Bloomberg:
- Ukraine Truce in Peril as Government Troops Abandon Rail Hub. The cease-fire in Ukraine was on the brink
of collapse on Wednesday as the battle for a transport hub came
to a head, with the government withdrawing its forces after
weeks of fighting to hold on to the strategic location. The clash for Debaltseve, a key town on the road that
connects Donetsk and Luhansk, is a “massive violation” of the
truce reached last week, said German Chancellor Angela Merkel’s
chief spokesman, Steffen Seibert. The European Union urged
implementing the truce agreement within hours.
- Lew Urges Greece to Reach Debt Deal to Avert Immediate Hardship. U.S. Treasury Secretary Jacob J. Lew urged
Greece to reach a deal with international creditors, warning
that failure to do so would bring immediate hardship to Europe’s
most indebted-state. Lew encouraged Greece to find a constructive path forward
in partnership with Europe, the Treasury Department said in a
statement after a call Wednesday between Lew and Greek Finance
Minister Yanis Varoufakis.
Greece will submit a request for a six-month loan extension
to the euro area Thursday, a day later than originally planned,
according to a government official.
- European Stocks Advance Amid Speculation of Greek Loan Agreement. European stocks rose to a seven-year high
amid investor speculation that Greece will reach a compromise
agreement on its bailout terms with euro-area creditors.
The Stoxx Europe 600 Index added 0.9 percent to 380.37 at
the close of trading. Of 18 western-European markets, 16 gained,
with the U.K.’s FTSE 100 Index little changed. The Stoxx 600
traded at its highest level since November 2007.
- SEC Sees Pervasive Bad Behavior in Complex Debt: Credit Markets. After stunning mortgage-bond traders by
seeking to put one in jail, U.S. investigators see more
inappropriate behavior that needs to be addressed in the market
for such complicated debt. Investigators are finding signs that dealers are still
lying to clients and striking improper deals such as parking
debt, according to Michael Osnato, head of the complex financial
instruments group in the Securities and Exchange Commission’s
enforcement division. Traders or investors park bonds by selling
them to accomplices with an understanding that they’ll
repurchase the securities at a later date, in an attempt to
skirt capital or internal rules. The opacity of the market “just creates an atmosphere
where people feel they can get away with things -- and they
largely have for a long time,” Osnato said in a telephone
interview. “It’s more pervasive than we would like,” he said.
“Lying to your customer, parking bonds for improper reasons,
crossing bonds for improper reasons that aren’t in the clients’
best interest -- those are all things that we see.”
- Einhorn Is the Latest Investor to Say Stocks Are Getting Expensive. Hedge-fund manager David Einhorn said he’s
scaled back wagers on stock gains after markets climbed and as a
stronger dollar threatens to limit earnings of U.S. companies
from operations overseas. Bets on rising assets exceeded short wagers by 38.9
percentage points as of Dec. 31, Greenlight Capital Re Ltd., the
Cayman Islands-based reinsurer where Einhorn is chairman, said
in a filing Tuesday. That compares with net-long exposure of 40
percent on Sept. 30 and 53.9 percent at the end of 2013.
- Wall Street’s Buying Less of Those Risky Junk Bonds It’s Selling. Credit trading just isn’t paying like in the
old days. That’s why Wall Street dealers are putting less money
at risk to broker the debt, and instead are matching buyers and
sellers as much as they can before making trades. Dealers are only acting as middlemen for about 60 percent
of high-yield bond transactions bigger than $2 million, moving
securities between two sides they already have lined up,
according to data compiled by financial-research company Tabb
Group LLC. Before the 2008 financial crisis, such trades
accounted for an estimated 25 percent of their business.
Wall Street Journal:
- Greek Bailout Meeting Hinges on ‘Credibly Worded Request’. Bailout request to be submitted Thursday. Eurozone finance ministers have tentatively scheduled a meeting on
Friday to discuss a request from Greece to extend its bailout, but they
will only meet if the request eases their concerns about policies of the
new left-wing government, European officials said. A Greek
government spokesman said Wednesday it will submit the extension request
on Thursday morning...
CNBC:
- Russia sanctions 'do not have a deterrent effect'.
A few days after Europe's leaders announced a ceasefire in Ukraine, the
European Union issued a new list of sanctions this week against
separatists in the region as well as Russian military leaders and
politicians. But experts who spoke with CNBC cast doubt on how hard the
new measures will hit Russia's economy.
- Crude falls $1.39 to settle at $52.14 a barrel. (video) U.S. crude settled at $52.14 per barrel on Wednesday, falling $1.39 per barrel, or 2.6 percent. Crude oil futures were unable to build on more
than 1 percent gains in the previous session as rising inventories
continue to curb rallies.
ZeroHedge:
Business Insider:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Telecom -1.37% 2) Energy -1.02% 3) Banks -1.0%
Stocks Falling on Unusual Volume:
- FOSL, MDAS, GRMN, VRNS, DORM, PERY, GLRE, SONS, WTS, I, FNGN, LZB, FE, AXDX, HPY, CTL, ROG, SIR, IDCC, GPRO, SSL, VDSI, CUBI, QIHU, TCO, RDUS, CTL, GES, ALLE and HUN
Stocks With Unusual Put Option Activity:
- 1) FOSL 2) CY 3) SD 4) SWN 5) SLXP
Stocks With Most Negative News Mentions:
- 1) LLTC 2) WSM 3) X 4) V 5) BAX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Utilities +.64% 2) Gaming +.63% 3) Computer Services +.43%
Stocks Rising on Unusual Volume:
- PBPB, JACK, HOLI, BSX, VA, YNDX, VEEV, Z, TEX, FLS, CNK, WWW, VEEV, MASI, CAVM and PAH
Stocks With Unusual Call Option Activity:
- 1) TMUS 2) SO 3) ACI 4) APO 5) RAX
Stocks With Most Positive News Mentions:
- 1) RAX 2) MGM 3) VLO 4) VMW 5) CELG
Charts:
Evening Headlines
Bloomberg:
- Putin Points Muslim Rage at Cold War Foes as Jihadis Vow Attacks. Hundreds of thousands of Muslims vented
their anger in unison, shouting “Allahu Akbar!” as their
leader condemned supporters of the satirical French magazine
Charlie Hebdo after militants murdered five of its cartoonists. The protest against caricatures of Muhammad and the
policies of the U.S. and its allies was organized by the state
and televised live across the country for more than an hour, but
it wasn’t in Iran or Pakistan. It was in Russia, where Vladimir
Putin came to power vowing to “wipe out” Muslim extremists,
even “in the outhouse.”
Fifteen years on, Putin is now seeking to turn Muslim anger
to his advantage by pushing for a united front against what he
sees as a U.S.-led conspiracy to dominate the world.
- Greece May Ask for a Six Month Loan Extension. (video)
- Chinese Local Debt Shunned as 50,000 Auditors Probe Provinces. Global investors are wary of Chinese local
government debt just as the nation’s provinces start going
overseas for fundraising amid state scrutiny. Qingdao City Construction Investment Group Co., a local
government financing vehicle on the country’s east coast, sold a
debut issue of U.S. dollar-denominated bonds on Feb. 5, raising
$800 million in a two-tranche sale. Some 20 percent of the $500
million portion was bought by money managers, compared with an
average 54 percent take-up for a $1 billion offshore deal by
Beijing Infrastructure Investment Co. in November, people
familiar with the matter said.
China has mobilized about 50,000 auditors to probe local
government debt, according to Mizuho Securities Asia Ltd., after
borrowings swelled to 17.9 trillion yuan ($2.9 trillion) as of
June 2013, from 10.7 trillion yuan at the end of 2010.
- Bank of Japan Keeps Record Stimulus as Country Crawls Out of Recession. The Bank of Japan maintained unprecedented
monetary stimulus, as Governor Haruhiko Kuroda aims to stoke a
recovery from recession and counter a slowdown in inflation. The central bank will boost the monetary base at an annual
pace of 80 trillion yen ($670 billion), it said in a statement
on Wednesday in Tokyo, as forecast by all 35 economists surveyed
by Bloomberg News.
- Russia Lures Asia Oil Buyers as Mideast Scraps Over Share. Middle East oil producers already scrapping
for share in Asia must now contend with more supply from Russia. Russia, the world’s second biggest crude producer, boosted
sales to China, Japan and South Korea by 25 percent last year,
increasing its portion of shipments to 8.7 percent, from 7.2
percent in 2013, according to government data compiled by
Bloomberg. Saudi Arabia accounted for 24 percent, down from 26
percent, while Qatar and Kuwait also ceded market share.
- Asian Stocks Head for Five-Month High on Optimism About Greece. Asian stocks rose after U.S. shares climbed
to a record amid speculation Greece will reach a resolution with
its creditors.
The MSCI Asia Pacific Index gained 0.3 percent to 143.65 as
of 9:15 a.m. in Tokyo, heading for its highest since Sept. 19.
- Oil rally seen reversing as unstoppable US supply deepens glut. The rebound in oil will reverse because rising US production is
deepening the global supply glut, according to UBS AG, Bank of America
Corp. and Commerzbank AG. Brent futures entered a bull market this month as US drillers stopped
using a record number of rigs, companies cut at least US$40 billion
from spending plans and hedge funds turned the most bullish in seven
months. None of that will stop Brent slipping back to US$45 a barrel or
lower within the next three months, from about US$61 now, the banks'
analysts say. Prices fell as low as US$45.19 on Jan 13. The highest US oil production in three decades won't be curtailed by
the idling of rigs and inventories will keep expanding, according to
UBS. The rally has been based on sentiment rather than the fundamentals
of supply and demand, Commerzbank says. As storage space fills up,
producers will need to discount to sell barrels, Bank of America
predicts.
Wall Street Journal:
- Fighting in Ukrainian Transport Hub of Debaltseve Threatens Cease-Fire. Rebel Attacks on the Town Pose a Dilemma for Ukraine’s President.
President Petro Poroshenko denounced the advance of Russian-backed
separatists into a strategic transport hub as a violation of a
cease-fire, but Russian President Vladimir Putin said Ukraine’s troops
were surrounded and should surrender. The street-to-street fighting as
militants entered the town of Debaltseve Tuesday further darkened hopes
for a European-brokered truce that was
negotiated last week and left Mr. Poroshenko with narrowing options.
- U.S. to Give Some Syria Rebels Ability to Call Airstrikes. After training, moderate rebels to get pickups with gear to call for American B-1B bombers. The U.S. has decided to provide pickup trucks equipped with machine
guns and radios for calling in U.S. airstrikes to some moderate Syrian
rebels, defense officials said. But the scope of any bombing hasn’t been
worked out—a reflection of the complexities of the battlefield in
Syria. Military officials point to U.S. airstrikes, called in by Kurdish fighters, that helped drive
- Pressure Builds to Weaken the Yuan. Traders have been pushing the currency lower, against central bank efforts to stabilize it.
- Americans Borrowing More, but Fissures Appear. Delinquencies climbed in auto and student lending. Overall debt rose $117 billion in 4th quarter.
- After Boom, Bust Could Be Upon Apartment REITs. Rise in vacancies seen in Houston, Washington, Charlotte and Austin, Texas. After a banner year in 2014, the party might be coming to an end for
real-estate investment trusts that specialize in residential apartment
buildings. Last year, the category produced total returns,
including dividends, of 39.7%, the best among all real-estate stocks,
according to the National Association of Real Estate Investment Trusts.
REITs overall recorded a total return of 28% last year, as the economy
improved and interest rates stayed low.
- The Too Little, Too Late Presidency by
John Bolton. Obama’s temporizing has been his foreign-policy trademark, from Iran and Syria to Libya and Ukraine.
MarketWatch.com:
CNBC:
- What top US hedge funds are buying and selling. (video)
- Greece faces resistance to extra emergency funds for banks: sources. (video) The European Central Bank faces resistance from Germany to allowing
any extra emergency lending for Greek banks, people familiar with the
matter said, increasing pressure on Athens to sign up to an extended
aid-for-reform program. After talks between Greece and euro zone creditors
broke down acrimoniously on Monday, the ECB's policymaking governing
council will review on Wednesday how far the country may support its
weak banks, which face rising deposit outflows.
Zero Hedge:
Business Insider:
Reuters:
- Greece faces resistance to extra emergency funds for banks -sources. The
European Central Bank
faces resistance from Germany to allowing any extra emergency lending
for Greek banks, people familiar with the matter said, increasing
pressure on Athens to sign up to an extended aid-for-reform programme. After talks between Greece and euro zone creditors broke down acrimoniously on Monday, the ECB's policymaking governing
council will review on Wednesday how far the country may support
its weak banks, which face rising deposit outflows.
Telegraph:
Passauer Neue Presse:
- Greece Should Exit Euro, Return to Drachma, Sinn Says. Greece is broke and is already in bankruptcy negotiations, Hans-Werner Sinn, president of Germany's IFO economic research institute, says. Debt relief won't make the country competitive and would be like trying to fill a bottomless
barrel. Greece has become too expensive as a result of a credit bubble
induced by the euro and low interest rates and needs to become cheaper that will only be achieved by a return to the drachma. Last 5 years have been a denial of reality. Any concessions to Tsipras would be dangerous, would be a stimulus for other popular movements and would suggest "anyone can do what he wants".
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 unch.
- Asia Pacific Sovereign CDS Index 66.75 unch.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (H)/.21
- (FLR)/1.10
- (ACT)/3.91
- (DUK)/.87
- (MAR)/.65
- (WMB)/.24
- (CAR)/.20
- (IPI)/.02
- (MIC)/.24
- (MRO)/.03
- (SCTY)/-1.27
- (CRMT)/.77
- (SNPS)/.62
Economic Releases
8:30 am EST
- Housing Starts for January are estimated to fall to 1070K versus 1089K in December.
- Building Permits for January are estimated to rise to 1069K versus 1032K in December.
- PPI Final Demand for January is estimated to fall -.4% versus a -.2% decline in December.
- PPI Ex Food and Energy for January is estimated to rise +.1% versus a +.3% gain in December.
9:15 am EST
- Industrial Production for January is estimated to rise +.3% versus a -.1% decline in December.
- Capacity Utilization for January is estimated to rise to 79.9% versus 79.7% in December.
- Manufacturing Production for January is estimated to rise +.4% versus a +.3% gain in December.
2:00 pm EST
- Minutes from Jan. 27-28 FOMC Meeting.
4:00 pm EST
- Net Long-Term TIC Flows for December.
Upcoming Splits
Other Potential Market Movers
- The
weekly MBA mortgage applications report, US weekly retail sales
reports, Barclays Industrial Conference, (TPX) investor day and (SMG)
analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity 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 day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.63 +6.4%
- Euro/Yen Carry Return Index 142.15 +1.17%
- Emerging Markets Currency Volatility(VXY) 10.61 -4.3%
- S&P 500 Implied Correlation 63.83 -.22%
- ISE Sentiment Index 83.0 -17.0%
- Total Put/Call .98 +2.08%
Credit Investor Angst:
- North American Investment Grade CDS Index 64.84 -.88%
- America Energy Sector High-Yield CDS Index 707.0 -.33%
- European Financial Sector CDS Index 67.11 +.16%
- Western Europe Sovereign Debt CDS Index 27.63 -.74%
- Asia Pacific Sovereign Debt CDS Index 66.52 -.25%
- Emerging Market CDS Index 368.43 +.21%
- iBoxx Offshore RMB China Corporates High Yield Index 113.64 -.01%
- 2-Year Swap Spread 27.75 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -22.75 -2.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 146.0 +8.0 basis points
- China Import Iron Ore Spot $63.02/Metric Tonne -3.46%
- Citi US Economic Surprise Index -45.40 -8.2 points
- Citi Eurozone Economic Surprise Index 47.20 +3.5 points
- Citi Emerging Markets Economic Surprise Index -9.0 -.2 point
- 10-Year TIPS Spread 1.72 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +182 open in Japan
- DAX Futures: Indicating +38 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech/medical sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.56% 2) Software -.87% 3) Internet -.85%
Stocks Falling on Unusual Volume:
- CSGP, HLX, HOLI, USLV, PFNX, IHG, LXFT, GLF, JCE, KING, ATRC, USTR, CAB, CRY, OUTR, ADP, BIDU, IT, RYN, UGLD, ITT, SSLT, ANW, JACK, CAG and VNR
Stocks With Unusual Put Option Activity:
- 1) FOSL 2) Z 3) GT 4) EWG 5) HOT
Stocks With Most Negative News Mentions:
- 1) CSX 2) RIG 3) YHOO 4) M 5) BAC
Charts:
