Tuesday, March 18, 2014

Tuesday Watch

Evening Headlines 
  • Putin Moves Toward Claiming Crimea as U.S. Joins EU on Sanctions. Russian President Vladimir Putin took another step toward annexing Crimea, defying sanctions imposed by the U.S. and European Union in the worst standoff with Russia since the end of the Cold War. Acting in concert, the U.S. and EU unveiled penalties yesterday on Russian and Ukrainian officials linked to efforts to wrest Crimea from Ukraine. Putin responded by recognizing the breakaway Black Sea region as a sovereign state while Western leaders warned that Russia would face added sanctions, including possibly on energy assets, if it moved deeper into Ukraine.
  • Evergrande Bonds Decline Amid China Housing Bankruptcy. Stocks and bonds issued by Chinese real estate companies slumped after the collapse of a private developer added to concern that defaults are starting to mount as the economy slows and the government reins in lending. Prices on the dollar bonds sold by Evergrande Real Estate Group Ltd., the nation’s fourth largest developer by market value, fell 0.5 cent on the dollar yesterday, sending yields to the highest since August. Prices on Kaisa Group Holdings Ltd. (1638)’s bonds maturing in 2018 dropped to a seven-month low. Shares of E-House China Holdings Ltd. (EJ), the online real estate services provider, slid 2.6 percent while SouFun Holdings Ltd. (SFUN) retreated for a seventh day
  • China Home-Price Growth Slows in Big Cities on Tight Credit. Chinese new-home price growth slowed last month, led by the four cities the government defines as first tier, amid tighter credit to rein in excessive borrowing and individual city measures to curb property prices. Prices in Beijing and the southern business hub of Shenzhen each rose 0.2 percent in February from a month earlier, the National Bureau of Statistics said today. That was the slowest pace since October 2012. They added 0.4 percent in Shanghai, the smallest increase since November 2012, and gained 0.5 percent in Guangzhou. Prices climbed in 57 of the 70 cities tracked by the government. That compares with 62 in January.
  • Japan Analysts Split on Fiscal Crisis Time as Tax Looms: Economy. Economists are split over how long Japan’s government has to rein in the world’s biggest debt burden, a Bloomberg News survey shows, adding to a debate on whether the government should keep ratcheting up a sales tax. Eleven of 34 analysts said the government has four years or less to put fiscal policy on a sustainable path and avoid a crisis, while seven said it has over 10 years. BNP Paribas SA and Credit Suisse Group AG were among five saying it’s too late to avert one. UBS AG says chances of a fiscal crisis are remote. 
  • Russia Sounds Alarm on Economic Crisis as West Imposes Sanctions. “The situation in the economy bears clear signs of a crisis,” Deputy Economy Minister Sergei Belyakov said in Moscow yesterday. The cabinet needs to refrain from raising the fiscal burden on companies, which would be the “wrong approach,” he said. “Taking money from companies and asking them afterward to modernize production is illogical and strange.”
  • Asian Stocks Rise From Five-Week Low on U.S. Factory Data. Asian stocks rose, with the regional gauge rebounding from a five-week low, as data showing an improvement in U.S. factory output boosted optimism in the world’s biggest economy. The MSCI Asia Pacific Index climbed 0.4 percent to 134.65 as of 9:02 a.m. in Tokyo. The gauge slumped 3.5 percent last week as data on Chinese industrial production and retail sales disappointed investors.
  • Milk Costs Most Ever on Surging Demand for U.S. Dairy Exports. Milk futures in Chicago jumped to an all-time high as surging U.S. dairy exports depleted supplies available for domestic consumers. Shippers sold 162,999 metric tons of milk powder, cheese, butterfat and whey in January, up 19 percent from a year earlier, according to the latest data from the U.S. Dairy Export Council. Almost 15 percent of milk production went to exported goods, up from 12 percent a year earlier, the group said. Cheese shipments climbed 46 percent.
  • Sony Corp. Said Cutting Jobs at Entertainment Division. Sony Corp. (6758) began a new round of job cuts at its entertainment division, said a person with knowledge of the situation, part of Chief Executive Officer Kazuo Hirai’s effort to improve profitability at the unit. The reductions are taking place at the Culver City, California-based film and television studio, as well as other locations worldwide, said the person, who asked not to be named because the details aren’t yet public.
Wall Street Journal: 
  • Chinese Companies Caught in Yuan Riptide. Bets by Firms and Individuals on a Rise in Currency Face Losses as Country Changes Tack. China's decision to squeeze speculators out of its currency is causing pain for local companies and individual investors. The yuan fell on Monday to its lowest level in 10 months against the dollar after the government over the weekend doubled the currency's daily trading range. The decision, foreshadowed by months of hints by Chinese officials, followed a weekslong campaign by the country's central bank to weaken the yuan. China is attempting to reduce the amount of money flowing into the country from foreign investors looking to profit on a rise in the yuan. The government sees this cash as inflating asset prices and making the economy more vulnerable to financial shocks.
  • Taper Talk Slammed Strong Emerging Nations Most. New research argues emerging-market nations hit hardest in the run up to the Federal Reserve’s decision to cut back its bond buying were those whose financial houses were in the best order, relatively speaking—a finding contrary to much recent conventional wisdom.
  • Obama's Unserious Sanctions. The U.S. and Europe help lift the Russian stock market. President Obama and the European Union announced their sanctions response to Vladimir Putin's rolling conquest of Crimea on Monday, and the most accurate assessment came from financial markets. Moscow's stock exchange, which has been battered for two weeks in fear of Western sanctions, rose 3.7%. Congratulations, Mr. President. You gave the Kremlin a sanctions relief rally. Mr. Obama had promised "consequences" if Mr. Putin followed through with the Crimean referendum, so we doubt even the Russian President thought the West's actions would be this weak. Russian opposition leader Alexei Navalny tweeted from Moscow that the sanctions list was "of course, funny." He added that "Obama only delighted all our crooks and encouraged them." That turned out to be literally true when one of the Russians on Mr. Obama's list, Deputy Prime Minister Dmitry Rogozin, tweeted, "It seems to me that some kind of joker wrote the U.S. president's order :)" LOL.
Fox News:
  • Ukraine officials pleading with US to provide military aid, lawmaker says. Ukrainian officials pleaded with visiting U.S. lawmakers this past weekend to provide military aid, claiming their ousted president intentionally gutted the nation's defenses so it would be vulnerable to a Russian takeover, one of those U.S. lawmakers told Fox News. "They wanted arms," the lawmaker said, "even recognizing that it could be cited by Putin as an excuse, a provocation for further military action by him. They said Putin's goal has never been Crimea; his goal is Kiev."
Zero Hedge:
Business Insider:
Evening Recommendations
  • Rated (CBI) Outperform, target $98.
  • Rated (FLR) Outperform, target $90.
Night Trading
  • Asian equity indices are +.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 128.0 -7.5 basis points.
  • Asia Pacific Sovereign CDS Index 97.5 -4.25 basis points.
  • FTSE-100 futures +.01%.
  • S&P 500 futures +.12%.
  • NASDAQ 100 futures  +.13%.
Morning Preview Links

Earnings of Note

  • (FDS)/1.21
  • (HTZ)/.32
  • (ORCL)/.70
  • (ADBE)/.25
  • (SCTY)/-.58
  • (DSW)/.29
  • (TECD)/1.93
Economic Releases
8:30 am EST
  • The Consumer Price Index for February is estimated to rise +.1% versus a +.1% gain in January.
  • The CPI Ex Food & Energy for February is estimated to rise +.1% versus a +.1% gain in January.
  • Housing Starts for February are estimated to rise to 910K versus 880K in January.
  • Building Permits for February are estimated to rise to 960K versus 937K in January.
9:00 am EST
  • Net Long-Term TIC Flows for January are estimated at $40.0B versus -$45.9B in December.
Upcoming Splits
  • (WLK) 2-for-1
Other Potential Market Movers
  • The German ZEW Index, weekly retail sales reports and the (SNCR) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology 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.

1 comment:

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