Bloomberg:
- Merkel Stamps Out Optimism on Greece After Tsipras Talks. (video) German Chancellor Angela Merkel said that greater efforts are needed
to unlock bailout funds for Greece after late-night negotiations with
Greek Prime Minister Alexis Tsipras failed to yield any sign of a
breakthrough. With time running out for a deal to free up the remaining 7.2
billion-euro ($8 billion) tranche of aid, Merkel’s discussions in Latvia
with Tsipras and French President Francois Hollande broke up in the
early hours of Friday with an agreement only to keep talking. Tsipras
talked of a resolution “soon,” whereas Merkel said there’s “a whole lot
to do.”
- Greek Banks Face Contingency Plans as Crisis Threatens. The European Commission is preparing contingency plans for the Greek
banking system in the event government leaders fail to agree to a deal
to help the indebted nation, according to two people familiar with the
talks. Officials are looking at how to manage the failure of financial firms
in Greece and other events that may cause widespread investor losses,
said one of the people, who asked not to be identified as the
discussions are private.
- German Business Confidence Declines as Risks Cloud Outlook. German business confidence fell for the first time in seven months
in May, signaling caution over the growth outlook for Europe’s largest
economy. The Ifo institute’s business climate index dropped to 108.5 from
108.6 in April. That still beat the median estimate of 108.3, and an
earlier report showed German capital investment increased at the fastest
pace in a year last quarter.
- Brazil Boosts Taxes on Banks Before Rolling Out Budget Cuts. Brazil is stepping up efforts to shrink a widening budget gap by raising taxes on banks and preparing to freeze spending. Banks, brokerages and credit-card processors among others will pay a
20 percent tax on profit, up from 15 percent, according to a
presidential decree published in the official gazette on Friday. The
measure, which becomes effective Sept. 1, will boost tax collection by
about 750 million reais ($244 million) in 2015 and 3.8 billion reais
next year, according to the tax agency.
- JPMorgan(JPM): Something Has Gone Wrong With the Global Consumer. What to make of a global slowdown in retail sales. "It would be difficult to overstate the recent downside surprise in
global consumer spending," writes JPMorgan Senior Global Economist
Joseph Lupton. Though retail sales
in the U.S. have missed expectations for five consecutive months,
disappointing consumer spending is far from just a made-in-the-USA
story, he observes.
- European Stocks Near Three-Week High as DAX Falls With Euro Up. European stocks were little changed, posting their biggest weekly gain since mid-April.
The Stoxx Europe 600 Index slipped less than 0.1 percent to 407.74 at
the close of trading in London, trimming a decline of as much as 0.4
percent.
- Iron Ore Completes Second Weekly Loss as Producers Expand Supply. Iron ore capped a second weekly decline on concern that rising
output from the world’s largest producers will exceed demand from China
and widen a global surplus. Ore with 62 percent content delivered to Qingdao dropped 2.2 percent
this week to $59.96 a dry metric ton, according to Metal Bulletin Ltd.
While the price jumped 3.5 percent on Friday, it remains 69 percent
below a record $191.70 in 2011.
- Risky Loans Shunned by Banks Are Booming in Wall Street's Shadow. Regulators’
efforts to rein in Wall Street’s biggest banks are in danger of
backfiring. Guidelines aimed at strengthening lending standards are
shifting the market for high-yield credit to less-supervised loan funds,
raising alarm this week from the Financial Stability Oversight Council.
Because the
funds don’t have depositors, some of their money comes from Wall Street
banks, leaving systemically important institutions exposed to risks
regulators hoped to avoid.
- Inflation Closer to Fed’s Goal After Core Prices Advance. The U.S. cost of living excluding what households pay for food and
fuel climbed more than forecast in April, indicating inflation is
gravitating toward the Federal Reserve’s goal. The core consumer-price index rose 0.3 percent, the biggest gain
since January 2013 and reflecting broad-based increases, a Labor
Department report showed Friday. In the last three months, core
inflation advanced an annualized 2.6 percent, the most since August
2011. Including food and fuel, the gauge was up a more moderate 0.1
percent as prices fell at grocery stores and gas stations. Costs may continue to firm as fuel expenses rebound, apartment rents climb and health-care services become more expensive.
Wall Street Journal:
- Huatai Collects More Fuel for China Stock-Market Fire. Huatai Securities’ Hong Kong IPO continues a barrage of brokerage fundraising that’s looking long in the tooth. It’s hard not to look at all the cash raised by brokers, along with the
massive increase in margin lending provided by those brokers, and
conclude there’s a self-reinforcing phenomenon at work. This week, for
the first time, margin lending outstanding breached 2 trillion yuan
($322 billion)—five times the level of a year ago.
Fox News:
- State Department releases 1st batch of Clinton emails. (video) The State Department has released 296 emails from Hillary Clinton's
tenure as secretary of state, in the first batch of emails to be made
public. The emails, just a fraction of what the department has in its
custody, show internal communications before and after the Benghazi
terror attack in 2012. One email to Clinton, regarding one of then-U.N.
Ambassador Susan Rice's TV appearances the Sunday after the attack,
appeared to praise her for reflecting their "view" that the attack was
"spontaneous."
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Funny times in China stocks, joke unclear: James Saft. Many
things about China stocks are funny, but probably not right now to
investors in Hanergy Thin Film Power Group, Goldin Financial Holdings or
Goldin Properties Holdings. The
three Hong Kong-listed shares, which had all increased in price
several-fold in recent months, tumbled over the past two trading days in
spectacular fashion. Solar company Hanergy's market value melted by $19
billion in scarcely more minutes on Wednesday, tumbling 47 percent on
no news before the stock was suspended. Thursday brought similar tumbles
in the linked Goldin companies, which fell more than 40 percent each,
slashing their value by $23 billion. Goldin Financial is a short-term
commercial lender but has wide-ranging property interests, while Goldin
Properties is a developer.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Construction -1.13% 2) Coal -1.10% 3) Road & Rail -.84%
Stocks Falling on Unusual Volume:
- OTIC, QUNR, JMEI, TFM, FL, MRVL, DL, CCIH, ROST, HABT, REX, FLT, ESPR, GPS, SNPS, CMCM, DLTR, SYT, PTCT, CHTR, BT, ANFI, SDRL, QSR and NTES
Stocks With Unusual Put Option Activity:
- 1) XPO 2) HPQ 3) FDX 4) EWZ 5) XLP
Stocks With Most Negative News Mentions:
- 1) GPS 2) XOM 3) PAA 4) LL 5) GDP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +.39% 2) Computer Hardware +.35% 3) REITs +.28%
Stocks Rising on Unusual Volume:
- RWLK, DGX, CTRP, YOKU, DANG, EXPE, SRPT, HPQ and LGF
Stocks With Unusual Call Option Activity:
- 1) LGF 2) HPQ 3) BRCD 4) ARNA 5) PAA
Stocks With Most Positive News Mentions:
- 1) INTU 2) DE 3) CTRP 4) EXPE 5) CPB
Charts:
Evening Headlines
Bloomberg:
- Greek Talks Break Up in Riga as Earlier Optimism Evaporates. Late-night negotiations between the Greek,
French and German government leaders ended without any sign of a
breakthrough that will unlock bailout funds and ensure Greece’s
future in the euro region. With time running out for a deal to free up the remaining
7.2 billion-euro ($8 billion) tranche of aid, talks between
Prime Minister Alexis Tsipras, President Francois Hollande and
Chancellor Angela Merkel broke up shortly before 1 a.m. on
Friday in the Latvian capital Riga with the three agreeing only
to stay in close contact.
- The Only Three People Worth Listening to on Greece. The trick, say economists from ING Diba in Frankfurt to Berenberg Bank
in London, is to focus on the people who exercise true power over the
euro region’s bond and currency markets right now: Greek Prime Minister
Alexis Tsipras, German Chancellor Angela Merkel and European Central
Bank President Mario Draghi.
- Bonds Head for Fifth Weekly Loss in Longest Decline Since 2013. Bonds around the world headed for a fifth weekly decline, the
longest run of losses in almost two years, as investors stuck to bets
for the Federal Reserve to increase interest rates and as oil prices
advanced. The debt-market retreat that started in Europe in April extended into
May on concern rising crude costs will lead to faster inflation. While
U.S. economic data have been mixed, the Fed will still raise borrowing
costs this year or early in 2016, a Morgan Stanley index shows. Europe
and Japan are both showing signs of growth.
- Yet Another Ghost Town in China Shows Extent of Regional Debt Crisis. China’s
Ordos city, where towers that sprang from Inner Mongolian farmland now
sit empty, is showing the hangover has just begun from a decade-long
building boom. Ordos City Huayan Investment Group Co., a developer
whose chairman headed a group of livestock researchers, is at high risk
of defaulting on 1.2 billion yuan ($194 million) of bonds if investors
exercise an option to offload them in December, said Haitong Securities
Co. and China Investment Securities Co. Also in the
city, Inner Mongolia Hengda Highway Development Co. asked noteholders to
defer rights to sell back private securities in April due to cash
shortages, according to China International Capital Corp.
- China’s Sea Aggression to Bring Vietnam, U.S. Closer, Says Osius. China’s territorial maneuvers in the contested South China Sea are
bringing its Communist neighbor Vietnam and the U.S. closer together,
according to the new ambassador to Vietnam, Ted Osius. In his first
interview with a Western news organization since
arriving in December, Osius said human rights concerns remain an
obstacle to even deeper ties that may lead to the lifting of a ban on
the sale of lethal weapons to Vietnam. Even so, the former war foes are
holding more high-level talks, particularly over how to manage tensions
with China, he said in an interview on Thursday in Hanoi.
- China Beverage Bottle Maker Sees Big Uncertainty Repaying Bond. A beverage bottle maker in China has said there’s big uncertainty
about whether it can pay a bond maturing next week as a slowdown in the
world’s second-biggest economy persists. Zhuhai Zhongfu Enterprise Co. said the company’s special account for
debt payments has 174.152 million yuan ($28.1 million) and needs 447
million yuan to make the full repayment, according to a May 21 exchange
statement. Its three-year 590 million yuan of 5.28 percent bonds come
due May 28.
- Hong Kong Investors Want More Oversight After $35 Billion Wipeout. After $35 billion in market value was erased from three Hong
Kong-listed companies over two days, investors are asking if the city’s
regulator should have done more to prevent the sudden selloff.
Goldin Financial Holdings Ltd. and Goldin Properties Holdings Ltd.,
controlled by billionaire Pan Sutong, plunged more than 40 percent
Thursday. A day earlier, Hanergy Thin Film Power Group Ltd. tumbled 47
percent in 24 minutes before trading in the Chinese solar company’s
shares was suspended. The stocks,
which had surged at least 500 percent in the 12 months before the rout,
can also be bought and sold by mainland investors through an exchange
link.
- Asian Stocks Track U.S. Gain as Mixed Data Spur Fed Rate Bets. Asian stocks rose, with the regional benchmark index paring its
weekly drop, after U.S. shares rose to records as mixed economic data
fueled bets the Federal Reserve won’t rush to raise interest rates.
The MSCI Asia Pacific Index added 0.2 percent to 153.09 as of 9:01
a.m. in Tokyo, on course for a 0.1 percent retreat this week.
- OPEC Seen Unyielding in Battle With Shale for Oil-Market Share. OPEC will stick with the strategy of favoring market share over
prices when it meets next month because rival producers are already
starting to buckle. All but one of the 34 analysts and traders surveyed by Bloomberg said
the Organization of Petroleum Exporting Countries will maintain its
daily production target of 30 million barrels when it meets in Vienna on
June 5.
Wall Street Journal:
- Health Insurers Seek Hefty Rate Boosts. Proposals set the stage for debate over federal health law’s impact. Major insurers in some states are proposing hefty rate boosts for
plans sold under the federal health law, setting the stage for an
intense debate this summer over the law’s impact. In New Mexico,
market leader Health Care Service Corp. is asking for an average jump of
51.6% in premiums for 2016. The biggest insurer in Tennessee, BlueCross
BlueShield of Tennessee, has requested an average 36.3% increase. In
Maryland, market leader CareFirst BlueCross BlueShield wants to raise
rates 30.4% across its products. Moda Health,..
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Evening Recommendations
Piper Jaffray:
- Rated (HRB) Overweight, target $38.
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 104.25 -1.75 basis points.
- Asia Pacific Sovereign CDS Index 58.25 -1.25 basis points.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The CPI for April is estimated to rise +.1% versus a +.2% gain in March.
- The CPI Ex Food and Energy for April is estimated to rise +.2% versus a +.2% gain in March.
- Real Avg. Weekly Earnings YoY.
Upcoming Splits
Other Potential Market Movers
- The BoJ rate decision, Germany IFO report, (CHK) annual meeting and the (PLCE) annual 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: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.25 -4.89%
- Euro/Yen Carry Return Index 140.66 +.03%
- Emerging Markets Currency Volatility(VXY) 9.29 -.54%
- S&P 500 Implied Correlation 60.81 -1.44%
- ISE Sentiment Index 100.0 -25.93%
- Total Put/Call .93 +12.05%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.45 -1.31%
- America Energy Sector High-Yield CDS Index 1,106.0 +1.378%
- European Financial Sector CDS Index 71.69 -2.17%
- Western Europe Sovereign Debt CDS Index 21.68 -.89%
- Asia Pacific Sovereign Debt CDS Index 58.71 -1.19%
- Emerging Market CDS Index 282.32 -2.15%
- iBoxx Offshore RMB China Corporates High Yield Index 119.57 +.09%
- 2-Year Swap Spread 26.50 +.5 basis point
- TED Spread 27.0 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -19.25 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- Yield Curve 161.0 -6.0 basis points
- China Import Iron Ore Spot $57.91/Metric Tonne +1.38%
- Citi US Economic Surprise Index -65.3 -1.0 point
- Citi Eurozone Economic Surprise Index -11.70 -5.5 points
- Citi Emerging Markets Economic Surprise Index -13.6 -.3 point
- 10-Year TIPS Spread 1.87 -3.0 basis points
Overseas Futures:
- Nikkei 225 Futures: Indicating +53 open in Japan
- China A50 Futures: Indicating +51 open in China
- DAX Futures: Indicating +12 open in Germany
Portfolio:
- Higher: On gains in my tech/retail sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
