>>> US Early premarket gappers

Early premarket gappers

Gapping up: CPXX +71.7%, CLF +15%, CBYL +13.2%, TTM +12.1%, WR +8.9%, SODA +5%, DANG +5%, LC +4.4%, MT+4%, MU +2.5%, JD +2.3%, LPG +2%, DE +1.9%, FRO +1.5%, VRX +1.4%, MRO +1.4%, MON +1.4%, UA +1.3%, BNS+1.3%

Gapping down: MNOV -10.2%, AG -3.2%, CS -2.8%, BP -1.9%, SDRL -1.5%, BBL -1.2%, TEVA -0.9%, BHP -0.8%, BCS-0.6%, RIO -0.5%

>>> FEMA Preparing For Magnitude 9.0 Cascadia Subduction Zone Earthquake, Tsunam

FEMA Preparing For Magnitude 9.0 Cascadia Subduction Zone Earthquake, Tsunami

Starting on June 7th, FEMA will be conducting a large scale drill that has been named “Cascadia Rising” that will simulate the effects of a magnitude 9.0 earthquake along the Cascadia Subduction Zone and an accompanying west coast tsunami dozens of feet tall. According to the official flyer for the event, more than “50 counties, plus major cities, tribal nations, state and federal agencies, private sector businesses, and non-governmental organizations across three states – Washington, Oregon, and Idaho – will be participating”. In addition to “Cascadia Rising”, U.S. Northern Command will be holding five other exercises simultaneously. According to the final draft of the Cascadia Rising drill plan, those five exercises are entitled “Ardent Sentry 2016″, “Vigilant Guard”, “Special Focus Exercise”, “Turbo Challenge” and “Joint Logistics Over-The-Shore”.
The primary scenario that of all of these participants will be focusing on will be one that involves a magnitude 9.0 earthquake along the Cascadia Subduction Zone followed by a giant tsunami that could displace up to a million people from northern California to southern Canada.

We have never seen such a disaster before in all of U.S. history.
Do they know something that the rest of us do not?
It is funny that they are preparing to deal with the effects of a magnitude 9.0 earthquake along the Cascadia Subduction Zone, because that is precisely the size of earthquake that I warned about in an article back in March.
The San Andreas Fault in southern California gets more headlines, but the Cascadia Subduction Zone is a much larger threat by far. This fault zone is where the Juan de Fuca plate meets the North American plate, and it stretches approximately 700 miles from northern Vancouver Island all the way down to northern California.
If a magnitude 9.0 earthquake were to strike, the immense shaking and subsequent tsunami would cause damage on a scale that is hard to even imagine right now. Perhaps this is why FEMA feels such a need to get prepared for this type of disaster, because the experts assure us that it is most definitely coming someday. The following comes from the official website of the “Cascadia Rising” exercise…


A 9.0 magnitude earthquake along the Cascadia Subduction Zone (CSZ) and the resulting tsunami is the most complex disaster scenario that emergency management and public safety officials in the Pacific Northwest could face. Cascadia Rising is an exercise to address that disaster.

June 7-10, 2016 Emergency Operations and Coordination Centers (EOC/ECCs) at all levels of government and the private sector will activate to conduct a simulated field response operation within their jurisdictions and with neighboring communities, state EOCs, FEMA, and major military commands.

If you don’t think that the scenario that they are studying is realistic, perhaps you should consider the fact that the largest earthquake in the history of the continental United States stuck along the Cascadia Subduction Zone back in 1700. The following comes from CNN…


In fact, “the Cascadia” already has made history, causing the largest earthquake in the continental United States on January 26, 1700. That’s when the Cascadia unleashed one of the world’s biggest quakes, causing a tsunami so big that it rampaged across the Pacific and damaged coastal villages in Japan.
Yes, we all remember the big Hollywood blockbuster about the San Andreas fault. But if they wanted to be more realistic, they should have made the movie about the Cascadia Subduction Zone. According to a professor of geophysics at Oregon State University, the Cascadia Subduction Zone has the potential to create an earthquake “almost 30 times more energetic” than anything the San Andreas Fault can produce…


Everyone knows the Cascadia’s cousin in California: the San Andreas Fault. It gets all the scary glamor, with even a movie this year, “San Andreas,” dramatizing an apocalypse in the western U.S.

Truth is, the San Andreas is a lightweight compared with the Cascadia.

The Cascadia can deliver a quake that’s many times stronger — plus a tsunami.

“Cascadia can make an earthquake almost 30 times more energetic than the San Andreas to start with, and then it generates a tsunami at the same time, which the side-by-side motion of the San Andreas can’t do,” said Chris Goldfinger, a professor of geophysics at Oregon State University.
And the kind of tsunami that would be created by such a massive quake along the Cascadia Subduction Zone would absolutely dwarf the massive tsunami that struck Japan back in 2011. In fact, an article in the New Yorker quoted the head of the FEMA division that oversees Oregon, Washington, Idaho and Alaska as saying that “everything west of Interstate 5 will be toast”…


If the entire zone gives way at once, an event that seismologists call a full-margin rupture, the magnitude will be somewhere between 8.7 and 9.2. That’s the very big one.

…By the time the shaking has ceased and the tsunami has receded, the region will be unrecognizable. Kenneth Murphy, who directs
FEMA
’s Region X, the division responsible for Oregon, Washington, Idaho, and Alaska, says,“Our operating assumption is that everything west of Interstate 5 will be toast.”

In the Pacific Northwest, everything west of Interstate 5 covers some hundred and forty thousand square miles, including Seattle, Tacoma, Portland, Eugene, Salem (the capital city of Oregon), Olympia (the capital of Washington), and some seven million people.
We live at a time when the crust of our planet is becoming increasingly unstable.
All over the world the Ring of Fire is roaring to life, and the Cascadia Subduction Zone lies directly along the Ring of Fire. Just last week, I wrote about the alarming earthquake swarms that we have seen directly under Mt. Rainier, Mt. Hood and Mt. St. Helens, and now we have learned that FEMA is about to hold a major drill that is going to simulate a magnitude 9.0 earthquake along the Cascadia Subduction Zone and an accompanying west coast tsunami dozens of feet in height.
Of course most Americans aren’t concerned about this threat at all.
Most Americans just assume that life will continue to go on normally just as it always has.
But I happen to agree with the experts that are promising us that an absolutely massive earthquake along the Cascadia Subduction Zone will strike someday, and when that happens life in America will be permanently altered.

(GS) China Index Inclusion - full note attached

China Musings: Index (inclusion) strategy: Raising our probability for A-share inclusion, and still liking ADRs post their 2nd tranche inclusion

Two important index (MSCI) events will take place in the next 2 weeks – first, the 2nd tranche of ADR inclusion is scheduled to be implemented on May 31, and on June 15 (HKT), the MSCI will announce the results of its Annual Market Classification Review, with the A-share market being one of the candidates for index inclusion. In this China Musings, we refresh our expectations and strategies for these 2 index inclusion events.

Raising our probability for A-share inclusion from 50% to 70%; but roadmap is still more important than timing
As detailed in our recent report: The great China debate (II): China A inclusion to MSCI – should, will, when?, Apr 25, we assigned a 50% probability to a Yes decision by the MSCI to add A-shares to its benchmark as we thought the arguments on both sides were largely balanced. One month has gone by, and two recent developments have prompted us to raise our Yes probability. They include:
* On May 6, the CSRC clarified its stance on beneficial ownership of securities through nominee holder, officially recognizing that "A QFII may apply to the securities registration and settlement institution for opening a securities
account, in the name of actual holders or nominee holder.”
* On May 27, the CSRC, together with the Shanghai and Shenzhen Stock Exchanges published detailed guidelines to regulate and curb voluntary stock suspension in the A-share market.

(CS) Global Equity Strat. : Equities: The dilemma

* We maintain our neutral stance on equities and stick to our year-end targets of 2,150 for the S&P 500 and 3,350 for the Euro Stoxx 50.
* What has improved, but is unlikely to improve further? (1) China: housing (prices rising in 65 out of 70 cities) and infrastructure (state/SoE investment up 23% Y/Y, a five-year high) but economic lead indicators look like they are rolling over, our policy indicators show tightening and there has been no rebalancing. (2) Oil: almost all risk trades have been correlated to oil. We believe if oil moves above $50pb, Saudi Arabia does not meet its apparent economic/political objectives, including preventing the US becoming selfsufficient in energy. Moreover, speculative positions are at all-time highs. (3) The Fed became more dovish as the market rallied, but this is now reversing (our economists expect two rate hikes this year; the market expects one). (4) Bond yields have never decoupled to this extent from ISM new orders, cyclicals or commodities. (5) Credit: in Europe there has been a c.50% retracement in HY spreads from their trough in Summer 2014. Spreads now look fair value. (6) US earnings revisions have turned positive for the first time since June 2014, but much of this is down to the dollar and commodities and hence this normally very positive signal could be misleading. (7) US lead indicators are now unusually ambiguous, and if anything, trending weaker

* What has not improved: (1) Global PMI or global nominal GDP growth (which is the weakest it has been outside of 2008/9). (2) US labour is getting some modest pricing power (which is bad for profit margins) and hence the gap between nominal GDP and wage growth has fallen to its lowest in this cycle. (3) There is significantly above-average political risk (relating to immigration, the Italian referendum, the US presidential election).

* The other worries for equities: (1) Both our fair value models are close to fair value (US ERP is 5.7% against a warranted of 5.6%). (2) We have never seen so much disruption to business models from new technology, regulation, and China in an environment where governments are helping labour relative to capital (via taxation and minimum-wage legislation). (3) We marginally raise our 2016 US EPS growth forecast to 1% from zero. The problems for corporates are: i) labour is getting pricing power, ii) operating earnings appear abnormally overstated compared to reported, and iii) one-off factors, which accounted for c.60% of margin improvement, are diminished. (4) Buybacks as a style is underperforming. (5) Seasonals are unsupportive: since 1988, May to September has seen flat markets. (6) A fall in the 50-week MA below the 100- week MA sees down markets 56% of the time over the next six months

* We remain benchmark of equities: (1) 'Fair value' for equities could be considered reasonable when bonds/real estate appear so expensive. The cost of equity in the US is 9.1%, still in its normal range (though at the lower end). (2) Risk appetite is pricing in an ISM below 50. (3) Excess liquidity is extremely high, and retail, institutional and prime positioning is also supportive. (4) Market breadth has improved.

