Thursday, October 03, 2013

Thursday Watch

Evening Headlines 
Bloomberg:  
  • Boehner Says Obama Refused Budget Negotiations in Meeting. House Speaker John Boehner said President Barack Obama refused to negotiate in a meeting with top congressional leaders about the government shutdown, signaling a lack of progress on resolving the fiscal impasse. As he exited a meeting today at the White House, Boehner said Obama must recognize that the U.S. has a divided government. “The American people expect their leaders to come together and try to find ways to resolve their differences,” said Boehner, an Ohio Republican. 
  • Goldman to Nomura Warn on Debt to Reserves Ratio: India Credit. Reserve Bank of India data showed the highest ratio of short-term external debt to currency reserves in more than a decade, raising alarm bells at Goldman Sachs Group Inc. and Nomura Holdings Inc. The $97 billion maturing in less than a year amounted to 34.3 percent of reserves as of June 30, the highest since at least March 2001, RBI figures released Sept. 30 show. The ratio was 146.5 percent during a balance-of-payments crisis in March 1991, according to the report’s partial data for the 1990s. Including longer-term debt, repayments due by June 2014 total $170 billion, or 60 percent of reserves. Indonesia’s comparable ratio is 55.8 percent. Asia’s third-largest economy faces significant risk as banks and companies seek to refinance global borrowings, even as the government acts to trim the current-account deficit, Goldman wrote in a Sept. 30 research note. Nomura said the slowest economic growth in a decade and a budget deadlock in the U.S. will damp inflows, further straining India’s finances.
  • Tepco Finds New Tank Leak at Fukushima Dai-Ichi Atomic Station. Tokyo Electric Power Co. (9501) found a fresh leak at a storage tank holding contaminated water at the Fukushima station about six weeks after an earlier outflow prompted the government to intervene in the plant’s cleanup. Beta radiation levels of 200,000 becquerels per liter were found near the leak that was confirmed at 9:55 p.m. yesterday, the utility known as Tepco said in a statement early this morning. Beta radiation includes strontium-90, which safety rules require to be kept under 30 becquerels at atomic plants. Tepco didn’t know when the leak started or how much water has been discharged, Yusuke Kunikage, a spokesman, said in an interview before a press conference planned for 10 a.m. The company can’t rule out the possibility that some of the water flowed to the sea, according to the statement.
  • Evidence Grows That North Korea Has Restarted Reactor. North Korea’s 5-megawatt reactor at Yongbyon is releasing hot water, a sign operations have resumed at the facility capable of producing enough plutonium to make one nuclear bomb a year, according to a U.S. research group. Satellite imagery taken Sept. 19 shows water being released into the Kuryong River from the reactor facility at North Korea’s main nuclear complex, according to the 38 North website, which is run by the U.S.-Korea Institute at Johns Hopkins University’s School of Advanced International Studies in Washington. “This release of hot water indicates that the reactor is in operation and the turbine powered electrical generators are producing power,” said Nick Hansen, who wrote the report. 
  • Asia Stocks Rise on China Services; Investors Watch U.S. Asian stocks rose, led by material and energy shares, after a gauge of China’s services industries jumped and as investors watched for progress on ending a budget impasse that has shut down the U.S. government. Newcrest Mining Ltd., Australia’s biggest gold producer, added 3.2 percent as material shares gained the most among the 10 industry groups on the benchmark regional index. PetroChina Co. climbed 1.6 percent in Hong Kong. Leighton Holdings Ltd., an Australian developer, slumped 9.3 percent after saying it’s unaware of any new allegations or ethics breaches in a statement responding to newspaper reports. The MSCI Asia Pacific Index added 0.3 percent to 139.12 as of 11:46 a.m. in Tokyo, with nine of the 10 industry groups rising
  • Rubber Gains From 7-Week Low as China Data Boosts Demand Outlook. Rubber climbed, snapping a four-day losing streak, as data showed improvement in China’s economy, boosting demand from the largest consumer. The contract for March delivery on the Tokyo Commodity Exchange gained as much as 1.9 percent to 261.4 yen a kilogram ($2,689 a metric ton), rebounding from the lowest settlement since Aug. 8. Futures traded at 260.3 yen at 10:56 a.m., paring losses to 14 percent this year for a most-active contract.
  • Brazil Rating Outlook Lowered to Stable From Positive by Moody’s. Moody’s Investors Service lowered its outlook on Brazil’s sovereign rating to stable from positive, citing deteriorating debt and investment ratios and evidence the economy is going through a low-growth period. “Even though there are signs that the Brazilian economy may be starting to recover, Moody’s view is that, if and when the upturn materializes, it is unlikely that it will be strong enough to restore a positive trend in Brazil credit metrics,” Moody’s said in a statement dated Oct. 2. Moody’s affirmed Brazil’s Baa2 government bond rating. Latin America’s biggest economy expanded less than forecast by analysts in five of the past six quarters and the central bank trimmed its 2013 growth outlook to 2.5 percent from 2.7 percent this week. President Dilma Rousseff has begun rolling back some incentives amid flagging government revenue.
  • Homebuilder Group Lowers Starts Forecast After Rate Jump. The National Association of Home Builders lowered its forecast for U.S. single-family home starts this year and next as higher interest rates slow the pace of growth in the housing market. Single-family home starts are expected to be 629,000 this year, lower than an April estimate of 672,000, the Washington-based group said in a report today. In 2014, the total is expected to be 826,000, compared with the prior forecast of 858,000. Work began on about 537,000 houses in 2012.
Wall Street Journal:
  • No Movement in Shutdown Standoff. Obama, Congressional Leaders Meet, But Neither Side Backs Off Budget Stance. President Barack Obama and congressional leaders met Wednesday for the first time since the federal government shut down, emerging more than an hour later with no evidence of progress toward resolving their impasse over health care and government spending. With hundreds of thousands of federal workers on furlough for a second day, congressional officials of both parties left the White House meeting pessimistic about prospects for a speedy end to the deadlock. They made clear that neither side had made concessions.
  • Casey Mulligan: How ObamaCare Wrecks the Work Ethic. The health-care law, starting Jan. 1, will begin driving up marginal tax rates—well above 50% for many. A new wave of redistribution will arrive in America on Jan. 1, primarily thanks to the Affordable Care Act. The president's health-insurance plan forces those who hire, work and produce to pay full price for health care, while creating generous discounts for practically everyone else.
Fox News:
  • ObamaCare reg on digital patient records raises security concerns. A provision in ObamaCare requiring medical providers to switch from paper patient charts to electronic records is intended to reduce costs and improve care. But privacy advocates fear the transition is too fast for security measures to keep pace. "The thing I worry about is not that we are doing it, but that we're doing it without the right safeguards," said Lee Tien, a senior staff attorney with the Electronic Frontier Foundation. "We have been giving (medical providers) incentives to move into the electronic-health-records era. But we haven't been giving them enough guidance on how they're supposed to do it."
CNBC:
  • Italy prosecutors seek JPMorgan indictment:Report. Siena prosecutors requested that JPMorgan Chase & Co stand trial for obstructing regulators as part of a wider probe into Banca Monte dei Paschi di Siena SpA's purchase of Banca Antonveneta SpA, Bloomberg reported citing people familiar with the matter.
  • Tesla(TSLA) Model S catches fire—in the wrong way. Video of a Tesla Model S on fire in Washington state is raising questions about what caused the electric car to go up in flames. The driver was able to get out of the car before the fire spread to engulf much of the front-end.
Zero Hedge:
Washington Post: 
  • CIA ramping up covert training program for moderate Syrian rebels. The CIA is expanding a clandestine effort to train opposition fighters in Syria amid concern that moderate, U.S.-backed militias are rapidly losing ground in the country’s civil war, U.S. officials said. But the CIA program is so minuscule that it is expected to produce only a few hundred trained fighters each month even after it is enlarged, a level that officials said will do little to bolster rebel forces that are being eclipsed by radical Islamists in the fight against the government of Syrian President Bashar al-Assad.
McClatchy:
  • Al Qaida fighters resume attack on U.S.-backed rebels in northern Syria. Fighters loyal to al Qaida have opened up a new offensive against a U.S.-backed rebel group that once escorted U.S. Sen. John McCain into northern Syria, according to Internet postings and news accounts.

