Bloomberg:
- Emerging Markets at Risk From Carry Trade Unwinding, BofA Says. Emerging-market assets are at risk
as the tapering of the Federal Reserve’s stimulus program will
probably trigger a reversal of $2 trillion in carry trades,
according to strategists at Bank of America Merrill Lynch. Carry trades, where investors borrow in a country with low
interest rates to fund purchases of higher-yielding assets
elsewhere, helped developing nations raise foreign-exchange
reserves by $2.7 trillion since the end of the third quarter of
2008, Hong Kong-based Ajay Singh Kapur and Ritesh Samadhiya at
BofA wrote in a research report today. The capital inflows
spurred economic growth and inflated prices, particularly those
of bonds and property, they said.
- PBOC Drains Funds Using Repos for First Time in 8 Months. China’s
central bank sold repurchase contracts for the first time since June,
draining funds from the banking system as money-market rates sink to the
lowest levels in at least three months. The People’s Bank of China
conducted 48 billion yuan ($7.9 billion) of 14-day repurchase contracts
at 3.8 percent today, according to a statement posted on its website.
The monetary authority last issued such contracts on June 6, when it
sold 10 billion yuan of 28-day repos. Today’s rate is higher than both
the 2.75 percent in the June auction and the 2.05 percent when the PBOC
last issued 14-day repos in January 2011.
- European Stocks Are Little Changed as ZEW Index Weakens.
European stocks were little changed, after two days of gains, as a
measure of German investor confidence fell more than forecast and the
Federal Reserve Bank of New York’s general economic index missed
estimates. Inditex SA lost 4 percent as Citigroup Inc. lowered its
rating on the retailer. Centrica (CNA) Plc slid 1.3 percent after UBS AG
recommended selling shares in the largest energy supplier to U.K.
households. Casino (CO) Guichard-Perrachon SA rallied 3.2 percent after
posting an 18 percent jump in 2013 earnings.
The Stoxx Europe 600 Index added less than 0.1 percent to
334.6 at the close of trading.
- Natural Gas Jumps to 2-Week High as Winter Storm Hits.
Natural gas futures jumped to a two-week high in New York as storms and
cold weather boosted heating demand, cutting stockpiles to the lowest
in 10 years.
Gas climbed as much as 6.6 percent as the second storm in
three days brought snow to the Northeast.
Wall Street Journal:
- Deadly Clashes Flare Anew in Ukraine. Government Says It May Take 'Tough Action' If Disorder Continues in Kiev. Three weeks of uneasy truce between the
Ukrainian government and Western-oriented protesters ended Tuesday with
an outburst of violence in which at least three people were killed,
prompting a warning from authorities of a crackdown to restore order. Protesters
outside the Ukrainian parliament hurled broken bricks and Molotov
cocktails at police, who responded with stun grenades and rubber
bullets. There were unconfirmed reports of shootings, and small arms
were visible among some protesters.
MarketWatch:
CNBC:
ZeroHedge:
Business Insider:
NY Times:
Reuters:
Style Underperformer:
Sector Underperformers:
- 1) Road & Rail -1.72% 2) Homebuilding -1.60% 3) Compute Hardware-.1.23%
Stocks Falling on Unusual Volume:
- BCOR, DRC, AMWD, KSU, APL, CRAY, WTW, ACO, FDP, NCLH, ATLS, GNC, KO,
WM, CPLA, GEL, RYAAY, ASPS, CHH, GIL, AN, VZ, JOSB, H, CLD, CF, NR, WWW
and CRAY
Stocks With Unusual Put Option Activity:
- 1) ADBE 2) KSU 3) VMW 4) KO 5) CRM
Stocks With Most Negative News Mentions:
- 1) KSU 2) BAC 3) GEL 4) WTW 5) MTZ
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Biotech +2.27% 2) Networking +1.06% 3) Drugs +.89%
Stocks Rising on Unusual Volume:
- FRX, ACT, HOLI, GHL, EPL, MNK, INSM, ENT, CCIH, MYGN, GTAT, TASR, JAZZ, SCTY, MYL, CAMP, AUXL, UBNT, CGNX, SLXP, CDE, SJM, GPC and SUNE
Stocks With Unusual Call Option Activity:
- 1) GGP 2) ACT 3) WM 4) AUXL 5) NS
Stocks With Most Positive News Mentions:
- 1) MDT 2) ITW 3) AAPL 4) FRX 5) ZNGA
Charts:
Weekend Headlines
Bloomberg:
- Japan Growth Trails Forecasts as Sales-Tax Increase Looms.
Japan’s economy grew at less than half the forecast pace in the fourth
quarter, underscoring risks to the nation’s recovery as a sales-tax
increase looms in April. Gross domestic product expanded an annualized 1
percent from the previous quarter, the Cabinet Office said today in
Tokyo, less than the median projection of 2.8 percent in a Bloomberg
News survey of 37 economists where the lowest estimate was 1.1 percent.
- BOJ Boost to Loan Programs Signals Room for More Easing: Economy. The Bank of Japan boosted lending programs while sticking with a plan
for unprecedented asset purchases, as the central bank tries to support
a recovery and stamp out 15 years of deflation. The BOJ doubled
a funding tool to 7 trillion yen ($68 billion) and said individual
banks could borrow twice as much low-interest money as previously under a
second facility. It left unchanged a pledge to expand the monetary base
by 60 trillion to 70 trillion yen per year.
- BOJ Said to Consider Refraining From 2015 Monetary-Base Forecast. The Bank of Japan is considering
refraining from issuing a monetary-base forecast for 2015 to
avoid signaling a commitment to its unprecedented easing for a
specific time period, according to people with knowledge of the
matter. In April last year, the BOJ said the monetary base will
rise to 270 trillion yen ($2.65 trillion) by the end of 2014.
Now, the central bank may avoid issuing any update for coming
years, said the people, who asked not to be named because the
talks were private. The BOJ is forecast to leave policy
unchanged at a meeting ending tomorrow.
- Asian Stocks Advance for Third Day Before BOJ Statement. Asian
stocks rose, with the regional benchmark index poised for a three-week
high, as the yen weakened before the Bank of Japan issues a policy
statement, boosting the outlook for the nation’s exporters. Nissan
Motor Co. (7201), a carmaker that gets about 80 percent of sales outside
Japan, increased 1.6 percent in Tokyo. BHP Billiton Ltd., the world’s
biggest mining company, rose 2 percent in Sydney after first-half profit
jumped more than analysts expected. Coca-Cola Amatil Ltd. dropped 6
percent after
Australia’s largest drinks maker reported full-year profit that
missed estimates.
The MSCI Asia Pacific Index added 0.5 percent to 136.93 as
of 9:39 a.m. in Tokyo, heading for its highest close since Jan.
24.
- Natural Gas Rises to Nine-Day High as Storm Crosses U.S. Midwest.
Futures for March delivery rose 23.7 cents, or 4.5 percent,
to $5.451 per million British thermal units at the 1:15 p.m. close of
electronic trading on the New York Mercantile Exchange. Volume was 80
percent below the 100-day average. Prices are up
29 percent this year.
- Hedge Funds Raise Gold Bull Bets as Paulson Holds: Commodities.
Hedge funds raised bullish gold wagers to a three-month high as signs
of slowing U.S. economic growth spurred demand for haven assets.
Billionaire John Paulson maintained his bullion holdings last quarter. The
net-long position climbed 17 percent to 69,291 futures and options in
the week ended Feb. 11, U.S. Commodity Futures Trading Commission data
show. Long wagers rose 8.8 percent, the most since March. Net-bullish
holdings across 18 U.S.-traded
commodities rose 18 percent to 1.07 million contracts, the
highest since October 2012, led by silver and coffee.
- Ibovespa Falls as Natura Drops Amid Brazil Growth Concern.
