Bloomberg:
- As China Stocks Outrun the 2007 Bubble, UBS Braces for Clampdown. (graph) With China’s world-beating stock market attracting an unprecedented
number of novice traders, the question on many investors’ minds is how
long authorities will let the rally run before stepping in to cool
things down. As UBS Group AG strategist Lu Wenjie sees it, policy makers may add
to existing interventions as soon as later this year. The Shanghai
Composite Index’s 121 percent surge over the past 15 months isn’t
justified by earnings prospects in an economy growing at the slowest
pace since 2009, according to Lu. “It’s absolutely possible we’ll see some draconian measures from the
regulators,” he said in an interview in Hong Kong. “The pace of stock
rally is too fast.”
- French Output Slows as ‘Moribund’ Economy on Verge of Stalling. Growth in France’s private sector almost stalled in April in a sign
of renewed weakness in the euro area’s second-largest economy. A Purchasing Managers Index for the service and manufacturing
industries dropped to 50.2 from 51.5 in March, London-based Markit
Economics said on Thursday. The reading is barely above the 50-point
mark that divides expansion from contraction and below the median
estimate in a Bloomberg survey of economists, which was for an increase
to 51.8.
- German Economy Starts Quarter Weaker as Orders Slow. A gauge of German economic growth weakened in April as new business slowed. A Purchasing Managers Index for factories and services fell to 54.2
from 55.4 in March, London-based Markit Economics said on Thursday.
While the reading remains well above the 50-point mark that divides
expansion from contraction, it is below the 55.6 predicted by economists
in a Bloomberg survey.
- Europe’s Top Asset Manager Says Stock-Market Crash Possible. Allianz SE, Europe’s biggest insurer and asset manager, cautioned
investors against possible turmoil in the stock markets after a recent
rally. “We see generally meager growth prospects, political dangers
and risks of a stock market crash,” Oliver Baete, board member and
designate chief executive officer, said in an interview with Germany’s
Manager Magazin on Thursday. Holger Ullrich, a spokesman for Allianz,
confirmed the comments.
- European Stocks Drop as Manufacturing, Services Miss Estimates. European stocks declined as data showed euro-area output expanded at
a slower pace in April, and Ericsson AB led technology shares lower.
The Stoxx Europe 600 Index lost 0.4 percent to 407.18 at the close of
trading, having earlier tumbled as much as 1 percent and gained 0.4
percent.
- U.S. Shale Fracklog Triples as Drillers Keep Oil From Market. Think the U.S. is awash in crude now? Thank the fracklog that it’s not worse. Drillers in oil and gas fields from Texas to Pennsylvania have yet to
turn on the spigots at 4,731 wells they’ve drilled, keeping 322,000
barrels a day underground, a Bloomberg Intelligence analysis shows.
That’s almost as much as OPEC member Libya has been pumping this year. The number of wells waiting to be hydraulically fractured, known as
the fracklog, has tripled in the past year as companies delay work in
order to avoid pumping more oil while prices are low. It’s kept crude
off the market with storage tanks the fullest since 1930. The fracklog
may slow a recovery as firms quickly finish wells at the first sign of
higher prices.
- Bird Flu ‘Catastrophe’ Mounts Amid Concern Virus Is Airborne. Deadly bird flu swelled in the poultry industry in Minnesota and
neighboring Wisconsin amid speculation that winds may be carrying virus
particles into facilities housing turkeys and chickens. “This is a
catastrophe for both the turkey and the egg industries,” William Rehm,
the president of Daybreak Foods Inc., said after his company’s farm in
Jefferson County, Wisconsin, with 800,000 egg-laying hens was infected
by bird flu. “Some USDA
veterinarians are starting to believe the virus is spreading from
particulates in the air,” he said Wednesday in a telephone interview.
- The U.S. Economy Hasn't Disappointed Analysts This Much Since the Great Recession. (graph) A morning's worth of disappointing data sent the Economic Surprise Index down further. Following a quartet of weaker-than-expected economic data reports
released this morning, Bloomberg's U.S. economic surprise index has
fallen to levels seen only during the Great Recession. At -0.783, the 15-year-old index has been this far away from zero in
either direction in only two other periods: in early 2009, when it hit a
record-low -0.996, and in March 2011, when it climbed as high as
0.950.
Wall Street Journal:
ZeroHedge:
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -3.43% 2) Semis -1.62% 3) Gaming -1.45%
Stocks Falling on Unusual Volume:
- ERIC, HZO, GMED, PHM, TOUR, TWC, TXN, ADTN, HNI, WBC, SYNT, FB, SCSS, VLTC, RUSHA, MJN, AMP, GM, MTH, HNP, VSAR, MMM, FTK, GGG, CBMG, VSH, FTK, GM, AVT and GMT
Stocks With Unusual Put Option Activity:
- 1) DHR 2) CSX 3) DHI 4) GPS 5) JNPR
Stocks With Most Negative News Mentions:
- 1) ADTN 2) TXN 3) MMM 4) PBR 5) GM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +4.25% 2) Oil Service +3.08% 3) Computer Services +2.09%
Stocks Rising on Unusual Volume:
- ARRS, SQM, TRCO, SKX, DPZ, DNKN, OCR, CVC, WFT, RS, CTXS, ASPS, MDSO, CVC, SXC, CLGX, ESPR, CAB, CAM, PMC, UTEK, CAKE, ORLY and CSL
Stocks With Unusual Call Option Activity:
- 1) DHR 2) ETP 3) TWC 4) USG 5) SKX
Stocks With Most Positive News Mentions:
- 1) SKX 2) DNKN 3) DPZ 4) EBAY 5) R
Charts:
Evening Headlines
Bloomberg:
- Putin’s Feed-Russia-First Push Has Global Grain Markets on Edge. Vladimir Putin is determined to make sure that Russians don’t run
out of affordable bread, even if it means a few bankrupt farmers and a
disrupted grain market. The country that last year was the fourth-largest wheat exporter is
now taxing all overseas sales of the grain. Shipments dropped by more
than half, and the loss of income is squeezing already thin profits for
growers. While Putin’s move kept more wheat at home, farmers have cut
back spending to stay solvent, including using less fertilizer and
pesticide.
- We're Just Learning the True Cost of China's Debt. (video) The true cost of the debt that China's real estate developers
peddled to eager international investors during a five-year property
boom is now becoming clear. Having found themselves shut out of local bond and loan markets seven
years ago, a band of developers began looking elsewhere for funds.
First an initial public offering, and then a dollar bond sale. It became
a well-trodden path. By 2010, a core group of four -- Kaisa Group
Holdings Ltd., Fantasia Holdings Group Co., Renhe Commercial Holdings
Co., Glorious Property Holdings Ltd. -- raised a total of $5.6 billion.
On Monday, Kaisa buckled under $10.5 billion of debt and defaulted.
- Sands China Shares Drop as Macau Downturn Causes Forecasts Miss. Sands China Ltd. dropped to a month low in Hong Kong trading after
the Macau casino operator reported worse-than-expected earnings and its
billionaire chairman Sheldon Adelson said he’s uncertain about the
industry’s recovery.
The stock fell 3.5 percent to HK$31.45 as of 9:35 a.m., the lowest
intraday level since March 20. The other five casino companies in the
city also fell with SJM Holdings Ltd. and Wynn Macau Ltd. losing more
than 2.3 percent.
- Asian Stocks Follow U.S. Shares Higher Ahead of China PMI Report. Asian stocks rose for a third day, after U.S. equities climbed
toward records, as Japanese shares gained on a weaker yen and investors
awaited a private report on Chinese manufacturing.
The MSCI Asia Pacific Index added 0.2 percent to 154.99 as of 9:02 a.m. in Tokyo.
- Qualcomm(QCOM) Forecasts Fall Short After Samsung Business Loss. Qualcomm Inc., whose chips power most of the world’s smartphones,
forecast fiscal third-quarter sales and profit that may miss estimates
as customers turn to rivals for key components or make their own parts. Net income in the current period will be 67 cents to 82 cents a share
on revenue of $5.4 billion to $6.2 billion, the San Diego-based company
said Wednesday in a statement. On average, analysts had estimated
earnings of 99 cents on sales of $6.46 billion, according to data
compiled by Bloomberg.
Wall Street Journal:
MarketWatch.com:
Zero Hedge:
Business Insider:
Reuters:
- Chipmaker Texas Instruments(TXN) forecasts revenue below estimates. Texas Instruments Inc forecast
current-quarter revenue below analysts' expectations, citing
weak demand for its chips from communication equipment and
consumer electronics markets and a strong dollar.
Shares of the company, which also reported
lower-than-expected profit and revenue for the first quarter,
fell 7 percent in extended trading on Wednesday.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 59.5 -.25 basis point.
- NASDAQ 100 futures -.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 AM EST
- Initial Jobless Claims are estimated to fall to 287K versus 294K the prior week.
- Continuing Claims are estimated to rise to 2290K versus 2268K prior.
9:45 am EST
- The Preliminary Markit US Manufacturing PMI for April is estimated at 55.7 versus 55.7 in March.
10:00 am EST
- New Home Sales for March are estimated to fall to 515K versus 539K in February.
11:00 am EST
- The Kansas City Fed Manufacturing Activity Index for April is estimated to rise to -2.0 versus -4.0 in March.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone PMI report, weekly Bloomberg Consumer Comfort Index, weekly
EIA natural gas inventory report and the (SCHW) Business Update could
also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.73 -3.92%
- Euro/Yen Carry Return Index 134.51 +.20%
- Emerging Markets Currency Volatility(VXY) 9.90 -.90%
- S&P 500 Implied Correlation 67.76 +.48%
- ISE Sentiment Index 161.0 +45.05%
- Total Put/Call .91 +1.11%
Credit Investor Angst:
- North American Investment Grade CDS Index 61.54 -.97%
- America Energy Sector High-Yield CDS Index 1,062.0 -.21%
- European Financial Sector CDS Index 73.26 -2.77%
- Western Europe Sovereign Debt CDS Index 26.74 -.02%
- Asia Pacific Sovereign Debt CDS Index 60.09 +.69%
- Emerging Market CDS Index 297.39 -1.82%
- iBoxx Offshore RMB China Corporates High Yield Index 116.98 +.18%
- 2-Year Swap Spread 26.75 -.5 basis point
- TED Spread 25.50 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -20.75 +1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% +1.0 basis point
- Yield Curve 143.0 +4.0 basis points
- China Import Iron Ore Spot $54.04/Metric Tonne +5.88%
- Citi US Economic Surprise Index -51.80 +1.3 points
- Citi Eurozone Economic Surprise Index 46.60 -1.2 points
- Citi Emerging Markets Economic Surprise Index -13.1 -.3 point
- 10-Year TIPS Spread 1.88 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +128 open in Japan
- DAX Futures: Indicating +72 open in Germany
Portfolio:
- Higher: On gains in my retail/medical/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
