Evening Headlines
Bloomberg:
- Greece Seeks Bridge Funding But Merkel's Cool to Bailout Compromise. German Chancellor Angela Merkel signaled
little willingness to compromise with Greece over the conditions
attached to its bailout as the country tries to drum up support
for a bridge funding plan before a euro-area finance ministers’
meeting on Wednesday. Greece will seek about 10 billion euros ($11.3 billion) in
short-term financing as it tries to stave off a funding crunch
while buying time to push its creditors to ease austerity
demands, said a government official who asked not to be named
because the negotiations are confidential. While French Finance Minister Michel Sapin said Monday that
“we need to put together” a plan for bridge funding, any such
accord would require Germany to soften its stance in the
standoff between Greece and its creditors over the conditions
attached to its 240 billion-euro lifeline. The impasse risks
leaving Europe’s most-indebted state without any funding as of
the end of this month, when its current bailout expires, putting
Greece’s euro membership in danger.
- Asian Stocks Drop Fourth Day as Greece Concern Drags U.S. Lower. Asian stocks fell for a fourth day, tracking
declines in U.S. markets, as Greece’s rejection of the country’s
bailout program spurred concern about euro-area stability.
The MSCI Asia Pacific Index slipped 0.2 percent to 141 as
of 9:03 a.m. in Tokyo, before markets opened in China and Hong
Kong.
- Gold Holds Gain as Greek Standoff With Creditors Boosts Demand. Gold held an advance amid concern that a
standoff between the new Greek government and its creditors may
worsen, with German Chancellor Angela Merkel signaling little
willingness to compromise over bailout conditions.
Bullion for immediate delivery traded at $1,239.65 an ounce
at 8:30 a.m. in Singapore from $1,239.03 on Monday, when prices
rose 0.4 percent, according to Bloomberg generic pricing.
- Loeb’s Third Point Cuts Risk as Market Volatility Jumps. Third Point, the hedge-fund firm run by Dan
Loeb, said it has reduced risk because of wider swings in the
markets. Out of 25 trading days this year, 22 have had intraday
moves in the market of more than 1 percent, New York-based Third
Point said on Monday in a letter. “Already, 2015 has been marked by increased volatility,”
the New York-based hedge fund said in a letter today.
Wall Street Journal:
- Qualcomm(QCOM) to Pay $975 Million Antitrust Fine to China. Deal Ends Country’s Investigation Into Chip Maker’s Licensing Practices. Qualcomm Inc. became one of the world’s biggest chip makers because
of its power over patents. Regulators in China chose to exact a penalty
for how it wielded that power, but left the company’s basic business
model intact.
Fox News:
- Republicans claim payout from big-bank settlements being steered toward 'special interests'. House Republicans are accusing the Obama administration of letting
millions of dollars from recent mortgage-lending settlements go toward
politically favored advocacy groups, in turn "shortchanging" the people
originally harmed by the financial crisis.
The separate deals were reached with the Justice Department in summer
2014, with Citigroup agreeing to pay $7 billion for misleading
investors over mortgage-backed securities and Bank of America paying
$16.65 billion for similar actions. But of the $24 billion, roughly $150 million is tabbed for
financial-counseling agencies -- a category that includes
liberal-leaning groups such as the National Council of La Raza.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Fed's George says early rate hikes can foster financial stability. Central banks should not shy away from
raising interest rates to head off asset bubbles, a top U.S.
Federal Reserve official said on Monday, and should do so
earlier rather than later in an economic recovery. "Modestly tighter policy earlier in the business cycle
expansion could moderate risk-taking and the potential for
destabilizing financial imbalances to build," Kansas City Fed
President Esther George said in remarks prepared for delivery at
an event hosted by the Bank for International Settlements in
Manila, Philippines. "Monetary policy runs the risk of remaining
overly accommodative following a downturn, and lead to future
instability."
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 unch.
- Asia Pacific Sovereign CDS Index 69.25 +1.5 basis point.
- NASDAQ 100 futures +.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The NFIB Small Business Optimism Index for January is estimated to rise to 101.0 versus 100.4 in December.
10:00 am EST
- Wholesale Inventories for December are estimated to rise +.2% versus a +.8% gain in November.
- Wholesale Sales for December are estimated to fall -.3% versus a -.3% decline in November.
- The IBD/TIPP Economic Optimism Index for February is estimated to rise to 51.9 versus 51.5 in November.
