Evening Headlines
Bloomberg:
- Xi Swats ‘Blood-Sucking Mosquitoes’ as Graft Push Goes Small. Chinese President Xi Jinping, who has likened his nationwide
corruption purge to hunting tigers and swatting flies, is sending
Communist Party graft-busters after an even more annoying pest:
mosquitoes. The term has been used in state media reports to describe a new
initiative targeting corruption in rural villages where petty cadres hold sway.
While tigers lurk far away, such mosquitoes are usually “buzzing around
the corner” and “sucking blood,” the official Xinhua News Agency wrote
in a commentary published July 4. The push against rural graft suggests a policy shift by Xi
almost three years into a campaign that has brought down more than 100
senior officials, including top generals, a former top presidential aide
and China’s retired security chief. With so many potential rivals locked
away, Xi can afford to relieve some pressure on the political elite in
Beijing to focus on his broader reform agenda.
- China’s Richest Regions Saw Boost From Stocks Boom Last Quarter. Guangdong, Beijing and Shanghai, which account for the biggest chunks of
China’s household equity ownership, received boosts from their sizable
financial services sectors in the second quarter, regional economic data
show. Shanghai, where the country’s major exchange and some of
the largest brokerages are located, saw its financial-sector output
surge more than 30 percent in the six months to June from a year earlier.
That helped GDP expand 7 percent in first half, up from 6.6 percent in
the January to March quarter. Growth also quickened in Beijing and
Guangdong, home to Shenzhen, the wealthiest municipality in the nation
by per capita GDP and the place where some of the country’s smaller
and advanced-technology companies are listed. In the capital Beijing,
where most state banks are headquartered, the financial industry
accounted for 19.2 percent of the economy in the first six months. Its
financial services increased 19.4 percent from a year earlier. Of the
7.7 percent growth in southern export hub Guangdong, 1.4 percentage
point came from financial services. That sector jumped 23 percent from a
year earlier in the first half, "driven by the rapid rally of the stock
market," according to the local statistics authority. While the province’s expansion was constrained by faltering exports and rising labor costs,
services surged 52.8 percent.
- Fanuc Cuts Profit Target on Signs of Slowing Demand in China. Fanuc Corp. lowered its full-year profit forecast as demand from the
information technology industry declines. The shares plunged in
Frankfurt and New York trading. The maker of industrial robots and factory automation equipment said
net income will probably be 159.5 billion yen ($1.3 billion) in the 12
months to March 31. That’s 17 percent lower than its April forecast and
trails the 198.6 billion yen average of 20 analysts’ estimates compiled
by Bloomberg.
- Ford(F) Sees China Auto Sales May Fall First Time Since 2000. Automakers may sell fewer vehicles in China this year for the first
time since at least 1998 as demand slows in the world’s largest market,
according to the low end of Ford Motor Co.’s revised projection. Ford is estimating industrywide sales to be between 23 million and 24
million units this year, Chief Financial Officer Bob Shanks said
Tuesday, compared with the 23.5 million sold last year. The low end of
that forecast would represent the first decline in at least 17 years,
according to official sales data. Before 1998, only production figures
were available.
- Alarm Bell Rings in Tokyo at Rapid Rise in German Exports to China. Losing out in Asia to European Rival. As if Japan didn't have enough economic problems to overcome,
officials in Tokyo have identified another worrying trend: lagging
export growth to China. Rapid gains in German shipments to China
have caught their attention, with exports from the European powerhouse
doubling in value since 2008 and reaching 74.5 billion euros ($82.5
billion) last year.
- Japan’s Monthly Retail Sales Fall for Third Time This Year. Japan’s retail sales dropped for the third time this year, sapping
an economy that analysts say struggled last quarter amid sluggish
exports and production. Sales slid 0.8 percent from May, following declines in January and
March. The median forecast in a survey by Bloomberg was for a drop of
0.9 percent. Weakness in consumer spending adds to risks to the world’s
third-biggest economy, whose manufacturing sector has struggled with
softness in exports to Asia. The task for Prime Minister Shinzo Abe is
to convince companies to continue to boost wages to help consumers cope
with a rise in living costs that the central bank sees picking up
quickly this year.
- Chinese Stocks Fluctuate Amid Signs of Exodus of Small Investors. Chinese stocks swung between gains and losses as signs of waning
interest by retail investors and margin traders countered speculation of
state support for equities. The Shanghai Composite Index slipped 0.2 percent to 3,656.45 at 10:38
a.m., after gaining as much as 1.6 percent. The benchmark gauge has
slumped 12 percent during four days of losses. Air China Ltd. plunged as
much as 10 percent as the company resumed trading after announcing a
private share sale. A total of 517 companies were still suspended from
trading in mainland exchanges Wednesday, or 18 percent of all listings,
down from 521 at Tuesday’s close.
- Asian Stocks Rise for First Time in Six Days Before Fed Meeting. Asian stocks rose for the first time in six days, following U.S. and
European shares higher, as investors awaited an update on monetary
policy from the Federal Reserve.
The MSCI Asia Pacific Index gained 0.4 percent to 140.85 as of 9:02 a.m. in Tokyo.
- Iron Ore Seen at $35 by Clarksons as Port Stockpiles Rebound. For a clue about where iron ore prices are headed, watch port stockpiles in China. Holdings will probably extend a rebound from a 19-month low as supply
rises, according to Clarksons Platou Securities Inc., the world’s
largest shipbroker, which says prices may slump to $35 a metric ton in
the second half. Inventories, at 82.5 million tons last week, may climb
to 95 million tons by September, said Australia & New Zealand
Banking Group Ltd.
- Copper’s Tumble Not Yet Over With Most Miners Still Making Money. The pain rippling through the copper market isn’t yet threatening
profits for most miners, and that could mean more tears for bullish
investors. Even with prices near a six-year low, about 90 percent of copper
mines are profitable, meaning most producers have little incentive to
reduce output, according to Standard Chartered Plc. Prices need to fall
another 24 percent before major companies begin cutting back, Bloomberg
Intelligence estimates. “You want miners to throw in the towel, start shutting down some
mines,” Kenneth Hoffman, an analyst at Bloomberg Intelligence, said by
telephone. “They keep forging ahead with all their plans. They’re still
bringing new stuff on.”
- Lew Warns That Puerto Rico Crisis Could Get Costly for U.S. U.S. Treasury Secretary Jacob J. Lew said a failure by Congress to
help Puerto Rico resolve its debts may hit the retirement portfolios of
average Americans, as he stepped up his call for lawmakers to help the
island. Lew endorsed legislation granting the commonwealth access to an
orderly bankruptcy regime that’s needed to prevent a chaotic and
protracted resolution of Puerto Rico’s financial troubles, an event he
said would be costly both for the island and the U.S.
- Health Spending to Gobble Up More of U.S. Economy in Next Decade. Spending
on health care will take up an increasing proportion of the
U.S. economy over the next decade as the population ages and more
people gain insurance coverage under Obamacare, a government report said.
Payments for hospitals, doctors, drugs and insurance will rise by about
5.8 percent a year through 2024, 1.1 percentage points faster than
overall economic growth, actuaries at the Centers for Medicare and
Medicaid Services said Tuesday in an annual study. Health spending
will account for 19.6 percent of gross domestic product in 2024, up from
17.7 percent last year.
Wall Street Journal:
- China Pushes to Rewrite Rules of Global Internet. Officials aim to control online discourse and reduce U.S. influence. As social media helped topple regimes in the Middle East and northern
Africa, a senior colonel in the People’s Liberation Army publicly warned
that an Internet dominated by the U.S. threatened to overthrow China’s
Communist Party.
- Israel’s Choice: Conventional War Now, or Nuclear War Later. There was no ‘better deal’ with Iran to be had. Now this calamitous one offers Tehran two paths to the bomb. Almost everyone who opposes the deal President Obama has struck with
Iran hotly contests his relentless insistence that the only alternative
to it is war. No, they claim, there is another alternative, and that is
“a better deal.”
Fox News:
- House lawmaker files motion to oust Boehner. In a move unprecedented in the history of the House of
Representatives, a Republican lawmaker filed a motion Tuesday to remove
House Speaker John Boehner, R-Ohio, from his post, in another sign of
dissatisfaction with Boehner’s leadership by a number of House
conservatives. Rep. Mark Meadows, R-N.C., filed the resolution -- a “motion to
vacate the chair” -- late Tuesday, claiming that he “has endeavored to
consolidate power and centralize decision-making, bypassing the majority
of the 435 Members of Congress and the people they represent.”
CNBC:
- Gilead(GILD) posts huge beat on earnings and revenue. (video)
Gilead Sciences delivered quarterly earnings and revenue on Tuesday
that easily surpassed analysts' expectations on the strength of strong
sales for its hepatitis C treatments. The company reported adjusted
second-quarter earnings of $3.15 per share on $8.24 billion in revenue.
Analysts had expected the company to report earnings of $2.71 a share on
$7.61 billion in revenue, according to a consensus estimate from
Thomson Reuters. Gilead's second-quarter total revenue rose more than 26
percent from the year-ago period's $6.54 billion figure. The stock rose more than 3 percent in after-hours trading immediately following the earnings announcement.
Business Insider:
- Yelp(YELP) crashes. Yelp shares fell as much as 16% in after-hours trading on Tuesday after the company slashed its outlook for full-year earnings.
Reuters:
- Akamai(AKAM) forecasts revenue, profit below estimates; shares sink. Online content distributor Akamai
Technologies Inc forecast third-quarter revenue and
profit below estimates, citing a stronger dollar. Shares of Akamai, which claims to deliver between 15 and 30
percent of all Web traffic, fell as much as 13 percent in
after-hours trading on Tuesday. The company's second-quarter profit fell nearly 8 percent
after 11 quarters of growth, as costs rose.
21st Century Business Herald:
- China Academic Urges Isolating Bank Funds From Stocks. Chinese
regulators should set up a "firewall" to prevent bank funds from being
invested in stock markets through various unofficial channels, including
umbrella trusts, Yin Zhongli, a researchers with the Chinese Academy of
Social Sciences, writes in an article. Stock regulators shouldn't be
burdened with tasks to support economic growth, Yin writes.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.25 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 62.0 -1.25 basis points.
- NASDAQ 100 futures -.10%.
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Pending Home Sales for June are estimated to rise +.9% versus a +.9% gain in May.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+134,000 barrels versus a +2,468,000 barrel increase the prior week.
Gasoline supplies are estimated to rise by +112,000 barrels versus a
-1,725,000 barrel decline prior. Distillate supplies are estimated to
rise by +1,020,000 barrels versus a +235,000 barrel gain the prior week.
Finally, Refinery Utilization is estimated to fall by -.04% versus a
+.2% gain the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark Fed Funds rate at .25%.
Upcoming Splits
Other Potential Market Movers
- The
Japan Industrial Profits report, $35B 5Y T-Note auction, weekly MBA
mortgage applications report, (MSFT) Windows 10 launch and the (YHOO)
consumer product event 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 mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.