Tuesday, December 10, 2013

Tuesday Watch

Evening Headlines
  • Asian Hedge Funds as Much as 42% Cheaper to Run, Survey Says. Running a hedge fund in the Asia-Pacific region can be as much as 42 percent cheaper than in the U.S. and Europe, helped by lower-than-average compensation, according to a survey by Citigroup Inc. (C) Small funds started in the region struggle to achieve profitability and expand assets, the fourth-largest U.S. bank cautioned. Ninety-five, or 57 percent, of the 167 regional equity long-short hedge funds which began trading with less than $50 million still manage less than that amount after an average of 5.3 years in existence, it added, citing data from Singapore-based Eurekahedge Pte. 
  • Asian Stock Index Swings Between Gains and Losses. Asian stocks swung between gains and losses after the biggest rally in three weeks, as investors await data on Chinese industrial production. Telecommunication and retail shares led declines while energy companies rose. Shimizu Corp. (1803) gained 3 percent in Tokyo after Credit Suisse Group AG analysts advised buying shares of the building contractor. QBE Insurance Group Ltd. (QBE) led declines on the regional benchmark index, dropping a second day after Australia’s largest insurer by market value forecast an unexpected loss of about $250 million. Doosan Infracore Co. (042670) sank 2.1 percent in Seoul as the construction-equipment manufacturer plans to start selling 40 million new shares. The MSCI Asia Pacific Index slid 0.1 percent to 140.44 at 12:24 p.m. in Hong Kong, having risen as much as 0.1 percent earlier.
  • Rebar Falls From Near Two-Month High as Winter Demand Seen Weak. Steel reinforcement-bar futures in Shanghai fell for the first time in three days as a rally to the highest in almost two months spurred some selling amid concern that consumption will weaken in winter. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, declined as much as 0.4 percent to 3,708 yuan ($611) a metric ton before trading at 3,714 yuan at 10:59 a.m. local time.
  • Wall Street Said to Win Softer Volcker Rule CEO Certification. In a victory for Wall Street, regulators won’t require chief executives to guarantee that their firms are complying with the Volcker rule, only that they have set up proper procedures to assure the proprietary trading ban is being followed, said people familiar with the rule. The wording will be a relief to large bank executives who were concerned that they would have to personally guarantee that their firms were in compliance with the rule. Instead, they will just have to sign off on having policies and systems in place, the people said. 
Wall Street Journal:
  • North Korea Purge Raises Stability Questions. Kim Jong Un's Removal of Uncle Comes as a Surprise. North Korea's highest-profile leadership purge since Kim Jong Un took power is viewed by outside observers as a move to consolidate power that could trigger instability if it upsets the balance between the military and the ruling party.
  • China Mobile to Accept iPhone Orders This Week. China Mobile Ltd. plans to take preorders for Apple(AAPL) Inc.'s iPhones from Thursday in Shanghai, according to an advertisement on its website, as the world’s largest mobile carrier by subscribers moves closer to launching high-speed fourth-generation mobile services in the country.
  • How to Keep Workers Unemployed. Another 99 weeks of jobless insurance won't create more jobs. House-Senate negotiators are close to a modest budget accord to avoid another government shutdown, but suddenly the White House is introducing a last-minute demand. Five years into an economic recovery that President Obama often hails as miraculous, he wants to extend unemployment benefits one more time. Maybe it's time to consider whether the big expansion of unemployment insurance has increased joblessness.
Fox News:
  • 'It is time to taper' and end QE3 says Fed's Fisher. The Federal Reserve should start to trim its massive bond-buying program next week, and spell out a clear path for phasing it out altogether, a top Fed official said on Monday. "It is time to taper,'' Dallas Federal Reserve Bank President Richard Fisher said in remarks prepared for delivery to the DTN/The Progressive Farmer AgSummit in Chicago. 
  • Why 2014 could be a ‘record year’ for stock listings. Could the boom times be back? Between 250 and 300 initial public offerings (IPOs) will launch in the first three months of 2014 according to professional services firm EY — a level not seen since the financial crisis hit in 2008.
