Sunday, December 27, 2015

Monday Watch

Posted by Gary .....at 11:07 PM
Today's Headlines
Bloomberg:  
  • China Telecom Shares Fall as Chairman Becomes Subject of Probe. China Telecom Corp., the nation’s third-largest wireless carrier, fell in Hong Kong trading after its chairman became the latest high-ranking executive to be targeted by anti-graft investigators. The stock dropped as much as 3 percent to HK$3.62 in early trading in Hong Kong. China’s Central Commission for Discipline Inspection said in a statement on Sunday that Chang Xiaobing, who headed China Unicom (Hong Kong) Ltd. for more than a decade before becoming chairman and chief executive officer of China Telecom Corp. in September, is being probed for severe disciplinary violations.
  • Chinese Stocks Fall in Hong Kong as Industrial Profits Decline. Chinese stocks headed for their steepest losses in two weeks in Hong Kong after industrial companies’ profits declined and the nation’s anti-graft authority announced an investigation into the chairman of China Telecom Corp. The Hang Seng China Enterprises index slid for the first time in three days, losing 0.7 percent at 10:30 a.m. China Telecom dropped the most in two weeks after the company said Chang Xiaobing is being probed for severe disciplinary violations. CRRC Corp. and Air China Ltd. retreated after data showed industrial profits slipped 1.4 percent last month.  
  • Asian Stocks Trading Near Three-Week High as Industrials Gain. Asian stocks advanced, with the regional benchmark measure trading near a three-week high, as industrial and financial shares led gains. The MSCI Asia Pacific Index climbed 0.1 percent to 131.37 as of 9:28 a.m. in Tokyo.
  • Commodity Funds Hemorrhage Cash as Investors Bail at Record Pace. Investors can’t get seem to get away from non-energy commodities fast enough. A record $857 million was pulled this year from U.S. exchange-traded funds backed by broad baskets of everything from grains to metals, according to data compiled by Bloomberg through Dec. 23. The value of the funds plunged 26 percent as raw materials tumbled to a 16-year low. Hedge funds are expecting more losses, betting on price declines for gold, copper, corn and natural gas. 
  • Oil Halts Gains Near 3-Week High as Iran Says Exports `Priority'. Oil in New York halted gains near a three-week high as Iran repeated its goal of boosting exports after sanctions on the country are lifted. Futures lost as much as 0.7 percent, falling the first time in five days. Iran’s priority is to boost crude shipments to pre-sanction levels, state-backed IRNA reported, citing Oil Minister Bijan Namdar Zanganeh. The Persian Gulf nation plans to add 500,000 barrels a day of exports within a week after sanctions are removed, said Rokneddin Javadi, head of National Iranian Oil Co., according to Shana news agency.
  • Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure. In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well. Those efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high. The problem? Oil’s no longer at $50. It now trades near $35.
  • Iron Ore Rings In 2016 With Port Stockpiles at Seven-Month High. Iron ore stockpiles at ports in China are heading into 2016 at the highest level in more than seven months as expanding low-cost supplies and sputtering demand in the biggest buyer spur concern that a glut will persist, hurting prices. “Stockpiles have been on the rise because domestic demand is getting weaker and shipments from the major producers have increased,” Dang Man, an analyst at Maike Futures Co. in Xi’an, said by phone on Monday. Mills have “been cutting production, which reduces demand for iron ore. So a lot of the stocks have remained at ports.” Holdings rose 0.8 percent to 93.1 million metric tons last week in the final reading of 2015, according to Shanghai Steelhome Information Technology Co. The inventories are at the highest since May after expanding for four months.
  • Webb Attacks Clinton With Eye on Independent Run. (video) If he declared an outsider presidential bid, the former Democratic candidate could have an outsize effect on the race. On Saturday morning, Webb used Twitter and his Facebook page to attack Democratic front-runner Hillary Clinton for her handling of Libya during her time as secretary of state. 
  • ‘Star Wars: The Force Awakens’ Crosses $1 Billion Sales.
Wall Street Journal: 
  • ‘Safe’ Puerto Rican Debt Stirs Worries. Investors uneasy that island will redirect money from Cofina bonds to pay off general-obligation debt. As Puerto Rico runs out of cash and approaches a Jan. 1 due date for about $1 billion in debt payments, investors increasingly are uneasy about the fate of bonds sold with a near guarantee. The bonds, backed by sales taxes and known by the Spanish acronym Cofina, were issued starting a decade ago to plug budget gaps and repay other lenders. The debt at the time was considered the island’s safest offering, and Cofina bonds soon became... 
  • USD/JPY May Drop as Far as 113.5 if It Falls Below 120. USD/JPY is losing ground in recent trade. The USD/JPY is losing ground in recent trade and its fall below the 120-mark may temporarily accelerate its downside bias, says Osamu Takashima, chief FX strategist at Citi in a morning note. If this is the case, the pair (now at 120.42) will have clearly failed to enter a new range within 120.50-123.50. More importantly...
  • Catalan Party Deadlocked on Supporting Secessionist Leader. Far-left Popular Unity Candidacy party members at impasse over backing Artur Mas as Catalonia’s president. A small far-left Catalan party wound up deadlocked in an internal vote Sunday over whether to give secessionist leader Artur Mas the margin of support he needs to be re-elected as the Catalonia region’s president, casting further uncertainty over Spain’s unpredictable political scene.
  • Go Live Elsewhere, We’re Cutting Carbon Here. The Newhall Ranch project near Los Angeles is green but not green enough for the antidevelopment crowd. Earlier this month California Gov. Jerry Brown promised to cut greenhouse-gas emissions to 80% below 1990 levels by 2050. This goal will be nearly impossible to achieve with California’s current population, projected to grow by 30% over the next 35 years to 50 million. So ecovangelists are trying to block any economic development that could help support more people.
Fox News: 
  • ISIS puts up heavy fight to slow Iraqi troop advance on Ramadi. (video) Islamic State fighters are putting up a tough fight in the militant-held city of Ramadi, slowing down the advance of Iraqi forces, a senior Iraqi commander said Sunday. Iraq launched the long-awaited operation to retake the Anbar provincial capital, which was captured by IS militants in May, but after an initial push across the Euphrates River, their progress stalled.
  • King says terror threat coming from mosques, calls for better surveillance. (video) New York GOP Rep. Peter King on Sunday called again for better surveillance of mosques in the U.S., suggesting Islamic terrorists visit them and said that critics can “cry all they want” about the tactic amounting to a civil liberties violation.
CNBC:
Zero Hedge:
Reuters:
  • Japan November output falls as soft global demand clouds outlook. Japan's factory output fell for the first time in three months in November, data showed on Monday, a sign that weak emerging market demand continues to cloud prospects for a sustained recovery in the world's third largest economy. But manufacturers expect to increase output in the coming months, offering some relief for the Bank of Japan as it struggles to jump-start growth and accelerate inflation toward its 2 percent target. Industrial output fell 1.0 percent in November from the previous month, more than a median market forecast for a 0.6 percent decline, trade ministry data showed.
Financial Times:
  • Oil drop threatens to push energy groups into liquidation. A growing number of energy companies that have filed or will soon file for bankruptcy court protection are likely to be liquidated, with their prospects diminished by the latest falls in natural gas and oil prices, according to distressed investors and restructuring advisers. Companies that restructure crippling debt loads can often emerge from bankruptcy and start life anew, but with the latest fall in energy prices, even a freshly capitalised balance sheet may not be enough to save the company.
China Daily:
  • China to Put Priority on Cutting Zombie Companies. China must slash the number of inefficient and unprofitable "zombie" enterprises next year as a priority, citing Yang Weimin, deputy director of the Office of the Central Leading Group on Financial and Economic Affairs, as saying a a forum in Beijing.
Night Trading
  • Asian indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 138.25 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 72.75 -1.0 basis point.
  • Bloomberg Emerging Markets Currency Index 69.72 +.04%.  
  • S&P 500 futures +.10%.
  • NASDAQ 100 futures +.15%.
Morning Preview Links 

 Earnings of Note
Company/Estimate 
  • None of note
Economic Releases 
10:30 am EST
  • Dallas Fed Manufacturing Activity for December is estimated to fall to -7.0 versus -4.9 in November.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The German Retail Sales report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the week.

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