Sunday, February 08, 2015

Monday Watch

Weekend Headlines 
Bloomberg:
  • Putin Rejects Attempts to Contain Russia After Peace Talks Fail. Russian President Vladimir Putin struck a defiant tone a day after talks in Moscow with the leaders of Germany and France failed to achieve a breakthrough in resolving the Ukraine crisis. Russia won’t tolerate the post-Cold War global system dominated by a single leader, Putin said Saturday at a meeting with the Federation of Independent Trade Unions in Sochi. “That type of world order has never been acceptable for Russia,” Putin said. “Maybe someone likes it and wants to live under a pseudo-occupation, but we won’t put up with it.”
  • Ukraine Summit Unsuccessful as U.S. Contemplates Next Steps. European and Russian leaders failed on Saturday to reach an agreement on ending the carnage in Ukraine in more than five hours of talks as U.S. officials debated new steps to pressure Russia, including military deployments in countries like Poland and the Baltic states. The talks, held by Russian President Vladimir Putin, German Chancellor Angela Merkel and French President Francois Hollande, took place at the Kremlin in a high-stakes effort to stave off a deeper confrontation between Russia and the West over Ukraine. Little of substance emerged and Merkel and Hollande left Moscow, although talks are to continue by phone over the weekend. The German leader is due to address the Munich Security Conference on Saturday 
  • Greece Reaffirms Rejection of Bailout Before Emergency EU Meeting. Greek Prime Minister Alexis Tsipras reaffirmed his government’s rejection of the country’s international bailout program two days before an emergency meeting with the euro area’s finance ministers. Tsipras vowed to increase the minimum wage, restore the income tax-free threshold and halt infrastructure privatizations in a speech that sets him on a collision course with the country’s creditors. “It is the irrevocable decision of our government to honor the mandate of the Greek people and negotiate an end to the European Union’s austerity,” Tsipras said in an address to parliament marking the start of a three-day debate on his government’s policy platform. “We aim to work with our partners in Europe to achieve these goals.”
  • Nigeria Postpones Vote for Six Weeks as Boko Haram Attacks Rage. Nigeria announced a six-week postponement of presidential and legislative elections that were scheduled to be held Feb. 14 because of worsening attacks by Islamist militants. Independent National Electoral Commission Chairman Attahiru Jega said the presidential and legislative elections will be held March 28, followed by state gubernatorial and legislative votes on April 11. The delay will help the commission finish distributing biometric cards to the 68.8 million registered voters. The security forces said “if we have six weeks” they can secure “normalcy,” Jega told reporters late Saturday in Abuja, the capital. “What else can we do? We believe them. I know there are sufficient grounds for cynicism, but let’s keep hope alive.” 
  • Abbott Remains Prime Minister After Defeating Challenge. Australia’s Prime Minister Tony Abbott thwarted a leadership challenge, though failed to end speculation his position is under threat after almost 40 percent of his Liberal Party colleagues voted against him. Liberal lawmakers voted by 61 to 39 against a motion that would have declared his job vacant and allowed candidates to run against him. Internal support for the prime minister has dwindled 17 months after he won office amid the government’s slumping poll ratings and concern about his leadership style.   
  • Asian Stocks Slide After China Trade Data. Asian stocks slid as China trade figures showed signs of weakness in the region’s biggest economy. Japanese equities rallied on a weaker yen after U.S. payrolls topped estimates. Benchmark indexes in Seoul, Sydney and Wellington slipped at least 0.4 percent as of 9:01 a.m. in Tokyo. Japan’s Topix index climbed 0.8 percent, leaving the MSCI Asia Pacific Index little changed at 141.24. China’s imports plunged by the most in more than five years and exports unexpectedly fell, a report over the weekend showed. Futures on the FTSE China A50 Index dropped 0.7 percent in most recent trading in Singapore.  
  • Hedge Funds Most Bearish on Crude in 4 Years After Rally: Energy. Hedge funds raised bearish bets on oil to the highest in more than four years, a sign they’re skeptical that a two-week 14 percent rally will last. Short bets on West Texas Intermediate climbed 1.2 percent in the week ended Feb. 3 to the most since August 2010, U.S. Commodity Futures Trading Commission data show. Net-long positions slipped for a third week, the longest stretch of declines since August.
  • Oil Companies May Keep Up Output to Repay Debt, BIS Report Says. Energy companies may be slow to cut oil production after a 50 percent price drop because they need to service debt that has risen fourfold since 2003, according to the Bank for International Settlements. “Debt-service requirements may induce continued physical production of oil to maintain cash flows, delaying the reduction in supply in the market,” the Basel, Switzerland-based institution said in a report Saturday
  • Grain Bulls Exit at Fastest Pace Since 2013 on Glut: Commodities. Hedge funds cut bullish wagers on agricultural commodities at the fastest pace since August 2013 as expanding grain supplies help keep a lid on global food inflation. Money managers lowered their net-long position on crops from corn to sugar for a fifth straight week, U.S. government data show. Investors got more bearish on wheat and have the smallest wager on a coffee rally in a year.
  • West Coast Port Operators Suspend Weekend Cargo Amid Slowdowns. Terminal operators at the 29 U.S. West Coast ports won’t handle cargo this weekend as a labor dispute with dockworkers escalates, their bargaining agent said. Loading and unloading of vessels at ports from San Diego to Bellingham, Washington, will be suspended from Friday through Monday morning, according to an e-mailed statement from the Pacific Maritime Association. Shipping lines and terminal operators can’t justify paying overtime to unionized dockworkers who are handling cargo at reduced levels of productivity, an association spokesman, Wade Gates, said in the statement.
Wall Street Journal:
  • Leaders Press for Ukraine Deal in Minsk. John Kerry Says West Is United in Response to Conflict. The U.S. and Germany are struggling to maintain a united front against an unflinching Russia ahead of a crucial week of high-stakes, top-level diplomacy on the Ukraine crisis. Chancellor Angela Merkel has given Russian President Vladimir Putin until Wednesday to agree to a road map to end the fighting in eastern Ukraine, according to Western officials. If in her assessment Russian intransigence has blocked a deal, they said,... 
  • U.S. Banks Say Soaring Dollar Puts Them at Disadvantage. Firms Say They May Be Forced to Hold More Capital Than Foreign Rivals. The strengthening U.S. dollar is rippling through the financial system in unexpected ways, revealing what bankers say is a hidden flaw in a Federal Reserve proposal to increase capital cushions at the nation’s largest banks. Big U.S. banks say that, under the rule proposed in December, the recent steep rise in the dollar’s value would force some U.S. firms to hold billions of dollars more in capital than foreign competitors, including weaker European banks, because of how the Fed plans to calculate a so-called surcharge levied on the eight most systemically important U.S. banks.
Zero Hedge:
  • Yanis Varoufakis Sums Up Europe In One Sentence. "A clueless political personnel, in denial of the systemic nature of the crisis, is pursuing policies akin to carpet-bombing the economy of proud European nations in order to save them."
Business Insider:
NY Post:
  • Next subprime bubble to burst — auto loans. Subprime auto loans are on the rise and just like subprime mortgages are claiming untold victims. Samuel Perez, 32, is still dealing with fallout from his experience with a subprime loan five years ago.
Night Trading
  • Asian indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 109.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 67.25 -.5 basis point.
  • S&P 500 futures -.42%.
  • NASDAQ 100 futures -.33%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (CNA)/.76
  • (DO)/.65
  • (HAS)/1.21
  • (L)/.53
  • (MAS)/.20
  • (SOHU)/-.18
  • (CSC)/1.12
  • (NTES)/1.53
  • (TDW)/.92
Economic Releases
10:00 am EST
  • Labor Market Conditions Index for January.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The China CPI, German Trade Balance, CSFB Financial Services Forum, Stifel Tech/Internet/Media Conference, BIO Investor Conference, (MCD) January Sales, (D) analyst meeting and the (DM) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.

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