Evening Headlines
Bloomberg:
- Putin to Meet Poroshenko as Ukraine Tensions Escalate. Russian
President Vladimir Putin is set to meet his Ukrainian counterpart,
Petro Poroshenko, as tensions flare on the two nations’ border. The
leaders will attend talks today with European Union representatives in
Minsk, Belarus, during a summit of the Customs Union, a Russian-led
trade bloc. No separate bilateral meeting is yet planned between them, Russian Foreign Minister Sergei Lavrov said yesterday.
The talks are bringing no respite to the conflict that the United
Nations says has left at least 2,000 dead since Putin annexed Crimea in
March. Ukraine yesterday said an armored column including 10 tanks
entered from Russia as the government in Moscow unveiled plans to send a
second convoy with humanitarian aid into its neighbor’s rebel-held
territory.
- Asian Stock Index Little Changed as Valuations Climb. Asian stocks were little changed after valuations on the regional benchmark index climbed to the highest level this year.
Boart Longyear Ltd. (BLY) fell 10 percent, the most in a month, after
the Australian mining-services firm posted a first-half loss. Dena Co., a
Japanese website owner, surged 5.9 percent, leading gains in the
region. Hyundai Heavy Industries Co. climbed 3 percent in Seoul,
accounting for the largest increase on South Korea’s Kospi index. China
Modern Dairy Holdings Ltd. climbed 7.8 percent in Hong Kong after sales
topped analyst estimates. The MSCI Asia Pacific Index (MXAP) slid less than 0.1 percent to
148.64 as of 9:38 a.m in Hong Kong.
Wall Street Journal:
- Russia Plans New Aid Convoy; Ukraine Says Moscow Moved Tanks. Kiev Says Moscow Sent Tanks, Armored Vehicles Into Its Territory.
Russia said it wants to send a second convoy of what it calls
humanitarian aid into Ukraine in the coming days, while Kiev accused
Moscow of moving tanks across the border, further damping hopes for
peace talks between the Ukrainian and Russian presidents set for Tuesday
in Minsk.
- Insurgency Deepens Iraqi Ethnic, Sectarian Divides. Militant Offensive Threatens to Divide Territory Along Ethnic, Religious Lines. Sunni families in northern Iraq are being prevented from returning to
their homes, suspected by their neighbors and Kurdish authorities who
control the area of collaborating with the extremist group Islamic
State. The offensive by the Sunni militants is threatening to
reshape the demographics of once-mixed communities by dividing territory
along ethnic and religious lines, Iraqi and Kurdish officials say. Kurds,...
Fox News:
- Obama authorizes use of surveillance drones over Syria. President Obama has authorized the use of drones for surveillance in
Syria even as the Assad regime demanded that the U.S. seek permission
before launching any airstrikes on its territory against Islamic State
targets. A senior U.S. official confirmed to Fox News that Obama this weekend
authorized the use of drone surveillance over Syria for the first time.
Zero Hedge:
ValueWalk:
Business Insider:
Financial Times:
- James Bullard says Fed will need to alter guidance. The
US Federal Reserve will soon need to modify its policy statement as the
economy improves and asset purchases end, said St Louis Fed president
James Bullard. Mr Bullard said in an interview with the Financial Times
that the Fed would have to alter both its declaration of “significant”
underutilisation of labour resources and its pledge not to change rates
for a “considerable time” after it stops buying assets.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 99.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 67.5 -.25 basis point.
- NASDAQ 100 futures -.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for July are estimated to rise +8.0% versus a +.7% gain in June.
- Durables Ex Transports for July are estimated to rise +.5% versus a +.8% gain in June.
- Cap Goods Orders Non-Defense Ex Air for July are estimated to rise +.2% versus a +1.4% gain in June.
9:00 am EST
- The FHFA House Price Index for June is estimated to rise +.3% versus a +.4% gain in May.
- The S&P/CS 20 City MoM SA for June is estimated unch. versus a -.31% decline in May.
10:00 am EST
- Consumer Confidence for August is estimated to fall to 89.0 versus 90.9 in July.
- The Richmond Fed Manufacturing Index for August is estimated to fall to 6.0 versus 7.0 in July.
Upcoming Splits
Other Potential Market Movers
- The 2Y $29B T-Note auction and the weekly US retail sales reports 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 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: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 11.55 +.70%
- Euro/Yen Carry Return Index 143.24 -.33%
- Emerging Markets Currency Volatility(VXY) 6.68 +.91%
- S&P 500 Implied Correlation 48.31 +7.71%
- ISE Sentiment Index 95.0 -18.80%
- Total Put/Call .89 -4.30%
Credit Investor Angst:
- North American Investment Grade CDS Index 56.19 -3.09%
- European Financial Sector CDS Index 63.41 +.78%
- Western Europe Sovereign Debt CDS Index 31.17 +.26%
- Asia Pacific Sovereign Debt CDS Index 68.07 +.47%
- Emerging Market CDS Index 2277.93 -.95%
- China Blended Corporate Spread Index 310.35 -.42%
- 2-Year Swap Spread 22.25 -.25 basis point
- TED Spread 22.25 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -13.75 -1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 189.0 -2.0 basis points
- China Import Iron Ore Spot $89.20/Metric Tonne -1.0%
- Citi US Economic Surprise Index 5.20 +.7 point
- Citi Emerging Markets Economic Surprise Index -14.20 +.6 point
- 10-Year TIPS Spread 2.15 unch.
Overseas Futures:
- Nikkei Futures: Indicating -33 open in Japan
- DAX Futures: Indicating -25 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/biotech/medical sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Ukraine Says Tanks Enter From Russia Amid Plan for Convoy. Ukraine said an armored column including 10 tanks entered
from Russia early today as the government in Moscow unveiled plans to
send a second convoy with humanitarian aid into its neighbor’s
rebel-held territory. Government forces destroyed two tanks,
captured crew members and seized other vehicles from the column that was
flying separatist banners, Andriy Lysenko, a spokesman for Ukraine’s
military, told reporters in Kiev today. Russian Foreign Minister Sergei
Lavrov said he had no information about the incident and accused Ukraine
of providing “a lot of disinformation about our invasions.”
- Islamic State Militants Seize Air Base in Syria, Group Says. (video) Islamic State militants seized a Syrian air base, dislodging forces
loyal to President Bashar al-Assad from their last stronghold in the
northeastern Raqqa province. The al-Qaeda breakaway group, which
is also fighting government forces in Iraq, stormed the Tabaqa air base
after battles that began last week, said the Syrian Observatory for
Human Rights, which monitors the daily developments of the civil war.
The government moved its aircraft to other bases, it said.
- China May Cut Salaries of SOE Executives by 70%, Caijing Says.
China may cut salaries of executives at state-owned enterprises and
financial institutions by as much as 70 percent, the most drastic
proposal yet in a planned overhaul of SOE management, according to
Caijing magazine. The upper limit for the annual salary of bosses at
central SOEs and banks would be set at 600,000 yuan ($97,532) under the
change, Caijing magazine reports, citing unidentified people with
knowledge of a draft plan by the Ministry of Human Resources and Social
Security, the Ministry of Finance and other related agencies.
- China Stocks Fall Most in Week on Lending Concern. China’s stocks fell, capping the benchmark index’s biggest loss in a week, as concern that new bank lending isn’t picking up overshadowed a rally for airlines. China Citic Bank Corp. and Huaxia Bank Co. led declines for financial companies, sliding at least 1.2 percent. Baoshan Iron & Steel Co., the largest-listed steelmaker, lost 3.1 percent after reporting a 14 percent drop in first-half profit. China Eastern Airlines Corp., the second-biggest domestic carrier, surged by the daily limit in Shanghai on the prospect it will benefit from an aviation investment fund. The Shanghai Composite Index (SHCOMP) fell 0.5 percent to 2,229.27
at the close, the biggest loss since Aug. 14.
- European Stocks Climb After Draghi Signals More Stimulus.
European stocks rose to their highest level this month, following two
weekly increases, after European Central Bank President Mario Draghi
signaled policy makers are ready to add stimulus. Banks contributed the most to the Stoxx Europe 600 Index’s gain, with Banca Monte dei Paschi di Siena SpA rallying 5.8 percent, and Banco Santander SA and BNP Paribas SA each adding at least 2 percent. Arkema SA (AKE) advanced 2.6 percent after Deutsche Bank AG recommended investors buy shares of the maker of composites and coatings. Eurazeo SA rose 3.4 percent after Societe Generale SA increased its rating on the stock. The Stoxx 600 gained 1.1 percent, the most since Aug. 18, to 340.46 at the close of trading in London, with all 19 industry groups up.