- JOLTS Job Openings for December are estimated to rise to 4990 versus 4972 in November.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Lacker speaking, UK Manufacturing PMI, USDA's WASDE report, $24B
3Y T-Note auction, weekly US retail sales reports, Stifel
Transport/Logistics Conference, BofA Merrill Insurance Conference and
the Goldman Tech/Internet Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology
and industrial shares in the region. I expect US stocks to open
modestly higher and to weaken into the afternoon, finishing modestly
lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 18.74 +8.39%
- Euro/Yen Carry Return Index 140.15 -.37%
- Emerging Markets Currency Volatility(VXY) 10.90 +.09%
- S&P 500 Implied Correlation 65.54 -1.01%
- ISE Sentiment Index 87.0 +38.10%
- Total Put/Call 1.05 +1.94%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.60 +.22%
- America Energy Sector High-Yield CDS Index 710.0 -3.0%
- European Financial Sector CDS Index 67.85 +7.85%
- Western Europe Sovereign Debt CDS Index 26.38 +3.53%
- Asia Pacific Sovereign Debt CDS Index 69.03 +2.58%
- Emerging Market CDS Index 379.55 +.52%
- iBoxx Offshore RMB China Corporates High Yield Index 113.43 -.18%
- 2-Year Swap Spread 26.25 -.5 basis point
- TED Spread 24.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -20.55 -1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- Yield Curve 131.0 +1.0 basis point
- China Import Iron Ore Spot $61.20/Metric Tonne -2.06%
- Citi US Economic Surprise Index -26.10 -.8 point
- Citi Eurozone Economic Surprise Index 29.20 +4.4 points
- Citi Emerging Markets Economic Surprise Index -11.60 -6.3 points
- 10-Year TIPS Spread 1.71 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -162 open in Japan
- DAX Futures: Indicating -35 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- Greek Markets Shudder as Tsipras Stands Ground on Economic Plans. Greece’s bonds and stocks fell as Prime
Minister Alexis Tsipras showed little sign of backing down in a
standoff with international creditors as he began three days of
debates on his government’s policy plans. The selloff sparked the biggest increase in yields on
three-year Greek notes since 2012. Equities dropped, led by
Piraeus Bank SA, and the nation’s lenders were the worst
performers in Bank of America Merrill Lynch’s Euro Financial
High Yield index.
- Greek Risk Draws Global Concern on Lehman Echo Warnings. (video) A country accounting for less than 0.4
percent of the world economy is again rattling those responsible
for three-quarters of it. Greece topped the list of worries for Group of 20 finance
chiefs as they started talks in Istanbul on Monday with calls
for the nation and its creditors to strike a new aid deal amid
concern its membership of the euro has never been more tenuous. Although global economic growth and Europe’s defenses are
stronger than when Greece flirted with exit from the single
currency three years ago and financial markets aren’t yet
signaling panic, a departure would still come as a shock. That
could ultimately trigger a flight from risk by investors, bank
runs and another downturn in European demand.
- Obama Says U.S. Examining Options in Ukraine If Talks Fail. (video) President Barack Obama said the U.S. is
examining “all options” for aiding Ukraine, including
supplying defensive weapons, if the latest round of diplomatic
efforts fails to bring a resolution with Russia. Obama and German Chancellor Angela Merkel said continued
Russian aggression in Ukraine has stiffened the resolve of the
U.S. and European Union to make President Vladimir Putin pay a
price for violating Ukraine’s sovereignty. Merkel, who opposes
delivering weapons to Ukraine’s army, said tactical differences
over lethal aid won’t shake the unity of the alliance.
- Russian 2015 Car Sales Seen Plunging 35% as Economy Seizes Up. Car sales in Russia will probably fall 35
percent this year as U.S. and European sanctions over Ukraine
and a ruble collapse batter the economy and raise prices,
according to PricewaterhouseCoopers. The market may shrink to 1.52 million cars this year,
Sergei Litvinenko, head of the audit company’s automotive
practice, told reporters Monday in Moscow. Under an optimistic
forecast, the decline this year may be 25 percent, he said.
- European Banks’ Dollar Swap Costs Most in 2 Years on Greece. The cost for European banks to fund in
dollars, a gauge of risk in the region’s financial system, rose
to the most expensive level in almost two years as Greece’s
rejection of the country’s bailout program raised concern the
government may run out of money. The one-year cross-currency basis swap, the rate for banks
to convert euro payments into dollars, was 26 basis points, or
0.26 percentage point, below the euro interbank-offered rate at
5 p.m. in London, according to ICAP Plc data. That’s the most
negative reading on a closing basis since April 2013. The
measure reached as much as 107 basis points below Euribor in
December 2011. A negative cross-currency swap rate signals traders are
paying a premium to exchange euro-based cash flows for
comparable flows denominated in dollars.
