Friday, September 06, 2013

Friday Watch

Evening Headlines 
Bloomberg: 
  • Obama Seeks Support for Syria Strikes as Timeline Grows. A week after he surprised his national security advisers by deciding to seek authorization from Congress, President Barack Obama’s path to military strikes against Syria isn’t getting any smoother. The outrage that Obama and Secretary of State John Kerry expressed over an Aug. 21 nerve gas attack they blamed on the Syrian regime, an action that crossed the president’s “red line,” hasn’t brought a groundswell of support from lawmakers and the U.S. public. Few international allies have said they’re ready to join in air strikes, and Russia and China say they are unswayed by the U.S. assertions blaming Syrian President Bashar al-Assad for the attack that killed more than 1,400 people, many of them women and children, near Damascus.
  • India’s Middle Class Hit Hard as Rupee Pushes Up Prices. Mumbai taxi driver Saiyad Ahmed Ali has cut back on fruit and fish, from about twice weekly to once a month these days as prices surge. He’ll tell you the culprit: India’s weakening currency. “The rupee’s value has been falling, gas is getting more expensive and fewer people want to take cabs,” said Ali, who has seen his daily income fall by about a third, to less than 400 rupees ($6.05) after the costs of running his taxi. “Life here in the big city has become more difficult.” A 17 percent plunge in the rupee this year has driven up the cost of imports such as petroleum and chemicals used in packaging. As a result, companies have raised prices for consumer staples like cooking oil and soap to compensate for imported raw-material and transport costs. 
  • Singh Fails to Convince S&P as Default Risk Surges: India Credit. India's default risk is rising the most among emerging markets as Prime Minister Manmohan Singh's government bucks a regional trend of budget tightening, raising the prospect of a junk debt rating as the rupee plunges. The cost to insure debt of State Bank of India, considered a proxy for the sovereign, surged 157 basis points in three months, according to CMA Credit-default swaps protecting government bonds climbed 108 basis points for Indonesia and 80 for Turkey.
  • China to Finish Local Government Debt Audit Ahead of Key Meeting. China will this month complete an audit of local-government debt to assess risks to its financial system, ahead of a Communist Party meeting in November to set economic policy, a government official said. China’s finance ministry will wrap up its first full audit in more than two years in September and release the results to in October, Vice Finance Minister Zhu Guangyao said yesterday at a briefing during the Group of 20 Summit in St. Petersburg, Russia. 
  • Asian Stocks Snap Six-Day Rise Ahead of U.S. Jobs Report. Asian stocks dropped, snapping a six-day advance and paring the regional benchmark index’s biggest weekly gain since July, as investors await the monthly American jobs report. Sumitomo Realty & Development Co. sank 2 percent as Japanese developers retreated ahead of a decision this weekend on whether Tokyo will host the 2020 Olympics. SoftBank Corp. (9984) fell 2.2 percent after competitor NTT DoCoMo Inc., Japan’s largest mobile-phone carrier, was said to be near an agreement to offer Apple Inc.’s iPhone. BBMG Corp., a cement company, rose 3.2 percent in Hong Kong after announcing a share sale. The MSCI Asia Pacific Index fell 0.1 percent to 133.08 as of 11:41 a.m. in Hong Kong, on course to rise 2.3 percent this week for the biggest advance since the week through July 12.
  • Rebar Declines to One-Month Low on Iron Ore Price, Mill Output. Steel reinforcement-bar futures in Shanghai fell to the lowest in a month as a drop in iron ore prices and rising output from mills encouraged selling. Rebar for January delivery on the Shanghai Futures Exchange fell as much as 0.6 percent to 3,711 yuan ($606) a metric ton, the lowest level for a most-active contract since Aug. 7. Futures traded at 3,722 yuan at 10:46 a.m. local time and have declined 0.8 percent this week
  • Rubber Drops, Paring Weekly Rally, as Yen Rebound Reduces Appeal. Rubber futures declined in Tokyo as the Japanese currency rebounded against the dollar, reducing the appeal of yen-based contracts, and as concern grew that the Syrian conflict may harm the global economic recovery. Rubber for delivery in February lost as much as 1 percent to 280.8 yen a kilogram ($2,814 a metric ton) before trading at 282.1 yen on the Tokyo Commodity Exchange.
  • Haunted Greeks Sell Real Estate EBay-Style to Evict Debt Specter. A legend that has swirled around the dilapidated mansion on Smolenski Street in Athens is that the ghost of the previous owner deters prospective buyers by moaning: “The house is mine.” The Greek government refuses to be spooked. The protected two-story mansion and tower, replete with palm trees in the overgrown gardens, will be sold on Sept. 17 to the highest bidder in an EBay-style Internet auction. Greece is trying to dispel criticism it’s not doing enough to sell real estate pledged as part of its 240 billion-euro ($315 billion) rescue. “It’s literally haunting the Greek budget,” Andreas Taprantzis, executive director for real estate at the Hellenic Republic Asset Development Fund, said in an interview. It “generates zero income, not even taxes,” he said.
  • Obama Seen Delaying Fed Nomination Until Syria Issue Resolved. President Barack Obama will likely wait to announce his nominee to lead the U.S. Federal Reserve until after Congress votes on military action in Syria and probably until the immediate outcome of a strike is clear, according to several people close to the White House. “Syria right now has kind of paralyzed the town,” said David Plouffe, a former senior Obama adviser. “They’ll wait until the dust clears.” 
  • Apple(AAPL) Said to Near Deal With Japan’s DoCoMo to Sell IPhone. Apple Inc. (AAPL), the world’s most-valuable company, is near a final agreement to offer its iPhone through the largest mobile carrier in Japan, NTT DoCoMo Inc. (9437), according to people familiar with the situation. DoCoMo may begin offering the iPhone later this year, said the people, who asked not to be identified because the information is private. Apple will debut new iPhones at a Sept. 10 event at its headquarters in Cupertino, California, a person familiar with the matter has said.
Wall Street Journal:  
  • Iran Plots Revenge, U.S. Says. Officials Say Intercepted Message to Militants Orders Reprisals in Iraq if Syria Hit. The U.S. has intercepted an order from Iran to militants in Iraq to attack the U.S. Embassy and other American interests in Baghdad in the event of a strike on Syria, officials said, amid an expanding array of reprisal threats across the region. Military officials have been trying to predict the range of possible responses from Syria, Iran and their allies. U.S. officials said they are on alert for Iran's fleet of small, fast boats in the Persian Gulf, where American warships are positioned. U.S. officials also fear Hezbollah could attack the U.S. Embassy in Beirut. While the U.S. has moved military resources in the region for a possible strike, it has other assets in the area that would be ready to respond to any reprisals by Syria, Iran or its allies.
  • EU Struggles to Save Iran Sanctions. Britain, France and Germany are struggling to craft measures to stop successful legal challenges to sanctions against Iran from undermining the West's efforts to combat Tehran's nuclear program. On Friday, a European Union court will issue decisions on a raft of cases brought by Iranian banks and other firms that say they were unfairly placed on the 28-nation bloc's sanctions list. Legal experts say at least some of the challenges are likely to succeed. The U.S. is pressing for a clear resolution soon—as are some European firms that, diplomats say, fear they could fall foul of U.S. law and face penalties if they conduct business with delisted Iranian firms.
  • Financial Crisis Anniversary: For Corporations and Investors, Debt Makes a Comeback. Five years after excessive debt propelled a housing-market collapse into a financial crisis and recession, similar bets are being placed across the U.S. The crisis ignited on Sept. 15, 2008, when investment bank Lehman Brothers collapsed under a mountain of highly leveraged mortgage debt. Despite a government bailout of financial firms that totaled hundreds of billions of dollars, 8.8 million jobs and $19.2 trillion in household wealth were lost. The conventional wisdom has been that Americans learned an important lesson—that you shouldn't take a loan just because one is available. Banks, companies and consumers aggressively dialed back borrowing in what was dubbed "the great deleveraging." But some experts say the deleveraging is over and releveraging is well under way, with corporate borrowers taking new loans hand over fist from investors hungry for higher returns.
  • Apple(AAPL) Tests iPhone Screens as Large as Six Inches. As Apple Inc. prepares to unveil both a new high-end iPhone and a cheaper version for the first time next week, it is already working on something bigger. The electronics giant has begun evaluating a plan to offer iPhones with screens ranging from 4.8 inches to as high as 6 inches, people familiar with the matter say. That would be a sizable leap from the 4-inch screen of the iPhone 5 released last year, and, at the upper end, would be one of the largest on the market. 
  • Navigating ObamaCare Outrage. How dare anyone ask anything about the law's implementation. With ObamaCare scheduled to launch on October 1, Democrats seem more than a little anxious about their ability to execute. That's the only fathomable explanation for their nervous breakdown over a routine House inquiry. The Affordable Care Act is paying for "navigators," or non-government groups that received federal dollars in August to help people figure out and enroll for subsidies. That such a program even exists explains a lot about the complexity of the new entitlement.
Fox News: 
  • Tale of Two St. Petes: As Obama visits Russia, US voters dubious on Syria strike. While President Obama was in St. Petersburg, Russia, on Thursday, trying to sway skittish allies to back a military strike on Syria, thousands of miles away in St. Petersburg, Fla., residents were leaving little doubt that Obama has a lot of work to do if he's to gain their support for military action. Lawmakers in and around the coastal city say their constituents are almost uniformly opposed, or at least cautious, on a strike. Rep. Kathy Castor, D-Fla., who represents the city, wrote to Obama saying her neighbors are "extremely wary of military action." Republican Rep. Rich Nugent, who represents a nearby district, told FoxNews.com his office has gotten 1,800 calls and emails opposing action in Syria, and only 17 in favor. "You usually don't see any kind of split like that," Nugent said. The overriding concern, he said, is that America could get drawn deeper into the fight
CNBC:
Zero Hedge: 
Business Insider: 
New York Times: 
  • Pentagon Is Ordered to Expand Potential Targets in Syria With a Focus on Forces. President Obama has directed the Pentagon to develop an expanded list of potential targets in Syria in response to intelligence suggesting that the government of President Bashar al-Assad has been moving troops and equipment used to employ chemical weapons while Congress debates whether to authorize military action.
Washington Post:
  • Turnover at Federal Reserve adds uncertainty to interest rate and QE3 promises. The Federal Reserve is facing significant turnover among top officials at a time when it is trying to craft a long-term strategy for winding down its support for the nation’s economy. The looming departure of Fed Chairman Ben S. Bernanke when his term ends in January has garnered the most attention on Wall Street and in Washington. But as much as half of the central bank’s powerful policy-setting committee could also leave next year — making it the biggest transition at the Fed since before the recession.
Reuters: 
Financial Times: 
  • Europe urges China to cede business control. European business representatives have accused Chinese regulators of unfairly targeting foreign companies in a series of recent corruption and monopoly investigations. Davide Cucino, president of the 1,700-member EU Chamber of Commerce in China, on Thursday called for “a vast ceding of political control over the business environment” in China, saying that market forces would only be strengthened if the government stepped back from its “over-dominant role”.
Evening Recommendations 
CSFB:
  • Upgraded (KEY) to Outperform, target $14. 
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 155.0 + basis point.
  • Asia Pacific Sovereign CDS Index 125.75 -3.0 basis points.
  • FTSE-100 futures +.25%.
  • S&P 500 futures -.03%.
  • NASDAQ 100 futures -.03%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (LAYN)/-.39
  • (MFRM)/.51
  • (UTIW)/.14
Economic Releases
8:30 am EST 
  • The Change in Non-Farm Payrolls for August is estimated to rise to 180K versus 162K in July.
  • The Unemployment Rate for August is estimated at 7.4% versus 7.4% in July.
  • Average Hourly Earnings for August are estimated to rise +.2% versus a -.1% decline in July.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's George speaking, Fed's Evans speaking and the German Industrial/Trade data could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

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