Tuesday, April 22, 2014

Tuesday Watch

Evening Headlines 
Bloomberg: 
  • Russia, U.S. Trade Blame as Ukraine Accord Nears Collapse. Russia and the U.S. traded blame for failing to rein in extremists in Ukraine, as a diplomatic accord reached last week all but collapsed. U.S. Secretary of State John Kerry warned Russian Foreign Minister Sergei Lavrov today that “there will be consequences” if Russia fails to act “over the next pivotal days” to restrain pro-Russian militants in eastern Ukraine, spokeswoman Jen Psaki said in Washington.
  • Obama Faces Asia Allies Uncertain of U.S. Commitment. President Barack Obama’s trip to Asia this week brings him face-to-face with allies who have grown uncertain about his commitment to the region. Even with the president’s pledge to continue “rebalancing” U.S. policy toward Asia, the region’s leaders have been unnerved by Obama’s focus on the crises in Syria and Ukraine, military budget cuts, and that the U.S. wants a new “great power relationship” with China that they worry will reduce Japan and other U.S. allies to second-class status.
  • Chinese Steel Industry Won't Turn Around Soon, UBS Says. Remains "relatively cautious" as Angang, Maanshan could record losses in 1Q due to weak steel market, UBS analyst Mick Mi writes in note to clients.
  • Japan’s Abe Sends Traditional Offering to Yasukuni Shrine. A group of 146 lawmakers visited the Yasukuni Shrine in Tokyo, after China and South Korea rebuked Prime Minister Shinzo Abe for sending a traditional offering to the site that honors Japan’s war dead.
  • Plane Hunt Yields No Debris as Search Enters Last Zone. An international team hunting for the missing Malaysian passenger jet is trawling the last third of a search zone for wreckage after an unmanned submarine failed to find traces of the aircraft.
  • Asian Stocks Rise as Japan Exporters Gain on Weaker Yen. Asian stocks rose as U.S. equities capped their longest stretch of gains since October and the yen extended losses, boosting the outlook for Japanese exporters. Komatsu Ltd. (6301), a maker of construction equipment that gets about 80 percent of sales overseas, added 0.8 percent, pacing gains among Japanese exporters. NHN Entertainment Corp. climbed 3 percent after the South Korean online gaming company said it’s considering a share buyback. Newcrest Mining Ltd., Australia’s biggest gold producer, slipped 2.2 percent after the bullion fell to a two-week low as signs of an improving U.S. economy reduced the appeal of haven assets. The MSCI Asia Pacific Index added 0.2 percent to 139.17 as of 10:52 a.m. in Tokyo, with all 10 industry groups on the gauge rising.
  • Dividend Deal 'Epidemic' Intensifies Junk Alarm: Credit Markets. Companies owned by private-equity firms are borrowing money to pay dividends like it's 2007, adding to concern among regulators that excesses are emerging in the riskier parts of the debt markets. Borrowers including Madison Dearborn Partners LLC's mobile-phone insurer Asurion LLC obtained almost $21 billion in junk-rated loans this year to enrich their owners, the most in seven years, according to S&P's Capital IQ LCD. Some of the least-creditworthy companies are even selling notes that may pay interest with more debt, which BMC Software Inc. did for its $750 million payout to a group led by Bain Capital LLC. With defaults by the neediest U.S. borrowers approaching record lows, buyout firms are taking advantage of the Fed's easy-money policies to extract payouts by piling more junk debt onto the companies they own. The central bank, the FDIC and the Office of the Comptroller of the Currency have warned in recent months that underwriting standards for speculative-grade issuers are weakening as investors become more willing to accept looser terms.
  • Keystone Route Ruling Should Be Overturned, Nebraska Says. A court challenge holding up TransCanada Corp. (TRP)’s Keystone XL pipeline should be dismissed, Nebraska’s governor said, urging his state’s high court to allow the project to move forward.
Wall Street Journal: 
Fox News:
CNBC:
Zero Hedge:
ValueWalk:
Evening Recommendations
CSFB:
  • Raised (FB) to Outperform, target $87.
Night Trading
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 120.50 -4.0 basis points.
  • Asia Pacific Sovereign CDS Index 87.5 -.75 basis point.
  • FTSE-100 futures +.42%.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures  +.08%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (SPG)/2.24
  • (RF)/.20
  • (LMT)/2.53
  • (MCD)/1.24
  • (LXK)/.87
  • (AKS)/-.43
  • (HOG)/1.09
  • (OMC)/.79
  • (GPC)/1.02
  • (BK)/.54
  • (UTX)/1.27
  • (ITW)/.98
  • (CREE)/.38
  • (GILD)/.91
  • (JNPR)/.29
  • (ISRG)/3.28
  • (IGT)/.19
  • (T)/.70
  • (AMGN)/1.94
  • (VMW)/.79
  • (ILMN).44
  • (YUM)/.84
  • (TRV)/2.16
  • (ETH)/.21
  • (CMCSA)/.64
Economic Releases
9:00 am EST
  • FHFA House Price Index MoM for February is estimated to rise +.5% versus a +.5% gain in January.
10:00 am EST
  • The Richmond Fed Manufacturing Index for April is estimated to rise to 2.0 versus -7.0 in March.
  • Existing Home Sales for March are estimated to fall to 4.56M versus 4.6M in February. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The China HSBC Manufacturing PMI, Australia CPI, Eurozone Construction Output, $32B 2Y T-Note auction, weekly retail sales report and the (MED) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and industrial 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.

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