Evening Headlines
Bloomberg:
- Russia to Bury Slain Opposition Leader as Allies Seek Momentum. (video) Russians prepared for the funeral of slain
opposition leader Boris Nemtsov as his allies tried to galvanize
supporters for a new wave of protests against President Vladimir
Putin. Nemtsov’s funeral was due to take place at Moscow’s
Troekurovskoe cemetery on Tuesday. He was shot four times in the
back while walking on a bridge just steps from the Kremlin last
week before he was slated to lead a protest against Putin.
- Conspiracies Swirl Over Moscow Murder. The contract-style murder last Friday night
of Boris Nemtsov, a vocal critic of Russian President Vladimir
Putin, has led to accusations of Kremlin complicity but also to
a slew of competing theories involving everything from the CIA
to Islamic militants and Ukrainian nationalists. Many of the as many as 50,000 people protesting Nemtsov’s
death at a rally on Sunday implicated the government in the
murder. A political cartoon reproduced as a poster by some
attendees showed a picture of the Kremlin bristling with
security cameras that were in fact pistols. But Putin supporters have been just as active in offering
their theories.
- Exxon’s(XOM) Russia Exposure Surges as Long View Outweighs Sanctions. Exxon Mobil Corp. shook off the chill of
sanctions and has continued to snap up oil drilling rights in
Russia, giving it larger exploration holdings in Vladimir
Putin’s backyard than in the U.S. Taking the long view, Exxon boosted its Russian holdings to
63.7 million acres last year from 11.4 million at the end of
2014, according to data from U.S. regulatory filings. That
dwarfs the 14.6 million acres of rights Exxon holds in the U.S.,
which until last year was its largest exploration prospect.
- Goldman Partner Who Called Japan's Demise Sees Similarities With China. Forecasts for China to surpass the U.S. as
the world’s main economic power are misplaced. So says an
observer who foresaw Japan’s eventual demise a year before its
land-price bubble began to burst. “The vulnerabilities in China today are very similar to
the vulnerabilities in Japan,” said Roy Smith, 76, who was a
Goldman Sachs Group Inc. partner when he wrote a column saying
Japan’s rise as a financial hegemon was done. “Nobody agrees
with me. But they didn’t agree with me in 1990, so at least I
have one right.” Among the risks: bad loans, overpriced stocks and a frothy
property market are flashing danger for China’s economy and
putting pressure on a fragile financial system -- similar to
conditions that triggered Japan’s fall, said Smith, a finance
professor at New York University’s Stern School of Business. A
further parallel is the burden of an aging population, with
mounting pension and health-care costs, he says.
- RBA Keeps Key Rate Unchanged as Currency Decline Eases Pressure. The Reserve Bank of Australia unexpectedly
kept interest rates unchanged as a weaker currency helps ease
pressure on an economy grappling with tumbling commodity prices. The overnight cash rate target was held at 2.25 percent,
Governor Glenn Stevens said in a statement Tuesday following a
board meeting in Melbourne. The decision was predicted by 11 of
29 economists surveyed by Bloomberg News, while 18 saw a cut.
Markets had priced in about a 60 percent chance of a reduction.
- Asian Stocks Follow U.S. Shares Higher on Consumer Spending, Yen. Asian stocks rose after U.S. equities
climbed to records as rising consumer spending signaled strength
in the world’s largest economy. Japanese shares gained after the
yen weakened.
The MSCI Asia Pacific Index advanced 0.1 percent to 146.31
as of 9:02 a.m. in Tokyo. The Topix index added 0.4 percent.
- L-Shaped Oil Recovery Flattens V-Shaped Market Optimists. Get ready for an L-shaped oil recovery. A growing consensus is emerging from the likes of BP Plc,
the International Energy Agency, shale wildcatters and even the
Saudis that a near-term recovery to $100-a-barrel crude isn’t in
the cards. Instead, expect a range of $50 to $60 for at least
the next few years. When oil prices plunged sharply in 2008, they rebounded
almost as quickly. Several months ago, industry and government
touted the same U or V-shaped recovery this time out. On closer
examination, a new factor in the marketplace -- shale oil -- has
changed their minds.
Wall Street Journal:
- U.S. Steers Clear of Tikrit, Cites Iran Role in Support of Iraqis. Islamic Revolutionary Guard Corps fighters were on the ground with Iraqi units, U.S. official says. Iraq’s latest push to retake the Sunni city of Tikrit from Islamic
State extremists has thrown a new spotlight on the role being assumed by
Iran in assisting Baghdad in its fight to regain control of the
country. U.S. officials said Iran is supporting the offensive to
retake Tikrit, supplying artillery, rocket fire and aerial drones.
- Foreign Banks Brace for Fed Stress Tests. Firms hire staff, overhaul operations to meet tougher requirements. The Federal Reserve’s growing scrutiny of global banks has set off a
scramble among foreign firms as they staff up and revamp operations to
meet the central bank’s rising expectations. The Fed’s stress
tests are expected to find shortcomings in risk management at the U.S.
units of some foreign banks, including Deutsche Bank AG and Banco
Santander SA.
- Israel and the Democrats. Chuck Schumer and other liberal fence-sitters will have their reputations stained forever if they let this Iran deal pass. The Democratic Party is on the cusp of abandoning the state of
Israel. That’s a shame, though less for Israel than it is for the
Democrats. The Democrats’ historic support for the Jewish state
has always been what’s best about the party. The understanding not only
that Jews are entitled to a state, but also that a liberal democracy is
entitled to defend itself—robustly and sometimes pre-emptively—against
illiberal enemies, is why the...
CNBC:
Zero Hedge:
Business Insider:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 98.0 -.25 basis point.
- Asia Pacific Sovereign CDS Index 60.0 +.75 basis point.
- NASDAQ 100 futures -.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:45 am EST
- ISM New York for February.
10:00 am EST
- IBD/TIPP Economic Optimism for March is estimated at 47.5 versus 47.5 in February.
Afternoon:
- Total Vehicle Sales for February are estimated to rise to 16.7M versus 16.56M in January.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen speaking, China HSBC Services PMI, weekly US retail sales
reports, Canadian GDP report, Pac Crest Emerging Tech Summit, JPMorgan
Aviation/Transport/Industrials Conference, BofA Consumer/Retail
Conference, (TGT) investor meeting, (JNPR) analyst update and the (ADP)
investor day 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 mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.28 -.25%
- Euro/Yen Carry Return Index 140.35 +.37%
- Emerging Markets Currency Volatility(VXY) 9.82 -.91%
- S&P 500 Implied Correlation 60.12 -1.05%
- ISE Sentiment Index 165.0 +44.74%
- Total Put/Call 1.05 +6.06%
Credit Investor Angst:
- North American Investment Grade CDS Index 60.75 -.81%
- America Energy Sector High-Yield CDS Index 652.0 +.01%
- European Financial Sector CDS Index 55.77 +2.71%
- Western Europe Sovereign Debt CDS Index 21.58 -4.11%
- Asia Pacific Sovereign Debt CDS Index 60.10 +.71%
- Emerging Market CDS Index 374.33 -.35%
- iBoxx Offshore RMB China Corporates High Yield Index 114.31 -.10%
- 2-Year Swap Spread 25.25 +.5 basis point
- TED Spread 25.75 +1.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -22.25 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 142.0 +5.0 basis points
- China Import Iron Ore Spot $62.83/Metric Tonne +.43%
- Citi US Economic Surprise Index -49.20 -2.5 points
- Citi Eurozone Economic Surprise Index 58.0 +7.0 points
- Citi Emerging Markets Economic Surprise Index -2.3 +5.0 points
- 10-Year TIPS Spread 1.83 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +98 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Higher: On gains in my biotech/tech/medical/retail sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Bloomberg:
- Body Language Reflects Chill as Kerry and Lavrov Discuss Ukraine. U.S. Secretary of State John Kerry and
Russian Foreign Minister Sergei Lavrov, unsmiling and standing
stiffly, let their body language speak for them before heading
into private talks Monday in Geneva. Afterward, they showed there was little to smile about.
