Bloomberg:
- Greece, Creditors Said to Disagree on Proposals For Sales Tax. Greece’s proposed tax overhaul isn’t passing muster with the
nation’s creditors because it wouldn’t do enough to help the country’s
budget, people familiar with the matter said. Greek Prime Minister Alexis Tsipras told lawmakers the plan won’t
gain approval from creditors and that Greece will submit a new offer in
coming days, according to another person. The people asked not to be
identified speaking on confidential matters.
- Merkel Gives Greece 12 Days to Reach Financing Accord. (video) German Chancellor Angela Merkel and French President Francois
Hollande gave Greece until the end of May to reach a deal on its aid
program, urging faster talks to end the standoff over the country’s
financing. Merkel and Hollande, standing side-by-side after meeting in Berlin on
Tuesday, said they would impress the message on Greek Prime Minister
Alexis Tsipras when they all attend a European Union meeting in Riga,
Latvia, this week.
- ECB to Frontload Asset Purchases in May, June. (video)
- NATO Says Russian Troops Must Leave Ukraine as Truce Strains. NATO called on Russian troops to withdraw from Ukraine, while the
Kremlin warned that Europe’s security would be threatened by a renewed
outbreak of fighting as the fragile cease-fire came under strain. Events must be stopped from “spiraling out of control,” Jens
Stoltenberg, secretary general of the North Atlantic Treaty
Organization, said after talks with Russian Foreign Minister Sergei
Lavrov in Brussels on Tuesday. Russia must “withdraw all its troops and
support for the separatists” in eastern Ukraine, he said.
- German Investor Confidence Falls Amid Slower Growth. German investor confidence fell more than analysts forecast after
growth in Europe’s largest economy slowed at the start of the year. The ZEW Center for European Economic Research in Mannheim said its
index of investor and analyst expectations, which aims to predict
economic developments six months in advance, fell to 41.9 in May from
53.3 in April. That’s the lowest level since December. Economists had
forecast a decline to 49, according to the median of 31 estimates in a
Bloomberg survey.
- U.K. Inflation Falls Below Zero for First Time Since 1960. Britain’s inflation rate fell below zero for the first time in more
than half a century, as the drop in food and energy prices depressed the
cost of living. Consumer prices declined 0.1 percent in April from a year earlier,
the Office for National Statistics said in London on Tuesday. Economists
had forecast the rate to be zero, according to the median of 35
estimates in a Bloomberg News survey. Core inflation slowed to 0.8
percent, the lowest since 2001.
- Even the Bears May Be Too Bullish on China. Survey forecasts for several key indicators have overshot the reality so far this year. As
China's economy slows, economists are proving too bullish. The median
forecasts in Bloomberg surveys for industrial production,
fixed-assets investment and retail sales have all overshot the reality
so far in 2015.
- China Said to Ready Plans to Buoy Local Government Borrowing. China is considering relaxing rules for bond sales in a bid to boost
slowing economic growth, people familiar with the matter said Tuesday. After two years of telling local authorities not to take kickbacks
and don’t borrow too much, President Xi Jinping’s national government is
tweaking the missive. With the economy undershooting its 7 percent
growth target, the admonition against borrowing is being wound back, at
least in part. China’s economic planning agency, the National Development and Reform
Commission, is now seeking opinions on a draft proposal that would
change rules on the bond sales it regulates in order to help investment
funding, the people familiar said, asking not to be identified because
the details are private. Xi and Premier Li Keqiang’s crackdown on the
old, debt-fueled model of unrestrained growth have gummed up stimulus
mechanisms, and restrictions on off-balance sheet financing vehicles are
being relaxed. “The government is running out of choices — investment is weak not only
in the property market but also in infrastructure, and the government
has to do something,” Yao Wei, a Paris-based China economist at Societe
Generale SA, said. While allowing local government financing vehicles
to sell more bonds and telling banks to lend money to them aren’t “in
line with China’s long-term reform goals, it’s necessary to address
short term slowdown problems."
- Chinese Professors Charged With Economic Espionage. Six Chinese citizens, including two university professors, have been
indicted on U.S. charges of pilfering sensitive mobile-phone technology
from two companies in the U.S. and sharing it with the Chinese
government. The charges represent the U.S. government’s latest salvo in its
long-running effort to pressure Beijing to stop what American officials
allege is the widespread theft of trade secrets to benefit China’s
commercial and military industries. In this case, the Justice Department
alleges, two Chinese researchers at U.S. companies conspired with
officials at a state-run university in China to steal the wireless
technology and mass produce it in their homeland.
- Goldman’s(GS) Call Sinks Petrobras as Ibovespa Leads World Declines. Goldman Sachs Group Inc.’s prediction that oil will tumble sank
Petroleo Brasileiro SA, sending the Ibovespa to the biggest drop among
major stock benchmarks. Oil slid for a fifth day as the New York-based firm said a continuing
surplus would drag prices down to $45 a barrel by October. Petrobras,
the producer at the center of Brazil’s largest graft probe, has said
offshore investments are economically viable with crude above that
level. The shares led losses in the Ibovespa, which retreated 1.9 percent to
55,143.62 at 12:36 p.m. in Sao Paulo. The gauge was set for the biggest
slump since March. The state-owned oil company extended a two-day rout
to 7.3 percent as crude decreased 2.7 percent to $57.81 a barrel in New
York.
- European Stocks Rally With Carmakers as ECB Plans to Boost QE. Stocks in Europe climbed to a three-week high after a European
Central Bank official said it plans to increase bond buying in May and
June.
The Stoxx Europe 600 Index added 1.6 percent to 404.89 at the close of trading.
ZeroHedge:
Business Insider:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Oil Service -3.62% 2) Gold & Silver -3.22% 3) Steel -2.27%
Stocks Falling on Unusual Volume:
- URBN, LINE, FGEN, ALDR, CDW, DKS, SSI, ICPT, ININ, WMT, VCYT, CSIQ, CCJ, I, WBK, RAX, LNCO, RAVN, NOAH, PSG, USLV, HD, VOD, HWAY, JOY and LOCO
Stocks With Unusual Put Option Activity:
- 1) AEO 2) WMT 3) KCG 4) CENX 5) RCL
Stocks With Most Negative News Mentions:
- 1) TSL 2) VALE 3) CRM 4) URBN 5) WDC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +2.06% 2) Banks +.99% 3) HMOs +.62%
Stocks Rising on Unusual Volume:
- MOMO, TTWO, RRGB, CMCM, ASNA, WBAI, KITE and BLUE
Stocks With Unusual Call Option Activity:
- 1) URBN 2) DRI 3) TTWO 4) NLY 5) OWW
Stocks With Most Positive News Mentions:
- 1) TTWO 2) PNRA 3) TJX 4) YUM 5) SYY
Charts:
Evening Headlines
Bloomberg:
- Islamic State Victory Threatens to Unravel Obama’s Iraq Strategy. Islamic
State’s seizure of the Iraqi city of Ramadi threatens to
unravel President Barack Obama’s strategy for defeating the Sunni
extremist group without sending U.S. ground troops back to Iraq.
Ramadi’s fall, two days after a U.S. general said Islamic State was
“losing” in Iraq, is the militants’ biggest success since they swept
across northern Iraq a
year ago. Deploying car bombs and executing dozens of pro-government
soldiers and civilians, the group raised its black banner over the
capital of Anbar province as government forces fled.
- Greek Leaders Say Deal Is Within Reach Amid Doubts by Creditors. Greek leaders expressed optimism a deal to unlock bailout funds is
within reach, in the face of continuing warnings by creditors that the
country has yet to comply with the terms of its emergency loans. “We are very close” to an agreement, Finance Minister Yanis
Varoufakis said in an interview late Monday with Greece’s Star TV
Channel. “I’d say it is a matter of one week.” Earlier Monday, Prime Minister Alexis Tsipras had told Greek
industrialists that “we are now at the final stretch before striking a
mutually beneficial agreement, after long and painful negotiations.”
- Which Stock Market Is Scarier: U.S. or China?
It’s scary stock-market ratio day! Bloomberg’s Lu Wang and Jennifer
Kaplan point out that economist James Tobin’s Q ratio -- companies’
market value divided by the replacement cost of their assets -- is
higher for U.S. companies “than any time other than the Internet bubble
and the 1929 peak.” Meanwhile, FT Alphaville tells of a Macquarie
report on margin lending in China, which now accounts for 8.9 percent of
the combined free float of the Shanghai and Shenzhen stock markets.
That “could already be the highest level of margins vs free float in
market
history.” What are we to make of these ominous-sounding measures?
Something. Definitely something.
- Most Asia Shares Gain as Bonds Extend Global Slide; Wheat Climbs. Most Asian shares rose following a record-setting day in the U.S.,
as bonds in the region tracked a resumption of selling in international
markets. Wheat extended gains near a five-week high, and crude oil
rallied.
The MSCI Asia Pacific Index climbed 0.2 percent by 11:13 a.m. in Tokyo, with five stocks climbing for every three that fell.
- Shale Poised to Pummel Another Market as U.S. LNG Plants Arrive. The U.S. is about to change the global LNG market forever. When the first tanker carrying liquefied natural gas from shale
fields leaves the Sabine Pass terminal in Louisiana in December, it will
turn consumers into traders with more bargaining power. That will
transform a market dominated by long-term contracts into one where spot
trading gains prominence, similar to crude oil.
- Funds Seen Driving China Commodity Trade Boom Defying Slowdown. Chinese hedge funds are helping drive a commodity-derivatives
trading boom in the world’s biggest energy, grains and metals consumer
that’s defying the worst economic growth in 25 years. Trading volumes across on the Shanghai Futures Exchange, China’s
biggest commodities bourse, surged 31 percent last year while activity
on exchanges in Zhengzhou and Dalian grew by 29 and 10 percent,
respectively. The expansion, compared with a 3.5 percent increase on the
London Metal Exchange, is being driven by a growing number of
investment funds nurtured by new regulations, according to Hu Yuyue, a
professor at Beijing Technology and Business University.
Wall Street Journal:
- Islamic State Solidifies Foothold in Libya to Expand Reach. Extremist group has sent money, trainers and fighters. Islamic State leaders in Syria have sent money, trainers and
fighters to Libya in increasing numbers, raising new concerns for the
U.S. that the militant group is gaining traction in its attempts to
broaden its reach and expand its influence. In recent months,
U.S. military officials said, Islamic State has solidified its foothold
in Libya as it searches for ways to capitalize on rising popularity
among extremist groups around the...
Fox News:
- ISIS capture of Ramadi renews concerns about US troop pullout, weapons left behind. (video) The Islamic State’s capture of the Iraqi city of Ramadi is sparking
renewed criticism of Obama administration policies in the region -- from
the decision to withdraw virtually all U.S. troops in 2011 to the
current anti-ISIS strategy that relies mostly on airstrikes. The fall Sunday of Ramadi, just 70 miles from Baghdad, marks the
second time in roughly a year that the extremist group has taken control
of a major Iraqi city -- after the United States spent nearly eight
years at war in the country.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 59.5 unch.
- NASDAQ 100 futures +.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for April are estimated to rise to 1015K versus 926K in March.
- Building Permits for April are estimated to rise to 1064K versus 1039K in March.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen at Financial Stability Oversight Council meeting, Fed's
Dudley speaking, UK CPI report, US weekly retail sales reports, Goldman
Sachs Basic Materials conference, JPMorgan Homebuilding/Building
Products conference, JPMorgan Tech/Media/Telecom conference, SunTrust
Robinson Humphrey Financial Services conference, (DDD) analyst event and
the (HAE) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and real estate 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.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.66 +2.26%
- Euro/Yen Carry Return Index 141.71 -.76%
- Emerging Markets Currency Volatility(VXY) 9.38 -.32%
- S&P 500 Implied Correlation 64.86 +1.58%
- ISE Sentiment Index 148.0 +64.4%
- Total Put/Call 1.0 +20.48%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.0 +.41%
- America Energy Sector High-Yield CDS Index 1,068.0 +1.12%
- European Financial Sector CDS Index 74.41 +1.77%
- Western Europe Sovereign Debt CDS Index 22.37 +2.73%
- Asia Pacific Sovereign Debt CDS Index 59.40 +.02%
- Emerging Market CDS Index 286.62 -1.15%
- iBoxx Offshore RMB China Corporates High Yield Index 119.19 +.24%
- 2-Year Swap Spread 26.0 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -19.25 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 166.0 +6.0 basis points
- China Import Iron Ore Spot $60.65/Metric Tonne -1.08%
- Citi US Economic Surprise Index -72.4 -.8 point
- Citi Eurozone Economic Surprise Index .6 -1.3 points
- Citi Emerging Markets Economic Surprise Index -11.6 +2.4 points
- 10-Year TIPS Spread 1.88 +2.0 basis points
Overseas Futures:
- Nikkei 225 Futures: Indicating +55 open in Japan
- China A50 Futures: Indicating -134 open in China
- DAX Futures: Indicating +34 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
