Thursday, November 20, 2014

Thursday Watch

Evening Headlines 
  • Germany Calls for Ukraine Peace Efforts as Tensions Mount. German Foreign Minister Frank-Walter Steinmeier said mounting tensions in eastern Ukraine raised the risk of a “major military confrontation.” Speaking after a day of shuttle diplomacy that took him to Moscow and Kiev, Steinmeier said yesterday he used his meeting with Russian President Vladimir Putin “for an exchange of views, which seriously differ” on Ukraine
  • Medicine and Meat Out of Reach Amid Ukrainian Price Shock. From Lviv, near the Polish border, to Kharkiv, 1,000 kilometers (650 miles) east in Russia’s shadow, Ukrainians are grappling with the world’s worst-performing currency, inflation that’s rocketed to 20 percent and the worst recession in five years. The plight of Zhytomyr’s 270,000 residents shows how bailout-mandated austerity and the strains of an eight-month insurgency are playing out in everyday life.
  • Distressed Debt in China? You Ain’t Seen Nothing Yet, Buyers Say. Bad debts in China are well underestimated because authorities persist in propping up weak companies and bailing out local investors, according to DAC Management LLC. The Chicago-based asset management and advisory firm, which focuses on distressed credit and special situations in China, says the worst is yet to come, and that means lots of opportunities for the world’s biggest distressed debt traders.
  • China Wages Policy Backfires as Costs Prompt Sock-City Blues. Wages at Chen Fengying’s sock factory on China’s east coast have soared almost sixfold in seven years. The 20 percent increase she expects in 2015 may doom her seven-year-old company as profit and revenue fall. “If things go on like this, we’ll just close down,” said Chen from Zhuji in Zhejiang province, the so-called Sock City that produces 17 billion pairs annually, more than 35 percent of global production. “Many factories have already died.”
  • Asian Stocks Retreat on Fed Minutes; Japan Shares Climb on Yen. Asian stocks fell a second day after Federal Reserve minutes showed some U.S. policy makers were concerned about low inflation. Shares in Japan gained as the yen weakened past 118 per dollar. The MSCI Asia Pacific Index (MXAP) lost 0.1 percent to 139.54 as of 9:04 a.m. in Tokyo after dropping 0.7 percent yesterday.
  • Codelco Seen Trimming 2015 China Copper Premium Amid Surplus. Codelco, the world’s biggest copper producer, will reduce the fee it charges Chinese buyers by 4 percent next year amid waning demand and rising supplies, according to an executive at the country’s largest non-state trader of the metal. The charge for long-term supplies from the Chilean miner added to prices for immediate delivery on the London Metal Exchange will fall to $133 a metric ton from this year’s $138, Luo Shengzhang, vice president of Maike Metals Group, said yesterday at a conference in Shanghai. The spot premium for shipments to Shanghai, including insurance and freight, is now $60 a ton, compared with $135 in May and a record $210 in August 2013, according to data from SMM Information & Technology Co.
Wall Street Journal: 
  • Obama Sets Immigration Rollout for This Week. Moves, to Be Announced in Thursday Night Speech, Expected to Protect Millions From Deportation. President Barack Obama will lay out sweeping changes to the immigration system in a speech Thursday night, offering new protections to millions of people in the country illegally and sparking a bitter fight with Republicans.
  • As Yen Slides, Investors Shun Other Asian Currencies. Regional Officials Fear Weaker Japanese Currency Could Hurt Competitiveness of Their Economies. Investors are shedding holdings of Korean won, Singapore dollars and other Asian currencies, in a bet the yen’s fall against the dollar will reverberate through the region’s foreign-exchange markets.
  • Obama: The Hangover. The Gruber technocracy is a green sludge consuming the Democratic Party. Who can forget the Obama acceptance speech in 2008 on a football field in Denver, the nominee standing amid Greek columns and scrolling through a long list of goals to 84,000 Democrats? That was the high. Six years later, the Democrats get the hangover.
  • Strains in Japan could put focus on debt. Naysayers have long worried the whole “Abenomics” experiment would end in tatters. And now Abe’s decision to delay the hike and call a snap election following the Japanese economy’s fall back into recession in the third quarter, has some observers worried of a possible strain between Kuroda and Abe.
  • Goldman(GS) accused of exploiting aluminum storage rules. (video) In a voluminous new report reflecting two years of research, an influential Senate panel accuses Goldman Sachs of manipulating aluminum storage rules in order to line its own pockets, even as manufacturers and customers suffered.
Zero Hedge:
Business Insider:
NY Times: 
  • Arizona Sues G.M. for $3 Billion Over Recalls. The attorney general of Arizona said on Wednesday that the state had filed suit against General Motors, claiming that the automaker had defrauded the state’s consumers of an estimated $3 billion.
  • Salesforce(CRM) 2016 revenue forecast misses market estimates. Cloud software company Inc forecast revenue for the current quarter and full year 2016 that fell short of market expectations, hurt by a strong dollar. Shares of Salesforce, which gets about 30 percent of its revenue from outside Americas, were down 4.5 percent in extended trading on Wednesday. The world's biggest maker of online sales software said it expected revenue of $6.45 billion to $6.5 billion for the year ending January 2016, missing analysts' average estimate of $6.66 billion.
  • More U.S. borrowers fall behind on their car loans in 3rd qtr. The amount of U.S. borrowers that were at least two months behind on their car loan payments jumped sharply in the third quarter, according to a report on Wednesday from Experian Automotive. The 60-day delinquency rate for U.S. auto loans rose nearly 9 percent to 0.62 percent in the third quarter from the same period in 2013.
Financial Times:
  • China and Russia in naval co-operation vow. China and Russia have vowed to strengthen bilateral military co-operation and hold joint naval exercises to counter US influence in the Asia-Pacific region as a growing chorus of voices warns of a looming “new cold war”.
Shanghai Securities News:
  • China Should Cut 'Excessive' Expansion of Investment. China should reduce "excessive" expansion of investments and improve their efficiency to ensure sustainable economic growth, according to an article written by Xu Ce and Wang Yuan from the National Development and Reform Commission. China should reform performance assessment of local govts and reduce shadow banking, the article said.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.75% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 105.50 unch.
  • Asia Pacific Sovereign CDS Index 64.5 +1.0 basis point.
  • FTSE-100 futures -.16%.
  • S&P 500 futures -.20%.
  • NASDAQ 100 futures  -.12%.
Morning Preview Links

Earnings of Note

  • (DLTR)/.64
  • (PDCO)/.51
  • (PLCE)/1.80
  • (BBY)/.25
  • (ROST)/.87
  • (GPS)/.73
  • (ZOES)/.03
  • (ADSK)/.22
  • (GME)/.61
  • (INTU)/-.20
  • (TFM)/.28
  • (SPLK)/.00 
Economic Releases
8:30 am EST
  • The CPI for October is estimated to fall -.1% versus a +.1% gain in September.
  • The CPI Ex Food & Energy for October is estimated to rise +.1% versus a +.1% gain in September.
  • Initial jobless Claims are estimated to fall to 284K versus 290K the prior week.
  • Continuing Claims are estimated to fall to 2370K versus 2392K prior.
9:45 am EST
  • Preliminary Markit US Manufacturing PMI for November is estimated to rise to 56.3 versus 55.9 in October.
10:00 am EST
  • Philly Fed for November is estimated to fall to 18.5 versus 20.7 in October.
  • Existing Home Sales for October are estimated to fall to 5.15M versus 5.17M in September.
  • The Leading Index for October is estimated to rise +.6% versus a +.8% gain in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Williams speaking, Fed's Tarullo speaking, weekly EIA natural gas inventory report, Bloomberg Economic Expectations Index for November, weekly Bloomberg Consumer Comfort Index, Canaccord Medical Tech/Diagnostics Forum, Goldman Emerging/SMID-Cap Growth Conference and the (INTC) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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