Evening Headlines
Bloomberg:
- Merkel Says Weekend Talks on Greece ‘Decisive’ as Time Runs Out. German Chancellor Angela Merkel and her fellow European Union
leaders told their finance ministers to unblock Greece talks once and
for all as positions hardened around conditions the country must meet to
secure aid. In the rundown to the June 30 expiry of Greece’s euro-area bailout,
hopes were raised -- then dashed -- by Prime Minister Alexis Tsipras,
who came to Brussels with a set of proposals only to push back when more
cuts were demanded. With Greece’s stay in the euro at stake,
negotiations have picked up in frequency as a breakthrough has proved
elusive.
- Russia’s ‘Saber-Rattling’ Threatens Stability, U.S. Says. Six years after then-Secretary of State Hillary Clinton said the
Obama administration wanted to “reset” relations with Russia, the
temperature is falling instead of rising. It hasn’t plunged to Cold War levels, but despite cooperation in
fighting terrorism and seeking to curb Iran’s nuclear program, relations
between Russia and the NATO alliance have been deteriorating steadily,
and concern over further Russian moves against Ukraine and other
neighboring European states has grown steadily.
- Chinese Stock Plunge Leaves State Media Speechless. In a front-page commentary on Tuesday, the China Securities Journal
said the nation’s “liquidity bull market” was “taking a break.” Future
gains would be “slow” and driven by government efforts to reform
state-owned companies, the paper said, echoing an earlier article by the
state-run Securities Times. The takeaway is that authorities are trying to discourage speculative
bets on the highest-flying stocks, Yan said. Instead, the government
wants to steer money toward state-run companies, which tend to trade at
lower valuations.
- Morgan Stanley Says Don’t Buy the Dip as China Stock Rally Peaks. Morgan Stanley is calling the top of China’s stock rally. The brokerage predicts the Shanghai Composite Index will fall between
2 percent and 30 percent over the next 12 months, according to Jonathan
Garner, Morgan Stanley’s chief Asia and emerging market strategist. The
Shanghai Composite declined 2.7 percent at 9:48 a.m. to its lowest
level in five weeks, while the ChiNext gauge of smaller companies fell
more than 20 percent in Shenzhen from its June 3 record.
- Shanghai Volatility Spreads to U.S. as ETF Erases Gains for June. The largest U.S. exchange-traded fund tracking mainland Chinese
stocks erased its gain for the month amid the widest price swings since
January on concern the rally that pushed shares to a seven-year high is
fading. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF slumped
5.1 percent to $47.81 on Thursday, putting it on track for the first
monthly drop since January. The fund’s 30-day historical volatility
climbed to 47 percent. The selloff followed another erratic session on
the Shanghai Stock Exchange after traders sold shares purchased with
borrowed money for a third day.
- China’s Stocks Tumble to Five-Week Lows as Margin Debt Declines. Chinese stocks fell to a five-week low after traders sold shares
purchased with borrowed money for a fourth day and concern grew
valuations are too high relative to earnings growth. Technology and industrial companies, the best performers over the
past six months, led declines. East Money Information Co. plunged by the
10 percent daily limit, while China Shipbuilding Industry Co. dropped
5.8 percent. Guotai Junan Securities, China’s largest brokerage by
revenue, jumped 44 percent in its debut in Shanghai after the nation’s
biggest domestic initial share sale since 2010.
The Shanghai Composite Index tumbled 2.7 percent to 4,404.16 at 9:35
a.m., erasing this week’s gain and sending it toward the steepest
monthly loss since January 2014.
- Asian Stocks Fall to Pare Weekly Gain as Investors Weigh Greece. Asian stocks fell, trimming the regional benchmark index’s weekly
advance, as investors weighed prospects for Greece after days of talks
failed to yield a breakthrough in its debt crisis.
The MSCI Asia Pacific Index lost 0.2 percent to 149.02 as of 9:02 a.m. in Tokyo, paring this week’s gain to 1.3 percent.
- Never Mind Greece, Euro Seen Driven Toward Parity by ECB Policy. (graph) If Greece is forced to default, sell the euro. If Greece reaches a deal with its creditors, sell the euro. That’s the message from strategists including Barclays Plc and Bank
of Tokyo-Mitsubishi UFJ Ltd., who say what matters for the currency is
the European Central Bank’s bond purchases.
