Wednesday, March 26, 2014

Wednesday Watch

Evening Headlines 
  • Obama Deflecting Criticism Calls Russia a Regional Power. President Barack Obama brushed aside his critics who say he’s been weak in foreign affairs and dismissed Vladimir Putin’s Russia as merely a regional threat as he set the stage for the next moves in the confrontation over Ukraine. Seeking to assure U.S. allies in Europe as well as voters at home, Obama told a gathering of world leaders in The Hague that an international coalition is moving to isolate a nation that no longer rates as a superpower. “Russia is a regional power that is threatening some of its immediate neighbors, not out of strength, but out of weakness.”   
  • Senate Reaches Deal on Ukraine Aid Omitting IMF Provision. U.S. senators reached agreement on legislation to aid Ukraine after Majority Leader Harry Reid abandoned a provision opposed by Republicans that would have boosted the International Monetary Fund. The deal sets up a March 27 vote on final passage, Reid said on the Senate floor tonight. The Nevada Democrat told reporters earlier today that he would drop language boosting the U.S. share, or quota, for the IMF and implementing a 2010 international accord giving rising economies more voice.
  • RBA Says Low-Rate Led Home Price Gains Can't Go On Indefinitely. The Reserve Bank of Australia said an upswing in property prices fueled by record-low interest rates can’t go on forever and lenders should avoid relaxing standards to boost profits. “While rising housing prices and greater household borrowing are expected results from the monetary easing that has taken place and are helping to support residential building activity, they also have the potential to encourage speculative activity,” the RBA said in its semiannual financial stability review in Sydney. “It is important for both investors and owner-occupiers to understand that a cyclical upswing in housing prices when interest rates are low cannot continue indefinitely.”
  • Asian Stocks Rise as U.S. Consumer Confidence Jumps. Asian stocks rose after U.S. consumer confidence climbed to a six-year high, buoying investor optimism about the outlook for the world’s biggest economy. Samsung Electronics Co., a consumer electronics maker that gets a fifth of its revenue in America, rose 1.4 percent in Tokyo. Iron-ore miner Fortescue Metals Group Ltd. gained 3.1 percent in Sydney as raw-material shares climbed the most among the 10 industry groups on the regional benchmark index. Kirin Holdings Co. advanced 2.8 percent on a report the Japanese beverage maker will raise its annual dividend to at least 40 yen and consider a share buyback. The MSCI Asia Pacific Index added 0.6 percent to 135.10 as of 9:28 a.m. in Tokyo, with almost four shares rising for each that fell.
  • Copper Falls From 2-Week High on Concern Chinese Growth Slows. Copper dropped from a two-week high amid concern that economic growth is slowing and default risks are rising in the biggest-user China at a time when global supplies are increasing. The contract for delivery in three months on the London Metal Exchange retreated as much as 0.7 percent to $6,554.25 a metric ton and was at $6,574 at 10:41 a.m. in Tokyo. The metal rallied 2.3 percent yesterday, the most since Feb. 6, to $6,623.75, the highest intraday level since March 11. China is headed for a “mini crisis” in its local-government debt market as economic reforms lead to defaults, Li Daokui, a former member of the People’s Bank of China’s monetary policy committee, said yesterday.
  • Iron Ore Price Forecast Cut by Australia as Miners Boost Output. Australia, the largest iron ore exporter, cut its price estimate for this year and predicted a further drop in 2015 as mining companies including Rio Tinto (RIO) Group and BHP Billiton Ltd. increase output and spur a glut. Spot prices will average about $110 a ton this year from $119 forecast in December and $126 in 2013, the Canberra-based Bureau of Resources and Energy Economics said today. Prices may average about $103 a ton in 2015, it said in a report. Iron ore fell into a bear market this month on speculation that slowing economic growth and credit concerns in China, the biggest buyer, may curb the expansion in demand just as global supply increases.
  • Junk-Loan ETF Asset Surge Heralds Higher Rates: Credit Markets. Investors just can't get enough of exchange-traded funds that buy junk-rated loans. After a more than tripling their assets in 2013, the loan funds are now growing four times as fast as the rest of the $262 billion market for fixed-income ETFs, according to data complied by Bloomberg. The biggest leveraged-loan ETF, Invesco Ltd.'s $7.4 billion PowerShares Senior Loan Portfolio, has already amassed almost a billion dollars in new money this year. While the demand has been a boon for ETFs that invest in loans to the neediest companies, it's also prompted regulators to warn that excesses which contributed to the credit crisis bay be creeping back.
  • Tudor to Return Money From Managed-Futures Fund Amid Loss. Tudor Investment Corp. is returning money to clients from its $120 million managed-futures fund run by Steve Evans after three years of losses. Investors in the Tudor Tensor Fund can put their money into a managed account that follows the same strategy, the firm said today in a letter to clients, a copy of which was obtained by Bloomberg News. Investors can get their money at the end of the month or the end of April, Tudor said.
Wall Street Journal:
  • Putin's Challenge to the West. Russia has thrown down a gauntlet that is not limited to Crimea or even Ukraine. Russian President Vladimir Putin has a long-festering grudge: He deeply resents the West for winning the Cold War. He blames the United States in particular for the collapse of his beloved Soviet Union, an event he has called the "worst geopolitical catastrophe of the 20th century."
Fox News:
  • North Korea fires two mid-range missiles, Seoul says. North Korea on Wednesday test-fired two medium-range ballistic missiles, South Korea said, a defiant challenge to a meeting by the leaders of rivals South Korea, Japan and the United States that focused on the North's security threat.
Zero Hedge:
Business Insider:
  • IGT(IGT) cuts 7 pct of jobs, lowers 2014 profit forecast. Slot-machine maker International Game Technology said it would cut 7 percent of its workforce and lowered its adjusted earnings forecast for the year, citing a steeper-than-expected fall in gaming revenue in North America.
China Securities Journal:
  • China Short-Term Stimulus Unneeded, Academic Says. China shouldn't pursue short-term economic stimulus as growth is still in a "reasonable range," Chen Zhongtao, a researcher at China Logistics Information Center wrote.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 131.0 -3.0 basis points.
  • Asia Pacific Sovereign CDS Index 94.0 -1.25 basis points.
  • FTSE-100 futures +.38%.
  • S&P 500 futures +.12%.
  • NASDAQ 100 futures  +.12%.
Morning Preview Links

Earnings of Note

  • (MOV)/.30
  • (PAYX)/.32
  • (FUL)/.50
  • (CUB)/.39
Economic Releases
8:30 am EST
  • Durable Goods Orders for February are estimated to rise +.8% versus a -1.0% decline in January.
  • Durables Ex Transports for February are estimated to rise +.3% versus a +1.1% gain in January.
  • Cap Goods Orders Non-Defense Ex Air for February are estimated to rise +.5% versus a +1.7% gain in January.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,815,000 barrels versus a +5,850,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,129,000 barrels versus a -1,467,000 barrel decline the prior week. Distillate supplies are estimated to fall by -1,168,000 barrels versus a -3,097,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.47% versus a -.4% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Bullard speaking, German Consumer Confidence reading, $35B 5Y T-Note auction, Fed CCAR Results for Banks, weekly MBA mortgage applications report, (CAB) analyst day, (IRM) investor day and (FLS) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by tech 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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