MONDAY 2/3/14

The Aussie dollar is weaker to spot 0.8754. Australia building approvals surprisingly tumble -2.9% printing three consecutive monthly declines. Analysts were hoping the housing market could lead the way forward now that the Aussie infrastructure and mining boom is waning. The Thai election does not ease tensions. Hundreds of polling sites were closed down by protestors preventing many from voting. The social unrest is hurting the tourism industry as well as neighboring countries that do routine business with Thailand. South Korea exports continue to fall and are blamed in part on Thailand. Honda misses sales estimates for the tenth consecutive quarter and blames the Thailand unrest. The Asian and global contagion develops tentacles.

Several Korean credit card companies are disciplined over the security breach that affected one-half of the Korean population. KB Financial loses -1.8%. MA is downgraded in the States and trades -1% lower. The Shanghai air is heavily-polluted like thick pea soup fog. The NIKK plummets 300 points, -2%, closing at 14620. The Tokyo Nikkei Index has now fallen -10.3% off the top officially sending Japan into a correction. Russia is down -9.8% and Brazil -8.2% off their tops approaching corrective phases. The dollar/yen falls under 102 so the stronger yen creates the Nikkei selling and weak US futures. Taiwan, Hong Kong, Vietnam and China continue the new year’s parties. Asian and European markets are weak. Crude oil and copper are lower.

The China VIX that measures volatility is approaching an elevated 30 level showing that traders are experiencing more fear in China than the US. The levels of fear are great at identifying bottoms so the data hints that perhaps China and/or the Asian stock markets may place a near-term bottom before the US markets.

French companies Total, Renault and others make plans to conduct business with Iran once sanctions are lifted. Human greed and the search for profits will always outweigh concerns over a shaky country developing nuclear weapons, worries over terrorism or human rights violations. Porsche, and Chairmen Wolfgang Porsche and Ferdinand Piech, are sued by seven hedge funds over the failed purchase of Volkswagen AG. Euro zone PMI’s are in line or better than expected with France at 49.3 fighting back towards the expansion level at 50.

The Turkish lira is 2.764. The 10-year yields in Germany, France and UK are 1.66%, 2.24% and 2.73%, respectively. The UK gilt and US Treasury yields are tracking together. The 10-year yield is 2.67% and 2-year yield is 0.34% for a 2-10 spread down to 233. Lloyd’s Bank dumps -2.6% after suspending the divvy and reporting disappointing results. UK manufacturing PMI is a touch weaker than ............





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After the bell, YUM beats on EPS but misses on the top line with sales lower in both the US and China. Traders must have expected much worse since the stock catapults +6% AH. TTWO beats on earnings but lowers guidance and is punished -2%. The CPC put/call ratio remains tame at a low 0.80 showing that traders remain very complacent and are not worried about the market selloff which typically indicates the selloff will continue. Market panic and fear, that identifies a stock market bottom, usually occurs when the CPC moves above 1.20 and higher.

The Obamacare debacle continues with tens of thousands of people experiencing trouble with their health insurance; this news after the president told everyone last evening that all is fine. Thousands are enrolled in the wrong plans, with wrong subsidies, others are unsure if they have enrolled, or not. The insurance companies continue to receive spotty information with some information lost in cyber space. The payment end is under continued development. Physicians report that patients are showing up for treatment but they cannot verify whether they have insurance. The worry is that no one appears to be fixing the problems.