Evening Headlines
Bloomberg:
- EU Fires Gazprom Warning Shot as Putin Moves to Tighten Gas Grip. For four decades, through the depths of the Cold War and the
collapse of the Soviet Union, Europe has relied on Russian gas to keep
its economy moving, sending hundreds of billions of dollars to Moscow in
return. Today, that relationship is fraying. The European Union is about to
serve OAO Gazprom, Russia’s exporter of the fuel, with an antitrust
complaint, just as President Vladimir Putin is wielding gas as a tool in
the conflict over Ukraine and inserting pipeline politics into Greece’s
financial crisis. None of this is likely to stop the gas from flowing, analysts say, though Gazprom is preparing for the worst.
- Goldman Sachs(GS) Says Insurers With $6 Trillion Mull Mortgage Loans. Global insurers who oversee more than $6 trillion in assets plan to
invest capital in commercial mortgage loans and private equity this year
to generate higher returns, a Goldman Sachs Asset Management survey
showed. Thirty-five percent of insurance executives said they plan to invest
in the mortgages, 30 percent in infrastructure debt and 29 percent in
private equity and middle market loans, according to the survey
published Wednesday. About 66 percent of the 267 chief investment
officers and chief financial officers said low yields were the greatest
risk to their portfolios. Most respondents said the industry took on an appropriate amount of
investment risk, while 21 percent thought peers took too much risk. Sanford
C. Bernstein analysts warned in February that the European Central
Bank’s bond buying program may accelerate the creation of credit
bubbles, driven by insurers who are among the
biggest buyers of debt.
- Blackstone(BX) CEO Schwarzman Sees ‘Excess’ in China’s Market. Blackstone Group LP’s Steve Schwarzman said the Chinese stock
market shows signs of excess as the population plows savings into it
while economic growth slows.
“We’re now finding retail investors with multiple brokerage accounts
and margin loans and indicia of some excess in their market system,”
Schwarzman, Blackstone’s co-founder and chief executive officer, said
Tuesday at the China General Chamber of Commerce’s Finance & Real
Estate Forum in New York.
- Most Asian Stocks Rise as Japan Gains on Yen, Telecoms Advance. Most Asian stocks rose, with the regional benchmark index trading
near its highest since 2008, as a weaker yen buoyed Japanese equities
and phone-company shares gained.
About two shares climbed for each that retreated on the MSCI Asia
Pacific Index, which added 0.1 percent to 154.07 as of 9:07 a.m. in
Tokyo.
- Now Investors Are Worried That a Single Trader Could Take Down the U.S. Stock Market. There are enough reasons to lie awake at night without having to
worry that a single trader can take down the U.S. stock market from a London suburb, fund managers said.
U.S. authorities accused 36-year-old Navinder Singh Sarao on Tuesday of
masterminding a five-year scheme to use phony orders in Standard
& Poor’s 500 Index futures to manipulate prices and book $40
million in illicit profits.
Along the way, he had a hand in erasing $862 billion from the U.S. stock
market -- in a matter of minutes, they alleged. That it might have
been going on for so long didn’t fill investors with confidence. “It’s
incumbent upon regulators not to be asleep at the switches,”
said Donald Selkin, who helps manage about $3 billion as chief market
strategist at National Securities Corp. in New York. “They have been,
time and time again.”
Wall Street Journal:
- Debt Piles Up in Asia, Threatening Growth. Countries borrowed a lot during the crisis, and kept doing so afterward. Asian countries borrowed heavily to maintain growth during the
financial crisis, but couldn’t break the habit even as the global
economy healed. Now they are feeling the hangover. Growth is
slowing fast across the continent as consumers and businesses focus on
repaying debt. Central banks have cut rates, pushing currencies lower,
but...
- On Greece, Europe Bluffs Itself. How different is Greece really from France, Italy and Spain? Greece’s new leader and his ministers are behaving like fools in their
debt showdown with the European union. So claims much of the punditry
and you won’t find an argument here. They’ve taunted Germany about war
reparations, threatened to open their borders to jihadists trying to
enter Europe and cozied up to Vladimir Putin.
Fox News:
Zero Hedge:
Business Insider:
Reuters:
- Broadcom(BRCM) profit beats as demand rises from smartphone makers. Wireless chip maker Broadcom Inc
reported higher-than-expected quarterly revenue and
profit, helped by strong sales of its WiFi and broadband chips
to smartphone makers such as Apple Inc and Samsung
Electronics Co Ltd. Shares of Broadcom, which also forecast current-quarter
revenue above analysts' expectations, rose 5.4 percent in
extended trading on Tuesday.
Financial Times:
- How futures trading could crash stocks. The US equity market ‘flash crash’ of May 6 2010 has long highlighted the pronounced link between futures
exchange contracts and the share prices of companies bought and sold by
investors of all stripes.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 59.75 -.75 basis point.
- NASDAQ 100 futures +.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 AM EST
- The FHFA House Price Index for February is estimated to rise +.5% versus a +.3% gain in January.
10:00 am EST
- Existing Home Sales for March are estimated to rise to 5.03M versus 4.88M in February.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,419,090 barrels versus a +1,294,000 barrel increase the prior week.
Gasoline supplies are estimated to fall by -864,550 barrels versus a
-2,072,000 barrel decline the prior week. Distillate supplies are
estimated to rise by +1,000,000 barrels versus a +2,017,000 barrel
increase the prior week. Finally, Refinery Utilization is estimated to
rise by +.55% versus a +2.2% gain the prior week.
Upcoming Splits
Other Potential Market Movers
- The
BoE Minutes, HSBC China Manufacturing PMI, weekly MBA mortgage
applications report and (ASML) annual meeting could also impact trading
today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial 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: Around Even
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.18 -.90%
- Euro/Yen Carry Return Index 134.31 +.44%
- Emerging Markets Currency Volatility(VXY) 9.97 +.10%
- S&P 500 Implied Correlation 68.22 +.59%
- ISE Sentiment Index 142.0 +52.69%
- Total Put/Call .87 +11.54%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.21 -.49%
- America Energy Sector High-Yield CDS Index 1,065.0 +.52%
- European Financial Sector CDS Index 75.34 -1.56%
- Western Europe Sovereign Debt CDS Index 26.75 +1.69%
- Asia Pacific Sovereign Debt CDS Index 59.68 -1.20%
- Emerging Market CDS Index 302.82 +.74%
- iBoxx Offshore RMB China Corporates High Yield Index 116.78 +.09%
- 2-Year Swap Spread 27.25 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -22.25 +1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% -1.0 basis point
- Yield Curve 139.0 +2.0 basis points
- China Import Iron Ore Spot $51.04/Metric Tonne -1.03%
- Citi US Economic Surprise Index -53.10 +1.2 points
- Citi Eurozone Economic Surprise Index 47.80 -2.1 points
- Citi Emerging Markets Economic Surprise Index -12.8 -.3 point
- 10-Year TIPS Spread 1.87 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +125 open in Japan
- DAX Futures: Indicating +51 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail/medical sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area Debt Levels Surge to Record, Led by Greece. Government debt in the euro area surged to the highest levels since
the introduction of the single currency, underscoring the challenges
still confronting the 19-nation bloc as it wrestles with Greece over new
aid payments. Greece’s debt pile swelled to a new high of 177.1 percent of gross
domestic product at the end of 2014, up from 175 percent a year earlier,
the European Union’s statistics office in Luxembourg said today. For
the euro zone as a whole, government debt rose to a record 91.9 percent
of GDP last year from 90.9 percent in 2013. Italy’s debt mountain increased and remained as the second-highest in
the euro area after Greece, going up to 132.1 percent of GDP in 2014
from 128.5 percent the previous year. Portugal, in third place, saw its debt rise to 130.2 percent of GDP
from 129.7 percent, while in Ireland, next in line, debt fell to 109.7
percent from 123.2 percent. Both countries received international
bailouts at the height of the euro crisis. The data also show that some euro-area countries are struggling to
reduce their budget deficits to within the EU’s 3 percent of GDP limit.
France, the region’s second-biggest economy, posted a deficit of 4
percent in 2014, down from 4.1 percent. Cyprus had the widest deficit,
at 8.8 percent of GDP while Spain recorded a deficit of 5.8 percent,
narrowing from 6.8 percent the year before. Greece posted a deficit of
3.5 percent.
- El-Erian: Greece Can’t Default and Remain in Euro Zone. (video)
- ECB Is Studying Curbs on Greek Bank Support. (video) The European Central Bank is studying measures to rein in emergency
funding for Greek banks as resistance to further aiding the country’s
stricken lenders grows among policy makers, people with knowledge of the
discussions said.
- Ukraine Pushes for UN Peacekeepers as Rockets Disrupt Truce. Ukrainian
President Petro Poroshenko renewed his efforts to invite
international peacekeepers to the country’s east, where foreign
observers reported rocket fire among recurring cease-fire violations.
Poroshenko and United Nations Secretary-General Ban Ki-Moon agreed by
phone on further steps for the possible deployment of a peacekeeping
contingent under the UN’s aegis, according to Poroshenko’s website.
Russian-backed separatists used mortars and tanks, killing one soldier,
Ukrainian officials said on Tuesday. The rebels in turn accused the
government of preparing to escalate the conflict in the Donbas region in
the east of the country, DAN news service reported.
- German Investor Sentiment Falls on Shaky Economic Outlook. German investor confidence unexpectedly fell for the first time in
six months, signaling that the uncertainty induced by Greece’s debt
crisis may be weighing on Europe’s largest economy. The ZEW Center for European Economic Research in Mannheim said its
index of investor and analyst expectations, which aims to predict
economic developments six months in advance, fell to 53.3 in April from
54.8 in March. Economists had forecast an increase to 55.3, according to
the median of 33 estimates in a Bloomberg News survey.
- U.K. Trader Accused of Manipulation Tied to 2010 Flash Crash. A U.K. futures trader contributed to the May 2010 flash crash by
engaging in illegal bait-and-switch practices, according to U.S.
authorities. The trader, 37-year-old Navinder Singh Sarao, was arrested in the
U.K. Tuesday, and the U.S. is seeking his extradition, the Justice
Department said in a statement. Sarao of Hounslow, U.K., who ran his own
trading shop, was charged with wire and commodities fraud in a criminal
complaint filed in federal court in Illinois.
- European Stocks Advance as SAP, Actelion Results Beat Forecasts. European stocks climbed as companies including SAP SE and Actelion Ltd. posted better-than-forecast results.
The Stoxx Europe 600 Index rose 0.6 percent to 409.12 at the close of trading.
- Fink Says Central Bankers ‘Destroying’ Insurers With Low Rates. Low interest rate policies by central banks around the world are
threatening insurance companies and pension funds, said Laurence D.
Fink, chief executive officer of BlackRock Inc., the world’s largest
asset manager. “As we live in a world of persistent low rates and, in the case of
Europe, negative rates today, when you put a macro-prudential framework
on it, we are destroying the value of pension funds,” Fink said at a
conference in Singapore on Tuesday. “We are destroying the viability of
insurance companies.”
- March U.S. Job Losses Widespread, Led by Slump in Energy. Payrolls dropped in 31 U.S. states in March, led by a slump in
energy producers such as Texas and Oklahoma. The unemployment rate fell
in 23. Payrolls in Texas decreased by 25,400, its first decline since
September 2010 and the biggest since August 2009, figures from the Labor
Department showed Tuesday in Washington. Oklahoma followed with 12,900
fewer jobs and employment in Pennsylvania fell by 12,700.
- Goldman Sachs Buys $21 Million Stake in HFT Network Company. Goldman Sachs Group Inc. has bought a $20.5 million stake in
Perseus, a technology company that provides high-frequency trading firms
with the networks they need to do business. “The investment by Goldman Sachs is an important accelerator of our
business,” Perseus Chief Executive Officer Jock Percy said in a
statement on Tuesday.
- Teva(TEVA) Makes $40 Billion Unsolicited Takeover Bid for Mylan(MYL). (video)
Teva Pharmaceutical Industries Ltd. made an unsolicited offer to buy
Mylan NV for about $40.1 billion, in the drug industry’s largest
takeover attempt this year.
- Harley-Davidson(HOG) Falls After Cutting Annual Shipment Forecast. Harley-Davidson Inc., the biggest U.S. motorcycle maker, fell the most
in more than two years after trimming its annual shipment outlook
because the company doesn’t plan to match competitors’ steep discounts.
ZeroHedge:
Business Insider:
NY Times:
- A Veteran of the Financial Crisis Tells China to Be Wary. (video)
About 340 pages into Henry M. Paulson’s new book on China, a sentence
comes almost out of nowhere that stops readers in their tracks.
“Frankly, it’s not a question of if, but when, China’s financial
system,” he
writes, “will face a reckoning and have to contend with a wave of credit
losses and debt restructurings.”
MNI:
- Rosengren Says Fed May Have to 'Experiment' with Liftoff. Fed
will have to be ready to make "technical adjustments" when time comes to
raise interest rates, Boston Fed President Eric Rosengren said in an
interview. Wile IOER is Fed's "primary tool" for pushing up fed funds,
other money market rates, and overnight reverse repurchase facility the
back-up, Fed may also have to use term RRPs as part of process.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Oil Service -3.61% 2) Coal -2.88% 3) Gaming -1.81%
Stocks Falling on Unusual Volume:
- BAM, SANM, HOG, PKG, UA, GLF, NVDQ, PRGO, EAT, ES, PNR, CNI, AMTD, FTK, AGRX, BRO, PII, ICLR, HAS, BIS, CALA, INVE, HAIN, MYGN, TRV, JOY, HAIN, KS and IP
Stocks With Unusual Put Option Activity:
- 1) HOG 2) COH 3) UA 4) CREE 5) APC
Stocks With Most Negative News Mentions:
- 1) HOG 2) ADT 3) BAC 4) HAL 5) OXD
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.12% 2) Biotech +1.62% 3) Drugs +.85%
Stocks Rising on Unusual Volume:
- SCHL, VLTC, ECHO, RMBS, FTNT, MYL, TTS, LRCX, ICON, ATI, HMSY, VRTX and KMB
Stocks With Unusual Call Option Activity:
- 1) SYY 2) HAS 3) EA 4) RMBS 5) HTZ
Stocks With Most Positive News Mentions:
- 1) VRTX 2) BMY 3) MYL 4) MS 5) KFT
Charts:
NYSE Composite Index:
- Volume Running 1.2% Above 100-day average
- 2 Sectors Rising, 8 Sectors Declining
- 53.2% of Issues Advancing, 42.4% Declining
- 58 New 52-Week Highs, 7 New Lows
