Monday, June 10, 2013

Monday Watch

Weekend Headlines 
  • Merkel Says Euro Nations Must Follow Germany’s Lead on Growth. Chancellor Angela Merkel said euro nations must follow Germany’s lead in tightening budgets and reshaping labor markets to return to growth as she seeks to stave off any crisis eruptions before elections in September. As European leaders struggle to stanch recession and unemployment, Merkel lauded Germany’s efforts to keep its economy stable through the crisis and said the euro area’s 17 member states must stick to a recipe of budget discipline and improving competitiveness so that growth can take hold
  • German Top Court Likely to Say ‘Yes, But’ to ECB Policy. Germany’s top court probably won’t intervene in the European Central Bank’s plan to buy bonds of crisis-torn countries, in line with previous cases involving the country’s integration with the European Union. The ECB’s Outright Monetary Transactions program and the European Stability Mechanism will be reviewed by the Federal Constitutional Court in Karlsruhe at hearings this week. While the judges may voice doubts about the central bank’s plans, the court won’t stop it, said Christoph Ohler, a law professor at Jena University.
  • La Dolce Vita Eludes Italian Students Found Unemployable. Young college graduates in Italy have among the highest unemployment rates in Europe, and those with jobs make only 9 percent more on average than those with high-school diplomas, compared with 37 percent in other industrialized countries. Italians also spend more time earning degrees and drop out at greater rates than their international peers.
  • Yen at 90 Seen by Options Losing Confidence in Abe: Currencies. Shinzo Abe is losing the confidence of the currency market, where traders are repudiating efforts by Japan's Prime Minister to end persistent deflation and revive the world's third-largest economy. Instead of continuing to push the yen lower in response to Abe's economic programs and the Bank of Japan's money-printing policies, traders have made it the best-performing major currency over the past month. Options show there's about an even chance it will gain to 90 per dollar by year-end, from as high as 95 last week and an almost five-year low of 103.74 on May 22. "We've been very skeptical of the rapid weakening in the yen," Robert Rennie, the Sydney-based chief currency strategist at Westpac Banking Corp., Australia's second-largest lender, said in a phone interview. "What Abenomics had done is it's changed expectations, I'm just not sure how quickly it can change reality," he said in reference to Abe's economic policies. 
  • China Export Growth Plummets Amid Fake-Shipment Crackdown. China’s trade, inflation and lending data for May all trailed estimates, signaling weaker global and domestic demand that will test the nation’s leaders’ resolve to forgo short-term stimulus for slower, more-sustainable growth. While the figures boost the case for easing monetary policy or approving more spending, the government’s room is limited by rising home prices, financial risks and overcapacity. May exports rose 1 percent from a year earlier, down from 14.7 percent in April, while imports dropped 0.3 percent from a year earlier. The median estimates of analysts were for 7.4 percent export growth and 6.6 percent import gains. The $20.4 billion trade surplus compared with forecasts for $20 billion. “This shows the real state of the Chinese export situation,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. The data give a “pretty depressed” picture, with weak external demand and a yuan that has appreciated substantially against a trade-weighted basket of currencies, said Shen, who previously worked at the European Central Bank.
  • Asian Stocks Rise on U.S. Jobs Data; Japan Shares Rally. Asian stocks rose, with the regional benchmark index rebounding from the biggest weekly drop in a year, after a report showed the U.S. added more workers than expected. Japanese shares surged after a three-week, $600 billion rout. The MSCI Asia Pacific Index added 1.2 percent to 131.92 as of 11:53 a.m. in Tokyo, the biggest gain since May 20.
  • Rubber Declines to 7-Week Low as China’s Auto Sales Growth Slows. Rubber declined to a seven-week low as China’s passenger-vehicle sales rose at a slower pace in May, raising concern that demand may weaken from the world’s largest consumer of the commodity used in tires. The contract for delivery in November lost as much as 1.3 percent to 242.9 yen a kilogram ($2,479 a metric ton), the lowest level since April 18. Futures traded at 245.9 yen on the Tokyo Commodity Exchange at 12:01 p.m., extending this year’s losses to 19 percent
  • Copper Declines for Third Day on Demand Concern in China, U.S. Copper slumped for a third day as China’s trade and industrial production in May trailed estimates and on prospects that the Federal Reserve will scale back stimulus. China and the U.S. are the top consumers of metals. The metal for delivery in three months on the London Metal Exchange fell as much as 1.1 percent to $7,151.25 a metric ton, the lowest price since May 16, and was at $7,157.25 at 10:24 a.m. in Tokyo. Prices lost 1.1 percent last week. Futures for delivery in July on the Comex slid 1.1 percent to $3.2325 per pound.
  • Gold Bull Bets Reach Seven-Week High Before Retreat: Commodities. Hedge funds increased wagers on a gold rally to the highest in seven weeks before a report showing the U.S. added more jobs than forecast spurred the biggest retreat in prices since April. Speculators raised their net-long position by 19 percent to 57,113 futures and options by June 4, U.S. Commodity Futures Trading Commission data show. The holdings surged 60 percent in two weeks, the most since March, as short bets contracted. Net-bullish wagers across 18 U.S.-traded commodities slid 3.3 percent as investors became more bearish on sugar and coffee. 
  • Syrian Opposition Says ‘Door Shut’ on Peaceful Solution to War. The Syrian opposition ruled out “any peaceful solution” to end the two-year conflict in the nation after government forces backed by Lebanon’s Hezbollah ousted rebels from al-Qusair. “What is happening now in Syria has shut the door on any peaceful solution,” George Sabra, acting leader of the Syrian National Coalition, said today from Istanbul in a broadcast shown by Al Jazeera satellite television. “I call upon the Syrian people to resist invaders with all means.”
Wall Street Journal: 
  • Afghan Militants Attack Near Coalition Base. Afghan insurgents Monday morning launched an attack in the vicinity of the U.S.-led coalition's base at the Kabul airport, officials said, waking the country's capital at dawn with the sound of blasts and gunfire, and halting air traffic. A number of suicide bombers took over a building under construction near the airport and were launching rocket-propelled grenades from it, Kabul police and coalition spokespeople said.
  • Housing's Up, but Is Foundation Sound? The housing-market recovery is here but there's a growing debate among bulls and bears over how long it will last and how strong it will become, with both groups pointing to the same data to make their case: U.S. demographics.
  • Energy Deal Maker Eyes Big Slice of Pie. Now that he is pitching Wall Street on his new energy company, Aubrey McClendon is asking for a lot of money, an unusually large slice of profits and a high degree of control over his business. 
  • The sequester may start to show in data. Retail sales, industrial production data to be in focus. So far, signs that sequestration and higher tax rates have damaged the economy have been few and far between. 
Zero Hedge:
Business Insider:
  • A Lot Of People Are Freaking Out Because They Think Microsoft's(MSFT) New Xbox Is Going To Spy On Them. Microsoft's new gaming console, the Xbox One, will come with a motion sensor/camera accessory called the Kinect that will be used for video chats and controlling games with your body. But the device will always be on by default, and that has a lot of people concerned, especially after yesterday's report that Microsoft and other big tech companies are working with the NSA and providing user data to the government through the scary-sounding PRISM program. 
Financial Times: 
Euro am Sonntag:
  • Rising Electricity Prices Jeopardize German Jobs. Germany risks losing more jobs than were created by renewable energy industry, citing an interview with EON CEO Johannes Teyssen. German electricity prices are "exploding" compared with China, U.S. If prices continue to rise, many jobs are in danger. Modern gas-fired power plants can't operate profitably due to distortion from subsidized renewables.
Der Spiegel: 
  • IMF Wants to Get Next Greek Haircut Under Way. The IMF can only participate in further rescue programs for Greece if financing for the country has been secured for the next 12 months. New haircut necessary amid EU4.6 billion funding shortfall. Germany's exposure to Greek debt is EU15 billion in KfW loans, plus EU35 billion as the country's contribution to various stability mechanisms. Germany many not be keen on the discussion ahead of federal elections in September as it would indicate taxpayers' money is lots.
Le Figaro:
  • Chad's Deby Says Libya Without Army Is Poised to Explode. Chad's President Idriss Deby said in an interview that Libya is increasingly controlled by brigades of jihadists and Islamist militants as the country has no army, no institutions, and no civil society. Jihadists chased out of Mali are building brigades and training camps in Tripoli and other parts of Libya, Deby said.
Weekend Recommendations
  • Bearish commentary on (TSLA).
Night Trading
  • Asian indices are unch. to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 126.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 105.25 +.75 basis point.
  • FTSE-100 futures -.27%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.21%.
Morning Preview Links

Earnings of Note

  • (BNNY)/.28
  • (NAV)/-1.20
  • (PBY)/.09 
  • (HNZ)/.82
Economic Releases
  • None of note
Upcoming Splits
  • (WAB) 2-for-1
Other Potential Market Movers
  • The Fed's Bullard speaking, China Trade/Industrial Profits/Retail Sales/Yuan Loan data reports, Japan GDP report, Italy GDP report, (TXN) Mid-Quarter Update and the (MCD) May Same-Store-Sales report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and technology 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 week.

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