Friday, March 27, 2015

Friday Watch

Evening Headlines 
  • Japan's Inflation Gauge Halts at Zero in February. The Bank of Japan’s key inflation gauge ground to a halt as consumer spending slumped, highlighting weakness in the nation’s recovery from recession. Consumer prices excluding fresh food rose 2 percent in February from a year earlier, less than a median estimate of 2.1 percent. The central bank’s measure that strips out last year’s sales-tax increase showed inflation at zero. 
  • Banks Slash Dividends as Loans Sour From Beijing To Pearl River. China’s biggest banks are accelerating cuts to their dividend payouts as bad debts pile up from struggling exporters in the Pearl River Delta, coal companies in the nation’s west and manufacturers in the Bohai Rim near Beijing. Three of the nation’s four largest banks, including Industrial & Commercial Bank of China Ltd., this week cut their payment ratios for 2014 by the most in three years. ICBC’s fell to 33 percent from 35 percent a year earlier. The smaller China Citic Bank Corp. last week eliminated its payment altogether.
  • Co-Pilot Focus in Crash Probe Intensifies Hunt for Data Recorder. Crash investigators are rushing to find the onboard data recorder from Germanwings Flight 9525 to confirm prosecutors’ suspicions that the co-pilot steered the jet into a mountain after locking the captain out of the cockpit. Audio files from the flight deck revealed that the co-pilot began descending after the captain stepped into the cabin, then denied him re-entry, prosecutor Brice Robin said in Marseille, France. Except for his breathing, the co-pilot stayed silent until the plane slammed into a slope at full speed, Robin said.  
  • TSMC Drops as Weakening Smartphone Market Threatens Chip Demand. Taiwan Semiconductor Manufacturing Co. fell for a fifth day in Taipei trading, its longest losing streak in two years, after at least four analysts published reports saying a stronger U.S. dollar may weaken smartphone chip demand. The shares dropped 1 percent to NT$144 as of 10:58 a.m. in Taipei, widening the decline this week to 6.5 percent. Taiwan’s benchmark Taiex, of which TSMC is the largest member, fell 0.8 percent.
  • Asian Stocks Decline for Second Day to Head for Weekly Retreat. Asian stocks fell for a second day, adding to the biggest daily drop in almost two months, as industrial shares led declines and most Japanese equities went ex-dividend. The MSCI Asia Pacific Index lost 0.2 percent to 147.10 as of 9:05 a.m. in Tokyo. The measure headed for a 0.3 percent decline this week after sliding 1.1 percent on Thursday.
  • North American Railroads Caught by Speed of Crude-Oil Collapse. The slowdown that North American railroad companies had been bracing for in crude oil shipments has turned into a rout, with volumes falling faster than executives had predicted. With energy companies scaling back drilling after prices for the commodity fell about 50 percent since July, industry executives and analysts anticipated that demand for hauling crude and extraction materials such as frac sand and pipes would slow after a four-year surge. They didn’t expect it to slow this much this fast.
Wall Street Journal:
  • Obama Struggles With a Messy Middle East. Latest fighting in Yemen complicates relations with Iran as ties with allies are strained. The Middle East has descended into a state of disarray unusual even for that troubled region, imperiling President Barack Obama’s policy dreams and leaving him with limited ability to control events. The latest complication has erupted in Yemen, where rebel forces backed by Iran have driven out the country’s president and are expanding their control southward across the country. The prospect that those Shiite rebels might succeed in taking over a neighboring...
  • Obama’s Mideast Vacuum. The Saudis invade Yemen as the Sunni-Shiite war escalates. An abiding goal of President Obama’s foreign policy has been to reduce America’s role in the Middle East, in the belief that it would lead to greater stability and serve U.S. interests. Has a policy ever been so thoroughly repudiated in so short a time? Mr. Obama has succeeded in his retreat, but the vacuum he’s left has produced a region on fire that is becoming a broad Sunni-Shiite war.
  • The Campus Climate Crusade. Liberal groups are out to sully the names of conservative professors and shut down programs funded by the Koch foundation. Conservative thought on campus these days is rare, though for some it’s still not rare enough. Witness the growing campaign by politicians, unions and environmentalists to intimidate into silence any academic or program that might challenge liberal ideology.
  • China stocks may be in serious bubble. As market volumes explode, even teenagers are buying. Some say that when the average “mom-and-pop” retail investors get back into the stock market, it could be time to get out. But what about when even teenagers start buying? China has entered a new stock frenzy, like something out of America in the Roaring 20s or the dottiest days of the dot-com bubble, with trading volumes continuing to push to new record highs.
Zero Hedge:
Business Insider:
Evening Recommendations 
Morgan Stanley:
  • Rated (YHOO) Overweight, target $55.
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 113.0 unch.
  • Asia Pacific Sovereign CDS Index 61.25 -.5 basis point.
  • S&P 500 futures +.39%.
  • NASDAQ 100 futures +.38%.
Morning Preview Links

Earnings of Note

  • (BBRY)/-.05
  • (CCL)/.10
  • (FINL)/.85
Economic Releases
8:30 am EST
  • 4Q GDP is estimated to rise +2.4% versus a +2.2% prior estimate.
  • 4Q Personal Consumption is estimated to rise +4.4% versus a prior estimate of a +4.2% gain.
  • 4Q GDP Price Index is estimated to rise +.1% versus a +.1% prior estimate.
  • 4Q Core PCE is estimated to rise +1.1% versus a prior estimate of a +1.1% gain.
10:00 am EST
  • Final Univ. of Mich Consumer Sentiment for March is estimated at 92.0 versus a prior estimate of 91.2.
 Upcoming Splits
  • (GIL) 2-for-1
Other Potential Market Movers
  • The Fed's Yellen speaking, Fed's Fischer speaking and the China industrial profits report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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