STOCKS CRATER, DOW PLUNGES : Here’s What You Need To Know

Myles Udland

Aug. 1, 2014

REUTERS/Sam Mircovich

Stocks got crushed across the board, with the Nasdaq logging the largest percentage loss while the Dow lost more than 300 points and the small cap Russell 200 index lost more than 2%.
First, the scoreboard:

• Dow: 16,573.23, -307.1, (-1.8%)
• S&P 500: 1,931.82, -38.2, (-1.9%)
• Nasdaq: 4,373.00, -89.9, (-2%)

And now, the top stories on Thursday:

1. On the economic data front, the Chicago purchasing managers index fell more than it has in one month since 2008, coming in at 52.6 for June against 62.6 in May. Economists were looking for the index to climb to 63.0. “A monthly fall of this magnitude has not been seen since October 2008 and left the Barometer at its lowest level since June 2013,” MNI Chicago said in its press release. “In spite of the sharp decline this month, feedback from purchasing managers was that they saw the downturn as a lull rather than the start of a new downward trend.”

2. Weekly initial jobless claims came in at 302,000, just above the 300,000 that was expected by economists. Last week’s number, however, was revised down to 279,000 from 284,000, as the four-week moving average of initial jobless claims fell to its lowest level since April 15, 2006. Following the report, Michael Gapen at Barclays said the report suggests modest improvement in labor markets, adding that, “We view the weekly rebound in claims off of last week’s unexpectedly large decline as reflecting volatility stemming from the annual auto industry shutdown for retooling auto production plants.”

3. Last night, Argentina defaulted on $1.3 billion worth of debt it owes to hedge fund creditors, and following the news, Argentina’s stock market took a serious hit, as the Merval lost more than 7%. 

4. Amid the sell-off in the major stock indices, a number of individual companies took a beating, including Valeant Pharmaceuticals and 3D Systems. Valeant, the Canadian Pharmaceutical company that is seeking to acquire Botox-maker Allergan, fell 8% after its full-year earnings and revenue outlook disappointed. 3D Systems, which made 3-D printers, fell 11% after reporting earnings and revenue that came in below expectations. 

5. In mergers and acquisitions news, French telecom company Iliad made an offer to acquire T-Mobile in a deal that values the company at $36.20 per share. T-Mobile, which also reported earnings this morning that showed revenue grew 8% in the second quarter, acknowledged that it received an offer from Iliad, but said it had no further comment. Following the news, T-Mobile shares gained more than 5%, while shares of Sprint, which has been seeking to acquire T-Mobile for some time, fell 6%. 

6. German athletic apparel maker Adidas issued a statement this morning that had two pieces of bad news: the turmoil in Russia will weigh on the company’s profit, and golf sales are lagging. Adidas said that, “[T]he recent trend change in the Russian rouble as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region point to higher risks to the short-term profitability contribution from Russia/CIS.” The company also said that sales in its TaylorMade-adidas Golf segment fell 18%, yet another indication of golf’s struggles. 

7. Earnings season is still rolling along, as Tesla and GoPro are among the notable companies expected to report earnings after Thursday’s market close. 

10 Things Malaysians Would Do If A Tornado Rips Through KL

Image via:
nationalgeographic.com

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 Jump to Chats

You would think Malaysians would 

run and hide. But no, we're better 

than that.

1. Instagrammers will take the once-in-a-lifetime

opportunity to take 'selfies' with the tornado. Facebook users will give their 'Likes' to 'help' those in need.

Last updated by WarnerBrosPictures 2 minutes ago

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2. Malaysians will be skeptical about the tornado. "Really meh? True or not?" These are just a few things they would say before continuing with their mega sale shopping or 'mamak' session.

Last updated by WarnerBrosPictures 2 minutes ago

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3. Buy one free one wau. Malaysians will also be so pro at flying kites, we'll make it into the Malaysian Book of Records. "Biggest Wau Flying Event In Malaysia And Some Say Asia."

Last updated by WarnerBrosPictures less than a minute ago

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4. Mamaks will cook up tornadoes in the kitchen to be sold at premium price: Tornado thosai, sup Tornado, Tornado tandoori, Tornado goreng tambah pedas, boss!

Last updated by WarnerBrosPictures 1 day ago

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5. Some Malaysians will complain because they can't watch their favourite TV shows on their cable network

Last updated by WarnerBrosPictures less than a minute ago

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6. "Tomorrow got public holiday ah?"

Last updated by WarnerBrosPictures 1 day ago

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7. Malaysians will stock up on everything imaginable - pails, sugar, rice, face masks, reverse osmosis water, etc. "Just in case."

Last updated by WarnerBrosPictures 1 day ago

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8. Haze will no longer be an issue as the tornado will vacuum all the smog away. Hurray!

Last updated by WarnerBrosPictures 1 day ago

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9. Raja Bomoh will be making an appearance again. This time with bigger coconuts to weigh him down just in case the tornado sweeps him away.

Last updated by WarnerBrosPictures 1 day ago

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10. Malaysian traffic will come to a standstill, some will be slowing down to see what number plates the tornado has destroyed so that they can bet on that 'lucky' number

Last updated by WarnerBrosPictures about 14 hours ago

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Petronas Dagangan share price to extend decline

Petronas Dagangan's share price has fallen since early May, and has so far gone from the all-time high of RM31.47 on Dec 30, 2013 to RM18.62 at 3.15pm on Thursday, July 17.

KUALA LUMPUR: Petronas Dagangan Bhd's share price has continued to fall since the major breakdown in early May from the all-time high of RM31.47 on Dec 30, 2013.

A technical chartist said the share price had cracked the 50% retracement floor price and the next probable support would be the 61.8% retracement level at RM16.

He said the share price would likely to stabilise around the RM16 level.

"If it is unable to hold on to that level, it would see a full retracement back to the RM6.30 level in 2007," he said.

Petronas Dagangan's share price had surged from RM6.30 in September 2008 and gathered momentum to hit the all-time high of RM31.37 on Dec 30, 2013. Based on the charts, volume is thinning from the start of the major breakdown in the share price when there were 6.2 million shares traded on May 6.

At 3.15pm on Thursday, Petronas Dagangan was down 32 sen to RM18.62. There were 657,900 shares done at prices ranging from RM18.60 to RM19.

The sharp fall in Petronas Dagangan's share price has also been a drag on the 30-stock FBM KLCI.

Norwegian fund Norges allots RM800mil to invest in Malaysian small, mid-cap stocks

BY LIZ LEE

The foreign fund has invested about RM1.7bil in 53 Bursa Malaysia-listed companies.

PETALING JAYA: Norwegian fund Norges has allotted RM800mil more to invest in small to mid-cap stocks in Malaysia.

A market source said the foreign fund appointed Eastspring Investments Bhd about a month ago and was investing in general equity, with a preference for the small to mid-cap equity space.

“There are no specific guidelines as to which sector Norges is keen on. It wants to look at good companies and it so happens the local small and mid-cap space is doing well this year,” the source said.

Norges has been one of the largest foreign fund investor in Malaysian equities since 2010.

In April, StarBiz reported that the foreign fund had invested about RM1.7bil in 53 Bursa Malaysia-listed companies, managed by Kenanga Investors Bhd.

At the time, the fund was already sitting on a paper gain of some RM600mil, with its entire holdings in Malaysia valued some RM2.3bil. Its performance in Malaysian equities was attributed to the big run-up in many of the small oil and gas companies since last year.

The source added that Norges was still looking for more fund managers to manage its investment in Malaysia.

“It has always had this allocation for Malaysia which it had not entirely fulfilled yet. So it is continuously looking for fund managers,” the source said.

PublicInvest Research in its strategy note for the second half of 2014 said smaller-capitalised stocks in Malaysia have had a good run year-to-date, reflected by the FBM Small Cap Index’s 18.6% gain compared with the FBM KLCI’s 0.3% gain and FBM Mid 70 Index’s 1.2% rise.

Eastspring Investments had about US$105bil (RM334.2bil) in assets under management as at March 31.

The asset management house was named Asia’s leading retail fund manager for 2013 in an annual survey by Asia Asset Management.

Norges, also referred to as the Norwegian oil fund, has a market value of 5,038 billion kroner (RM2.73 trillion) as of end-2013.

Norges is managed by Norges Bank Investment Management, the asset management unit of the Norwegian central bank.

As of end-2013, it is invested in 8,000 stocks in 82 countries and owns 1.3% of the world’s listed companies, delivering annual returns of 5.7% since 1998.

10 Things You Need To Know Before The Opening Bell

ROB WILE 

 JUL. 31, 2014

REUTERS/Kim Hong-Ji

1.  Argentina Defaults. Argentina defaulted after failing to make $539 million interest payment to a group of hedge funds. No one really knows what will happen next — the country’s been locked out of international credit markets since 2001. There’s still a chance the two sides could work out a settlement. “It’s in their best interest to delay acceleration and not introduce more difficulties,” Jane Brauer, a strategist at Bank of America, told Bloomberg. “The best thing for Argentina to do is to continue seeking a solution.”

2.  Adidas Shares Plunge On Russia. The footwear giant fell 14% in Europe trading after warning instability in Eastern Europe would impact store openings and profits. “[T]he recent trend change in the Russian rouble as well as increasing risks to consumer sentiment and consumer spending from current tensions in the region point to higher risks to the short-term profitability contribution from Russia/CIS,” said management in a new statement. “As a result, Management has decided to significantly reduce its store opening plan in the market for 2014 and 2015, and to further increase the number of store closures.”

3.  Tesla Officially Signs With Panasonic On Gigafactory. As Nikkei.com had previously reported, Tesla and Panasonic announced the Japanese electronics giant had agreed to provide equipment necessary for Tesla to assemble and package lithium ion batteries, with the goal of doubling the world’s supply by 2020. A person familiar with the matter told Reuters on Tuesday that Panasonic would initially invest around 20 to 30 billion yen ($200-300 million) into the factory and would ultimately invest about $1 billion. ”We have already engaged in various collaborative projects with Tesla toward the popularization of electric vehicles,” Panasonic said. “Panasonic’s lithium-ion battery cells combine the required features for electric vehicles such as high capacity, durability and cost performance. And I believe that once we are able to manufacture lithium-ion battery cells at the Gigafactory, we will be able to accelerate the expansion of the electric vehicle market.”

4.  Tesla Earnings. The announcement comes as Palo Alto firm will report earnings after the bell. Consensus is for a loss of $0.24/share. In a note yesterday Morgan Stanley’s Adam Jonas said there’s a chance numbers could come in light, but that investors should be “prepared to buy the dips.” “N. American Model S volume should continue to be down significantly YoY,” he writes. “After falling 47% YoY in 1Q, we expect Tesla’s NA revenues to be down around 20% YoY in 2Q (on NA shipments down nearly 30% YoY). While the company has highlighted supply prioritization for the international roll-out, this won’t stop some investors from wondering if markets like California are approaching saturation. We expect a vastly superior Model X (on the road by middle of next year) to put an end to these concerns.

5.  Russia. Russian equities are finishing off their worst month in more than a year, falling 29%. But Bloomberg reports those who’ve profited from the drop aren’t adding to their positions because the situation has never been muddier. “Many people are staying away from betting on or against the market because everything depends on the Russian government’s actions,” Sabina Mukhamedzhanova, a fund manager at Promsvyaz Asset Management in Moscow, which manages about 17.9 billion rubles ($500 million), told Bloomberg. “There’s no clarity regarding what’s going to happen.” Meanwhile, the Wall Street Journal reports Vladimir Putin and his closest ally in Europe, Angela Merkel, haven’t spoken in more than a week. “Three days after the crash of Malaysia Airlines Flight 17, German Chancellor Angela Merkel spoke to Russian President Vladimir Putin for at least the 30th time since the Ukraine crisis erupted,” Anton Troianovski and Alan Cullison report. “She had a blunt message, according to people briefed on the phone conversation: Call me if you have progress to report in defusing the conflict.”

6.  Banco Espirito Santo May Need A Bail-In. Shares in the Portuguese bank fell 40% before being halted after it reported a $3.6 billion loss and said it had suspended staff over “harmful management” linked to the bank’s exposure to business holdings of the Espirito Santo family. Reuters’ George Hay says creditors may now need to step in as private investors are scared off.  WSJ’s Simon Nixon says the BES situation is a blow to the ECBS’ credibility.

7.  Europe Data. Inflation slowed to 0.4%, the lowest level since 2009. The unemployment rate dropped a tenth to 11.5%. Youth unemployment in Spain and Greece remains above 20%.   

8.  U.S. Data. At 8:30 a.m. we get weekly jobless claims. Consensus is for 305,000, up from 284,000 prior. We also get the employment cost index. Consensus is for 0.5%, up from 0.3% prior. At 9:45 a.m. we get Chicago PMI. Consensus is for 63.2, up from 62.6. 

9.  Earnings. Besides Tesla, we get quarterly earnings announcements from Exxon, Mastercard, Sony, and Trulia before the bell. After the bell we get Expedia, LinkedIn, GoPro, Valeant, WWE. BNP reported a loss of $5.8 billion on U.S. fines for its worst quarter ever. Shell said it was still working to offload bad bets on U.S. shale plays. 

10.  Markets. U.S. futures are down 0.6%. London’s FTSE was down 0.25%. Frankfurt’s DAX was off 1%. Japan’s Nikkei was down 0.1%. Hong Kong’s Hang Seng was up 0.1%.

Markets Are In The Red, Major Portugese Bank Crashes

SAM RO 

JUL. 31, 2014

REUTERS/Susana Vera

Traders talk at the Madrid stock exchange.

Stocks are down across Europe.

Britain’s FTSE is down 0.2%.

France’s CAC 40 is down 0.7%.

Germany’s DAX is down 1.0%.

Spain’s IBEX is down 1.6%.

This comes in the wake of new inflation and unemployment data.

Consumer prices in the euro zone climbed by just 0.4% year-over-year in July, the lowest rate in five years.

Meanwhile, the unemployment rate in the region slipped to 11.5% in June from 11.6%.

“Lowflation in the euro area suggests the European Central Bank will maintain its easing bias,” said Bloomberg economists David Powell and Niraj Shah. “Those weak price pressures are likely to endure as the unemployment rate remains elevated.”

In Portugal, beleagured Banco Espirito Santo immediately lost half of its market value after shares resumed trading in the wake of a horrific earnings announcment.

“Banco Espirito Santo SA’s stock plunged by the most on record and the bonds slumped after it was ordered to raise capital following a 3.6 billion-euro ($4.8 billion) first-half net loss,” reported Bloomberg’s Joao Lima. “The Bank of Portugal required the lender to raise the money after it set aside 4.25 billion euros in the first half, mostly to cover souring loans to other members of the Espirito Santo Group. That cut Banco Espirito Santo’s common equity Tier 1 ratio to 5 percent, less than the 7 percent regulatory minimum, according to a statement yesterday.”

This is weighing on the Portugese stock market where the PSI20 is down 3.2%.

@ReutersJamie

“Banco Espirito Santo shares resume trading after suspension….and plunge 45%”

MARKETS JUMP AFTER BIG GDP REPORT

SAM RO

 JUL. 30, 2014, 8:45 PM

REUTERS/Jeff Zelevansky

U.S. futures are moving following today’s strong GDP report.

S&P 500 futures are up 10 points. Just prior to the release, they were up 3 points.

GDP grew at a 4.0% pace in Q2, reported the BEA. This was much stronger than the 3.0% expected by economists.

Dow futures are up 75 points and Nasdaq futures are up 21 points.

With the GDP report, we learedn that personal consumption jumped 2.5%, beating expectations for a 1.9% gain.

Making things even better, Q1 GDP growth was revised up to -2.1% from -2.9%, and personal consumption was revised up to+1.2% from +1.0%.

“There were large upward revisions to H2 2013: Q4 GDP is now 4.5% vs 4.1% previously and Q4 is now 3.5% vs. 2.6% previously,” noted Deutsche Bank’s Joe LaVorgna.

The 10 Most Important Things In The World Right Now

DINA SPECTOR

JUL. 30, 2014

REUTERS/Danny Moloshok

A woman looks up from an underground parking structure outside UCLA’s Pauley Pavilion sporting arena as water flows down the stairs from a broken thirty inch water main that was gushing water onto Sunset Boulevard near the UCLA campus in the Westwood section of Los Angeles July 29, 2014.

Good morning! Here’s what people will be taking about on Wednesday. 

1. The United States and Europe have adopted the strongest sanctions against Russia since the end of the cold war. The EU restrictions “include a measure that would prevent Russia’s largest state-owned banks from issuing stock or bonds in European markets,” the Financial Times reports, while both western powers are “barring technology transfers in several parts of the energy sector, including shale gas and deep-sea and Arctic oil exploration.”

2. Fifteen Palestinians were killed and around 90 injured when another UN school serving as a shelter for Palestinian refugees came under fire, The Guardian reports. The strikes follow the Israeli government’s announcement that the war against Hamas is going to be long. 

3. A massive pipe that burst near the campus of UCLA Tuesday night spilled 8 to 10 million gallons of water before it was shut down around three hours after the main line broke, the Los Angeles Times reports. Pictures show the university campus and streets underwater. 

4.  Twitter crushed expectations on revenue, EPS, monthly active users on Tuesday. CEO Dick Costolo said in an interview with Business Insider that the gain in new users was the result of a better “on boarding” process.

