Friday Watch

Evening Headlines 
Bloomberg:

• Greek Talks Break Up in Riga as Earlier Optimism Evaporates. Late-night negotiations between the Greek, French and German government leaders ended without any sign of a breakthrough that will unlock bailout funds and ensure Greece’s future in the euro region. With time running out for a deal to free up the remaining 7.2 billion-euro ($8 billion) tranche of aid, talks between Prime Minister Alexis Tsipras, President Francois Hollande and Chancellor Angela Merkel broke up shortly before 1 a.m. on Friday in the Latvian capital Riga with the three agreeing only to stay in close contact.  

• The Only Three People Worth Listening to on Greece. The trick, say economists from ING Diba in Frankfurt to Berenberg Bank in London, is to focus on the people who exercise true power over the euro region’s bond and currency markets right now: Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and European Central Bank President Mario Draghi.

• Bonds Head for Fifth Weekly Loss in Longest Decline Since 2013. Bonds around the world headed for a fifth weekly decline, the longest run of losses in almost two years, as investors stuck to bets for the Federal Reserve to increase interest rates and as oil prices advanced. The debt-market retreat that started in Europe in April extended into May on concern rising crude costs will lead to faster inflation. While U.S. economic data have been mixed, the Fed will still raise borrowing costs this year or early in 2016, a Morgan Stanley index shows. Europe and Japan are both showing signs of growth.

• Yet Another Ghost Town in China Shows Extent of Regional Debt Crisis. China’s Ordos city, where towers that sprang from Inner Mongolian farmland now sit empty, is showing the hangover has just begun from a decade-long building boom. Ordos City Huayan Investment Group Co., a developer whose chairman headed a group of livestock researchers, is at high risk of defaulting on 1.2 billion yuan ($194 million) of bonds if investors exercise an option to offload them in December, said Haitong Securities Co. and China Investment Securities Co. Also in the city, Inner Mongolia Hengda Highway Development Co. asked noteholders to defer rights to sell back private securities in April due to cash shortages, according to China International Capital Corp.

• China’s Sea Aggression to Bring Vietnam, U.S. Closer, Says Osius. China’s territorial maneuvers in the contested South China Sea are bringing its Communist neighbor Vietnam and the U.S. closer together, according to the new ambassador to Vietnam, Ted Osius. In his first interview with a Western news organization since arriving in December, Osius said human rights concerns remain an obstacle to even deeper ties that may lead to the lifting of a ban on the sale of lethal weapons to Vietnam. Even so, the former war foes are holding more high-level talks, particularly over how to manage tensions with China, he said in an interview on Thursday in Hanoi.

• China Beverage Bottle Maker Sees Big Uncertainty Repaying Bond. A beverage bottle maker in China has said there’s big uncertainty about whether it can pay a bond maturing next week as a slowdown in the world’s second-biggest economy persists. Zhuhai Zhongfu Enterprise Co. said the company’s special account for debt payments has 174.152 million yuan ($28.1 million) and needs 447 million yuan to make the full repayment, according to a May 21 exchange statement. Its three-year 590 million yuan of 5.28 percent bonds come due May 28. 

• Hong Kong Investors Want More Oversight After $35 Billion Wipeout. After $35 billion in market value was erased from three Hong Kong-listed companies over two days, investors are asking if the city’s regulator should have done more to prevent the sudden selloff. Goldin Financial Holdings Ltd. and Goldin Properties Holdings Ltd., controlled by billionaire Pan Sutong, plunged more than 40 percent Thursday. A day earlier, Hanergy Thin Film Power Group Ltd. tumbled 47 percent in 24 minutes before trading in the Chinese solar company’s shares was suspended. The stocks, which had surged at least 500 percent in the 12 months before the rout, can also be bought and sold by mainland investors through an exchange link. 

