Evening Headlines
Bloomberg:
- We Traveled Across China and Returned Terrified for the Economy. China’s steel and metals markets, a barometer of the world’s
second-biggest economy, are “a lot worse than you think,” according to a
Bloomberg Intelligence analyst who just completed a tour of the
country. What he saw: idle cranes, empty construction sites and half-finished,
abandoned buildings in several cities. Conversations with executives
reinforced the “gloomy” outlook. “China’s metals demand is plummeting,” wrote Kenneth Hoffman, the
metals analyst who spent a week traveling across the country, meeting
with executives, traders, industry groups and analysts. “Demand is
rapidly deteriorating as the government slows its infrastructure
building and transforms into a consumer economy.”
- Global PC Shipments Decline as Corporate Spending Fades. Worldwide personal-computer shipments fell 5.2 percent in the first
quarter as corporate spending that helped slow declines last year tailed
off, market researcher Gartner Inc. reported. About 71.7 million units were shipped in the quarter, down from 75.7
million in the same period a year earlier, Gartner said Thursday in a
report. Market researcher IDC reported a wider decline, finding that
68.5 million units were shipped, a 6.7 percent drop. IDC said it was the
lowest number of PC shipments since the first quarter of 2009.
- Hong Kong Chartist Seeing Unlucky Number Eight. In charting the meteoric rise of Hong Kong stocks, Thomas Schroeder
says there’s nothing lucky about a number starting with eight. The relative strength index for the Hang Seng China Enterprises Index
rose to 83.5 on Thursday, the highest since October 2010, according to
data compiled by Bloomberg. Some traders consider readings above 70 as a
sign to sell. The equity measure of Chinese firms trading in the former
British colony surged 16 percent through yesterday since regulators
eased access to the shares for mainland funds on March 27.
- Asia Shares Heading for Weekly Gain as Nikkei 225 Touches 20,000. Asian shares were poised for a weekly advance, after the measure
closed Thursday at its highest in almost seven years, as Japan’s Nikkei
225 Stock Average touched 20,000 for the first time in 15 years.
The MSCI Asia Pacific Index slid 0.2 percent to 151.60 as of 9:14
a.m. in Tokyo. The measure is headed for a 2.5 percent advance this
week.
Wall Street Journal:
- Ayatollah Blasts Terms of Nuclear Framework. Iran’s
supreme leader casts doubt on nuclear deal; White House plays down
impact. Just a week after agreeing on a framework for a nuclear deal,
Iran’s
supreme leader and the Obama administration clashed over its core
elements, rekindling doubts about whether Washington and Tehran can
finalize an accord by a June 30 deadline. The supreme leader,
Ayatollah Ali Khamenei, in his first public comments on the diplomacy,
said on Thursday the U.S. and its negotiating partners must lift all
sanctions...
- GE(GE) Close to Selling Real-Estate Holdings. Talks under way with Blackstone, Wells Fargo for most of $30 billion portfolio.
- FAA Calls Out ‘Systemic’ Hazard at United. Repeated violations regarding pilot qualification, scheduling requirements prompt regulator to step up oversight.
- Corker’s Fickle Friends on Iran. Senate Democrats who once were hawkish about a nuclear deal have gone into hiding.
Fox News:
- Jabs at Pelosi latest sign of friction in Dem ranks. (video) With a leadership transition on the horizon on Capitol Hill and
President Obama entering his final two years in office, cracks are
beginning to show in the Democratic Party. Most recently, two House
Democrats spoke out against their longtime and powerful leader, Nancy
Pelosi. Massachusetts Democratic Rep. Stephen Lynch said on WGBH’s
Greater Boston that it’s time for the House Democratic leader to step
aside. "Nancy Pelosi is not going to lead the Democrats back into the
majority," Lynch said.
Zero Hedge:
Business Insider:
Reuters:
Financial Times:
- US warns of ‘increasingly unbalanced’ global economy. The
US Treasury has stepped up calls for big economies, including the euro
area and Japan, to boost demand as it warned the global economy was becoming “increasingly unbalanced”. In
a semi-annual report to Congress, the Treasury urged euro area
governments and Tokyo not to rely solely on monetary policy to lift
growth, while pressing South
Korea to reduce interventions in currency markets and let the won rise.
Xinhua News Agency:
- Chinese
Investors Should Be in Awe of Stock Market. Stock market won't always
rise and isn't an ATM machine, the official Xinhua News Agency says in
an article on Thursday. A healthy bull market won't neglect fundamentals
of companies.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 104.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 58.25 +.5 basis point.
- NASDAQ 100 futures -.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Import Price Index for March is estimated to fall -.4% versus a +.4% gain in February.
2:00 pm EST
- The Monthly Budget Deficit for March is estimated at -$43.4B versus -$36.9B in February.
Upcoming Splits
Other Potential Market Movers
- The Fed's Kocherlakota speaking, Fed's Lacker speaking and the UK industrial production report could also impact trading today.
BOTTOM LINE: Asian
indices are mostly higher, boosted by real estate and technology
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.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.73 -1.79%
- Euro/Yen Carry Return Index 134.15 -.82%
- Emerging Markets Currency Volatility(VXY) 9.79 +1.77%
- S&P 500 Implied Correlation 62.75 -2.27%
- ISE Sentiment Index 121.0 -5.47%
- Total Put/Call .97 +2.11%
Credit Investor Angst:
- North American Investment Grade CDS Index 60.62 +.31%
- America Energy Sector High-Yield CDS Index 1,080.0 -2.43%
- European Financial Sector CDS Index 65.09 -1.21%
- Western Europe Sovereign Debt CDS Index 21.93 +.16%
- Asia Pacific Sovereign Debt CDS Index 58.28 +.66%
- Emerging Market CDS Index 294.42 +.48%
- iBoxx Offshore RMB China Corporates High Yield Index 115.05 -.02%
- 2-Year Swap Spread 26.0 +1.25 basis points
- TED Spread 25.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -21.25 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 141.0 +4.0 basis points
- China Import Iron Ore Spot $48.34/Metric Tonne +.60%
- Citi US Economic Surprise Index -53.50 +1.5 points
- Citi Eurozone Economic Surprise Index 57.40 -.2 point
- Citi Emerging Markets Economic Surprise Index 5.2 unch.
- 10-Year TIPS Spread 1.84 unch.
Overseas Futures:
- Nikkei Futures: Indicating +143 open in Japan
- DAX Futures: Indicating +72 open in Germany
Portfolio:
- Higher: On gains in my biotech/medical/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Iranian Supreme Leader Refrains From Endorsing Nuclear Deal. Iranian Supreme Leader Ayatollah Ali Khamenei refrained from
endorsing a framework nuclear deal agreed with world powers and said all
sanctions must be lifted once a final accord is reached. In his first public comments addressing the April 2 pact that was
outlined in Lausanne, Switzerland, Khamenei said on Thursday he was
“neither for it, nor against it.” Envoys from the U.S., U.K., France,
Russia, China, Germany and Iran have given themselves until June 30 to
reach a permanent deal.
- Lagarde Warns of ‘Bumpy Ride’ as Fed Prepares for Rate Rise. IMF Managing Director Christine Lagarde says the world could be in
for a “bumpy ride” when the Federal Reserve starts raising interest
rates, with overpriced markets and emerging economies likely to take the
biggest hits. While risks to the global economy have decreased over the last six
months, threats to the world’s financial system have actually risen,
Lagarde said on Thursday ahead of next week’s spring meetings of the
International Monetary Fund and World Bank in Washington. A long period of low interest rates in the U.S. and other advanced
economies has fostered a higher risk tolerance among investors, “which
can lead to overpricing” and could pose “solvency challenges” for life
insurers and defined-benefit pension fund, she said. Lagarde, 59, warned that “liquidity can evaporate quickly if everyone
rushes for the exit at the same time -- which could, for example, make
for a bumpy ride when the Federal Reserve begins to raise short-term
rates,” she said the text of a speech at the Atlantic Council in
Washington.
- Greece Wins More ECB Emergency Cash as Deal Seen Near Reach. (video) Greece secured an increase in emergency funding available to its
banks as Finance Minister Yanis Varoufakis said he’s confident of
reaching an aid agreement with European partners this month. The European Central Bank’s Governing Council raised the cap on
Emergency Liquidity Assistance provided by the Bank of Greece by 1.2
billion euros ($1.3 billion) to 73.2 billion euros in a telephone
conference on Thursday, said two people familiar with the discussion.
That was more than the 700 million-euro increase granted last week. An
ECB spokesman declined to comment.
- Hong Kong Housewife Cheers Stocks as Workers Trade at Lunch.
Hong Kong’s stock market rally is drawing individual investors from
all walks of life as the Hang Seng Index soars to a seven-year high.
With money from the mainland exchange link contributing to record
turnover in the city’s $4.9 trillion stock market, a crowd of part-time
traders hunched over computer screens at Bright Smart Securities
&
Commodities Group in Hong Kong’s central business district to take
advantage of the surge in Chinese demand. “Things are getting quite exciting,” said Chow Man, a 68-year-old
housewife who favors Chinese banks and infrastructure stocks and says
she has as much as HK$200,000 ($25,000) in play. “It’s becoming like a
hobby for a lot of mainland investors to trade stocks now. That’s why
more of them are taking opportunities in Hong Kong.”
- Here Are the Top Stocks Leading the Buying Frenzy in Hong Kong. As the flood of Chinese money pours into Hong Kong, shares in the
city are rising indiscriminately across industries, driving the Hang
Seng Composite Index toward a seven-year high. “A rising tide lifts all boats,” said Warren Lau, an analyst with
Maybank Kim Eng Securities in Hong Kong. “This is a liquidity-driven
market.” Below are the top performers on the Hang Seng Composite since yesterday. Gains are as of the midday trading break in Hong Kong.
- Fed-ECB Policy Gap Become Canyon for Euro, Deutsche Bank Says. (graph) Financial markets are signaling the Federal Reserve will raise
interest rates about four years before the European Central Bank,
magnifying weakness in the euro, according to Deutsche Bank AG. About a year ago, money-market derivatives projected monetary
tightening in America and the euro area both taking place sometime in
2016.
- Europe Stocks Climb to Record After German Industrial Production. The biggest three-day jump since January sent European stocks to an all-time high.
The Stoxx Europe 600 Index advanced 1.1 percent to 409.15 at the close of trading in London.
- Russian Oil Floods Export Market as Teapot Plants Lose Money. Crude oil exports from Russia, the world’s biggest producer, grew
about seven times faster than output in the first quarter as the country
processed less fuel at home. Shipments from the country increased
7.4 percent from a year earlier
between January and March, the biggest gain in at least nine years and
outstripping a 1.1 percent rise in production, according to Energy
Ministry data. Domestic crude deliveries to refineries fell 1.9 percent
as OAO Rosneft said simple plants, known as teapots, were not profitable
to run after prices plunged last year.
- The Oil Industry's $26 Billion Life Raft. For U.S. shale drillers, the crash in oil prices came with a $26
billion safety net. That’s how much they stand to get paid on insurance
they bought to protect themselves against a bear market -- as long as
prices stay low. The flipside is that those who sold the price hedges now have to make
good. At the top of the list are the same Wall Street banks that
financed the biggest energy boom in U.S. history, including JPMorgan
Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo
& Co. While it’s standard practice for them to sell some of that risk to
third parties, it’s nearly impossible to identify who exactly is on the
hook because there are no rules requiring disclosure of all
transactions. The buyers come from groups like hedge funds, airlines,
refiners and utilities. “The folks who were willing to sell it were left holding the bag when
prices moved,” said John Kilduff, partner at Again Capital LLC, an
energy hedge fund in New York.
- Private Equity’s Big Bet on Shipping Falters as Deal Boom Ends. At
a New York shipping conference late last year, Mark Friedman, a
senior managing director at Evercore Partners Inc., regaled attendees
with an analogy to the Eagles’ “Hotel California.” Investors, as his
reference to the song went, can get into the industry but can never
leave. WL Ross & Co., Oaktree Capital Group LLC and other
private-equity firms bought vessels at near record-low prices since
2010, planning to
ride the global recovery. Instead, they found that what goes down
sometimes stays down. And now, stuck running fleets that few others want
to buy, they’re left to contend with declining freight rates.
- Muddy Waters Shorts Noble Group, Quizzes Cash Flow in Report. Muddy
Waters LLC, the research firm founded by short seller Carson Block,
published a report questioning Noble Group Ltd.’s cash flow and
management, adding its weight to recent criticism of the commodity
trading company’s finances. Muddy Waters has taken a short position in Noble, Asia’s largest
commodity trader by revenue, the U.S. researcher said on its website.
Noble rejected the Muddy Waters allegations in a statement to the
Singapore stock exchange, where it trades.
Wall Street Journal:
- Plunging Iron Ore a Major Challenge For Australian Budget. Treasurer Joe Hockey says assumptions for iron ore will have to be revised further. Plunging iron-ore prices are forcing Australia’s government to redraw
forecasts underpinning the nation’s finances, another sign of how
fragile the economy is.
CNBC:
- Why the stock market is way overvalued. Interesting note from Nomura this morning saying the market is currently
pricing in 9.6 percent earnings growth in the S&P 500, well above
the long-term realized average of 7 percent (since 1945) and much higher
than analysts' expectations of mostly flat earnings growth this year.
- Hedge fund machines cash in—again. The robots are winning again. Hedge funds that rely on sophisticated computer algorithms to invest are once again producing the industry's best returns.
ZeroHedge:
Business Insider:
Style Underperformer:
Sector Underperformers:
- 1) REITs -1.91% 2) Homebuilders -1.71% 3) Coal -1.53%
Stocks Falling on Unusual Volume:
- PHK, LPLA, BBBY, MEMP, QURE, MSM, MG, CMCM, CMGE, ZUMZ, AA, FLTX, OTIC, RECN, GRUB, ARE, QIHU, OHI, DYAX, IMOS, CENX, CA, HNT, ATHM and TGI
Stocks With Unusual Put Option Activity:
- 1) AVP 2) BBBY 3) FXE 4) DE 5) AA
Stocks With Most Negative News Mentions:
- 1) PHM 2) EMC 3) MSM 4) DUK 5) MTH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +3.75% 2) Oil Service +2.59% 3) Energy +1.08%
Stocks Rising on Unusual Volume:
- DGLY, PIR, MYL, TASR, SIMO, EIGI, MR, ESRX, CLMT and KNDI
Stocks With Unusual Call Option Activity:
- 1) ALTR 2) BBBY 3) ESRX 4) TASR 5) INFN
Stocks With Most Positive News Mentions:
- 1) PTEN 2) MGM 3) WBA 4) CCO 5) UA
Charts:
NYSE:
- Volume 8.6% Below 100-day average
- 3 Sectors Rising, 7 Sectors Declining
- 37.2% of Issues Advancing, 59.2% Declining
- 100 New 52-Week Highs, 5 New Lows
