>>> Asian Update

Asia Mid-Session Market Update: Widespread dollar strength across the region; China MOFCOM warns trade is facing large downward pressures

***Economic Data***
- (KR) SOUTH KOREA JULY PPI Y/Y: -2.4% V -2.7% PRIOR
- (NZ) NEW ZEALAND JUL CREDIT CARD SPENDING M/M: +2.3% V -0.9% PRIOR; Y/Y: 5.6% V 4.1% PRIOR
- (NZ) New Zealand July Net Migration: 5.6K v 5.7K prior
- (KR) South Korea Q2 Household Disposable Income y/y: +0.1% v -0.1% prior
- (JP) Japan Jun All Industry Activity Index M/M: 1.0% v 0.9%e

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.1%, S&P/ASX +0.2%, Kospi -0.1%, Shanghai Composite -0.5%, Hang Seng -0.5%, Sep S&P500 -0.1% at 2,182

***Commodities/Fixed Income***
- Dec gold -0.4% at $1,352/oz, Sep crude oil +0.2% at $48.37/brl,; Sep copper 0.0% at $2.17/lb; Sept Silver -0.6% at $19.63/oz
- (CN) PBOC SETS YUAN MID POINT AT 6.211 V 6.6273 PRIOR
- (CN) PBOC to inject CNY45B in 7-day reverse repos; injects CNY15.5B for the week v injects CNY90B las week
- (AU) Australia MoF sells A$700M in 2.25% 2028 bonds, avg yield 2.0242%; bid-to-cover 1.98x
- USD/KRW: Onshore opens at KRW1,108 v KRW1,107 prior close
- (CN) China MoF sells 3-months bills at 1.9868%
- (CN) China MoF sells 30-yr bonds at 3.27%; bid-to-cover 3.8x

***Market Focal Points/FX***
- Asian equity markets started the session out slightly to the upside before sliding to unchanged levels, heading into the latter half of the session, Shanghai and Hong Kong declined. Focus remains on forex markets with the USD gaining against A$ (0.7%); JPY (0.6%); NZ$ (0.5) as well as the Euro, Pound and Swiss Franc. Oil names benefited from the higher oil prices, Woodside +2.2% and BHP +1.7 despite weaker results.

- After the US close, Fed's Williams called for a rate hike sooner rather than later, indicating a rising interest rate is what makes sense. Later in the session Fed's Kaplan declined to comment on rate changes any time soon. He did say US election irrelevant to when Fed will act.

- China Commerce Ministry (MOFCOM) Official said that foreign trade faces very large downward pressure; Exports may slow even more this year. Reminder in July China reported a surplus of $52.3B, a 6-month high, while exports were -4.4%.

- China Industry Ministry official said that steel capacity reduction to date is satisfactory and that the government has allotted CNY30.7B to facilitate capacity cuts in coal and steel. Coal names were under pressure in China on a report that Shanxi coal industry was in heavy debt.

- Indonesia Fin Min Indrawati said monetary and fiscal policy need to address people in need ahead of the central bank's interest rate decision later today. Indonesia debt was priced slightly higher with some speculation that the bank could cut rates, though analysts expect rates to remain unchanged.

***Equities***
US equities / ADRs:
- NWY, New York & Company (earnings), +24.4% after hours
- SHLM, A. Schulman (CEO steps down), +12.7% afterhours
- CERU, Cerulean Pharma (cuts workforce by 48%), +0.8% after hours
- ESV, Ensco (early termination of contract), -2.1% afterhours
- AMAT, Applied Materials (earnings), +5.5% afterhours
- CSPI, CSP Inc (earnings), +15.5% afterhours

Notable movers by sector:
- Consumer staples: BAL.AU, Bellamy 's (FY16 earnings) +5.4%
- Financials: 2007.HK, Country Garden (H1 earnings) 5%; AAD.AU, Ardent Leisure (selling health clubs) 15%; Medibank; MPL.AU (expects to ongoing market share loss) -4.5%
- Industrials: CWY.AU, Cleanaway Waste (FY16 earnings) +13.6%
- Technology: 3436.JP, Sumco (rival acquires SunEdison) +6.1%
- Materials: WSA.AU, Western Areas (1-yr high) +5.4%; WHC.AU, Whitehaven Coal (lowest level since mid-Jan) -12.7%
- Energy: 135.HK, Kunlun Energy; (H1 results) +5.1%; 1605.JP, Inpex (oil strength) +3%
- Healthcare: 1066.HK, Shandong Weigao Group Medical Polymer (H1 results) +2.6%
- Telecom: 941.HK, China Mobile (July subscribers higher) +0.2%