- German Business Climate Drops for Fourth Month on Risks. German business confidence declined for a fourth month, reflecting a
faltering euro-area economy that European Central Bank President Mario Draghi says might need more stimulus. The
Ifo institute’s business climate index, based on a survey of 7,000
executives, fell to 106.3 in August from 108 in July. Economists
predicted a drop to 107, according to the median of 39 estimates in a Bloomberg News survey.
- Short Sellers Add Bets Against VIX As Volatility Fades. Volatility in U.S. equity markets is near an all-time low and traders have loaded up on bets it has further to fall. Short holdings on an exchange-traded note tracking the Chicago Board
Options Exchange Volatility Index reached a six- month high in August,
essentially a bet that the volatility gauge will keep falling. There are
about 19 million shares of the iPath S&P 500 VIX Short-Term Futures
ETN that have been borrowed and sold to speculation on declines, almost
three times the level from early June, data compiled by Markit Ltd.
shows.
- Swaps Boom Is Unintended Consequence of New Curbs on Wall Street. The $9.8 trillion U.S. corporate-bond market may look pretty sleepy
right now, but there’s more and more happening in its shadows. Instead
of bothering with trading investment-grade bonds themselves, investors
are increasingly turning to derivatives tied to the creditworthiness of
specific companies. Volumes in such synthetic wagers have surged to
the
highest levels since at least the beginning of 2011, in many cases
outpacing trading in the underlying bonds, according to Barclays Plc
(BARC) data. This reflects investors’ concern that they can’t get in and out quickly
enough in the market for cash bonds. Wall Street is pulling back in debt
trading, potentially leaving investors vulnerable at a time when the outlook may change quickly given the Federal Reserve is grappling with how to exit from a sixth year of record stimulus. The boom in derivatives also underscores how traders are delving back
into more complicated structures that are inherently leveraged,
amplifying potential gains or losses.
MarketWatch.com:
ZeroHedge:
Business Insider:
- PAUL RYAN: 'We Were Right'. Rep. Paul Ryan (R-Wisconsin) looks back at the 2012 election and says, "We were right." Ryan,
the 2012 vice presidential nominee alongside presidential
nominee Mitt Romney, says the pair was right about the Obama
administration's foreign policy leading to the kinds of crises popping
up in the Middle East with the Islamic State of Iraq and Syria. He says
Romney was right when he declared Russia the U.S.' greatest
geopolitical foe, as evidenced by the current crisis in Ukraine.
Financial Times:
De Standard:
- German Economy Isn't Good News, Coene Says. "The faltering German
motor isn't good news for the other European economies, also not for
Belgium," European Central Bank Governing Council member Luc Coene says
in an interview. "The tone from most here when it comes to Europe is
best described as worrying," Coene says. There is concern
internationally over the sustainability of the recovery in Europe, he
said. "September will give a good indication of economic activity in the
fall adn of whether the recent weakening of the economy is temporary or
longer lasting. If it's the latter, there will probably be a downward
correction" in growth forecasts, Coene says.
Style Underperformer:
Sector Underperformers:
- 1) Coal -1.87% 2) Gold & Silver -1.31% 3) Gaming -.94%
Stocks Falling on Unusual Volume:
- QIHU, GEF, TRUE, GRUB, CMGE, REX, WUBA, WLDN, TRIB, INTU, LEJU, BIS, WEX, CRM, LGP, GB, CPA, KMP, TARO and RYL
Stocks With Unusual Put Option Activity:
- 1) EPI 2) EWT 3) BBY 4) WDAY 5) XLK
Stocks With Most Negative News Mentions:
- 1) AGN 2) STZ 3) XHB 4) STLD 5) AA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Biotech +2.29% 2) Banks +1.12% 3) Energy +.99%
Stocks Rising on Unusual Volume:
- THI, BKW, ITMN, DGLY, ROYT, ATHM, LTM, ANN, EXAS, BITA, JCP, KERX, LTM and MOBL
Stocks With Unusual Call Option Activity:
- 1) ITMN 2) KERX 3) ANF 4) MDLZ 5) TASR
Stocks With Most Positive News Mentions:
- 1) THI 2) AAPL 3) BKC 4) ITMN 5) TWTR
Charts:
