Evening Headlines
Bloomberg:
- Asian Stocks Set for Biggest Three-Week Gain in Two Years. Asian
stocks rose, with the regional benchmark index on course for its
biggest three-week advance in two years, as a weaker yen boosted
Japanese shares. Volumes were below average with markets in Hong Kong,
China, South Korea and Taiwan closed for holidays. Nikon Corp. (7731), a
camera maker that gets 85 percent of sales outside Japan,
climbed 6.2 percent. Shiseido Co. surged 4.7 percent in Tokyo as
Citigroup Inc. recommended buying shares of the comestics maker.
Declines among raw-material shares limited gains on the regional
benchmark gauge, which is on course for the biggest three-week
advance since October 2011. The MSCI Asia Pacific Index rose 0.2 percent to 141.38 as
of 11:03 a.m. in Tokyo, poised for a third straight week of
gains and extending a four-month high.
- Indonesia Has Bigger Problems Than Bikinis. This column isn’t a defense of beauty contests. My question is, why
the misplaced anger? Where’s the outrage over obscene levels of graft,
which eats up national wealth and forces 115 million Indonesians to live
on less than $2 a day? Where are the placards condemning policies that
have made the rupiah Asia’s most pathetic currency? Why don’t we hear
chants demanding greater accountability from leaders? It’s great
that Indonesians are worked up, but their ire would be more constructive
if it were focused on the right target. Investors know the trouble. And
that’s the biggest problem of all.
- Onion Shortage Seen Worsening in India as Rain Delays Crop. Onion prices in India may extend a
record rally as heavy monsoon rains delay harvests and worsen a
shortage, potentially accelerating food inflation in Asia’s third-largest economy.
Retail prices of the vegetable used in everything from soups to curries
soared to 70 rupees ($1.13) a kilogram (2.2 pounds) in New Delhi this
week from 20 rupees three months
earlier, according to the Consumer Affairs Ministry. Prices may
increase further as farmers are unable to pick the crop due to
monsoon rains, said C.B. Holkar, a director at the National
Agricultural Cooperative Marketing Federation of India Ltd.
- Rubber Declines, Paring Weekly Rally, as Oil’s Drop Cuts Appeal. Rubber declined, paring a weekly
advance, as a drop in oil reduced the appeal of the commodity as
an alternative to synthetic products used in tires. The contract for February delivery on the Tokyo Commodity Exchange lost as much as 1.3 percent to 281.5 yen a kilogram ($2,829 a metric ton) and traded at 282.5 yen at 10:36 a.m.
local time. The drop pared gains to 3.9 percent for the most-active contract this week.
- Odds Grow Longer for Obama’s Nominee to U.S. Energy Panel.
Opposition to President Barack Obama’s choice to head the U.S. Federal
Energy Regulatory Commission grew as Republicans led by Senator Mitch
McConnell said they’ll vote against Ron Binz’s confirmation. “His
nomination is yet another threat to American energy and jobs and I will
work to defeat it,” McConnell of Kentucky, the Senate minority leader,
said in a statement today. Senators Rob Portman of Ohio and Lamar
Alexander of Tennessee today joined fellow Republican senators Lisa
Murkowski of Alaska, Dean Heller of Nevada and Democrat Joe Manchin of
West Virginia in saying they won’t support Binz, a former chairman of
the Colorado Public Utilities Commission.
- The Fed Wants More Protection Against Losses at Foreign Banks’ U.S. Units. The world’s biggest banks paint on a vast canvas. Many operate with a
single, global balance sheet, raising money where it’s cheapest and
investing it where it earns the highest return. So in certain countries,
banks can have more liabilities than assets. Regulators allow them a
free hand on the assumption that if one of their national operations
runs into trouble, the home office will quickly route it all the funds
it needs. Daniel Tarullo doesn’t think that’s such a good idea. And as the point
person for regulation on the Federal Reserve’s Board of Governors, he
has sway in saying no. Tarullo is part of a wave of national regulators
who are “ring-fencing” national banking operations—insisting that they
have a thick cushion of capital locally. The Fed doesn’t want to have to
beg other central banks for help if a foreign bank in the U.S. suffers a
funding crisis. Goodbye, globalization. Hello, Balkanization.
