Tuesday, December 31, 2013

Tuesday Watch

Evening Headlines 
  • China Approves Listing of Five Companies as IPOs Set to Resume. China's securities regulator gave approvals for five companies to sell shares publicly in Shanghai and Shenzhen, paving the way for the resumption of initial offerings after a more than one-year freeze. About 50 companies are expected to complete the IPO approval preparations and list or be ready to do so by the end of January, the China Securities Regulatory Commission said in a statement last month. There are more than 760 companies in the queue for approval and it will take about a year to complete an audit of all the applications, the regulator said. Another several companies will likely receive approvals in the next few days, the China Securities Journal reported today, citing unidentified people at the companies.
  • Asia Stocks Outside Japan Rise Third Day as Consumer Shares Gain. Asian stocks outside Japan rose, with a regional gauge extending gains into a third day as consumer and utilities companies advanced. HanKore Environment Tech Group Ltd. (BIOT) soared 35 percent in Singapore after a filing showed China Everbright International Ltd. plans to transfer water-industry investments to the company. Sinopec Kantons Holdings Ltd. gained 4.6 percent in Hong Kong after the oil trader said its controlling shareholder China Petroleum & Chemical Corp. is considering a asset injection of natural gas pipelines. Perseus Mining Ltd., a gold producer, sank 3.9 percent in Sydney as the precious metal headed for its biggest annual decline since 1981. The MSCI Asia Pacific excluding Japan Index climbed 0.2 percent to 467.69 as of 12:06 p.m. in Hong Kong.
  • Rebar Set for Monthly Loss Amid Concern on Local Government Debt. Steel reinforcement-bar futures swung between gains and losses, heading for a monthly decline, amid speculation that rising local government debt may prompt China to rein in spending. Rebar for May delivery on the Shanghai Futures Exchange lost as much as 0.3 percent and gained as much as 0.2 percent before trading little changed at 3,574 yuan ($590) a metric ton at 10:56 a.m. Beijing time. The most-active contract fell 2.7 percent this month, bringing losses this year to 10 percent.
  • Corn Set for Worst Drop Since ’60 as Crop Prices Slump on Output. Corn is heading for the worst year since at least 1960 and wheat is poised for the biggest annual loss in five years as global production climbs to a record. Futures for corn plunged 39 percent this year to $4.23 a bushel by 11:35 a.m. in Singapore today as wheat dropped 23 percent to $6.005 a bushel. Soybeans fell 7.1 percent to $13.10.
  • Yen Set for Biggest Decline Since 1979 on Outlook for BOJ Policy. The yen is set for its biggest annual drop against the dollar since 1979 amid speculation the Bank of Japan will maintain unprecedented stimulus to support Prime Minister Shinzo Abe’s economic strategy. The yen has fallen 16 percent in 2013 against a basket of nine other developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the biggest slide within the gauge. Hedge funds and other large speculators increased bets on a drop in the yen against the dollar to the most since July 2007.
  • Ringgit Posts Worst Annual Drop Since 1997 Crisis as Fed Tapers. Malaysia’s ringgit posted its worst annual loss since the 1997 Asian financial crisis on concern capital inflows will slow as the Federal Reserve trims its record monetary stimulus. The Fed announced on Dec. 18 that it will start cutting monthly bond purchases by $10 billion to $75 billion in January and pledged to keep interest rates near zero until inflation and unemployment improve. Malaysia’s government bonds returned 0.9 percent in 2013, the smallest increase in four years, according to an index compiled by HSBC Holdings Plc.
  • Russia Bombings Raise Prospect of Olympics as Target. Two bomb attacks in southern Russia before the country hosts the Winter Olympics are raising concerns that the location, the nations represented and the international platform may make the games a major target for terrorists. Four U.S. and European counterterrorism experts said the main threat is attacks by the Muslim separatist groups in the north Caucasus that are at war with the Russian government. They are the leading suspects in the suicide bombings at the train station in Volgograd two days ago and on a trolleybus in the city yesterday that killed more than 30 people. 
  • Apple’s(AAPL) Cook, Gore Should Face E-Book Queries, U.S. Says. Apple Inc. faces opposition from the U.S. in its bid to block an antitrust monitor appointed in a electronic books price-fixing case from interviewing top executives and directors, including chief executive officer Tim Cook and board member Al Gore. The government said the monitor, former Justice Department inspector general Michael Bromwich, should be allowed to interview the company’s leaders, as such activities are “standard procedure in monitorships,” according to a filing today in Manhattan federal court. Bromwich was appointed in October by U.S. District Judge Denise Cote to evaluate Apple’s antitrust compliance policies.
Wall Street Journal: 
  • China Says Terrorist Group Behind Police Station Attack. Authorities Identify Eight People Shot Dead and a Ninth Arrested on Monday in Xinjiang. Police have identified the eight people shot dead by authorities on Monday and a ninth arrested outside a police station in China's far western region of Xinjiang as members of a terrorist group carrying out a premeditated attack, state media reported. A report on the Xinjiang government's news portal late Monday said the assailants hurled explosives at the Yarkand county police station. After the clash, it said, police recovered 25 other explosive devices and nine machetes at the scene. Investigators said the group formed in August and began gathering funds and materials for the "organized, premeditated, violent terrorist attack," according to the report on Tianshan.net.
  • FAA Authorizes Commercial-Drone Testing. Six Operators Selected to Conduct Research, Setting Stage for Eventual Widespread Use. Aviation officials on Monday selected a handful of universities and state agencies to operate sites for drone testing, in a step toward eventually integrating commercial unmanned aircraft into the U.S. aviation system. Under the six operators chosen by the Federal Aviation Administration, research will be conducted by industry experts and academics on the safe operation of drones, or unmanned aerial vehicles, across a broad array of geographical areas, climates and types of airspace. 
  • Tom Coburn: The Year Washington Fled Reality. 'Message discipline' can win elections but is not a healthy way to run a country. The past year may go down not only as the least productive ever in Washington but as one of the worst for the republic. In both the executive branch and Congress, Americans witnessed an unwinding of the country's founding principles and of their government's most basic responsibilities. The rule of law gave way to the rule of rulers. And the rule of reality—in which politicians are entitled to their own opinions but not their own facts, as Sen. Daniel Patrick Moynihan liked to say—gave way to some politicians' belief that they were entitled to both their own opinions and their own facts. It's no wonder the institutions of government barely function.
Zero Hedge: 
Business Insider: 
The Blaze:
  • Fed's Fisher says his FOMC vote will reflect concerns on bond buying. Dallas Federal Reserve Bank President Richard Fisher said his votes on the central bank's policy panel in 2014 will reflect his concern that the Fed's bond-buying risks stoking inflation and exposing the institution politically. In an interview conducted on Dec. 2 but posted to the Internet as a podcast on Monday, Fisher called the excess reserves piling up in the U.S. banking system potential "tinder" for inflation, and he said the central bank's plans to eventually unwind its extraordinary policies relied on an untested "theoretical exit strategy." "I expect that my own voting behavior will reflect this concern I've just stated," Fisher said in the interview hosted by the private educational foundation Liberty Fund. "I worry about the fact that we've already painted ourselves into a corner that's going to be very hard to get out of."
  • Reduced Fed support reflected in January bond-buying plan. The Federal Reserve plans to purchase about $40 billion in longer-dated federal government debt in 18 operations next month, the New York Fed said on Monday, reflecting the U.S. central bank's decision to trim its support for the economy. In what came as a surprise to some investors, earlier this month the Fed decided to cut its bond-buying program, known as quantitative easing, by $10 billion to $75 billion per month. It reduced purchases of both Treasuries and mortgage bonds by $5 billion each. 
  • South Korea, China alarmed over yen slide. China and South Korea’s anxiety over the rapidly falling yen came to the fore on Monday as senior officials said their exporters could be hurt by Japan’s attempts to pull its moribund economy out of a two-decade slump.
  • A world economy on the brink of fracture. What will happen in 2014? The Chinese economy will slow; the price of oil will sink; Germany will slide into recession; the EU will remain intact and the internet will begin to Balkanise.
  • China to Ban Trust Sales By Wealth-Management Agents. China Banking Regulatory Commission plans to ban wealth management agents from signing agreements with trust companies to sell products.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 128.0 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 104.75 +1.5 basis points. 
  • FTSE-100 futures -.03%.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures +.01%.
Morning Preview Links

Earnings of Note

  • None of note
Economic Releases
 9:00 am EST
  • The S&P/CS 20 City MoM SA for October is estimated to rise +.95% versus a +1.03% gain in September.
9:45 am EST
  • The Chicago Purchasing Manager report for December is estimated to fall to 60.8 versus 63.0 in November.
10:00 am EST
  • Consumer Confidence for December is estimated to rise to 76.2 versus 70.4 in November.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The China Govt Manufacturing PMI, German Retail Sales report and weekly US retail sales reports could also impact trading today.
BOTTOM LINE: Asian indices are slightly higher, boosted by financial and industrial 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 day.

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