Evening Headlines
Bloomberg:
- Japan Consumer Prices Slide in Challenge to Abe Revival Campaign.
Japan’s consumer prices dropped for a sixth straight month in April,
highlighting the challenge for Prime Minister Shinzo Abe in sustaining
confidence in an economic revival. Consumer prices excluding fresh
food fell 0.4 percent from a year earlier, the statistics bureau said in
Tokyo today, matching the median estimate of 29 economists in a
Bloomberg
News survey.
- Australia Banks on Track for Biggest Monthly Fall in Three Years.
Australian bank stocks are on course for their worst monthly
performance in three years as investors cash out of a rally that drove
financial shares to a record high in April. The S&P/ASX 200 Banks index has plunged 12 percent this
month, set for the biggest decline since May 2010. “Banks have stood out among the pack and investors, having
enjoyed the run and higher dividends, are rotating out to other
beaten-down sectors,” Stan Shamu, market strategist at
Melbourne-based IG Markets, said by phone. “It’s also time to
take a hard look at record-low mortgage growth, increasing competition and a slowing economy’s impact on banks.”
The International Monetary Fund this week lowered its growth forecasts
for China, Australia’s biggest trading partner, to 7.75 percent this
year and next, from earlier projections of 8 percent for 2013 and 8.2
percent in 2014. Investment in commodities and energy has peaked, threatening to slow Australia’s economy, the government said
this month.
- Rebar Poised for Fourth Monthly Loss on Supply, Iron Ore Price. Steel
reinforcement-bar futures
headed for a fourth monthly drop as iron ore fell to the lowest in more
than seven months and supply from Chinese mills climbed. Rebar for
delivery in October on the Shanghai Futures Exchange declined as much as
0.4 percent to 3,424 yuan ($558) a metric ton and was at 3,433 yuan at
10:15 a.m. local time. Futures retreated 4.6 percent in May. Iron
ore for immediate delivery at the Tianjin port in China fell 1.2 percent
to $111.60 a dry ton yesterday, the lowest since October, according to
the Steel Index Ltd. China’s steel output rose by 20.09 million tons in
the first four months
of this year, Wang Xiaoqi, deputy head of the China Iron and
Steel Association, said at a conference in Shanghai this week.
About 54 percent of the additional output is sitting in
warehouses, Wang said. “High capacity, high output and lower raw-material prices
are all pressuring rebar,” Wang Yongliang, an analyst at
Beijing CIFCO Futures Co., said in a report today.
- Asian Stocks Rise as Japan’s Topix Rebounds on Outlook.
Asian stocks gained, with Japanese equity gauges rebounding after
entering a so-called correction yesterday, following reports that
Japan’s pension fund may boost stock holdings and the nation’s
industrial output expanded faster than analysts estimated. Mitsubishi
Estate Co., Japan’s biggest developer by market value, rose 2 percent.
Sony Corp. jumped 3.8 in Tokyo percent as people familiar with the
matter said the electronics maker is
working with Morgan Stanley and Citigroup Inc. to consider
adopting Daniel Loeb’s proposal for an initial public offering
of its entertainment unit. BHP Billiton Ltd., the world’s
largest mining company, gained 1.4 percent in Sydney after
copper futures increased. The MSCI Asia Pacific Index added 0.2 percent to 135.83 as
of 11:25 a.m. in Tokyo, with about three shares rising for every
two that fell. Seven of the 10 industry groups on the gauge
advanced. The measure is heading for its first monthly decline
in seven months after Japanese indexes entered a correction
yesterday after reaching about five-year highs on May 22.
- Iran Increases its Support for Terrorism, U.S. Says. Iran
increased its support of international terrorist-related activities
last year, as the capabilities of al-Qaeda’s central leadership in
Pakistan declined, the U.S. State Department said. In its annual report
on terrorism issued yesterday, the State Department reported a “marked
resurgence” in terrorist-related activities last year by Iran, which
also is supplying weapons and other “extensive” aid to the Syrian regime
for its war against rebel groups. The State Department cited activities
by Iran’s Ministry of Intelligence and Security, its Islamic
Revolutionary Guard Corps-Quds Force, and its Lebanese ally, Hezbollah.
“Iran’s state sponsorship of terrorism and Hezbollah’s terrorist
activity have reached a tempo unseen since the 1990s, with attacks
plotted in Southeast Asia, Europe, and Africa,” according to the State
Department.
- HTC Said to Cancel Large Windows RT Tablet on Weak Demand.
HTC Corp. (2498) has scrapped plans to introduce a full-sized tablet
computer with Microsoft Corp. (MSFT)’s Windows RT operating system on
concern it will meet with lackluster demand, according to people
familiar with the matter.
- ERs Crumbling Amid Doctor Shortage as New Patients Loom: Health. “There’s
nothing more appalling than being treated in a hallway bed,” said James
Dunford, medical director for the city of San Diego’s emergency medical
services system. The emergency room is “the canary in the coal mine” for
what patients can expect from U.S. health care over the next few years,
he said. ERs, the front line of modern medical care, are crumbling nationwide
just as patient visits promise to surge with the 2014 rollout of the
Affordable Care Act adding 25 million newly insured patients over time.
ER doctors say they expect these people, seeking the everyday care they
couldn’t get before, to flood a system already so overcrowded that some
hospitals are unable to accept ambulances for days at a time. “There’s a shortage of all types of doctors now, and it will only
get worse with many Baby Boomer doctors retiring as the Baby Boomers
age,” said Darria Long Gillespie, a doctor at Beth Israel Deaconess
Medical Center in Boston.
Wall Street Journal:
- Swoon in Bonds Puts Eye on Fed. The bond market's monthlong plunge has pushed long-term interest rates
on mortgages and U.S. Treasurys to their highest levels in more than a
year, sparking a debate: Is this a bursting bubble, the aftereffect of
clumsy Federal Reserve communication or a welcome sign the U.S. economy
is, at last, on the mend.
- Dispute Flares Inside FDA Over Safety of Popular Blood-Pressure Drugs. The top-selling class of blood-pressure drugs is under attack from an
unusual source: a senior regulator at the Food and Drug Administration. Bucking his bosses, Thomas A. Marciniak is seeking stronger warnings
about the drugs known as angiotensin receptor blockers, or ARBs,
according to internal documents reviewed by The Wall Street Journal.
- Syrian Leader Mocks Foes and Threatens Israel.
President Bashar al-Assad mocked the Western-backed opposition groups
battling his regime and vowed to attack Israel if it strikes Syria
again, in comments that fueled doubts about a positive outcome from
planned peace talks.
-
David Malpass: Fed Policy Is a Drag on Recovery. The stock market is soaring. Yet real median income has fallen
5%, unheard of except during the Great Depression. Former Federal Reserve Chairman Paul Volcker said in a speech to the
Economic Club of New York on Wednesday that the Fed should not be asked
to "accommodate misguided fiscal policies" and "will inevitably fall
short." He outlined a preferred monetary policy based on orthodox
central banking aimed at a stable currency in order to maximize
employment. "Credibility is an enormous asset," he said. "Once earned,
it must not be frittered away." Those words are true and timely.
Barron's:
Fox News:
- Republicans seek IG probe into Sebelius over ObamaCare group donations. Congressional Republicans on Thursday escalated their call for an
independent investigation into whether Health and Human Services
Secretary Kathleen Sebelius broke the law when she sought donations from
private companies for an independent ObamaCare project. Three top Senate Republicans wrote a letter to the HHS inspector
general asking his office to launch a probe. It follows a previous GOP
call for a review by another internal watchdog, the Government
Accountability Office. At issue is Sebelius' effort to solicit donations and other
assistance from various charities and executives for a nonprofit group
that is helping sign up people for benefits under the federal health
care overhaul.
MarketWatch.com:
- Critic of big banks wants Fisher to head Fed. Simon Johnson, an economist who is leading the push for the government
to do more to tackle “too big to fail” banks, wants Dallas Fed President
Richard Fisher to replace Fed Chief Ben Bernanke when Bernanke’s term
expires early next year.
CNBC:
Zero Hedge:
Business Insider:
Washington Post:
- For Obama’s ex-aides, it’s time to cash in on experience. The
decision on whether to approve the Keystone XL oil pipeline is a
political headache for President Obama. But to five of his former aides,
it represents a business opportunity. Four of them — Bill Burton,
Stephanie Cutter, Jim Papa and Paul Tewes — work as consultants for
opponents of the project, which would carry heavy crude oil from Canada
to Gulf Coast refineries. Another, former White House communications
director Anita Dunn, counts the project’s sponsor, TransCanada, among
her firm’s clients.
Real Clear Politics:
Reuters:
Financial Times:
- Merkel party allies accuse Hollande of shaking EU’s foundations. Leading
members of Germany’s ruling Christian Democratic Union party have
fiercely criticised François Hollande, accusing the French president of
“shaking the foundations of the European Union” just hours before the
two countries’ leaders met in Paris in a bid to repair relations.
German concern about the French government’s resistance to economic
reform and hostility to EU pressure emerged after Mr Hollande said it
was not for the European Commission “to dictate” reforms to Paris.
NHK:
- Apple(AAPL) Raises iPad, iPod Prices in Japan on Weaker Yen. Apple raised prices of iPad, iPad 2, iPad mini, iPod series today, citing the U..S. maker of iPhone. Apple Japan website shows iPad mini 16GB Wi-Fi model priced at 32,800 yen; was 28,800 yen when released in Nov.
China Daily:
- China Local Debt Must Be Kept at 'Rational Level'. Chinese local government debt needs to be kept at a "rational level" by imposing a budget-regulated debt financing mechanism, Zhang Monan, a researcher at the State Information Center, writes in a commentary. The slowdown in growth is boosting local government debt to "even higher levels," Zhang wrote. China remains exposed to the risk of growing sovereign debt and is headed for a debt crisis, he said. Debt backed by "covert" guarantees from the central government poses the biggest risks in the medium and long term, Zhang said.
China Business News:
- China
May Start Tax on Online Sellers This Year. China may start levying a
tax on small and medium-sized online sellers within the year, citing a
person familiar with the matter.
Evening Recommendations
Deutsche Bank:
- Upgraded (MS) to Buy, target $30.
Night Trading
- Asian equity indices are -.50% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 111.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 96.0 +1.5 basis points.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for April is estimated to rise +.1% versus a +.2% gain in March.
- Personal Spending for April is estimated unch. versus a +2% gain in March.
- The PCE Core for April is estimated to rise +.1% versus unch. in March.
9:00 am EST
- The NAPM-Milwaukee for May is estimated to rise to 49.0 versus 48.43 in April.
9:45 am EST
- Chicago Purchasing Manager for May is estimated to rise to 50.0 versus a reading of 49.0 in April.
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for May is estimated at 83.7 versus a prior estimate of 83.7.
Upcoming Splits
Other Potential Market Movers
- The Fed's Pianalto speaking, Italian Unemployment data, Eurozone CPI report, OPEC meeting, G8 meeting, Canadian GDP report, 2013 ASCO meeting and the (IDCC) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open mixed and weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 102.0 +4.08%
- Total Put/Call .84 -2.33%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.11 -.99%
- European Financial Sector CDS Index 144.58 +1.12%
- Western Europe Sovereign Debt CDS Index 81.68 -.39%
- Emerging Market CDS Index 268.93 +.51%
- 2-Year Swap Spread 16.5 +.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -14.25 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .03% -1 bp
- China Import Iron Ore Spot $111.60/Metric Tonne -1.15%
- Citi US Economic Surprise Index -19.10 -3.6 points
- 10-Year TIPS Spread 2.16 -5 bps
Overseas Futures:
- Nikkei Futures: Indicating +190 open in Japan
- DAX Futures: Indicating +7 open in Germany
Portfolio:
- Higher: On gains in my medical/biotech/tech/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area Economic Confidence Climbs Amid Recession.
Economic confidence in the euro area increased in May, adding to signs
the region is beginning to emerge from the longest recession in the
single-currency era. An index of executive and consumer sentiment
rose to 89.4 from 88.6 in April, the European Commission in Brussels
said today. That’s in line with the median estimate in a Bloomberg News
survey of 33 economists.
- European Stocks Rebound From Three-Week Low.
European stocks climbed, rebounding from a three-week low, as investors
weighed data on U.S. economic growth and house sales to gauge the
Federal Reserve’s
view on continuing stimulus measures. Lonmin Plc and Fresnillo Plc both
rallied at least 5.5
percent as precious metals climbed. Genmab A/S jumped to its
highest price since August 2009 after its Arzerra cancer
treatment met its objective in a trial. Tate & Lyle Plc paced
declining shares after earnings missed analyst estimates. The Stoxx Europe 600 Index added 0.4 percent to 303.55 at
the close.
- Frontline(FRO) Says Tanker Glut Preventing Recovery as Debt Looms. Frontline
(FRO) Ltd., the oil-tanker company led by billionaire John Fredriksen,
said an oversupply of the vessels is preventing the market recovery
needed to be able to repay a convertible bond maturing in 2015. “The
tanker market is massively oversupplied and it may
take some time before a reasonable market balance is restored
and sustained recovery of the tanker market occurs,” the
manager of 32 supertankers said today as it reported a fourth
quarterly loss. Its cash might run out if the market doesn’t
recover and it can’t raise equity or sell assets, Hamilton,
Bermuda-based Frontline said, reiterating comments made Feb. 22.
- Joy(JOY) Cuts Forecast as Commodity Surplus Curbs Mining Expenditure. Joy Global Inc.
(JOY), the largest maker of underground mining equipment, cut its
full-year profit and sales forecasts and said it sees no immediate
recovery in orders as
commodity producers reduce spending amid surplus supply.
- Gold Futures Advance on Speculation Fed Will Maintain Stimulus. Gold futures rallied the most in a
week on speculation that the Federal Reserve will maintain bond
purchases to bolster the U.S. economy, boosting demand for the
precious metal as a store of value. Silver also rose.
Wall Street Journal:
- Smithfield(SFD) Deal Signals China's Need for Meat, Dairy, Other Food Buys. China's rising hunger is driving ever-larger acquisitions of global food
assets as the shifting dietary profile of the world's most populous
nation increasingly puts meat, dairy and processed-food producers into
play.
- Iron Ore Has Fallen 30% Since February. Iron ore slumped to a seven-month low on Thursday, down 30% from this
year's high in February, hit by slowing demand from China and a glut of
a supply. The raw material for steel making joins a broad selloff in global
commodities and is a key bellwether of economic activity in China, the
world's top buyer of iron ore. Signs are mounting that growth is
continuing to slow in Asia's largest economy, with traders rushing to
sell off supplies of iron ore and steel. Shares of Australian iron-ore
producers are also in the cross hairs. "The market is flush with product at the moment," RBS Morgans
resources analyst James Wilson said. "The pricing power has switched
from the iron-ore miners to the steel mills."
Fox News:
CNBC:
- When Chinese Walls Come Crumbling Down. One of the key reforms put in place in
the settlement was the bar on basing the compensation of stock analysts
on their contribution to investment banking revenue. This was meant to
prevent analysts from becoming shills for the corporate clients that
were paying fees to the investment banks for stock and bond underwriting deals. A new study suggests that this part of the settlement may have fallen by the wayside.
Zero Hedge:
Business Insider:
Reuters:
- Credit crunch casualty Eckert plots hedge fund reincarnation.
Fred Eckert - the hedge fund manager who lost $250 million of his own
money, saw his firm go bankrupt in the credit crisis, went through a
divorce and spent two months in a coma - is back with the launch of his
new firm. The 65-year-old former Goldman Sachs executive, who once
lived in one of the most expensive houses in New Jersey, has launched a
new firm called Phoenix Star Capital. He has already an initial $100
million from investors to pursue the strategy. And despite a
chastening credit crisis, the man who once enjoyed a fleet of 18 vintage
cars and a 1,500-bottle wine collection before filing for personal
bankruptcy in 2010, remains optimistic about his chances. "I'm not afraid of being able to raise substantial amounts," Eckert told Reuters in the American bar of the luxury Savoy hotel in central London. "They (investors) believe my record is excellent."
Eckert's former hedge fund firm GSC Group ran $28 billion at its peak,
but filed for bankruptcy in 2010 after borrowing around $250 million,
some of it just before the credit crisis sent asset prices tumbling and
froze money markets.
- Risky derivatives make return for returns' sake. Investors
facing record low bond yields are increasingly chasing higher returns
via complex derivatives, the instruments at the root of the 2008 global
financial crisis, which can punch yawning holes in balance sheets if
they go awry. Monetary stimulus from central banks has driven down
sovereign and corporate bond yields and sent shares to multi-year
highs, which in turn has encouraged investors to buy structured
products that bundle derivatives with stocks or bonds to increase
returns. "The low interest rate environment is pushing clients to search
for yield," said Sebastien Gyger, head of portfolio management for
private clients at Lombard Odier.
- With big-name backers, Chinese firm eyes Smithfield's know-how, brands. In three decades, Wan
Long has turned Shuanghui International Holdings from a
small, loss-making meat processor into China's largest, and is making
his country's biggest takeover of a U.S. company - the $4.7 billion
acquisition of Smithfield Foods Inc, the world's
leading pork producer.
- Italy's debt costs rise in hint rally of the vulnerable may be over. Italy's long-term borrowing costs edged up at an
auction on Thursday for the first time in three months, adding to signs that a 10-month-long rally in vulnerable euro zone bonds may be faltering.
USA Today:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Oil Service -.70% 2) Restaurants -.70% 3) REITs -.41%
Stocks Falling on Unusual Volume:
- BAS, HEP, BPFH, IRE, CVI, VNR, CLMT, CM, BWP, VNR, BXMT, BIG, MMLP, KMP, SRDX, PAA, SXL, MG, RHP, PBA, PCL, EPD, VMW, MRC, ADS, VNQI, CM, OSTK, MMP, GLP, GMLP, AREX, CVI, PCL, RHP and UCO
Stocks With Unusual Put Option Activity:
- 1) HK 2) OIH 3) EWJ 4) SFD 5) F
Stocks With Most Negative News Mentions:
- 1) HAL 2) BHI 3) SWK 4) DXJ 5) SMG
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +4.90% 2) Coal +1.98% 3) Networking +1.59%
Stocks Rising on Unusual Volume:
- NVE, EXPR, YY, AVGO, EMC, SNE, RKUS, BTU, FIO, ABX, FB, FSLR and GDX
Stocks With Unusual Call Option Activity:
- 1) CLSN 2) HERO 3) STSI 4) CLWR 5) NEM
Stocks With Most Positive News Mentions:
- 1) CRBL 2) QCOM 3) DO 4) YHOO 5) FSLR
Charts:
Evening Headlines
Bloomberg:
- ECB Targeted as Blockupy Protesters Descend on Frankfurt. Frankfurt,
Germany’s financial capital and the seat of the European Central Bank,
is bracing for as many as 30,000 demonstrators to descend on the city
for four days of protests against European leaders’ handling of the
sovereign-debt crisis. Activists have set up camp on the outskirts
of the trade fair grounds to the west of the city, awaiting the arrival
of busloads of people from all over the country as well as from abroad,
according to Blockupy, an international group that is organizing the
blockades. The biggest action is planned for May 31, when the
demonstrators plan to “visibly disturb the usual business of the ECB as
well as other actors of the crisis regime,” Blockupy said in a statement
on its website.
- EU Warns of Uncertainty If CFTC Won’t Delay Swaps Rule. The European Union is urging the U.S.
to allow time for international talks before it imposes swaps
rules on EU lenders, saying that the current timetable would
lead to “huge legal and operational uncertainty.” The European
Commission wrote to Gary Gensler, chairman of the U.S. Commodity Futures
Trading Commission, urging him to extend a temporary exemption for
overseas banks, which is due to expire on July 12, according to a copy
of the letter obtained by Bloomberg News.
- China Failure to Grow With $1 Trillion Credit Seen as Li Warning. China’s
economy is proving less responsive to credit, escalating pressure on
Premier Li Keqiang to strengthen the role of private enterprise. The
government’s broadest measure of credit rose 58 percent to a record 6.16
trillion yuan ($1 trillion) in January-to-March, when gross domestic
product gained 7.7 percent, compared with 8.1 percent a year earlier.
Each $1 in credit firepower added the equivalent of 17 cents in GDP,
down from 29 cents last year and 83 cents in 2007, when global money
markets began to freeze, according to data compiled by Bloomberg. The
diminishing returns to lending heighten focus on the need for what the
International Monetary Fund said yesterday are “decisive” policy changes
in the world’s second-largest economy. Without a refocus away from
state-approved projects, Li and President Xi Jinping risk overseeing
both a further slowdown in growth and an increase in non-performing
loans. “Less efficient and more highly leveraged borrowers have been
kept afloat, tying up credit that could be used to generate more
growth,” said David Loevinger, former senior coordinator for China
affairs at the U.S. Treasury Department. “To boost growth, China needs
to channel more financing to its private enterprises, which are both
more profitable and less leveraged than their state-owned counterparts.”
State enterprises have seen their return on equity fall by
half in six years, according to CLSA Asia-Pacific Markets in
Hong Kong. The biggest concern from China’s credit surge is the
money going to companies and state-run enterprises whose
performance is deteriorating, Francis Cheung, head of China-Hong
Kong strategy, wrote in a May 9 report.
- China Optimism Declines Among European Companies, Survey Shows. European
companies’ optimism for business prospects in China is declining amid
slowing growth, rising labor costs, regulatory obstacles and intensified
competition, a survey showed. Optimism for future revenue growth among
526 respondents
dropped to a four-year low of 71 percent, while 62 percent
lack confidence or aren’t sure the government has the resolve
to introduce market-driven change, according to a business
confidence survey released today in Beijing. It was conducted
in March by the European Union Chamber of Commerce in China
and Roland Berger Strategy Consultants.
- Asian Stocks Decline as Japanese Exporters Drop on Yen. Asian
stocks retreated, with the regional benchmark index heading for its
first monthly decline in seven months, as commodities fell and the yen
traded near a three-week high. Honda Motor Co. (7267), which gets 46
percent of sales from North America, slid 2.2 percent, on concern a
stronger yen will damp the earnings outlook among Japanese exporters.
BHP Billiton Ltd. (BHP), the world’s biggest mining company and
Australia’s top oil producer, lost 1.3 percent after crude oil and
copper futures dropped. National Australia Bank Ltd., the nation’s
fourth-biggest lender, fell 0.3 percent, heading for an eighth day of
decline, its longest losing streak since November 2010. The MSCI Asia Pacific Index decreased 0.9 percent to 136.77
as of 10:19 a.m. in Tokyo, with all 10 industry groups falling
on the gauge, which is poised to close at the lowest level since
April 19.
- Brazil Raises Rate to 8% as Inflation Threatens Recovery. Brazil’s central bank accelerated the
pace of interest rate increases, as policy makers step up
efforts to slow inflation that forestalled the economy’s rebound
in the first quarter. The bank’s board, led by President Alexandre Tombini, voted
unanimously to raise the benchmark Selic rate 50 basis points to
8.00 percent, matching the forecast of 19 of 57 economists
surveyed by Bloomberg. Thirty-eight analysts expected a second
straight 25 basis-point increase.
- Rubber Slumps to Three-Week Low as Yen’s Rebound Reduces Appeal. Rubber slumped to the lowest level in
more than three weeks, heading for the fourth monthly decline,
as a rebound in Japan’s currency against the dollar reduced the appeal of the yen-based futures.
The contract for delivery in November fell as much as 3.7 percent to
257.6 yen a kilogram ($2,540 a metric ton) on the Tokyo Commodity
Exchange, the lowest level since May 7. The most-active contract traded
at 260.7 yen at 10:14 a.m. and lost
0.8 percent this month.
- Rebar Trades Near Lowest in Eight Months on Overcapacity Concern.
Steel reinforcement-bar futures traded near the lowest level in more
than eight months on concern that overcapacity at Chinese mills means
supply will exceed demand. Rebar for October delivery on the Shanghai
Futures Exchange fell to as low as 3,422 yuan a ($558) a metric ton,
the lowest for a most-active contract since Sept. 10. It traded at 3,436
at
9:58 a.m. local time. Futures have lost 4.6 percent in May and
are set for a fourth monthly decline.
