Monday, January 11, 2016

Today's Headlines

Posted by Gary .....at 3:03 PM
Bloomberg:
  • PBOC Put? Li Signals No Major Stimulus While Past Suggests a Cut. (video) While the weekend’s inflation reading suggests there’s room to act, government signals give reason to pause: Policy makers wouldn’t seek strong stimulus or flood the economy with too much investment to boost demand, Beijing News cited Premier Li Keqiang as saying. The central government’s website republished that report Sunday, and the official Xinhua News Agency cited the comments on its online front page on Monday. What’s not clear is whether that rules out near-term monetary stimulus, or just the extent of any upcoming move. "Li’s statement signals that this year the focus of economic work will shift to the ‘supply side’ compared to previous demand-side stimulus," said Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. One reason to delay further rate cuts is that such a move may exacerbate capital outflows, Xia said. Pressure on the currency, stocks, capital outflows and growth is intensifying as China’s policy makers wrestle with the transition towards a greater role for markets. "We are not going to use ‘strong stimulus’ or ‘flood irrigation’ investment to expand domestic demand," Li was cited as saying in the Beijing News report. Instead, policies will seek to develop new business models and create new drivers for the economy, Li said according to the report.
  • Magnus Fears the Worst for China Economy as Credit Squeeze Lurks. China’s market ructions are likely masking a credit crisis and a bleak outlook for its economy, according to UBS economic adviser George Magnus. "Beneath all of the financial turbulence there lurks, in my view, a credit crisis," Magnus told Tom Keene and Francine Lacqua on Bloomberg Television on Monday. "I fear the worst now." The worries about the Asian economy triggered a stock-market rout that rippled around the world and pushed the offshore yuan to a five-year low last week. While China’s top policy makers promised a wave of reforms in December, including promoting flexible monetary policy and boosting agricultural production, they aren’t likely to be enough, Magnus said. “Incremental reforms do not substitute for the changes to the way in which your institutions function and the way in which your economy can respond to those institutional changes,” Magnus said. “The reform agenda, in many ways that really matters, has stalled" and so "things are looking much bleaker for China going forward."
  • JPMorgan: Potential Capital Outflows From China Have Become 'Practically Boundless'. A hurdle to large-scale depreciation has been jumped. China has seen nearly $1 trillion in capital leave the nation since the second quarter of 2014, and according to analysts at JPMorgan Chase, the sky's the limit for outflows going forward. The causes of these massive capital outflows, which have prompted the People's Bank of China to tap the country's war chest of reserves to support the currency, have grown more numerous in the second half of 2015, argues a team led by managing director Nikolaos Panigirtzoglou. Amid the broadening of sources of downward pressure on the yuan, however, a major factor that may have restrained the central bank from devaluing the currency in a big way has vanished. "The Chinese capital outflow picture appears to have entered a new phase in [the third quarter], broadening to include foreign direct investment and portfolio instruments, something that could make future capital outflows practically boundless," writes the JPM team.
  • Yuan Loan Rates Soar in Hong Kong as PBOC Halts Currency's Slide. (video) Interbank yuan lending rates in Hong Kong climbed to records across the board and the exchange rate surged the most in four months after suspected intervention by China’s central bank last week mopped up supplies of the yuan in the offshore market. The city’s benchmark rates for loans ranging from one day to a year all set new highs, with the overnight and one-week surging by the most since the Treasury Markets Association started compiling the fixings in June 2013. The overnight Hong Kong Interbank Offered Rate surged 939 basis points to 13.4 percent on Monday, while the one-week rate jumped 417 basis points to 11.23 percent. The previous highs were 9.45 percent and 10.1 percent, respectively. “Yuan liquidity is extremely tight in Hong Kong,” said Becky Liu, senior rates strategist at Standard Chartered Plc in the city. “There was some suspected intervention by the People’s Bank of China last week, and the liquidity impact is starting to show today.”
  • Brazil roiled by China mess shows investors can't catch a break. For investors in Brazil battered by a terrible 2015, there was reason to believe January would provide a respite. With summer holidays in full gear and Congress in recess, developments in the political scandals that had roiled markets were put on hold. And then came China. The turmoil in Brazil's largest trading partner sent its benchmark stock index down 8.2 percent in dollar terms to begin the year, making for the worst week in almost six months, as shares of commodity producers tumbled with raw materials to the lowest in more than a decade. The currency weakened past 4 per dollar, back to levels seen after Standard & Poor's surprised investors by cutting Brazil to junk in September.
  • China Rout Threatens to Spawn India Crisis, Top Banker Says. A deepening slowdown in China threatens to derail India’s economic growth, triggering financial market upheaval and a falling currency, Vishal Kampani, the nation’s top investment banker, said. “If China keeps getting hit like this, the yuan has to devalue, and we will see another crisis in India,” Kampani, managing director at JM Financial Ltd., the South Asian country’s top mergers and acquisitions adviser last year, said in a Jan. 8 interview. “I refuse to believe that India will stand out and will look very different.”
  • Suicide Attack Kills at Least 17 People at Baghdad Mall. Suicide bombers and gunmen killed at least 17 people and briefly took hostages in an attack on a mall in the Iraqi capital, an especially brazen assault in a city used to militant violence. Islamic State claimed responsibility. Attackers detonated a car bomb outside and suicide vests inside the building in the Baghdad Jadida neighborhood, police and Interior Ministry officials said by phone, adding that a child was among those killed. Twenty-one others were wounded before security forces ended the raid.
  • Emerging-Market Stock Volatility Surges Most in 224 Weeks: Chart. The Chicago Board Options Exchange Emerging Markets Volatility Index rose 51 percent in the week ended Jan. 8. That was second only to the 57 percent surge in the five days through September 23, 2011 amid a slump triggered by the euro-area debt crisis and the downgrade of U.S. credit rating by Standard & Poor’s.
  • Emerging-Market ETFs Suffer Worst Loss in 8 Weeks, Led by Taiwan. U.S. exchange-traded funds that invest in emerging markets had the biggest net outflows since mid-November, led by withdrawals from Taiwan and India. Redemptions from ETFs that invest across developing nations as well as those that target specific countries totaled $566.7 million in the week ended Jan. 8, compared with inflows of $431.3 million in the previous period, according to data compiled by Bloomberg. The last time investors pulled more money from the funds was in the week of Nov. 13, when outflows reached $1.06 billion, the data show. Last week, stock funds lost $507.3 million and bond funds declined by $59.4 million. The MSCI Emerging Markets Index fell 6.8 percent in the week. The biggest outflows were in Taiwan, where funds shrank by $164 million, compared with $26 million of inflows the previous week. All of the withdrawals were from stock funds, while bond funds remained unchanged.
  • Emerging Stocks Extend Worst Start to Year Since 1998 on China. Emerging-market stocks retreated to the lowest in more than six years and currencies weakened as concern that China’s growth outlook is worsening and a commodity slump pushed investors away of riskier assets. All 10 industry groups in the MSCI Emerging Markets Index fell as a gauge of energy companies fell to the lowest since September 2004. Philippine shares entered a bear market as Chinese equities on the mainland and in Hong Kong led a rout in Asia. The dollar-denominated RTS Index of Russian stocks plunged 5 percent as Brent crude sold for less than $32 a barrel. The MSCI Emerging Markets Index decreased 2.2 percent to 723.70 at 11:49 a.m. in New York, dragging the average valuation of its member stocks to 10.3 times projected 12-month earnings, the lowest in more than four months. That represents a 30 percent discount to the MSCI World Index of advanced-nation shares. A gauge of developing-nation financial companies slid 2.8 percent while one tracking energy stocks retreated 2.9 percent. 
  • Europe Stocks Erase Gains, Head for Lowest Level Since September. After a day of fluctuations, European stocks finally closed at their lowest levels since September, extending losses after their worst weekly plunge in more than four years. The Stoxx Europe 600 Index erased its gain in the final hour of trading, falling 0.3 percent at the close as commodity producers reversed advances. Germany’s DAX Index, which heavily relies on exporters and was among the worst developed markets last week, slipped 0.3 percent, after earlier climbing as much as 1.3 percent.
  • Oil Risks Revealed at Maersk as Nordea Warns of `Toxic Cocktail'. A.P. Moeller-Maersk A/S is a conglomerate with about 900 different divisions, but investors only really need to worry about one number in 2016: the price of oil. The owner of the world’s biggest shipping line is being battered “by a toxic cocktail with challenges in both the oil and the container division,” Stig Frederiksen, an analyst at Nordea in Copenhagen, said by phone. But “it’s now become the oil price that’s the main driver for Maersk’s share.” Maersk’s stock lost 9.8 percent in the first week of 2016, its worse start to a year since at least 1992. Brent crude was down by roughly as much last week. Maersk shares will probably be driven by the price of oil “for a while,” Frederiksen said. “We think that will be the case for 2016.”
  • China's Demand for Crude is Showing Signs of Cracking. Resilient supply isn't the only problem for crude. When looking for the prime culprit behind widespread weakness in commodity prices, fingers often point squarely at China. On the supply side, especially in select metals, the world's second-largest economy deserves a hefty portion of the blame for the rout. But in the case of crude, China has responded to lower prices with a jump in demand, says Barclays' Commodities Analyst Miswin Mahesh. Although, as he notes, there are signs that this increased appetite may soon wane.
  • Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength. (video) A rapid appreciation of the U.S. dollar may send Brent oil to as low as $20 a barrel, according to Morgan Stanley. Oil is particularly leveraged to the dollar and may fall between 10 to 25 percent if the currency gains 5 percent, Morgan Stanley analysts including Adam Longson said in a research note dated Jan. 11. A global glut may have pushed oil prices under $60 a barrel, but the difference between $35 and $55 is primarily the U.S. dollar, according to the report.
  • Glencore Debt Swaps Jump to Six-Year High as Copper Price Slides. The cost of insuring Glencore Plc’s debt against default rose to a more than six-year high as the price of raw materials such as copper continued to tumble. The trader and miner’s credit default swaps increased to as much as 946 basis points, the highest since April 2009 on a closing basis, according to data from S&P Capital IQ’s CMA. Slumping commodity prices have battered Glencore, prompting it to scrap a dividend payment, sell new shares and outline asset sales as it seeks to curb debt to maintain its investment-grade rating. Copper dropped to a six-year low amid a rout in metals as muted Chinese inflation increased concern that demand from the world’s largest buyer of raw materials will slow.
  • No Hedges? No Problem for Stock Traders Used to Resilience. With U.S. stocks off to the worst-ever start to a year, equity investors accustomed to swift market rebounds haven’t seen as much of a need for downside protection. It may come back to haunt them. In one example from the listed options market, the ratio of bearish to bullish contracts on an exchange-traded fund tracking the Standard & Poor’s 500 Index sits 15 percent below its one-year average, according to data compiled by Bloomberg. There are now 5 million fewer open options contracts on the ETF than in mid-September, the data show. As the bull market approaches its seventh anniversary, investors have gotten used either to buying the dip or waiting for a rebound to come. “Investors have become completely disengaged with the process of protecting their downside,” said Jeff Sica, who oversees more than $1.5 billion as the president of Circle Squared Alternative Investments in Morristown, New Jersey. “This market has been so good for so long, people don’t think they need to hedge. There’s an overconfident, laissez-faire attitude creeping in.”
  • Fed's Lockhart Says Global Markets Drop Won't Hurt U.S. Outlook. Federal Reserve Bank of Atlanta President Dennis Lockhart said he favors continued tightening of monetary policy this year, and a global selloff in stock markets is unlikely to affect the U.S. economy.
    “When such volatility develops, I think it’s helpful to look at the real economy of the United States as opposed to the financial economy and ask if something is fundamentally wrong,” Lockhart said in prepared remarks in Atlanta. “Are there serious imbalances that make the broad economy vulnerable to foreign shocks? I don’t see that kind of connection in current circumstances. ”
  • Bank of America: Rail Traffic Is Saying Something Worrying About the U.S. Economy. Rail carloads are looking recessionary. It's not the jobs report or the latest housing data but railway cargo that has analysts at Bank of America concerned. Railroad cargo in the U.S. dropped the most in six years in 2015, and things aren't looking good for the new year. "We believe rail data may be signaling a warning for the broader economy," the recent note from Bank of America says. "Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009."
  • Midtown Manhattan Office Vacancies to Rise as Large Spaces Empty. Midtown Manhattan, once the pinnacle of U.S. office markets, is facing a jump in large, empty work spaces as new towers open and tenants spread out across the city, including outer boroughs that businesses once shunned. By 2017, about 21 million square feet (1.2 million square meters) of Midtown’s Class A offices, or about 14 percent of the market, will probably be available, Keith DeCoster, director of U.S. real estate analytics for brokerage Savills Studley Inc., estimated. That’s just shy of the 22.6 million square feet of top-quality space that was available at the height of the last recession in early 2009, he said.
Fox News:
  • FBI's Clinton probe expands to public corruption track. (video) EXCLUSIVE: The FBI investigation into Hillary Clinton’s use of private email as secretary of state has expanded to look at whether the possible “intersection” of Clinton Foundation work and State Department business may have violated public corruption laws, three intelligence sources not authorized to speak on the record told Fox News. This new investigative track is in addition to the focus on classified material found on Clinton’s personal server. 
Zero Hedge:
Business Insider:
Gregor Peter:
Reuters:
Telegraph:
Xinhua:
  • China Industry Capacity Cuts May Cost 3M Jobs, CICC Says. Cut in production by 30% in industries w/most excess capacity to cause 3M job cuts in the coming 2-3 years, citing a report by China International Capital Corp. Industries: iron & steel; coal mining; cement; shipbuilding; aluminum & flat glass.
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Morning Market Internals

Posted by Gary .....at 11:36 AM
NYSE Composite Index:
0 comments

Sunday, January 10, 2016

Monday Watch

Posted by Gary .....at 10:55 PM
Today's Headlines
Bloomberg:  
  • Chinese Stocks Extend Decline as Economic Growth Concerns Deepen. Chinese stocks fell, extending last week’s plunge, as factory-gate price data fueled concern the economic slowdown is deepening. The Shanghai Composite Index slid 3.3 percent to 3,080.89 at 11:18 a.m. local time, led by energy and material companies. The producer price index slumped 5.9 percent in December, extending declines to a record 46th month, data over the weekend showed. The Hang Seng China Enterprises Index tumbled 4 percent, while the Hang Seng Index fell below the 20,000 level for the first time since 2013. “Pessimism is the dominant sentiment” said William Wong, head of sales trading at Shenwan Hongyuan Group Co. in Hong Kong. “The PPI figure confirms the economy is mired in a slump. Market conditions will remain challenging given weak growth and volatility in external markets and the yuan’s depreciation pressure.”
  • China Slowdown to Hurt Export-Heavy Singapore the Most in Southeast Asia. Philippines, Vietnam are least sensitive to weak Chinese growth. China's economic expansion has been a powerhouse for regional and global growth, boosting other countries' economies with demand for commodities and other imports. Now the reverse is happening - its slowdown is dragging down growth across the region. In Southeast Asia, Singapore could be the worst hit, with a 1 percentage point fall in China's economic growth subtracting 1.4 percentage points from Singapore's, according to estimates from Australia & New Zealand  Banking Group Ltd. China is the nation's largest export destination, taking almost 15 percent of shipments. Malaysia, the Philippines and Vietnam will be less affected, Glenn Maguire, ANZ chief economist for South Asia, Southeast Asia and Pacific, said in a Jan. 6 note, using a sensitivity index based on the past decade of data.
  • London Hedge Fund Omni Sees 15% Yuan Drop, and More in a Crisis. Omni. Partners, the $965 million London hedge fund whose wagers against China helped it beat the industry last year, said the yuan may fall 15 percent in 2016, and even more if the nation has a credit crisis. The currency, which tumbled to a five-year low last week, would have to drop to 7 or 7.5 a dollar to meaningfully reverse its appreciation and be commensurate with the depreciation of other slowing emerging markets, Chris Morrison, head of strategy of Omni’s macro fund, said in a telephone interview. The yuan slumped 1.4 percent last week to around 6.59 in Shanghai. “While Chinese authorities have been intervening heavily in the dollar-yuan market, they cannot ultimately fight economic fundamentals,” Morrison said, adding that even the 7-7.5 forecast would be too conservative if China were to have a credit crisis. “You’ll be talking about the kind of moves that Brazil and Turkey have seen, more like 50 percent, and that’s how you can create serious numbers like 8, 9 and 10 against the dollar.”
  • Intervention Loses Potency Just as Currency Wars Seen Escalating. As a new round of competitive devaluation looms, evidence is mounting that currency interventions are losing their potency. Mexico’s peso fell to a record on Friday as Cantor Fitzgerald LP criticized the nation’s efforts to strengthen the exchange rate as “mostly futile.” A study by Brazilian central bankers last week found “no evidence” that their intervention program was affecting currency volatility. And far from driving a sustained decline in the krona, mooted sales by Sweden’s Riksbank may actually be a buying opportunity, according to Citigroup Inc., the world’s biggest foreign-exchange trader.
  • Merkel's Refugee Woes Unbroken as Sexual-Assault Reports Rise. German Chancellor Angela Merkel surely can’t take many more weeks like last week. Merkel’s open-door refugee policy has blown open with the revelation of the New Year’s Eve sexual assaults, feeding opposition to migrants and widening the risks the chancellor faces at the start of 2016. With the number of women filing complaints soaring to more than 500 and the police seeking suspects, the latest stage in the crisis is still unfolding.
  • Catalonia Forms Separatist Government, Raising Pressure on Spain. Catalonia formed a government dedicated to splitting from Spain, increasing the pressure on Spanish political leaders to find a way out of their post-election deadlock. The regional assembly in Catalonia, Spain’s biggest economic region, endorsed Carles Puigdemont, a 53-year-old former journalist, as president in an emergency session late Sunday, following the decision of former incumbent Artur Mas to stand aside and not seek re-election. The new government will move ahead with plans to write a new constitution, create a central bank, expand the tax agency, and set up its own mechanisms for security and defense, Puigdemont said in a speech to the assembly on Sunday.
  • Whatever North Korea Tested, Its Nuclear Ambitions Remain Clear. North Korea is the only country known to have conducted a nuclear test this century. While defense experts are skepticalof Pyongyang’s claim that it detonated a hydrogen bomb on Jan. 6, they agree the latest test still advances its ambition to mount a nuclear warhead on a ballistic missile. Here’s a look at why joining the nuclear club has become an obsession of North Korea’s leaders from founder Kim Il Sung to his grandson, Kim Jong Un.
  • Won Drops to Five-Year Low as China Concern Fuels Stock Outflows. The won fell to the lowest since July 2010 as global funds sold South Korean stocks amid signs of faltering growth in China, the nation’s biggest export market. South Korea should closely monitor rising volatility in financial markets and scrutinize flows of foreign capital, Financial Services Commission Chairman Yim Jong Yong said Sunday. Overseas funds have pulled $550 million from local stocks this month following their first annual withdrawal in four years in 2015. China posted a record 46th monthly decline in producer prices and consumer inflation remained at about half the government’s 2015 target, according to data released Saturday. The won weakened 0.9 percent to 1,208.85 a dollar as of 10:05 a.m. in Seoul, according to data compiled by Bloomberg. The currency fell as low as 1,211.20. The Kospi index of shares declined as much as 1.3 percent, headed for its lowest close since September.
  • Saudi Arabian Stocks Lead Mideast Drop as Oil Slide Saps Trading. Saudi Arabian stocks led a decline across most Middle Eastern markets amid reduced trading, as investors weighed the impact of plummeting oil prices. The Tadawul All Share Index, the region’s biggest gauge, dropped 2.2 percent, extending its retreat this month to 12 percent. About 234 million shares were exchanged, or 9 percent less than the 30-day average. Qatari stocks fell 1 percent on about half the QE Index’s average volume. Trading in Dubai also slid. “Investors are waiting until the end of the first quarter to see the impact of low oil prices and government cutting spending on corporate profits,” said Nabil Farhat, an Abu Dhabi-based partner at Al Fajr Securities.
  • Asian Stocks Decline With Oil, Rand, Won; China Shores Up Yuan. Asian stocks extended last week’s global rout, oil dropped and the South African rand led a slump in emerging-market currencies as a China-fueled risk aversion stoked demand for government bonds. The yuan gained after the central bank kept its reference rate steady for a second day. The rand tumbled 9 percent to a record low before paring its slide. Oil sank to its lowest since 2003 and copper futures declined. Investments regarded as offering more safety found support, with sovereign yields falling in Japan, Australia and New Zealand. “The market is concerned about China’s financial stability,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion. “People are also quite nervous about the Chinese economic outlook. China is certainly slowing on a very gradual path down. A lot of people are fearing a hard landing is in play, but that’s not our central scenario.” The MSCI Asia Pacific excluding Japan Index slid 0.9 percent as of 11:39 a.m. Tokyo time, as the Shanghai Composite Index slid 1.3 percent and the Hang Seng Index dropped 2.5 percent in Hong Kong.
  • Oil Extends Slide From 11-Year Low Amid Signs of China Weakness. Oil extended declines from the lowest close in 11 years amid further signs of weakness in China, the world’s second-biggest crude consumer. Futures fell as much as 2.2 percent in New York after dropping more than 10 percent last week. Producer prices in China fell for a record 46th month and inflation remained at about half the government’s 2015 target. Saudi Arabian Oil Co., the world’s biggest crude exporter, confirmed on Friday it was studying options for a share sale, including listing “a bundle” of refining subsidiaries, according to a statement from the state-owned oil monopoly.
  • Hedge Funds Greet 2016 by Cutting Bullish Oil Bets to 5-Year Low. Money managers began the new year by reducing wagers on rising oil prices to the lowest level in more than five years. Oil tumbled in the first days of 2016 as a global glut outweighed an increase in tension between Saudi Arabia and Iran. The decline accelerated as turmoil in China’s markets bolstered concern that an economic slowdown in the world’s biggest commodity-consuming nation is worsening. Speculators’ net-long positions in WTI fell by 23,863 contracts to 76,934 futures and options, the lowest since July 2010, CFTC data show. Longs, or bets that prices will rise, dropped 2.5 percent to the lowest since July, while shorts climbed 11 percent.
  • Metals Rout Deepens, Dragging BHP Billiton to Lowest in Decade. Metals slumped, with copper dropping to the lowest level in more than six years, after Chinese inflation figures underscored concerns about slowing growth in the world’s biggest consumer. BHP Billiton Ltd., the largest miner, fell to a fresh decade-low in Sydney. Copper dropped as much as 1.5 percent to $4,416 a metric ton and traded at $4,425.50 by 9:49 a.m. in Shanghai. Prices extended a 4.7 percent decline last week amid a rout in metals and mining company shares triggered by swings in China’s financial markets and fears the country’s economic slowdown will hit demand. In the latest signal, inflation in December stayed at about half of the government’s 2015 target. Nickel dropped 2.7 percent to $8,330 a ton. BHP shares sank 5.3 percent to A$15.48, their lowest since 2005. Rio Tinto Group lost 4.5 percent. The LME Index of six base metals slid 4.3 percent last week, the worst performance since May.
  • Unwanted Piles of Corn, Soy Spur Most-Bearish Crop Outlook Ever. Piles of unwanted grain on farms near Doug Schmitz’s storage bins in southern Minnesota are a stark reminder of just how bearish the outlook is for U.S. crop prices. After record yields during the harvest a few months ago, growers in the area still have 80 percent of their corn crop left to sell and 70 percent of soybeans, said Schmitz, who operates four grain elevators and markets to processors and exporters. Normally, half the supply would be unloaded by now, he said. While Schmitz Grain Inc. is under contract to collect 2 million bushels from local farmers, the outlook is so dim that most of that inventory hasn’t been priced yet, he said.
Wall Street Journal:
  • Fed Eyes Margin Rules to Bolster Oversight. Rules limiting what portion of stocks or bonds can be purchased through borrowing are moving up the Fed’s to-do list. The Federal Reserve is dusting off a legal power it has largely ignored for four decades, a move that could significantly expand the Fed’s influence over financial markets. 
  • Trump and Cruz Have Trouble in the Middle. Independents will decide the general election, and they’re far from sold on the Republican front-runners. A terrible way to forecast the 2016 contest is to gauge whose supporters are the loudest. Presidential elections are not decided by partisans or ideologues. The arithmetic is pretty simple: 41% of voters in the 2012 presidential election described themselves as moderates, and 29% as independents. Almost all Republicans (93%) and self-described conservatives (82%) voted for Mitt Romney, but that wasn’t enough. Even if Mr. Romney had...  
Fox News:
CNBC:
  • Something 'massive' is happening in the economy: Pal. (video) Looking at International Monetary Fund data, "the year-over-year change in global exports is at the second lowest level since 1958," Raoul Pal, Publisher of the Global Macro Investor told CNBC's"Fast Money"this week. Basically, it means economies around the world are shipping their goods at near historically low levels. "Something massive is going on in the global economy and people are missing it," Pal added.
Zero Hedge:
  • Investors in the mood to cut hedge fund exposure. Global investors are planning to cut their exposure to hedge funds in 2016 following a disappointing performance in the past year, according to a survey. The poll data, from research group Preqin, will be met with dismay by the hedge fund industry, which had hoped volatile stock markets would encourage investors to seek alternative sources of return. It is also likely to add extra pressure on hedge fund fees.  
  • Big five US investment banks hurt by China and oil. Wall Street banks are poised to unveil another batch of lacklustre profits after the run-up to the Federal Reserve’s historic interest rate rise failed to boost their crucial trading businesses. Results to be presented over the next week and a half are expected to show the big five US investment banks  generated even less revenue from trading in the last three months of the year than in the troublesome third quarter.
Telegraph:
Kyodo:
  • Abe Will Impose 'Severe' Sanctions on North Korea. Japanese Prime Minister Shinzo Abe said he will "respond severely" with unilateral sanctions of North Korea after its 4th nuclear test.
Beijing News:
  • China Premier Vows No More Strong Stimulus on Economy. China wouldn't seek strong stimulus or flood economy with too much money to expand demand, citing Premier Li Keqiang as saying. China will try its best to develop new business models and create new drivers for the economy, Li was cited as saying. China must take concrete measures to ease overcapacity in steel and coal sectors, Li said.
Night Trading
  • Asian indices are -2.50% to -1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 150.25 +4.25 basis points.
  • Asia Pacific Sovereign CDS Index 76.25 -2.75 basis points.
  • Bloomberg Emerging Markets Currency Index 67.76 +.12%.  
  • S&P 500 futures -.27%.
  • NASDAQ 100 futures -.34%.

