Bloomberg:
- Iran Leader Says He Won’t Allow Nuclear Checks at Military Sites. Iran’s supreme leader said international inspectors won’t get access
to military complexes under any nuclear deal, nor be allowed to
interview Iranian scientists, a stance at odds with those taken by the
nation’s negotiators. “We have said that we will not allow foreigners to carry out
inspections of any military sites,” Ayatollah Ali Khamenei said at a ceremony
for army graduates. “I will not allow foreigners to interview, which is
tantamount to interrogation, the prominent beloved scientists and sons
of this nation.” Khamenei’s comments contradict both his own envoys to nuclear talks
with a group of world powers and a U.S. State Department “fact sheet”
published last month. That document stipulated that Iran would be
required to grant the United Nations nuclear agency access to any
“suspicious sites.”
- Greece, Creditors Delve Into Details as Deadline Looms. Greece delved into detailed proposals with creditors as some
European policy makers struck an increasingly optimistic tone that a
deal to unlock bailout aid can be reached. An agreement is possible in the coming weeks following progress this
month, European Union Economic and Monetary Commissioner Pierre
Moscovici told the French Senate Wednesday, the day after German
Chancellor Angela Merkel said Greece had until the end of the month to
reach a deal.
- Takeover-Fueled Junk Borrowing Hits Six-Year High in Europe. Europe’s junk-rated companies are raising funds for mergers at the fastest pace in at least six years. Buyout
deals accounted for 61 percent of the almost 24 billion euros ($26.6
billion) of leveraged loans issued this year, the biggest proportion
since the same period in 2009, according to S&P Capital IQ Leveraged
Commentary & Data. Companies are also funding deals in the bond
market, where sales are set for a record, according to Fitch Ratings.
- Portugal Sells Debt With a Negative Yield for the First Time. Portugal sold debt securities with a negative yield for the first
time as the European Central Bank’s bond-purchase program helps to drive
down borrowing costs. The country’s debt agency sold 300 million euros ($333 million) of
bills due in November 2015 at an average yield of minus 0.002 percent.
That compares with an average yield of 0.047 percent at a previous
auction on March 18. A negative yield means investors buying the
securities now will get less back when the debt matures than they paid.
- Euro’s Plunge Reignites Calls for Parity on ECB Bond-Buying Plan. The European Central Bank’s pledge to front-load its bond buying has
given hope to euro bears frustrated by the currency’s sharpest rally in
almost five years. In less than three days, the euro has tumbled 3 percent versus the
dollar, erasing a third of its gains since mid-March. The cost of
protecting against further declines using options jumped by the most in
four months after ECB Executive Board member Benoit Coeure said on
Monday that the central bank will bring forward some of its monthly bond
purchases before an anticipated summer lull.
- Burberry Lowers Outlook as China Shoppers Shun Hong Kong. (video) Burberry Group Plc, the British maker of $1,895 trenchcoats, lowered
its earnings forecast after the strong pound and decelerating sales in
Hong Kong weighed on last year’s profit, sending the shares down the
most in seven months. Earnings in the period through March 2016 will be about 40 million
pounds ($62 million) less than previously anticipated because of
currency swings, London-based Burberry said Wednesday. Adjusted pretax
profit fell 1 percent to 455.8 million pounds last fiscal year, the
first decline since 2009.
- European Stocks Extend Three-Week High as Altice, UBS Advance. A jump in telecommunication shares and banks pushed European stocks up for a third day. Altice SA climbed 12 percent on deals
activity, while Vodafone Group Plc rose 5.4 percent after Liberty
Global Plc Chairman John Malone said a tie-up with the U.K. phone
company would be a “great fit”
for his cable empire. UBS Group AG gained 3.2 percent and Barclays Plc
advanced 3.4 percent after agreeing to pay fines to settle probes into
interest-rate rigging.
The Stoxx Europe 600 Index rose 0.4 percent to 406.42 at the close of
trading in London, after falling as much as 0.3 percent earlier.
- Secret Data Collection on Innocent Americans Allowed Under Bill. A bill to limit widespread spying by the National Security Agency
would continue to allow the U.S. to secretly obtain large amounts of
data on innocent Americans. Senate leaders ended a standoff Tuesday by agreeing to vote on a
House-passed bill that would prohibit the NSA from collecting bulk
records while renewing three U.S. spy programs set to expire in two
weeks.
- Airline Rally Unwinding as American Air Spurs Price War Selloff. Turns out cheap oil isn’t always good for airlines. U.S. carriers sank the most in seven months amid signs that a year of
lower fuel costs has left them poised to ramp up competition for
customers with cut-rate fares and more routes. Southwest Airlines Co. dropped 7.5 percent to $37.84 at 1:20 p.m. in
its biggest drop in three years, while American Airlines Group Inc.
tumbled 6.4 percent to $44.80 in its worst day since emerging from
bankruptcy in 2013. Airline stocks have risen at twice the rate of the
Standard & Poor’s 500 Index in the past year.
Wall Street Journal:
- Germany’s Schäuble Doesn’t Rule Out Greek Default. Finance minister says election of left-wing party clouds outlook; also wants to ‘think together’ with U.K. on EU.
Germany’s finance minister said he couldn’t rule out a Greek default, a
stance that will add pressure on Athens as negotiations over
much-needed financing enter their final stretch. Asked whether he would
repeat an assurance he gave in late 2012 that Greece wouldn't default,
Wolfgang Schäuble told The Wall Street Journal and French daily Les
Echos that “I would have to think very hard before repeating this in the
current..
Fox News:
CNBC:
- Fed sees weakness as 'transitory,' all but rules out June hike: Minutes. Federal Reserve officials at their April meeting mostly brushed
aside the wobbly start the U.S. economy has had in 2015, attributing the
lack of growth to "transitory" factors that will abate soon. Meeting minutes show a Fed Open Market Committee
with little concern about growth, even though they detailed a laundry
list of weak spots that included industrial production, housing and
investment. Gross domestic product grew just 0.2 percent in the first
quarter—a number likely to be revised to a negative—while the Atlanta
Fed is tracking second-quarter growth at just 0.7 percent.
ZeroHedge:
Business Insider:
Reuters:
- Greece cannot make June 5 IMF payment without deal - lawmaker. Greece
will not be able to make a payment to the International Monetary Fund
that falls due on June 5 without a deal with its international lenders,
the government's parliamentary speaker said on Wednesday. Athens
faces several payments totalling about 1.5 billion euros (1 billion
pounds) to the IMF next month and is in talks with the European Union
and the International Monetary Fund to clinch a cash-for-reforms deal
before it runs out of money.
Style Underperformer:
Sector Underperformers:
- 1) Airlines -3.75% 2) Road & Rail -1.13% 3) Banks -.75%
Stocks Falling on Unusual Volume:
- DL, KEYS, AAL, VSAT, LUV, SAVE, CMCM, NDSN, INSY, IMH, LOW, NCLH, UAL, DAL, LOCO, JBLU, RYAAY, TEDU, RSPP, NHTC, CSIQ, QIHU, TTWO, CHTR, RAVN and HCLP
Stocks With Unusual Put Option Activity:
- 1) LUV 2) HUM 3) ADI 4) BBY 5) LOW
Stocks With Most Negative News Mentions:
- 1) STI 2) LUV 3) FITB 4) UNP 5) JPM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +2.31% 2) Tobacco +.63% 3) Oil Service +.59%
Stocks Rising on Unusual Volume:
- SRPT, MOMO, GNCA, XNET, DY, CVC, PBY, UVV, AEO, WBAI, TWC, SHAK, HRL and PII
Stocks With Unusual Call Option Activity:
- 1) ADI 2) TSN 3) SRPT 4) ACHN 5) WEN
Stocks With Most Positive News Mentions:
- 1) SRPT 2) AEO 3) HRL 4) TGT 5) JCI
Charts:
Evening Headlines
Bloomberg:
- Greek Conundrum Puts ECB in Tight Spot as Bailout Talks Progress. European Central Bank policy makers will discuss Greek bank aid on
Wednesday in a chore that is getting more uncomfortable every week. The Governing Council will meet in Frankfurt to debate whether to
tighten rules on Greek access to Emergency Liquidity Assistance as the
country veers toward default. At the same time, officials are well aware
their decision could worsen the political crisis just as bailout talks
show signs of progress.
