Sunday, November 02, 2014

Monday Watch

Weekend Headlines 
  • Ukraine Says Rebel-Held Elections Pose Threat to Peace. Russian-backed rebels held elections in their self-proclaimed people’s republics in eastern Ukraine, a move that the government in Kiev said poses a threat to the peace process. Rebels organized the ballots in the territory of Donetsk and Luhansk a week after boycotting Oct. 26 national parliamentary elections. The one-day ballot, designed to pick a head of government as well as local parliament, was only backed by Russia and defied governments from Kiev to Washington.
  • Ruble’s Two-Minute Rally Shows Russia Guessed Wrong. The Russian central bank’s gambit worked for all of about two minutes yesterday. That’s how long the ruble rallied after policy makers surprised investors by ratcheting up the benchmark interest rate 1.5 percentage points to 9.5 percent this afternoon. After that, it was right back to declines for the world’s worst-performing currency, with losses swelling to as much as 3.6 percent against the dollar, the biggest drop in three years
  • Abducted Nigerian Schoolgirls ‘Married Off’ by Boko Haram. School girls abducted by Nigeria’s Boko Haram group have converted to Islam and been “married off” to militants, according to a new video message. A man claiming to be the Islamist group’s leader, Abubakar Shekau, appeared in the 13-minute video and denied that a truce had been agreed with the government or that Boko Haram had started talks to free the abducted schoolgirls. The Nigerian military has repeatedly said it killed Shekau in its operations against Boko Haram.
  • Pacific Air Force Chief Says Wary of Risky Flying by China Jets. The U.S. is concerned Chinese jets may engage in further risky intercepts of its military aircraft, even after starting talks aimed at avoiding such encounters, the new commander of U.S. air forces in the Pacific said. A Chinese fighter jet flew within 20 feet of a U.S. P-8 Poseidon aircraft flying at more than 400 miles an hour near Hainan Island -- China’s gateway to the contested South China Sea -- on Aug. 19, an encounter that the Pentagon described as “unsafe and unprofessional.” “I never say never,” General Lori Robinson, 55, said when asked if talks meant such behavior would cease. “What’s important is that we do start the dialogue and that we do come to an understanding of what a traditional intercept is.”
  • Hedge Funds Cut Bullish Oil Bets on Rising Global Output. Hedge funds cut bullish holdings in crude as record U.S. output added to a global supply glut, spurring the longest losing streak in prices in six years. Money managers reduced net-long positions in West Texas Intermediate by 2.3 percent in the week ended Oct. 28, U.S. Commodity Futures Trading Commission data show. Long positions retreated to the lowest level in 17 months
  • Dollar Nears 7-Year High Versus Yen on U.S; Gold Slides. The dollar jumped to an almost seven-year high versus the yen and gold fell as slowing Chinese manufacturing growth and the Bank of Japan’s unexpected stimulus highlighted the diverging growth outlook for the U.S. and Asian economies. The Bloomberg Dollar Spot Index advanced 0.3 percent by 11:33 a.m. in Hong Kong, heading for a level last seen in June 2010 as the greenback bought 112.73 yen, the most since December 2007. Gold fell 0.4 percent to $1,167.73 an ounce in the spot market and silver sank 1.3 percent. South Korea’s won slid 0.7 percent as the yen’s slump heightened intervention speculation. Standard & Poor’s 500 Index futures were little changed as Asia’s benchmark share index slid 0.5 percent.
Wall Street Journal:
  • What Bubble? Silicon Valley’s Younger Set Exhibits Optimism. There’s a generation gap in Silicon Valley, and it’s over a great deal more than who is using Snapchat versus who is still sending emails. In tech, the psychological dividing line is whether you were in the game the last time it all came crashing down. “I remember the bubble bursting, but only just; I was 14,” says Sam Altman, president...
  • China faces trap in currency war. Japan’s latest monetary easing puts China’s policy makers in bind, forcing them to pick between two tough choices, writes Craig Stephen.
Zero Hedge:
New York Times:
  • Cracks in the Stress Tests of European Banks. The sigh of relief was almost audible last week when the European Central Bank published its long-awaited safety and soundness report on 130 banks in 19 countries in the region. Many investors seemed comforted that just 13 banks had failed the comprehensive exam. But there is much more to the report than a pass/fail grade for Europe’s banks. And some of the findings should trouble any investor interested in the accuracy and comparability of European banks’ financial statements.
Financial Times:
  • China’s growth in danger of slowing more sharply. China’s cooling economy has already roiled global commodity markets and prompted slowdowns in places such as Latin America, Australia and Germany that had been big beneficiaries of the Chinese boom. The Chinese economy grew at its slowest pace since the depths of global financial crisis last quarter and is almost certain this year to register its weakest annual growth rate since 1990.
  • German Government Sees 1,000 Potential Islamist Terrorists. Federal Criminal Office head Joerg Ziercke warns of possible Islamic State terrorist attacks by fanatical individuals or small groups in Germany, citing an interview.
Night Trading
  • Asian indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 108.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 63.5 -2.0 basis points.
  • FTSE-100 futures +.26%.
  • S&P 500 futures -.09%.
  • NASDAQ 100 futures -.09%.
Morning Preview Links

Earnings of Note

  • (AMG)/2.71
  • (SYY)/.51
  • (L)/.68
  • (CNA)/.78
  • (VNO)/1.22
  • (HLF)/1.51
  • (S)/-.06
  • (THC)/.09
  • (MRO)/.59
  • (TDW)/1.06
Economic Releases
9:45 am EST
  • The Final Markit US Manufacturing PMI for October is estimated at 56.2 versus a prior estimate of 56.2.
10:00 am EST
  • ISM Manufacturing for October is estimated to fall to 56.2 versus 56.6 in September.
  • ISM Prices Paid for October is estimated to fall to 58.0 versus 59.5 in September.
  • Construction Spending for September is estimated to rise +.7% versus a -.8% decline in August.
  • Total Vehicle Sales for October are estimated to rise to 16.4M versus 16.34M in September.
Upcoming Splits
  • (SYNT) 2-for-1
Other Potential Market Movers
  • The Fed's Fisher speaking, Fed's Evans speaking, Eurozone PMI data and the RBA rate decision could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.

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