Bloomberg:
- China Has a Massive Debt Problem. China has a $28 trillion problem. That’s the country’s total
government, corporate and household debt load as of mid-2014, according
to McKinsey & Co. It’s equal to 282 percent of the country’s total
annual economic output. President Xi Jinping’s government aims to wind down that burden to
more manageable levels by recapitalizing banks, overhauling local
finances and removing implicit guarantees for corporate borrowing that
once helped struggling companies. Those like Baoding Tianwei Group Co., a
power-equipment maker that Tuesday became China’s first state-owned
enterprise to default on domestic debt. Now hold that thought, and consider this: China’s also trying to prop
up a $10.4 trillion economy that’s decelerating and probably will
continue to do so through 2016, or so says the International Monetary
Fund.
- Greek Banks Win More Emergency Cash as Talks Loom. The European Central Bank almost doubled an increase in emergency
funding to Greek banks from last week, suggesting deposit flight is
accelerating as bailout talks drag on. The European Central Bank’s Governing Council raised the cap on
Emergency Liquidity Assistance by about 1.5 billion euros ($1.6 billion)
to 75.5 billion euros on Wednesday, people familiar with the decision
said. ELA is funding provided by national central banks at their own
risk, and is extended against lower-quality collateral than the ECB
accepts. “The ceiling increase shows that deposit outflows from Greek lenders
continue,” said Andreas Koutras, an analyst at in Touch Capital Markets
Ltd. in London. “The question now is when will the collateral against
ELA be exhausted -- in other words how much time is left?”
- Greece Optimism Cuts Spain Yields Most in 11 Months Versus Bunds. All it took was a glimmer of optimism in Greece’s debt negotiations
to fuel a rally in Spanish bonds that cut their yield premium over
German bunds by the most in almost a year. Greek bonds also jumped, pushing the three- and 10-year yields down
from the highest levels since 2012, while a slump in German bunds sent
yields up by the most in three months.
- Gazprom Accused of Market-Power Abuse to Raise EU Gas Prices. European Union regulators attacked OAO Gazprom’s pricing structure
throughout the eastern part of the continent, further straining
political relations between the 28-nation bloc and Russia. Margrethe Vestager, the EU’s competition chief, said Gazprom may have
imposed unfair prices by preventing gas from flowing from certain
central and eastern European countries to others. The move comes days
after she signed off on a so-called statement of objections to Internet
search giant Google Inc. “All companies that operate in the European market –- no matter if
they are European or not –- have to play by our EU rules,” Vestager said
in a statement Wednesday.
- Saudi Jets End Bombing Lull as Houthis Take Base in Yemen. Saudi Arabia renewed its aerial assault on Shiite rebels in Yemen, a day after saying it would scale back military operations. Fighter aircraft from the Saudi-led coalition attacked Houthi
positions in the cities of Taiz and Aden, residents said by phone, and
were seen flying over the capital, Sana’a. The Shiite Houthis had
earlier seized a brigade base from forces of the Saudi-backed President
Abdurabuh Mansur Hadi, according to locals and the Houthi-controlled
al-Masirah television channel.
- European Shares Are Little Changed While Greek Lenders Rebound. European stocks halted a two-day gain amid disappointing earnings
releases, while Greek shares rallied after a report that the nation won
access to more emergency funding for its banks. Kering SA lost 3.9 percent as it posted a worse-than-expected drop in
revenue at its Gucci brand, and Tesco Plc slid 5.2 percent after
reporting its biggest annual loss ever. Greece’s benchmark ASE Index
climbed 2.1 percent, the most among western-European markets, with its
banks gaining the most in almost two months. The Stoxx Europe 600 Index slipped less than 0.1 percent to 408.99 at
the close of trading in London. It earlier rose as much as 0.6 percent
and fell 0.8 percent.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
MNI:
- Greek Govt Moving Backward in Some Areas, Regling Says. There is
backward movement in some policy areas, contrary to understanding
reached on Feb. 20, ESM's Klaus Regling said in an interview. Creditors'
baseline scenario remains to keep Greece in the euro zone; ESM is
prepared for all possible outcomes.
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -2.65% 2) Gold & Silver -2.61% 3) Computer Hardware -.91%
Stocks Falling on Unusual Volume:
- CMG, SMCI, PFPT, CREE, ADTN, ILMN, TRIL, ALV, URI, TUP, MANH, DHI, UA, FLKS, IRBT, TEL, TRN, ISRG, FARO, HAS, SCHL, DFS, CMGE, PNR, TMO and HTLD
Stocks With Unusual Put Option Activity:
- 1) OIL 2) NOV 3) CMG 4) XLNX 5) CSX
Stocks With Most Negative News Mentions:
- 1) ALTR 2) TRN 3) BRO 4) SCHL 5) BTU
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +2.78% 2) I-Banks +.98% 3) Gaming +.96%
Stocks Rising on Unusual Volume:
- PKT, AEC, CAMP, DLB, VLTC, CCIH, PKG, ASML, ECHO, IBKR, YUM, STJ, VMW, VIMC, MA, AEC, FTI, V, TSLA and ADXS
Stocks With Unusual Call Option Activity:
- 1) VMW 2) ASHR 3) HK 4) CMG 5) ILMN
Stocks With Most Positive News Mentions:
- 1) BRCM 2) DUK 3) YUM 4) V 5) MCD
Charts:
NYSE Composite Index:
- Volume Running 2.4% Above 100-day average
- 4 Sectors Rising, 6 Sectors Declining
- 44.5% of Issues Advancing, 50.9% Declining
- 59 New 52-Week Highs, 15 New Lows
Evening Headlines
Bloomberg:
- EU Fires Gazprom Warning Shot as Putin Moves to Tighten Gas Grip. For four decades, through the depths of the Cold War and the
collapse of the Soviet Union, Europe has relied on Russian gas to keep
its economy moving, sending hundreds of billions of dollars to Moscow in
return. Today, that relationship is fraying. The European Union is about to
serve OAO Gazprom, Russia’s exporter of the fuel, with an antitrust
complaint, just as President Vladimir Putin is wielding gas as a tool in
the conflict over Ukraine and inserting pipeline politics into Greece’s
financial crisis. None of this is likely to stop the gas from flowing, analysts say, though Gazprom is preparing for the worst.
- Goldman Sachs(GS) Says Insurers With $6 Trillion Mull Mortgage Loans. Global insurers who oversee more than $6 trillion in assets plan to
invest capital in commercial mortgage loans and private equity this year
to generate higher returns, a Goldman Sachs Asset Management survey
showed. Thirty-five percent of insurance executives said they plan to invest
in the mortgages, 30 percent in infrastructure debt and 29 percent in
private equity and middle market loans, according to the survey
published Wednesday. About 66 percent of the 267 chief investment
officers and chief financial officers said low yields were the greatest
risk to their portfolios. Most respondents said the industry took on an appropriate amount of
investment risk, while 21 percent thought peers took too much risk. Sanford
C. Bernstein analysts warned in February that the European Central
Bank’s bond buying program may accelerate the creation of credit
bubbles, driven by insurers who are among the
biggest buyers of debt.
- Blackstone(BX) CEO Schwarzman Sees ‘Excess’ in China’s Market. Blackstone Group LP’s Steve Schwarzman said the Chinese stock
market shows signs of excess as the population plows savings into it
while economic growth slows.
“We’re now finding retail investors with multiple brokerage accounts
and margin loans and indicia of some excess in their market system,”
Schwarzman, Blackstone’s co-founder and chief executive officer, said
Tuesday at the China General Chamber of Commerce’s Finance & Real
Estate Forum in New York.
- Most Asian Stocks Rise as Japan Gains on Yen, Telecoms Advance. Most Asian stocks rose, with the regional benchmark index trading
near its highest since 2008, as a weaker yen buoyed Japanese equities
and phone-company shares gained.
About two shares climbed for each that retreated on the MSCI Asia
Pacific Index, which added 0.1 percent to 154.07 as of 9:07 a.m. in
Tokyo.
- Now Investors Are Worried That a Single Trader Could Take Down the U.S. Stock Market. There are enough reasons to lie awake at night without having to
worry that a single trader can take down the U.S. stock market from a London suburb, fund managers said.
U.S. authorities accused 36-year-old Navinder Singh Sarao on Tuesday of
masterminding a five-year scheme to use phony orders in Standard
& Poor’s 500 Index futures to manipulate prices and book $40
million in illicit profits.