- IBM(IBM) Needs to Reposition Itself for the Cloud Computing Era. How’s this for bleeding edge: The average member of IBM’s
(IBM) senior executive leadership team started at the company in 1985,
when the Internet was still a government project and Steve Jobs had just
been fired from Apple (AAPL). Chief Executive Officer Ginni Rometty
joined IBM in 1981, two years out
of Northwestern University’s engineering school, and has been there
ever since.
Wall Street Journal:
- Despite Merkel's Popularity, Angst Creeps In.
Chancellor's Re-Election Bid Comes Amid Calls for Economic Fixes; 'Mom
Will Take Care of It.' Angela Merkel has become Europe's most popular
leader by telling Germans they don't need to change, and by shielding
them from much of Europe's debt-crisis pain at the same time. But as Ms.
Merkel heads into a likely third term as Germany's
chancellor, there are increasing calls from the business community,
which she has counted among her most loyal supporters, and others for
her to move more quickly to confront simmering domestic problems that
they worry will eventually endanger German prosperity.
- Fed's Guidance Questioned As Market Misreads Signals. Federal Reserve officials created new uncertainty about how much
farther they will push their easy-money policies—and new questions about
how effective they are at communicating their thinking—with the
decision to stand pat on the pace of their bond purchases for now. The Fed on Wednesday went beyond merely deciding to keep buying the
$85 billion a month of mortgage-backed securities and U.S. Treasurys
that it had been telegraphing for months it might start winding down. In
the news conference after a two-day policy meeting, Fed Chairman Ben
Bernanke also seemed to walk away from some of the guidance he had given
in June on how the bond-buying program would play out over the next
year, making it even less clear when the program will end.
- J.P. Morgan Faces a Hard-Line SEC. Despite Agreeing to 'London Whale' Fines, Agency Probes Bank Employees Over Possible Negligence.
James Dimon is known for his hardball approach to business. Now, the
Securities and Exchange Commission is playing hardball with J.P. Morgan
Chase & Co. J.P. Morgan agreed to pay more than $920 million to
settle with the SEC, the Office of the Comptroller of the Currency, the
Federal Reserve and the U.K.'s Financial Conduct Authority over a
trading blunder that cost the bank more than $6 billion.
- China Intensifies Social-Media Crackdown. Campaign Takes Toll on Public Debate, Popular Platform. A forceful campaign of intimidation against China's most influential
Internet users has cast a chill over public debate in the country and
called into question the long-term viability of its most vibrant
social-media platform.
- Pricing Glitch Afflicts Rollout of Online Health Exchanges. Less than two weeks before the launch of insurance marketplaces created
by the federal health overhaul, the government's software can't reliably
determine how much people need to pay for coverage, according to
insurance executives and people familiar with the program. Government officials and insurers were scrambling to iron out the
pricing quirks quickly, according to the people, to avoid alienating the
initial wave of consumers.
- RSA: Don’t Use Encryption Influenced by NSA. RSA Security, a division of EMC, privately told customers Thursday to
ditch an encryption algorithm that reportedly contains a flaw engineered by the National Security Agency.
It marks one of the first instances of a security company acknowledging
the U.S. government may have been involved in propping open a backdoor
into a product.
Fox News:
- Ohio clinic touted by Obama slashes budget due to ObamaCare. An Ohio clinic that was touted by Obama while he was speaking on
health care reform is now blaming ObamaCare after it was forced to cut
$330 million from its budget. Fox 8 reports the Cleveland Clinic, which is the largest employer in
Northeast Ohio with about 39,000 workers in the region, announced the
cuts to its 2014 budget at a meeting Wednesday. A spokeswoman for the clinic tells Fox News the clinic is being
forced to cut back to prepare for increased costs and decreased revenue
under the health care reform law. These changes will include offering early retirement to approximately
3,000 employees, reducing operational costs, and then layoffs as
needed.
CNBC:
- Icahn: Market is fully valued, but Apple is a buy. (video)
Billionaire investor Carl Icahn said Thursday he thinks the stock
market is fully valued but still sees Apple as a buying opportunity. "I
think that right now, the market is giving you a false picture. The market tells you you're doing well, but I don't think a lot of companies are doing that well," Icahn told "Closing Bell," adding that while his firm is up 30 percent year to date, it still has a "huge hedge" on.
Still, Icahn continues to view Apple as "very undervalued" because it
has a low multiple and the underlying company has a tremendous amount of
cash on hand and remains profitable. Icahn said he continues to buy
shares of the tech company. Elsewhere in the market, Icahn said real
estate is "ridiculously overvalued," especially in urban centers. "It's
just absurdity, and I really can't understand it," Icahn said.
"I think real estate again is coming to the top of a bubble."
- Mortgage slowdown forces new layoffs at Wells Fargo. The ax is falling again at Wells Fargo's mortgage origination unit, as refinancing activity continues to slow. The bank on Wednesday sent 60-day notices of displacement to 1,800
employees across the country, citing a slowdown in activity throughout
2012 and early 2013.
Zero Hedge:
Business Insider:
LA Times:
- The next financial crisis. Five years after the Lehman Bros. collapse, practically no structural changes have been made to the U.S. financial system.
NY Times:
- As German Vote Nears, No Guarantees for Merkel’s Coalition. Germany’s race for Parliament tightened Thursday, three days before
elections, with fresh polls underlining the difficulty that even the
popular chancellor, Angela Merkel, faces in building a winning
coalition. Ms. Merkel’s Social Democratic challenger, Peer Steinbrück, a classic
center-leftist who has deep experience in Germany’s state and federal
governments, urged his party to make the most of what it says is
collapsing support for the chancellor and her Christian Democrats.
Reuters:
- AK Steel (AKS) warns of wider-than-expected loss; shares fall. AK Steel Holding Corp estimated a wider-than-expected loss for the third quarter as production
was hit by a mechanical failure at its Ohio facility, sending
its shares down 7 percent in after-market trading.
The steelmaker said it expects to incur a loss of 22 cents
to 27 cents per share. Analysts were expecting a loss of 11
cents per share, according to Thomson Reuters I/B/E/S.
AP:
- Obama Takes on Coal With First-Ever Carbon Limits. The Obama administration will press ahead Friday with tough requirements
for new coal-fired power plants, moving to impose for the first time
strict limits on the pollution blamed for global warming. The proposal would help reshape where Americans get electricity, away
from a coal-dependent past into a future fired by cleaner sources of
energy. It's also a key step in President Barack Obama's global warming
plans, because it would help end what he called "the limitless dumping
of carbon pollution" from power plants.
The
Obama administration will press ahead Friday with tough requirements
for new coal-fired power plants, moving to impose for the first time
strict limits on the pollution blamed for global warming.
The proposal would help reshape where Americans get electricity, away
from a coal-dependent past into a future fired by cleaner sources of
energy. It's also a key step in President Barack Obama's global warming
plans, because it would help end what he called "the limitless dumping
of carbon pollution" from power plants.
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99
Financial Times:
- Fed’s decision raises heat on Yellen. The
Federal Reserve’s surprise move to hold back on trimming its bond
buying has triggered a backlash among Republican lawmakers unhappy with
the
protracted easy-money policy, and raised pressure from the right on
Janet Yellen, the frontrunner to take the helm of the central bank. “I
hope the decision to continue purchasing assets at the same pace
doesn’t mean the Fed has gotten itself into a trade it can’t get out of,
which over time will create a whole new set of problems,” said Bob
Corker, the Republican senator from Tennessee and a senior member of the
Senate banking committee.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 118.0 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 97.50 -5.0 basis points.
- NASDAQ 100 futures -.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The Fed's Kocherlakota speaking, Fed's Bullard speaking, Fed's Tarullo speaking, Fed's George speaking, BoJ's Kuroda speaking, Eurozone Consumer Confidence report, UBS Oil & Gas Conference, (SEE) analyst day and the (GT) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and commodity shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.21 -2.80%
- Euro/Yen Carry Return Index 140.24 +1.56%
- Emerging Markets Currency Volatility(VXY) 9.77 -1.61%
- S&P 500 Implied Correlation 48.09 -.17%
- ISE Sentiment Index 113.0 +3.67%
- Total Put/Call .75 -9.64%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.79 +.42%
- European Financial Sector CDS Index 125.17 -4.66%
- Western Europe Sovereign Debt CDS Index 88.0 -1.46%
- Emerging Market CDS Index 271.92 +3.02%
- 2-Year Swap Spread 16.0 +.75 basis point
- TED Spread 25.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -6.75 +1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .00% -1 basis point
- Yield Curve 242.0 +5 basis points
- China Import Iron Ore Spot $131.80/Metric Tonne +.08%
- Citi US Economic Surprise Index 44.40 +5.2 points
- Citi Emerging Markets Economic Surprise Index 1.30 +.2 point
- 10-Year TIPS Spread 2.22 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +154 open in Japan
- DAX Futures: Indicating -11 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/medical sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Putin Says Not 100% Certain Assad Will Give Up Weapons. Russian
President Vladimir Putin said he isn’t “100 percent” certain that
Syrian President Bashar al-Assad will fulfill his commitment to give up
chemical
weapons. Putin’s comments today may indicate that Russia, Syria’s
arms provider and ally, harbors doubts about Assad’s
reliability, though less so than the U.S., which has demanded a
quick and intrusive process to prevent the use of Syria’s
chemical arsenal and to test whether the Syrian leader will give
it up.
- Lagarde Sees Subdued Global Growth as IMF Reviews Forecasts. The International Monetary Fund
sees continued sluggish global growth as it reviews its
forecasts, Managing Director Christine Lagarde said. “The IMF will release its updated forecasts in a few
weeks,” Lagarde said in a speech to the U.S. Chamber of
Commerce, according to her prepared remarks. “For now, let me
say that while we are seeing some signs of recovery, global
growth remains subdued.”
The fund will release its new predictions Oct. 8, three
months after cutting its global forecasts to 3.1 percent this
year and 3.8 percent in 2014.
- Adidas Cuts 2013 Earnings Forecast as Euro Gains on Yen to Real. Adidas AG (ADS), the world’s second-largest maker of sporting goods, cut its 2013 earnings forecast because several currencies weakened against the euro. Net income this year will be between 820 million euros ($1.1 billion) and 850 million euros, the Herzogenaurach, Germany-based company said in a statement today. Adidas had previously forecast net income of 890 million euros to 920 million euros. Adidas also cut its operating margin forecast to
about 8.5 percent from a previous forecast of 9 percent.
“The further weakening of several currencies versus the
euro throughout August and September such as the Russian rouble,
Japanese yen, Brazilian real, Argentine peso, Turkish lira and
Australian dollar have intensified the negative currency
translation headwinds already highlighted,” Adidas said today.
- Europe Stocks Rise to Five-Year High as Fed Resists Taper.
European stocks rose to the highest level in more than five years as
the Federal Reserve unexpectedly decided against slowing the pace of its
monthly bond purchases. UniCredit SpA and Standard Chartered Plc
climbed more than 2 percent each as a gauge of lenders advanced.
Randgold Resources Ltd. and Polymetal International Plc jumped at least 7
percent as the price of gold rallied. Cie. Financiere Richemont SA
(CFR) and Swatch Group AG added more than 1 percent as a report showed
Swiss watch exports increased last month.
The Stoxx Europe 600 Index gained 0.6 percent to 315.05,
the highest level since June 2008, at the close of trading,
after earlier surging as much as 1.2 percent.
- Oil Falls Fourth Time in Five Days as Libya Output Rises. WTI for October delivery, which expires tomorrow, slid
$1.53, or 1.4 percent, to $106.54 a barrel at 2:18 p.m. on the New York Mercantile Exchange.
It surged 2.5 percent yesterday, the biggest increase since Aug. 27.
The volume of all futures traded was 1.6 percent below the 100-day
average. The more
active November contract was down $1.21 at $106.07.
- Recovery Disconnects Most in U.S. From Prosperity, Census Shows. More Americans continued to take on
roommates or boarders than before the recession, women had fewer
children, and people were still flocking to college or graduate
school as a way to postpone their entry into the job market. Those are just some measures of a tepid U.S. economy
recorded last year in new Census Bureau reports that offer a
portrait of a nation struggling to fully rebound from the worst
downturn since the Great Depression. The data show a
geographically uneven recovery in which the middle class is
slipping and, on the basis of median household income, no better
off than it was in 1989. Unless there’s significant progress in the next few years,
that reversal could be a watershed in American history.
- Americans’ Views on U.S. Economic Outlook Drop to One-Year Low. Consumers views of the U.S. economic outlook deteriorated in
September to the weakest level in a year as higher borrowing rates
started to chip away at progress in the housing market. The gap
between positive and negative expectations widened to minus 9, the
lowest since August 2012, from minus 5 in the prior two months,
according to results of the Bloomberg Consumer Comfort Index. The weekly
confidence measure rose to a one-month high of minus 29.4 from minus
32.1.
Fox News:
- McCain tells Russian people 'Putin rules for himself' in Pravda op-ed.
Senate Republican John McCain, one of the most vocal advocates for
American military intervention in the crisis in Syria, is firing back
after Russian President Vladimir Putin’s op-ed in the New York Times
last week, in which the Russian chastised Americans for considering a
military strike in Syria and slammed the notion of American
exceptionalism. In an op-ed submitted to the Russian newspaper Pravda, McCain tells the Russian people that Putin "rules for himself, not you." The piece was posted on the paper's website, Pravda.ru, shortly before 10 a.m. Thursday, Moscow time.
- Rules that could 'kill'? Safety, cost concerns over EPA's new coal regs. New clean-energy rules pushed through by the Obama administration are
raising concerns that they could cripple the coal industry -- and may
require power plants to use technology so risky that even the
president's former top energy official once warned it could "kill." The EPA, by Friday, is expected to release a new proposal to set the first-ever carbon dioxide limits for new power plants.
- EU to change how it calculates deficit figures, possibly easing pressure for austerity. European Union finance officials have reached a preliminary agreement
to change the way the bloc determines some deficit figures, which might
lessen the pressure for austerity measures in crisis-hit economies. An
EU official said Thursday the change to the calculation of the
structural deficit would have "very significant" positive consequences
for Spain because of its labor market structure, and somewhat less so
for Ireland, Greece and Portugal.
CNBC:
- Postmaster says USPS may need emergency rate hike. The Postal Service may need an emergency rate increase to stay afloat. That's according to Postmaster General Patrick Donahoe, who's
testifying before a Senate committee. Donahue says the agency's cash
balance next month likely will cover only five days of its average daily
expenses.
Zero Hedge:
- The Fed's Reflexive Catch 22 In One Sentence. Another theme arising from their decision to hold fire was their
worry that financial conditions had tightened over the past few weeks.
If this is the case then the
path of tapering is going to be tough because every time the market
thinks they are going to taper, yields will likely rise and conditions
will tighten.
Business Insider:
Real Clear Politics:
Reuters:
Financial Times:
Telegraph:
- Fed's shock taper decision 'damages credibility'. The US Federal Reserve has damaged its credibility and sown confusion about
central banks’ communication strategies by surprising markets with the
decision to keep quantitative easing on hold, economists and traders have
warned.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Le Monde:
- France Set to Announce New Carbon Tax at Conference. The tax is
expected to bring in EU400-500m for the government in 2014, rising to
EU2.5b in 2015 and EU 4b in 2016. French President Francois Hollande and
Prime Minister Jean-Marc Ayrault will announce the tax at an
environmental conference that starts in Paris tomorrow.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.95% 2) Homebuilders -1.76% 3) Banks -1.50%
Stocks Falling on Unusual Volume:
- ROYT, SSNC, PIR, FLTX, MFRM, CAG, BPOP, BERY, PPO, TGI, TFM, LNC, HOMB, ZION, MSCC, KYTH, INVN, MET, APOG, CLC, KMP, EBIX, PTR, ADBE, CMA, FSC, SBNY, NWBI, KEY, LNC, CODE, DRIV and SIVB
Stocks With Unusual Put Option Activity:
- 1) ADT 2) SPF 3) SCHW 4) PRU 5) DLTR
Stocks With Most Negative News Mentions:
- 1) WFC 2) AAPL 3) TSLA 4) BA 5) MSFT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +.99% 2) Construction +.54% 3) Agriculture +.32%
Stocks Rising on Unusual Volume:
- A, P, USU, FENG, MKTG, SCTY, ISIS, CLDX, GRPN, TSLA and WLT
Stocks With Unusual Call Option Activity:
- 1) RAD 2) GT 3) PBI 4) CAG 5) LVLT
Stocks With Most Positive News Mentions:
- 1) KR 2) JPM 3) EOG 4) MCD 5) CME
Charts:
Evening Headlines
Bloomberg:
- U.S. Raises Prospect That Syria Will Miss Date for Disclosures. The U.S. raised the prospect that
Syria will miss the first test of its compliance with an
agreement to give up its chemical weapons. While Secretary of State John Kerry has said that Syria
“must submit” a full disclosure of its chemical weapons by
Sept. 21, as called for in the U.S.-Russia accord, State
Department spokeswoman Marie Harf said today that the U.S. was
prepared for some delay. She said the date -- one week after the
accord was reached in Geneva that averted U.S. military strikes
-- was more a “timeline” than “a hard and fast deadline.”
- Kuroda
Cash Heading to U.S. Dulls Stimulus Impact: Japan Credit. Bank of Japan
Governor Haruhiko Kuroda's unprecedented cash provisions are flowing
into U.S. bonds and overseas loans instead of fueling investment at
home. Treasuries held by Japanese investors rose $52 billion to a record
$1.135 trillion as other nations' holdings of the securities dropped by
$63 billion in July, U.S. government data show. At the same time,
Japanese lenders have become the world's biggest providers of
cross-border loans, a report from the Bank for International Settlements
showed on Sept. 15.
- Goldman Drawing Negative Loops as SBI Risk Climbs: India Credit. Goldman
Sachs Group Inc. warned
that “negative feedback loops” triggered by waning investor
confidence are threatening India’s finances, after state-owned
lenders’ bond risk surged the most in Asia this quarter. The investment
bank said in a Sept. 16 report the rupee may drop to 72 per dollar in
six months from 63.385 now as weaker capital inflows force the central
bank to raise interest rates, hurting lenders and the economy. Rising
bad loans then require more capital injections, further worsening
perceptions of India’s finances. “There might be a need to
recapitalize banks above the budgeted amounts, but there is not much
fiscal room available this year,” Tushar Poddar, Mumbai-based economist
at Goldman
Sachs, said in an interview yesterday.
- Asia Stocks, Bonds Jump on Fed as Copper to Baht Surge.
Asian stocks jumped to a four-month high, bond yields and credit risk
declined while industrial metals rallied after the Federal Reserve
unexpectedly refrained from reducing U.S. economic stimulus. The Thai
baht strengthened the most in six years. The MSCI Asia Pacific Index climbed 1.9 percent as of 12:20 p.m. in Tokyo, set for the highest close since May 22.