- Treasuries Set for Weekly Drop as Focus Moves to Fed From Greece. Treasuries headed for their first weekly decline in three weeks as
investors shifted their attention from Greece to the U.S. economy. Benchmark 10-year yields are about 10 basis points from the highest
since October after a report Thursday showed consumer spending rose the
most in almost six years in May, even as talks between Greece and its
creditors ended without agreement. Federal Reserve policy makers have
stressed the timing of the first interest-rate rise since 2006 will
depend on data, which a Bloomberg gauge shows are the strongest relative
to economist estimates in almost four months.
- Micron(MU) sales outlook disappoints as PC slump continues. Micron Technology, the biggest U.S. maker of memory chips, issued a
fiscal fourth-quarter sales forecast that fell short of analysts'
estimates on weaker demand for personal-computer components. Revenue for the period ending in August will be $3.45 billion
to $3.7 billion, the Boise, Idaho-based company said in a presentation
posted on its website. Analysts on average were projecting sales of
$4.16 billion, according to data compiled by Bloomberg.
Wall Street Journal:
- Islamic State Attacks Two Syrian Kurdish Areas. Group’s first major foray into Kobani after being routed out in January by Kurdish militias. Islamic State militants attacked two Syrian Kurdish areas in an apparent
warning to Kurdish militia fighters and their allies as they advance
toward the extremist group’s stronghold of Raqqa.
- The Political John Roberts. The Chief Justice again rewrites ObamaCare in order to save it. For the second time in three years, Chief Justice John Roberts has
rewritten the Affordable Care Act in order to save it. Beyond its
implications for health care, the Court’s 6-3 ruling in King v. Burwell
is a landmark that betrays the Chief’s vow to be “an umpire,” not a
legislator in robes. He stands revealed as a most political Justice. The
black-letter language of ObamaCare limits insurance subsidies to “an
Exchange established by the State.” But the Democrats who wrote the bill
in 2010 never imagined...
Fox News:
- US intel chief calls Iran the leading terror sponsor, as nuke talks enter final phase. (video) The nation’s top intelligence official labeled Iran the leading state
sponsor of terrorism and called the regime -- and its proxy Hezbollah
-- the single most important factors keeping Syrian dictator Bashar
Assad in power, according to a letter obtained by Fox News. The warning comes as Obama administration officials enter the final
phase of nuclear negotiation with Tehran. But despite the diplomatic
track, Director of National Intelligence James Clapper assailed the
country’s role in destabilizing the region in the letter to Republican
senators.
MarketWatch.com:
CNBC:
- Nike(NKE) earnings swoosh past estimates; shares rise. Nike delivered quarterly earnings and revenue that topped analysts' expectations on Thursday. The sports apparel retailer posted fiscal
fourth-quarter earnings of 98 cents per share and $7.78 billion in
revenue. Wall Street had forecast that the company would report 83 cents
a share on $7.69 billion in revenue, according to a consensus estimate
from Thomson Reuters.
Zero Hedge:
Business Insider:
Telegraph:
Australian Financial Review:
- HSBC dumps China PMI as Beijing tightens information flows. For those on wanting to understand China there is one economic statistic more closely watched than any other.
It's the Flash Purchasing Managers Index - or PMI - which is released in the last week of every month. The
index claims to be the "earliest available indicator" of activity in
China's giant manufacturing sector and it moves markets from
Shanghai to Sydney, while providing a talking point for pundits. For
the last five years the index has been sponsored by HSBC, giving the
bank an easy stream of publicity and allowing it to brand itself as an
authority on the Chinese economy. But HSBC's sponsorship
will finish at the end of this month after the bank did not renew its
global agreement with the survey's private sector compiler, Markit. The
bank will end its sponsorship of all 23 emerging market PMI's produced
by Markit. A spokeswoman for HSBC confirmed its exit to AFR Weekend
and said the bank would refocus its marketing dollars towards other
projects. She denied there was anything more to it than the bank moving
on after "five successful years".
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.5 -1.25 basis points.
- Asia Pacific Sovereign CDS Index 57.50 -.5 basis point.
- NASDAQ 100 futures -.16%.
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Final Univ. of Mich. Consumer Sentiment for June is estimated at 94.6 versus a prior estimate of 94.6.
Upcoming Splits
Other Potential Market Movers
- The Fed's George speaking, Eurozone M3 Money Supply and the final publishing of the reconstituted Russell indices could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and finaincial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