>>> US After Hours Summary: NWY +24%, AMAT +6%, MENT +6% following ear


After Hours Summary: NWY +24%, AMAT +6%, MENT +6% following earnings/guidance, CXW +7% / GEO +5% modestly rebounding... GPS -2.4% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: NWY +24.4%, CSPI +18.1%, AMAT +6%, MENT +5.6%, ROST +3%, CRMT +2.8% (ticking higher), SPWH +1%

Companies trading higher in after hours in reaction to news: SHLM +12.6% (Chairman Joseph Gingo has been named CEO and president, effective immediately; to initiate comprehensive review of business plan and global end markets in light of fiscal 2016 performance), CXW +6.9% (rebounding following 35% decline; co commented on Inspector General's report - findings simply don't match up to the numerous independent studies), RH +5.8% (following upgrade/Conviction Buy list addition at Goldman), GEO +5.4% (rebounding after closing 40% lower on the day; released statement after the close and will host conference call Friday at 11am ET), EMMS +2.5% (thinly traded -  receives non-binding proposal to be acquired for $4.10/share in cash), SQ +1.5% (Point72 Asset Management discloses increased 5.4% passive stake), PNR +1.1% (Emerson to acquire Pentair's Valves & Controls business for $3.15 bln), VIAB +1.1% (Reuters reporting that Viacom Board plans to meet tonight to discuss potential settlement with Redstone's National Amusements), TRN +1.1% (Trinity Industries receives confirmation from the U.S. Attorney for the District of Massachusetts that it has closed its investigation into the Company's ET 2000 and ET Plus guardrail end-terminal products without taking enforcement action), EW +0.5% (extending afternoon gains following FDA approval news), CREE +0.5% (light volume; Director disclosed purchase of 5855 shares, worth total of $116.7K)

Applied Materials (AMAT) peers trading higher in sympathy: LRCX +1%, KLAC +0.5%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: CCIH -12.4% (light volume), GPS -2.4%

Companies trading lower in after hours in reaction to news: FXCM -5.1% (CFTC charges Forex Capital Markets, LLC with undercapitalization, failing to timely report undercapitalization violation, and guaranteeing against customer losses), ENDP -1.1% (President and CEO Rajiv De Silva enters into a Rule 10b5-1 stock trading plan in connection with his year-end tax planning; will sell up to 13,500 co shares in September 2016), BLDP -0.5% (Ballard Power announced that a $28.3 mln strategic equity investment made by Zhongshan Broad-Ocean Motor; enters strategic collaboration framework agreement), TWLO -0.4% (continued weakness after today's 8% decline and closing near lows)

Kudelski : «Je n’ai pas l’intention de vendre Kudelski»

«Je n’ai pas l’intention de vendre Kudelski»

Alors que Kudelski transfère certaines responsabilités vers son nouveau siège américain de Phoenix, à Cheseaux, certains employés sont préoccupés par le sort qui les attend. Le fondateur de la société exclut une délocalisation complète
André Kudelski, administrateur-délégué et président du conseil d’administration, semblait, jeudi à Cheseaux, très satisfait des résultats semestriels de son entreprise. Le bénéfice net a progressé de 115,2% à 21 millions de francs. Les objectifs annuels ont d’ailleurs été revus à la hausse.

Lire aussi: Profits en hausse de 115% pour Kudelski

Pourtant, malgré des chiffres positifs, les employés du groupe vaudois semblent préoccupés par l’incertitude qui règne au sein de la société. Ils ignorent le sort qui leur sera réservé. Devront-ils rejoindre le siège américain de Phoenix? Certains craignent même une revente de l’entreprise, ou du moins d’une partie des activités.

Le Temps: Pensez-vous revendre la société ou certaines activités du groupe, comme certains le suggèrent?

André Kudelski: Cette idée est complètement infondée. Ni ma famille, ni moi-même n’avons l’intention de vendre l’entreprise. Nous y sommes extrêmement attachés. Au cours des années précédentes, nous avons réalisé certains désinvestissements ponctuels, mais nous sommes actuellement dans un périmètre qui nous paraît tout à fait judicieux. Dans les secteurs où nous sommes les plus actifs, que cela soit dans la télévision, l’accès public ou la cybersécurité, l’heure est aux investissements plutôt que l’inverse.

– Pourtant, le fait d’avoir réglé toute une série de litiges ces dernières semaines, notamment avec le géant californien de l’informatique Apple ou le spécialiste de la vidéo à la demande Hulu, serait également perçu comme un signal de vente…

– En principe, j’essaie d’éliminer les problèmes plutôt que d’en ajouter des nouveaux. Dans le cas précis, il y a eu une opportunité de régler un cas. Cela a entraîné un effet domino. Lorsque l’un cède, les autres suivent souvent dans la foulée.

– Combien de personnes devront quitter Cheseaux pour aller à Phoenix?

– Actuellement, le groupe compte près de 3700 personnes, dont 40 à Phoenix. Ce siège américain comptera 100 personnes d’ici la fin de l’année. Quelques dizaines de personnes qui avaient travaillé précédemment à Cheseaux sont déjà parties à Phoenix. D’autres les rejoindront, notamment des fonctions de support dans la finance ou dans le domaine juridique. Une partie de la recherche et du développement sera conduite aux Etats-Unis mais nous tenons à conserver la force du site de R&D à Cheseaux pour garder notre avantage compétitif.

Dans tous les cas, il est encore trop tôt pour chiffrer le nombre d’emplois qui seront concernés par un transfert. On est au stade de la réflexion. Cela dépendra de plusieurs facteurs, notamment des opportunités de marché et des équilibres monétaires.

– Peut-on voir dans le nouveau siège de Phoenix un transfert progressif de l’entreprise vers les Etats-Unis?

– Plutôt qu’un transfert, il s’agît d’une nouvelle répartition des rôles qui devrait permettre de mieux mettre en valeur les atouts des deux sites de façon durable.

– La cybersécurité pourrait-elle à moyen terme représenter la majorité des affaires?

>>>> CAT US - To explore strategic alternatives for certain mining products; cut

To explore strategic alternatives for certain mining products; cutting 155 jobs (less than 1% of workforce) 

To focus on those products with the greatest growth potential, intends to pursue strategic alternatives, including a possible divestiture, for its room and pillar products, which serve a segment of underground soft rock mining customers. The company will also discontinue production of track drills within its Resource Industries portfolio. The company and its dealers remain committed to existing customers and will support those room and pillar and track drill fleets currently in operation 

Room and Pillar and Track Drills
- The room and pillar underground mining products under strategic review include continuous miners, feeder breakers, coal haulage systems, highwall miners, roof bolters, utility vehicles and diesel vehicles. While under review, Caterpillar will stop taking new orders. 
- Production of track drills will be discontinued, and no new orders will be taken.

Workforce Impact
- expects to take actions to reduce the workforce in Houston, Pennsylvania, where the room and pillar products are manufactured. While the company intends to sell the room and pillar products, it will also assess other options, including a possible closure of the Houston facility.
- Total workforce reductions of up to 155 positions associated with the room and pillar business are expected, with some occurring immediately. These actions will more closely align employment levels with current end-market demand.
- In Denison, Texas, where track drills are produced, approximately 40 positions will be eliminated as a result of the track drill exit and other facility restructuring.

Repurposing of Winston-Salem Facility
- to repurpose its Winston-Salem, North Carolina, facility, transitioning it from a mining to a rail facility beginning later this year. Operations will transfer to Progress Rail, a wholly owned Caterpillar subsidiary.
- As a result, the company will relocate the manufacturing of some components used in large mining trucks from its facility in Winston-Salem to its existing facility in Decatur, Illinois.

Exec: "We continue to manage through the longest down-cycle in our history. We know these ongoing restructuring actions are not easy on our workforce; I'm grateful for our team's ongoing dedication."

>>> US Close Dow +0.13% S&P +0.22% Nasdaq +0.22% Russell +0.75%

Closing Market Summary: Stocks Inch Higher as Energy Leads

The stock market ended a range-bound day on a flat note as caution prevailed despite yesterday's dovish FOMC minutes from the July meeting. The S&P 500 (+0.2%) maintained a seven-point range, crossing into positive territory for the week (week-to-date:+0.1%).

Equity indices struggled for direction as investors continued to adjust rate hike expectations for the year. Yesterday's release of the FOMC minutes for July indicated that Fed officials were divided on whether or not an interest rate hike would be appropriate in coming months. Specifically, concerns about the sustainability of recent hiring trends and consistently weak inflation readings compelled some members to hold off on raising rates.

New York Fed President and FOMC voter William Dudley, however, maintained a somewhat hawkish tone. The Fed President stated that a rate hike remains in the cards at the September FOMC meeting. Mr. Dudley also indicated that two strong employment reports helped offset his prior concerns regarding U.S. labor markets. Participants shrugged off the commentary as it mirrored comments from earlier in the week. Investors will hear from San Francisco Fed President Williams (non-FOMC voter) and Dallas Fed President Kaplan (non-FOMC voter) at 16:00 ET and 20:00 ET, respectively.