Standard & Poor’s 500 Index futures added 0.1 percent after the
measure rose 1.2 percent to a record yesterday. Australian 10-year bond
yields fell the most in more than six weeks. Copper jumped 1.6 percent
and oil advanced 0.4 percent. The baht gained 2 percent, the Indian
rupee surged 2.5 percent and the Malaysian ringgit
was up 2.2 percent.
- WTI Oil Gains for Second Day as Fed Maintains Economic Stimulus.
West Texas Intermediate crude rose
for a second day after the Federal Reserve said it will maintain monthly
bond purchases to stimulate economic growth in the U.S., the world’s
biggest oil consumer. Futures advanced as much as 0.6 percent in New
York after
climbing the most in more than three weeks yesterday.
- Gold Jumps Most in 15 Months as Fed Refrains From Stimulus Taper. Gold jumped the most in 15 months
after the Federal Reserve unexpectedly refrained from reducing
the pace of monthly U.S. bond purchases, increasing demand for
the metal as a store of value. Gold for immediate delivery climbed 4.1 percent to
$1,364.02 yesterday, the biggest gain since June 1, 2012,
rebounding from a drop of as much as 1.4 percent to $1,292.02,
the lowest since Aug. 8.
- Merkel Rejects Joint Euro Debt, Promises to Stay Hard Course. German
Chancellor Angela Merkel told supporters she’ll stand as a bulwark
against joint debt in the euro area if she’s re-elected in four days and
continue to extract conditions from indebted nations. Speaking at
an election rally of several thousand at a portside warehouse in
Hamburg, Merkel denounced plans that have been supported by the
opposition Social Democrats, such as a debt-redemption fund and jointly issued euro bonds to overcome the nearly four-year-old European debt crisis.
Wall Street Journal:
- House GOP Ties Government Funding to Health Law. Boehner, Republican Leaders Press Plans to Tie Priorities With Derailing Obamacare.
House Republicans said Wednesday that stripping funding from the
health-care law championed by President Barack Obama would be their
price for keeping federal agencies open after the end of this month, a move that sharply increases the risk of a partial
government shutdown in two weeks.
GOP leaders said the House would vote
Friday on a bill to fund federal agencies for the first 2 1/2 months of
the fiscal year, which starts Oct. 1, but strip all health-law funding.
- Stock Investors Are Left Wondering When on Fed's Taper. Stocks Welcomed the Fed Sticking to Its Policy, but Big Questions Remain.
One of the oldest clichés on Wall Street is that financial markets hate
uncertainty and confusion. On Wednesday, the Federal Reserve gave the
markets uncertainty and
confusion about plans to wind down its bond-buying program, and markets
loved it, sending U.S. stock indexes to records.
Fox News:
- Defiant Assad claims government did not use chem weapons, vows to abide by agreement. (video) Syrian President Bashar Assad, in an exclusive interview with Fox News,
claimed he is fully committed to carrying out a plan to turn over and
destroy his government's chemical weapons -- while continuing to deny
responsibility for last month's deadly chemical weapons attack despite
new evidence that officials say implicates the Assad regime.
CNBC:
- Oracle(ORCL) shares skid after cautious outlook. Oracle delivered a cautious second-quarter outlook, which the company attributed to lackluster business-technology spending in the U.S. and
Europe. Shares fell nearly 3 percent after-hours. The company said it expects earnings of 64 to 69 cents a share and
for revenue to grow 1 percent to 4 percent during the quarter. Analysts currently expect earnings of 69 cents a share and revenue growth of 3 percent.
Zero Hedge:
- As Bernanke Blows A Bigger Bubble, Everything Is Bought. "We have got to turn the page on this kind of bubble-and-bust mentality that helped to create this mess in the first place, we
have got to build a housing system that’s durable and fair and rewards
responsibility for generations to come. That is what we have got to
do," - Barack Obama, August 6, 2013.