- Indian Stocks Decline With Rupee After Delhi Vote, U.S. Job Data. Indian stocks declined for a seventh day,
the longest streak in 15 months, after local election exit polls
indicated a setback for Prime Minister Narendra Modi’s party and
U.S. jobs data strengthened the case for higher interest rates.
The rupee and bonds retreated. The S&P BSE Sensex slid 1.7 percent to 28,227.39 at the
close,the lowest level since Jan. 16. The rupee touched 62.2175
per dollar, the weakest level in almost four weeks, while the
yield on government bonds due in July 2024 climbed two basis
points to 7.72 percent.
- European Stocks Retreat Amid Greece Concern as Lenders Decline. (video)
A drop in banks led European stocks lower,
with concern growing over the political situation in Greece as
Prime Minister Alexis Tsipras reaffirmed his rejection of the
country’s international bailout program. The Stoxx Europe 600 Index fell 0.7 percent to 370.55 at
the close of trading in London after dropping as much as 1.4
percent. With a 1.6 percent decline, lenders contributed the
most to the gauge’s retreat. Greece’s ASE Index lost 4.8 percent
as National Bank of Greece SA and Piraeus Bank SA slid more than
9.8 percent. Spanish and Italian stock measures fell the most in
the region after the Greek gauge.
- Bond Dangers Compounded by U.S. Pushing Out Debt Maturities. Uncle Sam is going long. As the insatiable demand for Treasuries pushes down yields,
the U.S. has locked in low-cost financing for years to come by
issuing more long-term debt. The average maturity of Treasuries
is now poised to reach an all-time high this year. The shift is saving money for American taxpayers -- but
it’s also made Treasuries more perilous for bond investors as
the strength of the U.S. economy bolsters the Federal Reserve’s
case for raising interest rates. Holders stand to lose about
$570 billion if yields rise by a percentage point, data compiled
by Bloomberg show. In 2009, it was $170 billion.
- McDonald’s(MCD) Slump Lingers With Drop in Global January Sales. (video) McDonald’s Corp., which is replacing its
chief executive officer in a bid to reignite growth, posted a
worse-than-projected decline in global sales for January,
dragged down by a slump at its Asian restaurants. McDonald's
January global comp. sales drop -1.8% vs. estimate down -1.2%. U.S.
comps. +.4%, est. +.3%. Europe comps. +.5%, est. -.5%. Asia-Pacific/Middle-East/Africa -12.6%, est. -8.4%.
Wall Street Journal:
- Obama Will Allow New Push for Peace Before Deciding on Arms for Ukraine. Merkel Disagrees With Lethal Aid, but Says Alliance Will Remain Solid Regardless. President Barack Obama said Monday he would allow one last push for
peace to play out before deciding whether to provide lethal assistance
to Ukraine, as he and German Chancellor Angela Merkel pledged to
continue to work together toward a diplomatic solution with Russia.
MarketWatch.com:
- Analyst who called China’s late 2014 rally isn’t so bullish now.
China’s easing move last week hasn’t impressed that much, and Monday’s
disappointing trade figures for the world’s No. 2 economy have rattled
investors. One analyst who turned particularly bullish on Chinese
equities in mid-November now has changed his tune. “The failure of
the market to respond to the recent RRR cut” — meaning last week’s
lowering of the reserve requirement ratio for banks — “may indicate that
the market’s belief in policy is waning,” says a note dated Sunday from
J.P. Morgan’s chief emerging
market equity strategist, Adrian Mowat, and his team. “The focus is back
on deteriorating economic growth.”
Fox News:
- Obama confirms arming Ukraine on the table if diplomacy with Russia fails. (video) President Obama confirmed Monday that his administration is weighing
the possibility of sending arms to Ukraine to help the country beat back
Russian-backed separatists, if diplomacy fails.
The comments came during a joint press conference with German
Chancellor Angela Merkel, following a meeting between the two leaders at
the White House.
CNBC:
ZeroHedge:
Business Insider:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Airlines -2.61% 2) Hospitals -1.92% 3) Medical Equipment -1.51%
Stocks Falling on Unusual Volume:
- BCE, RENT, RGLS, GRUB, HZO, PVH, YELP, ENT, CYOU, CBRL, TAHO, VVI, SOHU, DFT, FSAM, WPPGY, VFC, MCY, WRLD, QTS, FELP, GPRO, COR, WYN, BTI, DATA, PVH and ENT
Stocks With Unusual Put Option Activity:
- 1) AMJ 2) NOC 3) JBLU 4) XLNX 5) MOS
Stocks With Most Negative News Mentions:
- 1) ANF 2) BWLD 3) CMI 4) MCD 5) LUV
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +3.1% 2) Oil Service +1.71% 3) Gold & Silver +1.46%
Stocks Rising on Unusual Volume:
- CR, MSI, ACHN, CONN, NTT, OPK, NVS, HAS, WMGI, LGCY, LINE, ATW, NUS, OPK and POST
Stocks With Unusual Call Option Activity:
- 1) WMB 2) LNCO 3) CONN 4) HK 5) HAS
Stocks With Most Positive News Mentions:
- 1) HAS 2) CONN 3) SPF 4) MOS 5) WLH
Charts:
Weekend Headlines
Bloomberg:
- Putin Rejects Attempts to Contain Russia After Peace Talks Fail. Russian President Vladimir Putin struck a
defiant tone a day after talks in Moscow with the leaders of
Germany and France failed to achieve a breakthrough in resolving
the Ukraine crisis. Russia won’t tolerate the post-Cold War global system
dominated by a single leader, Putin said Saturday at a meeting
with the Federation of Independent Trade Unions in Sochi. “That type of world order has never been acceptable for
Russia,” Putin said. “Maybe someone likes it and wants to live
under a pseudo-occupation, but we won’t put up with it.”
- Ukraine Summit Unsuccessful as U.S. Contemplates Next Steps. European and Russian leaders failed on
Saturday to reach an agreement on ending the carnage in Ukraine
in more than five hours of talks as U.S. officials debated new
steps to pressure Russia, including military deployments in
countries like Poland and the Baltic states. The talks, held by Russian President Vladimir Putin, German
Chancellor Angela Merkel and French President Francois Hollande,
took place at the Kremlin in a high-stakes effort to stave off a
deeper confrontation between Russia and the West over Ukraine.
Little of substance emerged and Merkel and Hollande left Moscow,
although talks are to continue by phone over the weekend. The
German leader is due to address the Munich Security Conference
on Saturday.
- Greece Reaffirms Rejection of Bailout Before Emergency EU Meeting. Greek Prime Minister Alexis Tsipras
reaffirmed his government’s rejection of the country’s
international bailout program two days before an emergency
meeting with the euro area’s finance ministers.
Tsipras vowed to increase the minimum wage, restore the
income tax-free threshold and halt infrastructure privatizations
in a speech that sets him on a collision course with the
country’s creditors. “It is the irrevocable decision of our government to honor
the mandate of the Greek people and negotiate an end to the
European Union’s austerity,” Tsipras said in an address to
parliament marking the start of a three-day debate on his
government’s policy platform. “We aim to work with our partners
in Europe to achieve these goals.”
- Nigeria Postpones Vote for Six Weeks as Boko Haram Attacks Rage. Nigeria announced a six-week postponement of
presidential and legislative elections that were scheduled to be
held Feb. 14 because of worsening attacks by Islamist militants. Independent National Electoral Commission Chairman Attahiru
Jega said the presidential and legislative elections will be
held March 28, followed by state gubernatorial and legislative
votes on April 11. The delay will help the commission finish
distributing biometric cards to the 68.8 million registered
voters. The security forces said “if we have six weeks” they can
secure “normalcy,” Jega told reporters late Saturday in Abuja,
the capital. “What else can we do? We believe them. I know
there are sufficient grounds for cynicism, but let’s keep hope
alive.”
- Abbott Remains Prime Minister After Defeating Challenge. Australia’s Prime Minister Tony Abbott
thwarted a leadership challenge, though failed to end
speculation his position is under threat after almost 40 percent
of his Liberal Party colleagues voted against him. Liberal lawmakers voted by 61 to 39 against a motion that
would have declared his job vacant and allowed candidates to run
against him. Internal support for the prime minister has
dwindled 17 months after he won office amid the government’s
slumping poll ratings and concern about his leadership style.
- Asian Stocks Slide After China Trade Data. Asian stocks slid as China trade figures
showed signs of weakness in the region’s biggest economy.
Japanese equities rallied on a weaker yen after U.S. payrolls
topped estimates. Benchmark indexes in Seoul, Sydney and Wellington slipped
at least 0.4 percent as of 9:01 a.m. in Tokyo. Japan’s Topix
index climbed 0.8 percent, leaving the MSCI Asia Pacific Index
little changed at 141.24. China’s imports plunged by the most in
more than five years and exports unexpectedly fell, a report
over the weekend showed. Futures on the FTSE China A50 Index
dropped 0.7 percent in most recent trading in Singapore.
- Hedge Funds Most Bearish on Crude in 4 Years After Rally: Energy. Hedge funds raised bearish bets on oil to
the highest in more than four years, a sign they’re skeptical
that a two-week 14 percent rally will last. Short bets on West Texas Intermediate climbed 1.2 percent
in the week ended Feb. 3 to the most since August 2010, U.S.
Commodity Futures Trading Commission data show. Net-long
positions slipped for a third week, the longest stretch of
declines since August.
- Oil Companies May Keep Up Output to Repay Debt, BIS Report Says. Energy companies may be slow to cut oil
production after a 50 percent price drop because they need to
service debt that has risen fourfold since 2003, according to
the Bank for International Settlements.
“Debt-service requirements may induce continued physical
production of oil to maintain cash flows, delaying the reduction
in supply in the market,” the Basel, Switzerland-based
institution said in a report Saturday.
- Grain Bulls Exit at Fastest Pace Since 2013 on Glut: Commodities. Hedge funds cut bullish wagers on
agricultural commodities at the fastest pace since August 2013
as expanding grain supplies help keep a lid on global food
inflation. Money managers lowered their net-long position on crops
from corn to sugar for a fifth straight week, U.S. government
data show. Investors got more bearish on wheat and have the
smallest wager on a coffee rally in a year.
- West Coast Port Operators Suspend Weekend Cargo Amid Slowdowns. Terminal operators at the 29 U.S. West Coast
ports won’t handle cargo this weekend as a labor dispute with
dockworkers escalates, their bargaining agent said. Loading and unloading of vessels at ports from San Diego to
Bellingham, Washington, will be suspended from Friday through
Monday morning, according to an e-mailed statement from the
Pacific Maritime Association. Shipping lines and terminal operators can’t justify paying
overtime to unionized dockworkers who are handling cargo at
reduced levels of productivity, an association spokesman, Wade
Gates, said in the statement.
Wall Street Journal:
- Leaders Press for Ukraine Deal in Minsk. John Kerry Says West Is United in Response to Conflict. The U.S. and Germany are struggling to maintain a united front
against an unflinching Russia ahead of a crucial week of high-stakes,
top-level diplomacy on the Ukraine crisis. Chancellor Angela
Merkel has given Russian President Vladimir Putin until Wednesday to
agree to a road map to end the fighting in eastern Ukraine, according to
Western officials. If in her assessment Russian intransigence has
blocked a deal, they said,...
- U.S. Banks Say Soaring Dollar Puts Them at Disadvantage. Firms Say They May Be Forced to Hold More Capital Than Foreign Rivals. The strengthening U.S. dollar is rippling through the financial
system in unexpected ways, revealing what bankers say is a hidden flaw
in a Federal Reserve proposal to increase capital cushions at the
nation’s largest banks. Big U.S. banks say that, under the rule
proposed in December, the recent steep rise in the dollar’s value would
force some U.S. firms to hold billions of dollars more in capital than
foreign competitors, including weaker European banks, because of how the
Fed plans to calculate a so-called surcharge levied on the eight most
systemically important U.S. banks.
Zero Hedge:
- Yanis Varoufakis Sums Up Europe In One Sentence. "A clueless political personnel, in denial of the systemic nature of the crisis, is pursuing policies akin to carpet-bombing the economy of proud European nations in order to save them."
NY Post:
- Next subprime bubble to burst — auto loans.
Subprime auto loans are on the rise and just like subprime mortgages
are claiming untold victims. Samuel Perez, 32, is still dealing with
fallout from his experience with a subprime loan five years ago.
Night Trading
- Asian indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 67.25 -.5 basis point.
- NASDAQ 100 futures -.33%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Labor Market Conditions Index for January.
Upcoming Splits
Other Potential Market Movers
- The
China CPI, German Trade Balance, CSFB Financial Services Forum, Stifel
Tech/Internet/Media Conference, BIO Investor Conference, (MCD) January
Sales, (D) analyst meeting and the (DM) analyst meeting could
also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.