* The critical issues to watch are Chinese lead indicators, US wage growth and US lead indicators.

(CS) Global Equity Strat. : Equities: The dilemma

* We maintain our neutral stance on equities and stick to our year-end targets of 2,150 for the S&P 500 and 3,350 for the Euro Stoxx 50.
* What has improved, but is unlikely to improve further? (1) China: housing (prices rising in 65 out of 70 cities) and infrastructure (state/SoE investment up 23% Y/Y, a five-year high) but economic lead indicators look like they are rolling over, our policy indicators show tightening and there has been no rebalancing. (2) Oil: almost all risk trades have been correlated to oil. We believe if oil moves above $50pb, Saudi Arabia does not meet its apparent economic/political objectives, including preventing the US becoming selfsufficient in energy. Moreover, speculative positions are at all-time highs. (3) The Fed became more dovish as the market rallied, but this is now reversing (our economists expect two rate hikes this year; the market expects one). (4) Bond yields have never decoupled to this extent from ISM new orders, cyclicals or commodities. (5) Credit: in Europe there has been a c.50% retracement in HY spreads from their trough in Summer 2014. Spreads now look fair value. (6) US earnings revisions have turned positive for the first time since June 2014, but much of this is down to the dollar and commodities and hence this normally very positive signal could be misleading. (7) US lead indicators are now unusually ambiguous, and if anything, trending weaker

* What has not improved: (1) Global PMI or global nominal GDP growth (which is the weakest it has been outside of 2008/9). (2) US labour is getting some modest pricing power (which is bad for profit margins) and hence the gap between nominal GDP and wage growth has fallen to its lowest in this cycle. (3) There is significantly above-average political risk (relating to immigration, the Italian referendum, the US presidential election).

* The other worries for equities: (1) Both our fair value models are close to fair value (US ERP is 5.7% against a warranted of 5.6%). (2) We have never seen so much disruption to business models from new technology, regulation, and China in an environment where governments are helping labour relative to capital (via taxation and minimum-wage legislation). (3) We marginally raise our 2016 US EPS growth forecast to 1% from zero. The problems for corporates are: i) labour is getting pricing power, ii) operating earnings appear abnormally overstated compared to reported, and iii) one-off factors, which accounted for c.60% of margin improvement, are diminished. (4) Buybacks as a style is underperforming. (5) Seasonals are unsupportive: since 1988, May to September has seen flat markets. (6) A fall in the 50-week MA below the 100- week MA sees down markets 56% of the time over the next six months

* We remain benchmark of equities: (1) 'Fair value' for equities could be considered reasonable when bonds/real estate appear so expensive. The cost of equity in the US is 9.1%, still in its normal range (though at the lower end). (2) Risk appetite is pricing in an ISM below 50. (3) Excess liquidity is extremely high, and retail, institutional and prime positioning is also supportive. (4) Market breadth has improved.

* The critical issues to watch are Chinese lead indicators, US wage growth and US lead indicators.

Reuters - Kuka investor Voith says positive stance on Midea bid premature

Kuka investor Voith says positive stance on Midea bid premature



Kuka (KU2G.DE) management's positive stance toward a 4.5 billion euro ($5 billion) takeover bid by China's Midea (000333.SZ) is premature, the chief executive of the German firm's major shareholder Voith VOITH.UL said on Monday.

Unlisted mechanical engineering group Voith holds 25.1 percent of the shares in German factory robot maker Kuka, allowing it to block strategic decisions.

"The [Kuka] board said it was assessing the offer openly. I don't understand how they can make positive remarks already at this point," Voith CEO Hubert Lienhard said on a conference call, adding that Voith is considering carefully whether to hold or sell shares in Kuka.

Kuka said on Monday that it is assessing the Midea offer without prejudice.

A Kuka spokeswoman said the company it is generally open to partners that support its growth in China or the industrial Internet, in which smart factory systems are becoming increasingly connected.

This echoed remarks by Chief Executive Till Reuter at Kuka's annual shareholder meeting on Friday.

Germany's European Union Commissioner Guenther Oettinger also joined the debate on Monday, calling on majority shareholders to consider alternatives to Midea's bid, saying that Kuka is of strategic importance to Germany.

"Since there was no cry for help to China, we should be allowed to think about whether a European approach wouldn't be the better solution for Kuka," Oettinger told German daily FAZ, citing an alternative offer by the two majority shareholders or a takeover by other European companies as possible options.

Oettinger, the only German EU commissioner, echoed remarks by German government sources last week, who cautioned against an outflow of technology and said they were keeping a close eye on Chinese investments in the country.

The EU Commissioner, who is responsible for digital economy, does not have the power to block a takeover.