Evening Headlines
Bloomberg:
- S&P Cuts Russia's Rating to Junk; Sanctions and Oil Slump Hammer Ruble. Russia’s
foreign-currency credit rating was cut to junk by Standard &
Poor’s, putting it below investment grade for the first time in a
decade, as policy makers struggle to boost growth amid international
sanctions and a drop in oil prices. S&P, which last downgraded Russia in April, cut the sovereign one step to BB+,
according to a statement released on Monday, the same as countries
including Bulgaria and Indonesia. The ratings firm said the outlook is
“negative.” Russian stocks on U.S. exchanges tumbled with the ruble
following the announcement which came
after the close of equity trading in Moscow.
- Greece’s Odd-Couple Coalition Only Agrees About Ending Austerity. The two men disagree on just about
everything, except this: for Greece, the time of German-dictated austerity must end. Alexis Tsipras became prime minister of Greece on Monday by
vowing to challenge the budget-cutting policies demanded by the
European Union and International Monetary Fund in return for a
240 billion euro ($270 billion) rescue plan.
- Syriza’s ‘Bella Ciao’ Casts Shadow Over Italy Presidential Vote. As Greeks welcome Syriza’s historical
victory with the Italian partisan anthem “Bella Ciao”, Italian
Premier Matteo Renzi is nervously eying resistance within his
own party before a key presidential vote this week. “By gaining a clear
lead and moving to form a new government in a short time, Syriza leader
Alexis Tsipras is also galvanizing his Italian supporters, including a
significant number of Renzi’s opponents within his party”, Francesco Galietti, founder of research firm Policy Sonar in Rome, said in a phone interview.
- Nomura says odds up of Abenomics derailing as tax pledge doubted. Nomura Holdings Inc. says the probability that Prime Minister Shinzo Abe's economic policies will end badly is increasing. The worst-case scenario for Nomura chief credit strategist Toshihiro
Uomoto to the end of 2017: the economy contracts in the first half of
2016, Abe delays a sales tax rise for a second time, and the Bank of
Japan boosts asset purchases to suppress interest rates, causing the yen
to tumble. This month, he raised the probability of these events
unfolding to 10 per cent to 20 per cent or more, from about 10 per cent.
"Signs are mounting that Japan's fiscal sustainability is beginning
to crumble," said Uomoto, ranked Japan's No. 1 credit analyst for the
past two years by Nikkei Veritas.
- UBS Says Wealthy Asians Are Abandoning Australian Dollars. Asia’s
wealthy are falling out of love with the Aussie dollar as record-low
yields and sustained declines persuade them to look elsewhere, according
to UBS Group AG. (UBSG) Many of the bank’s wealthiest clients in
the region began to abandon the currency as Australia’s bond yield
premium over the U.S. slid and the Federal Reserve discussed raising
interest rates, said Simon Smiles, Zurich-based chief investment officer
for ultra-high-net-worth individuals. The 10-year yield is 74 basis
points above that of the U.S., down from 130 a year ago.
- Rising Vacancies and Default Auctions Show Singapore Property Is on the Decline.
The bargain hunters who stuffed themselves into the 50-seat conference
room are another sign of the decline of Singapore’s housing market. After five years of price gains, values are falling and defaults are rising following government measures to curb lending and a
decline in the number of foreign buyers. Banks auctioned 118
repossessed homes last year, about 10 times the number in 2013, said Mok
Sze Sze, head of Singapore auctions at broker Jones Lang LaSalle Inc.
- Asian Stocks Head for Two-Month High on Yen, Europe Optimism.
Asian stocks rose, poised for a two-month high, as a weaker yen buoyed
Japanese shares amid optimism the actions of Greece’s new government
won’t force the nation to leave the euro currency bloc. The MSCI Asia Pacific Index (MXAP) advanced 0.4 percent to 141.24 as of 9:03 a.m. in Tokyo.
- Nickel Leads Most Metals Lower as China Industrial Profits Slow.
Most base metals declined as data showed
industrial profits grew at the slowest pace on record last year in
China, adding to signs that demand in the largest consumer may contract.
Nickel lost as much as 1.4 percent while copper dropped as much as
0.5 percent. Industrial profits in 2014 grew at 3.3 percent, the weakest
in records going back to 2000, according to data released by the National Bureau of Statistics in Beijing on Tuesday. The
figure contracted for a third month in December, falling 8 percent.
China’s industrial profits are “just another bit of bad news on top of
other bad news,” said David Lennox, a resource analyst at Fat Prophets
in Sydney. “Because the outlook is so gloomy for some time, it’s just
reinforcing the downward movement.”
- Goldman Sachs’s Cohn Sees Oil Falling to $30 in Extended Slump. Oil prices will probably continue to decline
and could reach as low as $30 a barrel, according to Gary Cohn,
president of Goldman Sachs Group Inc. “We’re probably in the lower, longer view,” Cohn, a
former oil trader, said Monday in an interview with CNBC.
- U.S. Says Russian Spy Ring Sought NYSE, Sanction Secrets. Three
Russians charged by the U.S. with
espionage allegedly sought secrets tied to the New York Stock Exchange
and U.S. economic sanctions on Russia, even while one bemoaned his
tedious job’s lack of a James Bond flair. The U.S. investigation of
the alleged spy ring started within months of the Federal Bureau of
Investigation’s June 2010 arrest of 10 Russian agents dubbed the
“Illegals,” who had been on “deep cover” assignments, some living in the
U.S. for as long as a decade. That year, each of the 10 pleaded guilty
to
conspiring to act as an unregistered agent of a foreign
government, after which they were returned to Russia in a
prisoner exchange.
- Microsoft(MSFT) Business-Software License Sales Miss Estimates. Microsoft
Corp. (MSFT)’s software-license sales to businesses fell short of
analysts’ estimates in the fiscal second quarter, hurt by weak sales in
Japan and China. Commercial-licensing revenue fell to $10.7 billion
in the period that ended Dec. 31, the world’s largest software maker
said Monday in a statement. Analysts on average had projected $10.9
billion, based on a survey conducted by Bloomberg. Unearned revenue, a
measure of future sales, was
$21.2 billion, compared with estimates of $21.8 billion. The stock
slipped 3 percent in extended trading.
- United Technologies(UTX) Cites Surprise Dollar Gain as Forecast Pared.
A surging U.S. dollar against the euro and other currencies surprised
United Technologies Corp. (UTX) and forced a cut in the company’s annual
profit forecast just weeks after it was given to investors. United Technologies slid 2.1 percent to $116.20 at 5:04 p.m. in New York after the close of regular trading. The euro climbed 0.3 percent to $1.1238 at 5 p.m. in New York after
sliding to $1.1098, the weakest level since September 2003.
Wall Street Journal:
MarketWatch.com:
- U.S. spies on millions of cars. DEA uses license-plate readers to build database for federal, local authorities. The Justice Department has been building a national database to track in
real time the movement of vehicles around the U.S., a secret domestic
intelligence-gathering program that scans and stores hundreds of
millions of records about motorists, according to current and former
officials and government documents.
Zero Hedge:
Business Insider:
NY Times:
- Investment Riches Built on Auto Loans to Poor. Across the country, there is a booming business in lending to the
working poor — those Americans with impaired credit who need cars to get
to work. But this market is as much about Wall Street’s perpetual
demand for high returns as it is about used cars. An influx of investor
money is making more loans possible, but all that money may also be
enabling excessive risk-taking that could have repercussions throughout
the financial system, analysts and regulators caution.
Reuters:
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 69.75 +1.0 basis point.
- NASDAQ 100 futures -.06%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for December are estimated to rise +.4% versus a -.7% decline in November.
- Durables Ex Transports for December are estimated to rise +.6% versus a -.4% decline in November.
- Cap Goods Orders Non-Defense Ex Air for December are estimated to rise +.9% versus unch. in November.
9:00 am EST
- The S&P/CS 20 City MoM SA for November is estimated to rise +.65% versus a +.76% gain in October.
9:45 am EST
- The Preliminary Markit US Services PMI for January is estimated to rise to 53.8 versus 53.3 in December.
10:00 am EST
- New Home Sales for December are estimated to rise to 450K versus 438K in November.
- The Consumer Confidence Index for January is estimated to rise to 95.5 versus 92.6 in December.
- The Richmond Fed Manufacturing Index for January is estimated to fall to 5.0 versus 7.0 in December.
Upcoming Splits
Other Potential Market Movers
- The
Australia Consumer Price Index, US weekly retail sales reports and the
(CRZO) analyst conference 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 lower and to rally into the
afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.0 -3.96%
- Euro/Yen Carry Return Index 139.32 +1.02%
- Emerging Markets Currency Volatility(VXY) 10.28 -3.38%
- S&P 500 Implied Correlation 65.22 +.38%
- ISE Sentiment Index 68.0 +9.68%
- Total Put/Call .89 -29.37%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.22 -2.28%
- America Energy Sector High-Yield CDS Index 725.0 -.75%
- European Financial Sector CDS Index 57.46 -.70%
- Western Europe Sovereign Debt CDS Index 23.58 +1.55%
- Asia Pacific Sovereign Debt CDS Index 67.99 +1.48%
- Emerging Market CDS Index 391.37 +.79%
- iBoxx RMB China Corporates High Yield Index 111.78 +.02%
- 2-Year Swap Spread 25.25 unch.
- TED Spread 24.5 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -10.75 +1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- China Import Iron Ore Spot $63.54/Metric Tonne -4.34%
- Citi US Economic Surprise Index -3.70 -2.2 points
- Citi Eurozone Economic Surprise Index -.4 +.1 point
- Citi Emerging Markets Economic Surprise Index -10.50 -.2 point
- 10-Year TIPS Spread 1.61 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +247 open in Japan
- DAX Futures: Indicating +29 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Ukrainians Direct Fury at Russia as Mariupol Victims Mourned. Ukrainians
gathered to mourn 30 civilians
killed by rockets in Mariupol, blaming Russia after the deadliest attack
yet on the strategic port city, as fighting between government forces
and separatists spread. As President Petro Poroshenko called a day of
mourning,
dozens congregated Sunday to light candles on Kiev’s
Independence Square, the area known as Maidan that was the
epicenter of the revolt that overthrew the government last year.
In the Black Sea city of Odessa and in Kharkiv, near the Russian
border, people gathered at the Russian consulate.
- EU Renews Push for Russia Sanctions as Clashes Sweep Ukraine. European
Union nations edged closer to
tightening sanctions against Russia as fighting between government
troops and rebels consumed the front line in eastern Ukraine in the
deadliest escalation since a September truce. The EU will add more individuals this week to a list of
those facing visa bans and asset freezes over Russia’s
involvement in the conflict, Latvian President Andris Berzins,
whose country holds the 28-nation bloc’s rotating presidency,
said in an interview Monday. The recent events in Ukraine are
“more than worrying,” French Foreign Minister Laurent Fabius
said, with his German counterpart Frank-Walter Steinmeier
warning that more attacks would prompt an EU response.
- Russia Credit Rating Cut to Junk by S&P First Time in Decade. Russia’s credit rating was cut to junk by Standard & Poor’s, putting it below investment grade for the first time in a decade. S&P, which last downgraded Russia in April, cut the sovereign one step to BB+, according to a statement. The grade, which is on par with Bulgaria and Indonesia, has a negative
outlook. The world’s biggest energy exporter is on the brink of a
recession after oil prices fell to the lowest since 2009 and the
U.S. and its allies imposed sanctions over President Vladimir Putin’s actions in Ukraine. The penalties have locked Russian
corporate borrowers out of international debt markets and curbed
investor appetite for the ruble, stocks and bonds. “Russia’s monetary policy flexibility has become more
limited and its economic growth prospects have weakened,” S&P
said in a statement. “We also see a heightened risk that
external and fiscal buffers will deteriorate due to rising
external pressures and increased government support to the
economy.”
- Tsipras Win Draws French Congratulations, German Threat. France’s Francois Hollande congratulated
Greek Prime Minister-elect Alexis Tsipras on his election
victory while urging a new government to stay the reform course,
as a top German official threatened a cut-off in aid. Hollande stressed Greco-French “friendship,” even as he
called on Tsipras’s new administration to adhere to “growth and
stability” in the euro area, according to a government statement in
Paris late Sunday. While Chancellor Angela Merkel’s government didn’t
comment on Tsipras, one of her top lieutenants said Germany could scrap
financial assistance if a new anti-austerity Syriza government veers off
course.
- Spain Deflation Risks Mount as Producer Prices Drop Annual 3.7%.
Spanish producer prices plunged the most in more than five years last
month, adding to concerns that the economy risks falling into a
deflationary spiral. Prices of goods leaving factories, refineries
and mines dropped 3.7 percent in December from a year earlier, the
National Statistics Institute in Madrid said today. Economists forecast a
fall of 3.5 percent, according to a Bloomberg News survey. Prices fell 1.1 percent from the previous month.
- Boko Haram’s Attack on Nigerian State Capital Leaves 65 Dead. At least 65 people were killed in an attack
Sunday by Islamist militants on Maiduguri, the capital of the
northeastern Nigerian state of Borno, a local militia member
said. Armed forces killed 56 militants, while nine soldiers died
during the clashes as the military and local vigilante groups
fended off an attempt by Boko Haram to capture Maiduguri, Hassan
Ibrahim said by phone from the city. The assault was the first
major fighting in the state capital since an attack on an army
detention center in March.
- European Stocks Extend Seven-Year High on ECB After Greek Vote. European stocks rose for an eighth day amid optimism about
central-bank stimulus, while Greek shares dropped as opposition party
Syriza won the Sunday election. The Stoxx Europe 600 Index
advanced 0.6 percent to 372.39 at the close of trading in London, after
earlier losing as much as 0.5 percent.
- Iron Ore Extends Rout as China Slows, Banks Reduce Forecasts. Iron ore retreated to the lowest level in more than five years as a slowdown in China hurt the outlook for
demand in the world’s biggest user while the largest mining
companies add to supply, boosting a surplus. Ore with 62 percent content delivered to Qingdao, China,
tumbled 4.3 percent to $63.54 a dry metric ton, according to
data by Metal Bulletin Ltd. That’s the lowest price on record
going back to May 2009, and was the biggest one-day fall since
Nov. 18. The commodity is 11 percent lower this year.
Wall Street Journal:
- Medicare to Rework Billions in Payments. HHS Secretary Burwell Wants 50% of Payments Based on Performance by End of 2018. The Obama administration on Monday set an ambitious goal to rework
hundreds of billions of dollars in Medicare payments to doctors and
hospitals in an effort to reduce waste and make older Americans
healthier.
- European Regulators Pressure Big Banks to Increase Capital. Banks Encouraged to Raise Capital Well Above Formal Regulatory Limits. European regulators are turning up the pressure on large banks to
further strengthen their balance sheets amid nagging concerns about
Europe’s financial and economic health.
MarketWatch.com:
- Return of the 3% down payment. It is getting easier for some buyers to land a house with less money up front. More
lenders are lowering down-payment requirements, allowing borrowers to
commit 3%—or even less—of a home’s purchase price to get a mortgage.
Many had been requiring down payments of at least 20% since the
recession began.
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Shanghai Plans Stress Test at Banks Over Property Loans. Banks in
Shanghai are asked to conduct stress texts over their property loans,
citing notice issued by China Banking Regulatory Commission's Shanghai
office. The city's banking regulator also asked for continued monitoring
over risks stemming from loans borrowed by major property companies
outside Shanghai, the report says.
- Russian rouble weakens sharply after S&P downgrade. Russia's
rouble weakened sharply
late on Monday to trade around 5 percent lower against the U.S. dollar
after ratings agency S&P downgraded Russia's sovereign
credit rating to below investment grade.
The rouble was trading at 67.56 at 1824 GMT,
around 5 percent weaker than the previous close on the Moscow
Exchange.