- Greece May Need Third Rescue, EU’s Dombrovskis Says. Greece could need a third bailout deal when
its current program expires in June because markets may still
not be prepared to lend to its government, even with a euro-area
credit line, European Commission Vice President Valdis
Dombrovskis said. Prime Minister Alexis Tsipras, elected in January, said
Friday his government won’t need another bailout. Greece has
received pledges of 240 billion euros ($269 billion) in aid from
its two rescue packages, and Tsipras’s government must meet
creditor demands to tap remaining funds.
- Record Home Sales in Sydney Add to Bubble Fear. Sydneysiders wanting to sell their homes have never had it easier. The
proportion of successful house auctions in Australia's largest
city was above 80% at the weekend for the fourth week in a row. That is
the longest stretch on record and highlights the potential consequences
of a projected interest-rate cut. Governor Glenn Stevens's effort to
revive business investment with cheap finance is adding fuel to the
country's biggest property market. Home sellers may get a further boost, with 18 of 29 economists forecasting a 25-basis-point cash rate reduction on Tuesday.
- Bill Gross Says Currency War Risks Slowing Global Growth. Bill Gross said a global race to devalue
currencies in an “undeclared” war risks slowing growth instead
of stimulating it. Central bank policies have pushed interest rates below zero
in Europe, and countries including China and Japan appear to be
devaluing their currencies, he wrote in an investment outlook
for Janus Capital Group Inc., where he runs the $1.5 billion
Global Unconstrained Bond Fund. While such moves make debt
burdens more tolerable and exports cheaper, they are bound to
hurt the global economy as a whole, he wrote. “Common sense would argue the global economy cannot
devalue against itself,” Gross wrote. “Either the strong
dollar weakens the world’s current growth locomotive (the U.S.)
or else their near in unison devaluation effort fails to lead to
the desired results.”
- Emerging Currencies Decline to One-Week Low After China Rate Cut. Emerging-market currencies fell for a third
day after a Chinese interest-rate cut pushed the yuan to a 2012
low and the ruble and Brazilian real led declines in developing
Europe and Latin America. The yuan slid to as low as 6.274 against the dollar after
rates were reduced for the second time in three months. The
ruble dropped 0.9 percent. The real weakened 1.4 percent. South
Africa’s rand sank to a one-week low after weaker-than-predicted
manufacturing data followed a report last week showing a trade
deficit. Developing-nation equities fell for a second day.
- Corporate-Bond Market Poses Systemic Risk, SEC’s Gallagher Says. A lack of liquidity in corporate-bond
markets could pose a “systemic risk” to the economy when
interest rates rise, U.S. Securities and Exchange Commission
member Daniel Gallagher said. Gallagher, a Republican, warned that the Financial
Stability Oversight Council, a group of U.S. regulators that
monitors emerging systemic risks, hasn’t paid enough attention
to the $7.3 trillion corporate-bond market, which has ballooned
over the past seven years amid low interest rates. He made the
remarks Monday at a banking conference in Washington.
ZeroHedge:
Business Insider:
Telegraph:
Daily Mail:
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.08% 2) Steel -1.86% 3) Energy -1.52%
Stocks Falling on Unusual Volume:
- SQBK, LL, ES, CORE, LPI, NAVI, LXU, CLM, PCRX, ROVI, ENOC, AKAO, WTW, BPOP, SIR, OSK, BPT, INXN, PACW, IEP, SCMP, KYTH, SYNA, HAWK, BID, RKUS, TUBE and VDSI
Stocks With Unusual Put Option Activity:
- 1) MBI 2) LL 3) XLE 4) BBY 5) XLK
Stocks With Most Negative News Mentions:
- 1) NAVI 2) ESV 3) JOY 4) ARUN 5) CHK
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Semis +2.23% 2) Defense +1.41% 3) Airlines +1.38%
Stocks Rising on Unusual Volume:
- MVNR, EYES, NXPI, FSL, OMER, SMRT, SONC, ZIOP, RCAP and AMBA
Stocks With Unusual Call Option Activity:
- 1) ANF 2) GSAT 3) STX 4) THC 5) RMBS
Stocks With Most Positive News Mentions:
- 1) SONC 2) NXPI 3) FSL 4) JNJ 5) F
Charts:
Weekend Headlines
Bloomberg:
- Russian Opposition Gathers in Moscow to Honor Murdered Nemtsov. Tens of thousands marched through Moscow to
honor slain political activist Boris Nemtsov in the biggest show
of support for Russia’s opposition in three years. The city’s police estimated 21,000 people attended, while
Golos, a non-profit monitoring organization, said more than
50,000 took part. Protesters, led by former Prime Minister
Mikhail Kasyanov, chanted slogans such as “Russia without
Putin” as they passed the bridge near St. Basil’s Cathedral
where Nemtsov, 55, was shot dead Friday. “The fact that all this could happen in Russia in the 21st
century near the Kremlin walls, is shocking a lot of people,”
Kasyanov told Bloomberg News. “Today’s demonstrators aren’t
only our activists, but first of all, of course, people who care
what is happening in the country.”
- Nemtsov Sought to Show Russia Is in Ukraine, Poroshenko Says. Ukrainian President Petro Poroshenko said
his “friend” Boris Nemtsov, a Russian opposition leader gunned
down on a sidewalk near the Kremlin overnight, wanted to show
proof that his country’s troops are in Ukraine. Nemtsov, who was scheduled to lead a Sunday protest against
Russian President Vladimir Putin and the conflict in Ukraine,
was working on a report about Russia’s involvement, according to
fellow opposition activist Ilya Yashin. His murder happened just
before artillery fell mostly silent for the second time in a
week as government forces and the separatists said they were
pulling back weapons in line with a Feb. 15 cease-fire.
- Murder in the Heart of Moscow Has Hallmarks of Professional Hit. The Friday night killing of Russian
opposition leader Boris Nemtsov just outside the Kremlin, in one
of the most closely watched areas of Russia, bears all the signs
of having been planned and executed by professionals. That’s the assessment of former intelligence officials,
analysts and activists familiar with the case. The murder turned
a planned rally against President Vladimir Putin into a vigil
Sunday to mourn Nemtsov, 55, who Ukrainian President Petro
Poroshenko said was writing a report on Russia’s involvement in
the neighboring country’s conflict.
- Rajoy Denies Tsipras Claim That Spain Sought to Undermine Greece. Spanish Prime Minister Mariano Rajoy
rejected remarks from his Greek counterpart accusing Spain and
Portugal of trying to undermine Greece’s government. Spain is committed to help Greece, as the 26 billion euros
($29 billion) of loans and guarantees already provided to the
Greek bailout show, said Rajoy at a political event in Seville
today. Greek Prime Minister Alexis Tsipras, speaking yesterday
in Athens, said Spain and Portugal took negotiations over
Greece’s bailout to the brink of failure in a bid to avoid
domestic political consequences.
- Oil Drops as Gain in Saudi Arabian Output Boosts OPEC Production. Oil fell after posting the first monthly
gain since June as Saudi Arabia stepped up production, lifting
OPEC’s output beyond its collective quota for a ninth month.
Futures decreased as much as 1.1 percent in New York. The
Organization of Petroleum Exporting Countries pumped 30.6
million barrels a day in February, according to a Bloomberg
survey. Saudi Arabia’s output rose by 130,000 barrels a day to 9.85
million a day, the highest level since September 2013, a
Bloomberg survey of companies, producers and analysts shows. The
country pumps the most crude among the 12 nations of OPEC, which
supplies about 40 percent of the world’s oil.
