Evening Headlines
Bloomberg:
- Japan Limps Out of Recession With December Production Gain. Japan’s industrial production snapped two
quarters of decline, signaling the world’s third-largest economy
may have limped out of recession. Output rose 1.8 percent in the three months through
December from the third quarter, the trade ministry said Friday.
While household spending fell and inflation slowed in December,
the labor market continued to tighten, with the ratio of jobs to
applicants rising to the highest in more than two decades and
the unemployment rate falling to the lowest since August 1997.
- Top Economist Says BOJ Doesn’t Need More Stimulus: Japan Credit. Japan’s top-rated economist says the central
bank doesn’t need more stimulus, defying the consensus. Ryutaro Kono, chief Japan economist in Tokyo at BNP Paribas
SA, voted No. 1 by Nikkei Veritas magazine in six of the past
seven years, says lower oil prices will stimulate growth and
policy makers will favor yen stability. Twenty-six of 33 of
economists in a Bloomberg News survey forecast the Bank of Japan
will accelerate asset purchases by the end of October to meet a
2 percent inflation target. Ten-year inflation swaps slid to a
two-year low of 0.74 percent this week, Meitan Tradition data
showed.
- Taiwan’s GDP Growth Misses Economists Estimate in Fourth Quarter. Taiwan’s economy grew slower than economists
estimated last quarter after a food scandal weighed on demand. Gross domestic product rose 3.17 percent from a year
earlier in the three months through December, according to
preliminary data the statistics bureau released in Taipei
Friday. That missed the 3.25 percent median estimate in a
Bloomberg survey of analysts and declined from 3.63 percent in
the prior quarter. The economy expanded 3.51 percent in 2014.
- Asian Stocks Advance to Extend First Monthly Gain Since October. Asian stocks rose, with the regional
benchmark index extending its firstly monthly gain since
October, as Japanese shares climbed after the yen weakened
against the dollar on a drop in U.S. jobless claims.
The MSCI Asia Pacific Index added 0.3 percent to 140.91 as
of 9:01 a.m. in Tokyo.
- Plunging Oil Prices Felt Across Japan’s Industrial Base. The plunge in crude oil prices is taking its
toll across Japan’s industrial base. Forecasts from Nippon Steel & Sumitomo Metal Corp., Japan
Marine United Corp. and Komatsu Ltd. show the extent to which
lower crude prices are eroding the outlooks for industrial
companies with businesses linked to oil and gas.
- Iron Ore Set for Monthly Loss as ABN’s Crystal Ball Shows No Joy. Iron ore is heading for the biggest monthly
loss since May, signaling that the bear market that began last
year has further to run as steel mills in China curtail output
before a national holiday and major producers add supply. Ore with 62 percent content delivered to Qingdao, China,
was at $63.27 a dry metric ton on Thursday, 11.2 percent lower
this month, according to Metal Bulletin Ltd. The raw material
fell to $63.09 on Wednesday, the lowest price on record going
back to May 2009, and is poised for a third monthly drop.
- Hillary Clinton Faces Scrutiny for Use of Private Jets. Hillary Clinton took more than 200 privately
chartered flights at taxpayer expense during her eight years in
the U.S. Senate, sometimes using the jets of corporations and
major campaign donors as she racked up $225,756 in flight costs.
Wall Street Journal:
- Falling Prices Spread Pain Far Across The Oil Patch. Companies Plan to Slash Spending Along With Thousands of Jobs. Rumor became reality here last week when dozens of workers lost their
jobs at Laredo Petroleum Inc. The Oklahoma-based energy outfit said it
closed its regional office to cope with plunging oil prices.
- Former Hedge-Fund Managers Hit the Comeback Trail. Veteran Stock Pickers Michael Karsch, Adam Weiss Plan New Funds. It can be tough to start over in the hedge-fund world. The
$2.8 trillion industry is strewed with tales of managers who, after
shutting down large funds, relaunched only to limp along or close again.
Undaunted, veteran stock pickers Michael Karsch and Adam Weiss plan to
launch new funds less than two years after closing their old firms,
according to Mr. Karsch and people familiar with Mr. Weiss’s plans.
- America’s Strategy Deficit. A haphazard foreign policy makes a complicated world more dangerous. Something is going on here. On Tuesday retired Gen. James
Mattis, former head of U.S. Central Command (2010-13) told the Senate
Armed Services Committee of his unhappiness at the current conduct of
U.S. foreign policy. He said the U.S. is not “adapting to changed
circumstances” in the Mideast and must “come out now from our reactive
crouch.” Washington needs a “refreshed national strategy”; the White
House needs to stop being consumed by specific, daily occurrences that
leave it “reacting” to events as if they were...
Fox News:
- Official: Gitmo prisoner traded for Bergdahl reaching out to Taliban. (video) One of the five Taliban fighters traded last year for Sgt. Bowe
Bergdahl is trying to make contact with the Taliban once again, Fox News
has learned. A U.S. official confirmed to Fox News that the former Guantanamo
prisoner has been intercepted making telephone calls to the Taliban.
The development comes amid rising concerns over former Guantanamo
detainees returning to the battlefield, and over the nature of the
Bergdahl-Taliban trade itself last year, which was negotiated with the
involvement of the Qatari government.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Deckers cuts full-year forecast as demand for UGG shoes slows. Outdoor footwear and apparel manufacturer
and retailer Deckers Outdoor Corp cut its full-year forecast as demand
for its UGG Australia branded sheepskin shoes slows in the United
States. The company's shares fell 13.7 percent in after-market
trading on Thursday.
- Chinese banks back risky stock margin finance in face of regulator crackdown. Chinese banks seeking to profit
from the country's stock market frenzy have bought into the
recent surge in margin finance, foiling regulatory efforts to
reduce debt-fueled speculation and amplifying the risk if the
rally turns into a rout. Although regulators are cracking down on credit flows into
the stock market, financial industry insiders say they still
have not closed loopholes that allow banks to channel credit
into the stock market via brokerages.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 69.0 -.25 basis point.
- NASDAQ 100 futures +.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The 4Q Employment Cost Index is estimated to rise +.6% versus a +.7% gain in 3Q.
- Advance 4Q GDP is estimated to rise +3.0% versus a +5.0% gain in 3Q.
- Advance 4Q Personal Consumption is estimated to rise +4.0% versus a +3.2% gain in 3Q.
- Advance 4Q Core PCE is estimated to rise +1.1% versus a +1.4% gain in 3Q.
9:00 am EST
- ISM Milwaukee for January is estimated to rise to 58.0 versus 57.61 in December.
9:45 am EST
- Chicago Purchasing Manager for January is estimated to fall to 57.5 versus 58.3 in December.
10:00 am EST
- Final Univ. of Mich. Consumer Sentiment for January is estimated at 98.2 versus a prior estimate of 98.2.
Upcoming Splits
Other Potential Market Movers
- The Fed's Rosengren speaking, Fed's Tarullo speaking and the Eurozone Unemployment Rate call could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and consumer 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: Modestly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 19.34 -5.38%
- Euro/Yen Carry Return Index 139.80 +.89%
- Emerging Markets Currency Volatility(VXY) 10.32 +4.45%
- S&P 500 Implied Correlation 65.99 -5.17%
- ISE Sentiment Index 65.0 -26.97%
- Total Put/Call 1.16 +19.59%
Credit Investor Angst:
- North American Investment Grade CDS Index 68.09 -.34%
- America Energy Sector High-Yield CDS Index 752.0 +1.75%
- European Financial Sector CDS Index 64.32 +.40%
- Western Europe Sovereign Debt CDS Index 25.45 +3.24%
- Asia Pacific Sovereign Debt CDS Index 69.81 +.91%
- Emerging Market CDS Index 398.45 -.43%
- iBoxx Offshore RMB China Corporates High Yield Index 113.01 +.12%
- 2-Year Swap Spread 22.75 -2.5 basis points
- TED Spread 23.75 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.5 -2.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- China Import Iron Ore Spot $63.27/Metric Tonne +.29%
- Citi US Economic Surprise Index 1.1 +5.1 points
- Citi Eurozone Economic Surprise Index -2.30 -3.9 points
- Citi Emerging Markets Economic Surprise Index -6.40 +1.0 point
- 10-Year TIPS Spread 1.63 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +229 open in Japan
- DAX Futures: Indicating +48 open in Germany
Portfolio:
- Higher: On gains in my tech/retail/biotech/medical sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- EU Moves Toward Tougher Russia Sanctions as Greece Yields. European Union governments moved toward
imposing further economic sanctions on Russia as Greece’s new
administration refrained from casting a veto that could leave it
isolated in Europe.
EU foreign ministers gave the go-ahead to prepare steps
that would go beyond last year’s decisions to ban financing for
Russian state-owned banks and prohibit the export of advanced
energy-exploration technology. The EU will also extend a
blacklist of 132 people including Russian politicians and
military officers involved in the Ukraine conflict by six months
to September, and add more names to the list by Feb. 9. “It does include preparatory work for further punitive
measures,” EU foreign policy chief Federica Mogherini told
reporters after the 28 national ministers met Thursday in
Brussels. “We hope this can help put pressure in particular on
Russia to make positive steps.”
- Greek Market Moves Don’t Alter EU Stance, Official Says. (video) Market tension in Greece hasn’t weakened the
European Union’s determination that officials in Athens stick to
commitments under the nation’s international bailout, said
Valdis Dombrovskis, the European Commission’s vice president for
the euro. Stocks in Athens fell this week to lows not seen since the
worst of the debt crisis, with Greek banks losing more than $10
billion of value within 48 hours of the appointment of an anti-bailout cabinet under new Prime Minister Alexis Tsipras. The
markets rebounded Thursday as the government sought to downplay
the prospect of a clash with creditors, with the stocks gaining
3 percent and the yield on benchmark 10-year Greek bond falling
21 basis points to 10.12 percent.
- Greek Government’s Signals are ‘Very Mixed,’ ECB’s Jazbec Says. Greece’s new government is sending “very
mixed signals” on its aid program and it's too soon to say how
the country will be treated in the European Central Bank's bond-buying plan, ECB Governing Council member Bostjan Jazbec said. “Our concerns and hopes are related to how the Greek
government will understand the situation and react to it,” he
said in an interview in Ljubljana on Thursday. “It’s too early
to directly answer questions on when and how the ECB can buy
Greek government bonds.”
Jazbec’s comments are the most explicit yet from an ECB
policy maker on the Greek government’s stance.
- German Inflation Rate Is Negative for First Time Since 2009. Germany’s inflation rate turned negative in
January for the first time in more than five years, aggravating
a slump in consumer prices in the euro area. Prices in Europe’s largest economy fell 0.5 percent from a
year earlier, the Federal Statistics Office in Wiesbaden said
today. That’s the lowest rate since September 2009. Economists
predicted a drop of 0.2 percent.
- Nigeria Torn Asunder as Boko Haram Drive Fuels Caliphate Threat. Islamist fighters have declared a caliphate
in northeastern Nigeria that’s the size of Belgium. Whether the
region becomes autonomous or not, the damage has been done. As Nigeria prepares to hold general elections next month,
Boko Haram is expanding a six-year campaign to impose its strict
version of Islamic law on a region around Nigeria’s northeast
and spilling into neighboring Chad and Cameroon. While it’s
failed to capture the Borno’s capital, Maiduguri, the state’s
emergency agency said this month that its officials can’t travel
to 20 of 27 local government areas in Borno.
- Emerging Stocks Decline Amid Crisis Signs From Russia to Greece. Emerging-market stocks fell the most in
three weeks as China intensified its crackdown on speculative
trading and a flareup in the Ukraine conflict stoked concern
that economies in the region are being pushed into crisis. Citic Securities Co. and Haitong Securities Co. fell in
Shanghai as regulators planned a new round of checks into the
margin-lending businesses of brokerages. Russia’s ruble weakened
for a second day and stocks declined on speculation it will face
tougher international sanctions linked to Ukraine. The Ibovespa
sank for a second day in Sao Paulo. Greek banks rebounded from a
slump driven by the new government’s pledge to end austerity.
The MSCI Emerging Markets Index lost 1.4 percent to 971.10
at 11:07 a.m. in New York.
- European Stocks Trim Best Month Since 2009 as Shell Declines. European stocks closed little changed,
paring earlier losses, as German inflation data missed
forecasts, while U.S. jobless claims fell to a 15-year low. Royal Dutch Shell Plc slid 4.3 percent after reporting that
fourth-quarter profit rose less than analysts predicted.
Vallourec SA lost 3.8 percent after saying it will write down
the value of assets by as much as 1.2 billion euros ($1.35
billion) as lower oil prices force some customers to cut
spending. Deutsche Bank AG rose 2.6 percent after posting a
surprise quarterly profit.
The Stoxx Europe 600 Index fell 0.1 percent to 368.76 at
the close of trading, after earlier losing 0.8 percent and
rising 0.2 percent.
- Commodity Shipping Rate Falls to 28-Year Low on China Demand. A measure of global shipping costs for
commodities fell to a 28-year low as slowing growth in China’s
demand exacerbates the effect of a fleet glut. The Baltic Dry Index plunged 5.1 percent to 632 points, the
lowest since Aug. 22, 1986, according to data from the Baltic
Exchange in London on Thursday. Freight rates for all the vessel
types within the measure declined.
- Oil’s Plunge Hurts Houston Office Sales, Calgary Leases. These are early signs that demand is weakening for
commercial properties in cities that depend on the energy
industry after crude oil prices fell below $50 a barrel, the
lowest in five-and-a-half years, from more than $100 in June.
Oil companies looking to reduce costs are cutting jobs and
choosing to stay put rather than buy or lease new space, said
Ross Moore, director of Canada research for CBRE.
- Wall Street Creating CLOs That May Bypass Rules: Credit Markets. Wall Street has another rule it’s trying to
get around: regulations seeking to limit risk-taking by managers
of collateralized loan obligations. Leon Black’s Apollo Global Management LLC, Carlyle Group LP
and a unit of Credit Suisse Group AG have all taken steps in the
past two months to create CLOs now that they may be able to
refinance after the rules take effect in December 2016 without
having to comply with the new regulations, according to three
people with knowledge of the matter. The firms are trying to
avoid a requirement to hold a stake in the funds they manage.
- U.S. Homeownership Rate Falls to a 20-Year Low. The U.S. homeownership rate fell to the
lowest in more than two decades in the fourth quarter as many
would-be buyers stayed on the sidelines, giving the rental
market a boost. The share of Americans who own their homes was 64 percent
in the fourth quarter, down from 64.4 percent in the previous
three months, the Census Bureau said in a report. The rate was
at the lowest since the second quarter of 1994, data compiled by
Bloomberg show.
Fox News:
- Obama seeking to 'fully reverse' sequester cuts, raise spending caps in budget plan. (video) President Obama will push to "fully reverse" the so-called sequester
cuts and significantly raise government spending caps as part of his
upcoming budget plan, a proposal likely to anger fiscal conservatives
who want to see spending limits in place. The across-the-board cuts, agreed to by both parties, have been in
effect since 2013, after lawmakers were unable to produce a more
strategic deficit-cutting plan. Members of both parties have problems
with the cuts, which indiscriminately affect both domestic and defense
programs.
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Greece could face rating downgrade if troika talks stall - Fitch. Greece could face a rating
downgrade if it cannot come to an agreement with its
international creditors by the time Fitch next assesses the
country in May, said Douglas Renwick, the firm's head of western
European sovereigns on Thursday.
"If by our next review on the 15th of May there is no
progress on these talks or they look to be failing, of course
that would be a trigger for a downgrade," said Renwick during a
conference call.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Steel -3.79% 2) Oil Service -3.70% 3) Gold & Silver -3.65%
Stocks Falling on Unusual Volume:
- TGI, CLB, AERI, POST, ALB, FTNT, OSTK, QCOM, YHOO, HSY, WRLD, CAVM, DSKY, SWFT, PAYC, KNX, HP, BABA, USLV, PCH, VRTX, RTN, UBSH, MMYT, RCL, CRS, GLW, FCX, CHMT, BEAV, CAM, CRUS, RTN, TKR, FNSR, X, GHL, STLD, WWWW and RES
Stocks With Unusual Put Option Activity:
- 1) NFX 2) EWG 3) CTSH 4) HON 5) HOG
Stocks With Most Negative News Mentions:
- 1) VRTX 2) CAT 3) BABA 4) OSTK 5) GHL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.47% 2) Restaurants +1.68% 3) Airlines +1.13%
Stocks Rising on Unusual Volume:
- XNCR, HZO, HAR, KATE, CMPR, IRE, COH, CSH, VAR, AZPN, NOW, MCD, LRN, CSII, OMER, ABMD, CL, PHM, JBLU, APD, BC, SWK, CEMP and TSCO
Stocks With Unusual Call Option Activity:
- 1) VNDA 2) MCD 3) ADT 4) EMES 5) CL
Stocks With Most Positive News Mentions:
- 1) HOLX 2) BA 3) PG 4) FB 5) NOC
Charts: