Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.42 +5.5%
- Euro/Yen Carry Return Index 135.28 -.59%
- Emerging Markets Currency Volatility(VXY) 9.25 +1.54%
- S&P 500 Implied Correlation 50.40 +.98%
- ISE Sentiment Index 109.0 +12.37%
- Total Put/Call .81 -19.0%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.11 +2.60%
- European Financial Sector CDS Index 148.46 +.87%
- Western Europe Sovereign Debt CDS Index 88.15 -.96%
- Emerging Market CDS Index 308.76 +2.33%
- 2-Year Swap Spread 16.25 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.75 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $131.70/Metric Tonne -.68%
- Citi US Economic Surprise Index -5.50 -2.1 points
- Citi Emerging Markets Economic Surprise Index -27.10 +2.9 points
- 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
- Nikkei Futures: Indicating -103 open in Japan
- DAX Futures: Indicating +14 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- China’s Provinces Trail Growth Targets in Slowdown Signal. Most Chinese provinces reported
first-half growth below annual targets that in some instances
were already lower than last year’s goals, underscoring the
breadth of the nation’s slowdown. Seventeen of 30 provinces and provincial-level cities said January-to-June expansion trailed 2013 targets, compared with 14
of 31 in last year’s first half, according to data compiled by
Bloomberg News. Inner Mongolia, Jilin and Ningxia had the widest
gaps, each at 3 percentage points below a 12 percent target. One
province, Qinghai, has yet to release its latest figures.
- Bad-Loan
Risk Puts Bank Yield Gap at 17-Month High: China Credit. Chinese policy
banks' borrowing costs are the highest in more than a year relative to
the government's as a slowdown in the world's second-largest economy
fans concern bad loans will climb. The average yield on one-year debt
sold by the three lenders - China Development Bank Corp., Export-Import
Bank of China and Agricultural Development Bank of China - was 74 basis
points higher than comparable sovereign notes on July 25, the biggest
gap since March 2012, ChinaBond data show. That compares with this
month's low of 41 basis points on July 10 and precedes $8.5 billion of
debt sales by China Development Bank and Exim Bank today and tomorrow.
"Loan default is something we are worried about," said Wee-Khoon Chong, a
Societe Generale SA strategist in Hong Kong. "The rise in bank bond
yields is also driven by a liquidity squeeze as well. Money is at a
premium and investors demand higher yields."
- Brazil Swap Rates Rise on Inflation Outlook; Real Little Changed.
Brazil’s swap rates climbed after economists raised their 12-month
inflation forecast for a fourth straight week, adding to speculation
that the central bank will step up increases in borrowing costs. Swap
rates due in January 2015 rose five basis points, or 0.05 percentage
point, to 9.45 percent at 10:04 a.m. in Sao Paulo. “You need to
tighten more on the monetary side unless there’s room to let inflation
accelerate, and I don’t think there is,” Eduardo Suarez, a Latin America
foreign-exchange strategist at Bank of Nova Scotia, said in a telephone
interview from Toronto.
- S&P Sees Downgrade Risk
Rising as Debt Costs Climb: India Credit. India's attempt to buoy the
rupee by creating a cash crunch has driven corporate debt costs to a
2009 high, threatening the creditworthiness of businesses already
battling the worst economic slowdown in a decade. The extra yield on
three-year company bonds over government notes surged 113 basis points
in July to 211, data compiled by Bloomberg show.
- European Stocks Are Little Changed. Banca Popolare di Milano
Scrl led financial companies lower, retreating 5.9 percent. The Stoxx Europe 600 Index added less than 0.1 percent to
299.06 at the close of trading, having earlier climbed as much
as 0.7 percent.
- Dollar Strengthens Versus Euro Before Fed Meeting; Yen Gains.
The dollar strengthened versus the
majority of its most-traded peers amid expectations the Federal Reserve
will reiterate plans this week to reduce stimulus if economic
performance continues to show signs of improvement. Japan’s currency advanced against all of its 16 major peers
after Japanese retail sales fell and Chinese industrial
companies reported slowing profits, boosting demand for haven
assets.
