Bloomberg:
- Iranian Supreme Leader Refrains From Endorsing Nuclear Deal. Iranian Supreme Leader Ayatollah Ali Khamenei refrained from
endorsing a framework nuclear deal agreed with world powers and said all
sanctions must be lifted once a final accord is reached. In his first public comments addressing the April 2 pact that was
outlined in Lausanne, Switzerland, Khamenei said on Thursday he was
“neither for it, nor against it.” Envoys from the U.S., U.K., France,
Russia, China, Germany and Iran have given themselves until June 30 to
reach a permanent deal.
- Lagarde Warns of ‘Bumpy Ride’ as Fed Prepares for Rate Rise. IMF Managing Director Christine Lagarde says the world could be in
for a “bumpy ride” when the Federal Reserve starts raising interest
rates, with overpriced markets and emerging economies likely to take the
biggest hits. While risks to the global economy have decreased over the last six
months, threats to the world’s financial system have actually risen,
Lagarde said on Thursday ahead of next week’s spring meetings of the
International Monetary Fund and World Bank in Washington. A long period of low interest rates in the U.S. and other advanced
economies has fostered a higher risk tolerance among investors, “which
can lead to overpricing” and could pose “solvency challenges” for life
insurers and defined-benefit pension fund, she said. Lagarde, 59, warned that “liquidity can evaporate quickly if everyone
rushes for the exit at the same time -- which could, for example, make
for a bumpy ride when the Federal Reserve begins to raise short-term
rates,” she said the text of a speech at the Atlantic Council in
Washington.
- Greece Wins More ECB Emergency Cash as Deal Seen Near Reach. (video) Greece secured an increase in emergency funding available to its
banks as Finance Minister Yanis Varoufakis said he’s confident of
reaching an aid agreement with European partners this month. The European Central Bank’s Governing Council raised the cap on
Emergency Liquidity Assistance provided by the Bank of Greece by 1.2
billion euros ($1.3 billion) to 73.2 billion euros in a telephone
conference on Thursday, said two people familiar with the discussion.
That was more than the 700 million-euro increase granted last week. An
ECB spokesman declined to comment.
- Hong Kong Housewife Cheers Stocks as Workers Trade at Lunch.
Hong Kong’s stock market rally is drawing individual investors from
all walks of life as the Hang Seng Index soars to a seven-year high.
With money from the mainland exchange link contributing to record
turnover in the city’s $4.9 trillion stock market, a crowd of part-time
traders hunched over computer screens at Bright Smart Securities
&
Commodities Group in Hong Kong’s central business district to take
advantage of the surge in Chinese demand. “Things are getting quite exciting,” said Chow Man, a 68-year-old
housewife who favors Chinese banks and infrastructure stocks and says
she has as much as HK$200,000 ($25,000) in play. “It’s becoming like a
hobby for a lot of mainland investors to trade stocks now. That’s why
more of them are taking opportunities in Hong Kong.”
- Here Are the Top Stocks Leading the Buying Frenzy in Hong Kong. As the flood of Chinese money pours into Hong Kong, shares in the
city are rising indiscriminately across industries, driving the Hang
Seng Composite Index toward a seven-year high. “A rising tide lifts all boats,” said Warren Lau, an analyst with
Maybank Kim Eng Securities in Hong Kong. “This is a liquidity-driven
market.” Below are the top performers on the Hang Seng Composite since yesterday. Gains are as of the midday trading break in Hong Kong.
- Fed-ECB Policy Gap Become Canyon for Euro, Deutsche Bank Says. (graph) Financial markets are signaling the Federal Reserve will raise
interest rates about four years before the European Central Bank,
magnifying weakness in the euro, according to Deutsche Bank AG. About a year ago, money-market derivatives projected monetary
tightening in America and the euro area both taking place sometime in
2016.
- Europe Stocks Climb to Record After German Industrial Production. The biggest three-day jump since January sent European stocks to an all-time high.
The Stoxx Europe 600 Index advanced 1.1 percent to 409.15 at the close of trading in London.
- Russian Oil Floods Export Market as Teapot Plants Lose Money. Crude oil exports from Russia, the world’s biggest producer, grew
about seven times faster than output in the first quarter as the country
processed less fuel at home. Shipments from the country increased
7.4 percent from a year earlier
between January and March, the biggest gain in at least nine years and
outstripping a 1.1 percent rise in production, according to Energy
Ministry data. Domestic crude deliveries to refineries fell 1.9 percent
as OAO Rosneft said simple plants, known as teapots, were not profitable
to run after prices plunged last year.
- The Oil Industry's $26 Billion Life Raft. For U.S. shale drillers, the crash in oil prices came with a $26
billion safety net. That’s how much they stand to get paid on insurance
they bought to protect themselves against a bear market -- as long as
prices stay low. The flipside is that those who sold the price hedges now have to make
good. At the top of the list are the same Wall Street banks that
financed the biggest energy boom in U.S. history, including JPMorgan
Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo
& Co. While it’s standard practice for them to sell some of that risk to
third parties, it’s nearly impossible to identify who exactly is on the
hook because there are no rules requiring disclosure of all
transactions. The buyers come from groups like hedge funds, airlines,
refiners and utilities. “The folks who were willing to sell it were left holding the bag when
prices moved,” said John Kilduff, partner at Again Capital LLC, an
energy hedge fund in New York.
- Private Equity’s Big Bet on Shipping Falters as Deal Boom Ends. At
a New York shipping conference late last year, Mark Friedman, a
senior managing director at Evercore Partners Inc., regaled attendees
with an analogy to the Eagles’ “Hotel California.” Investors, as his
reference to the song went, can get into the industry but can never
leave. WL Ross & Co., Oaktree Capital Group LLC and other
private-equity firms bought vessels at near record-low prices since
2010, planning to
ride the global recovery. Instead, they found that what goes down
sometimes stays down. And now, stuck running fleets that few others want
to buy, they’re left to contend with declining freight rates.
- Muddy Waters Shorts Noble Group, Quizzes Cash Flow in Report. Muddy
Waters LLC, the research firm founded by short seller Carson Block,
published a report questioning Noble Group Ltd.’s cash flow and
management, adding its weight to recent criticism of the commodity
trading company’s finances. Muddy Waters has taken a short position in Noble, Asia’s largest
commodity trader by revenue, the U.S. researcher said on its website.
Noble rejected the Muddy Waters allegations in a statement to the
Singapore stock exchange, where it trades.
Wall Street Journal:
- Plunging Iron Ore a Major Challenge For Australian Budget. Treasurer Joe Hockey says assumptions for iron ore will have to be revised further. Plunging iron-ore prices are forcing Australia’s government to redraw
forecasts underpinning the nation’s finances, another sign of how
fragile the economy is.
CNBC:
- Why the stock market is way overvalued. Interesting note from Nomura this morning saying the market is currently
pricing in 9.6 percent earnings growth in the S&P 500, well above
the long-term realized average of 7 percent (since 1945) and much higher
than analysts' expectations of mostly flat earnings growth this year.
- Hedge fund machines cash in—again. The robots are winning again. Hedge funds that rely on sophisticated computer algorithms to invest are once again producing the industry's best returns.
ZeroHedge:
Business Insider:
Style Underperformer:
Sector Underperformers:
- 1) REITs -1.91% 2) Homebuilders -1.71% 3) Coal -1.53%
Stocks Falling on Unusual Volume:
- PHK, LPLA, BBBY, MEMP, QURE, MSM, MG, CMCM, CMGE, ZUMZ, AA, FLTX, OTIC, RECN, GRUB, ARE, QIHU, OHI, DYAX, IMOS, CENX, CA, HNT, ATHM and TGI
Stocks With Unusual Put Option Activity:
- 1) AVP 2) BBBY 3) FXE 4) DE 5) AA
Stocks With Most Negative News Mentions:
- 1) PHM 2) EMC 3) MSM 4) DUK 5) MTH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +3.75% 2) Oil Service +2.59% 3) Energy +1.08%
Stocks Rising on Unusual Volume:
- DGLY, PIR, MYL, TASR, SIMO, EIGI, MR, ESRX, CLMT and KNDI
Stocks With Unusual Call Option Activity:
- 1) ALTR 2) BBBY 3) ESRX 4) TASR 5) INFN
Stocks With Most Positive News Mentions:
- 1) PTEN 2) MGM 3) WBA 4) CCO 5) UA
Charts:
NYSE:
- Volume 8.6% Below 100-day average
- 3 Sectors Rising, 7 Sectors Declining
- 37.2% of Issues Advancing, 59.2% Declining
- 100 New 52-Week Highs, 5 New Lows
Evening Headlines
Bloomberg:
- Tsipras Returns to Reality After Putin With Greek Cash Depleting. When his plane touches back down in Athens, Greek Prime Minister Alexis Tsipras will be quickly reacquainted with reality. Talks with Russian President Vladimir Putin in Moscow on Wednesday
focused on a proposed energy pipeline, future investments and sanctions
over the conflict in Ukraine, a meeting that had been dismissed before
it began by Germany and France as a sideshow. With a payment to the
International Monetary Fund on Thursday depleting Greek cash reserves
still further, it’s back to haggling with creditors in the euro region
over a financial lifeline.
- Dimon Says JPMorgan Must Be Ready for Greek Exit From Euro Area. JPMorgan Chase & Co., the largest U.S. bank by assets, needs to
be ready for Greece to depart from the euro currency union, Chief
Executive Officer Jamie Dimon said. “We must be prepared for a potential exit,” Dimon said Wednesday in a
letter to shareholders of his New York-based bank. “We continually
stress test our company for possible repercussions resulting from such
an event.”
- Sydney Property Booming While Iron Ore Slumps Shows RBA Dilemma. While investors are betting the Reserve Bank of Australia will deliver
additional easing to lift an economy hit by the commodities slump, the
central bank chief disappointed them this week by leaving the cash
target unchanged at 2.25 percent. As he weighs the effect of 2.5
percentage points of reductions so far, he can’t help but notice house
prices are buoyant, household debt is rising and borrowing by
non-resource businesses is beginning to grow.
- China’s Deflation Threat: What to Look for Beyond the Headlines. (graph)
- Bank of Korea Holds Benchmark Rate Amid Weak Inflation, Growth. South Korea’s central bank held its key interest rate at an all-time
low to monitor the impact of three cuts since August as inflation
slowed and exports fell. The Bank of Korea kept the seven-day repurchase rate unchanged at
1.75 percent, as forecast by all 16 economists surveyed by Bloomberg.
The BOK is expected to keep it at that level until at least the end of
March 2016, according to a separate survey.
- Chinese Stocks in Hong Kong Surge Most Since 2007; Dollar Climbs. Hong Kong stocks surged the most since 2009 amid volume almost five
times the average and a frenzy of buying by mainland investors. The U.S.
dollar climbed after Federal Reserve meeting minutes showed division on
when to raise interest rates, while gold retreated.
The Hang Seng Index jumped as much as 6.4 percent and touched the highest level since 2007.
- Asian Stocks Fluctuate Near Seven-Year High; Energy Shares Drop. Asian stocks fluctuated, with the benchmark index trading near its
highest level since 2008. Health-care companies gained and energy
explorers fell.
The MSCI Asia Pacific Index slipped 0.1 percent to 150.96 as of 9:18
a.m. in Tokyo, swinging from a gain of less than 0.1 percent.
- Dimon Says Once-in-3-Billion-Year Treasury Move Warning Shot. JPMorgan Chase & Co. head Jamie Dimon said last year’s
volatility in U.S. Treasuries is a “warning shot” to investors and that
the next financial crisis could be exacerbated by a shortage of the
securities. The Oct. 15 gyration, when Treasury yields fluctuated by almost 0.4
percentage point, was an “unprecedented move” that would have serious
consequences in a stressed environment, Dimon, the New York-based bank’s
chairman and chief executive officer, said in a letter Wednesday to
shareholders. Treasuries are supposed to be among the most stable
securities.
Wall Street Journal:
- After Foreclosures, Home Buyers Are Back. As their credit improves, borrowers who defaulted get reprieve.
- Let’s Hit ‘Pause’ Before Altering Humankind. Two Nobel laureates on gene technology capable of making changes that are heritable by generations to come.
- The Incredible Obama Doctrine. Speak softly and claim to carry a big stick, which you have no intention of ever using. Last weekend, with the ink on the Iran nuclear deal still being
deciphered, the Obama Doctrine fell out of an interview between
President Obama and Thomas Friedman of the New York Times. “You asked about an Obama doctrine,” Mr. Obama said. “The doctrine is: We will engage, but we preserve all our capabilities.”
Barron's:
Fox News:
- US, Iran support for dueling sides in Yemen raises prospect of proxy fight. (video) Intervention by the U.S. and Iran in Yemen is raising the prospect of a
proxy war even as the Obama administration tries to reach a nuclear deal
with the Islamic Republic – with Iran sending two ships to waters near
Yemen, as the U.S. speeds up military aid to the Saudi-led coalition
striking Tehran-backed rebels there.
- Cheney slams Obama in radio interview, says policies aim to 'take America down'. “I vacillate between the various theories I’ve heard, but you know, if
you had somebody as president who wanted to take America down, who
wanted to fundamentally weaken our position in the world and reduce our
capacity to influence events, turn our back on our allies and encourage
our adversaries, it would look exactly like what Barack Obama’s doing,”
Cheney said.
MarketWatch.com:
CNBC:
- Alcoa(AA) beats on earnings, falls short on revenue. Alcoa reported quarterly earnings that beat analysts' expectations on Wednesday, but its revenue fell slightly short. The company, which is in the midst of a major business transformation push, reported adjusted first-quarter earnings
per share of 28 cents on revenue of $5.82 billion. Analysts had expected Alcoa to report earnings of
26 cents per share on $5.94 billion in revenue, according to a consensus
estimate from Thomson Reuters.
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 57.75 unch.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (STZ)/.94
- (ANGO)/.16
- (HGR)/.44
- (PSMT)/.98
- (RT)/-.03
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 283K versus 268K the prior week.
- Continuing Claims are estimated to rise to 2350K versus 2325K the prior week.
10:00 am EST
- Wholesale Inventories for February are estimated to rise +.2% versus a +.3% gain in January.
- Wholesale Trade Sales for February are estimated to rise +.3% versus a -3.1% decline in January.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone Industrial Production report, China CPI report, USDA's WASDE
report, $13B 30Y T-Bond auction, Bloomberg April US Economic Survey
results, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas
inventory report and the (LB) sales conference call could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity
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 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.32 -3.11%
- Euro/Yen Carry Return Index 135.35 -.38%
- Emerging Markets Currency Volatility(VXY) 9.63 -2.23%
- S&P 500 Implied Correlation 65.20 +.77%
- ISE Sentiment Index 127.0 +30.93%
- Total Put/Call .96 -3.03%
Credit Investor Angst:
- North American Investment Grade CDS Index 60.53 +.49%
- America Energy Sector High-Yield CDS Index 1,104.0 +.78%
- European Financial Sector CDS Index 65.79 -1.06%
- Western Europe Sovereign Debt CDS Index 21.89 +.27%
- Asia Pacific Sovereign Debt CDS Index 57.89 +.04%
- Emerging Market CDS Index 293.38 -3.54%
- iBoxx Offshore RMB China Corporates High Yield Index 115.07 +.18%
- 2-Year Swap Spread 24.75 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -21.5 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $48.05/Metric Tonne -.02%
- Citi US Economic Surprise Index -55.0 +.7 point
- Citi Eurozone Economic Surprise Index 57.60 -4.9 points
- Citi Emerging Markets Economic Surprise Index 5.2 +.6 point
- 10-Year TIPS Spread 1.84 -3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +103 open in Japan
- DAX Futures: Indicating +37 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail/medical/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