- Buyer-Beware Guide to Emerging-Market Debt, From Brazil to China. As the U.S. prepares to start raising interest rates for the first
time in almost a decade, speculation is brewing that emerging-market
corporate borrowers could be among the hardest hit. The concern
stems largely from the growth of the market: There's $1.3 trillion worth
of developing-nation dollar bonds today. Five years ago, that figure
was just $444 billion. With so many new names tapping the market, the
argument goes, surely some of them must be suspect. Throw in the
weakening of economies across much of Latin America, Asia and Eastern
Europe -- slowdowns that will cut into companies' sales and government
tax revenue -- and the worries only mount. Not that anyone is
expecting a full-blown crisis. Emerging-market debt has actually held up
well over the past month, preserving gains this year of 5 percent, as
the global bond market swooned. Still, investors and analysts are poking
around in search of the industries that will be hurt the most by rising
borrowing costs. Here's a quick look at some of their findings:
- Asian Stocks Rise as Yen Weakness Spurs Japanese Share Gains. Asian stocks rose, with a weaker yen boosting Japanese shares, after
data showing U.S. housing starts surged to a seven-year high
strengthened the case for an interest-rate increase this year.
The MSCI Asia Pacific Index gained 0.2 percent to 153.41 as of 9:01 a.m. in Tokyo.
- Leveraged-Loan Buyers Pinched by Shrinking Yields in Supply Drop. Investors who purchase risky corporate loans are being squeezed by
borrowers that are taking advantage of a supply shortage to cut rates on
their existing debt, sending yields to their lowest in almost a
year-and-a-half. Yields have fallen to 4.6 percent from more than 6 percent at the
beginning of 2015 as borrowers from PetSmart Inc. to the owner of Burger
King and Tim Hortons reduced the interest they pay, according to data
compiled by Bloomberg and Standard & Poor’s Capital IQ Leveraged
Commentary & Data. Companies are seeking to cut rates on more than
$29 billion of loans this month, the most since at least 2013, Bloomberg
data show.
- SEC Said to Propose That Mutual Funds Disclose Risk of Rate Rise. The U.S. Securities and Exchange Commission is set to propose a
requirement that mutual-fund companies report how vulnerable their bond
portfolios are to interest-rate changes, two people familiar with
the
matter said. The proposal, which the five-member commission is scheduled
to vote on Wednesday, is among the agency’s first moves to address
regulators’ concerns that many bond funds could face steep losses if the
Federal Reserve’s first interest-rate hike in almost seven years forces
them to sell assets quickly.
- Yellen Says Regulators Ready to Act as Panel Cites Risks. Federal Reserve Chair Janet Yellen said regulators will take steps
to address risks to financial stability as officials cited high-speed
trading and clearinghouses as potential threats. Yellen, speaking Tuesday at a meeting of the Financial Stability
Oversight Council, focused on clearinghouses, platforms where swaps
transactions are cleared and settled. The Fed will work with other
regulators to evaluate whether rules and risk-management practices are
strong enough, she said.
Wall Street Journal:
- Hillary Clinton’s State Department Staff Kept Tight Rein on Records. Aides scrutinized, sometimes blocked release of documents requested under public-records law. When Hillary Clinton was secretary of state, her staff scrutinized
politically sensitive documents requested under public-records law and
sometimes blocked their release, according to people with direct
knowledge of the activities. In one instance, her chief of staff,
Cheryl Mills, told State Department records specialists she wanted to
see all documents requested on the controversial Keystone XL pipeline...
- Theft of Debit-Card Data From ATMs Soars. Thieves are stealing information to make counterfeit plastic.
- White House Threatens to Veto Trade Bill Over Currency Measure. Fight
heats up over currency-manipulation amendment to fast-track bill. The
White House on Tuesday threatened to veto a crucial trade bill if it
contains legislation with binding punishments for currency manipulation,
the main point of contention between President Barack Obama and
congressional critics of his trade policy.
- Who Is Sid Blumenthal? The many roles of Hillary’s secret diplomatic adviser.
Fox News:
- Ramadi refugees trapped on road to Baghdad as Shias prepare to retake city. (video) A full-blown humanitarian crisis has developed from ISIS takeover of
Ramadi, as an estimated 25,000 Iraqi refugees are now making their way
east toward Baghdad, seeking food and shelter wherever they can and
facing the prospect of being blocked from the capital city amid fears
their ranks could include militants. The United Nations and other aid agencies were handing out food,
water and medical supplies along the 60-mile route between the cities,
but the situation was worsening amid dwindling supplies and reports the
Iraqi army was blocking the refugees from reaching the safety of
Baghdad.
Zero Hedge:
Business Insider:
Financial Times:
- Regulators warn of cyber threat to financial stability. US
regulators are increasingly concerned about the threat that cyber
attacks pose to financial stability after assaults on Sony Pictures and
Target highlighted the proliferating range of techniques used by digital
raiders.
Evening Recommendations
BMO:
- Raised (LC) to Overweight, target $23.
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 59.0 -.5 basis point.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (AEO)/.12
- (CTRN)/.75
- (EV)/.60
- (HRL)/.63
- (LOW)/.74
- (SFUN)/.04
- (SPLS)/.17
- (TGT)/1.03
- (HGR)/.44
- (LB)/.60
- (NTAP)/.72
- (CRM)/.14
- (SNPS)/.63
- (WSM)/.44
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-730,000 barrels versus a -2,191,000 barrel decline the prior week.
Gasoline supplies are estimated to rise by +200,000 barrels versus a
-1,142,000 barrel decline the prior week. Distillate inventories are
estimated to rise by +120,000 barrels versus a -2,503,000 barrel decline
the prior week. Finally, Refinery Utilization is estimated to rise by
+.27% versus a -1.8% decline prior.
2:00 pm EST
- April FOMC Minutes release.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Evans speaking, weekly MBA mortgage applications report, BMO Farm
to Market conference, (VMW) conference call, (YELP) annual meeting,
(HAL) annual meeting, (NVDA) annual meeting, (MDLZ) annual meeting,
(TSS) analyst day, (ANN) annual meeting and the (FAF) investor day 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 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 Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.85 +.94%
- Euro/Yen Carry Return Index 140.69 -.81%
- Emerging Markets Currency Volatility(VXY) 9.42 +.21%
- S&P 500 Implied Correlation 62.80 -3.03%
- ISE Sentiment Index 129.0 -3.01%
- Total Put/Call 1.08 +12.5%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.45 +.08%
- America Energy Sector High-Yield CDS Index 1,079.0 +.96%
- European Financial Sector CDS Index 72.95 -5.3%
- Western Europe Sovereign Debt CDS Index 21.77 -2.25%
- Asia Pacific Sovereign Debt CDS Index 59.0 -.85%
- Emerging Market CDS Index 289.08 +.25%
- iBoxx Offshore RMB China Corporates High Yield Index 119.22 +.03%
- 2-Year Swap Spread 25.75 -.25 basis point
- TED Spread 26.75 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -19.5 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- China Import Iron Ore Spot $58.53/Metric Tonne -3.5%
- Citi US Economic Surprise Index -64.5 +7.9 points
- Citi Eurozone Economic Surprise Index -4.50 -5.1 points
- Citi Emerging Markets Economic Surprise Index -10.7 +.7 point
- 10-Year TIPS Spread 1.88 unch.
Overseas Futures:
- Nikkei 225 Futures: Indicating +118 open in Japan
- China A50 Futures: Indicating +53 open in China
- DAX Futures: Indicating -21 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/retail sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
