Evening Headlines
Bloomberg:
- ECB Readies for Athens Return as Greek Banks Remain in Emergency. The European Central Bank is embarking on a third tour of duty in Athens, with victory less certain than ever. Officials holding a telephone call on Wednesday to discuss the
Emergency Liquidity Assistance that keeps Greece’s financial system
alive will be mindful that their decision is just a precursor to a
bigger task. They’re about to send a team back to the Greek capital
to
monitor compliance with austerity policies -- honed over two previous
rescues since 2010 -- that the government accepted in return for a
bailout deal. The ECB has an interest in seeing Greece make good on its
commitments, as the institution is embroiled there on multiple fronts
from saving the banks to deciding when to include the nation in monetary
stimulus. If the government of Prime Minister Alexis Tsipras fails to
convince on reforms, the ECB will once again be burdened with the
dilemma over whether it’s obliged to let the lenders collapse.
- World’s Wildest Stock Market Submits to Communist Party Rule. It took three weeks of unprecedented government intervention, but
Chinese authorities have finally managed to subdue the world’s wildest
stock market. That’s the verdict from options traders, whose expectations of
share-price swings on mainland exchanges have tumbled 48 percent since
the end of June. In a market where daily fluctuations exceeding 3
percent had become the norm, this week’s moves of less than 1 percent in
the Shanghai Composite Index have barely registered on the price
charts. For bulls, the growing sense of calm is a key step toward restoring
investor confidence after the Shanghai Composite lost as much as 32
percent from its June high. Bears point to the costs of intervention,
including an exodus by international money managers and the moral hazard
of backstopping one of the world’s most expensive stock markets. “The government has won the battle in terms of stemming the rout, but
they’ve lost the war if you think of the bigger picture,” Megan Greene,
the chief economist at Manulife Asset Management, whose parent company
oversees about $648 billion worldwide, said in a Bloomberg Television
interview in London.
- Hyundai Motor's First-Half China Sales Slump 8.5%. Hyundai Motor Co.’s deliveries in China slumped 8.5 percent in the
first half of this year, the latest foreign carmaker to report slowing
demand in the world’s largest vehicle market. The South Korean automaker sold 513,784 vehicles in China in the
first six months of this year, according to an e-mail from the company.
Excluding imports, sales last fell in the second half of 2007, when
deliveries slumped 24 percent.
- A $4 Trillion Force From China That Helped the Euro Now Hurts It. For almost a decade, China’s effort to diversify the world’s biggest
foreign-exchange reserves supported the euro. Now, the almost $4
trillion force may be working against the single currency. China’s
central bank depleted $299 billion of reserves in the year through June
to keep the yuan from falling, offsetting the private sector’s sales of
the currency for dollars amid a stock-market rout and faltering
economy. The decline in reserves is the longest in People’s Bank of
China data going back to
1993. It may mark the end of an era of accumulation that led the bank
to buy euros as part of reducing reliance on the dollar.
- Chinese Stocks in Hong Kong Fall to Extend World’s Worst Losses. Chinese stocks fell in Hong Kong trading, adding to losses for the
benchmark index that have made it the world’s worst performer this
month. Hong Kong’s Hang Seng China Enterprises Index retreated 1.5 percent
to 11,692.13 at 10:03 a.m. local time, heading for the steepest loss in a
week. China Railway Group Ltd., the nation’s biggest construction
company by total assets, and China Telecom Corp. slid more than 2
percent. GF Securities Co. led declines among brokerages with a 1.5
percent drop. The H-shares gauge has fallen 9.9 percent in July, making it the
worst performer among major global benchmarks tracked by Bloomberg,
after Chinese policy makers introduced a spate of measures to prop up
equities.
- Asia Stocks Drop With Nasdaq Futures on Apple’s Miss; Oil Slides. Asian stocks retreated with Nasdaq 100 Index futures as Apple Inc.
tumbled in after-hours trade and the dollar held Tuesday’s losses. Oil
resumed its decline while wheat sank for a ninth straight day.
The MSCI Asia Pacific Index dropped 0.9 percent by 10:36 a.m. in
Tokyo, with a rebound in the yen sending Japan’s Topix index down 1
percent.
- Commodity Rout Extends to Currencies Led Lower by Kiwi to Loonie. Janet
Yellen is breaking up the six-year-long party in the
currencies of economies tied to commodities, with New Zealand’s dollar
suffering the worst hangover. The Federal Reserve chair’s determination
to raise U.S. interest rates this year has seen the currencies of New
Zealand, Australia, Canada and Norway underperform their
developed-market peers in the past three months. The kiwi has lost
14 percent in that time, or more than the other three combined. The
currencies are under pressure as commodity-exporting nations cut
interest rates to support growth after raw-materials prices plunged 45
percent from their 2011 highs. None, though, will ease as aggressively
over the next year as New Zealand, according to market-implied policy
rates. Its Reserve Bank will start by lowering rates for a second
straight meeting on Thursday, economist forecasts compiled by Bloomberg
show.
- BHP(BHP) Fourth-Quarter Iron Ore Output Rises 6%. BHP Billiton Ltd., the world’s biggest mining company, said
fourth-quarter iron ore output rose 6 percent to beat analysts’
estimates.
Production was 60 million metric tons in the three months ended June
30, from 56.6 million tons a year earlier, Melbourne-based BHP said
Wednesday in a statement. That compares with the 58.9 million tons
median estimate of six analysts surveyed by Bloomberg. Total output will rise 6 percent to 247 million tons fiscal 2016.
Total output in the year to June 30 was 233 million tons, it said.
- Tech Rally Unravelling With Apple Poised for $50 Billion Slump. The biggest technology rally since October was knocked cold, as
disappointing earnings reports punished Microsoft Corp. and left Apple
Inc. in danger of its worst-ever loss of market value. Five days after Google Inc.’s earnings sparked the largest one-day
increase in market capitalization, computer and software shares are
tumbling. Apple, Microsoft and Yahoo! Inc. retreated on disappointing
results. Apple, the world’s most valuable company, dropped 6.7 percent, a
slump that would wipe more than $50 billion from its value.
Wall Street Journal:
- Iran can easily stretch out the inspection of suspect nuclear sites for three months or more. The Obama administration assures Americans that the Iran deal grants
access within 24 days to undeclared but suspected Iranian nuclear sites.
But that’s hardly how a recalcitrant Iran is likely to interpret the
deal. A close examination of the Joint Comprehensive Plan of Action
released by the Obama administration reveals that its terms permit Iran
to hold inspectors at bay for months, likely three or more.
MarketWatch.com:
- Microsoft(MSFT) reports biggest-ever quarterly loss.
Microsoft Corp. said its revenue fell 5.1% in its latest quarter, hurt
by continued weak PC demand, and posted its biggest quarterly loss ever
on a hefty write-down and other items related to the Nokia mobile-phone
business acquired last year.
Business Insider:
Reuters:
- Intuitive Surgical(ISRG) posts 30 pct rise in profit. Robotic surgical equipment maker
Intuitive Surgical Inc reported a better-than-expected
quarterly profit and forecast surgical procedures to grow 11 to
13 percent this year, sending its shares up 13 percent.
- Higher costs to attract eyeballs weigh on Yahoo(YHOO) forecast.
Yahoo Inc forecast lower-than-expected revenue for the current quarter
as it struggles to revive its core online advertising business and
spends more to attract users to its websites. Shares of Yahoo were marginally down at $39.34 in
after-market trading.
Financial News:
- China Researcher Sees Lower Potential Growth in Next 5 Years.
China's potential economic growth for 2016-2020 may slow to around
6%-6.5%, as earlier high growth driven by investment and exports would
be unsustainable, HKEx chief China Economist Ba Shusong writes in
article. China may see L-shaped recovery in economic growth, rather than
V-shaped rebound, Ba wrote.
Netease:
- China Regulators to Evaluate Banks' Equity Investments. People's Bank of China and China Banking Regulatory Commission have ordered commercial banks to assess their equity investment, citing a person familiar with the matter. Regulators aim to stress test risk exposure of banks' equity investment.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.25 +.75 basis point.
- Asia Pacific Sovereign CDS Index 58.25 +1.0 basis point.
- NASDAQ 100 futures -1.2%.
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The FHFA House Price Index for May is estimated to rise +.4% versus a +.3% gain in April.
10:00 am EST
- Existing Home Sales for June are estimated to rise to 5.4M versus 5.35M in May.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-1,450,000 barrels versus a -4,346,000 decline the prior week. Gasoline
supplies are estimated to rise by +565,000 barrels versus a +58,000
barrel gain the prior week. Distillate inventories are estimated to rise
by +1,680,000 barrels versus a +3,819,000 barrel gain the prior week.
Finally, Refinery Utilization is estimated to fall by -.09% versus a
+.6% gain prior.
Upcoming Splits
Other Potential Market Movers
- The
UK inflation report, BoE Meeting Minutes, (CPB) investor day and the
weekly MBA Mortgage Applications report could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and technology shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.
