Tuesday, November 18, 2014

Tuesday Watch

Evening Headlines 
  • EU Skips Wider Russia Sanctions While Targeting Rebels. European Union governments held off on further economic sanctions against the Kremlin for fomenting rebellion in eastern Ukraine, while agreeing to blacklist more pro-Russia separatists there. EU foreign ministers decided to impose additional travel bans and asset freezes in response to the Nov. 2 elections in the rebel-held regions of Donetsk and Luhansk. The names will be released by the end of the month.
  • Disappointment Becomes Norm for Global Growth as Japan Contracts. Group of 20 leaders pledged over the weekend to do everything they can to boost the global recovery. Japan’s descent into a recession is the latest reminder of how elusive that goal is proving to be. Less than 24 hours after heads of state gathering in Brisbane, Australia, agreed to take measures that would boost their economies by a collective $2 trillion by 2018, the Cabinet Office delivered news in Tokyo that Japan’s gross domestic product unexpectedly shrank an annualized 1.6 percent in the three months through September, the second straight contraction.
  • Abe Set to Call Election, Delay Tax Hike Amid Recession. Japanese Prime Minister Shinzo Abe is set to call early elections as part of a trio of measures today in a gambit to secure his political future and fortify the “three arrows” of his economic policy after the nation sank into recession. Abe will postpone an unpopular sales tax increase, scheduled for October 2015, for 18 months, people familiar with the discussions said last week. He’ll probably call an early election for Dec. 14, according to people with knowledge of the ruling party strategy. Abe will announce both steps at a press conference today, public broadcaster NHK said, well as ordering new stimulus measures.
  • Beijing Home Prices Drop for First Time in 2 Years on Discounts. Beijing home prices fell for the first time in almost two years as China’s property slowdown deepened, prompting developers to offer discounts to cut inventories. New-home prices dropped in October in 67 cities of 70 tracked by the government from a year earlier, and in 69 from September, the National Bureau of Statistics said today. Prices in Beijing declined 1.3 percent, the first annual decrease since November 2012 and a reversal from the 14.7 percent jump in January from the previous year
  • Lopsided Link Shows Chinese Rejection of Hong Kong Stocks. Chinese investors failed to show up for some of Hong Kong’s foremost companies on the first day of the exchange link with the mainland, confounding the predictions of Deutsche Bank AG, BNP Paribas SA and Goldman Sachs Group Inc
  • China Stocks Drop for Fourth Day as Data Shows Home-Price Slump. Chinese stocks dropped, with the benchmark index declining for a fourth day, as falling home prices added to concerns that an economic slowdown will deepen and enthusiasm toward an exchange link with Hong Kong faded. Poly Real Estate Group Co. (600048) and China State Construction Engineering Corp. slumped at least 1.8 percent. New-home prices decreased in all but one city monitored by the government last month as developers offered discounts to cut inventories. Hong Kong Exchanges and Clearing Ltd. slid 2.8 percent, extending yesterday’s 4.5 percent drop, as mainland investors used less than 4 percent of their 10.5 billion yuan ($1.7 billion) quota in Hong Kong this morning. The Shanghai Composite Index (SHCOMP) fell 0.4 percent to 2,463.76 at the noon-time break, while the Hang Seng China Enterprises Index slid 1 percent.
  • Asian Stocks Rise as Abe Poised to Add Stimulus, Call Election. Asian stocks rose as investors await a decision by Japanese Prime Minister Shinzo Abe to put off a sales-tax increase, add stimulus and call an election, after data yesterday showed the economy entered recession. The MSCI Asia Pacific Index (MXAP) gained 0.4 percent to 140.29 as of 9:00 a.m. in Tokyo, after slumping by the most in more than a month yesterday.
  • Goldman Cuts Copper Price Forecast on Rising Dollar, Falling Oil. Copper prices will fall next year as a strengthening U.S. dollar and weaker oil prices push down marginal production costs, according to Goldman Sachs Group Inc. The bank lowered its 2015 price outlook to $6,217 a metric ton from $6,400, analysts including Max Layton said in a report yesterday. Marginal production cost will fall to between $5,600 and $6,300 a ton next year, according to the report.
Wall Street Journal: 
  • President Orders Review of U.S. Hostage Policies. Move Follows Criticism Surrounding Beheading Cases In Syria. The Obama administration is undertaking a review of how it handles cases of U.S. citizens held captive by extremists abroad, according to a letter from a top Pentagon official made public Monday, a move that follows criticism from some relatives of slain Americans.
  • Small Towns Go to Bat for Wall Street Banks. Fed Bid to Limit Banks’ Commodities Activities Imperils Local Gas Contracts, Mayors Argue. A Federal Reserve plan that could stop big banks from owning oil pipelines, metals warehouses and other physical-commodity assets is sounding alarm bells hundreds of miles from Wall Street.
  • Federal Private-Pension Safety Net Running $62 Billion Deficit. Pension Benefit Guaranty Corp. Report Warns of Problems with Multiemployer Pension Plans. The federal government’s safety-net program for private pensions is running a near $62 billion long-term deficit, largely due to long-standing problems in a type of pension plan that is common in transportation, construction and some other industries, according to a new report. The problems are likely to bankrupt the federal safety-net program for so-called multiemployer pension plans within the next decade, perhaps in the next few...
Fox News:
  • Controversial economist Gruber has earned millions from taxpayers at federal, state levels. (video) “My job was just to see if the numbers added up,” Dr. Jonathan Gruber, the controversial architect of ObamaCare, told PBS two years ago. And add up the numbers did – at least in terms of Gruber’s consulting fees. A Fox News review of state and federal websites, as well as published reports, finds the MIT economist and his firm have secured millions in federal and state contracts stretching back over the last fifteen years.
  • Why a Santa rally might not be in the cards. (video) Many traders expect stocks to rally into the year-end, but the current complacency may be signaling that a late year Santa rally is not in the cards. "We're a little concerned by the fact that investors' memories have become so short that volatility has just completely collapsed to multiyear lows a month away from an incredibly frightening roller-coaster ride. The bearish readings have slipped," said Julian Emanuel, equity strategist at UBS.
Zero Hedge:
Business Insider:
Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.9Brazil cuts 2014 GDP growth forecast, keeps fiscal goaFed's Williams: Can't wait too long to raise rateTripAdvisor profit sags as costs jump; shares slid
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 106.50 -.5 basis point.
  • Asia Pacific Sovereign CDS Index 63.75 unch.
  • FTSE-100 futures n/a.
  • S&P 500 futures -.03%.
  • NASDAQ 100 futures  +.01%.
Morning Preview Links

Earnings of Note

  • (DKS)/.41
  • (HD)/1.13
  • (MDT)/.96
  • (TJX)/.85
  • (JACK)/.53
  • (PETM)/.95
Economic Releases
8:30 am EST
  • PPI Final Demand for October is estimated to fall -.1% versus a -.1% decline in September.
  • PPI Ex Food and Energy for October is estimated to rise +.1% versus unch. in September.
10:00 am EST
  • The NAHB Housing Market Index for November is estimated to rise to 55.0 versus 54.0 in October..
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Kocherlakota speaking, UK CPI report, Net Long-Term TIC Flows for September, US weekly retail sales reports, Stifel Healthcare Conference, UBS Tech Conference, Morgan Stanley Consumer/Retail Conference, (NOV) analyst day, (SYNA) investor meeting and the (ZTS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology 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 day.

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