Evening Headlines
Bloomberg:
- Spanish Bad Bank Risks Investor Conflict With Stressed Lenders. Spain must ensure a so-called bad
bank meets investor demands for yield without undermining the
balance sheets of lenders as the government seeks a panacea for
the country’s real estate crisis. “If the new investors do not believe they are going to get
a good return on their investment, they will not want to get
involved,” said Vanessa Gelado, director of Drago Capital, a
Madrid-based real estate fund that’s considering investing in
the bad bank. “It’s a very difficult equilibrium to achieve.” The terms of Spain’s 100 billion-euro ($129 billion) bank bailout oblige Prime Minister Mariano Rajoy to set up an asset
management firm to house foreclosed homes and real estate loans
from banks that received state aid. The government wants private
investors to own the majority of the bank so the debt doesn’t
contaminate national accounts as it tries to rein in the euro
region’s third-biggest budget deficit. The strategy pits investor demands for low valuations on
assets transferred to the bad bank with the needs of some
lenders to support real estate prices to avoid further losses,
said Luis Garicano, a professor at the London School of Economics. “It’s a very difficult balance to achieve, or maybe it’s
impossible,” said Garicano in a phone interview. “If you’re
the government, you’re trying to attract investors, but at the
same time you don’t want to underpay for the assets or you risk
undermining the banks and maybe having to recapitalize them
unnecessarily.”
- China Stocks Swing Between Gains and Losses. The Shanghai Composite Index fell 0.1 percent to 2,030.68
as of 10:37 a.m. local time, after changing directions at least
10 times.
- China Wealth Gap to Stay in Danger Zone, Government Adviser Says. China's income gap will persist at
a “dangerously” high level over the coming decade, putting
pressure on the nation’s incoming leaders to curb corruption and
state control of industries, according to a government adviser. China’s Gini coefficient a measure of inequality, may
hover around 0.5, Li Shi, who helped draft a government plan on
income distribution, said in an interview last week. The
government hasn’t published a countrywide Gini figure since 2000.
The index ranges from 0 to 1, readings at 0.4 or higher are used
by analysts as a gauge of the potential for social disturbances.
- Pork Supply Shrinks to Lowest Since 1975 on Drought: Commodities. U.S. hog farmers are slaughtering
animals at the fastest pace since 2009 as a surge in feed costs
spurs the biggest losses in 14 years, signaling smaller herds
next year and a rebound in pork prices.
- Copper
Stockpiles in Bonded Shanghai Warehouses Seen at Record. Copper
inventories at bonded warehouses in Shanghai probably climbed to a
record as import premiums dropped to a four-month low, signaling demand
in China may not be improving as much as expected after a summer lull.
Reserves were 650,000 metric tons, according to the median of nine
estimates from traders, analysts and warehouse managers, compiled by
Bloomberg. Five said that this was a record. The amount compared with an
estimate of 550,000 tons by Macquarie Group Ltd. on Aug. 20.
- Financial Firms Post Fewer Job Openings in Global Economic Slump. Financial firms are advertising fewer open jobs worldwide as slower
economic growth in the United States and the European debt crisis put
pressure on bank revenue, according to data compiled by Bloomberg. Job postings for the sector dropped 21 percent to 7,540 in September
from a year earlier, according to Bloomberg Industries. That figure fell
17 percent to 1,373 in the U.S., 24 percent to 2,508 in Britain and 15
percent to 2,377 in Asia, the data show.
- Caterpillar(CAT) Cuts 2015 Outlook as Mining Spending Falls. Caterpillar Inc., the world’s
biggest construction and mining equipment maker, cut its
forecast for 2015 earnings after commodity producers reduced
capital expenditure. Caterpillar said profit will be $12 to $18 a share,
compared with a previous projection of $15 to $20. While a
global recession remains possible, Caterpillar is forecasting
moderate and “anemic” growth through 2015, Chairman and Chief
Executive Officer Doug Oberhelman said today in a presentation
to analysts at the MINExpo industry conference in Las Vegas.
Construction activity in emerging markets will probably show
modest improvements, he said. “We’ve seen a slowing in economic growth that was more
than we expected,” he said. “We think ‘13 could look like 2012
in terms of worldwide economic growth.’’ Oberhelman has bet on a continuation of growth in commodity
demand by buying mining-equipment maker Bucyrus International
Inc. for $8.6 billion last year and agreeing in November to
acquire ERA Mining Machinery Ltd. in China. His plans are coming
under pressure as mining companies cut capital expenditures
after economic expansion slowed in China, the world’s largest
user of coal and metals. Global mining capital expenditures will drop 14 percent
through 2014 from a peak of $136 billion this year, JPMorgan
Chase & Co. said in a Sept. 21 report. Caterpillar fell 2.2 percent to $88.87 at 6:30 p.m. after
the close of regular trading in New York.
- CFTC Will Give Banks 2 Minutes to Accept or Reject Cleared Swaps. Swaps dealers will have two minutes
to accept or reject trades that will be sent to clearinghouses
starting next month, the Commodity Futures Trading Commission
said in the most-detailed requirement about timing to date. The time allowed for trade approval will fall to one minute
90 days after the CFTC rules are published in the Federal
Register, according to a Sept. 21 e-mail sent by Ananda Radhakrishnan, director of the division of clearing and risk.
Banks including JPMorgan Chase & Co., Goldman Sachs Group Inc.,
Citigroup Inc. and Morgan Stanley have argued that the
technology to instantly verify the credit and risk allowance of
their customers doesn’t exist and asked the CFTC to reconsider.
Wall Street Journal:
- New Wave of Workers Tries Novel Approach: Save More. As older Americans lose jobs, lose homes and delay retirement, their
children are watching and reacting. Growing numbers of young Americans
are boosting savings, cutting spending and planning for retirement.
- Romney Attacks Obama on ‘Bumps in the Road’. Mitt Romney accused President Barack Obama
on Monday of downplaying recent foreign crises as he seeks to gain an
edge on foreign policy – a relative area of strength for the president. President Barack Obama was assessing his support for the governments that have sprung up in the wake of the Arab Spring when he argued in a 60 Minutes interview that aired Sunday that “I was pretty certain and continue to be pretty certain that there are going to be bumps in the road.” “Bumps in the road?” Mr. Romney said Monday as he sized up Mr. Obama’s
interview performance and rattled off examples of tumult abroad. “We had
an ambassador assassinated…twenty thousand people have been killed in
Syria. We have tumult in Pakistan and of course Iran is that much closer
to having the capacity to build a nuclear weapon. These are not bumps
in the road, these are human lives.”
- State of Europe's Banks: Safe and Stressed. Germany's Lenders Find Fortunes Tied
To Spanish Peers.
- Hon Hai Riot Shows Squeeze on Chinese Manufacturers.
-
The 10% President.
The annotated Obama: How 90% of the deficit becomes somebody else's
fault. A question raised by President Obama's immortal line on CBS's "60
Minutes" on Sunday—"I think that, you know, as President, I bear
responsibility for everything, to some degree"—is what that degree
really is. Maybe 70% or 80% of the buck stops with him? Or is it
halfsies? Nope. Now we know: It turns out the figure is 10%. The other
90% is somebody else's fault. This revelation came when Steve Croft
mentioned that the national
debt has climbed 60% on the President's watch. "Well, first of all,
Steve, I think it's important to understand the context here," Mr. Obama
replied. Fair enough, so here's his context in full, with our own
annotation and translation below:
CNBC:
Zero Hedge:
Business Insider:
NY Times:
-
Ex-Regulator Has Harsh Words for Bankers and Geithner.
Sheila C. Bair, who tormented Wall Street and its Washington allies as a
banking regulator, is taking a fresh swipe at her foes in retelling the
dark days of the financial crisis. In a book to be released on Tuesday,
the former chairwoman of the Federal Deposit Insurance Corporation
takes aim at the bankers she blamed for the crisis. She also
criticized fellow regulators, including current Treasury Secretary
Timothy F. Geithner, for their response to the problems. Ms. Bair
painted Mr. Geithner, the former head of the Federal Reserve Bank of New
York, as an apologist for Wall Street, opposing some postcrisis
reforms. She questioned whether his effort to inject billions of dollars
into nine big banks masked a rescue intended solely for Citigroup, a theory that other government officials have rejected.
Real Clear Politics:
Rasmussen Reports:
Reuters:
- Clinton reassures Egypt's Mursi on U.S. assistance. Secretary of State Hillary
Clinton reassured Egypt's new Islamist president on Monday that
the United States would forge ahead with plans to expand
economic assistance despite anti-American protests that cast new
shadows over U.S. engagement with the region. Clinton met Egyptian President Mohamed Mursi in New York,
where both are attending this week's U.N. General Assembly
meeting, and reinforced the Obama administration's continued
commitment to provide both military and economic aid for Cairo,
a senior State Department official said.
- Red Hat narrows full-year revenue forecast. Red Hat Inc, the world's largest
distributor of Linux operating software, reported a
lower-than-expected adjusted profit as costs rose, and lowered
the top end of its full-year revenue outlook on slow growth in
its services business.
Financial Times:
- Wall St engineering revival of CDS. Wall
Street financial engineers have devised a new way to combat declining
trading in the credit derivatives market – they are revamping an index
to add financial instruments that do not exist.
Telegraph:
Nikkei:
- Toyota
to Reduce Lexus Output Amid Unrest in China. The co. plans to reduce
production of Lexus vehicles for the China market by about 20% as early
as this month.
Evening Recommendations
CSFB:
- Rated (GHDX) Outperform, target $43.
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 137.0 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 116.50 +5.5 basis points.
- FTSE-100 futures +.27%.
- S&P 500 futures +.28%.
- NASDAQ 100 futures +.28%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (FDS)/1.17
- (CCL)/1.43
- (JBL)/.58
- (CPRT)/.33
Economic Releases
9:00 am EST
- The S&P/CS 20 City MoM% SA for July is estimated to rise +.75% versus a +.94% in June.
10:00 am EST
- Consumer Confidence for September is estimated to rise to 63.2 versus 60.6 in August.
- The Richmond Fed Manufacturing Index for September is estimated to rise to -5 versus -9 in August.
- The House Price Index for July is estimated to rise +.6% versus a +.7% gain in June.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Plosser speaking, ECB's Draghi speaking, Germany inflation data,
weekly retail sales reports, 2Y T-Note auction and the (JOY) analyst day
could also impact trading today.
BOTTOM LINE: Asian
indices are mostly lower, weighed down by technology and commodity
shares in the region. I expect US stocks to open modestly higher
and to weaken into the afternoon, finishing modestly lower. The
Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Volume: Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- VIX 14.06 +.57%
- ISE Sentiment Index 133.0 +23.15%
- Total Put/Call .79 -1.25%
- NYSE Arms 1.01 -35.65%
Credit Investor Angst:
- North American Investment Grade CDS Index 98.16 bps +1.86%
- European Financial Sector CDS Index 186.60 bps +2.11%
- Western Europe Sovereign Debt CDS Index 135.15 +2.23%
- Emerging Market CDS Index 218.76 +2.41%
- 2-Year Swap Spread 13.25 +.25 basis point
- TED Spread 27.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -22.0 -1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .10% unch.
- Yield Curve 146.0 -3 basis points
- China Import Iron Ore Spot $103.70/Metric Tonne -2.54%
- Citi US Economic Surprise Index 20.6 unch.
- 10-Year TIPS Spread 2.46 -3 basis points
Overseas Futures:
- Nikkei Futures: Indicating -62 open in Japan
- DAX Futures: Indicating +19 open in Germany
Portfolio:
- Slightly Higher: On gains in my Medical sector longs and index hedges
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
BOTTOM LINE: Today's
overall market action is mildly bearish as the
S&P 500 trades slightly lower on rising global growth fears, high food/energy prices,
earnings worries, growing Mid-east unrest, increasing China/Japan
tensions, US "fiscal cliff" worries and tech/energy sector weakness. On
the positive side, Road & Rail and Utility shares are
especially strong, rising more than +.75%. The Transports have traded well throughout the day. The UBS-Bloomberg Ag Spot
Index is down -.5%, Gold is down -.5% and Oil is down -1.2%. Brazil is +.8% higher on the day. On
the negative side, Coal, Alt Energy, Oil Service, Computer,
Software, Semi, Biotech and Homebuilding shares are especially weak,
falling more than
-1.25%. Tech and Energy shares have traded poorly throughout the day.
Lumber is falling -1.0 and Copper is down -1.3%. Major Asian indices were mostly lower overnight, led down by a -.5% decline in Australia. The Shanghai Comp(-7.6% ytd)
opened at another new multi-year low, but rallied modestly into the
close to finish +.3% higher. Major European indices are lower today, led
down by a -1.2% decline in Spain. The Bloomberg European Bank/Financial
Services Index is -.56% lower. The Germany sovereign cds is jumping +5.9% to 49.79 bps, the France sovereign cds is up +2.9% to 108.0 bps(+12.0% in 5 days), the Japan sovereign cds is up +3.7% to 86.77 bps(+27.6% in 5 days), the Russia sovereign cds is surging +6.2% to 149.87 bps(+15.4% in 5 days), the Saudi sovereign cds is gaining +4.8% to 90.45 bps, the Israel sovereign cds is up +2.5% to 147.99 bps(+13.6% in 5 days)
and the Brazil sovereign cds is up +2.2% to 107.31 bps. Moreover, the
European Investment Grade CDS Index is gaining +3.0% to 130.47 bps, the
Asia Pac Sovereign CDS Index is jumping +4.8% to 116.46 bps and the
Italian/German 10Y Yld Spread is up +1.1% to 349.11 bps. The UBS/Bloomberg Ag Spot Index is up +22.0% since 6/1. The benchmark China Iron/Ore Spot Index is down -42.7% since 9/7/11. The China Hot Rolled Steel Sheet Spot Index
also continues to trend lower despite the recent bounce. As well,
copper and lumber continue to trade poorly given equity investor
perceptions that the Eurozone has successfully kicked-the-can, housing
has hit a major bottom and global central bank stimuli will boost
economic growth in the near future. US weekly retail sales have decelerated to a sluggish rate at +2.5%. The Philly Fed ADS Real-Time Business Conditions Index has shown meaningful deceleration since early July. Moreover,
the weekly MBA Home Purchase Applications Index has been around the
same level since May 2010 despite investor perceptions of a big
improvement in the nationwide housing market. The Baltic Dry Index has
plunged around -65.0% from its Oct. 14th high and is now down around
-55.0% ytd. Shanghai Copper Inventories have risen +360.0% ytd. Oil tanker rates have plunged, with the benchmark Middle East-to-US voyage down to 27.50 industry-standard worldscale points, which is near the lowest since May, 2009.
The 10Y T-Note continues to trade too well with the yield falling -4
bps to 1.71%. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro
backdrop. It remains unclear to me whether or not Germany will
destroy its own balance sheet or allow the ECB to monetize debt in a
major way in an attempt to "save" the euro even as investors have been pricing this outcome into stocks. Massive tax hikes and spending cuts have still yet to hit in several key eurozone countries that are already in recession. A lack of economic competitiveness and growth incentives remain unaddressed problems. The European debt crisis is also really affecting emerging market economies now, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades over the intermediate-term. I continue to believe that China's problems are much larger than commonly perceived
and cannot be solved with another massive stimulus package given their
real estate bubble, rising food prices/labor costs, massive
overcapacity in certain key parts of the economy and growing bad loans
problem. Little being done by global central bankers will actually boost global economic growth to an extent that overcomes the growing
macro headwinds over the intermediate-term, in my opinion. Over the intermediate-term the Fed's recklessness
greatly increases the chances of hard-landings in key emerging markets
and of a serious global stock swoon, in my opinion. Moreover,
uncertainty surrounding the effects on business of Obamacare, the "US
fiscal cliff" and the election outcome uncertainty will likely become
more and more of a focus for US investors into the fourth quarter. The Mid-east continues to unravel at an alarming rate.
The quality of the stock rally off the June lows remains poor as
breadth, volume, leadership, lack of big volume/gainers and
copper/lumber/transports relative weakness all continue to be concerns. Thus,
recent market p/e multiple expansion on global central bank
stimulus/action hopes, is creating an unstable situation for equities,
which could become a big problem this fall unless a significant macro
catalyst materializes soon. Google(GOOG) is hitting a new all-time
high today. While the stock is getting too frothy and extended
short-term, I still expect the shares to outperform over the
intermediate-term. Long GOOG. For this year's equity advance to
regain
traction, I would expect to see further European credit gauge
improvement, a subsiding of hard-landing fears in key emerging markets,
a rising 10-year yield, better volume, stable-to-lower food/energy
prices, a US "fiscal cliff" solution, a calming in Mid-east and
China/Japan tensions and higher-quality stock market leadership. I
expect US stocks to trade modestly lower into the close from
current levels on rising global growth fears, earnings worries, rising
Japan/China/Mideast tensions, quarter-end profit-taking, more shorting,
technical selling, tech/energy sector weakness and US "fiscal cliff"
concerns.
Style Underperformer:
Sector Underperformer:
- 1) Coal -4.62% 2) Gold & Silver -3.21% 3) Homebuilders -1.90%
Stocks Falling on Unusual Volume:
- VECO,
GTAT, CTXS, NGD, DNR, CRAY, E, CHTR, ACHN, QCOR, BTH, BPL, LEN, KBW,
JBSS, CHTR, KBH, PAAS, CIE, FNV, GORO, TROX, MLI, GRFS, CYS, AG,
CYMI, AVGO, MCP, GHDX, PNR and FB
Stocks With Unusual Put Option Activity:
- 1) MET 2) XHB 3) XLF 4) CREE 5) VOD
Stocks With Most Negative News Mentions:
- 1) AKS 2) BTU 3) GM 4) FDX 5) DOW
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Road & Rail +1.17% 2) Airlines +.98% 3) Education +.73%
Stocks Rising on Unusual Volume:
- TIVO, RMBS, RKT, MM and CTB
Stocks With Unusual Call Option Activity:
- 1) MET 2) WMB 3) TIVO 4) TTWO 5) STSI
Stocks With Most Positive News Mentions:
- 1) LMT 2) HPQ 3) BHI 4) FWLT 5) VZ
Charts:
Weekend Headlines
Bloomberg:
- European Leaders Struggle to Overcome Fresh Crisis Stalemate. European leaders are struggling to
overcome a crisis-fighting stalemate as they face discord over a
banking union, Greece’s ongoing debate on how to meet bailout
commitments and foot-dragging by Spain and Italy on financial
aid requests. Chancellor Angela Merkel and President Francois Hollande
underlined Franco-German disagreement over the weekend as they
clashed on a timetable to introduce joint oversight of the
region’s banking sector, with Merkel rebuffing Hollande’s appeal
to activate it “the earlier, the better.” “Complacency seems to have affected European policy-
makers,” Joachim Fels, chief economist at Morgan Stanley in
London, wrote yesterday. “One case in point is the disagreement
between governments about the nuts and bolts of a banking union,
which remains crucial to break the negative feedback loop
between banks and weak sovereigns.”
- Merkel, Hollande EU Unity Pledge Fails to Stretch to Bank Union. Chancellor Angela Merkel and
President Francois Hollande’s appeal for German-French unity to
tackle Europe’s ills lasted all of three hours as they disagreed
over closer integration of the region’s banking system. The two leaders, marking Franco-German reconciliation after
World War II, delivered back-to-back speeches in which they
hailed their mutual ties, tried out each other’s language and
pledged to work together for a more unified Europe to defeat the
financial crisis. The bonhomie broke down at a subsequent press
conference when they failed to mask their differences on a
planned “banking union” meant to achieve that end. “The earlier, the better,” Hollande told reporters in the
German town of Asperg yesterday, saying that banking union is
“an important step in our targets” with a goal of
implementation by year’s end. Merkel, standing alongside,
declined to set a target date, saying there’s no point doing
something fast if it then doesn’t work.
- Aussie Debacle Signaling China Hard Landing as Iron Market Melts. From the end of 2008 through July,
no major currency appreciated as much as Australia’s dollar,
thanks to booming shipments of iron ore and other commodities to
China. Since then, it’s the worst performer as the engine of
world growth slows. The so-called Aussie depreciated 2.5 percent in the past
month, the biggest decline among 10 developed-nation currencies
tracked by Bloomberg Correlation-Weighted Indexes. Traders are
betting Australia’s central bank will cut interest rates to
boost growth, dragging down the currency even though the
Standard & Poor’s GSCI Index of commodities has risen almost 20
percent from its low this year in June. This reversal shows the dangers for an economy tied too
closely to another. China, which buys 28 percent of Australia’s
exports, said industrial output grew at the slowest pace in
three years last month as Europe’s debt crisis cut sales of
Chinese goods. Polls show Prime Minister Julia Gillard’s
governing Labor Party is under pressure before elections due
next year. “The Australian dollar is very expensive from whichever
metrics you look at,” Dagmar Dvorak, a director of fixed-income
and currencies in London at Baring Asset Management, which
manages $50 billion, said in an interview on Sept. 20. “When a
currency overvaluation is that extreme, you have to question
what could be a trigger that stops it. For the Aussie, it’s the
economic slowdown in China and falling commodity prices. The
currency looks vulnerable.”
- China ‘Strongly’ Opposes Japan Landing on Disputed Islands. China “strongly” opposes the
landing of Japanese citizens on disputed islands, the Foreign
Ministry said. Japan’s move “constitutes a severe violation of China’s
territorial sovereignty” and Japan “must immediately stop all
activities that infringe upon China’s sovereignty,” spokesman
Hong Lei said in a brief statement late yesterday on the
ministry’s website. Japanese nationals visited the islands Sept. 21 with the
excuse of preventing a landing by Taiwanese activists, he said.
China Central Television described the Japanese group as
security personnel.
- China Beige Book Shows Optimism Drops as Job Cuts Rise. China’s manufacturers and retailers
are less optimistic about sales than they were three months ago
and more companies are cutting jobs, according to a survey
modeled on the U.S. Federal Reserve’s Beige Book. The China Beige Book, through interviews of more than 2,000
company executives and bankers from Aug. 9 to Sept. 3, found
limits to monetary easing after interest-rate cuts in June and
July, with banks loosening credit while fewer companies are
borrowing, according to a summary from CBB International LLC,
the New York-based researcher that conducted the survey. “The dramatic and unexpected worsening of the European
crisis and slowing of America’s economy brought China’s export
order growth to a near-standstill,” said Craig Charney,
research director for the China Beige Book.
- China Stocks Drop to 2009 Low on Concern Slowdown Will Persist. China’s stocks fell, dragging down
the benchmark index to the lowest level since January 2009,
after a central bank adviser said the economic slowdown may
extend into next year. The economic slowdown may persist into 2013 amid a lack of
funding for approved infrastructure projects, according to Song Guoqing, an academic adviser to the People’s Bank of China,
while a survey showed China’s manufacturers and retailers are
less optimistic about sales than they were three months ago.
Anhui Conch Cement Co. (600585) and Sany Heavy Industry Co. led declines
among construction-related stocks. Foshan Electrical and
Lighting Co. dropped to the lowest in almost a month after
saying a manager was fined for insider trading. “There was no positive news such as government stimulus
over the weekend so investors anticipate the current slowdown in
the economy hasn’t stopped,” said Wu Kan, Shanghai-based fund
manager at Dazhong Insurance Co., which oversees $285 million.
“There’s still some room for the market to drop.”
The Shanghai Composite Index (SHCOMP) slid 0.7 percent to 2,012.36
as of 10:13 a.m. local time. It plunged 4.6 percent last week
after a report on manufacturing signaled a contraction and
escalating tensions with Japan threatened trade. The Shanghai index has fallen 8.5 percent this year on
concern the government isn’t loosening monetary policy or
introducing stimulus policies fast enough to counter the
slowdown in the economy.
- Rebels Move Command to Syria as Activists Say Military Kills 180. The Free Syrian Army moved its
command center from neighboring Turkey into a part of Syria that
the rebel fighters described as “liberated,” while human-
rights activists said President Bashar al-Assad’s forces killed
180 people yesterday in intensified shelling and airstrikes. Troops clashed with rebels near the town of Nasib along the
border with Jordan, the Associated Press reported. Jordan’s
border guards arrested militants yesterday after an exchange of
gunfire, the state-run Jordanian news agency Petra reported. More than
26,000 people have died since the conflict between Assad’s
opponents and the military began in March 2011, the U.K.-based
Syrian Observatory for Human Rights said.
- Hedge Funds Cut Bets as Prices Drop Most Since June: Commodities. Hedge funds cut bullish commodity
bets for the first time this month as weaker manufacturing from
China and Europe eclipsed central banks’ efforts to boost
growth, driving down prices the most since June. Money managers decreased their net-long positions across 18
U.S. futures and options by 1.7 percent to 1.307 million
contracts in the week ended Sept. 18, halting two weeks of gains
that had sent holdings to a 16-month high, U.S. Commodity
Futures Trading Commission data show. The Standard & Poor’s GSCI
Spot Index (MXWO) of 24 raw materials dropped 4.4 percent last week,
the first retreat since the end of July.
- Senate Moves to Bar U.S. Airlines From EU Carbon Curbs. The U.S. Senate passed a measure
that would effectively shield U.S. airlines from a European
Union program designed to curtail aviation emissions. The bill, supported by the airlines, was approved early
today before lawmakers adjourned to campaign for the Nov. 6
election. Under the measure, which must be reconciled with
similar legislation passed by the House last year, U.S carriers
would be barred from participating in the EU emissions-trading
system for carbon credits. The 27-nation EU decided in 2008 to include flights to and
from Europe within its greenhouse-gas-reduction system from 2012
after airline emissions in the region doubled over two decades.
The expansion of the cap-and-trade program triggered opposition
from countries including the U.S., China and Russia.
- Redbox-Verizon Streaming to Challenge Netflix(NFLX) by Year-End. Coinstar Inc. (CSTR)’s Redbox and Verizon
Communications Inc. (VZ), providing details of their challenge to Netflix Inc. (NFLX), will offer subscription streaming, movie sales and
rentals by Christmas, along with DVDs from the local kiosk.
Wall Street Journal:
-
Japan Leader Warns China on Islands Dispute. Japan's prime minister warned China that its inflammatory reaction to a
territorial dispute—from violent protests to apparent informal trade
sanctions—could further weaken China's already-fragile economy by scaring away
foreign investors. The comments showed the risks that the diplomatic standoff
could broaden into a damaging commercial tit-for-tat between the world's second-
and third-largest economies. "China should be developing through the various foreign investments it
receives," Yoshihiko Noda told The Wall Street Journal following a tense week
filled with news of Japanese factories torched and cars overturned, and Chinese
patrol boats hovering in and around territorial waters controlled by Japan.
- Pension
Crisis Looms Despite Cuts. Almost Every State Trims Public-Employee
Benefits but $900 Billion Retirement Funding Gap Remains.
- Fed's Tarullo Stays in Touch With Bankers. Bankers
have been spending a lot of time bending Daniel Tarullo's ear. The top
banking regulator at the Federal Reserve met in person or
talked on the phone more than 60 times during one recent year with top
U.S. bank executives. That is five times more often than bankers spoke
with Fed Chairman Ben Bernanke. Even U.S. Treasury Secretary Timothy
Geithner met face to face with top bank executives less frequently
during his tumultuous first year in office, when the financial crisis
was raging.
Business Insider:
Zero Hedge:
CNBC:
- Stocks Tumble Whopping 20% If Lawmakers Flub 'Fiscal Cliff'. According
to new research from Citi, if lawmakers can’t stop their squabbling
over the "fiscal cliff" and get their acts together – the sell-off in
the stock market could be horrendous.
- France's Hollande hits new low in popularity poll. French President Francois Hollande's approval
ratings have tumbled to their lowest level since he first took office in
May, a new poll showed on Sunday, as France's grinding economic
stagnation and record unemployment show little sign of easing. According
to the Ifop poll for Sunday newspaper JDD, Hollande now has a 43
percent positive rating, down from 54 percent in August - one of the
sharpest drops in over a decade.
- China Will Not Ease Grip on Property Market. China plans to stick to its tight property sector policies and a
nationwide rebound in home prices remains unlikely, a senior official at
the housing ministry said in remarks published by state media on
Sunday.
- China's Corruption Crackdown Takes Shine Off Luxury Boom. Luxury brands banking on a China rebound to boost sales may be in for an
unpleasant surprise: weak demand in the world's second largest luxury
market may last longer than the economic slowdown as Beijing cracks down
on conspicuous consumption.
New York Times:
- Medicare Bills Rise as Records Turn Electronic. When the federal government began providing billions of dollars in
incentives to push hospitals and physicians to use electronic medical
and billing records, the goal was not only to improve efficiency and
patient safety, but also to reduce health care costs.
- Iran Says Nuclear Equipment Was Sabotaged. Iran on Saturday accused the German technology company Siemens of
planting tiny explosives inside equipment Iran bought for its disputed nuclear program, a charge Siemens denied.
CNN:
- Facebook(FB) raises fears with ad tracking. Facebook is working with a controversial data company called
Datalogix that can track whether people who see ads on the social
networking site end up buying those products in stores. Amid growing pressure for
the social networking site to prove the value of its advertising,
Facebook is gradually wading into new techniques for tracking and using
data about users that raise concerns among privacy advocates.
Atlanta Journal Constitution:
Rasmussen Reports:
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Sunday shows
President Obama and Mitt Romney each attracting support from 46% of
voters nationwide. Three percent (3%) prefer some other candidate, and
five percent (5%) are undecided.
Reuters:
- From Nigeria to Athens, Muslim protests rumble on. Muslims protested in Nigeria, Iran, Greece
and Turkey on Sunday to show anti-Western anger against a film and
cartoons insulting Islam had not dissipated. As delegates from around
the world gathered in New York for
a U.N. General Assembly where the clash between free speech and
blasphemy is bound to be raised, U.S. flags were once again
burning in parts of the Muslim world. Iranian students chanted "Death to
America" and "Death to
Israel" outside the French embassy in Tehran in protest at the
decision by satirical magazine Charlie Hebdo to publish cartoons
of the Prophet Mohammad, days after widespread protests - some
deadly - against a film made in the United States. Shi'ite Muslims in the Nigerian town of Katsina burned U.S.,
French and Israeli flags and a religious leader called for
protests to continue until the makers of the film and cartoons
are punished. In Pakistan,
where fifteen people were killed in protests on Friday, a government
minister has offered $100,000 to anyone who kills the maker of the
short, amateurish video "The Innocence of Muslims". Calls have increased
for a U.N. measure outlawing insults to Islam and blasphemy in general.
In Athens, some protesters hurled bottles of water, stones
and shoes at police who responded with teargas. Calm returned
when demonstrators interrupted the protest to pray. Hours later, dozens
of Muslim inmates in Athens' main prison
set mattresses and bed sheets on fire in protest. Firemen with
four engines battled the flames in some cells but police and
government officials said late at night the situation was under
control.
- France needs 37 bln euros in savings by 2013 - finmin. France
needs a total of 37 billion euros in budget savings to reach its
deficit target of 3 percent of GDP next year, including some 7 billion
euros of taxes passed this year, Finance Minister Pierre Moscovici said
on Sunday.
International Monetary Fund:
Financial Times:
- Hedge funds play long game for profits. Profit-starved hedge fund managers,
best known as masters of the financial universe, are turning to an
unlikely place for their next windfall: the unglamorous world of
long-only asset management. Amid volatile markets, constraints on the capacity of their main trading strategies and an ever more conservative investor base,
some of the industry’s biggest names are focusing on raising money for
pared-back versions of their main portfolios, eschewing leverage and
short selling in pursuit of assets and stability.
Telegraph:
- ECB in 'panic', say former chief economist Juergen Stark. The European Central Bank is in "panic" over the eurozone crisis and
acting outside its mandate with its new bond-buying plans, the bank's former
chief economist said in comments published Saturday. Mr Stark said the ECB's new plan to buy up unlimited amounts of eurozone
states' bonds, announced on September 6, on the secondary market to bring
down their borrowing rates was misguided. "Together with other central banks, the ECB is flooding the market, posing the
question not only about how the ECB will get its money back, but also how
the excess liquidity created can be absorbed globally," Mr Stark said.
- World on track for record food prices 'within a year'. Brace yourself for some painful "agflation". That is the shorthand
for agricultural commodity inflation, otherwise known as rising food prices.
Bild:
- New
Greek Haircut Would Cost German Taxpayers at Least 8 Billion Euros. The
calculation is based on another potential 50% debt reduction for
Greece, citing Carsten Schneider, the budget spokesman for the Social
Democratic Party, the biggest opposition group in the German parliament.
Der Spiegel:
- Germany's
ex-Finance Minister Peer Steinbrueck, who might challenge Chancellor
Angela Merkel in the next federal election, said banks should create a
rescue fund financed by their own money. The fund could help to cushion
the impact for taxpayers if a bank is insolvent.
The fund could
amount to 200 billion euros. Steinbrueck plans to separate investment
banking from credit and saving banking as risk and liability don't go
together.
ABC:
- European
authorities want to halt planned mergers among Spanish lenders to
prevent weakening stronger banks set to be buyers in the transactions.
El Mundo:
- The European Commission and ECB are asking Spain to stop linking pensions to inflation, citing people in the government.
Yonhap News Agency:
- Trade Between North Korea, Russia Soars 50% in First Half. According to the report from Seoul's state-run Korea Trade-Investment Promotion
Agency (KOTRA), the amount of bilateral trade between the two countries in the
January-June period came to US$38.8 million, up 49 percent from the same period
last year.
Australian Financial Review:
- BRIC Man Urges Caution on $A, China. Jim O’Neill, the man famous for coining the term BRIC, believes the
Australian dollar is overvalued at above parity with the US dollar
and warns investors to adjust their thinking on China’s contribution to
the global economy in the next decade. The London-based chairman of Goldman Sachs Asset Management, who
earlier this month downgraded his 2012 forecasts for growth in China and
India, arrives in Australia
on Tuesday for the first time in two years and is bracing for a big change in the attitude of local investors. “Back then there was a sort of mood that not only were you guys the
lucky country, but you were the lucky country to the power of 10 and
nothing could go wrong. I suspect I am coming this time where a rapidly
shifting mood is taking place,’’ he told The Australian Financial Review.
Mr O’Neill, who coined the acronym that stands for the four rapidly
developing nations of Brazil, Russia, India and China, is urging clients
to get their heads around a “new” China. He believes growth rates of
about 7 per cent, as outlined in Beijing’s five-year plan, will be the
norm, as opposed to the halcyon days of “old” China when growth was
regularly more than 10 per cent.
China Business News:
- Home
Prices in Major Chinese Cities May Rebound. Avg. inventory-sales ratio
for 10 major Chinese cities including Beijing and Shanghai fell to 9 in
August, indicating greater odds of a rebound in home prices.
Xinhua:
- China
to Use Drones to Monitor Disputed Islands.. China will use unmanned
aerial vehicles to strengthen surveillance of the disputed islands,
citing Yu Qingsong, an official at the State Oceanic Administration.
DawnNews:
- Pakistani
Federal Minister for Railways Ghulam Ahmed Bilour has offered a bounty
of $100,000 to anyone who kills the maker of an anti-Islam film produced
in the U.S., citing the minister.
Weekend Recommendations
Barron's:
- Made positive comments on (BGFV) and (INTU).
- Made negative comments on (FB).
Night Trading
- Asian indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 133.50 -.5 basis point.
- Asia Pacific Sovereign CDS Index 111.0 +1.0 basis point.
- FTSE-100 futures -1.0%.
- S&P 500 futures -.09%.
- NASDAQ 100 futures +.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (LEN)/.27
- (PAYX)/.41
- (RHT)/.29
Economic Releases
10:30 am EST
- The Dallas Fed Manufacturing Activity Index for September is estimated to rise to -1.4 versus -1.6 in August.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Williams speaking, Chicago Fed National Activity Index for
August, European Parliament LIBOR hearing and the Germany Business
Expectations Index could also impact trading today.
BOTTOM LINE: Asian
indices are mostly lower, weighed down by technology and
commodity shares in the region. I expect US stocks to open mixed
and to weaken into the afternoon, finishing modestly lower. The
Portfolio is 50% net long heading into the week.
U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE:
I expect US stocks to finish the week modestly lower on rising
global growth fears, Eurozone debt angst, US "fiscal cliff" concerns,
increasing Mid-east unrest, high food/energy prices, more shorting,
earnings worries and quarter-end profit-taking. My intermediate-term
trading indicators are giving neutral signals and the Portfolio is
50% net long heading into the week.