Style Underperformer:
Sector Underperformers:
- 1) Agriculture -5.25% 2) Steel -1.74% 3) Hospitals -1.47%
Stocks Falling on Unusual Volume:
- POT, CMP, BCS, DB, BP, SCCO, PMCS, CRK, INT, HIMX, HDB, SBGI, NXST, IPI, MOS, USU, HMA, SQM, XYL, OFIX, SAVE, AGU, CF, NATI, INT, COH, DDD, SNDK, MLM, EXLS, CRK, BP, AIR, ASGN, NOV, EOC, BAS, ASGN, AFOP, VSH, X and LMNX
Stocks With Unusual Put Option Activity:
- 1) TIF 2) COH 3) FIO 4) MMM 5) KRE
Stocks With Most Negative News Mentions:
- 1) NDAQ 2) SNDK 3) SOHU 4) POT 5) MOS
Charts:
Style Outperformer:
Sector Outperformers:
- Networking +2.28% 2) Gaming +1.39% 3) Semis +.88%
Stocks Rising on Unusual Volume:
- SIMO, VNDA, RATE, HLF, AEGR, OSK, RRD, PBI, HRS, CVLT, BYD, GT, GNRC, ROK and VRTX
Stocks With Unusual Call Option Activity:
- 1) OIS 2) VNDA 3) TIBX 4) DDD 5) BYD
Stocks With Most Positive News Mentions:
- 1) MAS 2) PRGO 3) RATE 4) ARO 5) FWLT
Charts:
Evening Headlines
Bloomberg:
- China Cities May Tighten Property Curbs as Slowdown Lifts Target. Chinese
cities seeking to cap home-price gains below income growth may need to
tighten property curbs as the nation’s slowing economic expansion makes
their targets more difficult to meet. Hangzhou, the capital city of the eastern province of Zhejiang, will tighten approvals of pre-sale permits in the
second half and may raise down payments for second homes to make
sure its price-control target is met, according to a July 27
report by Today Morning Express, a Chinese-language newspaper
affiliated with the provincial government. “The home-price problem facing the Hangzhou government in
the second half isn’t an isolated case, and therefore we expect
more second- and third-tier cities to tighten price controls,”
Luo Yu, a Shanghai-based analyst at advisory firm CEBM Group,
wrote in an e-mailed report. “The use of administrative
measures such as pre-sale permits and price registration will
have a negative impact on housing supply and sales.”
- China Is Set to Suffer the Skyscraper Curse. Auditors seeking to head off a Chinese crash are rushing to scrutinize
the debt-swollen books of the country’s local governments. Economists
are poring over statistics, bond spreads, electricity gauges and stock
valuations. They might all have more luck if they got their noses out of
the books and looked up.
- China’s Provinces Trail Growth Targets in Slowdown Signal. Most Chinese provinces reported first-half growth below annual
targets that in some instances were already lower than last year’s
goals, underscoring the breadth of the nation’s slowdown. Seventeen
of 30 provinces and provincial-level cities said January-to-June
expansion trailed 2013 targets, compared with 14 of 31 in last year’s
first half, according to data compiled by Bloomberg News. Inner
Mongolia, Jilin and Ningxia had the widest gaps, each at 3 percentage
points
below a 12 percent target. One province, Qinghai, has yet to release its
latest figures.
- Europe’s Biggest Solar Projects Threatened by China Deal.
Europe’s decision to curb imports of Chinese solar panels threatens to
limit the biggest projects using the technology in the 28-nation bloc
while having little impact on the manufacturers accused of dumping their
products. The agreement to set a minimum price of 56 euro cents
($0.74) a watt for panels until the end of 2015, reached this weekend,
will hurt developers of ground-mounted plants and reduce installations,
said Bloomberg New Energy Finance, IHS Inc. (IHS) and the U.K. Solar
Trade Association. Developers were
already buying Chinese panels cheaper, they said.
- Stevens Says Inflation Data Hasn’t Shifted RBA Scope to Ease. Australia’s
central bank Governor Glenn Stevens said second-quarter inflation data
suggests there’s still room to lower interest rates if required and that
he wouldn’t be surprised if the currency dropped further. “Recent
inflation data do not appear to have shifted” the RBA’s assessment that
the outlook for prices may “afford some scope to ease policy further if
needed to support demand,” he said today in the text of a speech in
Sydney. “The recent decline in the exchange rate seems to make sense
from a
macroeconomic perspective. It would not be a major surprise if a
further decline occurred over time.”
- RBI Says Restoring India Rupee Stability Is Key Policy Objective. The
Reserve Bank of India said steadying the rupee to help preserve
economic stability has become the priority for monetary policy and that
more steps are needed to curb the nation’s current-account deficit. “The priority for monetary policy now is to restore stability in the currency market so that macro-financial
conditions remain supportive of growth,” the Reserve Bank said
in an economic review before today’s rate decision in Mumbai.
Such a strategy will work only if reinforced by “structural
reforms” to reduce the deficit and spur investment, it said.
- Most Asian Stocks Rise as Japanese Exporters Gain on Yen.
Most Asian stocks rose as Japanese exporters advanced after the yen
weakened, offsetting a bigger-than-estimated decline in Japanese factory
output. Toyota Motor Corp. (7203) climbed 2.2 percent in Tokyo as the
yen’s weakness boosted the outlook for export income. Daiwa Securities
Group Inc., Japan’s second-largest brokerage, jumped 3.6 percent after
posting earnings that beat analyst estimates. Jiangxi Copper Co.,
China’s biggest producer of the metal,
dropped 0.9 percent in Hong Kong after copper futures declined. The MSCI Asia Pacific Index added 0.2 percent to 133.42 as
of 12:10 p.m. Tokyo time, with more than two shares rising for
each that fell.
- Copper Declines After China Provinces’ Growth Trails Targets.
Copper dropped after data showed
that first-half expansions in most provinces in China missed targets,
reinforcing concern that demand growth may slow in the world’s largest
consumer. Metal for delivery in three months fell as much as 0.6
percent to $6,840 a metric ton on the London Metal Exchange and was at
$6,845 at 10:11 a.m. in Shanghai. The price declined to $6,820
yesterday, the lowest since July 10.
- JPMorgan(JPM) Accused of Energy-Market Manipulation by U.S. Agency. JPMorgan
Chase & Co. (JPM) manipulated power markets in California and the
Midwest from September 2010 to June 2011, obtaining tens of millions of
dollars in overpayments from grid operators, the U.S. Federal Energy
Regulatory Commission alleged today. The agency said in a Notice of
Alleged Violations that it
had preliminarily determined a JPMorgan trading unit had engaged
in eight manipulative bidding strategies. The New York-based bank has
agreed to sanctions including a
fine of about $400 million in a settlement that may be announced
as early as tomorrow, according to a person familiar with the
case who asked not to be identified because the terms aren’t yet
public. Other sanctions may include forfeiting profits, this
person said.
- Regulators Face Scrutiny on Banks’ Commodities at Senate Hearing. U.S. banks’ ownership and trading of
physical commodities will face further scrutiny tomorrow when
the heads of the Commodity Futures Trading Commission and Securities and Exchange Commission testify before lawmakers.
Senator Sherrod Brown, the Ohio Democrat who led a hearing on the issue
last week, said he plans to question the CFTC’s Gary Gensler and the
SEC’s Mary Jo White on their oversight when the two chairman appear
before the chamber’s Banking Committee
on implementation of Dodd-Frank Act reforms.
- Wynn Resorts’(WYNN) Profit Lags Estimates on Weaker Macau Sales. Wynn
Resorts Ltd. (WYNN), the casino company run by Steve Wynn, reported
profit that trailed analysts’ estimates amid a slowing of Macau revenue
and ongoing hotel renovations by the company there. Excluding items, profit totaled $1.51 a share, Las Vegas-based Wynn said today in a statement. Analysts had projected
$1.57 a share, the average of 23 estimates compiled by
Bloomberg. Property Ebitda -- earnings before interest, taxes, depreciation
and amortization -- in Macau fell 4 percent. “Overall, the results in Macau were below our fairly low
expectations,” wrote Joseph Greff, an analyst with JPMorgan Chase & Co., in an investor note today.
“Ebitda margins were 210 basis points below our estimate, reflective of
a tough June on the mass table side and, to some degree, room
renovation disruption,” wrote Greff, who rates the shares the equivalent
of buy.
Wall Street Journal:
- U.S. Funds Buy No Love at Afghan College. Nangarhar University is a symbol of American largess: U.S. taxpayers
foot the bill for dormitories, classrooms and computer labs. Increasingly dominating the campus of Afghanistan's second largest
university, however, are Islamist activists who openly sympathize with
the Taliban. "The Taliban are the people who are defending this country," said Hamad,
a leader of the self-appointed Nangarhar University student council
that organizes regular demonstrations against the U.S. and President
Hamid Karzai's government. "The foreign troops are invaders."
- White House's Egypt Debate Heralds Shift. In Skirting Declaration on Whether Morsi's Overthrow Was a Coup, U.S. Seeks to Guard Its Limited Leverage Over Generals.
When Obama administration lawyers told top policy makers that they had
come up with a way to avoid designating Egypt's military takeover a
coup—a
decision that would obligate the U.S. to freeze aid to the country—some
senior White House staffers voiced reservations about the message that
would send.
But the plan was embraced by members
of President Barack Obama's national security cabinet, who concluded
unanimously that there was no other way to maintain limited U.S.
leverage with Egypt's generals and avoid fueling further violence, said
U.S. officials.
Fox News:
CNBC:
- Could Japan fall back into recession next year? Even before Japan can stage a convincing growth rebound, fears are
already building over a sharp slowdown in the world's third largest
economy, with one analyst warning of a possible recession next year.
Zero Hedge:
Business Insider:
Reuters:
- China risks following Japan into economic coma. After decades of
emulating Japan's export-driven economic miracle, China appears in
danger of following it into the same kind of economic coma that Japan is
trying to wake up from 20 years later.
China is struggling to wean
itself off a habit picked up from its more advanced neighbour: relying
for growth on exports and credit-fuelled investment. That has left its
economy lopsided, economists say, with massive over investment in
property and industries rapidly losing their cost advantage, from mining
and electronics to cars and textiles. Wages are rising, the return on
investments falling.
CaixinOnline:
China Securities Journal:
- China Finishes Draft to Remove Overcapacity. China has finished
draft on resolving overcapacity problem in steel, cement, electrolytic
aluminum, plate glass and shipbuilding industries, citing a person
familiar with the matter.
Securities Daily:
- Property Restrains Upgrade of Chinese Economy. Property has
become the biggest issue holding back the upgrade of China's economy,
according to a front-page commentary written by Li Fan. Risks are
increasing that real estate may "kidnap" the banking system, according
to the commentary. China should loosen limits on transaction of existing
homes to increase supply and curb prices, the commentary said.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 142.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 108.75 +2.25 basis points.
- NASDAQ 100 futures +.21%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The S&P/CS 20 City MoM SA for May is estimated to rise +1.4% versus a +1.72% gain in April.
10:00 am EST
- Consumer Confidence for July is estimated to fall to 81.3 versus 81.4 in June.
Upcoming Splits
Other Potential Market Movers
- The
Japan Manufacturing PMI report, Eurozone Consumer Confidence/CPI data,
Spain gdp report, India rate decision, weekly retail sales reports and
the Keefe Bruyette Woods Community Bank Conference could also impact
trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and real estate
shares in the region. I expect US stocks to open modestly higher
and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.42 +5.5%
- Euro/Yen Carry Return Index 135.28 -.59%
- Emerging Markets Currency Volatility(VXY) 9.25 +1.54%
- S&P 500 Implied Correlation 50.40 +.98%
- ISE Sentiment Index 109.0 +12.37%
- Total Put/Call .81 -19.0%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.11 +2.60%
- European Financial Sector CDS Index 148.46 +.87%
- Western Europe Sovereign Debt CDS Index 88.15 -.96%
- Emerging Market CDS Index 308.76 +2.33%
- 2-Year Swap Spread 16.25 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.75 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $131.70/Metric Tonne -.68%
- Citi US Economic Surprise Index -5.50 -2.1 points
- Citi Emerging Markets Economic Surprise Index -27.10 +2.9 points
- 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
- Nikkei Futures: Indicating -103 open in Japan
- DAX Futures: Indicating +14 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- China’s Provinces Trail Growth Targets in Slowdown Signal. Most Chinese provinces reported
first-half growth below annual targets that in some instances
were already lower than last year’s goals, underscoring the
breadth of the nation’s slowdown. Seventeen of 30 provinces and provincial-level cities said January-to-June expansion trailed 2013 targets, compared with 14
of 31 in last year’s first half, according to data compiled by
Bloomberg News. Inner Mongolia, Jilin and Ningxia had the widest
gaps, each at 3 percentage points below a 12 percent target. One
province, Qinghai, has yet to release its latest figures.
- Bad-Loan
Risk Puts Bank Yield Gap at 17-Month High: China Credit. Chinese policy
banks' borrowing costs are the highest in more than a year relative to
the government's as a slowdown in the world's second-largest economy
fans concern bad loans will climb. The average yield on one-year debt
sold by the three lenders - China Development Bank Corp., Export-Import
Bank of China and Agricultural Development Bank of China - was 74 basis
points higher than comparable sovereign notes on July 25, the biggest
gap since March 2012, ChinaBond data show. That compares with this
month's low of 41 basis points on July 10 and precedes $8.5 billion of
debt sales by China Development Bank and Exim Bank today and tomorrow.
"Loan default is something we are worried about," said Wee-Khoon Chong, a
Societe Generale SA strategist in Hong Kong. "The rise in bank bond
yields is also driven by a liquidity squeeze as well. Money is at a
premium and investors demand higher yields."
- Brazil Swap Rates Rise on Inflation Outlook; Real Little Changed.
Brazil’s swap rates climbed after economists raised their 12-month
inflation forecast for a fourth straight week, adding to speculation
that the central bank will step up increases in borrowing costs. Swap
rates due in January 2015 rose five basis points, or 0.05 percentage
point, to 9.45 percent at 10:04 a.m. in Sao Paulo. “You need to
tighten more on the monetary side unless there’s room to let inflation
accelerate, and I don’t think there is,” Eduardo Suarez, a Latin America
foreign-exchange strategist at Bank of Nova Scotia, said in a telephone
interview from Toronto.
- S&P Sees Downgrade Risk
Rising as Debt Costs Climb: India Credit. India's attempt to buoy the
rupee by creating a cash crunch has driven corporate debt costs to a
2009 high, threatening the creditworthiness of businesses already
battling the worst economic slowdown in a decade. The extra yield on
three-year company bonds over government notes surged 113 basis points
in July to 211, data compiled by Bloomberg show.
- European Stocks Are Little Changed. Banca Popolare di Milano
Scrl led financial companies lower, retreating 5.9 percent. The Stoxx Europe 600 Index added less than 0.1 percent to
299.06 at the close of trading, having earlier climbed as much
as 0.7 percent.
- Dollar Strengthens Versus Euro Before Fed Meeting; Yen Gains.
The dollar strengthened versus the
majority of its most-traded peers amid expectations the Federal Reserve
will reiterate plans this week to reduce stimulus if economic
performance continues to show signs of improvement. Japan’s currency advanced against all of its 16 major peers
after Japanese retail sales fell and Chinese industrial
companies reported slowing profits, boosting demand for haven
assets.
- Egypt Warns Against Unrest as Brotherhood Presses Protest. Egypt’s
interior minister, speaking after dozens of people died in protests,
said security forces are determined to bring about stability, a veiled
warning to Islamists who want President Mohamed Mursi reinstated. Interior Minister Mohamed Ibrahim’s comments signaled
impatience with demonstrations that have roiled the country
since the military deposed Mursi on July 3 after mass rallies
seeking his ouster. The pro-Mursi protests have led to fatal
clashes, undercutting hopes for national reconciliation.
- Corn Extends Drop to 33-Month Low on U.S. Crop; Soybeans Decline. Corn extended declines to a 33-month
low and soybeans fell on speculation that U.S. crops will
benefit from cooler weather and rain in the next two weeks.
Wheat rose. Temperatures will average below normal over much of the
Midwest in the next two weeks, helping to boost yields in areas
with adequate soil moisture and reducing stress on crops that
have not received significant rain this month, World Weather
Inc. said in a report today. Fields from Kansas to Kentucky will
get rain during the next two days and some crops in Nebraska and
Iowa will benefit from moisture beginning Aug. 1, the private
forecaster said.