- Bearish Oil Wagers Surge to Record as Glut Keeps Growing: Energy. Hedge funds raised bearish wagers on oil to
an all-time high, speculating crude has further to fall as the
supply glut keeps swelling. Money managers increased short positions in West Texas
Intermediate crude by 17 percent in the seven days ended Feb.
24, U.S. Commodity Futures Trading Commission data show. Net-long positions slid to the lowest in seven weeks. Stockpiles in the U.S. have risen for seven consecutive
weeks to a record 434.1 million barrels. Domestic production is
continually topping weekly records, reaching 9.29 million
barrels a day during the report period, while an unprecedented
decline in oil drilling rigs is showing signs of slowing.
Wall Street Journal:
- Institutions Pour Cash Into Bond ETFs. Move to exchange-traded funds comes as big investors deal with bond-trading challenges. Institutions are piling into exchange-traded bond funds at the fastest
pace on record, driven by forces reshaping the increasingly illiquid
corporate-debt market and their desire to stay nimble ahead of expected
interest-rate moves.
- Putin’s Culture of Fear and Death
by Garry Kasparov. Boris Nemtsov threw his big body, big voice and big
heart into the uphill battle to keep democracy alive in Russia.
Fox News:
MarketWatch.com:
- China rate cut renews economic concerns. The central bank renewed concerns about an array of issues weighing on
the economy: a slumping property market, capital flight that is
squeezing banks' ability to lend, and growing risks of falling prices
that, in effect, are pushing up borrowing costs for businesses.
Zero Hedge:
- Are Central Banks Creating Deflation?
(graph) It’s that linkage between investment (or the lack of it) and
all the stimulus which we find so disturbing. If the first $5tn of
global QE, which saw corporate bond yields in both $ and € fall to
all-time lows, didn’t prompt a wave of investment, what do we think a
sixth trillion is going to do? Another client put it more strongly
still. “By lowering the cost of borrowing, QE has lowered the risk of
default. This has led to overcapacity (see highly leveraged shale
companies). Overcapacity leads to deflation. With QE, are central banks manufacturing what they are trying to defeat?”
New York Times:
ValueWalk:
Reuters:
- Japan business capex growth slows in Q4, points to economic headwinds.
Japanese corporate capital expenditures grew in October-December from a
year earlier but the pace slowed from the prior quarter, casting doubt
about strength of business investment seen as key to spurring growth in
the world's third-largest economy. The 2.8 percent year-on-year increase
in capital spending in the fourth quarter followed a 5.5 percent annual
gain in July-September, data by the Ministry of Finance showed on
Monday.
Telegraph:
21st Century Business Herald:
- China Doesn't Have Condition for Massive Loosening. China doesn't
have conditions for massive loosening and stimulus, Yang Tao,
researcher at Chinese Academy of Social Sciences, writes. Cuts in
interest rate and reserve requirement ratio mainly aims to weaken market
expectations on deflation.
Night Trading
- Asian indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 98.25 -1.75 basis points.
- Asia Pacific Sovereign CDS Index 59.25 -1.75 basis points.
- NASDAQ 100 futures +.15%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for January is estimated to rise +.4% versus a +.3% gain in December.
- Personal Spending for January is estimated to fall -.1% versus a -.3% decline in December.
- The PCE Core for January is estimated to rise +.1% versus unch. in December.
9:45 am EST
- Final Markit US Manufacturing PMI for February is estimated at 54.3 versus 54.3 in January.
10:00 am EST
- Construction Spending for January is estimated to rise +.3% versus a +.4% gain in December.
- ISM Manufacturing for February is estimated to fall to 53.0 versus 53.5 in January.
- ISM Prices Paid for February is estimated to rise to 37.0 versus 35.0 in January.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone PMI, Eurozone CPI, RBA rate decision, Cowen Health Care
Conference and the Morgan Stanley Tech/Media/Telecom Conference could
also impact trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by metals/mining and
financial shares in the region. I expect US stocks to open modestly
higher and to weaken into the afternoon, finishing modestly mixed. The
Portfolio is 50% net long heading into the week.
