- Commodity investors’ expectations for a rebound in shipping rates are collapsing as Chinese steel mills reduce production and economic growth sputters.Shipping investors, analysts and brokers from NY to Oslo cut their forecasts for fourth-quarter rates by 17% in three days this week, according to data compiled by Bloomberg.The cost to hire a capsize vessel, most commonly used to carry coal and iron ore, will average an estimated $70,000 a day in the period, down from $84,000 forecast at the start of the week.The price to lease a capsize is falling the most in at least nine years, according to the benchmark Baltic Exchange index.Leasing costs may continue to decline because steelmakers are scaling back production and two of the world’s fastest growing economies, Russia and China, are slowing based on estimates from the IMF and economists surveyed by Bloomberg.“It will just keep going down from here,” said London-based Andreas Vergottis, the research director at shipping hedge fund Tufton Oceanic Ltd. who correctly predicted the plunge a month ago.Prices won’t “find resistance” until they’ve fallen about another 50%, he said Sept. 23.
- PICC Property & Casualty Co. said Chinese housing prices may drop as much as 50% over the next few years, citing the insurer’s asset management arm.Property prices have “gone far beyond what people can afford” and the nation’s housing bubble is “on the verge of ending,” citing Ling Xiuli, a senior researcher at the company.Shimao Property Holdings Ltd., a Chinese developer, yesterday cut its sales target for this year by 20% to $2.05 billion on falling demand.Shimao also lowered its sales targets for next year and 2010 by about 30%.
Late Buy/Sell Recommendations CSFB: - Rated (APEI) Outperform, target $56.
- Final 2Q GDP is estimated to rise 3.3% versus a prior estimate of a 3.3% gain.
- Final 2Q Personal Consumption is estimated to rise 1.7% versus a prior estimate of a 1.7% increase.
- Final 2Q GDP Price Index is estimated to rise 1.2% versus a prior estimate of a 1.2% gain.
- Final 2Q Core PCE is estimated to rise 2.1% versus a prior estimate of a 2.1% increase.
10:00 am EST
- FinalUniv. of Mich. Consumer Confidence for September is estimated to fall to 71.0 versus prior estimates of 73.1.
Upcoming Splits - (DXPE) 2-for-1
Other Potential Market Movers - The Fed’s Bullard speaking could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by shipping and commodity stocks in the region. I expect US equities to open lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Computer longs, Biotech longs, Software longs and Retail longs. I haven’t traded today, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 7.62% and is very high at 32.51. The ISE Sentiment Index is below average at 118.0 and the total put/call is above average at 1.01. Finally, the NYSE Arms has been running around average most of the day and is currently .96. The Euro Financial Sector Credit Default Swap Index is falling 7.36% today to 115.67 basis points. This index is up from a low of 52.66 on May 5th, but down from 157.81 on Sept. 16th. The North American Investment Grade Credit Default Swap Index is falling 2.96% to 162.0 basis points. The TED spread is rising .96% to 3.05 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is up 4 basis points to 1.79%, which is down 83 basis points in about 10 weeks and at the lowest level since July 2003, when deflation was the concern.Some gauges of credit angst are subsiding today, which is a large positive.As well, the US dollar remains steady despite worries over the costs of the rescue package and weaker economic data.On the negative side, breadth isn’t nearly as positive as it should be given the move in the major averages and volume is just around average.Moreover, while the rescue package should definitely help the economy over the intermediate-term, recent events will likely lead to weakening economic data over the short-run.Nikkei futures indicate a +270 open in Japan and DAX futures indicate an +65 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, diminishing financial sector pessimism, lower credit market angst and bargain-hunting.
- Russia’s economy will grow at a slower rate than expected this year as banks hoard cash and curb lending amid the biggest financial challenge the government has faced since it defaulted and devalued the ruble in 1998.Foreign investors have pulled $50 billion out of Russia since the country invaded its pro-Western neighbor Georgia last month, according to BNP Paribas.The war, plunging commodity prices and the seizing up of global capital markets culminated in a 25% plunge in Moscow’s benchmark Micex Index over three days last week.
- Norsk Hydro ASA, Europe’s second-largest aluminum producer, said the outlook for the lightweight metal is “uncertain” because of the global financial crisis.Market turmoil will curb short to medium-term economic growth, Hydro said.Aluminum demand in North America will drop as much as 5% this year.
- China and Iraq will conclude a $3 billion oil agreement next week, citing a spokesman from the Middle EastA Chinese delegation will visit Baghdad to sign the accord that will allow China National Petroleum Corp., China’s biggest oil company, to develop the field for 20 years, citing Assem Jihad. nation’s oil ministry.
Referans: - Orders for Turkish car parts have dropped 30% as the global financial crisis cuts domestic and export demand.Car producers and parts manufacturers have started to fire workers and reduce production.
Haaretz: - Israeli Finance Ministry officials say economic growth may slow to between 2% and 2.5% next year, and some say it may fall below 2%.The unofficial expectations compare with the 3.5% estimate the ministry used for forecasting tax revenue in the 2009 budget.