Evening Headlines
Bloomberg:
- Lagarde Push for Greece Debt Relief Sets Up Showdown With Merkel. Now that Greece is eligible again for loans from the IMF, getting
any more money from the fund may hinge on a test of wills between
Christine Lagarde and Angela Merkel. The bailout of as much as 86 billion euros ($95 billion) proposed by
European leaders this month assumes financing from the International
Monetary Fund and is conditional on Greece seeking a new loan program
from the IMF once the current one expires in March. The Washington-based
IMF, which requires borrowers to have sustainable debt, has made clear
it won’t ask its 187 other member nations to approve a deal until
euro-area states significantly ease terms on existing loans.
- Former Chinese Regulator Criticizes Government Stock Rescue. Gao Xiqing, an architect of China’s stock market and a former top
regulator, said policy makers helped inflate equity prices and then
mishandled the response to a collapse that wiped out $4 trillion in less
than a month. “I don’t see so much of a problem in the reduction of the market
value,” Gao, former vice chairman of the China Securities Regulatory
Commission, said at a panel discussion at the Council on Foreign
Relations in New York. “I worry a lot more about the way it happened and
how you deal with it.”
- The Meaning of China’s Stock Market Intervention. The government’s decision to prop up slumping markets may well signal a comeback for centralization. The spectacle of the stock market meltdown in China has led many
analysts and investors to see an upside to the downturn. The slump is
“the most serious crisis” facing President Xi Jinping “since he came to
power,” China commentator Willy Lam told an audience of academics in
Vancouver on July 10. “It will require a lot to restore people’s
confidence in the regime.” Volatility might force the state to clean up
the unregulated loans fueling stock purchases and to intervene less in
equity markets and the broader economy. The drop might even foster
massive discontent with the Communist Party and support for real
political reform. That’s because in China, unlike other major nations
where large institutions dominate the markets, retail
investors—90 million or so individuals, most of them belonging to the
urban elite—do most of the investing.
- Abe Battles to Prevent Support Slipping Toward Danger Zone. Spending hours defending his security policies on television,
scrapping a $2 billion Olympic stadium plan and playing up concerns
about China, Japanese Prime Minister Shinzo Abe is battling to claw back
a slide in support. His approval rating plunged below 40 percent in
polls taken after he pushed bills through parliament last week to expand
the role of Japan’s military. While he’s at no immediate risk of being
ousted, he must avoid dropping into the danger
zone around the 20 percent mark at which successive premiers have been
toppled at the ballot box or by their party.
- Aussie Drops to Six-Year Low as Kiwi Falls After China Flash PMI. The Australian dollar dropped to a six-year low and the New Zealand
dollar also retreated after a gauge of Chinese manufacturing activity
unexpectedly slipped to the weakest in more than a year. The Aussie weakened at least 0.4 percent against its 10 major
developed peers after the Caixin Media and Markit Economics’ flash
manufacturing purchasing managers’ index showed a greater-than-expected
slump in July. China is a key export market for both South Pacific
nations.
- Chinese Stocks Slump in Hong Kong as PMI Spurs Growth Concerns. Chinese stocks dropped in Hong Kong, with the benchmark index
falling for a sixth week, after a private gauge of manufacturing in the
nation unexpectedly declined to the lowest level in 15 months.
The Hang Seng China Enterprises Index slumped 1.3 percent to
11,678.54 at 10:56 a.m. local time, extending its retreat this week to
1.4 percent.
- Oil Turning Back to Bear Erases $100 Billion From Shale Drillers. Oil slipped back into a bear market Thursday, disappointing U.S. shale drillers that pinned their hopes on higher prices. West Texas Intermediate, the benchmark U.S. contract, tumbled 21
percent since June 10 to $48.45 a barrel, erasing more than $100 billion
in market value from the companies in the Bloomberg Intelligence North
America Independent Explorers and Producers Index.
- Copper Goes From Bad to Worse as Prices Tumble to Six-Year Low. A bad week for copper just got worse as futures tumbled to a
six-year low in New York and Goldman Sachs Group Inc. forecast prices
will drop another 15 percent by years end. The rout is driving down share prices and increasing pressure on
miners to trim costs. Freeport-McMoRan Inc., the biggest publicly traded
producer of the metal, fell the most in six months after an earnings
conference call left investors uncertain on the company’s direction.
- Retailers’ Answer to Apple(AAPL) Pay Is Said to Hit Stores in August. After almost three years in development, the retail industry’s answer to Apple Pay is finally getting off the ground.
A mobile payment application developed by Merchant Customer Exchange --
a company founded in August 2012 with funding from Wal-Mart Stores
Inc., Target Corp. and Best Buy Co. -- has been tested by employees of
the retailers and will get a limited trial run next month in stores, according to three people
familiar with the situation. That means shoppers will soon be able to
use the technology, called CurrentC, to pay for items with their phones.
- Dunkin’ Donuts Slams New York Regulators Over Wage Increase. Dunkin’ Brands Group Inc., the owner of Dunkin’ Donuts, upbraided
New York regulators over a plan to boost fast-food wages to $15 an hour,
a move the company said could lead to price increases. A wage board formed by Governor Andrew Cuomo arrived at the decision
without involvement from the restaurant industry, Dunkin’ Chief
Executive Officer Nigel Travis said on a conference call Thursday.
Wall Street Journal:
- Turkey to Let U.S. Military Use Its Base to Launch Strikes Against Islamic State. Agreement allows U.S. to operate manned, unmanned planes from air base near Syrian border. Turkey agreed to allow the U.S. to use air bases there to launch strikes
against Islamic State forces in neighboring Syria, a major shift long
sought by Washington and sealed hours before a deadly clash between
Turkish forces and militants across the border.
- Unlucky Emerging Markets Don’t Get Lift From Weak Currency. The bright side of a
currency decline is supposed to be rising exports. But in key emerging
markets around the world, that isn’t happening. The bright side of a currency decline is supposed to be rising
exports. But in key emerging markets around the world, that isn’t
happening. Currencies in some countries are hitting new lows,
down as much as 30% in the past 2½ years. Meanwhile, emerging-market
export growth has fallen to its lowest levels in more than half a
decade. Exports themselves fell 14.3% year over year in the three months...
- Senators Voice Skepticism on Iran Nuclear Deal. Republican in tense committee hearing says Obama administration had been ‘fleeced’. Lawmakers sharply clashed with Obama administration officials Thursday
over the landmark nuclear agreement with Iran in a hearing that marked
the start of and set the tone for two months of heated political debate.
Fox News:
- ISIS Netted Up to $1B in Cash After Taking Over Mosul, US Official Says. ISIS netted between $500 million and $1 billion in cash when it took
over Iraq’s second largest city in 2014, a top Obama administration
official said Thursday. Daniel Glaser, the U.S. Treasury’s assistant secretary for terror
financing, told participants at the Aspen Security Forum that when ISIS
swept through the city of Mosul in northern Iraq, it took the reserves
of over 90 banks, estimated to be between $500 million and $1 billion.
MarketWatch.com:
- The true cost of China’s multibillion-dollar market intervention. Beijing estimated to have spent 10% of GDP to support market. As the Shanghai Composite Index dove and panic sales spread, the Chinese
government spent billions of dollars to soothe battered sentiment and
shore up the stock market. But China may eventually end up paying a much
higher price from delayed reforms and a distorted stock market,
analysts say.
CNBC:
- Starbucks stock pops on earnings beat, buyback news. (video)
The coffee chain reported quarterly earnings and revenue that beat
analysts' expectations on Thursday. Starbucks posted fiscal
third-quarter earnings of 42 cents per share on $4.88 billion in
revenue. Analysts forecast Starbucks would report earnings of 41 cents a
share on $4.86 billion in revenue, according to a consensus estimate
from Thomson Reuters. After the earnings announcement, the company's
shares rose more than 5 percent in extended-hours trading. The coffee
giant is trading well above its $57 all-time high at current
extended-hours levels.
Business Insider:
- Millennials are thinking hard about leaning out. A survey of Harvard Business School alumni, released as part of the school’s new gender initiative, found that 37 percent of millennial women and 42 percent of those already married planned to interrupt their career for family. That compared with 28 percent of Generation X women and 17 percent of baby boomers.
- Report: Teen use of the morning-after pill is climbing. More than 1 in 5 sexually active teen girls have used the
morning-after pill - a dramatic increase that likely reflects that it's
easier now for teens to buy the emergency contraceptive. A report released Wednesday shows teen use of the morning-after pill
rose steadily from a decade earlier, when it was 1 in 12. Now, all teens
can buy it without a prescription.
Reuters:
- Caterpillar(CAT) sees end of good times, moves into cost-cutting mode. Caterpillar Inc rode
the boom markets in China, Brazil and piggybacked the oil industry to rich profits, but the world's biggest construction
and mining equipment company effectively declared the good times
over on Thursday, warning of an extended period of retrenchment. Facing slowdowns in developing markets, a static oil
industry and a strong U.S. dollar suppressing overseas earnings,
Caterpillar said it was pruning operations and cutting costs to
adapt.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 59.5 +.5 basis point.
- NASDAQ 100 futures +.06%.
Earnings of Note
Company/Estimate
Economic Releases
9:45 am EST
- Preliminary Markit US Manufacturing PMI for July is estimated at 53.6 versus 53.6 in June.
10:00 am EST
- New Home Sales for June are estimated to rise to 548K versus 546K in May.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI report and the (SCHW) business update could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and technology 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.