Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.26 +.45%
- Euro/Yen Carry Return Index 140.15 +.11%
- Emerging Markets Currency Volatility(VXY) 8.02 -2.79%
- S&P 500 Implied Correlation 37.88 +3.19%
- ISE Sentiment Index 93.0 +36.76%
- Total Put/Call .93 +16.25%
Credit Investor Angst:
- North American Investment Grade CDS Index 71.86 -.54%
- European Financial Sector CDS Index 125.37 +2.25%
- Western Europe Sovereign Debt CDS Index 69.0 -1.43%
- Emerging Market CDS Index 262.04 +.01%
- 2-Year Swap Spread 13.0 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.75 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 220.0 -1 basis point
- China Import Iron Ore Spot $133.30/Metric Tonne -.15%
- Citi US Economic Surprise Index 17.0 -.1 point
- Citi Emerging Markets Economic Surprise Index -5.60 +.8 point
- 10-Year TIPS Spread 2.19 +2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +123 open in Japan
- DAX Futures: Indicating +8 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/tech sector longs and index hedges
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- Export Slowdown Threatens World Economy. The
bet on trade is flopping for companies and policy
makers who had hoped it would power recoveries held back by weak
domestic demand. This week alone, Caterpillar Inc. (CAT) and Unilever
(UNA) complained of sliding overseas buying and data showed global trade
volumes fell in August by the most since February.
- China’s Stocks Fall, Capping Longest Losing Streak Since July. China’s
stocks fell for a fourth day, capping the longest stretch of losses in
almost three months, after money-market rates jumped and Great Wall
Motor Co.’s earnings missed analysts’ estimates. Great Wall Motor
tumbled 10 percent to lead declines for consumer-discretionary
companies reliant on economic growth. Kweichow Moutai Co. (600519), the
nation’s biggest liquor maker by market value, slid the most in five
weeks after a newspaper reported high-end liquor prices fell 20 percent.
Shanghai International Port (Group) Co. (600018) and Shanghai
Waigaoqiao Free Trade Zone Development Co. plunged at least 7 percent
after rallying more than 90 percent since the start of August. The Shanghai Composite Index (SHCOMP) dropped 1.5 percent to
2,132.96 at the close, the lowest level since Sept. 5.
- Europe Stocks Are Little Changed as Kering Offsets BASF.
European stocks were little changed, with the Stoxx Europe 600 Index
posting a third weekly advance, as companies from Kering SA to Renault
(RNO) SA reported sales that missed projections, offsetting gains in
BASF SE. Kering slid 3 percent after its Gucci brand posted the worst
sales growth in four years as demand waned in China. Renault slipped 3.2
percent after the Frenchcarmaker said
weaker emerging-market currencies cut third-quarter revenue.
Telecom Italia SpA slumped 6.4 percent as people familiar with
the matter said the company may seek to raise as much as 2
billion euros ($2.8 billion) of new capital. BASF rose 1.3
percent after posting better-than-forecast earnings. The Stoxx 600 slipped 0.1 percent to 320.09 at the close of
trading.
- Gold Futures Rise to One-Month High on U.S. Stimulus Speculation. Gold futures for December delivery gained 0.2 percent to settle at $1,352.50 an ounce at 1:37 p.m. on the Comex
in New York, after touching $1,356.40, the highest since Sept. 20. The
precious metal added 2.9 percent this week, the second straight
increase.
- Crude Rises for Second Day. WTI for December delivery gained 68 cents, or 0.7 percent,
to $97.79 a barrel at 1:29 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 38 percent lower than the 100-day average. Prices are down 3 percent this week.
- Obamacare Website Flaws Imperil President’s Activist Agenda. The rocky debut of the insurance
exchanges at the heart of President Barack Obama’s health-care
law poses risks to his political agenda and the activist role
for government that he has championed for his second term. White House officials say they expect a surge in online
enrollment to begin in mid-November, meaning the administration
may have only about three weeks to fix the flaws before negative
public perceptions about the new program begin to harden. “This is your signature program, and you’re marching it
onto the field and everybody stumbles,” said Peter Hart, a
veteran Democratic pollster. “It’s hard to see competency, and
it puts a giant question mark behind the future plans.”
Wall Street Journal:
- Abe Says Japan Ready to Counter China’s Power. Premier Urges China to Refrain from Using Force. Japanese
Prime Minister Shinzo Abe said on Friday that many nations were
concerned that China was attempting to use force to change the status
quo in Asia, adding that Tokyo's role as the region's leader is to urge
Beijing not to follow such a path.
- Havas CEO: ‘Dire Consequences’ if Advertisers Make Missteps on Privacy.
The latest allegations in the U.S. spying scandal have got the
advertising industry worried. Consumer behavior data is transforming
this industry, with campaigns shaped by analytics gathered from an
increasing amount of information shared online. Among the biggest fears? That consumers grow more reluctant to share
information about themselves online, potentially undermining
fast-growing areas of super-targeted campaigns, such as mobile
advertising. Some also fear tougher legislation on data protection, reining in advertisers’ ambitions to do more with it.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Real Clear Politics:
Reuters:
- Copper hits 2-week low on outlook for demand, surplus. Copper fell on Friday to its
lowest in two weeks on expectations for a growing surplus,
patchy data on global factory growth and fears top consumer China would clamp down on credit. Copper has traded in a $7,000-$7,420 range since early August due to swelling supply and slower demand growth in China.
Financial Times:
- Banks open fresh US settlement talks. Global
banks have started to approach New York’s attorney-general about paying
billions of dollars to settle charges they mis-sold mortgage-backed
securities that were at the heart of the financial crisis, following
JPMorgan Chase’s tentative agreement pay a $13bn settlement.
Telegraph:
- China turning into 'giant North Korea' say panda pundits. China experts Minxin Pei and Jonathan Fenby left a group of grizzled
policy veterans open-mouthed with astonishment at a Westminster lunch by
Centre for European Reform. They more or less said that China is reverting to full police-state
Maoism, with sinister self-criticism sessions making a comeback. The
reforms are skin deep, and the Communist Party is rapidly shutting off
the last hope of averting a violent denouement. The country risks turning into a "giant North Korea", held down by
repression alone. "People are losing faith in their ability to engineer a
(political) soft landing. The likelihood of a revolutionary event is
increasing", said Minxin.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Nikkei:
- Japan-US Defense Plan Has Scenario for Islets Recapture. Japan,
U.S. included in their joint defense plan a scenario in which the
nations' military forces would jointly recapture the disputed islands in
the East China Sea if the islets were occupied by China, citing a U.S.
defense official.
The Star Online:
- Nikkei tumbles 2.8% on China fears, biggest one-day fall since early August.
Japan’s Nikkei stock average suffered the biggest one-day loss in 2-1/2
months on Friday, hit by yen’s strength against the dollar and as fears
grew that tight credit conditions in China could put the brakes on the
world’s second-largest economy. The Nikkei shed 2.8% to 14,088.19, its lowest closing level since Oct.
9. For the week, the benchmark fell 3.3%, marking its first weekly fall
in three weeks.
Style Outperformer:
Sector Outperformers:
- 1) Software +1.56% 2) REITs +.57% 3) Utilities +.42%
Stocks Rising on Unusual Volume:
- MPWR, ZINC, CTCT, DECK, AMZN, SPNC, BCOV, AFOP, ETN, AVY, WOOF, WETF, MCK, MCRS, MKTO, QLGC, ESI, MXIM, CTCT, FLS, MSFT, GNRC, THRX, CLF and ALXN
Stocks With Unusual Call Option Activity:
- 1) XCO 2) DECK 3) QLIK 4) ESRX 5) MCK
Stocks With Most Positive News Mentions:
- 1) MSFT 2) BA 3) NOV 4) GOOG 5) CLF
Charts:
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 135.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 100.75 -1.0 basis point.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for September are estimated to rise +2.3% versus a +.1% gain in August.
- Durables Ex Transports for September are estimated to rise +.5% versus a -.1% decline in August.
- Cap Goods Orders Non-defense Ex Air for September are estimated to rise +1.0% versus a +1.5% gain in August.
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for October is estimated to fall to 75.0 versus a prior estimate of 75.2.
10:00 am EST
- Wholesale Inventories for August are estimated to rise +.3% versus a +.1% gain in July.
- Wholesale Trade Sales for August are estimated to rise +.3% versus a +.1% gain in July.
Upcoming Splits
Other Potential Market Movers
- The G7 meeting and UK GDP report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial 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: Higher
- Sector Performance: Mixed
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.20 -1.64%
- Euro/Yen Carry Return Index 140.02 +.09%
- Emerging Markets Currency Volatility(VXY) 8.33 -.24%
- S&P 500 Implied Correlation 36.79 -.49%
- ISE Sentiment Index 65.0 -39.25%
- Total Put/Call .78 -9.30%
Credit Investor Angst:
- North American Investment Grade CDS Index 71.95 -.02%
- European Financial Sector CDS Index 122.61 +1.99%
- Western Europe Sovereign Debt CDS Index 70.0 -1.03%
- Emerging Market CDS Index 261.08 +.79%
- 2-Year Swap Spread 13.25 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -3.25 +1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 221.0 +2 basis points
- China Import Iron Ore Spot $133.50/Metric Tonne +.23%
- Citi US Economic Surprise Index 17.10 -1.1 points
- Citi Emerging Markets Economic Surprise Index -6.40 +2.7 points
- 10-Year TIPS Spread 2.17 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating -31 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg
- Euro-Area Services, Manufacturing Unexpectedly Slow. Euro-area services and manufacturing
output unexpectedly slowed in October as the recovery in the
currency bloc struggled to gain momentum. A composite index based on a
survey of purchasing managers in both industries declined to 51.5 this
month from 52.2 in September, London-based Markit Economics said today.
Economists had forecast the indicator would rise to 52.4, according to the median of 24 estimates in a Bloomberg News survey.
- European Stocks Advance as ABB, Daimler Gain on Earnings.
European stocks advanced as companies from ABB (ABBN) Ltd. to Daimler
AG posted earnings that beat estimates, while a report showed China’s
manufacturing strengthened this month more than forecast. ABB climbed 5
percent after saying profit rose 10 percent amid increasing orders in
China and Germany. Daimler added 3.3 percent after also saying sales of
its CLA compact coupe and
upgraded E-Class sedan rose. Celesio AG jumped 5.4 percent after
McKesson Corp. agreed to buy the German drug wholesaler for 3.9
billion euros ($5.4 billion). Credit Suisse Group AG lost 2.8
percent after posting profit that missed analysts’ estimates. The Stoxx Europe 600 Index increased 0.4 percent to 320.38 at the close of trading in London.
- Fed to Propose Banks Hold Ready Funds for 30-Day Credit Drought. Banks
would have to hold enough easy-to-sell assets to survive a 30-day
credit drought under a rule to be proposed today by the Federal Reserve
that may have the greatest effect on banks with big trading
operations such as JPMorgan Chase & Co. (JPM) and Goldman Sachs
Group Inc. (GS) The demand for 30 days of liquidity is intended to
satisfy global Basel III accords for strengthening the financial system.
Increasing the banks’ liquid assets is meant to make them less
vulnerable in a crisis like the one that struck in 2008.
- U.S. Mortgage Rates Fall to a Four-Month Low.
U.S. mortgage rates fell to a four-month low after a
weaker-than-expected jobs report drove investors to the safety of the
government bonds that guide borrowing costs. The average rate for a
30-year fixed mortgage dropped to 4.13 percent the week ended today from
4.28 percent, Freddie Mac said in a statement. The average 15-year rate
declined to 3.24
percent, from 3.33 percent.
- Consumer Confidence in U.S. Falls to Eight-Month Low: Economy.
Consumer confidence sank last week to the lowest level in eight months
as Americans grew more concerned the budget standoff in Washington hurt
the world’s
largest economy. The Bloomberg Consumer Comfort Index declined
to minus 36.1 in the period ended Oct. 20, the lowest since February,
from minus 34.1. The report also showed more households were pessimistic
about the economy than at any time in the past year even as lawmakers
approved a deal that ended the partial shutdown of federal agencies.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Telegraph: