Thursday, March 10, 2016

Friday Watch

Posted by Gary .....at 10:28 PM
Evening Headlines
Bloomberg:  
  • New Chinese Index Charting 'Silk Road' Freight Sinks to Lowest Level. (graph) A new Chinese shipping index that tracks freight movements among the countries on the route of one of President Xi Jinping's key trade initiatives has fallen to the lowest level since it was established. The Maritime Silk Road Freight Index was launched on a trial basis by the Shanghai Shipping Exchange last July. The index takes January 2015 as its base point, and at that time it had a value of 100. The latest update, released on February 29, shows that the index has declined to 65.11 after falling 10.3 percent over the previous month alone. The index is divided into four subindexes—container imports, container exports, dry bulk imports and tanker imports—each of which began with a value of 100. The dry bulk figure has declined to 56.14, down 7.3 percent since the end of January. The index is based on the freight volume and rate, and the data is taken from other indices published by the SSE. In August, the state-owned China Daily newspaper reported SSE President Zhang Ye as saying the index was intended to "enhance the transparency and influence of the market." China's economic slowdown has triggered a drastic decline in worldwide shipping activity. China's exports fell 25.4 percent year on year in February, and imports were down 13.8 percent. The Baltic Dry Index, the global measure of the cost of shipping coal, iron ore, grain and other non-oil commodities, fell to a record low in February. At 9 a.m. on Friday it stood at $384, down from a peak of $1,222 in August.
  • Shanghai Property Surge May Prompt Cooling Measures: Chart. As China reports property prices next week, the cost of real estate has been soaring in the top-tier cities of Beijing, Shenzhen and Shanghai. The rise has worried officials in the nation’s financial hub. Shanghai authorities held a meeting this week to discuss measures to cool the surge in property, according to people familiar with the matter.
  • This Weekend in China: a Double Dose of Data. (video)
  • Top Forecaster Says Indian Stocks Overvalued, Sees Earnings Cut. Indian equities are expensive even after the worst start to the year since 2011 for the most accurate forecaster for the nation’s benchmark stock index. The reason: earnings. Company earnings will grow 12 percent in 2016, slower than the “very optimistic” 18.5 percent forecast by analysts, Devendra Joshi, Asia equity strategist at HSBC Holdings Plc, said in a phone interview from Hong Kong. The S&P BSE Sensex ended 2015 within 1 percent of his year-end target of 25,800, the closest call among the gauge’s forecasters.The Sensex, which tumbled into a bear market last month, is still valued at a 47 percent premium over a gauge of emerging markets.
  • Nikon, Casio in Short Sellers' Sights as Tech Pessimism Abounds. Hedge funds have boosted their bearish bets on Japanese technology companies such as Nikon Corp. and Casio Computer Co. as the industry struggles to deliver the next killer product. Technology companies account for eight of the 10 Japanese stocks that are most targeted by short sellers, who have collectively wagered 197.1 billion yen ($1.7 billion) that the shares will fall, according to data compiled by Bloomberg. Camera maker Nikon is the most-shorted stock. Oxford Asset Management, Vinva Investment Management Ltd. and Stats Investment Management Co. are among hedge funds that are wagering against Japanese tech stocks, according to filings with the Japan Exchange Group.
  • Scenes From the Disaster Zone: Five Years on in Fukushima. (pic) Five years since the meltdown at the Fukushima Dai-Ichi nuclear power plant, progress has been made to rebuild much of the prefecture. Yet within evacuation zones designated by the Japanese government, scars are still obvious. Many evacuees who fled are unwilling to return. Thousands still live in temporary housing outside these zones.  Photographs by Ko Sasaki and Tomohiro Ohsumi for Bloomberg. 
  • China Stocks Head for Weekly Loss as Investor Interest Dwindles. China’s stocks headed for a weekly loss as suspected state intervention failed to revive confidence among investors in the world’s worst-performing equity market. The Shanghai Composite Index declined for a third day, falling 0.8 percent, on turnover that was 36 percent below the average for this time of day. Financial and energy producers led losses before data this weekend that projected to show no let-up in the slowdown in industrial production and fixed-asset investment. The yuan strengthened in onshore trading after the central bank raised its daily reference rate by the most since November. Trading on the world’s second-largest stock market has tumbled to the lowest level since 2014 as margin traders unwind bullish positions in the face of suspected buying by state-directed funds. China’s benchmark gauge has lost 22 percent this year, the most among 93 global benchmark indexes tracked by Bloomberg, as worsening economic data and meddling by the government deter investors. "Fundamentals are not improving," said Steven Leung, a Hong Kong-based executive director for institutional sales at UOB Kay Hian. "Most people are staying on the sidelines," watching for any policy statements from ongoing government meetings, he said. The Shanghai Composite dropped to 2,781.59 at 10:28 a.m., heading for its lowest close since March 1 and extending losses this week to 3.3 percent. 
  • Most Asian Shares Fall, Euro Holds Gains After ECB; Yuan Rises. Most Asian stocks fell, set for their first weekly loss in a month, and the euro held gains after an unprecedented new round of European monetary stimulus was neutered by Mario Draghi damping the outlook for further interest-rate cuts. China’s yuan rose. Benchmark stock indexes declined across most of the region, following a 1.7 percent drop in the Stoxx Europe 600 Index. The euro traded near a three-week high versus the dollar, after its biggest one-day gain in more than a month. The yuan climbed to its strongest level since mid-February after the central bank boosted a daily fixing by the most in four months. Ten-year Japanese bond yields rose back above zero as those on Australian sovereign notes climbed to January levels. U.S. oil advanced beyond $38 a barrel, while copper and nickel gained. The MSCI Asia Pacific Index slipped 0.1 percent as of 11:40 a.m. Tokyo time, headed for a 0.7 percent weekly loss.
  • OPEC-Russia Oil Coalition Struggles With Its Very First Step. A month after promising co-operation that would re-balance global oil markets, the producer coalition forged by Saudi Arabia and Russia is having difficulty taking its first step. OPEC members and rival producers have yet to decide when, or where, to hold talks on a proposed accord to freeze oil output, a strategy aimed at curbing the worldwide oversupply. Dates and locations suggested by one producer -- this month or next, in Moscow, Doha or Vienna -- are promptly snubbed by another in the fledgling alliance. On Wednesday the process received another setback when a gathering of Latin American producers scheduled for Friday in Quito, Ecuador, was pushed back.
Wall Street Journal:
Fox News:
  • Republican Debate: Live Blog.
  • Report details ISIS atrocities against Christians, presses State for ‘genocide’ label. (video) Holding a bloody shirt he carries with him to remember the Islamic State's crimes against Iraqi Christians, Douglas Bazi described for a Washington audience Thursday how he's suffered at ISIS' hands: He was kidnapped, had his teeth bashed in with a hammer and watched as his church was bombed. “There is not ‘life’ in Iraq,” Bazi said, noting his congregation has been targeted so often it is called the “church of the martyrs, or the church of the blood.”
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
  • U.S.-based stock funds break nine-week streak of outflows: Lipper. U.S.-based stock funds attracted $4.6 billion in new cash during the week ended March 9, Lipper data showed on Thursday, breaking a nine-week streak of outflows. Taxable bond funds in the United States attracted $5.8 billion in new cash during the same weekly period, their seventh straight week adding new cash, the Lipper data showed. Investors added $2.4 billion in new cash to relatively low risk money-market funds during the week, according to the fund research service.
  • CMBS market on edge as US property prices decline. The US$600bn US commercial mortgage bond market is on edge after new data showed that a six-year bull run in property prices looks to be nearing an end. Moody's this week reported a 0.3% drop in its monthly property price index for January, calling it the first definitive pause in price growth since 2010. "This is a significant milestone that signals that a shift in sentiment among commercial property investors is under way," the company said.
Bild:
  • German Economists Criticize Draghi Internet Rate Policy. ECB lending at a negative interest rate of up to .4% to banks amounts to a prohibited subsidy policy in support of zombie banks and countries at risk of bankruptcy, IFO president Hans-Werner Sinn said. Says euro-region countries, which are net debtors, unscrupulously used their majority in the EU Council to craft interest rate conditions in a way so that they passed. ECB policies will always be ineffective, according to Lars Feld of the Walter Eucken Institute. Countries like Italy haven't carried out reforms despite the interest rate lows, are spending more than they raise and new measures won't change anything, citing Feld. ZEW President Clemens Fuest warns of risk of real-estate and bond market bubbles and weakening banks.
Night Trading 
  • Asian equity indices are -.50% +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 143.5 -2.25 basis points. 
  • Asia Pacific Sovereign CDS Index 67.75 -1.0 basis point. 
  • Bloomberg Emerging Markets Currency Index 70.58 +.09%. 
  • S&P 500 futures +.34%. 
  • NASDAQ 100 futures +.39%.
Morning Preview Links

Earnings of Note
Company/Estimate 
  • (BKE)/1.09
  • (CTRN)/.25
  • (GCO)/2.13
  • (HIBB)/.74 
Economic Releases 
8:30 am EST
  • The Import Price Index MoM for February is estimated to fall -.7% versus a -1.1% decline in January.
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The UK Trade Balance report, IEA release and the (GWW) Feb. sales report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.
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Stocks Slightly Lower into Final Hour on Diminished Central Bank Hopes, China Bubble-Bursting Fears, Oil Decline, Energy/Hospital Sector Weakness

Posted by Gary .....at 3:37 PM
Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 18.65 +1.69%
  • Euro/Yen Carry Return Index 132.31 +1.56%
  • Emerging Markets Currency Volatility(VXY) 11.84 +1.37%
  • S&P 500 Implied Correlation 61.31 +2.01%
  • ISE Sentiment Index 71.0 -24.5%
  • Total Put/Call 1.05 +12.90%
  • NYSE Arms .72 -38.31% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 91.40 -5.0%
  • America Energy Sector High-Yield CDS Index 1,927.0 +37.34%
  • European Financial Sector CDS Index 89.59 -8.94%
  • Western Europe Sovereign Debt CDS Index 29.53 -2.64%
  • Asia Pacific Sovereign Debt CDS Index 68.29 -.81%
  • Emerging Market CDS Index 331.90 -1.60%
  • iBoxx Offshore RMB China Corporate High Yield Index 124.84 +.09%
  • 2-Year Swap Spread 5.0 unch.
  • TED Spread 33.5 +1.0 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -21.0 +6.0 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 70.51 +.22%
  • 3-Month T-Bill Yield .31% +1.0 basis point
  • Yield Curve 100.0 +1.0 basis point
  • China Import Iron Ore Spot $57.92/Metric Tonne -.17%
  • Citi US Economic Surprise Index -9.80 +3.0 points
  • Citi Eurozone Economic Surprise Index -55.0 +.2 point
  • Citi Emerging Markets Economic Surprise Index -19.50 -2.2 points
  • 10-Year TIPS Spread 1.50% -1.0 basis point
  • 19.4% chance of Fed rate hike at April 27 meeting, 45.2% chance at June 15 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating -232 open in Japan 
  • China A50 Futures: Indicating -205 open in China
  • DAX Futures: Indicating +12 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my medical/retail sector longs and emerging market shorts
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
  • Market Exposure: 50% Net Long
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Today's Headlines

Posted by Gary .....at 3:08 PM
Bloomberg: 
  • Draghi's Stimulus Effect Fizzles as Euro Drop Proves Short-Lived. (video) It took less than 90 minutes for the euro to reverse all of the 1.6 percent decline sparked by the European Central Bank’s package of monetary stimulus. The currency tumbled by the most since November on an intraday basis after the ECB lowered all its main interest rates and expanded its quantitative-easing plan, exceeding economists’ expectations with its package of stimulus measures. That move reversed as President Mario Draghi said he didn’t see any need to reduce rates further, sparking a swing of more than 2.5 percent. “Draghi basically said ‘that’s it,’” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “He indicated no further rate cuts. It would have been sensible to keep the expectation that they can do more. On the interest-rate side, he just destroyed this expectation without need.” The 19-nation shared currency climbed 1.6 percent to $1.1173 as of 12:11 p.m. New York time, after weakening as much as 1.6 percent. The declines in the euro were even more short-lived than losses in the yen sparked when Bank of Japan Governor Haruhiko Kuroda surprised investors by adopting negative interest rates on Jan. 29. That move spurred only a brief drop in the yen, which went on to post its best month since 2008.
  • Draghi: ECB Done for Now on Rates. (video) The European Central Bank can cut interest rates further but isn’t likely to, Mario Draghi said after unveiling stimulus on Thursday that brought borrowing costs to record lows, expanded asset purchases and offered a borrowing subsidy to lenders. “It’s a fairly long list of measures, and each one of them is very significant and devised to have the maximum impact in boosting the economy and the return to price stability -- we have shown we are not short of ammunition,” the ECB president told reporters in Frankfurt after a two-day meeting of the Governing Council. “From today’s perspective, we don’t anticipate it will be necessary to reduce rates further.” The steps mark a dramatic expansion of the central bank’s stimulus program after a disappointing remodeling was panned by investors in December. The intensification of the fight to prevent the 19-nation euro area’s lackluster economy from slipping into a deflationary spiral came just days after data showed the inflation rate is once again below zero despite a whole year of quantitative easing. The euro whipsawed as Draghi spoke, falling as he repeated guidance that rates can go lower, and then strengthening as he explained that more cuts might not be needed, given the breadth of the ECB’s measures. That package included a 10 basis-point cut in its deposit rate to minus 0.4 percent, a surprise drop in the benchmark to zero, a pledge to buy corporate debt as part of 80 billion-euros ($88 billion) of monthly QE purchases -- 20 billion euros more than at the moment -- and four more multi-year lending operations.
  • Top-Ranked Researchers Flag China Bond Risks as Inflation Surges. China’s accelerating consumer prices and a slowing economy are raising the chances of stagflation and increasing the risk to bonds, according to the nation’s top-ranked fixed-income analysts. A Haitong Securities Co. research team, graded the best by China’s New Fortune magazine in 2015, issued the warning after data Thursday showed consumer inflation accelerated 2.3 percent in February, the fastest pace in 20 months. The producer-price index extended a record run of declines to 48 months.
  • China is Facing a Ticking Demographic Time Bomb. Getting old isn't easy on an economy.
  • Shanghai Authorities Said to Discuss Ways to Cool Property. Shanghai authorities held a meeting on Tuesday to discuss measures to cool a surge in property prices after recent frenzied residential homebuying, according to people familiar with the matter. The municipal government’s National Development and Reform Commission held discussions with regional authorities from the People’s Bank of China and the China Banking Regulatory Commission, said the people, who asked not to be named because the matter isn’t public. Possible measures weighed include tightening mortgage policies for second-home buyers who plan to purchase larger properties, the people said.
  • Obama Says Libya Is a 'Mess' Due to Europe, Gulf Failure to Help. President Barack Obama said five years after the U.S. intervened in Libya to topple then-dictator Moammar Qaddafi and prevent a bloody civil war that the plan pushed by advisers including Hillary Clinton “didn’t work” and Libya is now “a mess.” Obama, speaking in interviews with The Atlantic magazine published Thursday, blamed lack of support from European and Gulf allies and longstanding tribal divisions within Libya for the failure of the mission intended to stabilize the country and usher in a democratically elected government. “When I go back and I ask myself what went wrong, there’s room for criticism, because I had more faith in the Europeans -- given Libya’s proximity -- being invested in the follow-up,” Obama said.
  • Euro Climbs, Stocks Fall as Stimulus Doubts Persist; Crude Drops. For global financial markets, central-bank stimulus just isn’t what it used to be. Stocks retreated with government bonds, while the euro rallied to the highest level in almost a month as investors looked past an unprecedented boost from European monetary policy to focus on rising anxiety that policymakers have lost the ability to jumpstart global growth and stave off deflation. European shares plunged 4 percent from the highs of the session as President Mario Draghi’s signal that further interest-rate cuts aren’t likely damped enthusiasm after the European Central Bank cut three key interest rates and increased its bond-buying program.
  • How Central Banks Have Made Wealth Inequality Worse. Central banks' attempts to kick-start advanced economies following the financial crisis have made the gap between the rich and poor wider, suggests the Bank for International Settlements. In the BIS' Quarterly Review, Analysts Dietrich Domanski, Michela Scatigna, and Anna Zabai studied the evolution of wealth inequality in France, Germany, Italy, Spain, the U.K. and the U.S. was influenced by monetary policy since the recession.