The market inched higher in the early going, but reversed from its morning high after CNBC reported that influential hedge fund manager Paul Singer warned his investors that the bond market appears "broken" and that a loss of confidence in central bank policy could facilitate a broader market downturn. Mr. Singer's concerns come after other influential investors like George Soros and Carl Icahn have complained about market participants being in the dark due to low/negative interest rates in most sovereign bonds.

The S&P 500 (+0.2%) at its session high, testing resistance near the 2186/2188 price level. Seven sectors ended in the green with materials (+0.7%), utilities (+1.2%), and energy (+1.8%) leading the advance. Conversely, consumer discretionary (-0.1%) and telecom services (-0.8%) lagged the broader market. 

The influential technology sector (+0.1%) finished roughly in-line with the market as strength in high-beta chipmakers outweighed a downturn in Dow component Cisco Systems (CSCO 30.48, -0.24). The stock ended lower by 0.8% as disappointing first-quarter revenue guidance masked a bottom-line beat.

In the consumer discretionary space (-0.1%), home improvement retailers underperformed, marking a weak sport in the broader retail sub-group. The SPDR S&P Retail ETF (XRT 45.75, +0.41) finished higher by 0.9% as better-than-expected bottom-line results from L Brands (LB 77.87, +3.81) bolstered the group. The ETF also benefited from above-consensus bottom-line results from Dow component Wal-Mart (WMT 74.30, +1.37).

The commodity-sensitive energy space (+1.8%) buttressed the broader market as the energy component finished higher by 3.0% ($48.21/bbl; +$1.40). Dow components Exxon Mobil (XOM 88.91, +0.80) and Chevron (CVX 103.55, +1.33) ended with gains of 0.9% and 1.3%, respectively.

The Dow Jones Transportation Average (+0.5%) settled ahead of the broader market as rail names outperformed. In the group, Union Pacific (UNP 95.83, +1.26) and Norfolk Southern (NSC 91.67, +1.85) ended higher by 1.3% and 2.1%, respectively.

Treasuries ended the day on a higher note as the short-end of the curve enjoyed a decent bid. The yield on the 2-yr note settled lower by two basis points (0.71%) while the yield on the benchmark 10-yr note slipped one basis point to 1.53%.

Today's participation was below the recent average as fewer than 737 million shares changed hands at the NYSE floor.

Today's economic data included weekly initial claims, the Philadelphia Fed Survey for August, and Leading Indicators for July: 

  • Initial claims for the week ending August 13 slipped to 262,000 (consensus 265,000) from last week's unrevised level of 266,000.
    • The key takeaway from the report is that it will feed expectations for another month of strong nonfarm payrolls gains.
    • Continuing claims for the week ending August 6 jumped 15,000 to 2.175 million.
  • The Philadelphia Fed Index for August produced a positive surprise, checking in at 2.0 (consensus +0.6) after a negative 2.9 reading in July.
    • The report wasn't as positive as it appears at first blush considering higher prices, versus new order activity, drove the strength.
  • The Conference Board's Leading Economic Index for July increased 0.4%, as expected by the consensus estimate, on top of an unrevised 0.3% increase in June.
    • The increase was a broad-based affair. Only one index component -- average consumer expectations for business conditions -- made a negative contribution (-0.05 percentage points).

For further details on these economic releases, be sure to visit Economic Calendar page.

There is no economic data of note scheduled to be released tomorrow.

FT : Deutsche whistleblower spurns share of $16.5m award in SEC protest

Deutsche whistleblower spurns share of $16.5m award in SEC protest

A whistleblower who helped expose false accounting at Deutsche Bank has turned down a multimillion-dollar award from the Securities and Exchange Commission in protest against the agency’s failure to punish executives at the bank.
Eric Ben-Artzi, a former Deutsche risk officer, has told the SEC he is declining his share of a $16.5m payout — the third largest in the whistleblower programme’s history — awarded for information that led the agency to fine Deutsche Bank $55m last year. The SEC found Deutsche misstated its accounts at the height of the financial crisis by improperly valuing a giant derivatives position.

Mr Ben-Artzi said the fine should be paid by individual executives, not shareholders, and suggested the “revolving door” of senior personnel between the SEC and Germany’s largest bank had played a role in executives going unpunished.
“This goes beyond the typical revolving-door story,” Mr Ben-Artzi wrote in an opinion article for the Financial Times. “In this case, top SEC lawyers had held senior posts at the bank, moving in and out of top positions at the SEC even as the investigations into malfeasance at Deutsche Bank were ongoing,”
The SEC, citing confidentiality, and Deutsche Bank also declined to comment.
The award determination, which was made in July but has not been previously disclosed, allocated $8.25m each to Mr Ben-Artzi and Matt Simpson, a former Deutsche trader, who both applied for it, according to interviews and documents seen by the FT.
A third former employee, who contacted the SEC in 2010 and provided evidence of improper valuations in the derivatives book, also applied and was not deemed eligible for an award. Several later claims were also denied.
There has been a substantial number of Deutsche Bank executives who have moved in and out of the top echelons of the SEC in recent years.
Robert Khuzami, director of enforcement at the SEC between 2009 and 2013, was Deutsche’s former general counsel for the Americas. Between 2004 and 2013 Robert Rice was a senior lawyer at Deutsche Bank, where he led an internal investigation into the valuation claims; he then went to the SEC as chief counsel.

Both Mr Khuzami and Mr Rice were recused from the investigation. Dick Walker was enforcement director at the SEC between 1998 and 2001 and then joined Deutsche, later becoming general counsel; he left the bank this year. All three declined to comment.
This dispute offers a rare window on to the mechanics of the programme, which is shrouded in secrecy. It is believed to be the first time a whistleblower has refused an award since the programme went into effect in 2011. It allows for 10 to 30 per cent of any fine collected by the agency to be paid to those who bring original information that leads to an enforcement action. The award comes from a separate congressional budget allocation, rather than directly from the fine payment.
David Kovel, an attorney for the third whistleblower, who has requested anonymity, said he believed it was a “mistake” to leave his client off the award list.
“We think this is like Harry Markopolos, who reported the [Bernard] Madoff fraud to the SEC and was ignored,” said Mr Kovel, of the New York law firm Kirby McInerney. “Here, the SEC had the information about fraud from my client in 2010 and either they didn’t do anything with it or they are pretending they didn’t. From our perspective, what the SEC has done doesn’t make a lot of sense.”
Christopher Chang, a lawyer for Mr Simpson, said his client was “very grateful for the award and the tremendous effort by the SEC in investigating this matter. But beyond the dollars and cents, the real value of the award to Matt is what it represents and that is complete and unequivocal vindication.”
Mr Ben-Artzi said that although he would refuse to take any money himself, he was not able to reject parts of his award — accounting for the majority of the $8.25m — that were claimed by his ex-wife, lawyer or outside experts who worked on his submissions to the SEC.

(ZeroHedge) Options Traders Have Never Been More Bullish

Options Traders Have Never Been More Bullish

W

ith speculative positioning in VIX futures at record shorts (most bullish), and speculative longs in Dow and Nasdaq at or near record highs, we have one more "most hated rally" statistic to add to the pile of exuberance. The open interest in S&P 500 ETF (SPY) call options has never been higher as the last few days panic-buying leveraged long positions lifted exposure above summer 2011 highs...
The last time SPY call option open interest was this high, S&P 500 tumbled 20% in 2 months amid the US downgrade...The level of bullish bets that the SPDR S&P 500 exchange-traded fund will rise reached a record this month and hit the highest level since January relative to bearish options.

 

Of course - nothing matters so why not just keeping buying...

 

... during the discussion, several participants commented on a few developments, including potential overvaluation in the market for CRE, the elevated level of equity values relative to expected earnings, and the incentives for investors to reach for yield in an environment of continued low interest rates.
Bear in mind that speculative bullish positions all added this week with VIX shorts and Dow longs now at all-time-record highs.. and Nasdaq longs soaring...

 

Given all of that, we think it is worth remembering JPMorgan's quant guru Kolanovic's recent conclusion:
As this collapse in realized volatility is not a fundamental change in volatility regime, we expect realized volatility to increase (this increase in market volatility is shaping to be a consensus view, as indicated by steep contango of VIX futures). Option exposures that are pressuring volatility should roll-off, and investors should increase leverage and set protection closer to the current market level. This will set the stage for a more rapid increase in volatility. We have seen these switches between extreme low and high volatility that manifest themselves as high volatility of volatility (e.g., note that that the current “once in 10,000 year” market calmness came after a Brexit day move that was “a once in 50,000 year” move for EuroStoxx 50 index).
Put another way - this can't end well...
Whether central banks will respond with even more of the same to this upcoming "increase in volatility", remains to be seen.