5. A federal court blocked a Mississippi law on Tuesday that would close the last abortion clinic in the state. Nancy Northup, president of the Center for Reproductive Rights said: “Today’s ruling ensures women who have decided to end a pregnancy will continue, for now, to have access to safe, legal care in their home state.”

6. Argentina is under pressure to avoid its second debt default in 12 years. The country has until the end of Wednesday to “either cut a deal with ‘holdout’ investors suing it or win more time from a U.S. court to reach a settlement,” Reuters said. 

7. The doctor credited with leading the fight against the Ebola outbreak in West Africa, Sheik Umar Khan, died Tuesday after contracting the virus. Ebola can kill up to 90% of those infected. 

8. Housing prices in major global cities, including London, New York, and Sydney are soaring. For the past 12 months at the end of June Bloomberg reported that London is up 20%, Manhattan 18%, and Sydney was 15.4%.

9. British health experts warned that the Ebola virus, which has now killed nearly 700 people in West Africa, is a potential threat to the U.K.England’s global health director told Prime Minister David Cameron that the deadly virus is the “most acute health emergency” facing Britain right now, The Independent reports. 

10. A beach concert in the capital of Guinea turned deadly when 24 people were killed in a stampede, the BBC reports. The concert was celebrating the end of the holy month of Ramadan.

And finally…

Theodore VanKirk, the last surviving member of the American flight crew that dropped the atomic bomb on Hiroshima, died from natural causes at the age of 93. 

CHART OF THE DAY: People Are Looking At Their Twitter Timelines Like Never Before

DAVE SMITH

 JUL. 30, 2014

Twitter reported its earnings Tuesday, exceeding Wall Street’s expectations with $312 million in revenue — up 124% year-over-year — on $0.02 earnings per share. It exceeded predictions of 267 million monthly active users with 271 MAUs, and timeline views are at their highest ever.

According to Twitter’s data charted for us for Business Insider Intelligence, Twitter Timeline views in the most recent quarter were 173 billion — a jump from last quarter’s 157 billion views, and an even bigger jump from the year-ago quarter’s 151 billion views. As you can see, the company has been growing rather quickly over the past few quarters — Twitter CEO Dick Costolo argues the positive changes are related to changes in the company’s products, not necessarily the boost in traffic from this summer’s World Cup in Brazil.

Business Insider Intelligence

FOMC Preview: Here’s What To Expect From The Meeting

MYLES UDLAND 

 JUL. 30, 2014

REUTERS/Jonathan Ernst

The Federal Reserve’s Federal Open Market Committee is set to announce the results of its latest two-day monetary policy meeting Wednesday afternoon at 2 pm ET.

Economists expect the FOMC to take another $10 billion off its monthly asset purchases, or quantitative easing program, comprised of a $5 billion reduction in its purchases of both Treasury bonds and mortgage-backed securities. 

At its June meeting, the Fed signaled that if the economic recovery proceeds as the central bank expects, it would conclude QE with its October meeting. 

Wednesday’s meeting is largely expected to come and go without incident, with the Fed expected to keep interest rates between 0%-0.25% and continue with its taper, as Fed Chair Janet Yellen is not scheduled to hold a press conference after this meeting.

Without a press conference offer more insight into the Fed’s thinking, Bill McBride at Calculated Risk said there will be a heightened focus on the language in the Fed’s statement on Wednesday. 

McBride cited Goldman Sachs economist David Mericle who wrote that:

“We expect that next week’s FOMC statement will show very little change. The FOMC might choose to upgrade the language on growth in economic activity somewhat, and it might also strengthen the language on labor market indicators a touch in recognition of the strong June employment report.”

And as the Fed approaches the end of its QE program, Fed watchers are looking for a signal on when the central bank will raise interest rates, and if more members of the FOMC will begin agitating for change.

Michael Hanson and Ethan Harris at Bank of America Merrill Lynch, however, write that more dissent from FOMC members at this meeting would not be a useful signal for determining the Fed’s next move. 

Hanson and Harris expect that the Fed’s statement will acknowledge some of the better economic data since the last meeting, but they expect, “no meaningful change in the policy language.”

Despite expecting language that is no more hawkish in the Fed’s July statement, Hanson and Harris say that, generally, “The risk is that markets seize on any language that could be (mis)interpreted as hawkish at any of the next several FOMC meeting, given market sentiment and positioning.”

In September, Chair Yellen will hold a press conference following the FOMC’s statement and the Fed will also release its latest summary of economic projections.