Evening Headlines
Bloomberg:
- Ukraine May Resume Push in East as Russian Deal Crumples. Ukraine
considered resuming operations to oust militants from eastern cities as
an agreement with Russia to reduce tensions in the region lay in
tatters. Acting Ukrainian President Oleksandr Turchynov yesterday
called on security forces to move against the separatists after
the discovery of two bodies in the country’s eastern region,
saying that “terrorists” backed by Russia had “crossed the
line.” He spoke hours after meeting in Kiev with U.S. Vice
President Joe Biden, who pledged American support including $50
million in aid.
With the April 17 accord faltering, Ukraine is inching
closer to a renewed push to dislodge militants in defiance of
Russia’s warnings that such a move risks sparking civil war.
- China Defies Obama’s Slow Asia Pivot With Rapid Military Buildup. President Barack Obama’s trip to Asia this week will be dominated by a country he’s not even visiting: China.
Each of the four nations on the president’s itinerary is involved in
territorial disputes with an increasingly assertive China. And years of
military spending gains have boosted the capabilities of the People’s
Liberation Army faster than many defense analysts expected, casting a
shadow over
relations between China and its neighbors and sparking doubts about
long-term prospects for the U.S. presence in the Pacific.
- China’s Stocks Fall After Manufacturing Data Signals Contraction.
China’s stocks fell, led by energy and financial companies, after a
manufacturing gauge signaled a fourth month of contraction. The yuan
touched its lowest level since 2012. China Shenhua Energy Co. paced
declines for coal shares in Hong Kong and Shanghai. China Citic Bank
Corp. lost 1.2 percent in Shanghai. Liquor maker Kweichow Moutai Co.
rose 1.7 percent as a gauge of consumer companies least reliant on
economic growth climbed the most among industry groups. The Shanghai
Composite Index (SHCOMP) fell 0.4 percent to 2,065.37 at 9:54 a.m. The
index has slid for four out of the past five days on concern new initial
public offerings will divert funds. A preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 48.3 in April, below the level of 50
that’s the dividing line between expansion and contraction.
- Asian Stocks Pare Advance After Chinese, Australian Data.
Asian stocks pared their advance after China’s preliminary
manufacturing data signaled persisting weakness in the world’s
second-largest economy and Australia’s inflation rose less than
expected. Resona Holdings Inc. climbed 2.9 percent after Greenlight
Capital Inc., a hedge fund run by David Einhorn, said it bought shares
in the Japanese lender. Seibu Holdings Inc. jumped 5.1 percent as
Japan’s biggest hotel chain started trading on the Tokyo bourse. China
Overseas Land & Investment Ltd., the largest mainland developer
traded in Hong Kong, sank 4.1 percent, leading declines on the Hang Seng
Index. The MSCI Asia Pacific Index gained 0.1 percent to 138.75 as
of 12:12 p.m. in Tokyo, paring gains of as much as 0.6 percent.
- Copper Drops for First Time in Four Days on China Data. Copper fell for the first time in
four days after a private gauge of Chinese factory production
signaled a fourth month of contraction, curbing demand prospects
in the world’s biggest user of industrial metals. The contract for delivery in three months on the London
Metal Exchange retreated as much as 0.4 percent to $6,646 a
metric ton and was at $6,652 by 10:47 a.m. in Tokyo. The metal
has lost 9.6 percent this year, the worst performer among the
six main metals traded on the LME.
Wall Street Journal:
- U.S. to Move Troops to Allies Near Russia as Tensions Flare in Eastern Ukraine. Pentagon Seeks to Reassure NATO Allies as Kiev Accuses Pro-Russian Forces of Killings. Hundreds of U.S. troops are headed for maneuvers in Eastern Europe
through year's end, the Pentagon announced, new deployments intended to
reassure allies on Russia's borders as violence took a sinister turn
Tuesday in embattled Ukraine.
- In Chinese Property, Smart Players Are Selling. The Tycoon Li Ka-shing Unloads Projects in Shanghai, Guangzhou; Richard Li Sells in Beijing.
For years, Chinese property has been a sure bet for savvy investors
looking to ride the country's economic surge. Now, some of the
best-known names in Chinese investing are cutting back, at least for the
present. Since September, Hong Kong tycoon Li Ka-shing, widely
considered Asia's richest man, has sold office and shopping-mall
projects in the cities of Shanghai and Guangzhou. His son, businessman
Richard Li, sold a prime piece of real estate, a mixed-use complex in
Beijing's Sanlitun shopping district, for US$928 million in early
April.
