Wednesday, June 04, 2014

Wednesday Watch

Evening Headlines 
Bloomberg:
  • World Bank Approves First Russia Investment Since Crisis. The World Bank approved an investment in Russia for the first time since President Vladimir Putin annexed Crimea, overriding opposition from Canada and lack of support from the U.S. The International Finance Corp., the lender’s private-sector arm, voted May 29 for parts of a 250 million euro ($340 million) package enabling French grocery retailer Groupe Auchan SA to expand in Russia, Vietnam and other emerging markets, World Bank spokeswoman Serene Jweied said yesterday in an e-mail.
  • Asia Territory Spats Pose Real Danger to Trade, Singapore Warns. The risk of territorial disputes damaging trade in Asia is “very real” and the region must focus on shoring up economic links as well as security ties, according to Singapore Defence Minister Ng Eng Hen. “It’s completely artificial to think that there are somehow firewalls between trade and security,” Ng, 55, said yesterday in an interview at the Ministry of Defence. “We shouldn’t from a security point of view be dominating headlines every few other days and I don’t think it’s necessarily a positive if this continues for the region. At some point it may impact trade and our real economies.”
  • Russian Military Jet Intercepted U.S. Plane Near Japan. A Russian Su-27 Flanker fighter jet intercepted a U.S. surveillance plane off Russia’s east coast near Japan in April, flying unusually close, as tensions rose over the Ukraine crisis. The U.S. RC-135U Combat Sent electronic intelligence plane made by Boeing Co. (BA) was conducting a routine mission over the Sea of Okhotsk north of Japan on April 23 when the Russian fighter flew within about 100 feet (30 meters) of its nose, Rear Admiral John Kirby, a Pentagon spokesman, said today. Asked why the Pentagon didn’t disclose the incident until it was reported today by the Washington Free Beacon, spokesman Army Colonel Steve Warren said, “I don’t have a good answer for you.” 
  • Nespresso Falls Victim to Mining Cutbacks as China Cools. China’s reduced craving for raw materials is driving mining companies to go to extreme measures to cut costs amid steadily falling prices. Having already cut billions of dollars, mining companies are now scratching for savings wherever they can find them, from renegotiating rubber contracts for tires, to adopting driverless trucks and trains. Even menus aren’t exempt.
  • Brookstone Won With $173 Million Bid by Chinese Buyers. Brookstone Inc., the bankrupt luxury-gadget retailer, agreed to sell its assets to a group of Chinese buyers for more than $173 million, after they outbid a unit of Spencer Spirit Holdings Inc. at an auction, a lawyer said.
  • Asian Stocks Retreat From 7-Month High Before U.S. Jobs. Asian stocks fell, with regional benchmark index retreating from a seven-month high, as investors await a report on U.S. jobs and a decision from the European Central Bank on monetary policy. Santen Pharmaceutical Co. dropped 1.5 percent in Tokyo, leading a decline among health-care shares. Australand Property Group. climbed to a six-year high in Sydney after Frasers Centrepoint Ltd., a Singapore property company spun off from Fraser & Neave Ltd., trumped Stockland’s offer to buy the firm. JFE Holdings Inc. climbed 3.1 percent after Credit Suisse Group AG advised buying shares of the Japanese steelmaker. The MSCI Asia Pacific Index (MXAP) slid 0.2 percent to 142.84 as of 9:52 a.m. in Hong Kong as more than four stocks fell for every three that rose.
  • Juncker Boosted as EU’s Christian Democrats Widen Lead. Europe’s Christian Democrats widened their lead over other political groups in the European Parliament after last month’s elections, bolstering Jean-Claude Juncker’s bid to take over the bloc’s top executive job. The Christian Democrats won 221, or 29 percent, of the 751 seats in the incoming European Union assembly, according to an update it releasedyesterday in Brussels of the May 22-25 election results. That compares with 214 seats estimated June 2 and last week.
Wall Street Journal: 
  • Ukrainian Forces Clash With Pro-Russian Rebels. Kiev Acknowledges 181 People Dead as a Result of Military Action in Eastern Ukraine.
  • After Guantanamo, Freed Detainees Returned to Violence in Syria Battlefields. Release of Five Senior Taliban Figures from the U.S. Detention Center Renews Debate
  • The Accelerating Spread of Terrorism. Since 2010, there has been a 58% increase in the number of jihadist groups world-wide. President Obama's decision to withdraw troops from Afghanistan by 2016 is a risky step and may embolden Islamic extremists. So could the release of five high-level prisoners from Guantanamo Bay in a swap with the Taliban to win the freedom of Sgt. Bowe Bergdahl. The number of al Qaeda and other jihadist groups and fighters are growing, not shrinking. U.S. disengagement—or even risking the return of terrorists to the field by freeing them from detention—is not the answer to the threat they pose. Instead, U.S. strategy...
  • Health Care Is Our Other Afghanistan. The president and his worker bees believe in ObamaCare about as much as they believe in the Afghanistan war
Fox News:
  • Boehner: Lawmakers briefed on Bergdahl trade 2 years ago, had 'serious' concerns. Top congressional leaders were briefed more than two years ago about the possible exchange of five Guantanamo prisoners for American soldier Sgt. Bowe Bergdahl, but raised "serious" concerns from the outset about the risks of such a trade, officials say. House Speaker John Boehner and others provided new details Tuesday about the prior deliberations, and voiced grave concern that the administration charged ahead with the prisoner swap over the weekend without Congress' approval.
  • Federal regs for auto dealers costing US economy more than $10B, study says. Federal regulations for auto dealers are costing America's economy more than $10 billion in lost sales and employment each year, according to a new study conducted by the Center for Automotive Research provided to Fox News.
CNBC: 
Zero Hedge:
Business Insider:
Reuters:
Financial Times: 
  • Russia and China plan own rating agency to rival western players. Russia and China have agreed to set up a joint rating agency as Moscow’s stand-off with the west over Ukraine has made it more eager to establish institutions that would reduce its dependence on the US and Europe. “In the beginning, the agency will assess Russian-Chinese investment projects with a view to attracting of [investors from] a number of Asian countries,” Anton Siluanov, Russia’s finance minister, said in Beijing, according to his ministry. “Gradually, based on the progress and authority of such an agency, we believe it will rise to a level where its opinions will attract other countries.”
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.50% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 106.50 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 79.75 +.75 basis point.
  • FTSE-100 futures +.04%.
  • S&P 500 futures -.11%.
  • NASDAQ 100 futures  -.10%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (CYBX)/.04
  • (BF/B)/.58
  • (HOV)/.03
  • (FIVE)/.06
  • (PVH)/1.49 
Economic Releases
8:15 am EST
  • The ADP Employment Change for May is estimated at 210K versus 220K in April.
8:30 am EST
  • The Trade Deficit for April is estimated at -$40.8B versus -$40.4B in March.
  • Final 1Q Non-Farm Productivity is estimated at -3.0% versus a prior estimate of -1.7%.
  • Final 1Q Unit Labor Costs are estimated to rise +5.3% versus a prior estimate of a +4.2% gain.
9:45 am EST
  • Final Markit US Services PMI for May is estimated at 58.2 versus a prior estimate of 58.4.
10:00 am EST
  • The ISM Non-Manufacturing Composite for May is estimated to rise to 55.5 versus 55.2 in April.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -160,000 barrels versus a +1,657,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +140,000 barrels versus a -1,803,000 barrel decline the prior week. Distillate inventories are estimated to rise by +640,000 barrels versus a -196,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.18% versus a +1.2% gain the prior week.
2:00 pm EST
  • U.S. Fed Releases Beige Book.
Upcoming Splits
  • (AAPL) 7-for-1
Other Potential Market Movers
  • The Eurozone Services PMI, Bank of Canada decision, weekly MBA mortgage applications report and the Deutsche Bank Industrials/Basic Materials Conference could impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and real estate 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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