- Weak retail business in Europe hits Seagate revenue. Hard-drive maker Seagate Technology Plc's
revenue forecast for the current quarter fell well short
of analyst estimates, largely due to weakness in Europe, sending
the company's shares down as much as 12 percent.
Financial Times:
- Athens and creditors dig in on Greek debt. Greece
and its international creditors dug in on opposite sides of Europe’s
struggle over debt, austerity and economic reform on Monday as Alexis
Tsipras, leader of the radical leftwing Syriza party, was sworn in as
the new prime minister in Athens. Mr Tsipras dismayed EU governments
that oppose extensive debt relief for Greece by moving swiftly to form a
coalition with the Independent Greeks, a small, rightwing party that is
as fiercely opposed as Syriza to the
strict conditions attached to the nation’s €245bn bailout.
Telegraph:
Bild:
- Merkel Ally Friedrich Says Germany May Scrap Greek Aid.
Hans-Peter Friedrich, deputy caucus leader for Merkel's Christian
Democratic-led bloc in lower house of parliament, warns Germany may
scrap debt assistance to Greece. "The Greeks have the right to vote for
whom they want," Friedrich tells Bild in interview. "We have the right
to no longer finance Greek debt." "The Greeks now must take
responsibility and cannot burden German taxpayers," Friedrich says.
Marbridge Daily:
- Less Than 60% of Online Goods in China Are Genuine Products. China's State Administration for Industry and Commerce (SAIC) has tested
92 batches of products sold online in the second half of 2014 and found
that only 54 were genuine articles, equating to 58.7%. The percentage
of genuine items on Alibaba Group's (NYSE: BABA) C2C e-commerce site
Taobao was the lowest at 37.25%.
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -1.54% 2) Computer Hardware -1.42% 3) Software -.93%
Stocks Falling on Unusual Volume:
- BKD, MAT, STX, TLK, WDC, UPS, CONE, STRA, ACAT, COUP, ETP, KMB, HLSS, COV, GWW, VRSN, SEMI, MNRO, DLTR, MDT, ENTA, JBSS, ORB, PLCE, PODD, RMTI and ETP
Stocks With Unusual Put Option Activity:
- 1) STX 2) OIL 3) EMR 4) SHLD 5) ILMN
Stocks With Most Negative News Mentions:
- 1) UPS 2) PX 3) VALE 4) VRSN 5) STRA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +4.57% 2) Alt Energy +1.62% 3) Biotech +1.38%
Stocks Rising on Unusual Volume:
- MWV, OLED, HCA, RKT, AXS, RGP, GNRC, ASPS, POST, HWAY, SEMG, LCI, RGP, DXCM, DHI and ETE
Stocks With Unusual Call Option Activity:
- 1) AMD 2) HCA 3) NPSP 4) NFX 5) RMTI
Stocks With Most Positive News Mentions:
- 1) GRMN 2) KSU 3) BBBY 4) VLO 5) MWV
Charts:
Weekend Headlines
Bloomberg:
- Ukraine Rebels Launch ‘Offensives Everywhere,’ Renew Push to Sea. Ukraine said rebels and regular Russian
troops pushed north and south from their strongholds in eastern
Ukraine with an unprecedented shelling campaign that included
the deadliest yet on the strategic port city of Mariupol. At least 20 civilians died and 87 more were wounded in
rocket attacks this morning on residential districts in the
eastern outskirts of the Black Sea city, Ukrainian officials said
during an emergency meeting called by Prime Minister Arseniy Yatsenyuk
in Kiev. Overnight shelling in Luhansk, which borders Donetsk to the
north, was the worst the region has
suffered during the 10-month conflict, the local governor said.
- Syriza Rides Anti-Austerity Wave to Decisive Victory in Greece. Syriza
leader Alexis Tsipras said that Greece’s era of bowing to international
creditors is over, as he celebrated his party’s victory in Greek
elections dominated by a public backlash against years of budget cuts.
Tsipras, addressing supporters in central Athens Sunday night after
Prime Minister Antonis Samaras conceded defeat, said that Greece is
turning a page and putting austerity behind it. The Syriza government’s priority “will be for Greece and its people to
regain their lost dignity,” he said. “There will neither be a
catastrophic clash nor will continued kowtowing be accepted,” said
Tsipras, 40. “We are fully aware that the Greek people hasn’t given us
carte blanche but a mandate for national revival.”
- What Syriza's Sweep Means for Greece and Europe. by Mohamed El-Erian. Q: Are there broader implications? A: Yes. The outcome of the Greek elections is indicative of a broader
political phenomenon in Europe that involves the growth of
non-traditional parties. Fueled by concerns about disappointing growth,
unemployment and social issues, it is powered by large-scale
dissatisfaction with the established political order. And it isn't
limited to the peripheral economies.
- Greece Syriza Win Puts Question Mark on Europe Stocks After Jump. European investors enter the week with one
of their biggest anxieties confirmed, just after a stretch in
which equities posted the largest jump in three years. Greek opposition party Syriza defeated Prime Minister
Antonis Samaras’s New Democracy in the Sunday election, putting
the future of the nation’s austerity programs in doubt.
- Islamic State Demands Swap After Beheading One Japanese Hostage. Islamic State militants dropped their demand for a $200 million
ransom and are now seeking a prisoner exchange after the release of a
video that purported to show the corpse of one of two Japanese hostages
held by the group. The video had images of hostage Kenji Goto
holding a blurred photo purported to be the headless corpse of Haruna
Yukawa, a self-styled security contractor, who was captured in Syria by
Islamic State last summer. Japanese Prime Minister Shinzo Abe said
Sunday that analysis showed the video was “highly likely” to be
credible.
- China Property Agony Deepens as Trust-Loan Lifelines Cut. China’s
investment trusts are pulling financing for the real estate industry as
Kaisa Group Holdings Ltd. (1638)’s missed payments heighten default
concerns. Issuance of property-related products, which channel money
from wealthy individual investors, tumbled 62 percent from a year
earlier to 38.5 billion yuan ($6.2 billion) in the fourth quarter, data
compiled by research firm Use Trust show. Builders must repay 241
billion yuan of trusts in 2015, up from 178
billion yuan last year. Kaisa, which missed a bond coupon
payment this month, failed to repay a 2.5 billion yuan trust
last week, people familiar with the matter said.
- Shanghai Scraps Growth Target With ‘New Normal’ Focus on Quality. Shanghai
city became the first of China’s 31 provinces and municipalities to not
set a 2015 growth target, underscoring the shift away from unfettered
expansion. The financial center’s municipal government said its
economy should “rise steadily, improve structure, enhance quality and
efficiency” this year, according to its annual work
report released Sunday. Out of 10 other regions that have so far
announced 2015 growth targets, nine have cut them.
- China Bull Market Masks Momentum Breakdown as Stock Volumes Sink. Just
below the surface of China’s world-beating equity rally, signs of
trouble are emerging. While the Shanghai Composite Index touched a
five-year high on Friday after a 63 percent gain during the past year,
other gauges of investor enthusiasm are tumbling. Turnover sank 47
percent from its peak in December, while new equity account openings
fell 50 percent and purchases using borrowed money dropped 38 percent.
The number of stocks reaching new 52-week highs has declined 75 percent
in the past six weeks. The indicators suggest to Deutsche Bank AG and
Fortune SG Fund Management Co. that China's mainland-traded A shares are
no longer a one-way bet after monetary stimulus and a flood of new
individual traders propelled the Shanghai gauge to eight consecutive
months of gains through December. Windsor Capital, one of China’s
top 10 performing hedge funds, said last week investors will have to
wait until the middle of this year before the $5.1 trillion market
resumes its advance. “We have seen fewer new account openings, narrower
trading turnover and heightened market volatility recently in the
A-share market,” Yuliang Chang, the chief China and Hong Kong strategist
at Deutsche Bank, Germany’s largest lender, said in
e-mailed comments on Jan. 23. “This does not bode well for this
liquidity-driven rally.”
- Euro Slips With U.S. Futures on Greece as Treasuries Gain. The euro slipped with U.S. equity-index
futures, while Treasuries rallied as Greek voters handed victory
to a party that’s pledged to renegotiate the terms of an
international bailout. Asian stocks dropped with crude oil and
industrial metals. The 19-nation euro dropped 0.3 percent to $1.1168
by 11:12
a.m. in Tokyo, near a more than 11-year low reached last week after the
European Central Bank announced plans to expand asset purchases. The
yield on 30-year Treasuries fell to a record low. Standard & Poor’s
500 Index futures sank 0.6 percent and the MSCI Asia Pacific Index
(MXAP) lost 0.3 percent. U.S. crude declined 1.1 percent and nickel slid
1.2 percent. China’s yuan slumped a
second day.
- Oil Slides to Near 6-Year Low; Saudi Arabia Holds Firm Despite Supply Glut.
Oil fell to the lowest level in almost six years as signs that Saudi
Arabia’s new king will maintain its production policy and rising U.S.
crude inventories bolstered speculation that a global glut will persist.
Futures dropped as much as 2.7 percent in New York, extending a 6.4 percent slide last week.
- For Saudis, Falling Demand for Oil Is the Biggest Concern. As
the world’s oil producers wring their
hands over a global glut that’s pushing down prices, evidence is
mounting that Saudi Arabia is more concerned about shrinking demand.
The world’s largest exporter has chosen not to cut production, counting
instead on lower prices to stimulate consumption, said Mohammad Al
Sabban, an adviser to Saudi Arabia’s petroleum minister from 1988 to
2013. The Saudis are keeping an eye on investments in fuel efficiency
and renewable energy, according to Francisco Blanch, Bank of America
Corp.’s head of global commodity research. “Nobody should imagine the world will continue to demand
oil as long as you have it in your fields,” Al Sabban said in
an interview. “We need to prepare ourselves for that stage.”
- Hedge Funds Bet Oil Will Fall Further. Hedge
funds boosted bearish wagers on oil to a four-year high as U.S.
supplies grew the most since 2001. Money managers increased short
positions in West Texas Intermediate crude to the highest level since
September 2010 in the week ended Jan. 20, U.S. Commodity Futures Trading Commission data show.
Net-long positions slipped for the first time in three weeks.
- Copper Extends Declines as Dollar Gains Against Euro on Greece.
Copper extended losses as the U.S. dollar
gained against the euro after elections in Greece fueled concern that
the country may exit the currency bloc, curbing demand for commodities
priced in the greenback. Copper dropped as much as 1.2 percent after closing Jan. 23
at the lowest since July 2009. Nickel lost as much as 1.6
percent. The dollar rose to the highest level in more than 11
years against the euro after a general election victory by
Syriza, the anti-austerity party committed to renegotiating
Greece’s debt obligations.
- Precious Metals Coveted Once More as Draghi Acts: Commodities. Investors’ desire for precious metals is
deepening after Mario Draghi’s $1.3 trillion pledge drove gold to a five-month high and silver to the brink of a bull market. Their
buying helped boost the value of exchange-traded products backed by
gold and silver by $8.94 billion this month, the most since September
2012, data compiled by Bloomberg show. Hedge funds and other
speculators in futures are the most bullish on gold in two years and
have bet more on silver in all but two weeks since the start of
November.
- Obama Moves to Put Much of Refuge Off Limits to Drilling. President Barack Obama’s administration will
take steps to restrict 12 million acres of the Arctic National
Wildlife Refuge from oil and gas exploration, a move immediately
denounced by Alaskan lawmakers. A plan released Sunday recommends designating “core
areas” of the 19.8 million-acre refuge as wilderness, including
its Coastal Plain, according to a statement from the Interior
Department. The move requires approval from Congress.
- Company Bond Sales at $93 Billion See Slowest Start Since 2008. Sales of corporate bonds in the U.S. are off
to their slowest start since 2008, as company treasurers wager
they can afford to wait while global central banks continue to
suppress borrowing costs. Issuers from American International Group
Inc. to Ford Motor Co. have sold $92.8 billion in bonds so far this
year, down 27 percent from this point last year and 34 percent from
2013. The drop comes even as investment-grade bond yields have
fallen to 3.05 percent, below the 3.49 percent average of the
past five years, according to a Bank of America Merrill Lynch
index.
Wall Street Journal:
- U.S., Europe Threaten New Sanctions Against Moscow. Threats Come After Missile Attack in Eastern Ukraine. U.S. and European leaders threatened new sanctions against Moscow
after a missile attack blamed on pro-Russian separatists killed 30
civilians in the eastern Ukrainian city of Mariupol, the latest
escalation in violence that has brought Kiev’s fight with rebels back
toward full-scale war. Russia reacted with defiance, blaming Kiev
and its Western backers for the surge in fighting, but it also called
for urgent talks on implementing a September cease-fire.
- Leftists Sweep to Power in Greece. Syriza Clinches Coalition Deal With Independent Greeks. Greek voters were set to hand power to a radical leftist party in
national elections on Sunday, a popular rebellion against the bitter
economic medicine Greece has swallowed for five years and a rebuke of
the fellow European countries that prescribed it.
- Cal Dive Preparing Chapter 11 Filing. Filing Could Come in Next Few Weeks as Rout in Oil Prices Hit Company. Oil-and-gas contractor Cal Dive International Inc. is preparing for a
potential Chapter 11 bankruptcy filing that could come as soon as the
next few weeks, people familiar with the matter said, as the oil-price
rout exacerbates the company’s business challenges.
- First U.S. Bitcoin Exchange Set to Open. Coinbase Has Backing From the NYSE, Banks and Venture Capitalists. The virtual currency bitcoin is getting a very real boost on Monday with the opening of the first licensed U.S. exchange.
- The Greek Warning. Radical parties rise when mainstream parties tolerate stagnation. The exit polls Sunday night suggested that Greece’s far-left Syriza
party will score a major victory in the weekend’s parliamentary
election. The fallout for Europe will take time to sort out, but the
warning should be clear enough about the political consequences of
economic stagnation.
npr:
- Auto Loan Surge Fuels Fears Of Another Subprime Crisis.
There's a big potential downside that's evoking comparisons to the
subprime mortgage boom. Auto dealers are extending loans to a growing
number of people with weak credit, and more of them are having trouble
making payments.
Reuters:
- Freeport Indonesia copper exports seen declining over next 6 months. U.S. mining firm
Freeport-McMoRan Inc is expected to export 500,000
tonnes of copper concentrate from its Indonesian operations over
the next six months, down 100,000 tonnes from the previous six
months, a company official said. The official from Freeport's Indonesian unit, who made the
comment late on Sunday and declined to be named, did not give a
reason for the expected fall in exports.
Financial Times:
- Synthetic CDO volumes double amid hunt for yield.
Yield-starved European investors are helping to drive a resurgence of
structured credit securities that were blamed for worsening the global
financial crisis six years ago. Global volumes of synthetic
collateralised debt obligations roughly doubled last year to about
$20bn, in new and existing issues, according to two banks that help
structure the products, in part because of European investors seeking
higher-yielding securities.
Telegraph:
Bild:
- Bundesbank's Weidmann Warns of Real-Estate Bubble. Bundesbank
President Jens Weidmann tells Bild that the ECB's decision to buy
government bonds will drive up real-estate prices.
Malay Mail online:
China Youth Daily:
- Beijing Not a Livable City at the Moment. Mayor Wang Anshun said
govt's top priority is to control population. Beijing has been
considering since last year to implement odd-even driving days during
severe smog.
Night Trading
- Asian indices are -.75% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 110.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 68.75 +.25 basis point.
- NASDAQ 100 futures -.54%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- The Dallas Fed Manufacturing Activity Index for January is estimated to fall to 3.2 versus 4.1 in December.
Upcoming Splits
Other Potential Market Movers
- The German IFO and China Industrial Profits reports could
also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.
