BETWEEN THE HEDGES

Tuesday, April 21, 2015

Tuesday Watch

Posted by Gary .....at 12:25 AM

Evening Headlines
Bloomberg:

Russia Pushing Greece Gas-Pipeline Accord Before Turkey Signs On. When Greek Prime Minister Alexis Tsipras meets the head of Russia’s OAO Gazprom on Tuesday, they’ll probably sign an agreement to have a natural-gas link to Europe cross Greece, analysts from UBS Group AG and Alfa-Bank said. For now, the accord will be just a political step on the road to building the link, which depends on the backing of Turkey and the European Union, Maxim Moshkov from UBS and Alexander Kornilov from Alfa-Bank said. “The project has been supported in Russia at the highest level, so Gazprom is acting fast,” said Moshkov, an oil and gas analyst for UBS in Moscow.
Greece Poses Political Threat to Euro Area: Lebovitz. (video)
China Auto Sales to Rise Less Than 7% Forecast, Association Says. China’s vehicle sales will expand less in 2015 than the 7 percent forecast at the start of the year, as the economy slows and more cities impose restrictions on vehicle registrations, according to the state-backed auto association. “Even though we don’t like it, it will become a new norm that more cities will start limiting vehicle purchases every year,” Dong Yang, secretary general of the China Association of Automobile Manufacturers, said at a conference in Shanghai. He said the group will give a revised forecast later this year. China’s auto sales will grow by an average of about 5 percent to 10 percent a year, a “new normal” of slower expansion after increasing by an average of 24 percent from 2001 to 2010, he said.
Is China Getting Desperate for Growth? (video)
Asian Stocks Rise as U.S. Shares Rebound, Japanese Yen Weakens. Asian stocks rose, following a rebound in U.S. shares, as the yen’s first drop in seven days buoyed Japanese exporters. Materials and health-care shares led gains. The MSCI Asia Pacific Index added 0.2 percent to 152.57 as of 9:01 a.m. in Tokyo. The measure retreated 0.9 percent yesterday, the most in almost a month, as China’s curbs on speculative trading outweighed the central bank’s biggest cut to reserve requirements since 2008.
Steel demand in China forecast to decline through 2016. Steel demand in China will shrink this year and next to extend the first annual contraction since 1995 as economic growth in the world's biggest producer slows, according to the World Steel Association. China's steel use will drop 0.5 per cent to 707.2 million metric tons in 2015 and fall to 703.7 million tons next year, the group said in a statement. In 2014, demand declined 3.3 per cent to 710.8 million tons, according to the Brussels-based body, whose members account for 85 per cent of global output.

Wall Street Journal:

Bird Flu Hits Iowa Chickens in Escalation of Virus Outbreak. Farm with about 5.3 million chickens is biggest operation to be affected by outbreak.
Israel Alone. Previous quarrels between Washington and Jerusalem were about differing Mideast perceptions. Now the issue is how the U.S. perceives itself.

Fox News:

Top diplomat sorry for FBI director's remarks on Poland, Holocaust. FBI Director James Comey wasn't wrong when he said some in Poland were accomplices in the Holocaust, but his remarks -- which angered Poles and resulted in an apology Sunday night from America's top diplomat in Warsaw -- hit a raw nerve in a nation that suffered greatly at the hands of the Nazis, according to experts on the last century's darkest chapter

MarketWatch.com:

Zero Hedge:

Business Insider:

Boersen Zeitung:

Bundenbank's Dombret Warns of Risk to Financial Markets. Risks to financial stability have increased recently and the chances of a setback in such situations exists, citing Bundesbank board member Andreas Dombret saying in an interview. Increased risks to the financial system was dominant topic of discussion at the spring International Monetary Fund meeting and that of the G20 finance ministers and central bank governors in Washington. A growing cause of danger is unprecedented loose monetary policy, although there was strong support for this course by central banks to support growth. Liquidity has decreased significantly in some market segments, raising a question over what will happen in the event of a shock and certainly poses a danger.

Evening Recommendations

None of note

Night Trading

Asian equity indices are -.25% to +1.0% on average.

Asia Ex-Japan Investment Grade CDS Index 107.0 -2.5 basis points.

Asia Pacific Sovereign CDS Index 60.5 -1.25 basis points.

S&P 500 futures +.22%.

NASDAQ 100 futures +.23%.

Morning Preview Links

Earnings of Note
Company/Estimate

(ATI)/.08
(ACI)-.50
(ARMH)/.07
(BHI)/.44
(EAT)/.93
(CP)/2.20
(CS)/.67
(DD)/1.31
(GPC)/1.05
(HOG)/1.24
(ITW)/1.17
(KMB)/1.33
(LMT)/2.49
(MAN)/.79
(NVR)/9.72
(OMC)/.82
(RF)/.18
(SAP)/.63
(AMTD)/.35
(UA)/.05
(UTX)/1.46
(VZ)/.95
(AMGN)/2.11
(BRCM)/.60
(CMG)/3.64
(CREE)/.23
(FWRD)/.40
(ILMN)/.72
(ISRG)/3.88
(NBR)/.02
(SYK)/1.09
(VMW)/.84
(YHOO)/.18
(YUM)/.72

Economic Releases

None of note

Upcoming Splits

None of note

Other Potential Market Movers

The German ZEW index and US weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Monday, April 20, 2015

Stocks Surging into Final Hour on Central Bank Hopes, Yen Weakness, Technical Buying, Transport/Gaming Sector Strength

Posted by Gary .....at 3:26 PM

Broad Equity Market Tone:

Advance/Decline Line: Higher

Sector Performance: Most Sectors Rising

Volume: Below Average

Market Leading Stocks: Performing In Line

Equity Investor Angst:

Volatility(VIX) 13.14 -5.4%

Euro/Yen Carry Return Index 133.73 -.41%

Emerging Markets Currency Volatility(VXY) 9.94 +.51%

S&P 500 Implied Correlation 67.87 +1.09%

ISE Sentiment Index 71.0 -16.47%

Total Put/Call .81 -27.68%

NYSE Arms 1.32 +16.49%

Credit Investor Angst:

North American Investment Grade CDS Index 62.49 -2.99%

America Energy Sector High-Yield CDS Index 1,059.0 +.18%

European Financial Sector CDS Index 76.53 +1.13%

Western Europe Sovereign Debt CDS Index 26.20 -1.30%

Asia Pacific Sovereign Debt CDS Index 60.0 -2.77%

Emerging Market CDS Index 300.91 -.63%

iBoxx Offshore RMB China Corporates High Yield Index 116.67 +.13%

2-Year Swap Spread 26.25 unch.

TED Spread 26.0 unch.

3-Month EUR/USD Cross-Currency Basis Swap -23.75 unch.

Economic Gauges:

3-Month T-Bill Yield .01% -1.0 basis point

Yield Curve 137.0 +1.0 basis point

China Import Iron Ore Spot $51.57/Metric Tonne +1.26%

Citi US Economic Surprise Index -54.30 -.1 point

Citi Eurozone Economic Surprise Index 49.90 -3.5 points

Citi Emerging Markets Economic Surprise Index -12.5 -1.0 point

10-Year TIPS Spread 1.89 unch.

Overseas Futures:

Nikkei Futures: Indicating +96 open in Japan

DAX Futures: Indicating -4 open in Germany

Portfolio:

Slightly Lower: On losses in my index hedges

Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

Market Exposure: Moved to 50% Net Long

Today's Headlines

Posted by Gary .....at 2:58 PM

Bloomberg:

Tsipras to Seize Public-Sector Funds to Keep Greece Afloat. Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras ordered local governments to move their funds to the central bank. With negotiations over bailout aid deadlocked, Tsipras needs the cash for salaries, pensions and a repayment to the International Monetary Fund. Greek bonds fell after the move, pushing three-year yields to the highest since the nation’s debt restructuring in 2012. The order was questioned by local officials and slammed by the leading opposition party.

Greek Government Is Running Out of Options: S&P's Kraemer. (video)

Grexit Fears Cause GDP Forecasts to Plummet. Economists have severely cut their forecasts for core Greek economic indicators. That reflects growing concern that the debt burden of the southern European country may force an exit from the euro as its creditors grow frustrated with the lack of a clear vision from Syriza party leader and Prime Minister Alexis Tsipras, and the absence of a compromise on bailout terms.

BMW Cutting Production, Prices in China to Meet ‘New Normal’. BMW AG has reduced prices on some models in China and will cut production there to prevent a buildup of unsold cars in a sign that luxury demand in the world’s largest auto market is softening. BMW has scaled back manufacturing in the country to lower supply for its distributors and will cut output again in the second quarter, said Karsten Engel, BMW’s China chief, who declined to give specifics.
Putin Invites Saudi King to Russia as They Discuss Yemen Crisis. Russian President Vladimir Putin invited Saudi King Salman Bin Abdulaziz to make the first-ever visit to his country by a leader of the Gulf nation during a phone call in which they discussed the conflict in Yemen.

Emerging Stocks Drop on China Curbs as Russia Stems Ruble Rally. Emerging-market stocks fell for a second day as regulatory efforts to curb speculative trading in China dragged the nation’s shares from a 2008 high. The ruble slid as the central bank raised the cost of borrowing dollars. China CNR Corp. and CSR Corp. plunged from records in Hong Kong and the Shanghai Composite Index declined the most in seven weeks. The ruble tumbled 2.6 percent against the dollar. The rupee posted its biggest drop this year as India’s trade deficit widened. Poland’s zloty rallied past 4 per euro after better-than-expected industrial output data. The MSCI Emerging Markets Index retreated 0.9 percent to 1,032.85 by 11:45 a.m. in New York.

Europe Stocks Rebound From Weekly Drop as Miners Rally on China. European stocks rebounded from the year’s biggest weekly decline, with commodity shares leading gains after China’s central bank boosted stimulus measures. The Stoxx Europe 600 Index added 0.8 percent to 406.87 at the close of trading.

Russia Seen Maintaining Oil Output Even After Collapse in Prices. Russia will maintain oil output for at least two years as increased use of technology and tax breaks will counter falling prices, Oxford University researchers said. “Russian production may stay flat for the next few years and could even rise towards the end of the decade,” James Henderson, an analyst at the university’s Oxford Institute for Energy Studies, wrote in a report. That assumes fields that have yet to begin output are delayed for two years on spending cuts.

The U.S. Economy Keeps Disappointing. (graph) U.S. indicators are continuing to undershoot analysts’ estimates, according to the Bloomberg Economic Surprise Index, which made fresh lows late last week.

Mom-and-Pop Traders Went on a Buying Binge During Friday's Market Plunge. Apple Inc., Netflix Inc. and Facebook Inc. were involved in the most orders at Fidelity, with buys outnumbering sells by 2.6, 1.1 and 2.4 to 1 respectively, according to Colas. Retail investors were net buyers of the top 30 securities on the list and sellers of just two individual companies, Microsoft Corp. and Schlumberger Ltd.

ZeroHedge:

Did Greece Just Launch Capital Controls: "Mandatory Cash Transfer" Decreed Due To "Extremely Urgent Need".

Fed Study Finds Fed Insolvency "Would Not Create Serious Problems".

Multibillion Hedge Fund Manager: "Ultimately QE Will Fail; US And China Might Enter Recession At The Same Time".

These Are The Biggest "Pain Trades" Right Now. (table)

Oil Slips On Saudi Record Production Promise, Specs Pile In But Blackstone Skeptical.

Chinese Developer Kaisa Officially Defaults, Restructures Debt. (graph)

Business Insider:

US warships are reportedly heading to Yemeni waters to intercept an Iranian arms shipment.

The risk of a market shock causing spillovers is worse today than it was before the financial crisis.

China may have just cleared the way for a 'black swan' event.

New York Post:

426 Children Killed in Syria Gas Attack: Report. The devastating gas attack on Syrian civilians that took place in August 2013 killed more than 1,400 people — including 426 children, it was revealed Sunday.

Reuters:

Exclusive - Naimi says Saudi oil production near record high in April. Oil Minister Ali al-Naimi says Saudi Arabia is producing near record levels of crude in April, underscoring the kingdom's willingness to defend market share at a time when oil markets have staged a fragile recovery. There are worries that growing production from Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC) could snuff out a recent rebound in oil prices, particularly with economic growth in key oil consumer China the slowest in six years in the first quarter.

Financial Times:

Jaguar Land Rover says it cannot act on ‘copycat’ claim. Jaguar Land Rover cannot take any legal action in its dispute with an alleged Chinese “copycat”, the UK carmaker’s chief executive admitted on Monday — but he warned that a “copy-paste” approach to production would harm China’s industrial image.