Business Insider:
New York Times:
- JPMorgan(JPM) Set to Pay More Than $900 Million in Fines. JPMorgan Chase is expected to pay more than $900 million in fines to
government authorities in Washington and London and make a rare
admission of wrongdoing on Thursday, a pact that will settle a range of
investigations over a multibillion trading blunder the bank suffered
last year, according to people briefed on the matter.
Reuters:
- Cleveland Clinic announces job cuts to prepare for Obamacare. The
world-renowned Cleveland Clinic said on Wednesday it would cut jobs and
slash five to six percent of its $6 billion annual budget to prepare for
President Barack Obama's health reforms.
The clinic, which has treated
celebrities and world leaders such as musician Lou Reed, former Italian
Prime Minister Silvio Berlusconi and former Olympic gold medal skater
Scott Hamilton, did not say how many of its 44,000 employees would be
laid off. But a spokeswoman said that $330 million would be cut from its
annual budget.
- Japan firms' mood dips as emerging economies slow -Reuters Tankan. Confidence among Japanese
manufacturers slipped in September from a three-year high the
previous month, a Reuters poll showed on Thursday, as concerns about slowing growth in emerging markets hit exporters and a
weaker yen pushed up import costs. Since mid-year, the market gains have plateaued, a planned
sales tax rise has been a major political issue and some major
emerging markets have been badly hit by capital outflows. The index of sentiment at manufacturers fell to plus 12 in
September, its lowest since May, from 16 in August in the
monthly Reuters poll, which is strongly correlated with the Bank
of Japan's tankan poll.
Telegraph:
- No taper: the Fed loses its nerve. So for now, the Fed is holding back, even though it must know that QE
has become little more than a confidence trick in so far as the real
economy is concerned. It keeps markets happy, and asset prices growing,
but it does nothing to address the underlying fault lines in the US and
global economies, and indeed in the long term threatens only to make
them a great deal worse. The can has been kicked further down the road, but it's still there,
and the longer this failure to face up to reality persists, the more
painful the eventual denouement will be.
- China's credit boom is spiralling out of control, warns Fitch. China's massive credit boom is rapidly growing to unsustainable levels and
over-extended financial institutions risk being pushed over the edge by
rising interest rates, according to rating agency Fitch. Fitch warned that China's credit-fuelled expansion continued unabated, despite
talk of contracting credit. "To the extent people think there's deleveraging underway, or growth is
coming back in a strong way - nothing has really changed," said
Charlene Chu, senior director at Fitch Ratings. "The bottom line
is we
continue to be in the middle of this very large credit boom."
According to Fitch's calculations, annual new credit in China climbed to
21
trillion yuan (£2.15 trillion) in August, up from 19 trillion yuan in
August
2012, the fifth year that net new credit has exceeded more than one-third of
GDP. "It is difficult to see how a situation in which credit – already twice
as large as GDP – continues to grow by twice as fast can be sustainable
indefinitely," the report said.
Evening Recommendations
Night Trading
- Asian equity indices are +1.0% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 114.50 -17.5 basis points.
- Asia Pacific Sovereign CDS Index 102.5 -7.75 basis points.
- NASDAQ 100 futures +.19%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 330K versus 292K the prior week.
- Continuing Claims are estimated to rise to 2900K versus 2871K prior.
- The Current Account Deficit for 2Q is estimated at -$97.0B versus -$106.1B in 1Q.
10:00 am EST
- Philly Fed for Sept. is estimated to rise to 10.3 versus 9.3 in August.
- Existing Home Sales for August are estimated to fall to 5.25M versus 5.39M in July.
- Leading Index for August is estimated to rise +.6% versus a +.6% gain in July.
Upcoming Splits
Other Potential Market Movers
- The BoJ's Kuroda speaking, Fed's Pianalto speaking, (MSFT) financial analyst meeting, UK retail sales report, Bloomberg Economic Expectations Index for Sept. and the weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are sharply higher, boosted by financial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
