Tuesday, April 09, 2013

Tuesday Watch

Evening Headlines 
  • Developing Asia Rebound Faces Risk From Capital Flows, ADB Says. Developing Asia’s growth recovery faces the risk of asset bubbles from rising capital inflows, the Asian Development Bank said. Gross domestic product will increase 6.6 percent in 2013 and 6.7 percent next year, the Manila-based lender said in its Asian Development Outlook 2013 released today. Consumer prices will rise 4 percent in 2013 and 4.2 percent next year, it said.
  • China Failed Mining Deals Top $45 Billion on Hanlong Bungle. Sichuan Hanlong Group’s botched $1.2 billion bid for Australia’s Sundance Resources Ltd. (SDL) brings the value of China’s recent failed mining deals to $45 billion, a record that’s prompted stricter Chinese scrutiny of acquisitions. Chinese companies attempted $107 billion worth of mining takeovers over the past five years, with about $45 billion, or 42 percent by value, of deals ending in failure. Of $562 billion of deals proposed globally in the same period, $180 billion, or 32 percent, didn’t proceed, according to data compiled by Bloomberg.
  • Rogers Says North Korea’s Kim Likely to Cause ‘Skirmish’. North Korea will probably carry out a small military attack in the region so the country’s leader, Kim Jong Un, can brandish his power, the chairman of the U.S. House intelligence panel said today. “I do think there will be some small skirmish before this is over,” Representative Mike Rogers, a Michigan Republican, said in an interview at Bloomberg News headquarters in New York. North Korea has threatened to carry out pre-emptive nuclear strikes against the U.S. and South Korea, a move that escalated tensions in the region and prompted calls for dialogue. “I almost think they are looking for some small engagement so that he can brandish his credentials with the military,” Rogers said. He called Kim’s behavior “brazen” and said the new dictator is surrounded by “hardliners.” 
  • North Korea Acts a Clear Threat, U.S. Commander to Tell Congress. North Korea’s development of nuclear weapons and long-range missiles poses a “direct threat” to the U.S. and its allies, a top U.S. military commander plans to tell Congress today amid rising tensions on the Korean peninsula. The situation, fanned by hostile rhetoric from dictator Kim Jong Un, “creates an environment marked by the potential for miscalculation” and military escalation, Admiral Samuel Locklear, the head of the U.S. Pacific Command, said in prepared testimony for a Senate Armed Services Committee hearing. Efforts by Kim’s regime to build and test nuclear weapons and ballistic missiles violate United Nations Security Council resolutions and “represent a clear and direct threat to U.S. national security and regional peace and stability,” Locklear said in his testimony. 
  • Bernanke Says Interest on Reserves Would Be Main Tightening Tool. Federal Reserve Chairman Ben S. Bernanke said the Fed will raise the interest rate on excess reserves as its primary tool for tightening monetary policy rather than selling assets from its balance sheet. “The principal tool that we contemplate is the interest rate paid on excess reserves,” Bernanke said today in response to audience questions at a conference in Stone Mountain, Georgia. During a tightening, money market rates will probably stay close to the interest rate on excess reserves, he said.
  • J.C. Penney(JCP) Ousts CEO Johnson, Brings Back Ullman. J.C. Penney Co. ousted Chief Executive Officer Ron Johnson and reinstated his predecessor, Myron E. Ullman III, as the department-store chain works to rebound from its worst sales year in more than two decades. The shares slid in late trading.
Wall Street Journal: 
  • China's Xi Says Fast Growth Over. Chinese President Xi Jinping said China's days of breakneck growth are over as the world's No. 2 economy tries to balance expansion with sustainability and increasing environmental awareness. Speaking before business leaders at the Boao Forum for Asia in southern China on Monday, Mr. Xi said "it's not impossible to grow faster," but added, "we don't want to grow too fast." "I don't think China can sustain super-high or ultra-high-speed growth," he said, citing the need to balance economic growth with other issues. He said China's slowdown last year to 7.8% economic growth is "partially due to our efforts to control the speed of growth."
Fox News: 
  • As support for gun bill filibuster grows, Obama says backers trying to use 'political stunts'. The White House lashed out Monday at Republican lawmakers threatening to filibuster gun control legislation in the Senate, accusing them of trying to pull “political stunts” and "hide" behind procedural maneuvers -- as support for the filibuster continued to grow. Sen. Mike Lee, R-Utah, announced early Monday that 13 senators had signed a letter to Majority Leader Harry Reid threatening to oppose "any legislation that would infringe on the American people's constitutional right to bear arms."
Zero Hedge: 
Business Insider: 
New York Times:
  • Exchanges Are Moving to Curb Private Trades. The chief executives of the three largest stock exchanges are joining forces for the first time to push regulators to rein in the increasing amount of trading that is moving off public exchanges and onto platforms like so-called dark pools. The leaders of the New York Stock Exchange, Nasdaq and BATS Global Markets, the third largest exchange operator, are planning to meet on Tuesday with officials of the Securities and Exchange Commission, according to people briefed on the meeting.
  • N.Koreans don't show for work at Kaesong factory park. North Korean labourers did not show up for work on Tuesday at a factory complex operated with South Korea, companies with operations there said, effectively shutting down the zone for the first time since it began shipments in 2004.
    Pyongyang's decision to halt work at the Kaesong industrial park coincided with speculation it would carry out a missile launch, or even another nuclear test, in what has become one of the worst periods of tension on the peninsula since the end of the Korean War in 1953.
  • GM(GM) cuts S.Korean output due to weak Chevy sales in Europe. General Motors Co plans to deepen cuts to output at one of its South Korean plants in April to cope with lacklustre sales in Europe, a company official said on Tuesday. GM's South Korean unit will idle its plant in the southwestern city of Gunsan for nine days this month, up from six days in March, the official said. 
  • U.S. watchdog subpoenas swaps association over benchmark. The top U.S. derivatives regulator is probing a widely used benchmark for swaps, the trade body overseeing the rate said, dealing a further blow to the market after the sprawling Libor probe. The Commodity Futures Trading Commission (CFTC) has subpoenaed the International Swaps and Derivatives Association (ISDA) over its ISDAfix benchmark, widely used to anchor market rates, a spokeswoman for ISDA said. Bloomberg reported on Monday that the CFTC was investigating derivatives broker ICAP Plc and as many as 15 banks in a probe into the possible manipulation of the benchmark.
  • Alcoa(AA) profit rises, but price concerns linger. Alcoa Inc, the largest U.S. aluminum producer, reported a higher quarterly profit on Monday thanks in part to strength at its raw materials segment, but lower-than-expected revenue and an uncertain outlook dragged down the company's share price. Stubbornly low aluminum prices have weighed on the company's business of mining bauxite, refining it into alumina and smelting alumina to produce aluminum.
  • New Medicare cuts threaten U.S. non-profit hospitals -Moody's. Not-for-profit U.S. hospitals began confronting another threat to their shaky finances last week with the start of reductions to Medicare that are included in the universal federal spending cuts known as sequestration, Moody's Investors Service said on Monday.
  • North Korea May Fire Missile as Soon as April 10. North Korea told British, Russian, and some other embassies in Pyongyang on April 5 it may fire missile over Japan to the Pacific Ocean side as soon as tomorrow, citing people familiar with the situation.
Japan Daily Press:
  • Japan deploys rockets in Tokyo, readies to shoot down North Korean missiles. Two Patriot Advanced Capability-3 surface-to-air missile launchers have been deployed to the defence ministry in Tokyo in preparation for any North Korean attack. The government has authorized Japan’s armed forces to shoot down any missile that will be heading towards the territory. These are part of Japan’s defense preparations as North Korea continues to make threats towards South Korea, the United States and its allies in the region.
China Securities Journal:
  • Chinese first-tier cities including Shanghai, Guangzhou and Shenzhen are expected to raise down payment requirements for second homes, following Beijing, citing people familiar with the situation.
  • China's Polysilicon Oversupply to Last 1-2 Years. Supplies in the domestic market are expected to increase because of rising output by Chinese makers following Chinese anti-dumping and anti-subsidy measures on foreign products, citing a report from the country's silicon association.
  • China Iron Ore Prices to Fall on Oversupply. Iron ore prices are expected to fall because oversupplies in steel and raw material markets will continue, citing a report from the China Iron and Steel Association.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 118.0 -3.0 basis points.
  • Asia Pacific Sovereign CDS Index 96.5 -.75 basis point.
  • FTSE-100 futures +.69%.
  • S&P 500 futures +.12%.
  • NASDAQ 100 futures +.21%.
Morning Preview Links

Earnings of Note

  • (PSMT)/.77
Economic Releases
7:30 am EST
  • The NFIB Small Business Optimism Index for March is estimated to fall to 89.8 versus 90.8 in February.
10:00 am EST
  • Wholesale Inventories for February are estimated to rise +.5% versus a +1.2% gain in January.
  • JOLTs Job Openings for February are estimated to rise to 3740 versus 3693 in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Lacker speaking, Fed's Lockhart speaking, Eurozone Trade data, 3Y T-Note auction, weekly retail sales reports and the (FSLR) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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