MONDAY 7/14/14

The dollar/yen moves steadily higher to 101.41 so the weaker yen sends Japan stocks higher. NIKK +0.9%. Asia is up across the board. SSEC +1%. HSI +0.5%. SPASX200 +0.5%. The BOJ begins a two-day meeting but changes to monetary policy are not expected. Foxconn opens a new factory in China at the new Chinese Silicon Valley region. Chinese automakers are strong in recent days due to government subsidies. Protectionism continues to creep into the global landscape with the US imposing tariffs on South Korean steel pipe used for oil and natty gas applications. Korean steel company Hyundai Hysco drops -1%.

Russia says a Ukraine-fire mortar killed a Russian citizen in a town inside Russia. Russia says the incident will lead to irreversible consequences. Russia is playing the standard military game of developing a base case if they choose to invade East Ukraine. Ukraine is increasing the artillery assaults and offensive against the pro-Russian separatists in East Ukraine.

European trading starts on a positive note with the DAX gaining +0.8%. Germany brings home the World Cup golden trophy and Europe is proud taking the championship from the America’s. The next World Cup is in 2018 in Russia. Despite the infrastructure and social unrest worries in Brazil ahead of the World Cup, the games went relatively well. Argentina does not fare as well with riots breaking out in Buenos Aires. Police use water cannons and tear gas to restore control. Euro 1.3633. Pound 1.7118. May industrial output in Europe is negative but inline or slightly better than forecasts.

The Portugal banking crisis deescalates but traders remain concerned over the European financial system. The Portugal 10-year yield is 3.80% not too far from the 4% high last week when the negativity was starting to spin out of control. Banco Espirito Santo, at the center of the mess as well as associated holding companies, replaces board executives to exhibit a pro-active approach to the crisis and alleviate fear.

The Farnborough Airshow begins so airline deals and order announcements are likely. Airbus trades higher after announcing better fuel savings improvements for a new A330 Neo wide-body design (new engines). Alcoa receives orders and interest in its aluminum and composite aerospace products. Humorously, AA is up from 8 to 16, a double, +100%, since it was kicked out of the Dow Jones Industrials Index, the Dirty 30. Alcoa would have created nearly 70 points higher of upside in the Dow than present levels if it was still in the index. Nordic bank SEB reports robust profits. Swiss chocolate maker Lindt & Spruengli manufactures a sweet deal buying US private candy maker Russell Stover.

ABBV and Shire meet in New York over the weekend and reach a tentative agreement Shire finally agreeing to its sale. The tax inversion strategy is the main reason behind the takeover with AbbVie making the fifth offer now 35% above the initial price. C is announcing an agreement to pay a $7 billion settlement concerning the mortgage fraud probe and sanction violations (Citigroup conducting financial business with prohibited nations). The large fine may alleviate complaints that European banks are being unfairly targeted by US regulators. C will officially announce the settlement when earnings are reported in a few hours before the US opening bell.

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The C earnings set a happy tone for financials and the markets. Retail stocks are in focus ahead of Retail Sales data tomorrow morning. RTH and XRT trade dead flat. EBAY loses -0.7% despite the rosy partnership news with BID. Utility stocks are beaten with UTIL losing -1.1%. The hot GPRO IPO continues to fade losing -5.2% due to unfavorable comments in a Barron’s news article on the weekend. TSLA gains +5% after Pennsylvania permits Tesla to open dealerships. NEM loses -2.4% as the gold sector takes a hit today. Gold loses 32 to 1307 creating the largest drop this year but is maintaining the 1300-1305 support area.

After the closing bell, rumors surface that AAPL’s iPhone6 may be delayed until 2015. Missing the important holiday shopping season would be a major mistake for Apple. Perhaps the news is more of an inventory management ploy since in prior new releases the current Apple iPhone sales would drop as customers chose to wait for the new phone release. Perhaps Apple wants to create the illusion that the iPhone6 would be delayed so anyone sitting on the fence deciding to buy an iPhone will simply go ahead and buy the current model instead of waiting. This scenario would aid APPL in slyly reducing existing inventory and then also releasing the iPhone6 in time for the holidays.

VLO lowers earnings forecasts and immediately drops -2.5% in AH trading. The luster is coming off the refiners. TSO and WNR trade lower in sympathy. Seven small earthquakes occur across Oklahoma today which increases concern over fracking in the oil and gas industry.

The immigration crisis continues at the US southern border. Tragically, children’s bodies are washing up on the shore of the Rio Grande River after unsuccessfully trying to reach the US. The president and politicians need to stop the influx of immigrants. The situation is spinning out of control. Authorities admit that MS-13 violent gang members crossed the border during all the recent confusion and are in the US.