Wall Street Journal:
- Bank of Italy Inspecting Top Lenders' Books. Rise in Bad Loans Prompts Quiet Inspections. The Bank of Italy is quietly inspecting the finances of some of the
country's top lenders, which could push some Italian banks to sell
assets or take other major steps, according to a central-bank document
reviewed by The Wall Street Journal. The central bank's examinations, which were previously undisclosed,
come against a backdrop of increasing worry about the health of some of
the country's lenders amid a rising tide of souring loans. The current inspections are a follow-up to a previous round last fall
that resulted in the Bank of Italy ordering banks to set aside a total
of about €3.4 billion ($4.5 billion) more to guard against losses on bad
loans. Those results haven't previously been made public. Now, the Bank of Italy is digging even deeper into the loan
portfolios of some top banks, according to the document, while launching
on-site inspections of an additional 20 lenders.
- Big Hedge Funds to Swoop on Start-Up Talent. Some
of the world’s biggest hedge funds, including Marshall Wace, Millennium
Management, CQS and BlueCrest Capital Management, are among firms that
are capitalizing on a difficult environment for start-ups, hiring
potential managers who might once have considered setting up on their
own.
- Many Dead in Baghdad Bombings. At Least 47 Killed in Coordinated Attacks. A dozen car bombings hit in and around the Iraqi capital during
morning rush hour on Monday, officials said, killing at least 47 people
in the latest coordinated attack by insurgents determined to undermine
the government. The blasts, which wounded scores more, are part of a monthslong surge
of attacks that is reviving fears of a return to the widespread
sectarian bloodshed that pushed the country to the brink of civil war
after the 2003 U.S.-led invasion. Suicide attacks, car bombings and
other violence have killed more than 3,000 people since April, including
more than 500 since the start of July, according to an Associated Press
count.
CNBC:
- Rising rates zap pending US home sales momentum. Contracts to purchase previously owned U.S. homes fell in June,
retreating from a more than six-year high touched the prior month,
suggesting rising mortgage rates were starting to dampen home sales. The National Association of Realtors said on Monday its Pending
Homes Sales Index, based on contracts signed last month, decreased 0.4
percent to 110.9. May's index was revised down to 111.3 from a
previously reported 112.3.
- The new American poor: 4 in 5 live in danger of it. Four out of five U.S. adults struggle with joblessness,
near-poverty or reliance on welfare for at least parts of their lives, a
sign of deteriorating economic security and an elusive American dream. Survey data exclusive to The Associated Press points to an
increasingly globalized U.S. economy, the widening gap between rich and
poor, and the loss of good-paying manufacturing jobs as reasons for the
trend.
- 'Rally has gone too far,' Citi strategist says. Investors are getting a little too comfortable these days with
unspectacular earnings and weak economic growth, suggesting to one
otherwise-bullish Wall Street analyst that some pain is ahead.
- Forget growth, China is contracting, experts say. (video) Many China bears, including closely watched short-seller Jim
Chanos, have warned that economic numbers from the Chinese government
dramatically overestimate growth. But Robert Barbera,
co-director of Johns Hopkins Center for Financial Economics, argued on
CNBC on Monday that China's economy is actually contracting.
Zero Hedge:
Business Insider:
Reuters:
Financial Times:
- US money market funds return to EU banks. In
the first half of the year, the 10 biggest US money market funds
allocated about 15 per cent of their $652bn in assets to short-term
deposits and debt securities with eurozone banks, according to Fitch,
the credit rating agency. That represents an increase of nearly 90 per cent since June 2012, when fears over a eurozone break-up were at their peak.
Telegraph:
European Central Bank:
Economic Information Daily:
- China Should Start Probe of Imported Car Prices. China should
start an investigation on imported car prices, citing industry people.
Profit from selling imported luxury cars in China was 30% higher than
global average, citing China Automobile Dealers Assoc. executive vice
president and secretary general Shen Jianjun.
Style Underperformer:
Sector Underperformers:
- 1) Construction -1.53% 2) Energy -1.20% 3) Banks -1.18%
Stocks Falling on Unusual Volume:
- CTCM, EPD, AMX, SWN, TITN, PRGO, CYOU, SOHU, EXPE, HAE, RH, LECO, YRCW, SFUN, HTZ, OLED, IXYS, FDML, VMI, OB, SNDK, SMTC, DRC, XRM, TAL, ANGI, BCS, RYAAY, SAIA and CAF
Stocks With Unusual Put Option Activity:
- 1) NOV 2) MET 3) IBB 4) COG 5) COH
Stocks With Most Negative News Mentions:
- 1) WFM 2) ONXX 3) AIG 4) TWX 5) RH
Charts:
