Evening Headlines
Bloomberg:
- Ukraine Premier Starts ‘Kamikaze’ Mission as Crimea Anger Flares. With deposed ex-President Viktor Yanukovych claiming he’s
still the country’s rightful leader, Yatsenyuk must seal a
financial lifeline as investors pull out of Ukraine. Yatsenyuk
in an interview before his confirmation yesterday said he was
prepared to be “the most unpopular prime minister in the
history” of the nation. “The fate of all the members of this cabinet is the fate
of a political kamikaze,” Yatsenyuk said on his website after
getting the support of protesters on Feb. 26. “The treasury is
empty, pensions haven’t been paid in full for more than a month,
gold and foreign currency reserves have been robbed.
- Japan’s Output Climbs Most Since ’11 as Tax Rise Looms: Economy.
Japan’s industrial production grew the most since 2011, indicating the
economy is strengthening as a looming sales-tax bump stimulates demand,
while inflation matched the highest level in more than five years. Output
rose 4 percent in January from the previous month, the trade ministry
said today in Tokyo, more than a 2.8 percent median estimate in a
Bloomberg News survey of 33 economists. Consumer prices excluding fresh
food climbed 1.3 percent from a
year earlier, the statistics bureau said.
- China Must End Its GDP Worship. For China to get off the growth treadmill would be a giant reform all
its own. Why? Well, there are at least three major challenges China will
never be able to address if leaders feel obliged to keep growth above a
specified level: local government finances, pollution and the
shadow-banking system.
- China Yuan Set for Worst Month in 20 Years on Band-Widening Bets. China’s yuan headed for the worst
month in two decades on speculation the government will broaden
the currency’s trading band after allowing more volatility in
the exchange rate. The yuan in Shanghai slid 1.5 percent in February,
according to China Foreign Exchange Trade System prices. That’s
the biggest monthly loss in CFETS figures since 2007 and in
Bloomberg data before that.
- Soho China Sells Shanghai Buildings Amid Deepening Office Glut. Soho
China Ltd. (410), the biggest developer in Beijing’s central business
district, will sell two office buildings in Shanghai as an office glut
deepens in the country’s financial center. The company signed an
agreement with Financial Street Holdings Co., a developer of Beijing’s
central business area, to sell its entire equity stake in Soho Hailun
Plaza and related loans, and Soho Jing’an Plaza for about 5.23 billion
yuan ($853 million), it said in a statement to the Hong Kong stock
exchange
today.
- North Korea Fires Missiles After Recent Easing of Tensions. North
Korea fired four short-range missiles, the first confirmed launch in
more than nine months, disrupting a period of easing tensions with the
South. The missiles were fired into the sea from North Korea’s east coast shortly before 6 p.m. local time yesterday, and had a
range of at least 200 kilometers (124 miles), South Korea’s
Defense Ministry said.
- Asian Stocks Erase Advance as Yuan Drops Most on Record.
Asian stocks fell, with the
benchmark gauge erasing gains, after China’s yuan posted its steepest
one-day loss against the dollar. China’s Shanghai Composite Index lost 1
percent, set for a third monthly slide amid speculation a weaker
currency will curb earnings. Hong Kong’s Hang Seng China Enterprises
Index slid 1 percent, erasing gains of as much as 0.8 percent, while the
benchmark Hang Seng Index fell 0.4 percent. The MSCI Asia Pacific Index declined 0.4 percent to 137.45
as of 11:44 a.m. in Hong Kong after rising as much as 0.2
percent, and is little changed on the week.
- Yen Gains Versus Euro Amid Crimea Tensions; Oil Falls.
Japan’s yen headed for its longest streak of gains versus the euro in
15 months as reports that armed men seized an airport in Ukraine’s
Crimea region stoked haven demand. Crude oil fell, trimming its February
advance, while South Korea’s won and New Zealand’s dollar climbed. The
yen rose 0.2 versus Europe’s currency at 11:01 a.m. in Tokyo, a fifth
straight advance.
- Gold Heads for Second Monthly Advance as Haven Demand Increases. Gold headed for the first back-to-back monthly gain since August as concern that the U.S. recovery
may be losing momentum and turmoil in emerging markets boosted
haven demand. Assets in bullion-backed exchange-traded products
were set for the first monthly increase in 14 months. Bullion for
immediate delivery was at $1,332.61 an ounce at 9:26 a.m. in Singapore
from $1,331.33 yesterday. Prices are up 7 percent this month and reached
a 17-week high of $1,345.46 on
Feb. 26. Holdings in ETPs are up 0.3 percent in February after
declining last year for the first time since the first product
was introduced in 2003, data compiled by Bloomberg show.
- Gold Fix Study Shows Signs of Decade of Bank Manipulation. The
London gold fix, the benchmark used by miners, jewelers and central
banks to value the metal, may have been manipulated for a decade by the
banks setting it, researchers say. Unusual trading patterns around 3
p.m. in London, when the so-called afternoon fix is set on a private
conference call between five of the biggest gold dealers, are a sign of
collusive behavior and should be investigated, New York University’s
Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a
managing director at Moody’s Investors
Service, wrote in a draft research paper.
- Natural Gas Heads for Biggest Weekly Drop in New York Since 1996.
Natural gas futures fell for a fifth
day in New York and headed for the biggest weekly drop in 17
years after a government report showed a U.S. stockpile decline
that was smaller than forecasts. Natural gas for April delivery fell as
much as 1.3 percent in today’s electronic trading on the New York
Mercantile Exchange and was at $4.486 per million British thermal units
at 10:08 a.m. in Singapore. Volume for all futures traded was 86 percent
below the 100-day average. Gas is down 27 percent this
week, approaching the biggest slump since December 1996, and
down 9.2 percent for February.
- Deckers Outdoor(DECK) Falls After Forecasting Surprise Quarterly Loss. Deckers
Outdoor Corp. (DECK), the maker of Ugg boots and Teva sandals, dropped
as much as 20 percent in late trading after the company forecast an
unexpected first-quarter loss. The company, based in Goleta, California, projected a loss
of 16 cents a share for the current quarter. Analysts had
estimated a profit of 10 cents on average, according to data
compiled by Bloomberg.
Wall Street Journal:
- People’s Daily Arms Netizens to ‘Kill the Devils’. An online platform for China’s Communist Party is encouraging
citizens to take out their hostility toward the Japanese in the virtual
world. While Beijing flexes its muscles in a very real way in the
East China
Sea, ordinary Chinese can now play a game called “Kill the Devils” on
the website of the People’s Daily newspaper, the official mouthpiece of
the party here.
Zero Hedge:
Business Insider:
NY Times:
Reuters:
- Sovereigns to increase borrowing in 2014 to $7.1 trillion -S&P. Sovereign debt borrowing is
expected to rise by 2.7 percent to $7.1 trillion this year, with
the biggest relative increase coming in sub-Saharan Africa, a
new study by Standard & Poor's showed on Thursday. The
increase in long-term debt borrowing, equivalent to $185 billion, will
be led mainly by the United States and Japan, which will account for 57
percent of the total in 2014. The next biggest sovereign borrowers this
year are projected to be Italy, China and Brazil.
Shanghai Securities News:
- China Should Set Up Shadow Banking Regulatory Indicators. China
should set up a "regulatory indicator system" for shadow banking risks,
according to a commentary by Lei Wei, a researcher with the Development
Research Center of the State Council. China should strengthen
regulations on shadow banking risks for liquidity, maturities
mismatches, leverage ratios and counterparties, Lei wrote.
Xinhua:
- China's Property Industry Can't Maintain High Growth. China's
property industry can't maintain the high growth of recent years because
the nation's economy has entered a period of medium-high growth, citing
Li Wei, head of the Development Research Center of the State Council.
The supply-demand situation in the property market will see major
changes after more than 10 years of high growth, the report cites Li as
saying.
Evening Recommendations
BNP Paribas:
- Cut (BIDU) to Reduce, target $130.
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 133.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 102.25 -.75 basis point.
- NASDAQ 100 futures -.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- 4Q GDP is estimated to rise +2.5% versus a prior estimate of a +3.2% gain.
- 4Q Personal Consumption is estimated to rise +2.9% versus a prior estimate of a +3.3% gain.
- 4Q GDP Price Index is estimated top rise +1.3% versus a prior estimate of a +1.3% gain.
- 4Q Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.1% gain.
9:45 am EST
- Chicago Purchasing Manager for February is estimated to fall to 56.4 versus 59.6 in January.
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for February is estimated at 81.2 versus a prior estimate of 81.2.
10:00 am EST
- Pending Home Sales for January are estimated to rise +1.8% versus a -8.7% decline in December.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Kocherlakota speaking, Fed's Evans speaking, Fed's Plosser
speaking, China Manufacturing PMI, Eurozone Flash CPI, German retail
sales report and the (ETN) analyst conference could also impact trading
today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial 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 day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.43 +.56%
- Euro/Yen Carry Return Index 145.99 -.11%
- Emerging Markets Currency Volatility(VXY) 8.89 -1.11%
- S&P 500 Implied Correlation 53.81 -.43%
- ISE Sentiment Index 156.0 +59.18%
- Total Put/Call .91 +7.06%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.88 -1.0%
- European Financial Sector CDS Index 88.97 +.49%
- Western Europe Sovereign Debt CDS Index 53.0 unch.
- Asia Pacific Sovereign Debt CDS Index 102.44 -.59%
- Emerging Market CDS Index 305.45 -1.85%
- China Blended Corporate Spread Index 361.05 -.38%
- 2-Year Swap Spread 12.25 +1.0 basis point
- TED Spread 20.0 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -6.0 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- Yield Curve 232.0 -2.0 basis points
- China Import Iron Ore Spot $118.0/Metric Tonne +.17%
- Citi US Economic Surprise Index -13.20 -1.8 points
- Citi Emerging Markets Economic Surprise Index 14.70 +1.4 points
- 10-Year TIPS Spread 2.17 unch.
Overseas Futures:
- Nikkei Futures: Indicating -35 open in Japan
- DAX Futures: Indicating +4 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/tech/mdedical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Hagel Warns Russia on Ukraine Miscalculation Amid Crimea Unrest. U.S. Defense Secretary Chuck Hagel
cautioned the Kremlin against making a “miscalculation” in
maneuvering ground and air forces near the border with Ukraine,
which is still without a full-time government after the toppling
of its pro-Russian president. Joined by NATO allies, Hagel issued
the warning after Interfax reported that Russia put fighter jets on
alert, stepping up a military drill announced yesterday. Adding to
tensions, the parliament of the southern Ukrainian region of
Crimea was seized by armed backers of union with Russia.
- Yanukovych to Appear in Russia Tomorrow as Swiss Freeze Assets. Deposed
Ukrainian President Viktor Yanukovych will hold a press conference in
neighboring Russia tomorrow, one day after an interim government took
charge in
Kiev and the Swiss government told banks to freeze his assets. Yanukovych will brief reporters in Rostov-on-Don in
southern Russia at 5 p.m. Moscow time, state-run RIA Novosti
reported, citing a person close to Yanukovych. The location of
the briefing will be announced separately, according to RIA.
- Emerging Outflows Top $11 Billion as Cash Sent to Europe. Investors are stepping up
withdrawals from emerging-market exchange-traded funds and
shifting into Europe as concern mounts that growth is faltering
in developing nations while advanced economies strengthen. Withdrawals from U.S.-based ETFs investing in emerging-market equities and bonds totaled $11.3 billion this year,
already surpassing the redemption of $8.8 billion for the whole
2013, according to data compiled by Bloomberg. Funds investing
in European assets added $5 billion in the first two months of
2014, compared with $18 billion full-year inflows in 2013.
- Allianz Names El-Erian as Chief Economic Adviser. Allianz
SE (ALV) named Mohamed El-Erian to the new role of chief economic
adviser following his surprise resignation at the insurer’s Pacific
Investment Management Co. unit last month. El-Erian, the former
chief executive officer and co-chief investment officer at Newport
Beach, California-based Pimco, will spend 50 percent of his time working
for
Allianz, CEO Michael Diekmann said at a press conference in Munich
today. He will dedicate the rest of his time to his family and book
projects, Diekmann said.
- European Stocks Retreat as Tension Escalates in Crimea.
European stocks declined for a second day as tension escalated in
Crimea, following Ukraine’s change of government. WPP Plc (WPP) slid 3.5
percent and Allianz SE dropped 2.3 percent after posting profit that
missed estimates. Royal Bank of Scotland Group Plc (RBS) slumped 7.7
percent after the state-owned
lender reported its biggest full-year loss since receiving a
bailout in 2008. Man Group Plc rallied 14 percent after the
world’s largest publicly traded hedge-fund firm announced a $115-million
stock buyback. The Stoxx Europe 600 Index slipped 0.2 percent to 337.21 at
the close of trading.
- Yen Climbs as Ukraine Tension Boosts Safety Bid; Ruble Declines. “Putin
is conducting military exercises and putting Russian forces on high
alert,” said Richard Franulovich, the chief currency strategist for the
northern hemisphere at Westpac Banking Corp. “That’s risk-negative.”
The yen strengthened 0.2 percent to 102.19 per dollar at 1:59 p.m. New
York time, rising the most on a closing basis since Feb. 3. The Japanese
currency was little changed at 140.07 per euro, having rallied as much
as 0.9 percent earlier. The
euro climbed 0.2 percent to $1.3707, after falling as much as
0.3 percent.
- Copper Declines to Three-Week Low on China, U.S. Demand Concerns. Copper
futures fell to a three-week
low in New York on concern that the U.S. recovery may falter as China’s
economy slows, hurting demand from the two largest users of the metal.
Jobless claims in the U.S. increased by 14,000 to 348,000
in the week ended Feb. 22, the highest in a month and above all
forecasts in a survey, a Labor Department report showed today.
Chinese manufacturing probably slowed this month, economists
surveyed by Bloomberg said before an official gauge due March 1.
Copper prices are down 5.8 percent this year. “We need to see some real strong economic data before the
market starts trading higher,” Tom Power, a senior commodities
broker at RJO Futures in Chicago, said in a telephone interview. Copper futures for delivery in May slid 0.5 percent to
close at $3.201 a pound at 1:18 p.m. on the Comex in New York,
after touching $318.35, the lowest since Feb. 4. Prices dropped
for seven straight sessions.
- Yellen Repeats Fed Likely to Keep Trimming Asset Purchases. Federal Reserve Chair Janet Yellen said the central bank is likely to
keep trimming asset purchases, even as policy makers monitor data to
determine if recent weakness in the economy is temporary. “Unseasonably
cold weather has played some role,” she said in response to a question
today from the Senate Banking Committee. “What we need to do, and will
be doing in the weeks ahead, is to try to get a firmer handle on exactly
how much of that set of soft data can be explained by weather and what
portion, if any, is due to softer outlook.”
- U.S. Retail Chains See First Profit Decline Since Recession. U.S. retailers last quarter suffered
their darkest days since the recession. With results in from 62 of 122 retail chains, the industry
has posted its first profit quarterly drop since the economic
contraction that ended in 2009, according to Retail Metrics Inc.
Revenue also rose at the lowest rate since that year, the
research firm found. The results paint a grim picture of an industry hit hard by
the sluggish job recovery and slow wage growth, which have
turned U.S. consumers into a nation of penny pinchers. Earnings
are expected to drop 6.1 percent on average during the holiday
quarter, according to Retail Metrics data. The broader pool of
Standard & Poor’s 500 Index companies, meanwhile, are estimated
to see profit rise 8.5 percent.
- Study Finds SEC Staff Sold Shares Before Cases Made Public.
People working for the U.S.
Securities and Exchange Commission who owned stock in companies
under investigation were more likely to sell shares than other
investors in the months before the agency announced it was
taking enforcement actions, according to a new academic paper.
Wall Street Journal:
Fox News:
MarketWatch:
CNBC:
- US-China ties could end badly: Scholar. (video) The
United States needs to break out of its co-dependent relationship with
China before it's too late, the former chairman of Morgan Stanley Asia
told CNBC on Thursday. China is already taking steps to reduce its
"unhealthy reliance" on the U.S., which has been slower to make
reciprocal strides, said Stephen Roach, senior fellow at the Yale School
of Management.
ZeroHedge:
Business Insider:
- Australia Had An Ugly Day. Dylan
Grice summed up the concerns when he wrote that Australia is "a credit
bubble built on a commodity market built on an even bigger Chinese
credit bubble."
CNN:
- Gunmen seize government buildings in Ukraine's Crimea, raise Russian flag. Dozens of armed men seized the regional government administration
building and parliament in Ukraine's southern Crimean region Thursday
and raised the Russian flag in a challenge to the Eastern European
country's new leaders. Crimea, a Black Sea
peninsula with an ethnic Russian majority, is the last big bastion of
opposition to the new political leadership in the capital, Kiev, after
Ukrainian President Viktor Yanukovych's ouster Saturday.
NY Post:
- Russian warship in Cuban port while troops train near Ukraine border. In
a pair of brazen moves that resembled 1960s Cold War tactics, a Russian
warship cruised into a Cuban port Wednesday as President Vladimir Putin
massed troops near his country’s border with Ukraine. The Viktor
Leonov, an armed Vishnya-class intelligence-gathering ship, was
mysteriously docked at the Port of Havana’s cruise-ship area. The
warcraft, which has a crew of around 200, is reportedly armed with 30mm
guns and anti-aircraft missiles.
Institutional Investor:
Reuters:
- Fed's Fisher says happy with pace of QE withdrawal. Dallas Federal Reserve Bank
President Richard Fisher said on Thursday he would like the U.S.
central bank to continue scaling back its monthly bond-buying
stimulus at the current pace of $10 billion at each policy
meeting. If U.S. economic growth picked up significantly, Fisher
said, he "of course might be in favour of further reduction",
but even if he did support such a step, he said he knew he
"wouldn't win the argument".
Financial Times:
- Falling renminbi heightens derivatives risks. Chinese
companies will face billions of dollars in losses from complex hedging
products if the renminbi continues to weaken, analysts and investors
have warned. Mainland companies and global investors have bought
hundreds of billions of dollars worth of structured products that
benefit from renminbi appreciation over the past year, and now face
growing pressure after the Chinese currency fell to its lowest level
since July.
TheGuardian:
- GCHQ intercepted webcam images of millions of Yahoo users worldwide.
Britain's surveillance agency GCHQ, with aid from the US National
Security Agency, intercepted and stored the webcam images of millions of
internet users not suspected of wrongdoing, secret documents reveal. GCHQ
files dating between 2008 and 2010 explicitly state that a surveillance
program codenamed Optic Nerve collected still images of Yahoo webcam
chats in bulk and saved them to agency databases, regardless of whether
individual users were an intelligence target or not. In one six-month
period in 2008 alone, the agency collected webcam imagery – including
substantial quantities of sexually explicit communications – from more
than 1.8 million Yahoo user accounts globally.
Xinhua:
- China to Mark Anti-Japanese War Victory Day on Sept. 3. Standing
Committee of National People's Congress also approves China to set Dec.
13 as memorial day for victims of Nanjing Massacre.
Haaretz:
- UN nuclear agency drops sensitive Iran report, sources say. IAEA worries probing deeper into Iran's suspected atomic bomb plans could hinder talks.
The UN nuclear watchdog planned a major report on Iran that might have
revealed more of its suspected atomic bomb research, but held off as
Tehran's relations with the outside world thawed, sources familiar with
the matter said Thursday.
Style Underperformer:
Sector Underperformers:
- 1) REITs -.77% 2) Energy -.65% 3) Restaurants -.63%
Stocks Falling on Unusual Volume:
- WAC, CTRX, SFY, CHS, QUAD, BKD, BWC, ANIK, ESC, NDLS, BBEP, CIR, EPL, LINE, DATA, QCOR, NTRI, ESI, EDU, LPI, RL, HTWR, EZCH, DPM, DWA, PZZA, AKRX, CQB, CLR, AMAG, LNCO, NKTR, LKQ and NDLS
Stocks With Unusual Put Option Activity:
- 1) ANV 2) IRM 3) HK 4) SLB 5) DECK
Stocks With Most Negative News Mentions:
- 1) GM 2) JNJ 3) KMP 4) GME 5) COP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +2.11% 2) Gold & Silver +1.21% 3) Telecom +1.08%
Stocks Rising on Unusual Volume:
- PEIX, DANG, ZU, IQNT, WDAY, BEAT, MDAS, RP, BBY, MYL, SZYM, TIVO, GTI, NOAH, TROX, BDBD, FSLR, CIE, WLL, SHLD, QLIK, TASR and GPOR
Stocks With Unusual Call Option Activity:
- 1) PEIX 2) TIVO 3) WDAY 4) ZTS 5) MYL
Stocks With Most Positive News Mentions:
- 1) BBY 2) JCP 3) EBAY 4) GOOG 5) TSLA
Charts:
Evening Headlines
Bloomberg:
- Yuan Turns Worst Emerging Carry Trade as PBOC Stokes Volatility.
The yuan has gone from being the most attractive carry trade bet in
emerging markets to the worst in the space of two months as central bank
efforts to weaken the currency cause volatility to surge. The
yuan’s Sharpe ratio, which measures returns adjusted for price swings,
turned negative this year as three-month implied volatility in the
currency rose in February by the most since May, when the Federal
Reserve signaled plans to cut
stimulus. The exchange rate tumbled the most since 2010 on Feb.
25 amid speculation the People’s Bank of China was intervening
to deter one-way bets on currency gains.
- Mersch Says Renminbi May Challenge Dollar’s Reserve Role.
China’s renminbi might one day challenge the role of the U.S. dollar as
the world’s leading reserve currency, European Central Bank Executive
Board member Yves Mersch said. “Having become an important trading
and payment currency, the renminbi is now taking the first steps toward
establishing itself as an international investment currency,” Mersch
said in a speech at Luxembourg’s Renminbi Forum yesterday. “Due to the
size of China’s economy and its importance in global trade and,
potentially, finance, the renminbi might ultimately come to
challenge the U.S. dollar” as a leading reserve currency.
- Hong Kong Editor in Press Freedom Row Critical After Attack. The former chief editor of a Hong Kong newspaper, whose removal from
his post led to protests over press freedom in the city, was critically
injured after being slashed with a knife by assailants on a motorbike today.
The attack on Kevin Lau, chief operating officer at a unit of Media
Chinese International Ltd. (685) and former chief editor at Ming Pao
Daily News, happened days after at least 1,600 demonstrators held a
march to express concerns that media freedom is being eroded.
- Most Chinese Stocks Fall, Led by Energy, Material Companies. Most Chinese stocks fell, led by energy and material companies. The
Shanghai Composite Index (SHCOMP) slipped 0.2 percent to 2,037.66 at
9:37 a.m. local time. The CSI 300 Index (SHSZ300) lost 0.1 percent. The
Hang Seng China Enterprises Index (HSCEI) declined 0.4
percent.
- Aussie Drops With Sydney Stocks; Gold Slides With Corn.
The Australian (GACGB10) dollar weakened against major peers and
shares in Sydney dropped after private investment fell the most since
2009. Gold held a decline from a 17-week high on speculation the Federal
Reserve will continue stimulus cuts while emerging-market currencies
declined.
- Copper Drops to 12-Week Low on Signs China’s Growth Is Slowing. Copper slipped to the lowest price
in more than two months amid concern that China’s growth is slowing and as stockpiles rose in the biggest user. The
contract for delivery in three months retreated as much as 0.5 percent
to $6,994 a metric ton on the London Metal Exchange, the lowest level
since Dec. 4 and traded at $7,012.25 by 12:21 p.m. in Tokyo. Futures are
down 0.8 percent in
February, poised for a second monthly decline.
- Goldman’s(GS) Gmelich Likens Junk Loans to One-Way Freight Train. Investors
who have been pouring
money into funds that purchase leveraged loans need to be wary
of a reversal in demand, according to Justin Gmelich, the head of credit
trading at Goldman Sachs Group Inc. “It’s been a bit of a one-way
freight train,” Gmelich said in a question and answer session, posted on
the company’s website yesterday. “I would just caution those that are
involved in the loan space to be mindful of the fact that
they’ve been beneficiaries of inflows for 88 straight weeks and
the tide can turn.” The floating-rate debt, which offers a shield for investors
from rising rates, has seen unprecedented demand with the funds
that purchase the debt receiving deposits every single week
since the summer of 2012. That enabled speculative-grade
companies to raise $676 billion last year of bank debt, with
more than 80 percent of that used to escape maturing debt
deadlines, according to data compiled by Bloomberg.
- Vale Posts Record $6.45 Billion Loss After Brazil Tax Accord. Vale
SA (VALE5), the world’s largest iron-ore producer, posted a record
quarterly loss after settling a decade-long tax dispute with Brazil.
Vale’s fourth-quarter net loss widened to $6.45 billion, or $1.25 a
share, from a net loss of $2.62 billion, or 51 cents, a year earlier,
the Rio de Janeiro-based company said today in a
regulatory filing. Earnings before interest, taxes, depreciation
and amortization, or adjusted Ebitda, rose to $6.64 billion,
beating a $5.9 billion average estimate by 17 analysts compiled
by Bloomberg.
Wall Street Journal:
- Bradley A. Smith: Connecting the Dots in the IRS Scandal. The 'smoking gun' in the targeting of conservative groups has been hiding in plain sight. The mainstream press has justified its lack of coverage over the
Internal Revenue Service targeting of conservative groups because
there's been no "smoking gun" tying President
Obama
to the scandal. This betrays a remarkable, if not willful,
failure to understand abuse of power. The political pressure on the IRS
to delay or deny tax-exempt status for conservative groups has been
obvious to anyone who cares to open his eyes. It did not come from a
direct order from the White House, but it didn't have to.
MarketWatch.com:
CNBC:
Zero Hedge:
- Russia Responds To US Warning: Expands Military Presence Globally. Shortly after the US warned Russia over its "provocative actions" with regard Ukraine... RiaNovosti reports defense
minister Sergei Shoigu saying Russia plans "to expand permanent
military presence outside its borders by placing military bases in a
number of foreign countries," including Vietnam, Cuba,
Venezuela, Nicaragua, the Seychelles, and Singapore. "The talks are
under way, and we are close to signing the relevant documents," Shoigu
told reporters in Moscow.
Business Insider:
Reuters:
- Brazil central bank raises interest rate to 10.75 pct. Brazil's
central bank raised
its benchmark interest rate on Wednesday to 10.75 percent from 10.50
percent, slowing the pace of monetary tightening to avoid hurting an
economy that is flirting with recession. Thirty-four of 47 economists polled by Reuters last week
expected the bank to raise its benchmark Selic lending rate
by 25 basis points to 10.75 percent. The rest
expected another 50-bps increase.
- Transocean(RIG) profit slides on lower rig demand. Transocean Ltd, owner of the
world's largest offshore drilling fleet, said on Wednesday that
fourth-quarter profit fell 49 percent from a year ago, hurt by
lower rig utilization. The company's net profit attributable to controlling
interest fell to $233 million, or 64 cents per share, from $456
million, or $1.26 per share, a year earlier.
- Turkish Prime Minister targeted in second audio tape. A second audio
recording, presented as the voice of Turkish Prime Minister
Tayyip Erdogan asking his son not to accept an amount of money
on offer in a business deal but to hold out for more, was published on YouTube by an anonymous poster using a pseudonym on
Wednesday. Erdogan said a similar post on the video-sharing site on
Monday, allegedly of him telling his son Bilal to dispose of
large sums of cash as a graft investigation erupted, was faked
by his political enemies.
- East and West face off over Ukraine's Crimea. Waving
the Russian flag and chanting "Russia! Russia!", protesters in Crimea
have become the last major bastion of resistance to Ukraine's new rulers.
President Viktor Yanukovich's overthrow on Saturday has been accepted
across the vast country, even in his power base in the Russian-speaking
regions of eastern Ukraine. But Crimea, a Black Sea peninsula attached
to the rest of
Ukraine by just a narrow strip of land, is alone so far in
challenging the new order.
Shanghai Securities News:
- China Economy May See More Volatility in 2014. China's economy in
2014 is very likely to see more quarterly or even monthly volatility
because of the occurrence of new economic and financial factors, such as
Internet financing and shadow banking, citing Lu Lei, head of Guangdong
University of Finance, as saying. Central banks need to avoid "too
quickly" changing direction in monetary policy and should us micro-tools
to make economy more stable, Lu said.
Evening Recommendations
Morgan Stanley:
- Rated (MS) Overweight, target $76.
- Rated (WNC) Underweight, target $12.
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 137.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 103.0 -.25 basis point.
- NASDAQ 100 futures +.36%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for January are estimated to fall -1.7% versus a -4.3% decline in December.
- Durables Ex Transports for January are estimated to fall -.3% versus a -1.6% decline in December.
- Cap Goods Orders Non-Defense Ex Air for January are estimated to fall -.2% versus a -1.3% decline in December.
- Initial Jobless Claims are estimated to fall to 335K versus 336K the prior week.
- Continuing Claims are estimated to rise to 2985K versus 2981K prior.
11:00 am EST
- The Kansas City Fed Manufacturing Activity Index for February is estimated to fall to 2.0 versus 5.0 in January.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen speaking, Fed's Lockhart speaking, $29B 7Y T-Note auction,
Japan CPI/Manufacturing PMI, weekly EIA natural gas inventory report,
weekly Bloomberg Consumer Comfort Index, Stifel Industrials Conference,
(STT) analyst forum, (HBI) investor day, (BJRI) analyst day and the (CR)
analyst conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
