Monday, November 24, 2014

Monday Watch

Weekend Headlines 
  • Ukrainian Leader Evokes Stalin's Famine as Fight With Pro-Putin Rebels Intensifies. President Petro Poroshenko evoked memories of the 1930s famine that killed as many as 10 million Ukrainians under Soviet leader Joseph Stalin to rally citizens as pro-Russian separatists intensified fighting in the east. Poroshenko, flanked by his wife and administration officials, laid a jar filled with grains in front of a candle-shaped obelisk beside the Dnieper River in Kiev yesterday to commemorate the famine, which was declared a genocide in Nov. 28, 2006 by Ukrainian lawmakers. Russia has long rejected the claim of genocide, calling it a “one-sided falsification of history.” 
  • PBOC Bounce Seen Short Lived as History Defies Bulls. China’s benchmark stock index rose to a three-year high after the central bank’s surprise interest rate cut late last week. Recent history suggests the gains won’t last long. While the Shanghai Composite Index (SHCOMP) climbed 2 percent today, six of the past seven cuts to interest rates and reserve requirements have been followed by declines in stock prices over the next two months. The last time the PBOC lowered lending and deposit rates, in July 2012, the benchmark index fell 7.4 percent, according to data compiled by Bloomberg.
  • OPEC Underestimated Resiliency of U.S. Oil Output: Yergin. OPEC was mistaken in thinking that U.S. shale oil production would be unprofitable once crude prices slipped below $90 a barrel, according to Pulitzer Prize-winning author Daniel Yergin. The Organization of Petroleum Exporting Countries will have a tough time coming to an agreement about production when ministers gather Nov. 27 in Vienna, said the vice-chairman of IHS Inc., an Englewood, Colorado-based consultant. Oil prices plunged into a bear market last month, the result of a surge in shale drilling that lifted U.S. output to a three-decade high, as OPEC output rose and there were increasing signs of slower demand growth.
  • Asian Stocks Advance as China Rate Cut Boosts Optimism. Asian stocks rose, with a regional gauge heading for its biggest advance this month, after U.S. indexes reached another record as China’s unexpected interest-rate cut stoked optimism in the global economy. In Sydney, BHP Billiton Ltd. (BHP), the world’s biggest mining company that gets about 35 percent of revenue from China, jumped 3.9 percent and Fortescue Metals Group Ltd. climbed 8.9 percent, rebounding from losses the past two weeks. China Vanke Co., the nation’s biggest homebuilder by sales, surged 6.8 percent in Hong Kong, pacing gains among mainland developers. China Railway Construction Corp. gained 1.7 percent after winning $1.98 billion worth of contracts in Saudi Arabia. The MSCI Asia Pacific excluding Japan Index climbed 1.2 percent to 479.04 as of 9:48 a.m. in Hong Kong, heading for its biggest advance since Oct. 29.
  • Gold Wagers Gain as China Rate Reduction Stems Rout. Hedge funds added bullish gold wagers at the fastest pace since June as central bank action from China to Japan and Europe helped stem the rout in prices. The net-long position in New York futures and options expanded 56 percent, U.S. government data show. Short holdings fell to a two-month low and long wagers climbed for the first time in four weeks
  • BHP(BHP) Targets Further Spending Cuts as Iron Prices Tumble. BHP Billiton Ltd. (BHP) plans to take a scalpel to capital spending and costs to bolster cashflows as plunging iron ore and crude oil prices heighten investor concerns over returns. Capital expenditure will be cut to $13 billion in fiscal 2016, downmore than 40 percent from 2012. The world’s biggest mining company also increased its annual target for productivity gains by 2017 by $500 million. 
Wall Street Journal: 
  • No Iran Nuclear Deal Seen by Monday Deadline. U.S., Other World Powers Want to Extend Talks. The U.S. and other world powers said it will be virtually impossible to reach a comprehensive deal to curb Iran’s nuclear activities by the Monday night deadline, and they would favor extending the talks. U.S. officials are arguing that preserving improved relations with Tehran is preferable to a breakdown in more than a year of direct negotiations and a potential escalation of tensions in an already-fractious Middle East.
  • Loan ‘Guarantee Chains’ in China Prove Flimsy. Companies Renege on Promises to Pay Up in a Default. When a fabric company called Jiangyin Xueyuan Textile Co. collapsed, the troubles soon cascaded through other firms in this mill town. A machinery maker, paper producer, manufacturer of faux-wood flooring and textile maker had one thing in common. They had promised, in the event of default, to repay the loans taken on by Xueyuan. Court documents say the fabric company can’t pay what it owes.
Fox News:
  • U.S., global business confidence slumps. U.S. and global business confidence slumped in the third quarter, according to a survey of business executives released Sunday. Markit said its U.S. business outlook survey showed that a net 31.2% of executives saw growing activity for the next 12 months in October, down from a net 51.4% when they were surveyed in June. That’s the lowest reading since the survey started in 2009. A global survey conducted by Markit saw a net 28% expecting higher activity, down from 39% in June, to mark a five-year low. Optimism in the eurozone was the weakest since June 2013, and Russian confidence fell to a survey low. In the U.S., hiring intentions fell to a new survey low, as did investment intentions.
Zero Hedge:
Business Insider:
  • Mexico cuts 2014 growth forecast after surprisingly weak 3rd qtrMexico's finance ministry cut its 2014 growth forecast on Friday after the economy grew unexpectedly slowly in the third quarter in a modest recovery that is now also threatened by rising social unrest. Mexican gross domestic product expanded 0.5 percent in the third quarter from the second, the national statistics agency said on Friday, slowing from a downwardly revised 0.9 percent growth in the April-to-June period. A Reuters poll had projected 0.7 percent growth.
Financial Times:
  • US oil imports from Opec at 30-year low. US imports of crude oil from Opec nations is at its lowest level in almost 30 years, underlining the impact of the shale revolution on global trade flows.
  • Germany Sees Danger of Separation of East Ukraine. Reality in eastern Ukraine isn't in line w/Russia's promise not to destroy country's unity, citing interview w/German Foreign Minister Frank-Walter Steinmeier.
Night Trading
  • Asian indices are +.25% to +1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 105.0 -1.5 basis points.
  • Asia Pacific Sovereign CDS Index 64.0 -1.75 basis points.
  • FTSE-100 futures n/a.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures +.04%.
Morning Preview Links

Earnings of Note

  • (NUAN)/.28
  • (WDAY)/-.09
  • (PANW)/.12
  • (CPRT)/.37
Economic Releases
8:30 am EST
  • The Chicago Fed National Activity Index for October is estimated to fall to .4 versus .47 in September.
9:45 am EST
  • The Preliminary Markit US Services PMI for November is estimated to rise to 57.3 versus 57.1 in October.  
10:30 am EST
  • The Dallas Fed Manufacturing Activity Index for November is estimated to fall to 9.0 versus 10.5 in October.
Upcoming Splits
  • (JAH) 3-for-2
Other Potential Market Movers
  • The $28B 2Y T-Note auction and the (ASML) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and real estate 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 week.

No comments: