Tuesday, December 01, 2015

Wednesday Watch

Posted by Gary .....at 10:00 PM
Evening Headlines
Bloomberg:
  • Cameron to Make Case for Striking Islamic State as Labour Splits. Prime Minister David Cameron will make the case for extending British airstrikes against Islamic State into Syria as he asks Parliament Wednesday to back military action in a vote. Lawmakers will debate for more than 10 hours, starting at 11:30 a.m. in London, with opinion split on both sides of the House of Commons. But the rift is much larger in the opposition Labour Party, whose leader, Jeremy Corbyn, will make the case against strikes before the foreign-affairs spokesman, Hilary Benn, makes the case for them. Cameron is likely to win the vote with the “clear majority” that he said last week he wanted, with the bulk of his Conservative Party backing the motion. Corbyn’s already weak authority over his lawmakers may be further dented if a large proportion of Labour members of Parliament, especially senior figures, vote against him, even though he’s agreed they can vote according to their consciences. He warned them Tuesday of the possible consequences of their actions.
  • Emerging Markets Face Another `Challenging' Year, JPMorgan Says. While the worst of the emerging-market selloff may be over, a return to the golden days is unlikely, according to JPMorgan Chase & Co., provider of some of the most followed indexes for developing-country fixed income securities. Local-currency bonds can rise 3.7 percent in 2016, after declining 25 percent over the past three years, the New York-based bank forecasts. Dollar-denominated debt sold by developing-nation countries is likely to return between 1 percent and 3 percent next year. “Emerging markets will continue to face fundamental challenges in 2016, leading to low single-digit returns in EM fixed income next year,” strategists led by Luis Oganes wrote in a note Tuesday. While the growth outlook is “a bit stronger” next year, it “remains below potential,” according to the report.
  • BTG Pactual Cut to Junk by Moody's Following Esteves's Arrest. Banco BTG Pactual SA had its credit grade cut to junk by Moody’s Investors Service on concern that the investment bank will struggle to keep enough cash on hand and maintain its franchise following last week’s arrest of its then-leader, Andre Esteves. The ratings firm lowered its baseline credit assessment for BTG two levels to Ba2 from Baa3, according to a statement Tuesday. It made the same change for the firm’s long-term global local- and foreign-currency deposit ratings. Esteves resigned his posts on Sunday and has denied wrongdoing in a corruption probe through attorneys.
  • Australia's Economic Growth Accelerates as Exports Rebound. Australia’s economy expanded at a quicker pace than economists forecast in the third quarter, driven by the fastest gain in exports since 2000, and supporting the central bank’s decision Tuesday to keep interest rates steady. Gross domestic product advanced 0.9 percent in the three months through September from the previous quarter, when it rose a revised 0.3 percent, government data showed Wednesday. That compared with the median of 28 estimates for a 0.8 percent gain. The picture inside Australia was a little less rosy than the headline, as domestic demand contracted by half a percent in the three months.
  • Price Cuts Herald End of Sydney Home Boom as Foreigners Retreat. Chris Carr, a real estate agent in Sydney’s northwestern suburbs, has had to convince sellers to drop prices on at least six homes in the past two months to complete transactions. Such price cuts sent Sydney dwelling values 1.4 percent lower in November, the most in five years, as Chinese demand slows, banks raise mortgage rates and buyers balk at record home values. The first open inspection of a home now attracts on average about six groups of prospective buyers, compared with as many as 30 three months earlier, Carr, an agent with Gilmour & Orley, said in an interview. “Sellers have had to accept up to 10 percent price reductions,” said Carr, who sells homes in Sydney’s Hills district about 30 kilometers (18.6 miles) from the central business district. “There is a lack of international buyers, particularly those with a Chinese background now, who were behind the price rise. Local demand is still there, but they are price-conscious.” 
  • China's Stocks Fall in Shrinking Turnover as Developers Retreat. China’s stocks fell for the first time in three days in shrinking turnover as property developers slumped amid speculation a recent rally was overdone. The Shanghai Composite Index slid 0.7 percent to 3,443.11 at 9:49 a.m. local time.
  • Asian Stocks Hold Advance as U.S. Data Add to Dovish Fed Case. Asian stocks held Tuesday’s jump as an unexpected contraction in American manufacturing added to speculation that the pace of Federal Reserve rate increases will be gradual. The MSCI Asia Pacific Index rose 0.1 percent to 134.25 as of 9:03 a.m. in Tokyo, with about the same number of shares gaining and falling. 
  • Metals Slump No Hitch for New Rio Mine With 60% Profit Margin. The worst commodity slump since the global recession and a collapse in aluminum prices doesn’t mean there isn’t money to be made from digging up the bauxite ore used to produce the metal -- provided you have the right kind of mine. Rio Tinto Group, the world’s second-biggest mining company, is investing $1.9 billion on a new deposit in Australia even as the price rout has forced it to slash global capital spending by $11.5 billion since 2013. That’s because by 2019, the Amrun project will be able to unearth high-grade ore for about $20 a metric ton and sell it for around $50 a ton, according to Deutsche Bank AG.
Wall Street Journal: 
  • Islamic State Prevents Civilians From Fleeing Iraqi City. Iraqi forces urge people to leave Ramadi ahead of an offensive to retake it. Islamic State fighters are preventing civilians from fleeing the city of Ramadi—and threatening to kill those who try—after Iraqi forces warned people to leave ahead of an impending offensive, residents said Tuesday.
  • Yahoo(YHOO) Board to Weigh Potential Sale of Internet Business, Sources Say. Board expected to discuss whether to proceed with a plan to spin off more than $30 billion in shares of Alibaba, find a buyer for core business, or both, sources said.
  • ‘Climate Change’ Fish Story. You won’t believe what they’re saying in Paris. “You go down to Miami and when it’s flooding at high tide on a sunny day, the fish are swimming through the middle of the streets,” President Obama claimed at a press conference this morning. We go down to Miami with some frequency and have never seen any such thing. And believe us, we know how to troll.
  • Liberalism’s Imaginary Enemies. In Paris, it’s easier to battle a climate crisis than confront jihadists on the streets. Little children have imaginary friends. Modern liberalism has imaginary enemies. Hunger in America is an imaginary enemy. Liberal advocacy groups routinely claim that one in seven Americans is hungry—in a country where the poorest counties have the highest rates of obesity. The statistic is a preposterous extrapolation from a dubious Agriculture Department measure of “food insecurity.” But the line gives those advocacy groups a...
Fox News:
  • Top military officer contradicts Obama, says ISIS not 'contained'. (video) America’s top-ranking military officer found himself at odds Tuesday with the nation’s commander-in-chief over his claim that the Islamic State was “contained” – an assertion President Obama had made before the Paris terror attacks. Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, gave a dim assessment when asked during a House Armed Services Committee hearing whether that's the case.
  • ‘Saved us money’: Rubio wins conservative cred for ObamaCare change. Marco Rubio's Republican presidential bid is getting a surprisingly big boost from a little-known legislative tweak he helped tuck into last year's spending bill — one that ObamaCare critics are crediting with shielding taxpayers from jittery health insurance companies that may be eyeing shaky bottom lines.
CNBC:
Zero Hedge:
Financial Times:
Telegraph:
Evening Recommendations 
  • None of note
Night Trading 
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 129.25 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 67.25 -1.0 basis point.
  • Bloomberg Emerging Markets Currency Index 70.38 +.03%.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures +.02%.
Morning Preview Links 

 Earnings of Note 
Company/Estimate
  • (BF/B)/1.00
  • (GIII)/1.78
  • (ISLE)/.19
  • (RY)/1.64
  • (ARO)/-.34
  • (PVH)/2.47
  • (SNPS)/.66  
Economic Releases
8:15 am EST
  • The ADP Employment Change for November is estimated at 190K versus 182K in October.
8:30 am EST
  • Final 3Q Non-Farm Productivity is estimated to rise +2.2% versus a +1.6% prior estimate.
  • Final 3Q Unit Labor Costs are estimated to rise +1.0% versus a +1.4% prior estimate. 
9:45 am EST:
  • The ISM New York for November is estimated to fall to 58.0 versus 65.8 in October.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -679,170 barrels versus a +961,000 barrel gain the prior week. Gasoline supplies are estimated to rise by 900,000 barrels versus a +2,478,000 barrel gain the prior week. Distillate inventories are estimated to rise by +400,000 barrels versus a +1,046,000 barrel gain prior. Finally, Refinery Utilization is estimated to rise by +.69% versus a +1.7% gain prior.
2:00 pm EST
  • US Fed Beige Book report.
Upcoming Splits
  • (CTRP) 2-for-1
Other Potential Market Movers
  • The Fed's Yellen speaking, Fed's Lockhart speaking, Fed's Tarullo speaking, Bank of Canada rate decision, Eurozone CPI report and the weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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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