- Egypt Warns Against Unrest as Brotherhood Presses Protest. Egypt’s
interior minister, speaking after dozens of people died in protests,
said security forces are determined to bring about stability, a veiled
warning to Islamists who want President Mohamed Mursi reinstated. Interior Minister Mohamed Ibrahim’s comments signaled
impatience with demonstrations that have roiled the country
since the military deposed Mursi on July 3 after mass rallies
seeking his ouster. The pro-Mursi protests have led to fatal
clashes, undercutting hopes for national reconciliation.
- Corn Extends Drop to 33-Month Low on U.S. Crop; Soybeans Decline. Corn extended declines to a 33-month
low and soybeans fell on speculation that U.S. crops will
benefit from cooler weather and rain in the next two weeks.
Wheat rose. Temperatures will average below normal over much of the
Midwest in the next two weeks, helping to boost yields in areas
with adequate soil moisture and reducing stress on crops that
have not received significant rain this month, World Weather
Inc. said in a report today. Fields from Kansas to Kentucky will
get rain during the next two days and some crops in Nebraska and
Iowa will benefit from moisture beginning Aug. 1, the private
forecaster said.
Wall Street Journal:
- Bank of Italy Inspecting Top Lenders' Books. Rise in Bad Loans Prompts Quiet Inspections. The Bank of Italy is quietly inspecting the finances of some of the
country's top lenders, which could push some Italian banks to sell
assets or take other major steps, according to a central-bank document
reviewed by The Wall Street Journal. The central bank's examinations, which were previously undisclosed,
come against a backdrop of increasing worry about the health of some of
the country's lenders amid a rising tide of souring loans. The current inspections are a follow-up to a previous round last fall
that resulted in the Bank of Italy ordering banks to set aside a total
of about €3.4 billion ($4.5 billion) more to guard against losses on bad
loans. Those results haven't previously been made public. Now, the Bank of Italy is digging even deeper into the loan
portfolios of some top banks, according to the document, while launching
on-site inspections of an additional 20 lenders.
- Big Hedge Funds to Swoop on Start-Up Talent. Some
of the world’s biggest hedge funds, including Marshall Wace, Millennium
Management, CQS and BlueCrest Capital Management, are among firms that
are capitalizing on a difficult environment for start-ups, hiring
potential managers who might once have considered setting up on their
own.
- Many Dead in Baghdad Bombings. At Least 47 Killed in Coordinated Attacks. A dozen car bombings hit in and around the Iraqi capital during
morning rush hour on Monday, officials said, killing at least 47 people
in the latest coordinated attack by insurgents determined to undermine
the government. The blasts, which wounded scores more, are part of a monthslong surge
of attacks that is reviving fears of a return to the widespread
sectarian bloodshed that pushed the country to the brink of civil war
after the 2003 U.S.-led invasion. Suicide attacks, car bombings and
other violence have killed more than 3,000 people since April, including
more than 500 since the start of July, according to an Associated Press
count.
CNBC:
- Rising rates zap pending US home sales momentum. Contracts to purchase previously owned U.S. homes fell in June,
retreating from a more than six-year high touched the prior month,
suggesting rising mortgage rates were starting to dampen home sales. The National Association of Realtors said on Monday its Pending
Homes Sales Index, based on contracts signed last month, decreased 0.4
percent to 110.9. May's index was revised down to 111.3 from a
previously reported 112.3.
- The new American poor: 4 in 5 live in danger of it. Four out of five U.S. adults struggle with joblessness,
near-poverty or reliance on welfare for at least parts of their lives, a
sign of deteriorating economic security and an elusive American dream. Survey data exclusive to The Associated Press points to an
increasingly globalized U.S. economy, the widening gap between rich and
poor, and the loss of good-paying manufacturing jobs as reasons for the
trend.
- 'Rally has gone too far,' Citi strategist says. Investors are getting a little too comfortable these days with
unspectacular earnings and weak economic growth, suggesting to one
otherwise-bullish Wall Street analyst that some pain is ahead.
- Forget growth, China is contracting, experts say. (video) Many China bears, including closely watched short-seller Jim
Chanos, have warned that economic numbers from the Chinese government
dramatically overestimate growth. But Robert Barbera,
co-director of Johns Hopkins Center for Financial Economics, argued on
CNBC on Monday that China's economy is actually contracting.
Zero Hedge:
Business Insider:
Reuters:
Financial Times:
- US money market funds return to EU banks. In
the first half of the year, the 10 biggest US money market funds
allocated about 15 per cent of their $652bn in assets to short-term
deposits and debt securities with eurozone banks, according to Fitch,
the credit rating agency. That represents an increase of nearly 90 per cent since June 2012, when fears over a eurozone break-up were at their peak.
Telegraph:
European Central Bank:
Economic Information Daily:
- China Should Start Probe of Imported Car Prices. China should
start an investigation on imported car prices, citing industry people.
Profit from selling imported luxury cars in China was 30% higher than
global average, citing China Automobile Dealers Assoc. executive vice
president and secretary general Shen Jianjun.
Style Underperformer:
Sector Underperformers:
- 1) Construction -1.53% 2) Energy -1.20% 3) Banks -1.18%
Stocks Falling on Unusual Volume:
- CTCM, EPD, AMX, SWN, TITN, PRGO, CYOU, SOHU, EXPE, HAE, RH, LECO, YRCW, SFUN, HTZ, OLED, IXYS, FDML, VMI, OB, SNDK, SMTC, DRC, XRM, TAL, ANGI, BCS, RYAAY, SAIA and CAF
Stocks With Unusual Put Option Activity:
- 1) NOV 2) MET 3) IBB 4) COG 5) COH
Stocks With Most Negative News Mentions:
- 1) WFM 2) ONXX 3) AIG 4) TWX 5) RH
Charts:
Style Outperformer:
Sector Outperformers:
- Utilities +.39% 2) Hospitals +.33% 3) Homebuilders +.31%
Stocks Rising on Unusual Volume:
- SKS, USU, ELN, OMC, IPG, DDD and QCOR
Stocks With Unusual Call Option Activity:
- 1) ODP 2) NOV 3) FRX 4) SKS 5) HTZ
Stocks With Most Positive News Mentions:
- 1) ESRX 2) DHI 3) WCRX 4) SPW 5) COG
Charts:
Weekend Headlines
Bloomberg:
- China 3% Growth Risk Seen by Barclays Signals Likonomics Anxiety. A
copper price collapse of more than
60 percent, zinc cut by up to a half and oil down to $70 a barrel.
That’s the fate facing world commodity markets should China’s growth dip
to 3 percent in the next three years -- a scenario economists at
Barclays Plc (BARC) are now examining. They’re not the only ones
building models based on a steep decline in growth in the world’s
second-biggest economy. Nomura Holdings Inc. (8604) estimates a
one-in-three chance of a sharp drop by the end of 2014, and Societe
Generale SA sees a “non-negligible risk” of less than 6 percent growth
this year and an outside chance of 3 percent average expansion for this
half and next. Premier Li Keqiang’s efforts to rein in a record
credit boom, avert a property-price bubble and strengthen environmental
protections risk deepening China’s slowdown and adding to drags on the
global economic recovery. With growth already heading for a
23-year low, a hard landing would batter commodity markets, hurting
mineral exporters like Australia, Brazil and South Africa, and miners
such as BHP Billiton Ltd. (BHP) and Rio Tinto Group, that have begun to
slow expansion. “This is a very delicate thing they’re trying to do
because to slow gradually is very difficult, partly because it’s a
self-enforcing mechanism and it can become a vicious cycle,”
said Andrew Polk, an economist in Beijing with the Conference
Board, a New York-based research group, who sees average growth
of 5.5 percent over the next five years. “There’s a distinct
possibility that the slowdown could get out of control and the
risk of a policy misstep cannot be discounted.”
- China’s Industrial Profits Growth Moderates as Economy Cools. Growth in Chinese industrial
companies’ profits slowed in June as the economy cooled, costs
rose and prices fell on moderating demand and overcapacity. Net
income increased 6.3 percent from a year earlier to
502.4 billion yuan ($82 billion), the Beijing-based National Bureau of
Statistics said yesterday, down from a 15.5 percent pace in May. Profit
from main business operations fell 2.3
percent after an 8.8 percent gain the previous month, it said.
- China to Audit Government Borrowings as Risks to Growth Increase. China
will begin a nationwide audit of government borrowings, as the nation’s
growth slowdown puts pressure on the new leadership to determine the
extent of potential bad debts weighing down the economy. The State
Council, under Premier Li Keqiang, requested the National Audit Office
to conduct a review, according to a statement from the audit office’s
website yesterday, without providing any more details. The first audit
of local government
debt found liabilities of 10.7 trillion yuan ($1.8 trillion) at
the end of 2010, the National Audit Office said in June 2011.
- China Reaches Deal With EU to Curb Solar-Panel Shipments. European Union and Chinese
negotiators reached an agreement to curb EU imports of solar
panels from China in exchange for exempting the shipments from
punitive tariffs. The accord would set a minimum price for imports of the
renewable-energy technology from China. In return, Chinese
manufacturers would be spared EU levies meant to counter below-cost sales, a practice known as dumping. The EU import taxes
target more than 100 Chinese companies including Yingli Green
Energy Holding Co., Wuxi Suntech Power Co. and Changzhou Trina
Solar Energy Co.
- China Money Rate Climbs Most in a Month as Banks Build Reserves.
The seven-day repurchase rate, which measures interbank funding
availability, climbed 59 basis points, or 0.59 percentage point, to 5
percent as of 10:25 a.m. in Shanghai, after increasing 65 basis points
last week, according to a
weighted average compiled by the National Interbank Funding
Center. That was the biggest increase since June 20, when the
rate reached a record 12.45 percent amid a cash squeeze.
- China’s Stocks Drop to 3-Week Low on Debt Audit, Slowing Profits.
Chinese stocks fell to a three-week low after industrial companies
reported slower profit growth and China began a nationwide audit of
government borrowings amid concern potential bad debts may weigh down
the economy. Industrial Bank Co. (601166) and Huaxia Bank Co. slumped at
least 3 percent, sending a gauge of financial companies to the biggest
loss among industry groups. Anhui Conch Cement Co. (600585) plunged 6.6
percent, dragging down material producers. PetroChina Co., the
nation’s biggest energy company, declined 1.9 percent. The Shanghai
Composite Index (SHCOMP) fell 1.6 percent to 1,979.38 at the 11:30 a.m.
break, heading for the lowest level since July 9. The State Council
audit order was “urgent” and the office suspended other projects to work
on the review, the People’s Daily said yesterday. Concern that loan
losses will increase is extending the two-month drop in financial shares
that was sparked by a cash crunch in the interbank market and economist
forecasts for the weakest annual economic growth since 1990.
- Asian Stocks Slip Before Kuroda as Metals Fall; Gas Sinks.
Asian stocks fell, with the regional benchmark retreating a fourth day,
before a speech by Bank of Japan Governor Haruhiko Kuroda and monetary
policy reviews from the U.S. to Europe this week. The yen held gains
versus the dollar, while most metals and natural gas declined. The MSCI Asia Pacific Index of regional equities sank 0.8
percent by 9:57 a.m. in Tokyo, headed for a 2 1/2-week low. The
yen climbed 0.2 percent against the dollar, set for the
strongest close since June 26 after posting the biggest jump of
16 major currencies tracked by Bloomberg last week.
- Investors Are Lab Rabbits in Central Bank Experiments. The European Central Bank and Bank
of England are emulating Ben S. Bernanke’s experiment in
offering monetary-policy guidance to financial markets.
Investors could well end up being the guinea pigs. “If this is science, then we’re the little white lab
rabbits,” said Vincent Reinhart, chief U.S. economist for
Morgan Stanley in New York, who served as the Fed’s chief
monetary-policy strategist from 2001 to 2007.
- German Protests Against U.S. Spying Draw Thousands. Thousands of protesters in cities across Germany took part in demonstrations against spying by the U.S. and other countries. An organization called Stop Watching Us, which describes itself as a “conglomeration of concerned citizens,” had called
for protests in more than 30 cities across the country,
according to its website. Florian Waechter, who organized the
demonstrations, said in a telephone interview that his group
doesn’t yet know how many people participated.
- Egypt Warns Against Unrest as Brotherhood Presses Protest. Egypt’s
interior minister, speaking after dozens of people died in protests,
said security forces are determined to bring about stability, a veiled
warning to Islamists who want President Mohamed Mursi reinstated. Interior Minister Mohamed Ibrahim’s comments signaled
impatience with demonstrations that have roiled the country
since the military deposed Mursi on July 3 after mass rallies
seeking his ouster. The pro-Mursi protests have led to fatal
clashes, undercutting hopes for national reconciliation. “The police are determined to achieve security and
stability for the country, and are capable of doing so,”
Ibrahim said in a televised speech yesterday at a cadet
graduation ceremony. “We will vigorously and decisively
confront any attempt to undermine security.” At least 72 people were killed in weekend clashes near a
pro-Mursi protest in Cairo, the Health Ministry said, the
highest toll in a single incident since his ouster.
- Alwaleed Warns Saudi Oil Minister of Waning Need for Oil.
Saudi Prince Alwaleed bin Talal told Oil Minister Ali Al-Naimi in an
open letter that the kingdom won’t be able to raise production capacity
to 15 million barrels of crude a day as planned, and that he disagrees
with him over the impact of U.S. shale gas output. The prince published the letter today on Twitter, saying
there’s a “clear and increasing decline” in demand for crude
from members of the Organization of Petroleum Exporting
Countries, particularly Saudi Arabia. The kingdom is now pumping
at less than its production capacity as consumers limit oil
imports, Alwaleed said. “We disagree with your excellency on what
you said and we
see that raising North American shale gas production is an inevitable
threat,” the billionaire prince, founder of Kingdom Holding Co.
(KINGDOM), said in the letter.
- Copper Falls Most in Three Weeks on China Factory Cuts. Copper
futures tumbled the most in
three weeks after China ordered companies in 19 industries to cut
manufacturing capacity, signaling lower demand for industrial metals.
Surplus capacity must be idled by September and eliminated by year-end,
the Chinese government said yesterday. A report on July 24 showed July
manufacturing weakened more than estimated in the Asian nation, the
world’s top consumer of copper. A basket of prices on the London Metal
Exchange also dropped the most in three weeks. “Everything we hear
out of China now is about a slowdown and how they’re not buying copper,
and this announcement just adds to those concerns,” Frank Lesh, a trader
at FuturePath Trading in Chicago, said in a telephone interview. “China
is a big buyer of copper, so this is a problem.” Copper futures for
delivery in September slid 2.5 percent
to $3.1055 a pound at 1:17 p.m. on the Comex in New York, the
biggest decline for a most-active contract since July 5. The
price has dropped 15 percent this year.
- Rebar Falls to Three-Week Low After Output in China Advances.
Steel reinforcement-bar futures in Shanghai fell to the lowest level in
almost three weeks after crude steel production in China rose. Rebar for delivery in January on the Shanghai Futures Exchange fell as much as 1.1 percent to 3,627 yuan ($592) a
metric ton, the lowest since July 10, and was at 3,645 yuan at
11:14 a.m. local time.
- Rubber Slumps to One-Week Low as Yen’s Rebound Reduces Appeal. Rubber slumped to the lowest level
in more than a week as Japan’s currency rebounded to a one-month high, weakening the appeal of the yen-denominated futures.
The contract for delivery in January lost as much as 3
percent to 242.7 yen a kilogram ($2,478 a metric ton) on the
Tokyo Commodity Exchange, the lowest level since July 18.
- Hedge Funds Raise Gold Bets as Goldman Sees Decline: Commodities.
Hedge funds raised wagers on a gold rally as speculation that the
Federal Reserve will hold off on curbing stimulus drove prices toward
the biggest gain in 18 months. Goldman Sachs Group Inc. expects the
rally to reverse. Money managers increased their net-long position by 26
percent to 70,067 futures and options as of July 23, U.S. Commodity
Futures Trading Commission data show. The fourth consecutive weekly gain
is the longest streak since October. Bullish wagers across 18
U.S.-traded commodities gained 7.4
percent to 615,140. Investors more than doubled bets on lower
corn prices to a record net-short holding.
- JPMorgan(JPM) Commodities Exit May Sap Liquidity Until Others Step in. A
decision by JPMorgan Chase & Co. (JPM) to exit its physical
commodities business would temporarily reduce market liquidity before
other companies quickly take its place, according to analysts and
traders. New York-based JPMorgan, the largest U.S. bank, said
yesterday that it’s “pursuing strategic alternatives,” including the
sale or spinoff of its commodities business, after an internal review.
The statement came three days after a congressional hearing investigated
whether deposit-taking banks should be allowed to trade raw materials
such as oil and
industrial metals.
- S&P Wants Government Documents About Other Investigations.
McGraw Hill Financial Inc. (MHFI)’s Standard & Poor’s,
preparing its defense to the fraud lawsuit by the U.S. Justice
Department, will ask the government for information about investigations
of other credit raters. The Justice Department and S&P
yesterday filed a joint report ahead of a hearing July 29 in federal
court in Santa Ana, California. The report lays out the kind of evidence
each side will seek from the other in preparation for a trial of the
government’s claims that S&P lied to investors about its ratings
being independent and free of conflicts of interest.
Wall Street Journal:
- Fed Only Putting Off Day of Reckoning. Markets could turn volatile as autumn approaches and investors once
again begin wringing their hands over the likely timing and consequences
of a cutback in Fed stimulus.
- Yield Seekers Get Their Second Wind From Fed. High-yielding corners of the stock market took a hit earlier in the
summer, a casualty of worries over the Federal Reserve's commitment to
easing. The blow wasn't a fatal one: Heavy demand for new shares of
dividend-paying companies shows that money managers are back on the hunt
for yield. Key to this renewed appetite are recent signals from Fed
officials that interest rates will stay low for years to come.
- Corporate Profits Lose Steam. With Many Cost Cuts Taken, Earnings Are Expected to Slip in Latest Quarter Amid Slow Sales Growth. With global economies sluggish and sales growth at a crawl, big U.S.
companies have had one route to push profits higher: Cut costs and
squeeze suppliers. That strategy may be running out of steam. Revenue at the companies that make up the Standard & Poor's
500-stock index—excluding banks, whose profits have soared—is expected
to creep up by just 1.1% in the second quarter from a year earlier,
according to Thomson Reuters, which melds Wall Street analysts'
projections with company reports. Earnings, meanwhile, are expected to decline 0.6%. That would be the
first profit decline for nonfinancial companies since last autumn and
the first time in a year that earnings grew more slowly than revenue, a
sign that margin widening is petering out.
Fox News:
- White House doubles down on vow Obama won't agree to more spending cuts.
The Obama administration dug in Sunday on its vow to reject proposed
spending cuts by congressional Republicans in upcoming budget talks but
declined to say whether the president would veto their proposals or
allow a government shutdown. Treasury Secretary Jack Lew told “Fox News
Sunday” that President
Obama will neither sign government funding bills that slash domestic
spending nor negotiate with Republicans over spending cuts to reduce the
federal debt limit. However, he would not say whether the president
would veto proposals and put the responsibility on Capitol Hill.
“Congress has to do its work," Lew said.
CNBC:
- Global ad market abuzz over $35 billion new giant. The
global advertising market began their week with news of the creation of
the world's biggest firm in the sector, after France's Publicis and
U.S.-based Omnicom announced at the weekend they were joining forces to
form a group worth $35.1 billion, overtaking global leader WPP.
Business Insider:
Reuters:
- Fed's Lacker says exit from bond-buying should be quick. The
U.S. central bank must end its bond-buying program quickly and an end
to the program was "in sight", a senior Federal Reserve official said in
a German magazine on Saturday. "We must make our exit from the
bond-buying program quick," Richmond Fed President Jeffrey Lacker, one
of the Fed's most fiscally conservative officials and a persistent
critic of the latest round of bond buying, said in WirtschaftsWoche. "An
end to these bond purchases came into sight at the latest Fed meeting,"
said Lacker, who is not among the Fed policymakers who will vote on
monetary policy this year. Lacker pointed to relatively low
inflation and said a faster-than-expected fall in the U.S. jobless rate
was sufficient to start winding down the program. "First of all we
should end the monthly purchases of mortgage bonds as quickly as
possible," Lacker said in the interview. It was not the central
bank's role to give any sector preferential support, he said. Lacker
said the United States had made hardly any progress in cutting its debt
and had instead only come up with temporary solutions for several months
at a time. He said he hoped the Fed's planned scaling back of bond
purchases this year and rising interest rates would force the U.S.
Congress to agree more quickly on reducing debt. "We need a sustainable
solution and the sooner the better," he said. Whoever takes the helm at
the Fed when Bernanke's term as chairman ends in January 2014 must find a
way to exit the bond-buying program without shocking the markets,
Lacker said. He said the quantitative easing program had done little to
boost the economy, and the U.S. economy would grow by 2 percent this
year and by no more than 2.25 percent next year - lower than the 2.8
percent in 2013 and 3 percent in 2014 forecast by other Fed policymakers
- as consumers remain cautious. Lacker said more needed to be done on
drawing up rules to avoid future government bank rescues and said stress
tests done in the United States were a step in the right direction.
Telegraph:
Der Spiegel:
- BaFin
Sees New Risks in German Bank Shipping Loans. German banks with
significant shipping loan portfolios may be forced to seek fresh capital
ahead of the stress test planned by the ECB when it takes on
supervision of the euro area's biggest banks, citing the BaFin bank
regulator. BaFin asked banks to assess risks from shipping loans and in
"singles cases" was not happy with the results.
Deutschlandfund radio:
- Greece Must Honor All Aid Term Into 2014, Schaeuble Says.
Greece's rescue program that runs into 2014 is tied to conditions that
must be fulfilled "month for month, step by step," German Finance
Minister Wolfgang Schaeuble said in response to a reporter, who asked
whether his country's policy may change after the Sept. 22 election. Greece is "far from being over the hill," needs to improve efficiency of administration, tax collection, Schaebule said.
Bild am Sonntag:
- Schaeuble Rules Out Debt Writedown for Greece. German Finance Minister Wolfgang Schaeuble rules out another debt cut for Greece.
Euro am Sonntag:
- German Banks May Be Misjudging Loan Risks. Banks in Germany may
not be accurately reflecting risks in rates they charge borrowers,
citing Raimund Roeseler, head of banking supervision at German regulator
Bafin, as saying in an interview. Roeseler cited as saying that he sees
"fierce" competition in German lending potentially leading to banks not
applying appropriate margins on loans.
Welt am Sonntag:
- German Wealth Tax Would Threaten Company Ownership. A proposed
German tax on wealth would threaten the ownership of companies by German
investors, citing Hasso Plattner, billionaire founder of SAP, as saying
in an interview. Plattner cited as saying wealth tax would prompt
investors to sell stocks and could cause companies to move abroad.
Veja:
- Brazil's Mantega Asks IMF to Change Gross Debt Calculations.
Brazilian Finance Minister Guido Mantega has asked the IMF to change the
way it calculates the country's gross debt, Lauro Jardim reported.
Mantega requested change in letter sent July 25 to IMF's Christine
Lagarde, according to Jardim.
Yonhap News:
- South Korea to Propose Derivatives Trading Tax. South Korean
government will propose a tax to begin next year on derivatives trading
such as Kospi 200 futures and options in a bid to increase tax revenue,
citing finance ministry official.
Economic Information Daily:
- China's Tier 1 City Home Prices Have Room to Rise. Home prices in
China's 1st-tier and 2nd-tier cities still have room to rise because of
big demand for urban housing, citing Li Tie, director general of China
Center for Urban Development under National Development and Reform
Commission.
China Business News:
- Some Chinese Cities Tighten Housing Provident Fund Loans. China's
Hangzhou and Xuzhou city will use bank loans for housing provident
funds lending because of low capital.
Weekend Recommendations
Barron's:
- Bullish commentary on (HFC), (ADSK), (F), (OI), (DD) and (DOV).
- Bearish commentary on (RH), (NATH) and (ANGI).
Night Trading
- Asian indices are -1.50% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 140.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 106.50 -3.25 basis points.
- NASDAQ 100 futures -.15%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Pending Home Sales for June are estimated to fall -1.0% versus a +6.7% gain in May.
10:30 am EST
- Dallas Fed Manufacturing Activity for July is estimated to rise to 7.3 versus 6.5 in June.
Upcoming Splits
Other Potential Market Movers
- The Japan unemployment rate could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and real estate shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the week.
U.S. Week Ahead by Reuters (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as high energy prices, interest rate worries, more emerging
markets unrest and earnings outlook concerns offset central bank hopes,
less Eurozone debt angst, investor performance angst and
short-covering. My intermediate-term trading indicators are giving
neutral signals and the Portfolio is 75% net long heading into the week.
