Wednesday, March 05, 2014

Tuesday Watch

Evening Headlines 
  • Putin Says There’s No Need Yet for Russia to Invade Ukraine. Russian President Vladimir Putin said he saw no immediate need to invade Ukraine while leaving open the possibility of using force, as the U.S. weighed sanctions on Russia and offered aid to the Ukrainian government. In his first public remarks since Ukraine said its Crimean peninsula was seized by Russian forces, Putin said yesterday he has a duty to defend ethnic Russians in the region and reserved the right to military action. U.S. President Barack Obama challenged Putin’s rationale for intervening, as Secretary of State John Kerry unveiled $1 billion in loan guarantees to Ukraine’s cash-strapped government during a visit to Kiev.
  • Crimea Crisis Haunted by Ghosts of Bungled World War I Diplomacy. A century later, as Russian President Vladimir Putin menaces Ukraine, the world hasn’t banished the risks of the miscommunications, clumsy judgments and botched intelligence that blindsided Europe in 1914, said Max Hastings, a British military historian.
  • China Boosts Defense Spending as Xi Pushes for Stronger Military. China’s central government will boost defense spending 12.2 percent this year as President Xi Jinping vows to create a strong military and the navy extends its reach into neighboring waters. The defense budget is set to rise this year to 808.23 billion yuan ($131.6 billion), the Ministry of Finance said in a report today. China has the second-biggest military budget in the world after the U.S., though its spending remains at least five times less. 
  • Chaori Solar Warns It May Miss 89.8 Million Yuan Bond Payment. A Chinese solar company warned it may not be able to make an 89.8 million yuan ($14.6 million) interest payment in full by the March 7 deadline, in what may be the first default of an onshore bond. Shanghai Chaori Solar Energy Science & Technology Co. (002506), a maker of cells to convert sunlight into power, plans to pay 4 million yuan to bondholders, the company said in a statement to the Shenzhen stock exchange yesterday. 
  • China Value-Added Tax on Telecom Services May Cut Carrier Profit. Premier Li Keqiang said China will impose a value-added tax on telecommunication services, a move analysts said may cut earnings at the country’s three major wireless carriers. The VAT will replace an existing business tax as part of a national trial also applied to railway transportation and postal services, Li said in a report delivered today at the start of the annual meeting of China’s legislature, the National People’s Congress. Li didn’t say when the VAT would start or offer other details.
  • Asian Stocks Rise as Wheat Drops on Receding War Threat. Asian stocks rose, with the regional index climbing the most in a week, and credit risk fell to the lowest level this year as the threat of war in Ukraine receded and China kept its growth target unchanged. Wheat dropped. The MSCI Asia Pacific Index climbed 0.9 percent by 10:46 a.m. in Tokyo, its biggest increase since Feb. 21, with most major indexes in the region advancing
  • ECB May Repeat Japan Mistake That Triggered Lost Decade. The central bank failed to sound a deflation alert. “At present there is no reason to expect that overall prices will drop sharply and exert deflationary pressure on the entire economy,” policy makers wrote in their monthly report, signed off by the governor.
  • Subprime Auto Boom Besieged by Late-Payment Jump: Credit Markets. A three-year lending boom to car buyers with spotty credit that helped push auto sales to a six-year high is starting to show signs of overheating. The percentage of loans packaged into securities that are more than 30 days late rose 1.43 percentage points to 7.59 percent in the 12 months ended September 30, according to S&P. That's the highest in at least three years, the data released last week by the NY-based ratings company show. "We're at this inflection point," Amy Martin, an analyst at S&P, said by telephone. "Now that they are opening the lending spigot, it's only natural that losses are starting to rise." 
  • Benghazi Seen as Clinton’s Top Career Negative, Pew Poll Shows. Americans named “Benghazi” as the most glaring negative on former U.S. Secretary of State Hillary Clinton’s political resume, while more than two-thirds approved of her performance as America’s top diplomat, a poll shows. Fifteen percent of those surveyed identified the Sept. 11, 2012, killing of four Americans at a U.S. compound in Benghazi, Libya, when asked to name the worst thing about the career of Clinton, a possible 2016 Democratic presidential candidate, according to the Pew Research Center/USA Today poll released today.
Wall Street Journal: 
  • Putin, Obama Talk Tough on Ukraine. Moscow Shows Little Sign of Backing Down; Russian Troops Fire Warning Shots Outside Air Base. The U.S. kept up a war of words with Russian President Vladimir Putin while hoping he will back down over Ukraine, but there was little evidence Tuesday he would. Mr. Putin offered a full-throated defense of his use of force in the restive region of Crimea, rejecting Western demands to withdraw and insisting sanctions would be counterproductive. Russian troops occupying an air base there fired warning shots at Ukrainian counterparts, seemingly underlining Moscow's determination.
Fox News:
Zero Hedge:
Business Insider:
Financial Times:
  • US considers sanctions on Russian banks. The banking sanctions are one of a series of measures that the administration has been discussing with Congress in recent days as it seeks to find ways to isolate Moscow diplomatically and economically, according to congressional aides and officials.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 129.0 -8.0 basis points.
  • Asia Pacific Sovereign CDS Index 99.50 -4.0 basis points.
  • FTSE-100 futures +.03%.
  • S&P 500 futures -.05%.
  • NASDAQ 100 futures  +.03%.
Morning Preview Links

Earnings of Note

  • (FSS)/.25
  • (PETM)/1.21
  • (NAV)/-1.75
  • (BF/B)/.76
  • (BYD)/-.25
  • (REV)/.82
  • (HOV)/-.04
Economic Releases
8:15 am EST
  • The ADP Employment Change for February is estimated at 155K versus 175K in January.
10:00 am EST
  • ISM Non-Manufacturing for February is estimated to fall to 53.5 versus 54.0 in January.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,078,000 barrels versus a +68,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -878,000 barrels versus a -2,807,000 barrel decline the prior week. Distillate supplies are estimated to fall by -1,033,000 barrels versus a +338,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.34% versus a +1.2% gain the prior week.
2:00 pm EST
  • Fed's Beige Book.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Fisher speaking, Fed's Williams speaking, Eurozone Services PMI, Eurozone GDP, weekly MBA mortgage applications report, (XOM) analyst meeting and the (HON) Investor Conference  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 lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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