Monday, July 20, 2015

Today's Headlines

Posted by Gary .....at 2:57 PM
Bloomberg: 
  • China Stock Resumptions Dwindle as 20% of Shares Stay Halted. A fifth of China’s stock market remains frozen as the number of companies resuming trading slows to a trickle. A total of 576 companies were suspended on mainland exchanges as of the midday break on Monday, equivalent to 20 percent of total listings, and down from 635 at the close on Friday. The halted firms are valued at an average 243 times reported earnings, compared with 164 times for all companies traded in Shanghai and Shenzhen. The ongoing suspensions are raising doubts about the sustainability of a rebound in Chinese stocks. The Shanghai Composite Index has climbed about 14 percent from its July 8 low, following a 32 percent plunge that helped erase almost $4 trillion of value. The number of companies with trading halts exceeded 1,400, or around 50 percent of listings, during the height of the rout as the government took increasingly extreme measures to shore up equities.
  • Shrinking China Trade Drags on Hong Kong to Singapore Banks. The business of financing China’s trade is shrinking, curbing what had been a fast-growing revenue stream for banks in Hong Kong and Singapore over the past decade. Since reaching a peak of about $145 billion in June last year, the value of trade loans provided by lenders in the two financial hubs has tumbled 20 percent due to the slowing Chinese economy and a slump in commodity prices, central bank data show.
  • Audi Gives $193 Million in Financial Aid to Dealers in China. Audi AG is providing 1.2 billion yuan ($193 million) in financial aid to its dealers in China as demand for luxury vehicles slows in its largest market, according to people with knowledge of the matter. The money will be paid out soon to distributors of the brand in China, according to two people familiar with the plan, who asked not to be named as the information isn’t public. The automaker also lowered its sales target for 2015 from 600,000 units to about last year’s level, the people said. It delivered 578,932 vehicles in China including Hong Kong last year.
  • Greeks Line Up as Banks Reopen in Start to Return to Normalcy. Greeks lined up outside banks after they reopened Monday with basic services, three weeks after closing to stop a rush on withdrawals after Prime Minister Alexis Tsipras called a referendum over spending cuts. “I’ll now be able to start paying bills again as I don’t have phone or Internet banking,” said Diana Sotiropoulou, 60, a retired restaurant owner who was waiting in a line outside a bank in Varkiza, outside Athens, to make a transfer to pay a power bill. “Before, there was no way I was going to wait in line for four days at an ATM to withdraw 240 euros ($260) to pay the bill.”
  • Brazil in Crisis Means 93 Company Downgrades Just the Beginning. Brazil is keeping credit-rating companies busy. Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have dished out 93 corporate downgrades since Jan. 1, already more than in any full year since 2002, and they may not be done. Speculation is mounting that Moody’s -- which met with officials in Brazil last week -- will lower the country’s rating, a move that would trigger cuts for businesses with close ties to the government, such as state-controlled companies and banks. 
  • Confidence Plunges in Canada as Officials Quibble Over R-Word. All this talk about a recession is making people nervous. A weekly gauge of Canadian consumer sentiment dropped to a four-month low last week after the Bank of Canada said the nation’s economy “contracted modestly” in the first half, sparking a debate among policy makers and economists about whether the shrinkage qualifies as a recession. 
  • Emerging-Market Gold Producers Slide as Lira Drops Most in Month. Emerging-market stocks fell for a second day as a slump in precious metals sent South African gold producers tumbling. Turkey’s lira slid the most in a month amid speculation the country will hold early elections. Zijin Mining Group Co. lost 6.3 percent in Hong Kong and AngloGold Ashanti Ltd. sank to a record in Johannesburg as gold plunged to the lowest since 2010. A gauge of technology firms declined for the first time in four days. OAO AK Bars Bank started investor meetings for what may be Russia’s biggest Eurobond sale since November. The lira depreciated 1.7 percent versus the dollar as Brazil’s real retreated 0.5 percent. The MSCI Emerging Markets Index decreased 0.8 percent to 934.59 at 2:13 p.m. in New York.
  • Europe Stocks Climb for Ninth Day in Longest Streak Since 2014. Takeover activity and receding concerns over Greece sent European stocks up for a ninth day. OCI NV rallied 14 percent after CF Industries Holdings Inc. said it’s in preliminary talks about a combination with some businesses of the Dutch maker of fertilizers. Aveva Group Plc jumped 27 percent after Schneider Electric SE agreed to merge its software business with the U.K. company. Pearson Plc trimmed a loss of as much as 3.2 percent after people familiar with the matter said it’s exploring a sale of the Financial Times. The Stoxx Europe 600 Index rose 0.3 percent to 406.8 at the close of trading in London.
  • Crude Falls Below $50 for First Time Since April on Glut Concern. Crude slumped below $50 a barrel in New York for the first time in more than three months on speculation that Iranian shipments will climb, extending a global glut. West Texas Intermediate decreased as much as 1.9 percent. Iran will focus on regaining oil sales it lost due to sanctions regardless of the impact on prices, Oil Minister Bijan Namdar Zanganeh said in Tehran Monday. U.S. crude stockpiles remain almost 100 million barrels above the five-year average for this time of the year, Energy Information Administration data show.
  • Fed’s Bullard Sees More Than 50-50 Chance of September Rate Rise. There’s a more than 50-50 chance the Federal Reserve will raise interest rates in September, St. Louis Fed President James Bullard said. “The economy is much closer to normal today than it’s been in quite a while, certainly over the last five years,” Bullard said Monday in an interview on Fox Business Network. “The main problem is we are in emergency settings for monetary policy.”
  • Yellen's 7 Reasons to Expect a 2015 Rate Increase. 
  • Obama Adviser Obstfeld Appointed as IMF’s Next Chief Economist. A White House adviser who co-wrote an international economics textbook with Nobel laureate Paul Krugman was named the next research director of the IMF. Maurice Obstfeld, appointed a member of President Barack Obama’s Council of Economic Advisers in June 2014, will succeed Olivier Blanchard in September as the International Monetary Fund’s chief economist, the Washington-based institution said Monday in an e-mailed statement.
  • AshleyMadison.com Hack Threatens Millions of Would-Be Adulterers. (video) Adultery website AshleyMadison.com has been hacked, potentially exposing names, addresses, and sexual preferences of millions of would-be cheaters just as the site’s owner was preparing to go public. Avid Life Media Inc., the Toronto company that runs the site with the tagline “Life is short, Have an affair,” said Monday that hackers had gained access to its systems and that it was working with police to investigate the breach. A group or individual called The Impact Team has claimed responsibility for the attack, and has already leaked maps of company servers, staff information, and company bank accounts, according to cyber-security blog Krebs on Security. In a message overlaid on the AshleyMadison homepage, the hackers threatened to publish the stolen information unless the site and its peer EstablishedMen.com are taken offline.
Wall Street Journal:
Fox News: 
  • UN Security Council endorses Iran deal, Tehran diplomat lashes out at US. (video) The U.N. Security Council on Monday unanimously endorsed the Iran nuclear deal, though the show of support was interrupted shortly afterward by a war of words between the American and Iranian ambassadors. Iran's ambassador lashed out at the U.S. mere moments after the vote, in retaliation for U.S. Ambassador Samantha Power bringing up Tehran's human rights record.
ZeroHedge:
Telegraph:
Handelsblatt:
  • Germany's Krichbaum Says Greek Exit Still Option. German lawmaker Gunther Krichbaum, chairman of the European Affairs committee in the lower house of parliament, says he still considers Greece's exit from the euro region an option because he won't accept a deal on a third bailout package at any price, citing an interview. Debt forgiveness for Greece out of the question as long as Greece is a euro member, he said. Says he doubts Greece's debt is sustainable.
Xinhua:
  • Carmakers Cut Prices at China Show to Clear Inventory. 12th China Changchun International Automobile Expo ended Sunday racked up 5.7 billion yuan in vehicle sales, citing organizers. 70% of cars on display priced below market.
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Bear Radar

