Dog Day Advance
Financial Review by Sinclair Noe for 08-17-2015
DOW + 67 = 17,545
SPX + 10 = 2102
NAS + 43 = 5091
10 YR YLD – .05 = 2.15%
OIL – .62 = 41.88
GOLD + 3.70 = 1118.40
SILV + .07 = 15.42
A reading of New York-area manufacturing conditions fell in August. The Empire State general business conditions index nose-dived to a reading of negative 14.9, from positive 3.9 in July, marking the worst level since April 2009.
The National Association of Home Builders/Wells Fargo housing market index rose 1 point to 61, marking the highest level since Nov. 2005. Any reading above 50 indicates “good” conditions. NAHB says the report is consistent with their forecast for a gradual strengthening of the single-family housing sector in 2015.
Japan’s economy contracted in Q2 as overseas demand for Japanese goods slumped and households spent less, raising the possibility the government will act to support the country’s weak recovery. GDP shrank 1.6% on an annualized basis in the April-June quarter.
The yuan started the week on stable footing after the People’s Bank of China set the currency’s daily reference rate at 6.39 per dollar – in line with Friday’s close. The move signals Beijing is willing to cede more control to market forces, following last week’s record devaluation that saw the currency plunge 3.6%. Shanghai +0.7%. Shenzhen +1%.
Rounding up support for Greece’s fresh aid package, German Chancellor Angela Merkel said she expects the IMF to take part in the new bailout – ahead of Wednesday’s crucial vote on the deal in the Bundestag. Merkel reiterated that a so-called haircut remained out of the question for Germany, but extending debt maturities and tweaking rates remained possibilities.
Hundreds of thousands of Brazilians took to the streets on Sunday calling for the impeachment of President Dilma Rousseff. Demonstrators denounced widespread corruption among the country’s political and business elites and called for the end of more than 12 years of Workers’ Party rule. Barely seven months into her second term, Rousseff’s approval rating has dropped to just 8%.
Oil led commodities lower as Iran said OPEC production may hit a record after sanctions on the country are lifted, and as U.S. drilling activity sustained gains. Hedge funds resumed their retreat from U.S. oil, cutting bullish positions for the seventh time in eight weeks.
Israel’s cabinet has approved a regulatory framework that will pave the way for development of the hotly discussed Leviathan natural gas field. The plan will allow Texas-based Noble Energy and Israel’s Delek Group to keep ownership of the massive offshore deposit, but will require them to sell off other assets, including stakes in another large field called Tamar. Leviathan, with estimated reserves of 22 trillion cubic feet of gas, is slated to begin production in 2018 or 2019.
KKR’s Samson Resources Corp. plans to file for chapter 11 bankruptcy protection by mid-September after finalizing a restructuring plan with key lenders Friday. The Oklahoma-based oil and gas producer agreed to hand ownership to a group of its lenders in bankruptcy. The private-equity firm led a $7.2 billion leveraged buyout of Samson in 2011, the biggest-ever such deal for an oil and gas producer. The bankruptcy reorganization would wipe out the roughly $4.1 billion in cash KKR and its partners invested in the company.
IndiGo, India’s biggest airline, has firmed up an order to buy as many as 250 Airbus A320neos, handing the European plane maker its largest-ever deal by number of aircraft. The $26.5 billion purchase helps extend Airbus’s lead over arch-rival Boeing for the fast-growing upgraded narrow-body aircraft segment. According to website data, Boeing has secured 2,831 orders for its 737 Max, while Airbus now has over 4,100 orders for the A320neo.
Brookfield Asset Management, Canada’s largest alternative asset manager, led a group that agreed to pay $6.5 billion in cash and stock for Asciano Ltd., the Australian rail and port operator.
Liberty Interactive, which owns home shopping network QVC, said it would acquire Zulily in a deal valued at $2.4 billion. Zulily, a website that hosts “flash” sales of clothing primarily for women and children, counts Chinese ecommerce giant Alibaba Group as one of its shareholders.
Expanding into the seafood industry, Cargill has agreed to acquire EWOS from private-equity firms Altor Equity and Bain Capital for $1.5 billion. EWOS, which is based in Norway, produces more than 1.2 million metric tons of fish feed a year and accounts for one-third of the world’s market for salmon and trout feed. The deal would be Cargill’s first entry into the salmon market, making it a leading supplier to salmon farms as it expands its aquaculture business. It is Cargill’s second deal related to operations serving fish farms in recent months. The deal is expected to close by the end of the year.
Pump and valve maker Pentair agreed to buy fastening products maker Erico Global for $1.8 billion in cash, including debt, weeks after activist investor Nelson Peltz asked the company to bulk up through deals.
Citigroup has agreed to pay $180 million to settle charges by the SEC that the bank concealed problems at two of its now-defunct hedge funds, while taking in additional investments in the months before the financial crisis. Citigroup’s settlement comes more than seven years after the two hedge funds collapsed, saddling investors with billions of dollars in losses. The funds used large amounts of leverage to prop up returns from municipal bonds and other fixed income investments. The funds were sold to investors by Citigroup’s financial advisers, working for the bank’s former Smith Barney wealth management unit, who told clients that the hedge funds were essentially as safe as traditional bond funds. But in 2007 and early 2008, the fund’s managers failed to inform the thousands of investors in the funds about a severe shortage of liquidity and margin calls from lenders. Fund managers also misled investors into believing that potential losses from the funds would be minimal, but they kept selling the funds and raising additional money from investors up until the very end. Citigroup agreed to pay the $180 million to harmed investors without admitting any wrongdoing.
Richard Fisher retired in March as president of the Dallas Federal Reserve Bank. Today, Robert Steven Kaplan was announced as the new president and chief executive of the Dallas Fed. Kaplan was the former vice-chairman of Goldman Sachs until 2006.
On Wednesday the Fed will publish minutes from the July FOMC meeting. The Fed published a statement following that meeting, hinting at its first rate increase in almost a decade. Also on Wednesday, the Labor Department will report on prices at the retail level; the consumer price index is not the Fed’s preferred inflation gauge but we will be watching for any signs of inflation.
Remember back in May when the IRS announced a computer breach? Hackers stole information on over 100,000 taxpayers? I know all these hacks are starting to blur together. Well, this one is a lot bigger than first reported; potential victims now total 334,000. The thieves accessed a system called “Get Transcript,” where taxpayers can get tax returns and other filings from previous years. In order to access the information, the thieves cleared a security screen that required knowledge about the taxpayer, including Social Security number, date of birth, tax filing status and street address, the IRS said. The personal information was presumably stolen from other sources. The IRS believes the thieves were accessing the IRS website to get even more information about the taxpayers, which could help them claim fraudulent tax refunds in the future. The IRS will begin mailing letters in the next few days to taxpayers where there were instances of possible or potential access to taxpayer account information.
Sprint announced that it would abandon two-year contracts, joining T-Mobile and Verizon who have made similar moves.
America Movil is removing Mexico-U.S. roaming charges for 40M Mexican prepay clients, after AT&T bought two domestic wireless operators looking to steal market share on its rival’s home turf. Carlos Slim is also under additional pressure. America Movil, which is facing a regulatory crackdown in Mexico, must lower its 70% mobile market share under new antitrust rules.
While it has been long known that American telecommunications companies worked closely with the NSA, newly disclosed documents show that a relationship with AT&T has been especially productive. The New York Times reports AT&T gave the NSA access to billions of emails that have flowed across its networks, some of it classified, and permitted the wiretapping of all Internet communications at United Nations headquarters, among other activities. The NSA’s top-secret budget in 2013 for the AT&T partnership was more than twice that of the next-largest such program. The company installed surveillance equipment in at least 17 of its Internet hubs on American soil, far more than its similarly sized competitor, Verizon.