Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.29 +5.4%
- Euro/Yen Carry Return Index 150.97 -.27%
- Emerging Markets Currency Volatility(VXY) 9.24 -.11%
- S&P 500 Implied Correlation 50.63 unch.
- ISE Sentiment Index 178.0 +93.48%
- Total Put/Call .65 -10.96%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.34 -2.20%
- European Financial Sector CDS Index 87.20 -.30%
- Western Europe Sovereign Debt CDS Index 59.69 -.43%
- Emerging Market CDS Index 273.80 +.03%
- 2-Year Swap Spread 10.5 +1.0 basis point
- TED Spread 18.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.25 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .07% +1.0 basis point
- Yield Curve 265.0 +6.0 basis points
- China Import Iron Ore Spot $134.20/Metric Tonne unch.
- Citi US Economic Surprise Index 52.20 +2.0 points
- Citi Emerging Markets Economic Surprise Index -6.40 +.3 point
- 10-Year TIPS Spread 2.23 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +99 open in Japan
- DAX Futures: Indicating +49 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- China’s Dec. New Home Prices Rise Most in 2013: SouFun. China’s
new home prices in December jumped by the most last year even as the
country’s biggest cities tightened property controls to moderate price
gains. The average price rose 12 percent from a year earlier to 10,833 yuan ($1,789) per square meter (10.76 square feet),
SouFun Holdings Ltd., the nation’s biggest real estate website
owner, said in an e-mailed statement yesterday based on a survey
of 100 cities. Prices climbed 0.7 percent from November.
- China’s Tianjin to Begin Restricting Car Population, Xinhua Says. China’s
northern Tianjin municipality will begin restricting its car population
next year to control traffic congestion and air pollution, the official
Xinhua News Agency reported. Only 100,000 new license plates will be issued in Tianjin
next year, of which 60,000 will be distributed by lottery and
the rest auctioned off for a minimum bid of 10,000 yuan ($1,650)
each, according to Xinhua. Government departments will be banned
from buying new official cars and all proceeds from the auctions
will go to support public transportation, Xinhua reported,
citing a plan approved by the Tianjin government.
- Revlon to Exit Operations in China, Cut 1,100 Jobs. Revlon Inc. (REV), the maker of cosmetics under its namesake and Almay brands, will cease operations in
China and eliminate about 1,100 positions, including 940 beauty
advisers, as it restructures its struggling business.
- Toyoda Predicts Emerging Markets Slowdown to Persist This Year. A
slowdown in emerging markets will extend into this year, compounding
uncertainty over demand in China and at home, according to a group
representing Japan’s auto manufacturers. “A deceleration is seen in
emerging markets that have been growing rapidly until now,” Akio Toyoda,
president of Toyota Motor Corp. (7203) and chairman of the Japan
Automobile Manufacturers Association, said in a statement. “This year,
the situation is unpredictable.” Slowing demand in emerging markets including India,
Thailand, Brazil and Russia has marred an earnings boom for
Japanese exporters as the weaker yen drives up profits.
- Europe Stocks Post Best Year Since 2009 Before U.S. Data. European stocks
advanced, with the Stoxx Europe 600 Index posting its biggest annual
gain since 2009, amid shortened trading hours for New Year’s Eve before
American consumer confidence and housing data. SBM Offshore NV added 1
percent for its longest winning streak in two months. Real estate companies gained, with Land
Securities Group Plc and Unibail-Rodamco SE increasing more than
1.5 percent. Banco Comercial Portugues SA dropped 1.3 percent
for its worst two-day slump in almost six months.
The Stoxx 600 added 0.3 percent to 328.04 at 1:53 p.m. in
London, extending its rise this year to 17 percent as the European Central Bank pledged to keep interest rates low for an
extended period.
- U.S. 10-Year Yield Climbs to 2-Year High as Data Stoke Fed Bets. Treasuries fell, pushing 10-year
note yields to the highest level in more than two years, as
gains in U.S. consumer confidence and home sales bolstered bets the Federal Reserve will end bond purchases next year.
Thirty-year bond yields also reached the highest since
2011. The 10-year yield climbed six basis points, or 0.06
percentage point, to 3.03 percent at 2 p.m. New York time, according to
Bloomberg Bond Trader prices. It was the highest level since July 2011.
- Copper Falls, Capping Annual Drop, as Global Supply Gains. Copper
prices fell in London, capping a 7.2 percent annual decline, as
inventories in 2013 climbed for the first time in four years. Stockpiles monitored by the London Metal Exchange gained 14 percent this year.
Mine openings and expansion from Peru to Mongolia will leave a supply
surplus of 127,000 metric tons in 2014, Barclays Plc has forecast.
Economic growth in China, the world’s biggest user of the metal, has
slowed every year since
2010.
- Commodities Set for First Drop in 5 Years as Corn to Gold Tumble. Commodities headed for the first
annual drop in five years as supply exceeded demand for corn to
sugar to nickel and after investors lost faith in precious
metals as a store of value amid signs economies are improving. The
Standard & Poor’s GSCI gauge of 24 raw materials fell 0.4
percent to 633.51 by 1:44 p.m. in London for a 2 percent decline this
year. Corn led the retreat with a 39 percent plunge, with silver and
gold the next worst performers.
Commodity-fund investments fell by a record $88 billion to $332
billion in the first 11 months, Barclays Plc estimates.
Fox News:
- Politicians, companies see green as FAA approves drone test sites. Are drones the engine of the next economic boom? Officials in the six states selected Monday to develop drone test
sites certainly seem to think so. Despite concern about government
surveillance dominating the headlines this year, those behind the
successful bids ended 2013 cheering over the possibility of a new
commercial drone industry. "This is wonderful news for Nevada that creates a huge opportunity
for our economy," Senate Majority Leader Harry Reid, D-Nev., said in a
statement, after his state was selected as one of the six sites.
- Passengers, crew stuck on ship trapped in Antarctic ice ring in 2014. Passengers and crew who set off on an expedition to prove climate
change are ringing in the new year in the same place where they have
been for the past week: stuck in ice at the bottom of the world. The 74 scientists, tourists and crew on the Russian ship MV Akademik
Shokalskiy, which has been trapped near Antarctica since last Tuesday,
are expecting to be airlifted from the ship by a helicopter.
MarketWatch:
CNBC:
ZeroHedge:
ValueWalk:
Business Insider:
NY Post:
c/net:
Reuters:
- Chinese recycling tycoon says he wants to buy New York Times. An eccentric Chinese recycling
magnate said on Tuesday he was preparing to open negotiations to
buy the New York Times Co. Chen
Guangbiao, a well-known philanthropist, is something of a celebrity in
China. During a particularly murky bout of pollution in January, the
ebullient
and tireless self-promoter handed out free cans of "fresh air."
Boersen-Zeitung:
- Merkel
Adviser Opposes ECB Bond Purchases. ECB buying bonds if European
governments fail to implement reforms to combat sovereign debt crisis
wouldn't be "healthy," citing Christoph Schmidt, head of German
Chancellor Angela Merkel's council of economic advisers.
Style Underperformer:
Sector Underperformers:
- 1) Restaurants -.21% 2) REITs -.20% 3) Oil Tankers -.18%
Stocks Falling on Unusual Volume:
- UNXL, USLV, RUTH, KNDI, AXDX, EXAS, ADUS, APFC, FNGN, DGLD, MGNX, DEST, ACHC, ENZY, CTRP, SATS, ELLI, CLFD and DGX
Stocks With Unusual Put Option Activity:
- 1) AVP 2) ITB 3) IEF 4) DXJ 5) YHOO
Stocks With Most Negative News Mentions:
- 1) IBM 2) JCP 3) BTU 4) TWTR 5) WU
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.32% 2) Airlines +.86% 3) I-Banks +.85%
Stocks Rising on Unusual Volume:
- ICLD, HTZ, NQ, ONVO, MRVL and TWTR
Stocks With Unusual Call Option Activity:
- 1) HTZ 2) DG 3) AET 4) ONVO 5) UNXL
Stocks With Most Positive News Mentions:
- 1) STT 2) NFLX 3) HPQ 4) AAPL 5) WAG
Charts:
Evening Headlines
Bloomberg:
- China Approves Listing of Five Companies as IPOs Set to Resume. China's securities regulator gave
approvals for five companies to sell shares publicly in Shanghai
and Shenzhen, paving the way for the resumption of initial
offerings after a more than one-year freeze. About 50 companies are expected to complete the IPO
approval preparations and list or be ready to do so by the end of January, the China Securities Regulatory Commission said in a statement last month. There
are more than 760 companies in the queue for approval and it will take
about a year to complete an audit of all the applications, the
regulator said. Another several companies will likely receive approvals
in the next few days, the China Securities Journal reported today,
citing unidentified people at the companies.
- Asia Stocks Outside Japan Rise Third Day as Consumer Shares Gain.
Asian stocks outside Japan rose, with a regional gauge extending gains
into a third day as consumer and utilities companies advanced. HanKore
Environment Tech Group Ltd. (BIOT) soared 35 percent in Singapore after a
filing showed China Everbright International Ltd. plans to transfer
water-industry investments to the company. Sinopec Kantons Holdings Ltd.
gained 4.6 percent in Hong Kong after the oil trader said its
controlling shareholder China Petroleum & Chemical Corp. is
considering a asset injection of natural gas pipelines. Perseus Mining
Ltd., a gold producer, sank 3.9 percent in Sydney as the precious metal
headed for its biggest annual decline since 1981. The MSCI Asia Pacific excluding Japan Index climbed 0.2 percent to 467.69 as of 12:06 p.m. in Hong Kong.
- Rebar Set for Monthly Loss Amid Concern on Local Government Debt.
Steel reinforcement-bar futures
swung between gains and losses, heading for a monthly decline, amid
speculation that rising local government debt may prompt China to rein
in spending. Rebar for May delivery on the Shanghai Futures Exchange lost as much as 0.3 percent and gained as much as 0.2 percent
before trading little changed at 3,574 yuan ($590) a metric ton
at 10:56 a.m. Beijing time. The most-active contract fell 2.7
percent this month, bringing losses this year to 10 percent.
- Corn Set for Worst Drop Since ’60 as Crop Prices Slump on Output. Corn is heading for the worst year
since at least 1960 and wheat is poised for the biggest annual
loss in five years as global production climbs to a record. Futures
for corn plunged 39 percent this year to $4.23 a bushel by 11:35 a.m. in
Singapore today as wheat dropped 23 percent to $6.005 a bushel.
Soybeans fell 7.1 percent to $13.10.
- Yen Set for Biggest Decline Since 1979 on Outlook for BOJ Policy.
The yen is set for its biggest annual drop against the dollar since
1979 amid speculation the Bank of Japan will maintain unprecedented
stimulus to support Prime Minister Shinzo Abe’s economic strategy.
The yen has fallen 16 percent in 2013 against a basket of
nine other developed-nation currencies tracked by Bloomberg
Correlation-Weighted Indexes, the biggest slide within the
gauge. Hedge funds and other large speculators increased bets on
a drop in the yen against the dollar to the most since July
2007.
- Ringgit Posts Worst Annual Drop Since 1997 Crisis as Fed Tapers. Malaysia’s ringgit posted its worst
annual loss since the 1997 Asian financial crisis on concern
capital inflows will slow as the Federal Reserve trims its record monetary stimulus.
The Fed announced on Dec. 18 that it will start cutting monthly bond
purchases by $10 billion to $75 billion in January and pledged to keep
interest rates near zero until inflation and
unemployment improve. Malaysia’s government bonds returned 0.9
percent in 2013, the smallest increase in four years, according
to an index compiled by HSBC Holdings Plc.
- Russia Bombings Raise Prospect of Olympics as Target. Two
bomb attacks in southern Russia before the country hosts the Winter
Olympics are raising concerns that the location, the nations represented
and the international platform may make the games a major target for
terrorists. Four U.S. and European counterterrorism experts said the
main threat is attacks by the Muslim separatist groups in the
north Caucasus that are at war with the Russian government. They
are the leading suspects in the suicide bombings at the train
station in Volgograd two days ago and on a trolleybus in the
city yesterday that killed more than 30 people.
- Apple’s(AAPL) Cook, Gore Should Face E-Book Queries, U.S. Says. Apple
Inc. faces opposition from the
U.S. in its bid to block an antitrust monitor appointed in a
electronic books price-fixing case from interviewing top executives and
directors, including chief executive officer Tim Cook and board member
Al Gore. The government said the monitor, former Justice Department
inspector general Michael Bromwich, should be allowed to interview the
company’s leaders, as such activities are “standard procedure in
monitorships,” according to a filing today in Manhattan federal court.
Bromwich was appointed in
October by U.S. District Judge Denise Cote to evaluate Apple’s
antitrust compliance policies.
Wall Street Journal:
- China Says Terrorist Group Behind Police Station Attack. Authorities Identify Eight People Shot Dead and a Ninth Arrested on Monday in Xinjiang. Police have identified the eight people shot
dead by authorities on Monday and a ninth arrested outside a police
station in China's far western region of Xinjiang as members of a
terrorist group carrying out a premeditated attack, state media
reported. A report on the Xinjiang
government's news portal late Monday said the assailants hurled
explosives at the Yarkand county police station. After the clash, it
said, police recovered 25 other explosive devices and nine machetes at
the scene. Investigators said the group formed in August and began
gathering funds and materials for the "organized, premeditated, violent
terrorist attack," according to the report on Tianshan.net.
- FAA Authorizes Commercial-Drone Testing. Six Operators Selected to Conduct Research, Setting Stage for Eventual Widespread Use. Aviation officials on Monday selected a
handful of universities and state agencies to operate sites for drone
testing, in a step toward eventually integrating commercial unmanned
aircraft into the U.S. aviation system. Under
the six operators chosen by the Federal Aviation Administration,
research will be conducted by industry experts and academics on the safe
operation of drones, or unmanned aerial vehicles, across a broad array
of geographical areas, climates and types of airspace.
- Tom Coburn: The Year Washington Fled Reality. 'Message discipline' can win elections but is not a healthy way to run a country. The past year may go down not only as the least productive ever in Washington but as one of the worst for the republic. In
both the executive branch and Congress, Americans witnessed an
unwinding of the country's founding principles and of their government's
most basic responsibilities. The rule of law gave way to the rule of
rulers. And the rule of reality—in which politicians are entitled to
their own opinions but not their own facts, as Sen.
Daniel Patrick Moynihan
liked to say—gave way to some politicians' belief that they were
entitled to both their own opinions and their own facts. It's no wonder
the institutions of government barely function.
CNBC:
Zero Hedge:
Business Insider:
The Blaze:
Reuters:
- Fed's Fisher says his FOMC vote will reflect concerns on bond buying. Dallas Federal Reserve Bank
President Richard Fisher said his votes on the central bank's
policy panel in 2014 will reflect his concern that the Fed's
bond-buying risks stoking inflation and exposing the institution
politically.
In an interview conducted on Dec. 2 but posted to the
Internet as a podcast on Monday, Fisher called the excess
reserves piling up in the U.S. banking system potential "tinder"
for inflation, and he said the central bank's plans to
eventually unwind its extraordinary policies relied on an
untested "theoretical exit strategy." "I expect that my own voting behavior will reflect this
concern I've just stated," Fisher said in the interview hosted
by the private educational foundation Liberty Fund. "I worry
about the fact that we've already painted ourselves into a
corner that's going to be very hard to get out of."
- Reduced Fed support reflected in January bond-buying plan. The Federal Reserve plans to
purchase about $40 billion in longer-dated federal government
debt in 18 operations next month, the New York Fed said on
Monday, reflecting the U.S. central bank's decision to trim its support for the economy.
In what came as a surprise to some investors, earlier this month the
Fed decided to cut its bond-buying program, known as quantitative
easing, by $10 billion to $75 billion per month. It reduced purchases of
both Treasuries and mortgage bonds by $5
billion each.
- South Korea, China alarmed over yen slide. China and South Korea’s anxiety over the rapidly falling yen came to the
fore on Monday as senior officials said their exporters could be hurt
by Japan’s attempts to pull its moribund economy out of a two-decade
slump.
Telegraph:
- A world economy on the brink of fracture. What will happen in 2014? The Chinese economy will slow; the price of oil will
sink; Germany will slide into recession; the EU will remain intact and the
internet will begin to Balkanise.
Caixin:
- China to Ban Trust Sales By Wealth-Management Agents. China Banking Regulatory Commission plans to ban wealth management agents from signing agreements with trust companies to sell products.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 128.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 104.75 +1.5 basis points.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The S&P/CS 20 City MoM SA for October is estimated to rise +.95% versus a +1.03% gain in September.
9:45 am EST
- The Chicago Purchasing Manager report for December is estimated to fall to 60.8 versus 63.0 in November.
10:00 am EST
- Consumer Confidence for December is estimated to rise to 76.2 versus 70.4 in November.
Upcoming Splits
Other Potential Market Movers
- The China Govt Manufacturing PMI, German Retail Sales report and weekly US retail sales reports could also impact trading today.
BOTTOM LINE: Asian indices are slightly higher, boosted by financial 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: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.45 +7.95%
- Euro/Yen Carry Return Index 151.33 +.36%
- Emerging Markets Currency Volatility(VXY) 9.25 -.11%
- S&P 500 Implied Correlation 50.53 +2.62%
- ISE Sentiment Index 91.0 -1.09%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.73 +.75%
- European Financial Sector CDS Index 87.73 +2.57%
- Western Europe Sovereign Debt CDS Index 59.85 -1.0%
- Emerging Market CDS Index 273.87 +.14%
- 2-Year Swap Spread 9.5 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -3.75 -2.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- Yield Curve 259.0 -2.0 basis points
- China Import Iron Ore Spot $134.20/Metric Tonne +.15%
- Citi US Economic Surprise Index 50.20 +.8 point
- Citi Emerging Markets Economic Surprise Index -6.70 +2.3 points
- 10-Year TIPS Spread 2.21 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +54 open in Japan
- DAX Futures: Indicating +49 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