Posted by Gary .....at 1:14 PM
Style Underperformer:
  • Small-Cap Value -.62%
Sector Underperformers:
  • 1) Gold & Silver -7.8% 2) Internet -4.42% 3) Disk Drives -2.03%
Stocks Falling on Unusual Volume:
  • MSB, KODK, NEWP, HMSY, AFMD, ITCI, SUN, VNR, CALM, VTL, GOOG, RGLD, HRTG, FNV, NEM, GG, NEOT, PSXP, GOLD, SLW, MACK, ETSY, HCI, GPC, WHR, OPHT, MEMP, TERP, BOX, HTZ, CF and EPZM
Stocks With Unusual Put Option Activity:
  • 1) CPN 2) AKS 3) HOG 4) DHI 5) TSO
Stocks With Most Negative News Mentions:
  • 1) YELP 2) PBR 3) Z 4) URI 5) XOM
Charts:
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Bull Radar

Posted by Gary .....at 12:57 PM
Style Outperformer:
  • Large-Cap Growth +.32%
Sector Outperformers:
  • 1) Restaurants +.97% 2) Gaming +.59% 3) Banks +.53%
Stocks Rising on Unusual Volume:
  • VSLR, LII, SWI, ANTH, SCMP, HAS, GPRO, SCTY, HW and EBAY
Stocks With Unusual Call Option Activity:
  • 1) SE 2) EXEL 3) GDXJ 4) JNUG 5) APOL
Stocks With Most Positive News Mentions:
  • 1) HAS 2) ADT 3) AMZN 4) LMT 5) BMY
Charts:
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Morning Market Internals

Posted by Gary .....at 11:01 AM
NYSE Composite Index:
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Sunday, July 19, 2015

Monday Watch

Posted by Gary .....at 11:50 PM
Today's Headlines 
Bloomberg:
  • Greece’s Real Crisis Deadline Arrives With ECB Debt to Pay. Greece has reached the deadline it couldn’t afford to miss, for a bill it can finally afford to pay. Monday is the day the country must reimburse the European Central Bank 4.2 billion euros ($4.5 billion), including interest, as bonds bought during its last debt crisis mature. The impending reckoning may have been the factor that eventually forced Prime Minister Alexis Tsipras on July 13 to accept the austerity he and his electorate had previously rejected, in return for the funds needed to keep his nation from default. As Greece blew past multiple political and financial supposed end-dates over the past five months, July 20 always remained make-or-break. European Union law bans the ECB from financing governments, meaning a default would probably require it to pull support from Greek lenders, leaving an exit from the single currency all but assured.
  • Greek Banks to Open Monday as Tsipras Prepares for Another Vote. Greek banks reopen Monday three weeks after they were shut down to prevent their collapse, as Prime Minister Alexis Tsipras prepares for a second parliamentary vote crucial to securing a bailout. Greeks will regain access to some basic bank services, including the ability to deposit checks and access safe deposit boxes. Although customers will continue to face restrictions on cash withdrawals, the daily limit of 60 euros ($65) will be replaced by a cumulative maximum of 420 euros a week.
  • Merkel Holds Out Prospect of Limited Greek Debt Relief. German Chancellor Angela Merkel held out the prospect of limited debt relief for Greece if it follows through on the terms of a third bailout, while insisting that Greek membership in the euro precludes a debt writedown. Nations in the 19-member currency union will consider extending maturities and reducing interest rates on Greek bonds only after the first assessment of whether Greece is meeting pledges for more austerity and overhauling its labor market, the German leader said -- “not now, but then.”
  • France’s Hollande Proposes Creation of Euro-Zone Government. French President Francois Hollande said that the 19 countries using the euro need their own government complete with a budget and parliament to cooperate better and overcome the Greek crisis. “Circumstances are leading us to accelerate,” Hollande said in an opinion piece published by the Journal du Dimanche on Sunday. “What threatens us is not too much Europe, but a lack of it.” 
  • In Bailouts, China’s Bias for the Complex May Be Storing Up Risk. The second major bailout program from China’s leadership this year underscored its preference for relying on the banking system to shore up markets, a strategy that risks the need for further intervention over time. As details emerged last week on a stock-support plan valued at as much as $483 billion, investors became better acquainted with an agency called China Securities Finance Corp. that previously had a limited role in economic policy. The unit is now being deployed, with financing from state-owned banks, to buy up the nation’s depreciated equities. 
  • Volkswagen China Sales Decline for First Time Since 2005. Volkswagen AG, which counts China as its largest market, posted the first decline in first-half deliveries there in a decade as demand slowed with the economy. VW’s deliveries in China and Hong Kong fell 3.9 percent from a year earlier to 1.74 million units in the January to June period, the company said in a statement. First-half sales in China last fell in 2005, when deliveries slumped 14 percent. 
  • Aussie Banks Must Set Aside More Capital for Mortgage Losses. Australia’s biggest lenders will have to set aside more capital against potential losses on home loans, the nation’s banking regulator said Monday in its latest move to bolster the financial system. Under rules coming into force on July 1, 2016, the average risk weight on residential mortgage exposures will rise to at least 25 percent from about 16 percent, the Australian Prudential Regulation Authority said in a statement. That will increase the capital requirements of the biggest four banks by about A$12 billion ($8.9 billion), according to Goldman Sachs Group Inc. and Morgan Stanley.
  • Asian Stocks Decline, Paring Biggest Weekly Advance Since April. Asian stocks outside Japan dropped as materials and information technology shares led declines after a regional benchmark index posted the biggest weekly advance since April. The MSCI Asia Pacific Excluding Japan Index fell 0.1 percent to 463.99 as of 8:03 a.m. in Hong Kong.
  • Gold Plunges 4.2% to Lowest Since March ’10 as Platinum Slides. Gold sank 4.2 percent to the lowest level in more than five years, dropping for a sixth day, on prospects for higher U.S. interest rates and after China said it held less metal in reserves than some analysts expected. Platinum extended its decline to the lowest since 2009.
  • Saudi Arabia Crude Exports Fall to Five-Month Low on China. Saudi Arabia’s crude oil exports slumped to a five-month low in May as local refineries used more supplies and some plants in China closed for maintenance. The world’s biggest oil exporter shipped 6.94 million barrels a day in May, down from 7.74 million in April and the lowest since December, according to data published Sunday on the website of the Joint Organizations Data Initiative, or JODI. The drop in exports is more than Qatar produces in one month. New refineries in Saudi Arabia are leaving less crude available for overseas at a time when the market is in surplus. Chinese refineries had almost 1 million barrels a day of capacity offline in May, almost twice the total in April, according to London-based Energy Aspects. Brent crude futures declined for the past two months as U.S. drillers added more rigs and OPEC production exceeded its monthly output target for more than a year. “It’s very clear that if China sneezes, Saudi oil exports will get a cold,” Mohammed Ramady, professor of economics at King Fahad University for Petroleum and Minerals at Dhahran, Saudi Arabia, said by phone on Sunday. “The fall in Saudi crude exports in May illustrates the tight rope of opportunities facing major oil exporters with their dependence on a single market like China for sustaining their growth.”  
  • Hedge Funds Dump Crude Oil as Iran Deal Threatens Prolonged Glut. Speculators cut bullish bets on oil to the lowest level since March because an agreement over Iran’s nuclear program threatens to prolong a global supply glut. Money managers reduced their net-long position in West Texas Intermediate crude by 15 percent in the week ended July 14, U.S. Commodity Futures Trading Commission data show. Longs dropped 7.9 percent and short wagers rose 4.2 percent.
  • Fuel Feud Pits Saudis’ Secretive Ghawar Against Sprawling Bakken. How much crude the Saudis pump out of their largest field may determine the fate of some of America’s oilmen. Ghawar is the world’s oil spigot. It’s the biggest conventional field in the world’s biggest-producing country, Saudi Arabia. Statistics about Ghawar—a narrow, deep deposit in porous limestone—are a state secret. The best guess, according to Rasoul Sorkhabi, a geology professor at the University of Utah, is that the field accounts for about 60 percent of Saudi oil. As such, Ghawar is the country’s lever on oil prices. Too high, and the Saudis open the nozzle; too low, and they close it a bit. They’ve been pumping a lot of oil of late—the nation produced a record 10.6 million barrels a day in June, according to data the country provided to OPEC—in part to drive U.S. shale drillers out of business.
Wall Street Journal: 
  • For Many Firms, China’s ‘New Normal’ Spells Doom. Industrial city’s struggle illustrates how slower economic growth is squeezing manufacturers. What Chinese leaders are welcoming as the “new normal”—an era of slower but better growth—translates for many businesses as a wrenching battle for survival. Tengzhou, an industrial city of 1.5 million in eastern Shandong province, grew fast during the years of cheap, abundant capital. But since China’s slowdown started, a number of its...
  • After Five Years, Dodd-Frank Is a Failure. The law has crushed small banks, restricted access to credit, and planted the seeds of financial instability. Tuesday will mark five years since President Obama’s signing of the Dodd-Frank law, the most sweeping rewrite of the country’s financial laws since the New Deal. Mr. Obama told the country that the legislation would “lift our economy.” The statute itself declared that it would “end too big to fail” and “promote financial stability.” None of that has come to pass. Too-big-to-fail institutions have not disappeared. 
Business Insider:
  • The 'leveraged loan' time bomb just exploded. Millennium Health – biggest drug-testing lab in the US and biggest recipient of Medicare drug-testing payments, which account for one-third of its revenues – is Exhibit A of how a credit bubble allows companies and banks to put yield-desperate investors, blinded by a zero-interest-rate policy, through the wringer.
Telegraph:
Weekend Recommendations
  • None of note
Night Trading
  • Asian indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 104.5 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 57.75 -1.25 basis points.
  • S&P 500 futures +.03%.
  • NASDAQ 100 futures +.02%.

Earnings of Note
Company/Estimate 
  • (GPC)/1.32
  • (CALM)/1.04
  • (HAL)/.29
  • (HAS)/.29
  • (MS)/.73
  • (BMI)/.73
  • (BXS)/.35
  • (BRO)/.44
  • (IBM)/3.79
  • (SANM)/.49
  • (RMBS)/.13
  • (STLD)/.21
  • (WERN)/.42
  • (ZION)/.38
Economic Releases
  • None of note
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The RBA Minutes and the Fed Board Meeting to establish risk-based capital surcharges could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finished modestly lower. The Portfolio is 50% net long heading into the week.

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Weekly Outlook

Posted by Gary .....at 6:40 PM
Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on Fed rate hike worries, earnings outlook concerns, China bubble-bursting fears, oil weakness, emerging markets/US high-yield debt angst and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.
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