Zero Hedge: 
NY Times: 
  • Spies Infiltrate a Fantasy Realm of Online Games. Not limiting their activities to the earthly realm, American and British spies have infiltrated the fantasy worlds of World of Warcraft and Second Life, conducting surveillance and scooping up data in the online games played by millions of people across the globe, according to newly disclosed classified documents.
of two minds.com:
  • China's air zone announcement was just the beginning. When China announced its decision to claim a wider air zone that encompassed the disputed Senkaku/Diaoyu Island territories, the East China Sea erupted into conflict reminiscent of the Cold War era. In response, the United States and Japan declared the zone illegitimate and flew military aircraft through it, while China deployed fighter jets to identify them. But this was not a simple instance of China overstepping and getting burned - nor was it as sudden and unexpected as headlines suggest. Rather, it was the manifestation of a longstanding Chinese regional strategy that is only just beginning. And China is likely quite pleased with how it is playing out thus far
  • Texas Instruments(TXN) narrows quarterly forecast in slow economy. Chipmaker Texas Instruments Inc narrowed its fourth-quarter forecast on Monday following concerns on Wall Street that demand was not improving as much as previously expected. The company, seen as a barometer of the chip industry because it makes components for a variety of markets, said in a statement that it now estimates earnings of 44 cents to 48 cents per share on revenue of $2.92 billion to $3.04 billion for the quarter ending in December.
The Obama administration will press ahead Friday with tough requirements for new coal-fired power plants, moving to impose for the first time strict limits on the pollution blamed for global warming. The proposal would help reshape where Americans get electricity, away from a coal-dependent past into a future fired by cleaner sources of energy. It's also a key step in President Barack Obama's global warming plans, because it would help end what he called "the limitless dumping of carbon pollution" from power plants.
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99
Financial Times: 
  • Foreign Banks Say China Lending Limits Will Hurt Them. Proposed new rules to restrict interbank loans used by domestic banks to get around govt credit controls will damage foreign banks, citing bankers. New rules would affect key source of funding and revenues for foreign banks.
  • Japan Abe Cabinet Support Rate Falls 9 Ppt to 55%. Support for cabinet of Japanese Prime Minister Shinzo Abe falls from 64% in Nov., according to Yomiuri poll. Disapproval rate rises 15 ppt to 38%.
Evening Recommendations
Deutsche Bank:
  • Rated (DDD) Buy.
  • Rated (SSYS) Buy, target $140. 
Night Trading
  • Asian equity indices are -.50% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 134.50 unch.
  • Asia Pacific Sovereign CDS Index 106.0 -.25 basis point. 
  • FTSE-100 futures -.15%.
  • S&P 500 futures +.09%.
  • NASDAQ 100 futures +.12%.
Morning Preview Links

Earnings of Note

  • (TOL)/.43
  • (HDS)/.36
  • (AZO)/6.28
  • (JW/A)/.72
  • (SWHC)/.21
  • (HRB)/-.37
Economic Releases
7:30 am EST
  • The NFIB Small Business Optimism Index for November is estimated to rise to 92.6 versus 91.6 in October.
 10:00 am EST
  • JOLTs Job Openings for October are estimated to fall to 3895 versus 3913 in September.
  • Wholesale Inventories for October are estimated to rise +.3% versus a +.4% gain in September.
Upcoming Splits
  • (GRC) 5-for-4
  • (SHI) 3-for-2
Other Potential Market Movers
  • The Eurozone Industrial production data, Final Vocker Rule Language, UK trade data, Senate Banking Committee hearing on GSE's, USDA crop report, weekly retail sales reports, 3Y $30B T-Note auction, Capital One Energy Conference, BMO Tech/Digital Media Conference, Goldman Sachs Financial Services Conference, Oppenheimer Healthcare Conference, BofA Merrill Basic Materials Conference, JPMorgan Smid-Cap Conference, (XCO) analyst meeting, (BRCM) analyst day and the (FISV) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial 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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