Earnings of Note
Company/Estimate 
  • (APOL)/.31
  • (AA)/.04
  • (TISI)/.82
Economic Releases 
10:00 am EST
  • Labor Market Conditions Index for December is estimated to fall to 0.0 versus .5 in November. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Kaplan speaking, Fed's Lockhart speaking, Japan Current Account report and the (UAL) Dec. traffic report could also impact trading today.
BOTTOM LINE: Asian indices are sharply lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the week.

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Weekly Outlook

Posted by Gary .....at 9:54 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 mixed as commodity weakness, rising European/Emerging Markets/US High-Yield debt angst and emerging market currency worries offset bargain-hunting, technical buying and central bank hopes. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.
0 comments

Saturday, January 09, 2016

Today's Headlines

Posted by Gary .....at 10:26 PM
Bloomberg:
  • U.S. Stocks Tumble, Cap Worst Five-Day Start to Year on Record. (video) U.S. stocks tumbled in a late-afternoon selloff that sent major equity indexes to their worst weekly declines in more than four years, as investors found little relief in moves by China to restore calm to its sinking markets and data that showed resilience in the U.S labor market. Bank stocks led the late slide, with JPMorgan Chase & Co. and Citigroup Inc. falling at least 2.2 percent to cap the week with drops of nearly 11 percent. Energy shares in the Standard & Poor’s 500 Index lost 1.3 percent to press deeper into five-year lows. Seven of the benchmark’s 10 main industries sank more than 5.5 percent this week in the gauge’s worst five-day start to a year in data going back to 1928. The S&P 500 dropped 1.1 percent to 1,922.03 at 4 p.m. in New York, and fell 6 percent for the week. The Dow Jones Industrial Average sank 167.65 points, or 1 percent, to 16,346.45. The index lost more than 1,000 points this week in its worst opening five-days to a year ever. The Nasdaq Composite Index declined 1 percent, stretching its losing streak to seven days, the longest since 2011. “When investors saw there was no traction and the market was unable to hold rallies over several attempts throughout the day, it just became fear of going into the weekend,” said Gene Peroni, a fund manager at Advisors Asset Management Inc. in Conshohocken, Pennsylvania. “The market has just been so reactive to news, people will wait on the sidelines and see what the weekend brings. It has been a rough week.”
  • World's Richest Lose $194 Billion In First Trading Week of 2016. The world’s 400 richest people lost almost $194 billion this week as world stock markets began the year with a shudder on poor economic data in China and falling oil prices. Forty-seven billionaires lost $1 billion or more during the worst week for U.S. stocks since 2011, according to the Bloomberg Billionaires Index. The combined drop was almost seven times the $29 billion lost in the first five trading days of 2015. The 400 people on the index had a combined $3.7 trillion at the end of the week, compared with more than $4 trillion a year ago.
  • Credit Market's Fear Gauge Jumps to 3-Year High on China, Oil. The cost to protect against defaults by North American investment-grade companies rose to the highest level in three years amid a new year’s equities rout triggered by the latest cracks in China’s financial market. The end cost for high-yield debt approached a three-year high as concern grew that the selloff in Chinese capital markets will weigh on a global economy already reeling from an extended commodities slump. “The year has gotten off to a terrible start," said Martin Fridson, chief investment officer at Lehmann Livian Fridson Advisors LLC in New York. "The high-yield market, like equities, is being affected by the oil prices and the slowdown in China. The connection with China is more indirect, but clearly it’s affecting the overall market." The risk premium on the Markit CDX North America Investment Grade Index, which is composed of 125 equally weighted credit-default swaps on investment grade entities, soared 10.4 basis points this week to 98.65 basis points in New York. That’s the highest level since December 2012. A similar benchmark for junk debt jumped 52.36 basis points this week to 522.27 basis points, compared with 522.76 basis points on Dec. 11 that was the most since December 2012. "People are concerned about headline risk," said Ken Monaghan, the head of global high yield at Amundi Smith Bredeen. "They’re wondering about the extent to which the moves in the market will influence fundamentals, just because it can really change people’s willingness to take risk."
  • China's Factory-Gate Deflation Extends Record Stretch. China’s consumer inflation remained muted while factory-gate prices fell more than forecast as weakening domestic demand dimmed the outlook for growth. The consumer-price index rose 1.6 percent in December from a year earlier, the National Bureau of Statistics said Saturday, compared with a 1.6 percent median estimate in a Bloomberg survey and 1.5 percent in November. The producer-price index fell 5.9 percent, compared to a projected 5.8 percent drop, extending declines to a record 46 months. "We believe that China’s inflation will continue to slide and the CPI could fall further" to around 1 percent in 2016, Australia & New Zealand Banking Group Ltd. economists led by Liu Ligang wrote in a report ahead of the data.
  • China's Currency But Emerging-Market Peers' Problem: New Yuan. In an echo of the Nixon administration’s missive when a depreciating U.S. currency was roiling its trading partners, the yuan may be China’s currency but it’s increasingly the problem of others -- and especially its emerging-market peers. Smaller developing economies are struggling to cope with China’s decision to weaken the yuan, with Mexico warning of the risk of competitive devaluations and Thailand saying its exports will be affected. In Indonesia, where the central bank had seen room last month to cut borrowing costs, its governor says it’s prioritizing stability when setting rates and monitoring global developments. “Emerging markets can’t decouple from what is happening in China,” said Jonathan Cavenagh, head of Asia emerging-market currency strategy at JPMorgan Chase in Singapore. “The parts of China that matter for most other emerging economies are still quite weak, and in a backdrop of a weakening currency, it will weigh on sentiment elsewhere.”
  • Hedge Funds Are Bullish on Yen for First Time Since October 2012. Hedge funds and other large speculators are bullish on the yen for the first time in more than three years. Positions that profit from yen gains against the dollar outnumbered bearish positions by a net 4,103 contracts in the week to Jan. 5, according to data from the U.S. Commodity Futures Trading Commission. That’s the first time since October 2012 the data haven’t shown net short positions. "Dollar-yen has plunged on yen safe haven flows in the midst of turmoil in the global equity markets, and could fall further if China’s financial/economic woes continue to weigh on the markets," said Matt Weller, an analyst at Gain Capital Holdings Inc.’s Forex.com unit in Grand Rapids, Michigan.
  • Tensions High on Korean Border as North Raises Threat of War. Tensions remained high on the fortified border dividing North and South Korea as the resumption of propaganda broadcasts prompted Pyongyang to raise the risk of war, overshadowing diplomatic efforts to respond to North Korea’s surprise nuclear test. South Korea turned on the powerful loudspeakers on Friday in retaliation for the nuclear test conducted on Wednesday. The South Korean military also fortified its positions near the huge banks of loudspeakers that can broadcast miles into North Korea. The broadcasts risk pushing the two sides “toward the brink of war,” Yonhap News cited North Korean Workers’ Party Secretary Kim Ki Nam as saying at a rally in Pyongyang.
  • Gulf States Urge Action Against Iran to Prevent Terror Acts. The GCC, whose members are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, “calls upon the international community to take serious measures against Iran to prevent repetition of such attack on diplomatic missions in the future,” Abdul Latif Al Zayani, the secretary-general of the council, told reporters in Riyadh Saturday after a meeting of its foreign-affairs ministers. It “welcomes the strong rejection of Iran’s actions against Saudi Arabia from neighboring Arab and Islamic countries.”
  • Humana(HUM) to Record 2016 Obamacare Shortfall, Membership Drops. Humana Inc. is the latest insurer to run into trouble in Obamacare’s individual health-insurance markets. The health insurer said that it probably won’t collect enough money to cover costs for some customers who bought individual plans, and will set aside what’s known as a premium deficiency reserve. The shortfall is for 2016 plans that comply with new rules under the Affordable Care Act, Louisville, Kentucky-based Humana said Friday. UnitedHealth Group Inc., the biggest U.S. health insurer, said in November that it might stop participating in the Obamacare next year after taking losses. One analyst predicted that Humana would follow suit.
Wall Street Journal:
  • Suspect in Philadelphia Police Shooting Had Visited Egypt and Saudi Arabia. Authorities try to determine if man has terrorist connections and whether his overseas travel is significant to investigation. The man arrested for allegedly shooting a Philadelphia police officer three times in a late-night ambush traveled to Saudi Arabia in late 2011 and to Egypt in 2012, according to a person familiar with the matter.
  • Saudi Arabia Steps Up War of Words With Iran. Kingdom’s execution of Shiite cleric Nemer al-Nemer has inflamed tensions. Saudi Arabia on Saturday accused Iran of not acting like a nation state and said it is considering further measures against its regional rival, as tensions between the two countries escalated further over the kingdom’s execution of a dissident Shiite cleric.
Barron's:
  • Had bullish commentary on (HBI), (DECK), (AAPL), (INTC), (MRK), (DOW), (JPM), (C), (BAC), (GS), (SLB), (XOM), (EOG) and (NFX).
  • Had bearish commentary on .
MarketWatch.com:
Fox News:
  • Protests in Cologne after assaults; Merkel pledges new laws. Women's rights activists, far-right demonstrators and leftwing counter-protesters took to the streets of Cologne on Saturday to voice their opinions in the debate that has followed a string of New Year's Eve sexual assaults and robberies blamed largely on foreigners. Amid the heightened public pressure, Chancellor Angela Merkel's party proposed stricter laws regulating asylum-seekers in the country -- some 1.1 million of whom arrived last year. Police said that around 1,700 protesters from the anti-Islam PEGIDA movement were kept apart from 1,300 counter-demonstrators in simultaneous protests outside the city's main train station.
  • Sanders calls Bill Clinton's affair 'totally disgraceful and unacceptable'. (video) Democratic presidential candidate Bernie Sanders said Friday night that former President Bill Clinton, now stumping on the campaign trail for wife Hillary Clinton, committed a “totally disgraceful” act in having an affair with White House intern Monica Lewinsky. Sanders’ remark was in response to a question at an Iowa town hall meeting, not part of a speech. However, the Vermont senator had until this point in the primary season largely avoided saying anything negative related to the front-running Hillary Clinton, expect to attack her on policy issues.
CNBC:
Zero Hedge:
Business Insider:
  • China is going back in time. China is about to go back nearly 40 years in time, one of the most in-demand analysts on the country says. Charlene Chu at Autonomous Research published a prediction this week that secondary-industry output — think production and construction — could contract in 2016. That would be the first reduction on record since 1978.
Reuters:
  • Thermo Fisher to buy Affymetrix for $1.3 billion. Thermo Fisher Scientific Inc (TMO), the world's largest maker of scientific instruments, said it agreed to buy Affymetrix Inc (AFFX) for $1.3 billion in cash, beefing up its genetic analysis products business. Thermo Fisher's offer of $14 per share represents a rich 52 percent premium to Affymetrix's Friday close of $9.21. Affymetrix shares were trading at $13.70 after market, while Thermo Fisher was unchanged.
Financial Times:
Telegraph:
Spiegel:
  • Germany Sees 1M Refugees Trying to Cross Turkey in 2016. One million refugees to try to pass through Turkey on their way to Europe this year, citing German Deputy Interior Minister Ole Schroeder. Says Turkey may be able to hold back and accommodate 200,000 of them at best.
South China Morning Post:
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Friday, January 08, 2016

Market Week in Review

Posted by Gary .....at 5:03 PM
  • S&P 500 1,922.03 -5.96%*
photo add_zps7m934kw8.png

 The Weekly Wrap by Briefing.com. 

 *5-Day Change
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