20 June 2013 AMC

20 June 2013 AMC

Market Summary 

Market Internals

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Stock Market Update 16:20 ET Dow -353.87 at 14758.32, Nasdaq -78.57 at 3364.64, S&P -40.74 at 1588.19 :[BRIEFING.COM] Equities ended with sharp losses across the board as yesterday's selling persisted into today's trade, and dragged global shares into the fray. The S&P 500 fell 2.5% after losing its 50-day moving average at the open.  Markets across the globe sold off after yesterday's comments from Federal Reserve Chairman Ben Bernanke were interpreted as a warning of an impending modification to the Fed's asset purchase program. Although the Fed Chairman qualified his statement by saying the economy must continue showing improvement before modifications can be made, investors looked past this condition and chose to focus on the potential timeframe instead.  Concerns regarding possible tapering, as well as worries about the Fed losing control over the situation, have caused a significant spike in interest rates. Since yesterday, the yield on the 10-yr note has jumped 25 basis points to 2.414%, with ten of those coming during today's session.  Elevated Treasury yields have contributed to selling in high-yielding, defensively oriented sectors. To that end, the consumer staples sector led to the downside with a loss of 3.0%. Health care (-2.6%) and utilities (-2.9%) also saw significant selling while the fourth countercyclical group, telecom services, outperformed with a loss of 2.3% after leading yesterday's decline with a 2.7% slide.  Meanwhile, commodity-related names saw the heaviest selling among cyclical sectors with energy and materials dropping 2.7% and 2.6%, respectively. On a related note, crude oil slumped 3.6% to $94.98 per barrel while copper tumbled 3.0% to $3.05 per pound. Precious metals had a flashback to mid-April as gold sank 6.8% to $1280.10 per ounce while silver dropped 9.4% to $19.59 per ounce. Softness in those metals pressured the Market Vectors Gold Miners ETF (GDX 24.55, -1.96), sending it lower by 7.4%.  The sharp losses in metals were rivaled by homebuilders as PulteGroup (PHM 18.87, -1.89) and Ryland Group (RYL 38.65, -4.35) both plunged more than 9.0% while the broader iShares Dow Jones US Home Construction (ITB 22.34, -1.36) sank 5.7%.  Today's weakness caused investors to adjust their near-term volatility expectations. As a result, the CBOE Volatility Index (VIX 20.47, +3.83) ended at its highest level of the year. Interestingly, this month's weakest group, financials, finished ahead of the remaining sectors with a loss of 2.2%.  The initial claims level increased from an upwardly revised 336,000 (from 334,000) for the week ending June 8 to 354,000 for the week ending June 15. The Briefing.com consensus expected the initial claims level to increase to 340,000.  The Conference Board's Index of Leading Indicators increased 0.1% in May, down from an upwardly revised 0.8% (from 0.6%) gain in April. The Briefing.com consensus expected the index to increase 0.2%.  Manufacturing activity improved in the Philadelphia region as the Philadelphia Fed's Business Outlook Survey increased from -5.2 in May to 12.5 in June. That was the highest reported Philly Fed Index since April 2011. The Briefing.com consensus expected the Philly Fed Index to increase to -0.2.  Existing home sales jumped above the 5.00 million mark for the first time since the homebuyer tax credit temporarily boosted sales in late 2009. Home sales rose from 4.97 million in April to 5.18 million in May. The Briefing.com consensus expected existing home sales to increase to 5.00 million. Future sales are still supply constrained. Only 2.2 million homes are currently on the market, representing a 5.1-month supply, which is down 10.1% from a year ago. There is usually a 6-month supply during normal selling conditions. Anything below that level signals upward pricing pressures. ..NYSE Adv/Dec 148/2994. ..NASDAQ Adv/Dec 364/2160.

Commodities

Commodities End Sharply Lower

NYMEX Energy Closing Prices
Aug crude oil fell $3.39 to $95.09/barrel. Crude oil fell alongside the equities markets as investors reacted to statements from Federal Reserve Chairman Ben Bernanke that suggested a potential reduction to the stimulus program. A stronger dollar index also put pressure on prices. The energy component slid further into negative territory after pulling-back from its session high of $96.55 set at pit trade open. It eventually settled 3.4% lower. July natural gas fell $0.08 to $3.88/MMBtu. Natural gas also spent its entire pit session in the red as inventory data for the week ending June 14 showed a build of 91 bcf when a build of 89 bcf was anticipated. Although prices initially popped to a session high of $3.95 and quickly slipped to a session low of $3.84 on the data, natural gas corrected to early morning price levels and ultimately settled with a 2.0% loss. Aug heating oil fell 10 cents to $2.87/gallon. Aug RBOB gasoline fell 10 cents to $2.78/gallon.

COMEX Metals Closing Prices
Aug gold fell $87.90 to $1285.90/ounce. Gold extended overnight losses as it tumbled below $1300 to its lowest levels since September 2010. Investors reacted to statements from Federal Reserve Chairman Ben Bernanke that signaled a potential reduction to the Fed's asset purchase program in 2014 if the economy continues to improve. Strength in the dollar index also added to selling pressure. The yellow metal booked a 6.4% loss as it settled at its session low. July silver fell $1.79 to $19.82/ounce. Silver fell for a fourth consecutive session alongside gold. Prices plummeted below $20 to levels not seen since September 2010. The metal settled slightly above its session low of $19.70, booking a loss of 8.3%. July copper fell 8 cents to $3.06/lb.

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
July corn fell 7 cents to $6.73/bushel
Dec corn fell 9 cents to $5.61/bushel
July wheat fell 5 cents to $7.00/bushel
Nov soybeans fell 25 cents to $12.86/bushel
Aug ethanol fell 3 cents to $2.38/gallon
Sep sugar (#16 (U.S.)) fell 0.64 of a penny to 18.95 cents/lbs

Treasuries

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Other news


European Markets Update
Major European indices hover near their lows following the release of a full slate of economic news. The Eurozone Manufacturing PMI ticked up to 48.7 from 48.3 (48.6 expected) while Services PMI rose to 48.6 from 47.2 (47.5 forecast). Germany's Manufacturing PMI fell to 48.7 from 49.4 (49.8 expected) while Services PMI rose to 51.3 from 49.7 (50.0 forecast). In addition, PPI declined 0.3% month-over-month (-0.1% expected, -0.2% prior). French Manufacturing PMI rose to 48.3 from 46.4 (47.0 expected) while Services PMI ticked up to 46.5 from 44.3 (44.8 forecast). Italian industrial orders rose 0.6% month-over-month (1.1% forecast, 1.8% previous). Great Britain's retail sales rose 2.1% month-over-month (0.8% expected, -1.1% prior) while core retail sales also increased 2.1% month-over-month (0.9% forecast, -1.2% prior). In addition, CBI Industrial Trends Orders ticked up to -18 from -20 (-15 expected). 

Also of note, the Bank of England said five of eight banks had an aggregate capital shortfall of GBP27.1 billion at the end of 2012.

• Great Britain's FTSE trades lower by 3.0% as 99 of 101 members register losses. Miners are among the weakest index members as Fresnillo, Randgold Resources, and Rio Tinto sport losses between 3.8% and 5.7%. The only two advancers, Carnival and Lloyds Banking, trade with slim respective gains of 0.1% and 0.4%.
• In Germany, the DAX is lower by 3.3% with 29 of 30 components in the red. Exporters BMW and Volkswagen lead to the downside with losses near 4.0%. On the upside, Fresenius Medical is higher by 0.3%.
• France's CAC trades down 3.7% as Renault leads to the downside with a loss of 5.0%. Financials have also shown weakness as BNP Paribas sheds 3.2% while Societe Generale trades lower by 3.6%.

Jason's Commentaries


Just 2 sessions... the entire gains from May and June were all gone. Nasty isn't it. Market opened when the futures were down 1%. Market did not fight back at all. The market went on a constant decline all the way till closing bell. What a sign of weakness in the market. All sectors were down by at least 2%, with the financials being the weakest loser of 2.22% loss. Volumes were way up high at 1066m shares traded in the NYSE. DVOL outweight UVOL by 20:1. It was a bloodshed. Asia was not spared yesterday as well. However, Asia seemed to find some footing today with Nikkei up marginally. Futures were up at 92 points at 6am ET. 

 Treasuries were being hammered after FOMC statements. Commodities were also not spared from this bloodshed. There is no data coming out on Friday. It seems to be a good day to cover some shorts. Stay safe guys. Haze is covering Singapore. Pray for rain!

Market Call: UP

Date: 21 June 2013

19 June 2013 AMC

19 June 2013 AMC

Market Summary 

Market Internals

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Stock Market Update 16:25 ET Dow -206.04 at 15112.19, Nasdaq -38.98 at 3443.2, S&P -22.88 at 1628.93 :[BRIEFING.COM] Equities ended on their lows with the S&P 500 down 1.4%.  The S&P entered today's session with a week-to-date gain of 1.5% as investors expected reassuring words from today's Federal Open Market Committee Statement.  Stocks traded with slim losses until this afternoon's FOMC Statement and subsequent comments from Chairman Bernanke sent equities and Treasuries to their lows while also providing a significant boost to the dollar.  Today's Statement was not too different from the last directive released on May 1. However, it did indicate inflation has been running below the longer-run objective while long-term inflation expectations remain stable.  During his remarks, Chairman Bernanke said if conditions continue to improve, the Fed could reduce the pace of purchases later this year with a potential end to purchases coming in the middle of 2014. He also suggested downside risks have diminished since the fall, but the Fed will not sell securities as long as the market remains in normalization stage.  Finally, Mr. Bernanke said that a decline in the unemployment rate to 6.5% will not automatically signal a rate hike. Instead, reaching the target will pave way for that discussion to begin.  The Dollar Index saw the sharpest post-FOMC move as investors dumped other currencies in favor of the greenback. The afternoon bid sent the Index higher by 0.9% and allowed it to regain its 200-day moving average.  Elsewhere, Treasuries fell victim to aggressive selling pressure as a loss of more than one point ran the 10-yr yield up 14 basis points to 2.332%. This marked the highest close since March 2012. Even more notable was today's 17.5 basis point surge in the 5-yr yield, which made for its best close since August 2011.  The sharp spike in rates weighed on rate-sensitive countercyclical sectors as they led equities to the downside. Telecom and utilities saw respective declines of 2.7% and 2.3% while consumer staples and health care lost near 1.8% each.  Meanwhile, most growth-oriented groups held in relatively well through the afternoon selling. Financials and industrials were the two exceptions as both underperformed prior to the FOMC Statement, and lagged behind other cyclical sectors into the close.  Energy and materials outperformed the broader market with respective losses of 1.0% and 0.8%. On a related note, crude oil dipped 0.6% to $98.07 per barrel while copper ticked down 0.6% to $3.14 per pound.  The weekly MBA Mortgage Index declined 3.3% to follow the prior week's increase of 5.0%.  Tomorrow, weekly initial claims will be reported at 8:30 ET while May existing home sales, leading indicators, and June Philadelphia Fed Survey will cross the wires at 10:00 ET. ..NYSE Adv/Dec 455/2595. ..NASDAQ Adv/Dec 687/1809.

Commodities

Treasuries

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Other Market Moving Factors:

• Japan reported an adjusted trade deficit of -JPY0.82 trillion (-JPY0.89 trillion expected, -JPY0.70 trillion prior)
• New Zealand reported a current account deficit of $0.66 billion (-$0.60 billion expected, -$3.23 billion prior).
• Australia's CB Leading Index rose 0.3% month-over-month (0.1% prior) while the MI Leading Index came in at 0.6% (0.1% previous).
• Markets in China and Hong Kong registered losses amid ongoing worries regarding the health of the liquidity-starved Chinese financial system. As a result, the short term repurchase rates have climbed to multi-month highs.
• Spain reported a trade deficit of -EUR1.60 billion (EUR0.30 billion expected, EUR0.60 billion prior).
• The Swiss ZEW Expectations Survey remained unchanged at 2.2 (10.0 forecast).
• The International Monetary Fund has released a report on Spain, cautioning the banking sector may be exposed to further loan losses as the economy continues to contract.
• Fed sees downside risks to the outlook for the economy and the labor market as having diminished
• Bernanke said Fed could reduce pace of purchases later this year until the middle of 2014 when it would end

Fed releases FOMC statement
(Full Statement)

Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace. Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable. 

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate. The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The Committee also anticipates that inflation over the medium term likely will run at or below its 2% objective. 

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. 

The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives. 

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%. 

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was James Bullard, who believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

IN AEROSPACE/DEFENSE NEWS ...

EADS (EADSY) is considering options for defense business but has no plans to sell it, according to reports 
Click Here for the Reuters.com Article

US Airways (LCC) and American Airlines (AAMRQ) deal should get reviewed, says lawmakers, according to reports 
Click Here for the Reuters.com Article

Boeing (BA) Dreamliner from United (UAL) was diverted following possible oil filter problem, according to reports 
Click Here for the Reuters.com Article

CIT Group (CIT) has placed an order for 30 BA 737 MAX airplanes. 
Boeing (BA) and CIT Group (CIT) announced from the 2013 Paris Air Show that CIT Aerospace has placed an order for 30 737 MAX 8s. The order is comprised of 10 new incremental aircraft and conversions of 20 existing Next-Generation 737 orders.
Reuters.com Article

RTI International Metals (RTI) announced its wholly owned subsidiary RTI Claro, earlier this year entered into a long-term contract with Bombardier Aerospace (BDRBF) to supply precision machined components and assemblies for several Bombardier aircraft models. This agreement, which replaces a recently expired supply arrangement, runs through 2019 and calls for RTI to manufacture components and assemblies not previously provided by RTI.

Northrop Grumman (NOC) has delivered the first of four AQS-24A airborne mine-hunting vehicles to the Japanese Maritime Self-Defense Force for deployment on Japan's new MCH-101 helicopter platform. 

Boeing (BA) and Ryanair finalized a firm order for 175 Next-Generation 737-800 airplanes valued at $15.6 bln at list prices. The order was originally announced as a commitment in March. 

Boeing (BA) announced that first delivery of the 737 MAX 8 to launch customer Southwest Airlines will be a quarter earlier than originally scheduled -- in the third quarter of 2017 instead of fourth quarter.

International Lease Finance, a wholly owned subsidiary of American International (AIG) has selected Pratt & Whitney PurePower PW1100G-JM engines to power an additional 30 A320neo Family aircraft bringing ILFC's total commitment to 180 engines. Pratt & Whitney is a division of United Technologies (UTX). 

Boeing (BA) and Oman Air announced an order for five Boeing Next-Generation 737-900ER airplanes. The order, previously unidentified on the Boeing Orders & Deliveries website, is valued at $473 mln at current list prices. 

Pratt & Whitney, a unit of United Technologies (UTX), has successfully completed initial design review with the U.S. Air Force Research Laboratory on its Adaptive Engine Technology Development Program. Also, co will provide exclusive power for up to 100 Embraer (ERJ) E-Jets E2 aircraft based on the letter of intent announced by Embraer and International Lease Finance Corporation.

Pratt & Whitney (UTX) and Norwegian Air Shuttle signed a definitive agreement to power 50 firm EADS' (EADSY) Airbus A320neo family aircraft with PurePower PW1100G-JM engines. Also, International Lease Finance Corporation has selected Pratt & Whitney PurePower PW1100G-JM engines to power an additional 30 A320neo Family aircraft bringing ILFC's total commitment to 180 engines. 

Boeing (BA) and Travel Service have announced a commitment for three 737 MAX 8s at the 2013 Paris Air Show, valued at $301.5 million at list prices 

Northrop Grumman (NOC) announced the delivery of its Scalable Node Architecture Software Development Kit to second- and third-party defense product and services firms to foster broader use of open architecture throughout the co's defense program teaming efforts. 

Pratt & Whitney, a United Technologies (UTX) co, recently reached a milestone in the National Aeronautics and Space Administration's Environmentally Responsible Aviation Project by demonstrating performance and efficiency of a Geared TurboFan ultra-high bypass system, successfully completing 275 hours of fan rig testing in the NASA Low Speed Wind Tunnel.

Bonds: Treasuries Hammered Post-FOMC
Treasuries were hammered to session lows following the release of today's FOMC Statement, and continued lower throughout Fed Chairman Ben Bernanke's accompanying press conference. Today's Statement met market expectations as the FOMC suggested it would continue buying a total of $85 bln per month in agency mortgage-backed securities and Treasury securities and that it is prepared to " increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes." However, during his accompanying press conference Chairman Bernanke suggested if conditions and trends continue the Fed could reduce its purchases later this year and through mid-2014 when the program could end. Heavy selling engulfed longer dated maturities with those seven years on up all ending lower by just more than one full point. The weakness weighed heaviest on the belly of the curve with the 5-yr surging 17.5 bps to 1.227%, marking its highest close since August 2011. Elsewhere, the benchmark 10-yr yield jumped nearly 13 bps to end the day at 2.311% to see its highest close since March 2012. The long bond outperformed as its losses ran the 30-yr yield up just 7.2 bps to 3.414%, but it too still settled at its highest since March 2012. Significant curve steepening developed on the sell-off as the 2-10-yr spread widened to 201 bps.

Jason's Commentaries


Like what my mentor said. Best to stay away from the market when its filled with divergence, idiots and Ben Bernanke. Last night was really a hell of a gyration where many people are being rinsed out by the market makers. One hour before the closing bell during Bernanke's conference, market washed out once again. All sectors reported losses last night, with utilities hit with the heaviest loss of 2.29%. It seems that the market is taking the news negatively. Luckily they have already priced in the losses on Monday and Tuesday, else their portfolio would have been really awful now. Volumes were at 760m shares traded on the NYSE, bulls were totally overrun by the bears. Treasuries took a hit after the FOMC statements as well. When asked about his future plans, Bernanke refused to talk about it after Obama's comments about 'firing' him on Monday. On the technical side, the indices were exhibiting somewhat like an engulfing pattern, breaking the 20MA. Besides the equity and Treasuries market, the metal market was also being affected heavily as well. Asia was in the sea of red as well. Seems that we're going to have some bearish open today.

Market Call: DOWN

Date: 20 June 2013

18 June 2013 AMC

18 June 2013 AMC

Market Summary 

Market Internals

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Stock Market Update 16:20 ET Dow +138.38 at 15318.23, Nasdaq +30.05 at 3482.18, S&P +12.77 at 1651.81 : [BRIEFING.COM] The major averages ended higher across the board as the S&P 500 advanced 0.8%.  Equities climbed steadily since the opening bell as investors prepared for tomorrow's policy decision from the Federal Reserve. Although chatter in recent weeks has included speculation the Fed would look to taper its asset purchases, today's broad gains suggest investors expect mostly reassuring words from Chairman Bernanke at tomorrow's press conference.  All ten sectors ended with solid gains, but today's rally was predicated on the strength of cyclical names.  The industrial space rose 1.3% amid outperformance in transportation and defensive stocks. The Dow Jones Transportation Average advanced 1.0% as 19 of 20 components registered gains. GATX (GMT 48.05, -0.45) was the lone decliner after Stifel Nicolaus downgraded the stock to ‘Hold' from ‘Buy.'  With regards to defensive stocks, Dow component General Electric (GE 24.33, +0.56) settled higher by 2.4% after forging a strategic partnership with Accenture (ACN 82.93, +0.48). The broader PHLX Defense Index climbed 1.7%.  Discretionary stocks also made a significant contribution to today's rally as the sector displayed broad strength. The lone pocket of weakness was among homebuilders as the group ended in mixed fashion following today's housing data. New home sales for the month of May hit an annualized rate of 914,000, which was short of the 950,000 expected by the Briefing.com consensus.  Notably, single-family starts increased a minuscule 0.3% in May from 597,000 in April to 599,000. This sector tends to be very stable. The lack of solid rebound after 4.2% decline in April could signal a slowdown in overall construction levels.  Interestingly, the financial space was more tentative in its advance, posting a gain of 0.6%. Today's rise helped the sector erase its month-to-date loss.  Meanwhile, this month's top performer, telecom, was able to build on its strength. The sector ended higher by 1.3% to bring it June return to 4.1%.  Treasuries ended the day little changed as investors stood pat ahead of tomorrow's FOMC meeting. The benchmark 10-yr yield ticked up less than one point to 2.182%.  Consumer prices increased 0.1% in May, which was the first increase since February after prices fell 0.2% in March and 0.4% in April. The Briefing.com consensus expected the CPI to increase 0.2%. Surprisingly, the higher-than-expected food and energy prices from the May PPI did not pass through to consumer prices.  Energy prices increased a modest 0.4% in May after falling 4.3% in April. Gasoline prices, which caused the decline in energy prices in April, were unchanged in May. In contrast, energy prices in the PPI rose 1.3% on a 1.5% increase in gasoline costs. Meanwhile, food prices declined 0.1% in May after increasing 0.2% in April. The food at home category, which includes grocery store purchases, fell by 0.3%. That was the largest monthly decline since July 2009. Dairy product prices fell by 0.8%.  Excluding food and energy, core prices rose 0.2% in May, up from a 0.1% gain in both March and April. The consensus expected these prices to increase 0.1%.  Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC decision is set to cross the wires at 14:00 ET. ..NYSE Adv/Dec 2070/977. ..NASDAQ Adv/Dec 1729/749.

Commodities

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ECONOMIC COMMENTARY

Australia Economic Data

- RBA Minutes for June meeting, for details click here

China Economic Data

- May Actual FDI +0.3% vs +0.4% in May 2012
- May Conference Board Leading Index 261.6 vs 260.8 in Apr

Japan Economic Data

- Apr final Industrial Production -3.4% vs -2.3% in prelim
- May final Machine Tool Orders -7.4% vs -7.4% prelim

Eurozone Economic Data

- May New Car Registrations -5.9% vs +1.7% in Apr

UK Economic Data

- May CPI +2.7% vs +2.4% in May 2012
- May Core CPI +2.2% vs +2.0% in May 2012
- May RPI +3.1% vs +2.9% in May 2012

Germany Economic Data

- Jun ZEW Econ Sentiment 38.5 vs 36.4 in May
- Jun ZEW Current Situations 8.6 vs 8.9 in May

U.S. Economic Data

- May CPI M/M +0.1% vs +0.2% 
- May Core CPI M/M +0.2% vs +0.2% 
- May Building Permits 974K vs 983K; Prior revised to 1005K from 1017K
- May Housing Starts 914K vs 950K; Prior revised to 856K from 853K

Housing Starts Rebound in May, Gains Below Expectations
New home starts increased 6.8% in May from an upwardly revised 856,000 (from 853,000) in April to 914,000. The Briefing.com consensus expected 950,000 new homes to be started in May. While the gain in starts was strong, it is still 9.1% below where it was in March when 1.005 mln homes were started. It was wishful thinking that starts could rebound as quickly as the consensus expected. Most of the drop in starts in April was the result of a massive pullback (32.2%) in multifamily construction. This volatile sector had been running much hotter than its long-term trend and starts will unlikely return to pace any time soon. The more worrisome trend is that single-family starts only rose a minuscule 0.3% in May from 597,000 in April to 599,000. This sector tends to be very stable. The lack of solid rebound after 4.2% decline in April could signal a slowdown in overall construction levels. Still, the number of homes under construction rose from 606,000 in April to 620,000 in May. The 2.3% increase should be enough to keep residential investment growth as a main contributor to second quarter GDP growth.

Lower-than-Expected Energy Price Growth Keeps Inflation in Check
Consumer prices increased 0.1% in May, which was the first increase since February after prices fell 0.2% in March and 0.4% in April. The Briefing.com consensus expected the CPI to increase 0.2%. Surprisingly, the higher-than-expected food and energy prices from the May PPI did not pass through to consumer prices. Energy prices increased a modest 0.4% in May after falling 4.3% in April. Gasoline prices, which caused the decline in energy prices in April, were unchanged in May. In contrast, energy prices in the PPI rose 1.3% on a 1.5% increase in gasoline costs. Food prices declined 0.1% in May after increasing 0.2% in April. The food at home category, which includes grocery store purchases, fell by 0.3%. That was the largest monthly decline since July 2009. Dairy product prices fell by 0.8%. Excluding food and energy, core prices rose 0.2% in May, up from a 0.1% gain in both March and April. The consensus expected these prices to increase 0.1%. Again, there were no unusual outliers that caused the slight acceleration in inflation. Core CPI, which is running at 1.7% y/y, is still well below the Fed's target level.

Asian Markets Close; Nikkei -0.2%, Hang Seng UNCH, Shanghai +0.1%
The major Asian bourses ended mixed amid a relatively lackluster session. Japan's Nikkei (-0.2%) slipped amid a rather tame session, for a change. Overnight, at the G8 conference, German Chancellor Angela Merkel pushed back against the new easy money policy of Japan, commenting on the impact on foreign exchange. Data out showed Chinese home prices climb 6.0% MoM while Hong Kong's unemployment rate ticked down to 3.4% (3.5% previous). Looking at the currencies...USDCNY edged up to 6.1288; USDINR climbed to 58.76; USDJPY is stronger at 95.30; AUDUSD is lower near .9455.

In Japan, the Nikkei closed -0.2% amid a choppy trade. Exporters saw a mixed fate as Toshiba added 1.1% and Panasonic shed 0.5%. Elsewhere, Sony rallied 4.4% after Third Point increased its stake in an effort to make a presentation on a partial spinoff of the co's entertainment unit.

In Hong Kong, the Hang Seng finished unchanged, giving up early gains. Mainland financials lagged after China's sovereign wealth fund increased its stake in the sector. China Construction base was among the worst performers in the space, shedding 0.5%.

In China, the Shanghai Composite settled +0.1% as property developers rallied on the back of the increase in home prices. Gemdale gained 1.7% and Poly Real Estate tacked on 0.2%. 

In India, the Sensex closed -0.5% as action was unable to retake the 50- and 100-day moving averages. Financials fell on a weak rupee with HDFC Bank giving up 1.5%. Meanwhile, telecom provider Bharti Airtel lost 1.7% after a competitor lowered roaming charges. Click here to see a daily Sensex chart.

In Australia, the ASX finished -0.2% as financials led and miners lagged. ANZ was the top performer among the big four' financials, as shares added 2.3%. Elsewhere, miners ended in the red with Rio Tinto falling 0.6% and BHP Billiton sliding 0.3%.

In Taiwan, the Taiex closed +0.2% as Acer gained 1.4%.
In South Korea, the Kospi finished +0.9% as Hyundai Motor surged 3.9%.

Jason's Commentaries



AEROSPACE/DEFENSE NEWS ...

EADS's Airbus (EADSY) has received an $11 bln order from EasyJet, according to reports 
Click Here for the Reuters.com Article

United Continental (UAL) becomes North American launch customer for Boeing (BA) 787-10 as it increases Dreamliner order to 65 
Co increased its 787 Dreamliner order to 65 aircraft (including six previously delivered aircraft) with an order for 20 787-10s. United is the North American launch customer for the 787-10 and it expects delivery of its first aircraft in 2018. United ordered 10 incremental 787-10 aircraft and will convert 10 existing 787s on order to 787-10s, enabling the airline to further modernize its international widebody fleet by replacing older, less efficient aircraft.

Alaska Air (ALK) orders three Bombardier Q400 NextGen turboprop airliners
Bombardier Aerospace announced that Horizon Air has signed a firm contract to acquire three 76-seat Bombardier Q400 NextGen turboprop airliners. The transaction represents the conversion of three previously booked options on the aircraft. The airline also reconfirmed its options on another seven Q400 NextGen aircraft. Based on the list price of the Q400 NextGen aircraft, the contract is valued at approximately $98 million. The three new aircraft will increase Horizon Air's orders for Q400 and Q400 NextGen airliners to 51 aircraft.

IAE (UTX is shareholder) is assembling the first V2500-E5 engines - selected in 2011 to power Embraer (ERJ) Defense and Security's new KC-390 multi-role tanker/transport aircraft - in June. In addition, Philippine Airlines has selected IAE International Aero Engines AG's V2500 engine to power its order for 34 A321 aircraft.

Ducommun (DCO) has received a multi-year contract from Sikorsky Aircraft, a unit of United Technologies (UTX), to continue to produce electromechanical assemblies for various models of the UH-60 BLACK HAWK helicopter.

Aerojet Rocketdyne, a GenCorp (GY) co, and Experimental Design Bureau Fakel of Kaliningrad, Russia, announced the signing of an extension to the teaming agreement between the two cos. The agreement provides Aerojet Rocketdyne with the right to market and sell Fakel's low-power Hall thrusters (<1.5kW) in the U.S. market.

China Aircraft Leasing has entered into an agreement under which IAE International Aero Engines AG will provide V2500 engines to power 11 new A320 family aircraft. IAE is a multinational aero engine consortium whose shareholders are comprised of Pratt & Whitney (UTX), Pratt & Whitney Aero Engines International GmbH, Japanese Aero Engines and MTU Aero Engines.

Aviation Capital Group has selected Pratt & Whitney PurePower PW1100G-JM engines to power 12 firm A320neo aircraft. Deliveries are scheduled to start in 2018. Pratt & Whitney is a division of United Technologies (UTX).

Jacobs Engineering Group (JEC) was awarded a contract by Polimeri Europa UK to provide services to support a major expansion at Polimeri Europa UK's plant in Grangemouth, Scotland. Officials did not disclose the contract value. Co was also selected as an awardee to provide services to the Department of Homeland Security as part of the Technical, Acquisition and Business Support Services contract (a five-year multiple-award IDIQ contract with an $11 bln funding limit).

LATAM Airlines has selected Pratt & Whitney, a division of Untied Technologies (UTX), PurePower PW1100G-JM engines to power its order of 42 firm A320neo family aircraft. Also, Pratt & Whitney has delivered the 100th F135 propulsion system, the power plant for the F-35 Lightning II, to the U.S. government.

Parker Aerospace, an operating segment of Parker Hannifin (PH), has been chosen by Rolls-Royce to partner on its Trent XWB-97 engine program. The Rolls-Royce Trent XWB-97 engine is being developed for the new Airbus (EADSY) A350 XWB-1000 aircraft. Parker estimates that the agreement will generate ~ $2.2 bln in revs over the life of the program.

Spirit Airlines (SAVE) expands aftermarket agreement with IAE; adds coverage for 86 incremental V2500 engines 
Co amended their existing V-Services fleet Hour Agreement to include coverage for 86 incremental V2500 engines. Spirit's entire current and future fleet of A320 family aircraft powered by V2500 engines will be covered by an IAE V-Services aftermarket agreement. The deal is valued at ~$700 mln.

Embraer SA (ERJ) and Boeing (BA) team to market and sell KC-390 medium-airlift aircraft 
Co are partnering on the sales and marketing of Embraer's KC-390 -- a multi-mission mobility and aerial refueling aircraft with advanced capabilities in the medium-sized airlift market. Under the agreement, Boeing is the lead for KC-390 sales, sustainment and training opportunities in the U.S., UK and select Middle East markets. Embraer will manufacture the aircraft and collaborate on sales, sustainment and training.

Boeing (BA) may be getting additional Korean Air orders, according to reports 
See related Reuters.com story.

Boeing (BA) confirms Korean Air has agreed to purchase five 747-8 Intercontinental airplanes and six 777-300ER jetliners, valued at approximately $3.6 bln

Got the call wrong last night. Was expected the market to stay flat last night however, the market went up more than 130 points. It could be the market pricing in anticipation of the Fed's decision. Volumes were much lower than average, standing at 645m shares traded on the NYSE. Bulls outpaced the bears slightly. 5 stocks on the Dow makes up most of the gains on Dow last night. While we're having the Paris Airshow, contracts are dishing out like mad. The defense and aerospace industry are likely to make a run soon. I will be expecting the market to stay sidelined at the initial part of the market. After 2pm ET, we're gonna expect some serious volatility.

Market Call: ABSTAIN

Date: 19 June 2013