Thursday, January 09, 2014

Friday Watch

Evening Headlines 
Bloomberg: 
  • Morgan Stanley(MS) Warns of Crisis Amid Inflation Sign: Japan Credit. Morgan Stanley said inflation and overspending threaten to push Japan's finances to the brink, amid signs government-bond investors are preparing for rising consumer prices. "There's the risk interest payments would swell should the government fail to cut budget deficits when inflation and yields grind higher," Feldman said in an interview in Tokyo on Jan. 8. "Absent an increase in tax revenues stemming from a tangible improvement in the real economy, there is a risk of collapse." 
  • Yen Seen Rallying 16% Threatens Abe’s Successes: Market Reversal. Mitsubishi UFJ Morgan Stanley Securities Co. and Westpac Banking Corp. are breaking from the pack to bet the yen will rally in 2014, which could threaten Japan’s efforts to reflate the economy. The yen will surge 16 percent to about 90 per dollar this year, which would be the strongest level since last January, from 104.82 in New York yesterday, according to Naohiko Miyata at Mitsubishi UFJ, citing trading patterns. The yen slid 18 percent versus the dollar last year, the most since 1979, after Prime Minister Shinzo Abe began his economic strategy of fiscal spending, monetary easing and growth initiatives. “We’ve probably reached a bottom in the yen, and if that proves to be true, we’ll see a large rebound,” Miyata, the firm’s Tokyo-based chief technical analyst, said by phone on Jan. 6. “Since the start of the Abe trade, we haven’t seen any corrections exceeding 10 yen. 2014 will probably be the year where we’ll see such a move.”
  • China Dec. Exports Trail Estimates as Import Gains Accelerate. China’s export growth trailed estimates in December while import gains beat projections, government data showed today. Overseas shipments rose 4.3 percent from a year earlier, the General Administration of Customs said today in Beijing. That compares with the median estimate for 5 percent growth from 39 economists surveyed by Bloomberg News. Imports (CNFRIMPY) increased 8.3 percent, leaving a narrower-than-projected trade surplus of $25.64 billion.
  • Taiwan Rejects China Fishing Rules for Foreign Vessels in South. Taiwan said it rejected China’s fishing rules requiring foreign vessels to seek permission from China before entering waters near its southern shores and called for reduced tensions in the South China Sea. Taiwanese fishermen are proceeding as normal without declaring themselves and haven’t been stopped by Chinese authorities, deputy minister of mainland affairs Wu Mei-hung said at a press briefing today. 
  • China’s Benchmark Index Heads for Weekly Retreat on IPO Concerns. China’s stocks fell, sending the benchmark index towards losses for this week, amid concern new share offerings will divert funds. Technology shares and brokerages slumped, while dairy producers rallied. The Shanghai Composite Index (SHCOMP) fell 0.2 percent to 2,022.87 at 10:22 a.m., adding to a weekly loss of 2.9 percent.
  • Asian Stocks Fall on China Trade Data Before U.S. Jobs. Asian stocks fell, with the regional benchmark index extending its weekly loss, as data showed China’s trade surplus narrowed and investors await reports U.S. payrolls. Rio Tinto Group and BHP Billiton Ltd., Australia’s biggest shippers of iron-ore to China, fell at least 1.5 percent. Mitsubishi Materials Corp., which processes metals, dropped 1.6 percent in Tokyo as it plans to halt a plant after an explosion. Dainippon Sumitomo Pharma Co., which has the Japanese distribution rights for a liver-disease drug developed by Intercept Pharmaceuticals Inc., soared 12 percent after a clinical trial proved successful. The MSCI Asia Pacific Index slipped 0.2 percent to 138.72 as of 11:20 a.m. in Tokyo, on course for a 1.1 percent loss this week.
  • Rebar Heads for Fifth Weekly Drop on China Data, Iron Ore Price. Steel reinforcement-bar futures in Shanghai headed for a fifth weekly decline after iron ore prices fell to a five-month low, even as imports of the raw material climbed to a record in 2013. Rebar for May delivery on the Shanghai Futures Exchange traded little changed at 3,452 yuan ($570) a metric ton at 10:54 a.m. local time. The contract has lost 2.5 percent this week, the most since May.
  • Rubber Set for Biggest Weekly Drop Since April on China Demand. Rubber in Tokyo declined, heading for the biggest weekly loss since April, amid speculation that China’s economy is slowing and will weaken demand for the commodity used in tires. The contract for delivery in June on the Tokyo Commodity Exchange fell as much as 1.1 percent to 254.1 yen a kilogram ($2,424 a metric ton), matching a two-month low reached Jan. 7. Futures traded at 255.8 yen at 10:33 a.m. local time and have lost 6.8 percent this week, the most since the five days through April 19.
  • Debt Rule Faces Dilution as Global Regulators Heed Bank Warnings. Lenders are poised to win concessions from central bank chiefs and global regulators over a debt limit they criticized as a blunt instrument that would penalize low-risk activities and curtail lending. A revised leverage-ratio plan is set to be laxer than a draft published last year by the Basel Committee on Banking Supervision, said a person familiar with the scope of a Jan. 12 meeting of the group’s oversight body at which the measure will be discussed. Leverage ratios are designed to curb banks’ reliance on debt by setting a minimum standard for how much capital they must hold as a percentage of all assets on their books. A quarter of large global lenders would have failed to meet the draft version of the leverage limit had it been in force at the end of 2012, according to data published by the committee in September.
  • PCs Mark Steepest Drop With Shipments Slumping 10% in 2013. Personal-computer shipments fell 10 percent in 2013, marking the worst-ever decline after lackluster holiday sales underscored how consumers and businesses are shunning machines for mobile devices, two research firms said. Manufacturers shipped 315.9 million units, returning to 2009 levels and making it the “worst decline in PC market history,” researcher Gartner Inc. said in a statement today. IDC also said shipments had a record decline.
  • Pentagon Says Snowden Took Most U.S. Secrets Ever: Rogers. The Pentagon concluded that Edward Snowden committed the biggest theft of U.S. secrets in history, downloading about 1.7 million intelligence files, including information that could put personnel in jeopardy, according to lawmakers. The Defense Department found that Snowden’s disclosures last year could “gravely impact” national security and that much of what he took is related to current military operations, Representative Mike Rogers, chairman of the House intelligence committee, said in a statement today describing the findings.
  • Sears Holdings(SHLD) Falls After Forecasting Fourth-Quarter Loss. Sears Holdings Corp. fell as much as 21 percent in late trading after forecasting a fourth-quarter loss and posting lower sales during the holiday period. The shares tumbled 13 percent to $36.90 at 7 p.m. in New York after earlier plunging as low as $33.51. Sears rose 19 percent in 2013.
Wall Street Journal: 
  • Banks Face New U.S. Moves Against Laundering. The Justice Department has put Wall Street on notice that it plans additional enforcement actions against banks that haven't done enough to stem the flow of illicit funds into the U.S. financial system. A top Justice Department official, in an interview with The Wall Street Journal, said banks have stepped up efforts to guard against money laundering in the wake of several high-profile federal enforcement actions, but the U.S. is still finding problems as it investigates banks.
  • Banks Cut as Mortgage Boom Ends. With Rates Creeping Up and Refinancings Dwindling, Lenders Get Squeezed and Earnings Face Hit. A sharp slowdown in mortgage refinancing is forcing banks to cut jobs, fight harder for a smaller pool of home-purchase loans and employ new tactics to drum up business. The end of a three-decade period of falling mortgage rates has slammed the brakes on a huge wave of refinancing by U.S. households. The drop-off has deprived lenders of a key source of income at a time when the growth in loans for home purchases remains weak. 
  • Apple(AAPL) Devices Flow Into Corporate World. The popularity of the iPhone and iPad among employees is prompting corporate tech managers to rewrite policies and change traditional buying patterns. The iPhone has replaced the BlackBerry as the mobile phone of choice, as the iPad assumes tasks once reserved for PCs.
Fox News:
  • Republicans call for removal of Obama supporter leading IRS targeting probe. Republicans claim the Justice Department's investigation of the IRS targeting scandal is "compromised," after revealing that it's being led by one of President Obama's political supporters. In a letter to Attorney General Eric Holder, the lawmakers said they've learned trial attorney Barbara Kay Bosserman is leading the probe. They detailed federal campaign finance records showing she's given more than $6,000 to Obama's two presidential campaigns -- and urged Holder to remove her from the case.
  • Afghanistan releasing 72 prisoners considered security threat by US. Afghan President Hamid Karzai said the country is going to release all but 16 of 88 prisoners considered a security threat by the United States. In a statement Thursday, Karzai says that a review of the prisoners' cases by Afghan intelligence and judicial officials turned up no evidence of wrongdoing for 45 of the detainees. Karzai says there was insufficient evidence on another 27 and that they must be released.
MarketWatch.com:
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
LA Times:
  • Bomber in Iraq Kills 22 Recruits Seeking to Fight Al Qaeda. A suicide bomber detonated explosives on Thursday among a group of recruits who were joining the Iraqi Army to fight Al Qaeda in Anbar Province, the police said. Twenty-two recruits were killed, and 31 were wounded, officials said.
NY Times:  
The Blaze: 
Reuters: 
  • Alcoa(AA) reports big loss after impairment charge. Alcoa Inc reported a massive quarterly loss on Thursday after recent declines in aluminum prices led to a $1.7 billion non-cash impairment charge on smelter acquisitions. Shares of the largest U.S. aluminum producer fell 4 percent in after-hours trade after the company posted a profit adjusted for one-time items that fell short of analyst expectations and it issued an outlook for stagnant growth in global aluminum demand.
  • U.S. unemployment benefits extension stalls in Senate. U.S. Senate Democrats on Thursday offered a new plan to revive federal unemployment benefits until mid-November and pay the $18 billion price tag with new spending cuts, but hopes of a bipartisan deal dissolved into bickering by day's end. 
Telegraph:
China Securities Journal:
  • China May Start Coal Resource Tax on Price 'Soon'. China may announce rules on implementing coal resource tax based on price "soon," citing a person familiar with the matter.
Evening Recommendations
RBC:
  • Cut (PAYX) to Underperform.
Macquarie:
  • Cut (NTDOY) to Underperform.
Night Trading
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 140.50 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 108.50 +.5 basis point. 
  • FTSE-100 futures +.37%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.16%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (INFY)/46.71
Economic Releases
8:30 am EST
  • The Change in Non-Farm Payrolls for December is estimated at 197K versus 203K in November.
  • The Unemployment Rate for December is estimated at 7.0% versus 7.0% in November.
  • Average Hourly Earnings for December are estimated to rise +.2% versus a +.2% gain in November.
10:00 am EST
  • Wholesale Inventories are November are estimated to rise +.4% versus a +1.4% gain in October.
  • Wholesale Sales for November are estimated to rise +.7% versus a +1.0% gain in October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Bullard speaking, China New Loan data, UK Industrial Production, USDA's WASDE report and the IBD/TIPP Economic Optimism Index for January could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 day.

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