- Numericable Set to Issue Record Junk Bond. Debt Offering Could Raise $11.6 Billion. A French cable operator is preparing what could be the largest
junk-bond sale in history—a sign of investors' ravenous appetite for
risk in an era of low rates and a mark of the profound shift in bond
financing on a continent that had long borrowed heavily from its banks. Bankers
working on the deal say Numericable Group SA was expected to raise the
equivalent of €8.4 billion ($11.6 billion) from the bond sale Wednesday,
about...
- Keystone Uncensored. A labor leader calls the Administration 'gutless,' 'dirty' and more. Republicans are denouncing President
Obama's
latest delay on the Keystone XL pipeline, six long years after it
was proposed. But for cold political fury they have nothing on
Terry O'Sullivan,
who runs the Laborers' International Union that represents a
half-million construction workers.
Fox News:
- Republicans warn BLM eyeing land grab along Texas-Oklahoma border. Texas officials are raising alarm that the Bureau of Land Management,
on the heels of its dust-up with Nevada rancher Cliven Bundy, might be
eyeing a massive land grab in northern Texas. The under-the-radar issue has caught the attention of Texas Attorney
General Greg Abbott, who fired off a letter on Tuesday to BLM Director
Neil Kornze saying the agency “appears to be threatening” the private
property rights of “hard-working Texans.”
CNBC:
Zero Hedge:
Business Insider:
ABC News:
- Bill Ackman’s Secret $$ Deal for Herbalife Whistleblower. In his year-long campaign against the embattled Herbalife company, Wall
Street hedge fund manager Bill Ackman secretly promised a disgruntled
former company executive as much as $3.6 million over 10 years if he
lost his job after providing information to government investigators and
the media.
Reuters:
- Juniper's(JNPR) revenue rises as telecom clients ramp up networks. Network gear maker Juniper Networks Inc reported a higher-than-expected 10 percent rise in quarterly revenue as U.S. telecom carriers spent more to ramp up
their networks to manage increasing data traffic on smartphones
and tablets. Juniper's shares were little changed in extended trading.
- VMware(VMW) revenue beats estimates, but shares dip on sales delays. Virtualization software maker VMware Inc reported better-than-expected first-quarter revenue and forecast current-quarter revenue largely above analysts'
average estimate as more customers opt for its cloud
infrastructure services. However, the company's shares slipped more than 6 percent in
extended trading after it acknowledged a delay in closing some
of its enterprise license agreements (ELAs) in the first quarter
as customers looked to sign expanded deals.
- Intuitive Surgical(ISRG) cuts outlook for growth in robot procedures. Intuitive Surgical Inc on
Tuesday lowered its forecast for procedure growth for its da
Vinci surgical robots, citing a slowdown in U.S. gynecology
procedures. The medical device maker said it now expects da Vinci
procedure growth in a range of 2 percent to 8 percent, down from
the prior forecast of 9 percent to 12 percent. The lower, wider range reflects uncertainty about the impact
on procedure volumes as hospitals adjust to the implications of
the Affordable Care Act, company officials said on a conference call after the release of first-quarter earnings.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.50 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 86.5 -1.0 basis point.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:45 am EST
- The Preliminary Markit US Manufacturing PMI for April is estimated to rise to 56.0 versus 55.5 in March.
10:00 am EST
- New Home Sales for March are estimated to rise to 450K versus 440K in February.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,680,000 barrels versus a +10,013,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -1,495,000 barrels versus a
-154,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -495,000 barrels versus a -1,278,000 barrel decline
the prior week.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI, BoE Minutes, $35B 5Y T-Note auction and the weekly MBA mortgage applications report also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and financial 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: Substantially Higher
- Sector Performance: Almost Every Sector Gaining
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 12.92 -2.49%
- Euro/Yen Carry Return Index 147.80 +.11%
- Emerging Markets Currency Volatility(VXY) 8.40 +1.20%
- S&P 500 Implied Correlation 56.40 -1.23%
- ISE Sentiment Index 119.09 -23.72%
- Total Put/Call .65 -12.1%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.24 -2.31%
- European Financial Sector CDS Index 78.37 -1.98%
- Western Europe Sovereign Debt CDS Index 35.0 -.30%
- Asia Pacific Sovereign Debt CDS Index 86.97 -.46%
- Emerging Market CDS Index 275.31 +.94%
- China Blended Corporate Spread Index 349.71 -.42%
- 2-Year Swap Spread 13.75 -.75 basis point
- TED Spread 20.75 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -1.0 +1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% -1.0 basis point
- Yield Curve 231.0 -2.0 basis point
- China Import Iron Ore Spot $113.56/Metric Tonne -.71%
- Citi US Economic Surprise Index -22.90 +.7 point
- Citi Emerging Markets Economic Surprise Index -25.40 -.6 point
- 10-Year TIPS Spread 2.21 unch.
Overseas Futures:
- Nikkei Futures: Indicating +101 open in Japan
- DAX Futures: Indicating +19 open in Germany
Portfolio:
- Higher: On gains in my tech/medical/biotech/retail sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Biden Vows Support for Ukraine as Deal With Russia Frays. Ukraine’s
president urged the resumption of an offensive against militants after
U.S. Vice President Joe Biden’s visit as an agreement with Russia to
ease tensions in the former Soviet republic’s east neared collapse. With
eastern Ukraine in control of “terrorists” supported by Russia, the
separatists have “crossed the line” after bodies of a local lawmaker and
a member of the Batkivshchyna party were found today, acting President
Oleksandr Turchynov said in a statement on the parliament website. Biden
expressed U.S. support for Ukraine during a visit to Kiev.
- Chinese Bad-Loan Ratio Rises ‘Significantly,’ Huarong Says. China’s
bad-loan ratio rose “significantly” in the first quarter, increasing
risks for the nation’s banking industry, according to the nation’s
largest manager of soured debt. The business environment this year has
been “grim and complicated” as lenders face pressures on asset quality,
liquidity and lending margins, China Huarong Asset Management Co.
Chairman Lai Xiaomin said during an internal meeting on April 15,
according to a statement today on the website of the
Beijing-based company. China’s slowing economy has made it tougher
for borrowers to repay debt, driving up banks’ sour loans for a ninth
straight quarter as of December to the highest level since 2008, data
from the banking regulator show. New nonperforming loans amounted to
more than 60 billion yuan ($9.6 billion) in the first two months of this
year, compared with 100 billion yuan for all of 2013, China Business News reported on April 9, citing
people it didn’t identify. “The economic indicators we’ve seen so far are quite
disappointing and repayment risks are rising across sectors from
property to small businesses due to weak demand,” Rainy Yuan, a
Shanghai-based analyst at Masterlink Securities Corp., said by
phone. “Banks will be hit in such an operating environment but
managers of bad assets like Huarong and China Cinda Asset
Management Co. stand to benefit” because they can accumulate
more sour loans, she said.
- European Stocks Advance as Glaxo Shares Increase on M&A.
European stocks rose the most in seven weeks as health-care companies
lead gains amid mergers and acquisitions activity. GlaxoSmithKline Plc
rose 5.2 percent after Novartis AG agreed to buy the U.K. company’s
cancer-drug business and form a consumer-health venture with Glaxo.
AstraZeneca Plc (AZN) jumped the most since August 2011 after reports
that Pfizer Inc. discussed acquiring the drugmaker in informal,
now-discontinued talks.
Royal Philips NV posted its biggest decline in almost a year
after the world’s biggest lighting company reported first-quarter profit
that missed analysts’ projections.
The Stoxx Europe 600 Index added 1.4 percent to 337.03 at
the close of trading, bringing its three-day gain to 3.2
percent, the most since June.
- Williams Urges Fed to Avoid Stoking Risk as It Boosts Jobs. Federal Reserve Bank of San
Francisco President John Williams said the central bank should
avoid encouraging excessive financial risk-taking as it pursues
its goals of full employment and stable prices. “We’re exactly on
the right track” with current policy, Williams said in an interview
yesterday in San Francisco, predicting unemployment will fall to 5.5
percent by the end of next year and inflation will accelerate to about
1.7 percent. Trying to achieve the Fed’s goals sooner “would take policy actions that might have more negative effects,” he said.
- PE Firms’ Dividend ‘Epidemic’ Intensifies Junk-Debt Alarm.
Companies owned by private-equity
firms are borrowing money to pay dividends like it’s 2007,
adding to concern among regulators that excesses are emerging in the riskier parts of the debt markets.
With defaults by the neediest U.S. borrowers approaching record lows,
buyout firms are taking advantage of the Federal Reserve’s (FDTR)
easy-money policies to extract payouts by piling more junk debt onto the
companies they own. The central bank, the
Federal Deposit Insurance Corp. and the Office of the
Comptroller of the Currency have warned in recent months that
underwriting standards for speculative-grade issuers are
weakening as investors become more willing to accept looser
terms.
- McDonald’s(MCD) Sees April Sales Growth After Profit Fell. McDonald’s Corp. (MCD)’s free coffee may have slowed diners’ rush to check out Taco Bell’s waffle tacos. While McDonald’s today posted falling sales at its
established U.S. locations and first-quarter profit that trailed
analysts’ estimates, the world’s largest restaurant chain is
showing some encouraging signs. The March drop in U.S. sales was
the smallest in five months, and the company today said global
store sales may be “modestly positive” in April, which would
be the second straight monthly gain.
Wall Street Journal:
CNBC:
- Einhorn: Tech bubble brewing, shorting momentums. David Einhorn has a clear warning for technology investors: we're in a bubble. "Now there is a clear consensus that we are witnessing our second tech
bubble in 15 years," Greenlight Capital said in an investor letter
Tuesday. "What is uncertain is how much further the bubble can expand,
and what might pop it."
ZeroHedge:
Business Insider:
Reuters:
- Eli Lilly(LLY) to buy Novartis' animal health unit for $5.4 billion. Eli Lilly and Co said on Tuesday it will buy Swiss drugmaker Novartis AG's animal health business for $5.4 billion in cash to strengthen and diversify its Elanco unit.
Lilly said it plans to fund the deal with about $3.4 billion of cash on hand and $2 billion of loans.
Style Underperformer:
Sector Underperformers:
- 1) Steel -1.60% 2) Coal -1.54% 3) Computer Hardware -.73%
Stocks Falling on Unusual Volume:
- MDSO, ALSN, LXK, FMER, PNR, ASTE, AZN, ATI, BIS, FSS, RUSHA, PHG, KMB, HSTM, ATHN, RCI, HXL, KPTI, ERJ, OMC, BRO, EDU, FWRD and SBNY
Stocks With Unusual Put Option Activity:
- 1) AGN 2) RSH 3) CTIC 4) YUM 5) DO
Stocks With Most Negative News Mentions:
- 1) ACI 2) LXK 3) PNR 4) LMT 5) VRX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +4.66% 2) Biotech +2.98% 3) HMOs +1.88%
Stocks Rising on Unusual Volume:
- WB, GWPH, AGN, VRX, CNC, HOG, RCII, NFLX, HLX, JNS, IPG, ICPT, AMBC, SGMS, NKTR, DDS, CLDX, SRPT, CE, LVS, SGMO, FEYE, PRGO, XON, JNS, ANGI and THRX
Stocks With Unusual Call Option Activity:
- 1) HD 2) AGN 3) RDN 4) VRX 5) CAG
Stocks With Most Positive News Mentions:
- 1) TWC 2) TSLA 3) NFLX 4) AGN 5) DDD
Charts:
Evening Headlines
Bloomberg:
- Russia, U.S. Trade Blame as Ukraine Accord Nears Collapse. Russia
and the U.S. traded blame for failing to rein in extremists in
Ukraine, as a diplomatic accord reached last week all but collapsed.
U.S. Secretary of State John Kerry warned Russian Foreign Minister
Sergei Lavrov today that “there will be consequences” if Russia fails to
act “over the next pivotal days” to restrain pro-Russian militants in
eastern Ukraine, spokeswoman Jen Psaki said in Washington.
- Obama Faces Asia Allies Uncertain of U.S. Commitment. President Barack Obama’s trip to Asia this week brings him
face-to-face with allies who have grown uncertain about his commitment
to the region. Even with the president’s pledge to continue
“rebalancing” U.S. policy toward Asia, the region’s leaders have been
unnerved by Obama’s focus on the crises in Syria and Ukraine, military
budget cuts, and that the U.S. wants a new “great power relationship”
with China that they worry will reduce Japan and other U.S. allies to
second-class status.
- Chinese Steel Industry Won't Turn
Around Soon, UBS Says. Remains "relatively cautious" as Angang, Maanshan
could record losses in 1Q due to weak steel market, UBS analyst Mick Mi
writes in note to clients.
- Japan’s Abe Sends Traditional Offering to Yasukuni Shrine.
A group of 146 lawmakers visited the Yasukuni Shrine in Tokyo, after
China and South Korea rebuked Prime Minister Shinzo Abe for sending a
traditional offering to the site that honors Japan’s war dead.
- Plane Hunt Yields No Debris as Search Enters Last Zone. An international team hunting for
the missing Malaysian passenger jet is trawling the last third
of a search zone for wreckage after an unmanned submarine failed
to find traces of the aircraft.
- Asian Stocks Rise as Japan Exporters Gain on Weaker Yen.
Asian stocks rose as U.S. equities capped their longest stretch of
gains since October and the yen extended losses, boosting the outlook
for Japanese exporters. Komatsu Ltd. (6301), a maker of construction
equipment that gets about 80 percent of sales overseas, added 0.8
percent, pacing gains among Japanese exporters. NHN Entertainment Corp.
climbed 3 percent after the South Korean online gaming company said it’s
considering a share buyback. Newcrest Mining Ltd., Australia’s biggest
gold producer, slipped 2.2 percent after the bullion fell to a two-week
low as signs of an improving U.S. economy reduced the appeal of haven
assets. The MSCI Asia Pacific Index added 0.2 percent to 139.17 as of 10:52 a.m. in Tokyo, with all 10 industry groups on the gauge
rising.
- Dividend Deal 'Epidemic' Intensifies Junk Alarm:
Credit Markets. Companies owned by private-equity firms are borrowing
money to pay dividends like it's 2007, adding to concern among
regulators that excesses are emerging in the riskier parts of the debt
markets. Borrowers including Madison Dearborn Partners LLC's
mobile-phone insurer Asurion LLC obtained almost $21 billion in
junk-rated loans this year to enrich their owners, the most in seven
years, according to S&P's Capital IQ LCD. Some of the
least-creditworthy companies are even selling notes that may pay
interest with more debt, which BMC Software Inc. did for its $750
million payout to a group led by Bain Capital LLC. With defaults by the
neediest U.S. borrowers approaching record lows, buyout firms are taking
advantage of the Fed's easy-money policies to extract payouts by piling
more junk debt onto the companies they own. The central bank, the FDIC
and the Office of the Comptroller of the Currency have warned in recent
months that underwriting standards for speculative-grade issuers are
weakening as investors become more willing to accept looser terms.
- Keystone Route Ruling Should Be Overturned, Nebraska Says.
A court challenge holding up TransCanada Corp. (TRP)’s Keystone XL pipeline should be dismissed,
Nebraska’s governor said, urging his state’s high court to allow
the project to move forward.
Wall Street Journal:
Fox News:
CNBC:
Zero Hedge:
ValueWalk:
Evening Recommendations
CSFB:
- Raised (FB) to Outperform, target $87.
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 120.50 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 87.5 -.75 basis point.
- NASDAQ 100 futures +.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (SPG)/2.24
- (RF)/.20
- (LMT)/2.53
- (MCD)/1.24
- (LXK)/.87
- (AKS)/-.43
- (HOG)/1.09
- (OMC)/.79
- (GPC)/1.02
- (BK)/.54
- (UTX)/1.27
- (ITW)/.98
- (CREE)/.38
- (GILD)/.91
- (JNPR)/.29
- (ISRG)/3.28
- (IGT)/.19
- (T)/.70
- (AMGN)/1.94
- (VMW)/.79
- (ILMN).44
- (YUM)/.84
- (TRV)/2.16
- (ETH)/.21
- (CMCSA)/.64
Economic Releases
9:00 am EST
- FHFA House Price Index MoM for February is estimated to rise +.5% versus a +.5% gain in January.
10:00 am EST
- The Richmond Fed Manufacturing Index for April is estimated to rise to 2.0 versus -7.0 in March.
- Existing Home Sales for March are estimated to fall to 4.56M versus 4.6M in February.
Upcoming Splits
Other Potential Market Movers
- The
China HSBC Manufacturing PMI, Australia CPI, Eurozone Construction
Output, $32B 2Y T-Note auction, weekly retail sales report and the (MED)
analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.