- Blankfein Leads Bank CEO Pay With $26 Million Deemed as Overpaid. Bankers at Goldman Sachs Group Inc. had a tumultuous 2012. The
firm
cut 900 jobs, promoted the fewest executives to the exalted post of
partner in more than a decade and slashed the portion of revenue set
aside for compensation to 38 percent from 42 percent a year earlier. For
the man at the very top of Goldman Sachs’s pay pyramid, Chief Executive
Officer Lloyd Blankfein, 2012 was his finest year since the boom times
of 2007. Blankfein, 58, was awarded $26 million for his work last year,
lifting him to No. 1 in the Bloomberg Markets ranking of the best-paid
CEOs at North America’s 20 largest financial companies by customer
deposits. John Stumpf, who led Wells Fargo & Co. to a record profit
of $18.9 billion, ran a distant second, at $19.3 million, Bloomberg
Markets magazine will report in its July issue. The pay of the 20 chiefs increased an average of 7.7 percent for 2012 compared with a year earlier,
according to data compiled by Bloomberg. The tally is based on
salaries, stock, bonuses and long-term incentive pay awarded to the CEOs
for 2012. “All of them are being overpaid,” says Eleanor Bloxham, CEO of Value Alliance Co., a board advisory firm in Westerville, Ohio. “The bank boards still don’t have a good handle on how they should be compensating
their executives.” Bloxham says directors lean too
much on share performance and instead should look at how CEOs manage
risk, including capital ratios that measure financial strength.
- Volcker Cautions Federal Reserve May ‘Fall Short’. Former Federal Reserve Chairman Paul Volcker said today the
central bank will probably “fall short” by being asked to do too much. “It’s
fashionable to talk about a dual mandate, that policy should somehow be
directed toward two objectives, of price stability and full
employment,” Volcker told the Economic Club of New York. “Fashionable or
not, I find that mandate both operationally confusing and ultimately
illusory.” “Asked to do too much, for instance to accommodate misguided fiscal
policies, to deal with structural imbalances, to square continuously the
hypothetical circles of stability, growth and full employment, then it
will inevitably fall short,” Volcker said. Those efforts cause it to
lose “sight of its basic responsibility for price stability, a matter
that is within the range of its influence.” “The Federal Reserve, any central bank, should not be asked to do too
much to undertake responsibilities that it cannot responsibly meet with
its appropriately limited powers,” Volcker said. He said a central
bank’s basic responsibility is for a “stable currency.” “Credibility
is an enormous asset,” Volcker said. “Once earned, it must not be
frittered away by yielding to the notion that a little inflation right
now is a good a thing, a good thing to release animal spirits and to pep
up investment.” “The implicit assumption behind that siren call
must be that the inflation rate can be manipulated to reach economic
objectives,” according to Volcker. “Up today, maybe a little more
tomorrow and then pulled back on command. Good luck in that. All
experience demonstrates that inflation, when fairly and deliberately
started, is hard to control and reverse.”
Wall Street Journal:
- Mexico Housing Bust Bruises Investors, Buyers. Hardly anyone turns up nowadays at a Homex sales center for low-income homes in this dusty town north of Mexico City. On
a recent Saturday, a banner promising "well-being" flapped in the wind
near a sign that read "a new life awaits you." Even the lone
saleswoman on duty, Carolayn León, says she no longer believes in her
employer after several missed paychecks. She isn't the only one
who has lost faith. Home buyers and investors are turning their backs on
Mexico's low-income housing darlings, bringing a government-fueled boom
that lasted more than a decade to a screeching halt. Scores of new
homes in far-flung communities sit empty, while banks have canceled
credit lines to some of the country's biggest housing companies.
- Blackstone(BX) Weighs Bigger SAC Withdrawal. SAC
Capital's largest outside investor, Blackstone Group, is planning to
withdraw close to $400 million from the embattled hedge-fund firm, or
potentially twice as much as was expected earlier this month.
- Currencies Cave to Commodity Dive. Aussie Dollar, Others Start to Tumble as Investors Bet on Sustained Price Declines for Raw Materials. Currencies of the world's biggest commodity exporters are plumbing fresh
lows, the latest sign that investors are betting on a sustained decline
in prices of oil, iron ore, copper and other raw materials.
Fox News:
- Tea Party groups file lawsuit over IRS targeting. A Washington advocacy group filed a lawsuit on Wednesday against the IRS
and top Obama administration officials on behalf of 25 Tea
Party-related groups, marking the biggest lawsuit to date over the tax
agency's practice of targeting conservatives for additional scrutiny.
MarketWatch.com:
CNBC:
- China's Grab of US Hogs Stokes Interest on Hill. China's
largest acquisition to date of a U.S. company, Smithfield Foods, raised
eyebrows on Wednesday among market watchers who question China's
interest in taking possession of one of America's largest food
producers.
Zero Hedge:
Business Insider:
New York Times:
- China’s Food Play Extends Its Reach, Already Mighty. If you dined on tilapia recently, chances are it came from China. And
that artificial vanilla you just used to make cookies? It, too, may have
made the same long journey to your kitchen in the United States.
