Evening Headlines
Bloomberg:
- Macquarie: Emerging Markets Are Not Facing a 1997-Style Crisis—They're Facing Something Worse. Instead of sharp heart attack (a la 1997), it is far more likely
that EM economies and markets would face an extended period that can be
best described as a “chronic disease”, with limited (if any) cures or
exits, punctuated by occasional significant flare-ups (short of an
outright heart attack). In many ways it is likely to be a far more
painful and insidious process. In the meantime, any signs of
significant strain (either at a country or corporate level) could easily
freeze up the emerging market universe. The crux of their argument is that despite the difficulties of 1997, its
effects were mitigated by rising global leverage, liquidity, and trade
shortly thereafter. This time around, those factors might not be there.
- Hedge Fund Returning 107% Sees More China, Emerging-Market Pain. (video) Bakhramov
finally got his wish in July and August, as did a handful of managers
who made multi-year wagers that emerging-market stocks and
currencies would begin to tumble, starting with a downturn in China.
Forum’s main fund notched a 24 percent gain in July and jumped 60
percent the following month, fueled by short positions in the Chinese
yuan and the Taiwanese and Singapore dollars, according to a letter to
investors obtained by Bloomberg. All told, the fund has soared 107
percent this year through August. "We’re
basically long volatility," Bakhramov, who previously structured
asset-backed securities at Credit Suisse Group AG, said in an interview
last week. "We’ll have a lot of tremors and then a big shakeout. This is
just the first."
- Japan's Exports Add to Abe's Woes as China Slowdown Saps Demand. Japan’s export growth slowed for a second month, signaling waning
overseas support for an economy that’s already beset by weakness at
home. The value of shipments rose 3.1 percent in August from a
year earlier, compared with estimates compiled by Bloomberg for a 4.3
percent increase. Imports dropped 3.1 percent, leaving a deficit of
569.7 billion yen ($4.7 billion), according the figures released by the
finance ministry Thursday. Exports to China fell 4.6 percent as a
market rout and economic slowdown in Japan’s biggest trading partner
sapped demand. Disappointing data in recent months has raised concern on
the outlook for economic growth after a contracted last quarter and an inflation rate that’s slid back to zero.
Wall Street Journal:
- Wall Street Has Doubts About Fed Lifting Interest Rates. Skepticism reflects concerns about the economy and the state of the markets. Wall Street is skeptical that the Federal Reserve has room to raise
short-term interest rates Thursday, underscoring persistent doubts about
the health of the global economy and financial markets following seven
years of easy policy.
- Higher Rates a Risk for Emerging-Economy Debt. Funding
conditions could tighten just as growth is slowing. Borrowing costs in
emerging markets are ticking up, a further blow to
economies hit by slowing growth, weak exports and high debt. The
rising costs come at a challenging time. Yields will likely rise
further if the U.S. Federal Reserve raises interest rates over the next
few months, as expected. That means funding conditions at home and in
international markets will tighten just as growth is slowing in these
economies.
- The Joy of Madness. Donald Trump, Bernie Sanders and the mad-as-hell American electorate. Frustration, anger, despair. Allow life’s negatively charged emotions to
run free long enough and they all arrive at the same place—madness. We
are there.
Fox News:
- Round 2: GOP rivals hammer Trump from outset of debate. Donald Trump and his Republican rivals tangled from the outset of the
second GOP presidential primary debate, with Carly Fiorina calling the
GOP front-runner an “entertainer” and Sen. Rand Paul calling him
“sophomoric.” Asked whether fellow candidates would be comfortable
with Trump in
charge of America’s nuclear weapons, Fiorina did not answer directly but
said: “I think Mr. Trump is a wonderful entertainer.” She said
“judgment” and “temperament” will be revealed “over time and under
pressure” in the race.
- Commander admits size of US-trained Syrian fighting force at ‘4 or 5’. (video) The top U.S. military commander for the Middle East admitted
Wednesday that only "four or five" U.S.-trained fighters remain on the
battlefield in Syria, leading to accusations from lawmakers that the
program is a "joke" and "total failure." Gen. Lloyd Austin, commander of the U.S. Central Command, addressed
the state of the so-called "train and equip" mission in testimony before
the Senate Armed Services Committee.
Reuters:
- Oracle(ORCL) revenue forecast disappoints as license sales continue falling. Oracle Corp's sales fell more
than expected in the first quarter, hurt by a strong dollar and
a continued drop in licensed software sales and the company
warned revenue could fall in the current quarter even on a
constant currency basis. Oracle's shares fell as much as 2.8 percent in extended
trading on Wednesday.
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 129.0 -1.75 basis points.
- Asia Pacific Sovereign CDS Index 80.25 -2.25 basis points.
- NASDAQ 100 futures -.17%.
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The 2Q Current Account Deficit is estimated at -$111.5B versus -$113.3B in 1Q.
- Housing Starts for August are estimated to fall to 1160K versus 1206K in July.
- Building Permits for August are estimated to rise to 1159K versus 1119K in July.
- Initial Jobless Claims are estimated at 275K versus 275K the prior week.
- Continuing Claims are estimated to fall to 2258K versus 2260K prior.
10:00 am EST
- Philly Fed Business Outlook Index for September is estimated to fall to 5.9 versus 8.3 in August.
2:00 pm EST
- The FOMC is expected to leave the benchmark Fed Funds Rate at 0.00-.25%.
Upcoming Splits
Other Potential Market Movers
- The Fed's Yellen speaking, Fed EconChina August Property Price report, UK Retail Sales report,
Bloomberg Economic Expectations Index for September, EIA weekly natural
gas inventory report, weekly Bloomberg Consumer Comfort Index, Stifel Nicolaus Consumer conference, (PGR) August Sales release, Deutsche Bank Tech conference, Morgan Stanley Healthcare conference, (INTU) investor day and the (SNPS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.
