Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Volume: Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- VIX 18.79 +5.50%
- ISE Sentiment Index 106.0 unch.
- Total Put/Call .83 -16.16%
- NYSE Arms .87 -45.23%
Credit Investor Angst:
- North American Investment Grade CDS Index 99.28 bps -1.25%
- European Financial Sector CDS Index 175.0 bps +.39%
- Western Europe Sovereign Debt CDS Index 106.85 bps -.22%
- Emerging Market CDS Index 234.59 bps -.29%
- 2-Year Swap Spread 9.75 -.25 basis point
- TED Spread 20.0 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -24.0 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .11% unch.
- Yield Curve 140.0 -2 basis points
- China Import Iron Ore Spot $119.30/Metric Tonne -.42%
- Citi US Economic Surprise Index 48.10 -2.1 points
- 10-Year TIPS Spread 2.50 +2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +13 open in Japan
- DAX Futures: Indicating +3 open in Germany
Portfolio:
- Slightly Higher: On gains in my Medical/Retail sector longs and index hedges
- Disclosed Trades: None
- Market Exposure: 25% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Biotech -2.40% 2) HMOs -2.01% 3) Oil Service -1.92%
Stocks Faling on Unusual Volume:
- BIRT, LPS, IPGP, ONB, FMBI, IPHI, IQNT, TLM, END, CBEY, PBR, LGCY, LLY, PBH, MNST, COT, WU, IRG, DCM, HURN, H, IPXL, QEP, RVBD, ONB, CAM, WPC, MSTR, VRSN, LPNT, MVO, ANIK, ALLT, CLNE, COR, NS, UHS, EQT, CBG, FB, RDC, IMGN, CPNO, AGCO, TWGP, CRL, RBC, CQP, GLT, H, AREX, TUMI, LUFK, VVUS and WCG
Stocks With Unusual Put Option Activity:
- 1) LOW 2) CTSH 3) ALL 4) HIG 5) DIS
Stocks With Most Negative News Mentions:
- 1) WU 2) HURN 3) CRNT 4) WFC 5) FB
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.87% 2) Education +1.13% 3) Oil Tankers +.89%
Stocks Rising on Unusual Volume:
- GNW, SHF, OPNT, GNRC, WRC, PVH, VRSK, CLH, CVLT, LECO, PWR, CAVM, UBS, F, HMSY, EXP, OC, URI, LEG and CTCT
Stocks With Unusual Call Option Activity:
- 1) HLF 2) ALL 3) GFI 4) RSX 5) VIXY
Stocks With Most Positive News Mentions:
- 1) WRC 2) RRGB 3) UNH 4) HON 5) ISRG
Charts:
Evening Headlines
Bloomberg:
- EU Convenes on Greece as Samaras Coalition Squabbles. Euro-area
finance chiefs will try to shunt Greece’s bailout plan back on track
today as officials split on whether the country needs another debt
writedown and Greek politicians squabble over further austerity
measures. With recession biting, policy makers are again seeking ways to
keep Greece in the euro and avert an exit that former
Deutsche Bank Chief Executive Officer Josef Ackermann said would
cost “several hundred billion” euros. Finance ministers will
hold a conference call at 12:30 p.m. Brussels time and may
release a statement afterwards. European officials are grappling over ways to fill Greece’s
financing gap two weeks before a decision is due on whether to
give the country a further round of emergency funds. While
German Chancellor Angela Merkel has signaled her desire to stand
behind Greece’s euro membership, Prime Minister Antonis Samaras’s coalition is still at odds over the steps needed to
secure more money.
- Monti
Government Runs Into Rising Political Risks: Euro Credit. Prime
Minister Mario Monti is trying to counter rising risks for Italy's
public finances after an anti-austerity movement emerged as the largest
political force in Sicily and his predecessor, Silvio Berlusconi,
threatened to withdraw support for the government.
- Hollande Faces Competitiveness Calls Amid Job Cuts. Renault
SA (RNO) says if President Francois Hollande wants more cars built in
France, he needs to tackle the country’s high labor costs and rigid work
rules.
- Hungary Retail Debt-Sale Plan Threatens to Drain Bank Deposits. Hungary’s
plan to add euro bonds to household debt offerings while aid talks
stall risks starving local banks of deposits and may prolong the second
recession in
four years, policy makers and investors in Budapest said.
- China Stocks Fall to One-Month Low as PetroChina Drops on Profit.
Chinese stocks declined, dragging the benchmark index to a one-month
low, as lower-than-estimated profit at PetroChina Co. overshadowed
higher earnings at Industrial Bank Co. PetroChina, the country’s biggest
oil company, sank 0.7 percent. Beiqi Foton Motor Co. (600166), China’s
largest commercial- vehicle maker, slumped the most since July 2011
after reporting a loss.
- Gasoline Supply Seen at 1990 Low on Sandy. Gasoline stockpiles on the U.S. East
Coast may sink to the lowest level since at least 1990 as
Hurricane Sandy moves ashore, curtailing fuel production and
distribution, based on Energy Department data. Refineries accounting for 94 percent of regional processing
capacity shut or reduced rates before Sandy, the largest
tropical storm on record in the Atlantic, approached the East
Coast yesterday. Colonial Pipeline Co., which operates the
largest link between Gulf Coast refiners and East Coast
distributors, planned to shut its main line delivering fuel to
Philadelphia and New York Harbor late yesterday as customers
shuttered operations. Prices had jumped 5.9 percent in three days, breaking the
longest losing streak since 1986, as the storm headed directly
for the heart of East Coast fuel refining and distribution.
Gasoline inventories in the central Atlantic area are already 16
percent below a year earlier. Sandy threatens to flood and
disrupt power at refineries and terminals that account for one-
third of U.S. finished gasoline production, according to BNP
Paribas SA.
- New York Subway System Faces Weeks to Recover From Storm. New York’s subway system may take
weeks of work and tens of billions of dollars to be restored to
full service as officials assess the toll from floods,
hurricane-force winds and electrical damage that crippled the
most populous U.S. city’s transportation hub. “I can say unequivocally that the MTA last night faced a
disaster as devastating as it has ever faced in its history,”
Metropolitan Transit Authority Chairman Joe Lhota said at a news
conference today.
- Hotel Recovery Hurt as Sandy Causes Cancellations, Damage. Revenue growth at U.S. hotels,
already hurt by slowing traveler demand, will be hampered
further by Sandy, the superstorm that blacked out much of
southern Manhattan and flooded areas along the East Coast. Starwood Hotels & Resorts Worldwide Inc. and real estate
investment trusts including Host Hotels & Resorts Inc., owner of
the Westin New York Grand Central, and Hilton Times Square
landlord Sunstone Hotel Investors Inc. are among the companies
that probably will be most affected by Sandy because of their
properties in the U.S. Northeast, said Nikhil Bhalla, a senior
lodging analyst at FBR & Co. in Arlington, Virginia. Room-revenue growth was “generally soft through the first
three weeks of the month,” before Sandy hit, Bhalla said in an
e-mail. “So I expect results for the last week of October to be
notably soft.”
Wall Street Journal:
- Live Updates: Hurricane Sandy.
- Questions Cloud Market Reopening. Critics
Fault Wall Street for a Lack of Disaster Preparedness; Friction Over
NYSE's Backup Plan. U.S. stock markets were preparing to open in the
wake of Sandy on
Wednesday, ending a shutdown that left investors unable to trade for two
days and sparked recriminations over whether Wall Street should have
been better prepared to handle the impact of such a storm. The New
York Stock Exchange said Tuesday that it plans to open as
usual at 9:30 a.m. and that its trading floor and headquarters in lower
Manhattan were "fully operational" despite widespread blackouts and
flooding in that part of the city. The Nasdaq Stock Market and other
exchanges will open as well. Bond markets will follow suit.
- Apple(AAPL) Shake-Up Signals Tim Cook Era.
- M.B.A.s Rethink Wall Street. Repeated cutbacks have dulled Wall Street's luster for some prospective
Masters of the Universe, in the latest reflection of the gloom
overhanging the finance industry.
- Sudan, After Blast, Greets Iran Ships.
Iranian naval commanders met Tuesday with their counterparts in Sudan to
discuss joint training exercises, in the wake of explosions at a
weapons factory that Sudan blamed on Israeli jets.
- In Vancouver, Home Sales Hit the Brakes.
After a blistering, multiyear run that saw ramshackle bungalows fetch
seven-figure sums, one of the hottest real-estate markets in North
America seems to be cooling, damped in part by government changes meant
to deflate what many policy makers saw as the start of a bubble.
- Caesars Packs Up in Macau, Leaving Spoils to Its Rivals. "When you have that much capital devoted to an asset that's not
delivering its potential, you need to consider other options," says
Steven Tight, the company's president of international development.
- Some Investors Likely to Face New Tax Bite. Those Dabbling in Real Estate Could See Surtax on Rental Income Starting Jan. 1; Just Who Qualifies Is in Question.
- David Gamage: ObamaCare's Costs to the Working Class. Perverse incentives will make part-time work more attractive than a better-paying full-time job.
- Big Storm Opportunism. Did you know Hurricane Sandy favors higher marginal tax rates?
CNBC:
Zero Hedge:
Business Insider:
Gallop:
Rasmussen Reports:
Financial Times:
- Chinese Cos. Report Increase in Unpaid Bills in 3Q.
66% of Chinese cos. said in 3Q financial results that unpaid bills had
increased in the 3-mo. period from a yr earlier, citing its own analysis
of S&P Capital IQ data. Sany Heavy reported accounts receivables
were 83% higher as of the end of 3Q.
Telegraph:
FAZ:
- The German government will swiftly implement a European Court of Justice ruling on the taxation of dividends
of foreign corporations that will cause tax revenue losses. Federal and
state governments face tax revenue losses of about 1.5 billion euros
each in 2013 and 2014 and 600 million euros each in 2015 and 2016.
Xinhua:
- China will use the latest international benchmark to revise China's gdp calculation, citing Peng Zhilong, an official from the nation's statistics bureau.
Securities Times:
- Regulators may allow brokers to sell credit default swaps and other derivatives, citing people familiar with a meeting between regulators and Goldman Sachs China.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.0 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 96.50 -.5 basis point.
- FTSE-100 futures +.01%.
- S&P 500 futures +.13%.
- NASDAQ 100 futures -.23%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (ETN)/1.09
- (H)/.17
- (RDC)/.48
- (MA)/5.92
- (HES)/1.19
- (PWR)/.39
- (IPGP)/.79
- (COCO)/.04
- (CLX)/.96
- (STE)/.51
- (CMI)/1.83
- (AGCO)/1.02
- (MGM)/-.17
- (GM)/.60
- (WCG)/1.47
- (AMT)/.74
- (CAM)/.88
- (CRUS)/.71
- (ALL)/1.13
- (HTZ)/.61
- (IPI)/.35
- (TSO)/.34
- (FSLR)/1.07
- (RGR)/.80
- (V)/1.50
- (WMB)/.27
- (MET)/1.28
- (PZZA)/.54
- (MUR)/1.20
- (BMC)/.87
- (BWA)/1.19
- (SPW)/1.06
Economic Releases
8:30 am EST
- The 3Q Employment Cost Index is estimated to rise +.5% versus a +.5% gain in 2Q.
9:45 am EST
- Chicago Purchasing Manager for October is estimated to rise to 51.0 versus 49.7 in September.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,750,000 barrels versus a +5,896,000 barrel gain the prior week. Distillate
inventories are estimated to fall by -1,400,000 barrels versus a
-646,000 barrel decline the prior week. Gasoline supplies are estimated
to fall by -500,000 barrels versus a +1,439,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.13% versus a -.2% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The Fed's Williams speaking, France/Germany Bond Auctions, Germany retail sales data, Eurozone inflation data, Eurozone unemployment data, Canada GDP, China Manufacturing PMI, NAPM-Milwaukee report for October and the weekly MBA applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity 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.
Evening Headlines
Bloomberg:
- Spain Sets Discount for Bad Bank Assets, Seeks Investors. Spain’s
bad bank will buy foreclosed assets at an average discount of 63
percent as the state seeks investors to become shareholders in the 60
billion-euro ($77 billion) facility, the nation’s bank-rescue fund said.
The bad bank, known as SAREB, will apply an average discount of 46
percent to gross book value on loans to developers, the FROB rescue fund
said in a presentation yesterday in Madrid. Nationalized lenders will transfer 45 billion euros of assets to the bad bank, while other lenders
with capital shortfalls may transfer about 15 billion euros,
FROB Chairman Fernando Restoy said, adding that the transfer
values shouldn’t be a “reference” for the property held on the
books of the rest of the banking industry. “The market will always try to make the read across and
will conclude that the banks should be holding these assets at
the higher discount,” Antonio Ramirez, an analyst at Keefe, Bruyette & Woods Ltd. in London, said in a phone interview. “It doesn’t look like the regulator will force the banks to take
additional haircuts.”
- Juncker Calls Extra Finance Chief Talks as Greece Showdown Looms. Euro-area
finance chiefs are
scheduled to talk three times in the next two weeks as the 17-
nation bloc grapples over ways to fill Greece’s financing gap
and ease concerns that it might have to exit from the euro. Ministers
will probably hold a “physical meeting” on Nov.
8, Luxembourg’s Jean-Claude Juncker, who leads of group of euro- region
finance ministers, said in an interview in Luxembourg yesterday. The
gathering will take place between a Greece- related conference call set
for tomorrow and a regularly scheduled Nov. 12 meeting in Brussels.
The negotiations reflect policy makers’ struggle to find a solution for
Greece, which remains the epicenter of Europe’s sovereign debt crisis
more than three years after it owned up to an inflated budget deficit.
International Monetary Fund chief Christine Lagarde is due in Berlin
today for talks with German Chancellor Angela Merkel after meeting with
French President Francois Hollande in Paris yesterday. “There is no
consensus right now,” said Carsten Brzeski, a senior economist at ING
Group in Brussels. “I still think that some kind of debt forgiveness
will happen in the future but I don’t see it happening right now.”
- Japan’s Industrial Production Falls as BOJ Mulls Easing.
Japan’s industrial production fell the most since last year’s
earthquake and tsunami, bolstering the case for the Bank of Japan (8301)
to add to monetary easing today to support an economy at risk of
contraction. Output declined 4.1 percent in September from the
previous month, when it dropped 1.6 percent, the Trade Ministry said in
Tokyo today. The median of 29 estimates in a Bloomberg News survey of
analysts was for a 3.1 percent slide. None forecast
such a large decline. A separate report showed unemployment
unchanged. Weakness in global demand and the expiration of car-
purchase subsidies hit output, which is on a “downward trend,”
the ministry said today.
- Asia Leveraged Loans Set to Stall as Global Gloom Spurs Caution. Leveraged loan volumes in Asia may
decline in 2013 as Europe’s debt crisis and China’s slowdown
limits mergers and acquisitions while private equity firms shy
away from selling businesses at discounted prices, lenders say. Companies are disagreeing on the value of assets amid
increased global economic uncertainty, making them cautious
about large transactions, according to HSBC Holdings Plc, Credit
Agricole SA and Mizuho Corporate Bank Ltd. Public-to-private M&A
deals in the Asia-Pacific region are down 30 percent this half
to date versus the first six months of the year while private-
to-public deals slumped 34 percent, according to data compiled
by Bloomberg. “M&A volumes this year have been lamentable but it’s not
because of any lack of buyside equity and debt capital to get
deals done,” said Lyndon Hsu, the head of leveraged and
acquisition finance, Asia-Pacific, at HSBC in Hong Kong. “Banks
in the region have plenty of money to deploy and there’s a lot
of equity capital floating around, but as Europe chokes on its
own economic and financial problems and growth in China slows,
transaction flows are drying up.”
- U.S. Labor Dept. Says It Is Aiming for Nov. 2 Jobs Data Release.
- Ohio Steel Towns Feeling Recession Fallout Waver on Obama. Kathryn
Adams, a Democrat all her 56
years, chokes for a moment as she speaks. “Life is so much harder now
for so many people than it was
four years ago,” says Adams, a Methodist campus minister at
Youngstown State University in Ohio, describing the struggling families
she has served in soup kitchens and the declining collections at the
local churches that support her work. “Too many people are hurting, and
it’s time for a change,” she said, in explaining why she plans to vote
against Barack Obama, the man she backed for president in 2008.
- Australia New-Home Sales Dropped 3.7% in September, HIA Says.
- RBI Signals Inflation Needs to Ease to Boost Rate-Cut Scope. Indian
monetary policy may have space in future to support growth if price
pressures ease and fiscal and trade deficits narrow, even as caution is
needed for now to focus on inflation, the nation’s central bank said.
“Monetary policy needs to be cautious in the interim, focusing on
inflation while using the available space to support growth to the
degree it can,” the Reserve Bank of India said in a report yesterday
ahead of its interest-rate decision in Mumbai today. If threats from
inflation and the deficits recede further, that “could yield space down
the line for monetary
policy to respond to growth concerns,” it said.
Wall Street Journal:
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
Gallop:
Rasmussen Reports:
Reuters:
- China's Baidu(BIDU) eyes soft fourth quarter as economy bites. Baidu Inc, China's largest
search engine company, posted its slowest quarterly revenue
growth in more than two years and forecast softer-then-expected
growth this quarter, hurt by weaker sales as China's economic
engine sputters. However, the company -- which still grew revenue by 50
percent in the third quarter -- said it added a record number of
new advertisers for the quarter and was focusing on boosting
revenue from fast-growing mobile search traffic. "Their large customers' spending has not been so robust and
has been quite flat, but Baidu has done a decent job of bringing
new customers online," said Michael Clendenin, managing director
of technology consultancy firm RedTech Advisors.
- US markets shut on Tuesday, focus shifts to Wednesday. Hurricane Sandy will close U.S. stock
markets for a second day on Tuesday, as Wall Street turned its
attention to whether markets would be able to resume functioning
on the month's final trading day on Wednesday. U.S. stock markets closed on Monday due to weather for the
first time in 27 years. Bond markets closed early, at noon, as
winds and waves from Hurricane Sandy lashed the Eastern
seaboard. NYSE Euronext and Nasdaq OMX Group, the largest two U.S. exchange operators, said they intend to
reopen Wednesday, conditions permitting. The bond markets will also
close on Tuesday, with traders aiming to reopen on Wednesday.
- Sicilian vote, Berlusconi threat add to Italy uncertainty. Former Italian prime minister
Silvio Berlusconi's struggling party suffered a heavy defeat on
Monday as voters turned against the centre-right in its former
stronghold of Sicily, five months before national parliamentary
elections. The centre-left candidate Renato Crocetta, an openly gay
anti-mafia campaigner, was set to be the next regional governor
while there were strong gains for the anti-establishment 5-Star
Movement of comic Beppe Grillo. "We've won in Sicily, it's crazy," said Pier Luigi Bersani,
head of the Democratic Party (PD), the main party on the
centre-left, adding that the result laid the groundwork for real
change in the national elections.
China Securities Journal:
- China's financial stability may be affected
if it doesn't control large or one-way yuan appreciation resulting from
speculative "hot money" or other negatives, according to a front-page commentary by Wang Donglin, a reporter at the newspaper.
The current rapid appreciation of the currency isn't sustainable while
it poses a hidden threat to the financial system, according to the
commentary.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 125.50 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 97.0 +.25 basis point.
- FTSE-100 futures -.14%.
- S&P 500 futures -.63%.
- NASDAQ 100 futures -.94%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (LLL)/1.85
- (CAH)/.79
- (ADM)/.43
- (JCI)/.75
- (F)/.30
- (TRW)/1.16
- (CBG)/.33
- (ADVS)/.25
- (BNNY)/.25
- (WMB)/.27
- (EA)/.10
- (AGN)/1.04
- (VLO)/1.79
Economic Releases
9:00 am EST
- The S&P/CaseShiller Home Price Index for August is estimated to rise +.5% versus a +.44% gain in July.
Upcoming Splits
Other Potential Market Movers
- The effects of Hurricane Sandy, Fed's Dudley speaking, Fed's Kocherlakota speaking, ECB's Draghi speaking, Spain GDP report, German Unemployment report, Italy bond auction, India rate decision, Japan rate decision, Japan Manufacturing PMI, (MAT) analyst meeting and the (UNP) Investor Day could also impact global trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer staple shares in the region.
Bloomberg:
- Spain's Pain Seen Intensifying as Slump Swells Deficit: Economy. Retail sales plunged 11% in September from a year ago, the
National Statistics Institute said today. Figures on public finances,
consumer prices, and gdp tomorrow may confirm a deteriorating economy
and debt profile amid the toughest austerity in its domestic history.
- Germany Supports ECB Greek Debt Buyback Plan, Rejects Write-off. German
Chancellor Angela Merkel’s government said it is willing to consider a
European Central Bank proposal for a buyback of Greek debt, as it
stepped up opposition to imposing more losses on Greece’s creditors. A restructuring of Greek sovereign debt held by its public sector partners “is out of the question” for Germany and “not
in Greece’s interests,” Steffen Seibert, Merkel’s chief
spokesman, told reporters in Berlin today. At the same time,
Seibert noted that Finance Minister Wolfgang Schaeuble said
yesterday that a buyback “is worth serious discussion.”
- Ford(F) Joins GM(GM) in Europe Morass Losing Combined $1 Billion. General Motors Co. (GM) and Ford Motor Co. (F), struggling to reverse growing losses in Europe, will each
post plunging profits this week as they take different paths to
fixing their operations in that economically ravaged region.
- European Stocks Drop as Insurers Decline. European
stocks dropped, snapping a
three-day advance, as Hurricane Sandy headed toward New York City,
prompting the U.S. to suspend equity trading on all markets today. A
gauge of insurance companies posted the biggest decline of the 19
industry groups on the Stoxx Europe 600 Index. BT (BT/A) Group Plc
slipped 1.5 percent after a person familiar with the matter said the
telecommunications company may cut its full-year sales forecast. UBS AG
(UBSN) rose 6.4 percent after Switzerland’s largest bank was said to
have decided to cut as many as 10,000 jobs amid a plan to retreat from
capital-intensive trading. The Stoxx 600 slid 0.5 percent to 269.14 at
1:32 p.m. in London.
- Chinese Stocks Drop to One-Month Low; Yanzhou Coal Paces Losses. Chinese
stocks fell, dragging the benchmark index to a one-month low, as weaker
earnings from companies including Yanzhou Coal Mining Co. (600188)
outweighed better- than-estimated figures from China Petroleum &
Chemical Corp. (600028) Yanzhou Coal, China’s fourth-largest miner of
the fuel, lost 1 percent after posting a loss in the three months to
Sept. 30. Weichai Power Co. (000338), a maker of high-speed
heavy-duty diesel engines, sank 2.1 percent after profit decreased.
China Petroleum, Asia’s biggest oil refiner and also known as Sinopec,
added 1.1 percent. “Earnings are the focus of the market now and
investors give premiums to companies whose profits can exceed
expectations,” said Li Jun, a strategist at Central China Securities Co.
in Shanghai. “There will be little movement on the index as there are few catalysts for buying stocks.” The Shanghai Composite Index (SHCOMP) fell 0.4 percent to 2,058.94
at the close, its lowest level since Sept. 27.
- Sandy Strengthens as Hurricane Barrels Toward New Jersey. Hurricane
Sandy, the Atlantic’s largest tropical storm, will strike the East
Coast today or early tomorrow with a life-threatening surge, emptying
the streets of the nation’s largest cities and lashing a region of 60
million with gales, rain and even snow. The storm, 900 miles across,
shut the federal government and state administrations from Virginia to
Massachusetts. It halted travel, prevented U.S. stock markets from
opening and upended
the presidential campaign. It may cause more than $6 billion in damage
and knock out power to 10 million for a week or more.
- U.S. Corporate Credit Swaps Rise to Highest Level in Four Weeks. The Markit CDX North America Investment Grade Index climbed 2.5 basis points to a mid-price of 100.5 basis points at 8:57 am in New York. That is the highest intraday level since 102.3 basis points on Sept. 27.
- U.S. Margins Stagnate for Longest Stretch in Three Years. Chief executive officers in America
are finding fewer costs to cut, sending profit margins into the
first 12-month contraction since 2009 and leaving investors
increasingly dependent on economic growth to boost stocks. Standard & Poor’s 500 Index companies earned $81.93 a share
in the last 12 months on sales of $919.39 a share, generating
margins of 8.9 percent, according to data compiled by Bloomberg
that excludes banks. The measure, a key gauge for investors,
slipped from 9.0 percent, the first decline after a three-year,
1.6 percentage point expansion, the biggest ever.
- Riverbed(RVBD) Agrees to Buy OPNET Adding Network Management. Riverbed Technology Inc. has agreed to acquire OPNET Technologies Inc. for $43 a share in a
transaction with an equity value of $1 billion, expanding its
offerings to help businesses manage computer networks.
- Presidential Vote Count Could Be Delayed in a Close Ohio. With polls showing a tightening U.S.
presidential contest in Ohio, there’s a chance for what
elections officials call the “nightmare scenario”: The race
comes down to Ohio on election night, and the election can’t be
called for days. That could happen if the margin of votes in Ohio were
significantly less than the number of provisional ballots cast.
These ballots are cast by voters who show up at the polls and
have moved residences and haven’t updated their registration, or
who don’t appear in the polling-place books. Provisional ballots
are held for 10 days to verify voter eligibility.
- Consumer Spending in U.S. Increases 0.8%. Household purchases, which account for about 70 percent of
the economy, rose 0.8 percent, the most since February, after a
0.5 percent gain the prior month, a Commerce Department report
showed today in Washington. The median estimate in a Bloomberg
survey of 71 economists called for a 0.6 percent rise. Incomes
rose 0.4 percent, the most since March.
- Apple(AAPL) IPad Mini Shipping Delays Suggest Product Sold Out. Apple Inc.'s iPad mini will now take
about two weeks to ship to customers who order it from the
company’s online store, suggesting the product may be sold out. Models with Wi-Fi only are available to ship in two weeks,
while versions with wireless connections will be sent to
customers in mid-November, according to delivery information on
Apple’s website.
Wall Street Journal:
- Live Blog: Hurricane Sandy Targets East Coast.
- Election 2012: Streaming Coverage.
- U.S. Stock Futures End Lower.
As Hurricane Sandy barreled down on the East Coast, stock exchanges
were closed, investors fled to the safety of Treasurys and trading in
currencies and commodities continued with light volumes. Futures contracts on U.S. stocks traded until 9:15 a.m. Eastern time,
following European markets lower. It wasn't clear when stock and
derivatives markets would open again, but traders said the impact of the
storm added to investors' worries. "Certainly the storm is playing a role—traders hate uncertainty and
this is the ultimate in uncertainty because you can't predict the scale
of the damage that may or may not occur," said Piers Curran, head of
trading at London's Amplify Trading. Dow Jones Industrial Average futures ended trading 61 points lower,
or 0.5%, to 12993. Standard & Poor's 500-stock index futures shed
4.85 points, or 0.5%, to 1402.75 and Nasdaq 100 futures shed 15.50
points, or 0.6%, to 2643.50.
- Copper Falls to Seven-Week Low.
Copper prices slumped to a seven-week low in thin trading as
retreating global equities markets renewed demand concerns for the
industrial metal and a stronger U.S. dollar dented sentiment. Copper for December delivery, the most actively traded contract
recently traded down 3.70 cents, or 1.1%, at $3.5130 a pound on the
Comex division of the New York Mercantile Exchange. Futures fell as low
as $3.494 a pound, the lowest intraday price since Sept. 6.
- Sandy Leads Pfizer(PFE), Others to Postpone Earnings.
- Spain Retail Sales Fall at Record Pace. Spanish retail sales plunged at a record pace in September as consumers
cut spending following a sharp increase in the country's value-added tax
rate. According to data released Monday by Spain's National Statistics
Institute, or INE, seasonally adjusted retail sales were down 10.9% on a
year-to-year basis in September, compared with a 2% decline in August.
The September decline was the sharpest since the INE started
collecting the data in 2004. It was the 27th straight monthly decline in
retail sales. Spain increased its maximum VAT rate on consumer
products and services to 21% from 18% at the beginning of September.
Household spending is hurt by an unemployment rate that breached 25%
for the first time in the third quarter. Spanish residents are also
saving more in an attempt to cut their debt burden, which had soared
during Spain's decadelong housing boom. Real retail sales dropped 12.6% on the year, the INE data showed, also the largest drop on record.
- BYD Projects Annual Profit Will Plunge.
Chinese battery and car maker BYD Co. 002594.SZ -0.69% forecast that
annual earnings would drop as much as 98%, after reporting a sharp
decline in third-quarter net. The company cited continued weakness in
Chinese demand for cars, lower sales at BYD's handset division and
losses in its solar business. Third-quarter net was 4.6 million yuan
($734,000), down 94% from 77.37 million yuan a year earlier, the
company said Monday. Revenue fell 11% to 10.53 billion yuan. The
Shenzhen-based company projected profit for the year to between 27.69
million yuan and 110.8 million yuan. MidAmerican Energy Holdings Co., a unit of Warren Buffett's Berkshire Hathaway Inc., BRKB 0.00% owns 10% of BYD.
Reuters:
Financial Times:
- China’s luxury buyers embrace thrift. Shops
selling, renting and repairing second-hand luxury goods are springing
up across China, along with branches of high-end consignment shops from
Japan and Hong Kong that buy and sell second-hand goods, paying the
seller a commission.
Weekend Headlines
Bloomberg:
- Rajoy Faces Bailout Split With Monti at Madrid Meeting. Italian
Prime Minister Mario Monti and Spanish counterpart Mariano Rajoy may
try to mask a growing divide over Europe’s new bailout strategy when
they meet in Madrid today. While both have jointly argued against extra
budget austerity as the price for help from the European Central Bank,
their interests diverge when it comes to whether they should ask for
assistance together. A go-it-alone strategy by Spain would probably
cut Italy’s borrowing costs while leaving Rajoy to weather the political
flak of seeking emergency funds. “Rajoy was probably pressed by Monti
in August to accept a pre-emptive” bailout, said Gilles Moec, co-chief
European
economist at Deutsche Bank AG in London. “It would have made
things so much smoother in Europe and for Italy as well. Rajoy
is very much following his own route now.”
- UBS Said to Plan 10,000 Job Cuts, Investment Bank Shrinks. UBS AG’s decision to cut as many as
10,000 jobs and retreat from capital-intensive trading
businesses will help position Switzerland’s largest bank to
return more funds to shareholders.
- BOE’s Bean Cautions Final-Quarter Growth May Be Weak. Bank
of England Deputy Governor Charles Bean cautioned against over-optimism
following third- quarter gross domestic product data and said U.K.
growth may be weak in the final three months of the year. The figures
were “stronger than we expected, but we should avoid getting
over-excited,” Bean said in an interview with Sky
News television yesterday. “It’s quite possible that we see
weak growth in the next quarter. The big picture is of an
economy that’s been bumping along the bottom.”
- China’s Slowing Revenue Gains Seen Limiting Spending. China’s
government spent more than
planned in the first nine months of the year, and revenue gains
moderated, leaving little room for public outlays to stoke the economy
this quarter without an expansion of the budget. Fiscal revenue
rose 10.9 percent in January-to-September from a year earlier to 9.06
trillion yuan ($1.5 trillion), compared with a 29.5 percent gain in the
same period in 2011, Ministry of Finance data showed this month. Spending
in the January-September period rose 21.1 percent, higher than the
targeted 14.1 percent rise for the full year, leaving a surplus of about
half last year’s level. “The effects of China’s fiscal policy were
expansionary in the first nine months but will be neutral in the fourth
quarter as spending won’t be higher than a year earlier,” said Ding
Shuang, senior China economist with Citigroup Inc. in Hong Kong,
who formerly worked at the People’s Bank of China and
International Monetary Fund.
- China’s Stocks Retreat to One-Month Low; Yanzhou Coal Declines. China’s
stocks fell, extending last week’s decline, as Yanzhou Coal Mining Co.
reported a quarterly loss and China Southern Airlines Co. posted lower
profit. Yanzhou Coal, China’s fourth-largest miner of the fuel, lost 0.9
percent. China Southern, the nation’s biggest carrier by fleet
size, slid 1.4 percent. Weichai Power Co., a maker of high-speed
heavy-duty diesel engines, retreated 3.3 percent after profit decreased.
“The market has yet to digest the bad impact of third- quarter earnings and sentiment is cautious,” said Li Jun, a
strategist at Central China Securities Co. in Shanghai.
- Korea’s Manufacturer Confidence Falls for Second Month. South Korean manufacturers’
confidence fell for the second straight month as slowing
economic growth weighed on sentiment. An index measuring expectations
for November fell to 70 from 72 in October, the Bank of Korea said in a
statement in Seoul today. A measure of expectations at
non-manufacturing companies was unchanged from October at 67, with any number
below 100 indicating that pessimists outnumber optimists. “The Korean economy still faces considerable difficulty in
the coming months,” Yoon Eun Hye, an economist at Standard
Chartered Plc in Seoul, said before the release.
- H.K. Imposes Property Tax on Non-Locals on Bubble Risks. Hong Kong Chief Executive Leung
Chun-ying imposed the city’s first property tax targeted at
overseas buyers as U.S. monetary easing and record-low interest
rates boost the risk of a housing bubble. Non-local and corporate buyers will have to pay a 15 percent tax upon purchase, Financial Secretary John Tsang told
reporters at a press conference on Oct. 26. The government also
raised a resale tax on property by about 5 percentage points and
extended the period during which it will apply to three years
from two.
- Will 3D Printing Kill Asia's Manufacturing Sector? (video)
- Speculators Reduce Wagers as Annual Advance Erased: Commodities. Speculators
lowered bullish wagers
on commodities for the third straight week, the longest streak
since April, as prices erased this year’s gain on mounting
concern about slowing economic growth. Hedge funds cut net-long
positions across 18 U.S. futures and options by 0.2 percent to 1.18
million contracts in the week ended Oct. 23, the lowest since July 24,
U.S. Commodity Futures Trading Commission data show. Copper holdings
fell the most in
seven weeks, and sugar wagers dropped to a one-month low.
Bullish bets on gold slumped the most in three months.
Wall Street Journal:
- Markets Go Dark Ahead of Storm. U.S. stock and options markets will close Monday due to Hurricane
Sandy, exchanges and regulators said, and there was a chance the markets
would remain closed through Tuesday. Earlier in the day Sunday, exchanges had decided to close their
trading floors but stay open for electronic trading. However,
exchanges, regulators and trading firms agreed late Sunday to close all
U.S. stock markets.
- Hurricane Sandy: Live Updates.
- Europe's Crisis Spawns Calls for a Breakup—of Spain. This vibrant northern region of Catalonia has long been known as the
"factory of Spain" for generating wealth that helped sustain the entire
nation. Now Catalonia, beaten down by years of recession, has become the
battleground in what threatens to become an economic civil war. In protests large and small, hundreds of thousands of Catalans are
embracing a stark proposition: Only by breaking ties with Spain and
becoming an independent country can Catalonia free itself from economic
malaise.
- Catalonia Flies Flag for Secession from Spain. (video)
- Euro-Skeptics in Finland Are Projected to Make Gains. The euro-skeptic Finns Party likely made good on pollster predictions
of being the biggest gainer in Finland's local elections Sunday as the
fiercely-nationalistic party continued to gain popularity compared with
previous elections. The party surged past its 2008 municipal election result in gaining
12.3% of votes, according to preliminary data released by the nation's
justice ministry. The justice ministry numbers were based on 99.8% of
votes being counted.
Business Insider:
Zero Hedge:
CNBC:
Des Moines Register:
- The Des Moines Register endorsement: Mitt Romney offers a fresh economic vision. Ten months ago this newspaper endorsed former Massachusetts Gov. Mitt
Romney for the Republican nomination for president. An overarching
consideration was which of the party’s candidates could we see occupying
the White House, and there was no question that Romney was qualified
for the job. Now, in the closing days of the general election
campaign, the question is which of the two contenders deserves to be the
next president of the United States.
Reuters:
- Governments to debate 50 billion euro cut to EU budget. European Union
governments will debate a cut of at least 50 billion euros this week as
the starting point for negotiations on the bloc's proposed 1
trillion-euro ($1.3 trillion) long-term budget, a source familiar with
the issue said. The cut will be proposed in the
latest EU negotiating text on the bloc's spending plan for 2014-2020,
but is unlikely to be deep enough to satisfy Britain, Germany, France and other net budget contributors.
- Honda cuts FY profit forecast as China backlash hits. Japan's Honda Motor Co
cut its full-year net profit forecast by a fifth after sales in
China, the world's biggest autos market, were hit by a popular
backlash against Japanese products in a dispute over East China
Sea islands. The substantial cut makes it likely that rivals Toyota
Motor and Nissan Motor will follow suit when they report quarterly
earnings early next week.
Telegraph:
Frankfurter Allgemeine Zeitung:
- Munich Re is planning for all potential outcomes to the euro crisis, including an end to the common currency, citing an interview with CEO Nikolaus von Bomhard. Another Greek debt restructuring would cause markets to lose all confidence. Laws are needed in case a euro zone country goes bankrupt.
Financial News:
- China's
monetary authority is now "much less" inclined to cut lenders' reserve
requirement ratio because of growth in foreign currency positions
and M2 money supply, and persistent high levels of financing bolstered
by corporate bonds and trust lending, Financial News said in a
front-page commentary written by Xu Shaofeng, who wasn't identified.
China Securities Journal:
- China's economy doesn't currently have "significant" conditions for rebound as global quantitative easing limits the nation's monetary policy, China Securities Journal publishes a front page commentary written by Cao Yang, a reporter at the newspaper. Some important, traditional industries in China are still facing over-capacity, the commentary said.
China State Oceanic Administration:
- Chinese patrol boats are "monitoring and collecting evidence" of Japanese actions after finding Japan's patrol boats in waters near the disputed islands.
The News Tribe:
-
Al-Qaeda chief urges followers to kidnap westerners. Al-Qaeda leader Ayman
al-Zawahiri has urged his followers to kidnap western citizens in order
to liberate Qaeda inmates in U.S, Guantanamo Bay and other places. In a 58-minute video posted on Jihadi
websites, the terror outfit leader said that liberating Omar Abdul
Rahman, an Egyptian cleric jailed in the United States for his role in
the 1993 World Trade Center attack, and inmates at the US prison at
Guantanamo Bay was an “obligatory duty for every Muslim.” “I
call upon Muslims to capture citizens of the countries that wage wars
against Muslims,” he said. “Our captives or Sheikh Omar Abdul
Rahman will not be liberated except through force, for it is the only
language that they understand.” In that vein, he made a reference to
Warren Weinstein, a relief worker with USAID who was captured in Lahore,
Pakistan in August 2011. The al-Qaeda chief also focused his
homeland Egypt in speech by urging Egyptians to restart their revolution
to press for Islamic law.
Weekend Recommendations
Barron's:
- Made positive comments on (BKS) and (HY).
- Made negative comments on (GIS) and (MNST).
Night Trading
- Asian indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 123.0 +4.0 basis points.
- Asia Pacific Sovereign CDS Index 96.75 +3.25 basis points.
- FTSE-100 futures -.21%.
- S&P 500 futures -.42%.
- NASDAQ 100 futures -.40%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (BKW)/.14
- (RRGB)/.17
- (CRUS)/.71
- (FLS)/2.06
- (PCL)/.36
- (HTZ)/.61
- (PPS)/.62
- (APC)/.75
- (ADVS)/.25
- (JLL)/1.18
- (MAS)/.12
- (CNA)/.67
- (SUP)/.19
Economic Releases
8:30 am EST
- Personal Income for September is estimated to rise +.4% versus a +.1% gain in August.
- Personal Spending for September is estimated to rise +.6% versus a +.5% gain in August.
- The PCE Core for September is estimated to rise +.1% versus a +.1% gain in August.
10:30 am EST
- Dallas Fed Manufacturing Activity for October is estimated to rise to 0.0 versus -.9 in September.
Upcoming Splits
Other Potential Market Movers
- The Spain retail sales report and the Japan unemployment rate could also impact global trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and real estate
shares in the region. The Portfolio
is 25% net long heading into the week.
