Wednesday, April 24, 2013

Wednesday Watch

Evening Headlines 
  • Napolitano Set to Decide on Mandate for Italian Premiership. Italian President Giorgio Napolitano is poised to announce his selection for prime minister after completing a round of talks with parliamentary leaders. “We will adhere to the choices made by the president,” Enrico Letta, a representative of Italy’s Democratic Party, said late yesterday after meeting Napolitano at the presidential palace in Rome. An announcement is due as soon as today, the president’s office said. Napolitano’s pick will have to unite the disparate forces in Italy’s divided parliament to give the country a government after an eight-week deadlock. This will be Napolitano’s second attempt at resolving the impasse after his first choice, ex- Democratic Party head Pier Luigi Bersani, failed last month to win support from a majority of lawmakers.
  • China Stocks Rise First Time in Three Days; Phone Shares Advance. Chinese stocks rose after valuations on the benchmark index approached the lowest level since Dec. 24, as telecommunication and technology companies advanced. Chengdu Dr Peng Telecom & Media Group Co. jumped to the highest level in two years. Zhejiang Dahua Technology Co. climbed 4.9 percent to a record. Western Mining Co. rebounded from a four-month low after first-quarter net income more than doubled. Liquor-maker Sichuan Swellfun Co. (600779) lost 2.3 percent, leading declines by consumer staples producers. The Shanghai Composite Index (SHCOMP) added 0.7 percent to 2,199.41 at the 11:30 a.m. local-time break. The measure plunged 2.6 percent yesterday as a gauge of manufacturing missed estimates and trades at 12 times reported earnings.
  • Rebar Trades Near Lowest in Four Months on Inventory Concerns. Steel reinforcement-bar futures in Shanghai fell for a third day to the lowest in more than four months as investors remained concerned about high inventories. The contract for October delivery on the Shanghai Futures Exchange declined as much as 0.5 percent to 3,581 yuan ($580) a metric ton, the lowest level since Dec. 5, and was at 3,599 at 10:14 a.m. local time.
Wall Street Journal: 
  • Inside Merkel's Bet on the Euro's Future. Angela Merkel listened in Vatican City as Pope Francis, in his inaugural Mass last month, called on the powerful to care for the weak. A few hours later, in her limousine to the airport, the German chancellor took a phone call from the desperate president of Cyprus, Nicos Anastasiades. "I need more solidarity," he pleaded, according to officials familiar with the March 19 conversation. His parliament was about to reject a euro-zone bailout deal. His tiny country faced ruin. "I won't negotiate with you," Ms. Merkel replied. "You need to talk to the troika"—the International Monetary Fund, European Commission and European Central Bank. It was a typical Merkel move: trying to play down Germany's dominant role in reshaping Europe's currency union. Few in Europe believe it. However lightly Ms. Merkel treads, German strength in Europe is raising tensions. Many Greeks and Spaniards blame Berlin's austerity diktat for turning their countries' financial crises into economic depressions. On Monday, European Commission President José Manuel Barroso warned that German-backed austerity policies need to be softened because they lack sufficient "political and social support" in hard-hit countries. Germany's finance ministry retorted Tuesday that deficit-cutting is the only way to rebuild investors' trust in the euro zone. This account of Ms. Merkel's handling of Europe's crisis, based on interviews with 17 European policy makers, shows Cyprus's bailout flowing directly from principles that will continue to guide German leadership in Europe. In September, Ms. Merkel is expected to win a third term as chancellor. That means her agenda will dominate Europe's crisis response for years. The euro's survival hinges to a considerable extent on whether her strategy works.
  • Twitter Hoax Sparks Swift Stock SwoonA short-lived hoax on Twitter briefly erased $200 billion of value from U.S. stock markets on Tuesday, underscoring the vulnerability of financial markets to computerized trading programs that buy and sell shares without human intervention.
Zero Hedge: 
Business Insider: 
New York Times:
The Times:
  • Europe’s tax on trading ‘will damage bond markets’. Serious doubts have been raised over Europe’s proposed tax on financial transactions after civil servants from participating member states suggested that it could drive up government borrowing costs and damage the functioning of the bond market.
The Guardian:
Australian Financial Review:
  • S&P Warns of Risk to AAA Rating. Standard & Poor’s has warned that Australia’s AAA rating could be vulnerable in five years if the credit ratings agency doubts the government’s commitment to restoring the surplus, national debt keeps rising and the economy fails to self-correct.
  • China Communist Party's Central Military Commission on Jan. 14 approved its navy to point its artillery and fire-control radar in the direction of Japan Self-Defense Force ships, citing several people with knowledge of the matter. China approved the measures as a method to threaten Japan ships; timing of provocation was left up to captains of navy vessels.
Shanghai Securities News: 
  • China's economic growth will fall to below 7.5% in 2Q, citing Zhang Ping, deputy head of the Chinese Academy of Social Sciences' economic institute.
China Securities Journal:
  • China's eastern city of Hangzhou will likely start a property tax trial next month, citing people familiar with the matter. Shenzhen and Beijing have submitted property tax plans to the central government.
Evening Recommendations  
  • Rated (ARO) Positive, target $18.
Night Trading
  • Asian equity indices are +.50% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 111.0 -1.5 basis points.
  • Asia Pacific Sovereign CDS Index 89.25 -.75 basis point.
  • FTSE-100 futures +.27%.
  • S&P 500 futures +.10%.
  • NASDAQ 100 futures +.06%.
Morning Preview Links

Earnings of Note

  • (PX)/1.39
  • (PG)/.96
  • (GLW)/.24
  • (NOC)/1.73
  • (WYN)/.67
  • (WLP)/2.38
  • (TMO)/1.29
  • (WHR)/1.90
  • (GRA)/.80
  • (LLY)/1.05
  • (EMC)/.39
  • (F)/.37
  • (ROK)/1.29
  • (S)/-.34
  • (OC)/.19
  • (BA)/1.49
  • (HES)/1.58
  • (SYK)/1.01
  • (QCOM)/1.17
  • (CCI)/.04
  • (TSCO)/.62
  • (FFIV)/1.06
  • (CAKE)/.42
  • (AFL)/1.62
  • (COG)/1.24
  • (WDC)/1.77
  • (LRCX)/.37
  • (RYL)/.28
  • (AKAM)/.45
  • (CLF)/.33
  • (FLS)/1.94
  • (GD)/1.50
  • (XLNX)/.45
Economic Releases
8:30 am EST
  • Durable Goods Orders for March are estimated to fall -3.0% versus a +5.7% gain in February.
  • Durables Ex Transports for March are estimated to rise +.5% versus a -.5% decline in February.
  • Cap Goods Orders Non-defense Ex Air for March are estimated to rise +.3% versus a -2.7% decline in February. 
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a -1,233,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -600,000 barrels versus a -633,000 barrel decline the prior week. Distillate inventories are estimated to rise by +500,000 barrels versus a +2,364,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.5% versus a -.5% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The German/Italian 10Y  auctions, 5Y T-Note auction, Germany IFO Index, Australian CPI and the weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by commodity and automaker shares in the region. I expect US stocks to open mixed and weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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