Wednesday, August 20, 2014

Wednesday Watch

Evening Headlines 
Bloomberg:
  • Ukraine Gains Against Rebels as Diplomacy Intensifies. The Ukrainian government said its forces took control of one of four districts in the pro-Russian separatist stronghold of Luhansk and are fighting in the city center as diplomatic efforts to end the conflict intensified. German Chancellor Angela Merkel will visit Kiev on Aug. 23 for talks with President Petro Poroshenko. Russian President Vladimir Putin will take part in an Aug. 26 Customs Union meeting in Minsk attended by Poroshenko, the Kremlin said in a statement. Poroshenko is due to join an Aug. 30 European Union summit in Brussels and a Sept. 4 NATO summit in the U.K. 
  • More Russia Sanctions Are Needed, Ukraine Ambassador Says. Tougher U.S. and European sanctions on finance, military sales and energy are needed to stop Russia arming and supporting separatists and end the conflict in Ukraine, the country’s ambassador to the U.S. said today. At a Bloomberg Government lunch today in Washington, Olexander Motsyk ruled out a unilateral cease-fire by Ukrainian forces and questioned a purported humanitarian aid convoy from Russia. He said stronger sanctions are needed, even if that would restrict the energy exports on on which Ukraine and other European countries depend. 
  • Heartbleed Flaw Said Used by Chinese in Hospital Hacking. Chinese hackers exploited the Heartbleed Internet security flaw to steal data on 4.5 million patients of Community Health Systems Inc. (CYH), the first known breach of a company by use of the vulnerability, said a person involved in the investigation who wasn’t authorized to comment publicly. 
  • China Levies Record Antitrust Fine on Japanese Firms. China found 12 Japanese auto-parts makers guilty of price fixing and doled out a record 1.24 billion yuan ($200 million) in fines amid one of the broadest investigations since the nation’s antitrust law came into effect six years ago. Eight Japanese auto-parts makers and four bearings manufacturers were found guilty of collusive behavior, with Sumitomo Electric Industries Ltd. (5802) and Yazaki Corp. drawing the heaviest fines, according to the National Development and Reform Commission, China’s main economic planner, in a statement on its website.
  • China Coal Port Seen as Economic Barometer Set for Record Supply. Qinhuangdao, home to China’s largest coal port that’s been called an indicator of Asia’s biggest economy, is set for record commodity deliveries over the next three years as urbanization boosts demand for the fuel. Shipments of mainly coal and ores via the port, also a popular resort where the late Chairman Mao Zedong holidayed, may rise by 20 million to 30 million metric tons by 2017, Xing Luzhen, the chairman of Qinhuangdao Port Co. (3369), said on Aug. 14. Supplies hit a record high of 279 million tons in 2011. 
  • Australia Review Chills $20 Billion Clean-Energy Industry. Australia is frightening developers away from renewable energy even before the government decides on whether to overhaul targets for the industry’s growth. Prime Minister Tony Abbott’s decision to take advice on renewable energy targets from a skeptic about the causes of global warming prompted at least two developers to reconsider plans for wind and solar farms. Earlier this week, the company planning a giant solar plant in Mildura pulled out of the project citing the risk the government will rework its policy.
  • Asia Stocks Little Changed Near 6-Year High; BHP Slumps. Asian stocks were little changed, with the benchmark regional index trading near a six-year high, after data showed the U.S. economy is strengthening and inflation is running below the Federal Reserve’s target. BHP Billiton Ltd. (BHP) slumped. QBE Insurance Group Ltd. (QBE) surged 3.6 percent in Sydney as it completed a A$650 million ($604 million) capital raising. Hitachi Metals Ltd. added 3.2 percent in Tokyo after unveiling plans to acquire Waupaca Foundry Inc. BHP, the world’s largest miner, tumbled 4.3 percent in Sydney after announcing a spinoff and refraining from a share buyback expected by some investors. The MSCI Asia Pacific Index traded at 148.76 as of 9:34 a.m. in Tokyo, before markets open in Hong Kong and China.
Wall Street Journal: 
  • Iraqi Military Launches Offensive to Reclaim Tikrit. Campaign Is the Second Attempt by Iraqi Forces to Retake City From Islamic State. The Iraqi military launched a major air and ground offensive early Tuesday to reclaim Tikrit from Islamist militants, who had taken control of the city best known as the hometown of former dictator Saddam Hussein, officials said. Tuesday's campaign marked the second attempt since July by Iraqi forces to retake Tikrit, which fell to Islamic State fighters—supported by former allies of Mr. Hussein—in early June.
  • Putin Meeting Leaves Kiev With Tough Choices. Encounter Would Be First Since June, Comes Amid Diplomatic Push. Russian President Vladimir Putin and his Ukrainian counterpart will meet next week for the first time in two months, officials in both countries said, intensifying a diplomatic push that could force Kiev to choose between continuing its military campaign against pro-Russia separatists or making concessions to Moscow to stop the bloodshed. Calls for a cease-fire from both Russia and Europe are growing louder amid a deepening...
  • The Medical Innovation Threat. The attack on a near-cure for Hepatitis C is a prelude to price controls. An invasive species has been introduced into the U.S. health innovation ecosystem, with a growing danger of permanent damage to the development of specialty drugs. The relentless assault on the price of Sovaldi is becoming a threat to the 30-year political balance that has energized the biomedical revolution. Sovaldi is the kind of medicine that the drug scolds claim to want—a true scientific advance with a near-perfect cure rate for Hepatitis C, the liver-destroying virus that infects one of every 100 Americans and some...
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Evening Recommendations
ISI:
  • Raised (FFIV) to Strong Buy.
Night Trading
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 100.5 -1.5 basis points.
  • Asia Pacific Sovereign CDS Index 69.25 -1.25 basis points.
  • FTSE-100 futures -.03%.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures  -.04%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (HAIN)/.89
  • (TGT)/.78
  • (PETM)/.94
  • (SJM)/1.37
  • (EV)/.62
  • (IRF)/.29
  • (LB)/.62
  • (HPQ)/.89
  • (SNPS)/.60
  • (CRMT)/.60
  • (SPLS)/.12
  • (LOW)/1.03
  • (AEO)/.00 
Economic Releases 
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,140,000 barrels versus a +1,401,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,390,000 barrels versus a -1,160,000 barrel decline the prior week. Distillate inventories are estimated to fall by -360,000 barrels versus a -2,421,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.38% versus a -.8% decline the prior week.
2:00 pm EST
  • Fed Releases Minutes from July 29-30 FOMC Meeting.
Upcoming Splits
  • (EPD) 2-for-1
Other Potential Market Movers
  • The China Manufacturing PMI, BoE Minutes, weekly MBA Mortgage Applications report and the (MON) investor event could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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