    Read more here: http://www.mcclatchydc.com/2013/10/02/204003/al-qaida-fighters-resume-attack.html#storylink=cpy

    Read more here: http://www.mcclatchydc.com/2013/10/02/204003/al-qaida-fighters-resume-attack.html#storylink=cpy
South China Morning Post:
  • People want Hong Kong's property curbs to continue, poll finds. Lawmakers' calls to drop taxes aimed at fighting speculation fail to win public support, poll finds. Most people believe three taxes introduced to cool the property market should stay in place or be strengthened, a survey found, despite calls from lawmakers to make the measures "less spicy".
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 152.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 119.0 +.25 basis point. 
  • FTSE-100 futures +.34%.
  • S&P 500 futures -.12%.
  • NASDAQ 100 futures -.03%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (STZ)/.88
  • (ISCA)/-.01
Economic Releases 
8:30 am EST
  • Initial Jobless Claims are estimated to rise to 315K versus 305K the prior week.
  • Continuing Claims are estimated to fall to 2805K versus 2823K prior.
 10:00 am EST
  • The ISM Non-Manufacturing Composite for Sept. is estimated to fall to 57.0 versus 58.6 in August.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Powell speaking, Fed's Fisher speaking, Fed's Lockhart speaking, Fed's Williams speaking, China HSBC Services PMI, Eurozone retail sales data, Eurozone Services PMI data, Challenger Job Cuts report for Sept., RBC Consumer Outlook for Oct., weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology 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.

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