Evening Headlines
Bloomberg:
- Greece Warned Deal Not There Yet as G-7 Ministers Visit Dresden. The euro area’s biggest players have a message for Greece: its reform pledges aren’t worth anything until they’re laid down in black and white. As German and French officials arrived in Dresden for a meeting of Group of Seven finance chiefs, they pushed back against Greek claims that an agreement to unlock bailout funds is near. Negotiations on the economic reforms needed to release that cash have dragged on for months, raising the prospect that Greece may leave it too late to avoid a debt default.
- Carter Warns China U.S. Will Go Wherever Global Law Permits. Defense Secretary Ashton Carter delivered the strongest U.S. warning yet against China’s moves in the South China Sea, demanding a halt to land reclamation in disputed waters and vowing that the U.S. will remain Asia’s leading power “for decades to come.” Heading for a 10-day tour of the Asia-Pacific, Carter called on countries in the region to settle territorial claims with diplomacy rather than force.
- China Brokers Tighten Margin Lending Rules to Limit Rising Risks. Chinese brokerages are tightening rules for lending to stock investors to try to limit the risks from any market bust. Changjiang Securities Co. joined larger rivals GF Securities Co. and Haitong Securities Co. in increasing its margin requirement, the collateral put up by an investor when borrowing. The firm announced the increase to 80 percent from 60 percent in a statement on Wednesday.
- Australian Business Investment Falls at Double Expected Pace. Australian business investment fell twice as fast as economists predicted last quarter, signaling the central bank’s targeted transition to growth outside mining is yet to gain traction. The currency slumped half a U.S. cent. Capital spending fell 4.4 percent from the final three months of last year, data showed Thursday, compared with a median forecast for a 2.2 percent drop. Companies predicted they would invest A$104 billion ($80 billion) in the year ending June 30, 2016, a 25 percent fall from the estimate a year earlier.
- Japan’s Retail Sales Rise Less Than Forecast as Tax Weighs. Japan’s retail sales rose less than forecast in April, signaling a weak start to the second quarter for an economy that is still weighed down by last year’s sales-tax increase. Sales climbed 0.4 percent from March, when they dropped 1.8 percent, government data released Thursday showed. Economists had forecast a gain of 1.1 percent.
- Yen Drops to 12-Year Low as Yellen Builds Case for Fed Rate Rise. The yen fell to a 12-year low versus the dollar as the Federal Reserve prepares to raise interest rates, sharpening the contrast with the Bank of Japan’s unprecedented monetary stimulus. Japan’s currency weakened to 124.20 against the greenback as of 11:54 a.m. in Tokyo on Thursday. It touched 124.25, the lowest since December 2002.
- Asian Stocks Track Global Gains on U.S. Tech Rally, Greece Bets. Asian stocks rose after U.S. and European shares rallied amid gains in technology shares and optimism about a Greek debt deal. Japan’s Topix index climbed as the yen traded near an almost eight-year low against the dollar. The MSCI Asia Pacific Index added 0.3 percent to 152.47 as of 9:02 a.m. in Tokyo.
- Oil Bulls Beware, Soaring Tanker Rates Show Supply Glut Persists. A sudden surge in demand for supertankers drove benchmark charter rates 57 percent higher in the two weeks through May 20. OPEC will have almost half a billion barrels of oil in transit to buyers at the start of June, the most this year, while analysts say about 20 million barrels is being stored on ships in another indication the glut has yet to dissipate. The Organization of Petroleum Exporting Countries is pumping the most oil in more than two years, determined to defend market share rather than prices. A record cut to the number of active U.S. drilling rigs and billions of dollars of spending reductions by companies since last year’s price plunge has yet to translate into a slump in barrels produced. The world is producing about 1.9 million barrels a day more crude than it needs, according to Goldman Sachs Group Inc.
- Financial Vulnerability Haunts U.S. Families After Crisis. Five years after the recession ended, many Americans still teeter on the financial brink, barely prepared tohandle an emergency expense and aging toward retirements they haven’t saved for, a Federal Reserve report shows. About 47 percent of 5,896 respondents in the Fed’s 2014 household survey, taken last October and November, wouldn’t be able to cover an emergency $400 expense without selling something or borrowing money. While that marks an improvement from 52 percent last year, the report states that it shows many Americans to be “ill-prepared for a financial disruption.”
Wall Street Journal:
- Broadcom(BRCM) Is Latest Target of Chip Rival. Deal would value semiconductor maker at more than $35 billion. Chip maker Avago Technologies Ltd. is in advanced talks to buy rival Broadcom Corp. in a deal worth about $35 billion, the latest in a wave of takeovers for the companies that supply parts to power smartphones, tablets and other gadgets.
- Traders Pile In at the Close. End-of-day action affects costs, liquidity in stock market. The middle of the day has become awfully quiet on the U.S. stock market, as index funds and computer models push the action toward the end of the trading day.
- EPA’s Amphibious Attack An expansive new rule lets Washington regulate any creek or pothole. While retrenching abroad, the Obama Administration remains committed to expanding Washington’s footprint at home. Behold the Environmental Protection Agency’s rewrite Wednesday of the Clean Water Act that extends federal jurisdiction over tens of millions of acres of private land.
- Schoolroom Climate Change Indoctrination. In one assignment, students measure the size of their family’s carbon footprint and suggest ways to shrink it. While many American parents are angry about the Common Core educational standards and related student assessments in math and English, less attention is being paid to the federally driven green Common Core that is now being rolled out across the country. Under the guise of the first new K-12 science curriculum to be introduced in 15 years, the real goal seems to be to expose students to politically correct climate-change orthodoxy during their formative learning years. The Next Generation of Science Standards were...
Fox News:
- Pentagon says ‘live anthrax’ inadvertently shipped across US. (video) The Pentagon revealed Wednesday that "live anthrax" was shipped, apparently by accident, from a lab in Utah to as many as nine states over the course of a year. Pentagon spokesman Col. Steve Warren assured "there is no known risk to the general public" and said an investigation is under way. But precautions are being taken for potentially exposed workers in labs where the samples were sent. A U.S. official told Fox News that four people in three companies are being treated for "post-exposure" and being prescribed prophylaxis.
MarketWatch.com:
- Obamacare to add billions in insurance overhead costs, study says. Obamacare will cost insurers more than a quarter of a trillion dollars in additional administrative costs by 2022, a new study released Wednesday says. The findings published in Health Affairs magazine call for a universal single-payer system because it would reduce, rather than add, to administrative costs.
CNBC:
- Fallen Lehman chief opens real estate brokerage. Just seven years after his brokerage firm collapsed under a mountain of troubled mortgages, former Lehman Bros. Chairman and CEO Dick Fuld is back in the real estate business.
- Shake Shack(SHAK) not a great investment: Strategist. With a price-earnings multiple of more than 1,000, "you're going to have to wait 1,000 years to get any money back that you invest in the company at the current rate of earnings. It's a premium to the industry that is not warranted," he added.
Zero Hedge:
Business Insider:
Financial Times:
- More than half world’s countries now producing jihadis. More than half of the world’s countries are now producing jihadis to fill the ranks of violent Sunni terrorist organisations in the Middle East, according to a UN report. The al-Qaeda network and its schismatic rival, the Islamic State of Iraq and the Levant (Isis) have seen more than 25,000 mujahideen join them in recent years, it states, creating an “unprecedented” threat to national and international security in both the “immediate and long-term” that most governments have failed to grasp the significance of so far.
Telegraph:
- Creditors dash Greek optimism as US warns country faces an 'abyss' of a euro exit. Hopes of a draft agreement with creditors is dismissed by European officials after warnings from the White House over a Greek "accident".
Securities Times:
- More China Brokerages Tighten Margin Lending Rules. Guosen Securities raised margin requirement for stock financing on 908 stocks, citing a statement from the brokerage.
Evening Recommendations
- None of note
Night Trading
- Asian equity indices are -1.25% to +.5% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 58.5 -1.0 basis point.
- S&P 500 futures -.07%.
- NASDAQ 100 futures -.01%.
Earnings of Note
Company/Estimate
- (ANF)/-.35
- (FLO)/.30
- (FRED)/-.01
- (JKS)/.45
- (SAFM)/3.29
- (SHLD)/-2.59
- (SIG)/1.61
- (TECD)/.72
- (TITN)/-.25
- (TD)/1.11
- (AVGO)/2.00
- (DECK)/.00
- (GME)/.59
- (OVTI)/.21
- (PSUN)/-.11
- (SPLK)/-.03
- (ULTA)/.93
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 270K versus 274K the prior week.
- Continuing Claims are estimated to fall to 2200K versus 2211K prior.
10:00 am EST
- Pending Home Sales for April are estimated to rise +.9% versus a +1.1% gain in March.
11:00 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,200,000 barrels versus a -2,674,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,163,640 barrels versus a -2,774,000 barrel decline the prior week. Distillate inventories are estimated to fall by -550,000 barrels versus a -546,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.3% versus a +1.2% gain prior.
Upcoming Splits
- None of note
Other Potential Market Movers
- The Fed's Williams speaking, Fed's Kocherlakota speaking, Eurozone Business Climate report, Japan CPI/Jobless rate reports, 7Y T-Note auction, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index and the (A) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial 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.