• Asian Stocks Track U.S. Gain as Mixed Data Spur Fed Rate Bets. Asian stocks rose, with the regional benchmark index paring its weekly drop, after U.S. shares rose to records as mixed economic data fueled bets the Federal Reserve won’t rush to raise interest rates. The MSCI Asia Pacific Index added 0.2 percent to 153.09 as of 9:01 a.m. in Tokyo, on course for a 0.1 percent retreat this week.

• OPEC Seen Unyielding in Battle With Shale for Oil-Market Share. OPEC will stick with the strategy of favoring market share over prices when it meets next month because rival producers are already starting to buckle. All but one of the 34 analysts and traders surveyed by Bloomberg said the Organization of Petroleum Exporting Countries will maintain its daily production target of 30 million barrels when it meets in Vienna on June 5.

Wall Street Journal:

• Health Insurers Seek Hefty Rate Boosts. Proposals set the stage for debate over federal health law’s impact. Major insurers in some states are proposing hefty rate boosts for plans sold under the federal health law, setting the stage for an intense debate this summer over the law’s impact. In New Mexico, market leader Health Care Service Corp. is asking for an average jump of 51.6% in premiums for 2016. The biggest insurer in Tennessee, BlueCross BlueShield of Tennessee, has requested an average 36.3% increase. In Maryland, market leader CareFirst BlueCross BlueShield wants to raise rates 30.4% across its products. Moda Health,..

• Brazil’s Economic Downturn, Corruption Scandals Shake Leader. Dilma Rousseff, Brazil’s first female president, is working to save her presidency and stanch the deterioration of Latin America’s biggest economy.

Fox News:

• All for nothing? US vets who fought for Ramadi angry over fall to ISIS. (video) Iraqi War veteran Sgt. Ben Rangel remembers fighting to secure the city of Ramadi when he first arrived in Iraq for a tour of duty in 2004. He also recalls the bloodshed.

• States move to pre-approve groceries that can be bought with food stamps. (video)

CNBC:

• Our $58 trillion love affair with debt, in one crazy chart. (graph)

Zero Hedge:

• US Retaliates At China Escalation, Warns Sea "Sandcastles" May "Lead To Conflict".

• How The Media Deceive The Public About "Fast Track" And The "Trade Bills".

• The Government's Message For Heavily Indebted Students: Don't Pay Us Back.

• The Fallacy Of Unequivocal Faith In The Fed's Babbling Bubble-Blowers. (graph)

• 3 Things: If You Don't Like It Change It. (graph)

• Hewlett Packard(HPQ) Just Reported Its Worst Revenue Since 2007: This Is How It "Beat". (graph)

• "Above The Law" Fed Subpoena'd By Hensarling Over 2012 Leak "To The Priveleged Few".

• Former Fed Governor Says Fed Lost Credibility To "Stay On Top Of Ticking Monetary Bomb".

• When The Current Housing Bubble Finally Bursts. (graph)

• 572 Reasons Why The Fed Is Terrified To Hike: "One Rate Cut Every Three Trading Days".

• 2015's Lowest Volume, VIX Crush, & Data Dump Send Stocks To Record Highs. (graph)

Business Insider:

• Charter(CHTR) is in talks with TWC(TWC) over a bid likely well above $170 per share.

• Look no further than Japan and Germany for an answer on how low rates can go.

Evening Recommendations 
Piper Jaffray:

• Rated (HRB) Overweight, target $38. 

Night Trading

• Asian equity indices are -.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 104.25 -1.75 basis points.

• Asia Pacific Sovereign CDS Index 58.25 -1.25 basis points.

• S&P 500 futures +.07%.

• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ANN)/.32

• (CPB)/.52

• (DE)/1.56

• (FL)/1.23

• (HIBB)/1.13 

Economic Releases 
8:30 am EST

• The CPI for April is estimated to rise +.1% versus a +.2% gain in March.

• The CPI Ex Food and Energy for April is estimated to rise +.2% versus a +.2% gain in March.

• Real Avg. Weekly Earnings YoY.

Upcoming Splits

• None of note

Other Potential Market Movers

• The BoJ rate decision, Germany IFO report, (CHK) annual meeting and the (PLCE) annual meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.