Evening Headlines
Bloomberg:
- China Reserves Seen Dropping $40 Billion a Month on Yuan Support. China’s foreign-exchange reserves are expected to drop by some $40
billion a month as the central bank intervenes to support the yuan, a
Bloomberg survey shows. The holdings, the world’s largest, will decline to $3.45 trillion by
year-end from $3.65 trillion at the end of July, based on the median
estimate of 28 strategists and traders surveyed following last week’s
surprise devaluation of the currency. The forecasts ranged from $3
trillion to $3.71 trillion. The currency is seen weakening 1.6 percent
to 6.50 a dollar in the remainder of 2015, the survey showed.
- Weibo to Youku Drop as Sales Forecasts at China Peers Disappoint. Weibo
Corp. and Youku Tudou Inc. fell in New York as disappointing
revenue guidance at their larger Chinese peers raised concern the
Internet firms may report quarterly results this week that will trail
analysts’ estimates. American depositary receipts of Weibo,
China’s Twitter-like social media platform, sank 3.8 percent on Monday
to a four-month low of $13.09. Youku Tudou, owner of China’s largest
video websites, fell 3.3 percent to the lowest since April. A
Bloomberg gauge of the most-traded Chinese companies in the U.S. slid
0.3 percent in the first decline in three days.A total of 10 out of 13
Chinese companies, including
Baidu Inc. and Vipshop Holdings Ltd., have provided quarterly sales
projections to U.S. investors that were below analyst expectations this
earnings season, according to data compiled by Bloomberg.
- G-20 Growth Won’t Hit Pre-Crisis Pace Anytime Soon, Moody’s Says. Don’t expect global economic growth to reach the level it attained
before the financial crisis anytime soon, Moody’s Investors Service
said. Expansion in the Group of 20 economies won’t return to its pre-2008
rate within the next five years, the credit-rating company said Tuesday
in an update to its global outlook. Combined output growth in the group,
which includes 19 nations and the euro area, will average 3 percent per
year from 2015 to 2019, about half a percentage point lower than in the
decade through 2007. The world economy is being held back by the crisis’s lingering drag
on productivity growth, China’s slowdown, unfavorable demographic trends
and slowing gains from trade, Moody’s said. The company lowered its
U.S. expansion forecast for this year to reflect a slower-than-projected
rebound in the second quarter, while leaving the G-20 growth forecast
for 2015 unchanged at 2.7 percent. The report cites a big, sustained drop in Chinese asset prices or a Greek exit from the euro as risks for the world economy.
- Bangkok Blast Kills at Least 19 in Worst Attack Since Thai Coup. A powerful explosion killed at least 19 people in Bangkok’s central
shopping district on Monday night, the first major attack in the Thai
capital since the military seized power in May last year.
The blast during rush hour left body parts scattered on Ratchaprasong
intersection, which is surrounded by malls, hotels and the Erawan Hindu
shrine frequented by tourists and locals. The military government
blamed miscreants seeking to destroy the tourist-reliant economy.
Nineteen people, including Chinese and Filipino tourists, were
killed, the Ministry of Public Health said. Hospital officials are
treating 117 people, many of whom are foreigners, according to the
Emergency Medical Institute of Thailand.
- Brazil's Political Crisis Puts the Entire Economy on Hold. In Brazil, General Motors Co. has been halting factories and laying
off thousands. Latam Airlines, the region’s biggest, is cutting flights.
And the world’s third-largest planemaker, Embraer SA, is delaying its
biggest new aircraft. In the midst of its deepest economic and political crisis in a
generation, Brazil is contending with a business climate so punishing
that major projects across numerous sectors are being frozen or shrunk,
while small businesses slash prices and shift focus.
- Korea’s Won Falls for Second Day as Data Show Pickup in Outflows. The
won fell for a second day amid concern foreign investors will
pull more money from South Korean assets as economic growth slows.
Global funds reduced holdings of local bonds in July by the most
since December 2011 and of equities by the most since June 2013, the
Financial Supervisory Service reported Tuesday. The government will
prepare detailed measures to stabilize financial markets if needed in
response to risks such as volatility in Chinese stocks and the yuan’s
devaluation, Finance Minister Choi Kyung Hwan said at a meeting with
officials on Monday.
The won fell 0.3 percent to 1,185.95 a dollar as of 10:01 a.m. in
Seoul, according to data compiled by Bloomberg. The currency has lost 6
percent this quarter, the worst performance in Asia after Malaysia’s
ringgit.
- Thai Stocks Drop Most in 8 Months on Bangkok Attack; Baht Falls. Thai stocks sank the most in eight months and the baht dropped after
an explosion in Bangkok killed at least 20 people and put the nation’s
tourism industry at risk. The benchmark SET Index fell as much as 2.8 percent, before paring
losses to 1.7 percent at 10:23 a.m. in Bangkok. Gauges of tourism and
transport-related companies declined more than 4 percent. The baht
weakened 0.5 percent to 35.536 per dollar, approaching its lowest level
since April 2009.
- Most Asian Stocks Rise After U.S. Shares Gain on Housing Data. Most Asian stocks advanced, with the regional benchmark index
holding near a seven-month low, following gains in U.S. equities as
strong homebuilder data added to signs the world’s biggest economy is
improving.
The MSCI Asia-Pacific Index fell 0.1 percent to 137.73 as of 9:05
a.m. in Tokyo with about three stocks gaining for every two that fell.
- It's Like 2009 for Some Asset-Backed Securities Rattled by the Fed. Asset-backed securities -- bundles of debt mainly tied to consumer
borrowing -- are taking a hit as investors become increasingly rattled
by broad financial issues, including the Federal Reserve possibly
raising interest rates next month. While bonds ranging from
corporate notes to mortgage-linked securities also have suffered
recently, they aren’t losing as much ground as ABS, or at least when it
comes to the yields compared to benchmark rates. In ABS, this spread
shows that “many market segments are at or near the post-crisis wides
established in 2010,” according to Wells Fargo & Co. analysts John McElravey and
Ryan Brinkoetter. Bank of America Corp. described them as “at the wide
end of three-year trading ranges and even five-year trading ranges.”
Reuters:
- Urban Outfitters says comparable sales may be slower in 3rd qtr. Urban Outfitters Inc on Monday
said same-store sales growth so far in the third quarter was
slower than in the previous three months, raising concerns about
the apparel retailer's performance in the back-to-school
shopping season. The Philadelphia-based retailer reported second-quarter
comparable sales growth of 4 percent on Monday, lower than the
4.3 percent rise analysts on average had expected, according to
research firm Consensus Metrix. Urban Outfitters' shares initially rose as much as 10
percent in extended trading after it reported a
better-than-expected quarterly profit, but fell nearly 7 percent
when Chief Financial Officer Frank Conforti said sales were
slower so far in August.
- BB&T to buy National Penn Bancshares for about $1.8 billion. BB&T
Corp (BBT.N) said it would buy National Penn Bancshares Inc (NPBC.O) in
a cash-and-stock deal for about $1.8 billion to expand in the U.S.
Mid-Atlantic region. The
deal would consist of 70 percent BB&T shares and 30 percent in
cash. National Penn shareholders can opt to receive 0.3206 of a BB&T
share or $13 in cash for each National Penn share.
Shanghai Securities News:
- China's Economic Growth May Remain Low, PBOC Adviser Says.
China's economic growth may remain low for the next few years, citing
Fan Gang, an adviser to the People's Bank of China, as saying at a
financial industry seminar. China needs to deal with overcapacity and
debt problems into 2018, Fan said. China's economy may face further
difficulties next year and only stabilize in 2017, he said.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 116.25 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 71.25 +1.0 basis point.
- NASDAQ 100 futures +.05%.
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for July are estimated to rise to 1180K versus 1174K in June.
- Building Permits for July are estimated to fall to 1228K versus 1343K in June.
Upcoming Splits
Other Potential Market Movers
- The RBA minutes, UK CPI report and the weekly US retail sales reports could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology 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.