A growing amount of food commonly consumed by Americans — ranging from
canned tuna and mandarin oranges to fresh mushrooms and apple juice — is
now being imported from China. By the end of last year, the United
States imported 4.1 billion pounds of food products from China,
according to the Agriculture Department.
The Blaze:
Reuters:
- Moody's downgrades Alcoa(AA), sees headwinds for primary metals. Moody's
Investors Service downgraded aluminum producer Alcoa Inc. on Wednesday,
citing weak aluminum prices and a tough market for the company's
primary metals business. Moody's cut Alcoa's senior unsecured debt
ratings to Ba1
from Baa3, and assigned a corporate family rating of Ba1. It
said the firm's rating outlook is stable.
- Buffett pays $5.6 bln for Vegas utility, bulks up in West. Berkshire's MidAmerican Energy Holdings Co said on Wednesday
it will buy NV Energy for $23.75 per share, a 23 percent premium
to NV's Wednesday closing price. NV Energy shares rose to $23.90
in after-hours trading on Wednesday.
Telegraph:
- France must reform or the euro will die. Yes, there were sighs of relief on Wednesday as the European Commission
stepped back from hitting eurozone countries with fines for their failure to
meet targets to cut public spending. Behind the cover of easing up on austerity, the commission flexed new European
Union powers to enforce economic reform and France is in its sights.
Yonhap News Agency:
- South Korea's Hyun Says Japan's Economic Policies Fragile. South Korean Finance Minister Hyun Oh Seok described policies being promoted by Japanese Prime Minister Shinzo Abe as "a fragile sand castle," citing Hyun in a Q&A session at an OECD meeting in Paris. Hyun says quantitative easing without improvement in economic fundamentals doesn't support sustainable growth. Says Japan's easing brings adverse effects to region, including more exchange rate volatility.
Xinhua:
- U.S.
to Collect Anti-Subsidy Duty on China Shrimp. The U.S. will collect
anti-subsidy duty of 5.76% on imports of frozen shrimp from China,
citing a preliminary decision announced by the U.S. Dept. of Commerce.
21st Century Business Herald:
- Beijing to Take Measures to Limit Home Prices. China's Beijing will likely cap home prices on a "larger scale" in 2H.
Time-Weekly:
- China Railway Corp. Wants Debts Waived. China Railway Corp. officials have been reaching out to the State Council and asking to have its liabilities waived, citing a person close to the company. The company has total liabilities of 2.84t yuan by the end of March, according to its bond prospectus.
Evening Recommendations
SunTrust Robinson:
- Rated (BMY) Buy, target $55.
- Rated (LLY) Buy, target $63.
- Rated (PFE) Reduce, target $27.
Night Trading
- Asian equity indices are -2.0% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 112.50 +5.5 basis points.
- Asia Pacific Sovereign CDS Index 94.50 +3.75 basis points.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- 1Q GDP is estimated to rise +2.5% versus a prior estimate of a +2.5% gain.
- 1Q Personal Consumption is estimated to rise +3.3% versus a prior estimate of a +3.2% gain.
- 1Q GDP Price Index is estimated to rise +1.2% versus a prior estimate of a +1.2% gain.
- 1Q Core PCE is estimated to rise +1.2% versus a prior estimate of a +1.2% gain.
- Initial Jobless Claims are estimated at 340K versus 340K the prior week.
- Pending Home Sales for April are estimated to rise +1.5% versus a +1.5% gain in March.
- Continuing Claims are estimated to rise to 2955K versus 2912K prior.
10:00 am EST
- Pending Home Sales for April are estimated to rise +1.5% versus a +1.5% gain in March.
11:00 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -500,000
barrels versus a -338,000 barrel decline the prior week. Gasoline
inventories are estimated to fall by -500,000 barrels versus a +3,015,000 barrel gain the prior week. Distillate inventories are estimated to fall by -450,000 barrels versus a -1,052,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +.3% versus a -.7% decline prior.
Upcoming Splits
Other Potential Market Movers
- The 7Y T-Note auction, Japan CPI report, China Manufacturing PMI report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and the (FLEX) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity shares in the region. I expect US stocks to open mixed and weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