Along the way, he had a hand in erasing $862 billion from the U.S. stock
market -- in a matter of minutes, they alleged. That it might have
been going on for so long didn’t fill investors with confidence. “It’s
incumbent upon regulators not to be asleep at the switches,”
said Donald Selkin, who helps manage about $3 billion as chief market
strategist at National Securities Corp. in New York. “They have been,
time and time again.”
Wall Street Journal:
- Debt Piles Up in Asia, Threatening Growth. Countries borrowed a lot during the crisis, and kept doing so afterward. Asian countries borrowed heavily to maintain growth during the
financial crisis, but couldn’t break the habit even as the global
economy healed. Now they are feeling the hangover. Growth is
slowing fast across the continent as consumers and businesses focus on
repaying debt. Central banks have cut rates, pushing currencies lower,
but...
- On Greece, Europe Bluffs Itself. How different is Greece really from France, Italy and Spain? Greece’s new leader and his ministers are behaving like fools in their
debt showdown with the European union. So claims much of the punditry
and you won’t find an argument here. They’ve taunted Germany about war
reparations, threatened to open their borders to jihadists trying to
enter Europe and cozied up to Vladimir Putin.
Fox News:
Zero Hedge:
Business Insider:
Reuters:
- Broadcom(BRCM) profit beats as demand rises from smartphone makers. Wireless chip maker Broadcom Inc
reported higher-than-expected quarterly revenue and
profit, helped by strong sales of its WiFi and broadband chips
to smartphone makers such as Apple Inc and Samsung
Electronics Co Ltd. Shares of Broadcom, which also forecast current-quarter
revenue above analysts' expectations, rose 5.4 percent in
extended trading on Tuesday.
Financial Times:
- How futures trading could crash stocks. The US equity market ‘flash crash’ of May 6 2010 has long highlighted the pronounced link between futures
exchange contracts and the share prices of companies bought and sold by
investors of all stripes.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 59.75 -.75 basis point.
- NASDAQ 100 futures +.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 AM EST
- The FHFA House Price Index for February is estimated to rise +.5% versus a +.3% gain in January.
10:00 am EST
- Existing Home Sales for March are estimated to rise to 5.03M versus 4.88M in February.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,419,090 barrels versus a +1,294,000 barrel increase the prior week.
Gasoline supplies are estimated to fall by -864,550 barrels versus a
-2,072,000 barrel decline the prior week. Distillate supplies are
estimated to rise by +1,000,000 barrels versus a +2,017,000 barrel
increase the prior week. Finally, Refinery Utilization is estimated to
rise by +.55% versus a +2.2% gain the prior week.
Upcoming Splits
Other Potential Market Movers
- The
BoE Minutes, HSBC China Manufacturing PMI, weekly MBA mortgage
applications report and (ASML) annual meeting could also impact trading
today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial 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: Around Even
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.18 -.90%
- Euro/Yen Carry Return Index 134.31 +.44%
- Emerging Markets Currency Volatility(VXY) 9.97 +.10%
- S&P 500 Implied Correlation 68.22 +.59%
- ISE Sentiment Index 142.0 +52.69%
- Total Put/Call .87 +11.54%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.21 -.49%
- America Energy Sector High-Yield CDS Index 1,065.0 +.52%
- European Financial Sector CDS Index 75.34 -1.56%
- Western Europe Sovereign Debt CDS Index 26.75 +1.69%
- Asia Pacific Sovereign Debt CDS Index 59.68 -1.20%
- Emerging Market CDS Index 302.82 +.74%
- iBoxx Offshore RMB China Corporates High Yield Index 116.78 +.09%
- 2-Year Swap Spread 27.25 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -22.25 +1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- Yield Curve 139.0 +2.0 basis points
- China Import Iron Ore Spot $51.04/Metric Tonne -1.03%
- Citi US Economic Surprise Index -53.10 +1.2 points
- Citi Eurozone Economic Surprise Index 47.80 -2.1 points
- Citi Emerging Markets Economic Surprise Index -12.8 -.3 point
- 10-Year TIPS Spread 1.87 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +125 open in Japan
- DAX Futures: Indicating +51 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail/medical sector longs
- Market Exposure: 50% Net Long