The Ibovespa dropped for the third
time in four sessions as companies that sell domestically
including cosmetics seller Natura Cosmeticos SA sank after
analysts cut Brazil’s economic growth estimates. BR Malls Participacoes
led declines among real estate stocks, while utility Centrais Eletricas
Brasileiras SA fell the most on the benchmark gauge. Homebuilder
Brookfield Incorporacoes SA (BISA3) rallied after saying its corporate
parent will offer to buy all outstanding shares for as much as 1.60
reais each to take it private. The Ibovespa fell 1.3 percent to 47,576.33 at the close of trading in Sao Paulo, with 63 stocks lower and eight higher.
Wall Street Journal:
- Suspected Islamic Militants Kill at Least 90 in Nigerian Village. Suspected Islamic militants stormed a
village along Nigeria's mountainous border with Cameroon, a local
official and a witness said Sunday, killing at least 90 people. Several
hundred fighters screaming "Allah akbar," or "God is great," ran
through the village of Izge Saturday night, said local resident Ibrahim
Musa. The town is a predominately Christian enclave in Nigeria's largely
Muslim northeast, the homeland to Islamist insurgency Boko Haram. "They
started shooting sporadically, killing everyone on sight," said Mr.
Musa, who fled into the surrounding countryside. When he returned
Sunday, he counted 90 bodies, "littered everywhere in our town."
- Charges Open New Front in Libor Probe. Investigation Into Alleged Rigging of Libor Broadens. British prosecutors filed criminal charges against three former bank
traders for alleged fraud, opening a new front in a global investigation
into alleged rigging of benchmark interest rates, with more charges in
the pipeline.
MarketWatch.com:
Fox News:
CNBC:
- Carmakers may be on the verge of an incentives war.
When General Motors announced it would offer more than $7,000 in
discounts on some of its big Silverado pickups, the news sent many
shoppers rushing to showrooms. But it also sent shivers racing down the
spines of automotive investors increasingly worried that slowing sales
may trigger the sort of incentive wars that trashed industry profits
during the years leading up to the recent recession.
Business Insider:
LA Times:
San Francisco Chronicle:
Reuters:
- Weak spending shows Japanese consumer doubts about Abenomics. Japanese consumers ended last year
with a whimper instead of the bang many had expected,
reinforcing a nagging worry that the prime minister's aggressive
policies are struggling to find support among those key to its
success. Economic growth figures on Monday added to evidence that
concern about job security is holding back consumers, trumping
the urge to spend before a rise in the national sales tax rate
in April makes goods more expensive.
Financial Times:
- Bankers play funding trick with subprime car loan deals. Pre-funding is like spending winnings before cards have been dealt. While
millions of Americans have fallen out of love with their cars, Wall
Street has been swept off its feet by loans used to finance sales of
Volkswagens, Hondas and Fords. Car ownership rates in the US have
slumped to their lowest in more than 15 years – at the same time that
sales of auto asset-backed securities (auto ABS) – or bonds backed by
loans that fund car purchases – have surged.
Telegraph:
China Securities Journal:
- Chinese Govt Guarantee on Trusts to Harm Pricing. Chinese
governments and banks shouldn't continue to tolerate trust products that
have "no risk" because of implicit guarantees, according to a
front-page commentary. Government guarantees on off-balance-sheet wealth
management products from state-owned companies and banks will harm
market pricing, according to the commentary.
Weekend Recommendations
Barron's:
- Bullish commentary on (EPL), (CVS), (SJM), (NPO) and (AAL).
Night Trading
- Asian indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.0 unch.
- Asia Pacific Sovereign CDS Index 101.75 -2.0 basis points.
- NASDAQ 100 futures +.24%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Empire Manufacturing for February is estimated to fall to 9.0 versus 12.51 in January.
9:00 am EST
- Net Long-Term TIC Flows for December are estimated to rise to $30.0B versus -$29.3B in November.
10:00 am EST
- The NAHB Housing Market Index for February is estimated at 56 versus 56 in January.
Upcoming Splits
Other Potential Market Movers
- The BoJ decision, Reserve Bank of Australia Minutes, German ZEW Index and UK Inflation data 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 mixed. The Portfolio is 50% net long heading into the week.
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising
global growth fears, increasing emerging markets debt angst, technical
selling, a stronger yen and profit-taking. My intermediate-term trading
indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.
