Tuesday, October 15, 2013

Tuesday Watch

Evening Headlines 
Bloomberg:
  • Asian Stocks Rise Amid Signs U.S. May Broker Deal on Debt. Asian stocks rose, with the regional index heading for a five-month high, as Senate leaders said they’re optimistic they will forge a deal to reopen the U.S. government and avoid a breach of the debt limit this week. James Hardie Industries SE, a maker of building materials that gets about 70 percent of sales from the U.S., increased 1.5 percent in Sydney. Mazda Motor Corp. (7261) jumped 3.3 percent in Tokyo after Macquarie Group Ltd. and BNP Paribas raised ratings on the carmaker. Hankook Tire Co., South Korea’s No. 1 tiremaker, advance 1.8percent after announcing plans to build its first factory in the U.S. The MSCI Asia Pacific Index gained 0.5 percent to 141.57 as of 11:07 a.m. in Tokyo, with almost three shares rising for each that fell.
  • Rebar Little Changed as Investors Weigh Steel Output, Iron Ore. Steel reinforcement-bar futures in Shanghai were little changed as China’s steel output climbed and iron ore prices increased. Rebar for delivery in January on the Shanghai Futures Exchange was at 3,628 yuan ($594) a metric ton at 10:21 a.m. local time from 3,625 yuan yesterday.
  • Coal Slump Leaves Australia Port Half-Used, Bank Lenders at Risk. Australia & New Zealand Banking Group Ltd. (ANZ) and Westpac Banking Corp. are among lenders risking losses on $3 billion of loans backing a coal port in Australia that will be twice its required size. Wiggins Island Coal Export Terminal Pty, the group comprising the unfinished project’s owners, including Glencore Xstrata Plc (GLEN) and Wesfarmers Ltd. (WES), in 2011 borrowed the debt from 19 banks, according to data compiled by Bloomberg. When the port in the state of Queensland begins shipping in early 2015, only about half of its 27 million metric tons of initial annual export capacity will be used after a slump in coal demand, forecaster Wood Mackenzie Ltd. estimates. 
  • China Challenges CME to SGX With Iron-Ore Futures Contract. China’s Dalian Commodity Exchange will start trading the country’s first iron-ore futures for physical delivery this week, challenging index-backed contracts by CME Group Inc. and Singapore Exchange Ltd. (SGX) Trading will begin Oct. 18 after the securities regulator approved the plan last week, the bourse in the northeastern port city said in a statement on its website yesterday. Chinese steelmakers, the world’s biggest iron-ore buyers, earlier this year questioned the reliability of a price index provided by Platts that became a benchmark after producers including Vale SA (VALE) and Rio Tinto (RIO) Group scrapped annual contract price talks in 2010. China started its own spot-trading platform last year, introducing a weighted average daily price in March. 
  • S&P Subpoenas Federal Reserve Board as Part of U.S. Suit. McGraw Hill Financial Inc. (MHFI)’s Standard & Poor’s unit seeks information from the board of governors of the Federal Reserve to bolster its defense against U.S. claims it misled investors in mortgage-backed securities. The credit rating company said it served subpoenas on the Federal Reserve board as well as the Federal Open Market Committee and the Federal Reserve Bank of New York, according to a filing today in federal court in Santa Ana, California.
  • Fed Gets Bigger in Markets as QE Prompts New Tools. The Federal Reserve is getting more involved in debt markets as it tries to compensate for the impact of its almost $4 trillion balance sheet on short-term interest rates. Policy makers are testing a new tool intended to improve their control of near-term borrowing costs. The facility would allow banks, broker-dealers, money-market funds and some government-sponsored enterprises to lend the Fed unlimited amounts of cash overnight at a fixed rate in exchange for borrowing Treasuries in so-called reverse repo transactions.
  • Saudi Aramco Plans ‘Massive’ Spending to Extend Field Life. Saudi Arabia, the world’s largest crude exporter, is making “massive investments” as it seeks a production buffer to guard against swings in global oil prices while addressing a decline in output from its older fields. Saudi Arabian Oil Co., the state-owned producer known as Saudi Aramco, plans to maintain spare output capacity of more than 2 million barrels a day, according to Chief Executive Officer Khalid Al-Falih. The Dhahran-based company raised its annual capital budget tenfold to $40 billion over the last decade and, in the past two years, has adjusted its daily production by more than 1.5 million barrels, he said.
Wall Street Journal:
  • Senate Leaders in Striking Distance of a Deal. White House Meeting Delayed to Give Talks More Time to Progress. Top Senate leaders said they were within striking distance of an agreement Monday to reopen the federal government and defuse a looming debt crisis just days before the U.S. could run out of money to pay its bills.
Fox News:
MarketWatch.com:
  • Teradata(TDC) shares fall after outlook cut. Shares of Teradata fell 12% to $46.17 on heavy volume after the company said it now expects adjusted full-year earnings of $2.70 to $2.80 a share. Analysts surveyed by FactSet expect earnings of $2.85 a share.
CNBC:
  • Nobel prize winner warns of 'bubbly' home prices. One of three American economists who won the 2013 economics Nobel prize on Monday for research into market prices and asset bubbles expressed alarm at the rapid rise in global housing prices. Robert Shiller, who shared the 8 million Swedish crown ($1.25 million) prize with fellow laureates Eugene Fama and Lars Peter Hansen, said the U.S. Federal Reserve's economic stimulus and growing market speculation were creating a "bubbly" property boom.
Zero Hedge:
Business Insider:
Washington Post: 
  • NSA collects millions of e-mail address books globally. The National Security Agency is harvesting hundreds of millions of contact lists from personal e-mail and instant messaging accounts around the world, many of them belonging to Americans, according to senior intelligence officials and top secret documents provided by former NSA contractor Edward Snowden. The collection program, which has not been disclosed before, intercepts e-mail address books and “buddy lists” from instant messaging services as they move across global data links.
Reuters:
  • Brazil, worried over debt, to lend less to BNDES, states. Brazil will inject less money next year into the country's development bank BNDES, its leading source of long-term corporate loans, to focus more on infrastructure financing as concerns mount over public debt. The National Treasury has a target of phasing out annual capital injections into BNDES "within a few years," Finance Minister Guido Mantega said on Monday.
China Securities Journal:
  • China May Face Greater Inflation Pressure in 2014. China may face greater inflationary pressures next year if global economic recovery accelerates, according to a commentary published on its front page, written by its reporter Gu Xin.
  • China 2H Inflation May Face More Upward Pressure. China may face greater upward inflationary pressure in 2H, as compared with 1H, citing Hu Chi, researcher at the State-owned Assets Supervision and Administration Commission's research center.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 139.0 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 109.5 -.25 basis point. 
  • FTSE-100 futures +.56%.
  • S&P 500 futures +.09%.
  • NASDAQ 100 futures +.18%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (JBHT)/.78
  • (KO)/.53
  • (JNJ)/1.32
  • (SCHW)/.20
  • (OMC)/.81
  • (DPZ)/.52
  • (C)/1.04
  • (IBKR)/.33
  • (CSX)/.42
  • (YHOO)/.33
  • (INTC)/.53
  • (LLTC)/.45
Economic Releases
8:30 am EST
  • Empire Manufacturing for October is estimated to rise to 7.0 versus 6.29 in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Fisher speaking, Fed's Williams speaking, Fed's Dudley speaking, weekly retail sales reports, Germany ZEW Index, UK Inflation, (WMT) Investment Community Meeting and the (WWW) Investor Day could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by technology 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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