Thursday, March 20, 2014

Thursday Watch

Evening Headlines 
  • Russia’s Trade, Energy Might Frustrates EU Move for Sanctions. European Union leaders are set to spar over punishing Russia for seizing Crimea after preparatory meetings between EU government officials failed to reach a consensus. Beset by east-west divisions and concerns that trade curbs would do self-inflicted damage to Europe’s economy, the EU’s 28 member states remain divided over whether and how to press further sanctions against Russia for its move to annex Ukrainian territory. As leaders including President Francois Hollande of France and Germany’s Chancellor Angela Merkel prepare to gather for a two-day summit in Brussels today, it is unclear whether they will be able to agree on a road map for economic sanctions, six EU officials told reporters yesterday. One less controversial option would be to expand an existing blacklist of 21 Russian and Crimean officials, they said.
  • China Developers Get Share-Sale Approval in Government Shift. Chinese developers Tianjin Tianbao Infrastructure Co. and Join.In Holding Co., received regulatory approval for new-stock sales, the first the government has allowed by real estate companies in about four years. The China Securities Regulatory Commission said yesterday the companies are allowed to sell yuan-denominated A shares in private placements, according to separate statements to Shanghai and Shenzhen stock exchanges. China hasn’t allowed developers to raise money by selling shares since 2010, when it stepped up efforts to cool the real estate market amid rising home prices, according to Zheshang Securities Co. and Haitong Securities Co. Yesterday’s approval comes after a developer collapsed under its debt, prompting declines in property companies’ shares and bonds. 
  • Australia May Have Found Objects Linked to Missing MH370 Flight. Australian authorities combing the Indian Ocean for missing Malaysian Airline Flight MH370 have found two objects and diverted surveillance aircraft to locate them, Prime Minister Tony Abbott said. “The Australian Maritime Safety Authority has received information based on satellite imagery of objects possiblyrelated to the search,” Abbott told lawmakers in parliament today. “Following specialist analysis of this satellite imagery, two possible objects related to the search have been identified.”
  • Asia Stocks Drop to Six-Week Low as Fed Signals Rate Rise. Asian stocks fell, with the regional gauge heading for a six-week low, as the Federal Reserve signaled it may raise U.S. interest rates from the middle of next year. Newcrest Mining Ltd. (NCM), Australia’s biggest gold producer, slumped 6.4 percent after bullion dropped the most in three months as the Fed’s announcement curbed demand for the metal as a store of value. Myer Holdings Ltd. declined 5.3 percent in Sydney as the retailer reduced its forecast for gross profit margin. Toyota Motor Corp., the world’s largest carmaker, rose 0.5 percent in Tokyo after the yen slumped yesterday. The MSCI Asia Pacific Index declined 0.8 percent to 133.61 as of 9:45 a.m. in Tokyo, heading for the lowest close since Feb. 7.
  • Yellen Retreat From Policy Thresholds Doubted as Yields Rise. Janet Yellen said the Federal Reserve wasn’t altering policy when it overhauled the way it signals changes in borrowing costs. Investors didn’t buy it. In her first press conference as Fed chair, Yellen emphasized that dropping a 6.5 percent unemployment threshold for considering an interest-rate increase “does not indicate any change in the committee’s policy intentions.”
  • Obama Aides’ Anti-Keystone View Clashes With Risk of Senate Loss. President Barack Obama’s advisers are lining up against the proposed Keystone XL oil pipeline. Top Democratic donors oppose the project. And Obama himself dismisses claims that it will create many jobs. Yet there’s still one big obstacle to the president saying no to Keystone: election-year politics. If Obama rejects the pipeline, it might sink Democratic candidates in states with big energy industries, such as Louisiana and Alaska. That could cost Democrats control of the Senate -- a risk that’s likely to weigh heavily on any decision the president makes, to approve the pipeline, reject it or wait until after November to announce a decision.
Wall Street Journal:
Zero Hedge:  
Business Insider:
Washington Post:
China Securities Journal:
  • China Corporate Bond Default Risk Rises. Default risk of China's corporate bonds rises as economic growth and property investment growth slow, according to a front-page commentary. Cos. relevant to the property sector will face a "more severe" situation of overproduction, the commentary said. More defaults may have an impact on banks. China should keep economic policies stable and prevent risks from becoming systemic.
Evening Recommendations
  • Rated (CVD) Buy, target $121.
Goldman Sachs:
  • Cut (BYI) to Sell.
Night Trading
  • Asian equity indices are -1.25% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 130.25 +2.25 basis points.
  • Asia Pacific Sovereign CDS Index 98.0 +1.75 basis points.
  • FTSE-100 futures -.68%.
  • S&P 500 futures -.28%.
  • NASDAQ 100 futures  -.27%.
Morning Preview Links

Earnings of Note

  • (IHS)/1.24
  • (LEN)/.28
  • (SCHL)/-.37
  • (CAG)/.60
  • (NKE)/.72
  • (SCVL)/.04
  • (TIBX)/.18
  • (CKP)/.31 
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to rise to 322K versus 315K the prior week.
  • Continuing Claims are estimated to rise to 2880K versus 2855K prior.
10:00 am EST
  • Philly Fed Business Outlook for March is estimated to rise to 3.2 versus -6.3 in February.
  • Existing Home Sales for February are estimated to fall to 4.6M versus 4.62M in January.
  • Leading Index for February is estimated to rise +.2% versus a +.3% gain in January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed Bank Stress Test results, weekly EIA natural gas inventory report, Bloomberg Economic Expectations Index for March, weekly Bloomberg Consumer Comfort Index and the (TRI) investor day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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