economic growth targets as policy
makers adjust to the “new normal” of a slower expansion pace for the
world’s second-largest economy. Of seven provinces, municipalities and regions that have so
far published 2015 growth targets, six have cut the rates.
Economists expect the central government will lower its national
target to about 7 percent from last year’s 7.5 percent at the
People’s Congress in March.
- Euro Falls to 11-Year Low as ECB Expands Bond-Buying. The
euro fell 2.1 percent to $1.1371 at 1:35 p.m. in New York and touched
$1.1363, the weakest level since September 2003. The last time the euro
and dollar traded one for one was
in 2002. The shared currency declined 1.8 percent to 134.44 yen and
touched 134.29, lowest since Oct. 16. The dollar added 0.2
percent to 118.25 yen.
- Europe Stocks Post Biggest Six-Day Gain Since 2011 After Draghi. European stocks rose, posting the biggest six-day gain since December
2011, as ECB President Mario Draghi announced a plan to buy government
bonds. The Stoxx Europe 600 Index climbed 1.7 percent to 364.05
at the close of trading, the highest level since December 2007. The
gauge extended gains after Draghi’s announcement and later briefly
erased them.
- Oil Slips as U.S. Crude Stockpiles Surge Most in 14 Years.
Oil fell after a government report showed that U.S. crude supplies
surged the most in almost 14 years. Inventories rose 10.1 million
barrels in the week ended Jan. 16, the biggest gain since March 2001,
according to the Energy Information Administration. Refineries operated
at 85.5 percent of their capacity, the lowest level since April 2013 as
units were idled for maintenance. “The 10 million-barrel plus increase
was a big surprise,” Gene McGillian, a senior analyst at Tradition
Energy in Stamford, Connecticut, said by phone. “The big drop in
refinery runs left nowhere for the crude to go but storage. This
suggests that we’ll see more big supply
builds in the future with production at such high levels.” West Texas
Intermediate crude for March delivery slipped 85 cents, or 1.8 percent,
to $46.93 a barrel at 12.55 p.m. on the New York Mercantile Exchange.
The volume of all futures traded was 35 percent above the 100-day
average for the time of day.
- Oil Drillers ‘Going to Die’ in 2Q on Crude Price Swoon. Oil drillers will begin collapsing under the weight of lower crude
prices during the second quarter and energy explorers who employ them
will shortly follow, according to Conway Mackenzie Inc., the largest
U.S. restructuring firm. Companies that drill wells and manage
fields on behalf of oil producers will be the first to fall after the
benchmark American crude, West Texas Intermediate, lost 55 percent of
its value in seven months, said John T. Young, whose firm led the city
of Detroit through its 2013 bankruptcy.
- Copper Falls on China Demand Concern, ECB Stimulus.
Copper declined for the first time in three
days as the European Central Bank announced more stimulus and
investors speculated demand is slowing from China. A private
manufacturing Purchasing Managers’ Index due Friday is forecast to show
factory activity contracted for a second month in China, the world’s
biggest metals consumer. Copper for delivery in three months fell 1.5 percent to
$5,685 a metric ton on the London Metal Exchange by 1:59 p.m. in
London. The metal has declined 9.8 percent so far this month.
Futures for March delivery slipped 1.4 percent to $2.575 a pound
on the Comex in New York.
- Iron Ore Declines to 2009-Low as Steel Mills Seen Cutting Output. Iron ore declined to the lowest level in
more than five years amid speculation that mills in China will
reduce steel output in the runup to a holiday next month,
curbing demand from the biggest user and worsening a glut. Ore with 62 percent content delivered to Qingdao, China,
dropped 1.5 percent to $66.79 a dry metric ton, the lowest level
since June 2, 2009, according to Metal Bulletin Ltd. Prices are
headed for a third consecutive weekly loss.
- IGC Raises Corn Outlook, Sees Grains Stockpiles at 30-Year High. World
corn output will beat a November
forecast, the International Grains Council said, lifting the estimate an
eighth time on improved prospects for South America. Bigger corn and
wheat crops will expand world grain output excluding rice to a record
and lift inventories at the end of the season to the highest in about 30
years, the London-based organization wrote in a report today. Corn futures have dropped 9.7 percent in Chicago in the past 12 months as U.S. growers harvested a record crop and the outlook for production in Brazil and Argentina improved, while wheat futures have dropped 4.4 percent. Cheaper grain has contributed to a drop in international food prices.
- Lagarde Sees Fed Starting Rate Increases in Mid-Year. International Monetary Fund Managing
Director Christine Lagarde said the Federal Reserve will probably begin raising interest rates within months in a sign
that the economy is on the mend. “Our expectation is that it’s more likely to happen mid-year than at the end of the year,” Lagarde said on a Bloomberg
Television panel hosted by Francine Lacqua at the World Economic
Forum in Davos. “The fact that the Fed is going to do that is
good news in itself. It shows that things are moving in the
right direction.”
- Lazard’s Gary Parr Sees ‘Darwinian’ Pressure on Banks to Shrink. Banks
will be forced to cut back the number of businesses in which they
operate in the next three years as new regulations make the universal
model untenable, according to Gary Parr, vice chairman of Lazard Ltd.
(LAZ) “In 18 to 36 months, there will be a much more intense
pressure on some number of banks to break up,” Parr said in an interview
with Tom Keene on Bloomberg TV at the World Economic Forum in Davos,
Switzerland on Thursday. “It’s a Darwinian exercise, and what’s
fascinating to me is how slowly it’s going. It seems obvious with
regulators increasing the capital requirements, with the burden of
regulation, with the charges particularly for systemically important
institutions.”
MarketWatch.com:
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Oil majors seek to claw back costs from service firms. Global oil majors say
they are demanding cheaper but better services from engineering
and service companies, or simply taking work back in-house,
after losing hundreds of billions on cost overruns in the last
five years.
Telegraph:
Boersen-Zeitung:
- ECB's Impact Limited, Goldman's Pill Says. ECB's QE decision
won't have 'dramatic' effect, Goldman's chief European economist, Huw
Pill, says in interview. Bond yields, currency rate indicate that
there's already some easing in place. Bond purchases less effective tool
in Europe as lending is mainly done by banks, less by capital markets.
Style Underperformer:
Sector Underperformers:
- 1) Coal -1.51% 2) Networking -1.42% 3) Oil Service -.94%
Stocks Falling on Unusual Volume:
- RY, FFIV, LE, DFS, DLB, MHG, XLNX, SNDK, TCBI, BMRN, EVEP, AXP, FCS, URI, PBYI, BPFH, ASPX, BMA, ADVS, BGG, MDVN, NVGS, AZPN, FBC, SWN and CAVM
Stocks With Unusual Put Option Activity:
- 1) FFIV 2) LL 3) UTX 4) HON 5) AXP
Stocks With Most Negative News Mentions:
- 1) EMR 2) FLS 3) SNDK 4) XLNX 5) DNR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +2.95% 2) Road & Rail +2.51% 3) Banks +2.21%
Stocks Rising on Unusual Volume:
- CYN, EBAY, KEY, BBRY, LUV, JNS, JBLU, LOCO, WBS, FRC and UAL
Stocks With Unusual Call Option Activity:
- 1) MCP 2) FXCM 3) STX 4) FFIV 5) TWX
Stocks With Most Positive News Mentions:
- 1) AGU 2) IHS 3) EBAY 4) SODA 5) CCI
Charts:
Evening Headlines
Bloomberg:
- Revenge of Disaffected Europe Risks New Crisis Sparked in Greece. They
speak different languages, they come from different backgrounds,
yet all have the same message of frustration that’s threatening
to redraw the European political map over the next year. Starting with
elections this Sunday in Greece and heading west to Ireland via Britain
and Spain, polls show Europeans will vent their anger over issues from
widening income disparities and
record unemployment to unprecedented immigration. For Athens
pensioner Irini Smyrni, the moment she’d had enough was when her younger
daughter lost her job with the government last year. For Dublin florist
Nicola Johns, it was when her business fell behind on rent.
- Draghi Is Pushing Boundaries of Euro Region with QE Program. Mario Draghi is about to bring Europe’s integration project across the Rubicon.
At about 2:30 p.m. in Frankfurt, the European Central Bank president
will probably commit to a quantitative-easing program that may exceed 1
trillion euros ($1.2 trillion). While the move comes much later than
that of the Federal Reserve, which ended its own QE three months ago,
the ECB’s arrival at this point still marks a critical juncture in the
history of the currency and
the European unity it embodies.
- Emerging Markets, Currencies Look Ripe to Short Sell: Bloomberg Poll. Emerging-market stocks and currencies are luring global investors for all the wrong reasons right now. A
quarterly Bloomberg Global Poll showed there was a two-fold surge in
the number of respondents who identified developing-nation equities and
currencies as the assets they’d most like to bet against. For
currencies, the percentage jumped to 12 percent from 6 percent in
November while for stocks, it rose to 7 percent from 3 percent.
- Brazil Keeps Pace of Rate Increases by Boosting to 12.25%. Brazilian policy makers raised borrowing
costs for a third straight meeting as analysts forecast they
will miss the country’s inflation target. The central bank’s board, led by bank President Alexandre Tombini, boosted the benchmark rate to 12.25 percent from 11.75
percent, as forecast by 56 of 60 economists surveyed by
Bloomberg. The vote was unanimous and took into consideration
“the macroeconomic scenario and the inflation outlook,”
according to the central bank statement. Four analysts had
forecast a quarter-point increase.
- Japan Margin Traders Record Yen Shorts Facing Swiss, Oil Shocks. (graph)
Margin
traders in Japan raised bets the yen would fall against the dollar to a
record amid their currency’s best start to a year since 2010.
Wagers from individuals for the Japanese currency to decline outnumbered
bets it would gain by 522,856 contracts on Jan. 15, the biggest net
shorts since Tokyo Financial Exchange
Inc.’s Click 365 began collecting the data in 2006. The figure
more than doubled since Sept. 30 as the Bank of Japan’s
unexpected Oct. 31 decision to expand bond purchases, known as
quantitative easing, drove the yen to an 8 1/2-year low in 2014.
- Asian Stocks Fall Before European Central Bank Stimulus Decision.
Asian stocks fell even amid speculation the European Central Bank will
boost stimulus through a sovereign-bond purchase program under the
quantitative-easing strategy. The MSCI Asia Pacific Index (MXAP) lost
0.1 percent to 134.46 as of 9:05 a.m. in Tokyo before markets open in
China and Hong Kong.
- Oil Drops as Iraq Signals Production Boost to Offset Price Slide. Oil
fell as Iraq said it needs to boost crude production and exports to
compensate for lower prices, signaling the global supply glut that
spurred the market’s collapse may persist. Futures dropped as much as
1.2 percent in New York. Iraq has lost about 50 percent of its
revenue because of the price decline, Iraq’s Deputy Prime Minister
Rowsch Nuri Shaways said in Davos, Switzerland. Crude stockpiles in the
U.S., the world’s biggest oil consumer, probably expanded for a second
week, a Bloomberg News survey shows before government data on Thursday.
- Bankruptcy Forecaster Sees Junk-Debt Bubble Bursting Next Year. A bubble in the leveraged-finance market is
growing and may burst in 12 to 18 months, said Edward Altman, a
specialist in credit markets who developed a model for
predicting corporate bankruptcies. “We think it’s building,” Altman told a gathering of
corporate restructuring experts Wednesday in New York. He said
the current “benign credit cycle” encouraged by low interest
rates has been going on for five years and led to a “frothy”
market. “You’ll be busier at this time next year.” A financial crisis isn’t necessarily expected, since few
economists are also predicting a U.S. economic recession, Altman
told the Turnaround Management Association, a group of
consultants, lawyers, liquidators and other professionals who
advise distressed companies. Altman is the director of research in credit and debt
markets at New York University’s Salomon Center for the Study of
Financial Institutions. He developed the “Z-Score,” a method
of predicting a company’s likelihood of bankruptcy.
- AmEx(AXP) to Cut More Than 4,000 Jobs This Year After Unit Sale. American
Express Co. will cut several thousand jobs this year across the company
as part of a restructuring, according a person familiar with the
decision. AmEx, the biggest U.S. credit-card issuer by purchases, will take a $313
million pretax charge in the fourth quarter to “improve operating
efficiencies,” the New York-based company said Wednesday in a statement
as it reported results for the period. The person, who asked not to be
identified because the reductions weren’t publicly disclosed, declined
to elaborate.
Wall Street Journal:
- The World’s Monetary Dead End. The European Central Bank embraces quantitative easing despite the sorry track record of ‘helicopter money.’ Central banks in the U.S., Japan and Europe are trapped in a loop. They
are fully invested in the theory that zero rates and bond buying are
stimulative and add to inflation, yet growth, inflation and median
incomes keep going down.
- Now He’s After Middle-Class Savers. Mr. Obama prepares to wipe out popular vehicles for funding education. President Obama is pitching his new tax plan as a way to help the
middle class at the expense of the rich. But middle-class savers are
bound to notice if he achieves two of the White House’s stated goals—to
“roll back” tax benefits of 529 college savings plans and “repeal tax
incentives going forward” for Coverdell Education Savings Accounts.
Fox News:
Zero Hedge:
NY Times:
- U.S. Not Expected to Fault Officer in Ferguson Case. Justice Department lawyers will recommend that no civil rights charges
be brought against the police officer who fatally shot an unarmed
teenager in Ferguson, Mo., after an F.B.I. investigation found no
evidence to support charges, law enforcement officials said Wednesday.
Reuters:
- F5 Networks(FFIV) revenue misses estimates as big deals slow down. Network equipment maker F5 Networks
Inc reported revenue that missed Wall Street's estimates for the first
time in eight quarters due to "a marked decrease in the number of deals
greater than $1 million".
The company also
forecast current-quarter revenue and profit below market estimates,
sending its shares down nearly 16 percent to $106 in extended trading.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 113.0 -8.0 basis points.
- Asia Pacific Sovereign CDS Index 71.5 -3.25 basis points.
- NASDAQ 100 futures +.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 300K versus 316K the prior week.
- Continuing Claims are estimated to fall to 2400K versus 2424K prior.
9:00 am EST
- The FHFA House Price Index for November is estimated to rise +.3% versus a +.6% gain in October.
11:00 am EST
- The Kansas City Fed Manufacturing Activity Index for January is estimated at 8.0 versus 8.0 in December.
- Bloomberg
consensus estimates call for a weekly EIA crude oil inventory build of
+2,670,000 barrels versus a +5,389,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +1,350,000 barrels versus a
+3,171,000 barrel gain the prior week. Distillate inventories are
estimated to rise by +780,000 barrels versus a +2,925,000 barrel gain
the prior week. Finally, Refinery Utilization is expected to fall by
-.83% versus a -2.9% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The
ECB rate decision, Draghi press conference, weekly Bloomberg Consumer
Comfort Index, Bloomberg Economic Expectations Index for January,
eco10weekly EIA natural gas inventory report and the (PGH) investor day
could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and commodity 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.