  • Clinton Misses Chance to Erase Michigan Loss in Immigration-Heavy Debate. (video) Coming off a huge upset in Michigan, Bernie Sanders turned in a strong performance in a debate with the former secretary of state in Miami, Florida. Hillary Clinton had a shot in Wednesday's Democratic debate at retooling her message to white working-class voters a day after they largely rejected her in Michigan, and just in time for a fresh set of primaries March 15. But she found little traction to steer the conversation back to jobs and the economy under aggressive questioning from debate moderators. And in that way, the event was a lost opportunity ahead of contests in states very much like Michigan, including Ohio and Missouri. Clinton spent much of the night on the defensive about her trustworthiness and use of private e-mails while serving as secretary of state. At one point, she was pressed to say whether she would drop out if she was indicted over sending and receiving classified information in some e-mails. Exasperated, she said she wouldn't even answer the question.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
  • Exclusive: China to ease commercial banks' bad debt burden via equity swaps - sources. China's central bank is preparing regulations that would allow commercial lenders to swap non-performing loans of companies for stakes in those firms, two people with direct knowledge of the new policy told Reuters. The new rules would reduce commercial banks' non-performing loan (NPL) ratios, and free up cash for fresh lending for investment in a new wave of infrastructure products and factory upgrades that the government hopes will rejuvenate the world's second-largest economy. NPLs surged to a decade-high last year as China's economy grew at its slowest pace in a quarter of a century. Official data showed banks held more than 4 trillion yuan ($614 billion) in NPLs and "special mention" loans, or debts that could sour, at the year-end. "Such a rule change shows banks' bad loans have risen to such a level that this issue has to be tackled now before it's too late," said Wu Kan, Shanghai-based head of equity trading at investment firm Shanshan Finance. The quality of assets held by banks is worse than it looks, analysts have said. To avoid stumping up capital and to protect their balance sheets, some banks have under-reported bad loans and under-recognized overdue debt. The top banking regulator has warned commercial lenders to pay special attention to risks. Bank shares fell more than 2 percent on Thursday, with Industrial and Commercial Bank of China down 2 percent and Bank of Communications losing 2.7 percent. "This was mainly due to a technical correction, but there's also investor uncertainty over how those non-performing assets would be valued, and disposed of eventually," said Wu at Shanshan Finance.  The sources had no further detail on how banks would value the new equity stakes, which would represent assets on their balance sheets, or what ratio or amount of NPLs they would be able to convert this way. On paper, the move would also represent a way for indebted companies to reduce their leverage, cutting the cost of servicing debt and making them more worthy of fresh credit. "(In China) credit to non-financial corporates has risen in the last five years from 120 percent of GDP to more than 160 percent in May 2015," Jose Vinals, director of monetary and capital markets at the International Monetary Fund, said at an event in Mumbai.
Telegraph:
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Bear Radar

Posted by Gary .....at 1:33 PM
Style Underperformer:
  • Small-Cap Growth -2.0%.
Sector Underperformers:
  • 1) Disk Drives -2.5% 2) Alt Energy -2.2% 3) Homebuilders -1.8%
Stocks Falling on Unusual Volume:
  • BPT, JCOM, CCRN, BBSI, OME, BGS, RAVN, GPOR, CSGS, CWEI, TVPT, CSIQ, SQ, TRP, AMOT, RNG, MTN, CBMG, WMB, NNBR, APD, BTI, MGPI, VRTS, SAFM, CQH, BOX, JACK, KFY, RDUS and BPT
Stocks With Unusual Put Option Activity:
  • 1) LINE 2) COG 3) HLT 4) XRT 5) XLI
Stocks With Most Negative News Mentions:
  • 1) VALE 2) FDS 3) PBR 4) ETE 5) TWTR
Charts:
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Bull Radar

Posted by Gary .....at 1:14 PM
Style Outperformer: 
  • Mid-Cap Value -.9%
Sector Outperformers:
  • 1) Gold & Silver +3.7% 2) Gaming +.2% 3) HMOs +.1% 
Stocks Rising on Unusual Volume: 
  • PRTY, CPGX, UGLD, DG, TAHO, TLRD, X, ABY, PHH, SRPT and AEM
Stocks With Unusual Call Option Activity: 
  • 1) RF 2) ULTA 3) DG 4) SQ 5) NUAN
Stocks With Most Positive News Mentions: 
  • 1) EXPE 2) KR 3) CSTM 4) DG 5) DLTR
Charts:
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Morning Market Internals

Posted by Gary .....at 11:22 AM
NYSE Composite Index:
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