Tuesday Watch

Evening Headlines 

Bloomberg: 

• European Leaders, IMF Meet Secretly in Berlin. (video) 

• China Debt Markets Show Stress Amid Duck Maker Loan Default. China’s debt markets signaled more stress as a duck processor cited increasing difficulty getting credit as it defaulted on bank loans ahead of a bond deadline next week. Zhong’ao Holdings Group Co., a closely held maker of smoked duck leg and other foods, owes banks 295.96 million yuan ($47.7 million) in loan principal and interest, according to a statement dated June 1 on Chinamoney. The company, based in the eastern province of Shandong, must repay 200 million yuan of 7.39 percent notes on June 12.  

• Cancer Epidemic Sweeping Through China. (video)

• China Stocks in Hong Kong Decline as Insurance Companies Drop. China’s stocks trading in Hong Kong fell, led by insurers, after the index rose the most in a week on Monday. The Shanghai Composite Index swung between gains and losses. Ping An Insurance (Group) Co. and Air China Ltd. fell more than 1 percent in Hong Kong. Zoomlion Heavy Industry Science and Technology Co. jumped 10 percent on a plan to buy Italian renewables company Ladurner Ambiente. Hong Kong’s Hang Seng China Enterprises Index dropped 0.9 percent to 14,172.88 at 9:46 a.m. local time. The Hang Seng Index lost 0.5 percent.

• Asian Stocks Retreat as Copper Slips With Oil; Aussie Rebounds. Most Asian stocks fell, led by consumer and raw materials companies, as copper drove a retreat among industrial metals and crude oil slipped a second day. Australia’s dollar rallied before an interest-rate review. The MSCI Asia Pacific Index slipped a second day, down 0.4 percent by 11:06 a.m. in Tokyo as benchmarks in Australia and South Korea dropped at least 0.5 percent.

• Euro’s Growing Ties to Oil Only Encourage Bears Seeing Parity. If you want to know which way the euro’s headed, ask an oil trader. The euro-dollar rate is tracking crude prices more closely than at any time in the past two years. The European Central Bank gives more weight to the impact of energy prices on inflation than the Federal Reserve, so when oil started falling in the middle of last year it was one more reason for Europe to step up monetary stimulus to boost price growth.

• Bank of America: U.S. Home Prices Set for a Fall in 2017. Americans will face falling home prices in a matter of years as personal income gains fail to keep pace with the recovery from the financial crisis, according to a Bank of America Corp. analyst. Chris Flanagan predicted in a report Monday that starting in 2017 the U.S. housing market will experience three straight years of “modest” declines in property values.

Wall Street Journal:

• More Health-Care Insurers Seek Big Premium Increases. The Obama administration published more information about hefty 2016 proposals. The Obama administration published more information Monday about hefty premium increases for 2016 sought by large insurers selling plans under the health law. Major carriers from around the country are proposing big increases in the premium rates paid by consumers who buy insurance policies on their own.

• The FIFA-Clinton Method. Nothing embarrasses them, so nobody stops them. Ubiquitous but opaque. Powerful but unaccountable. Ostensibly public spirited but relentlessly mercenary. Often shamed but unshakably shameless. Let us count the ways in which the Clinton Foundation resembles the Fédération Internationale de Football Association, better known as FIFA.

Zero Hedge:

• A Hurt Ben Bernanke Explains That He Is Not Responsible For Record Inequality, Epic Hilarity Ensues.

• From The Keynesian Archives: Who Said In 2010 That "Europe Is An Economic Success".

• Carl Icahn Is "Extremely Worried" About Stocks, Warns "It's Not If, But When It Will Happen". (video)

• Inside Q1's Punk GDP Numbers - Why Bubble Vision Doesn't Get It. (graph)

• Chart Of The Day: It's Worse Than 2000! (graph)

• The Caitlyn Jenner Rally Clipped - Now You See It, Now You Don't. (graph)

• May Consumer Spending Has Biggest Annual Drop Since Great Financial Crisis, Gallup Survey Finds. 

• Hacked Emails Expose George Soros As Ukraine Puppet-Master.

• Here's What Happens When Your City Is Cut To Junk. (graph)

• China May Double Down On Debt Swap As ABS Issuance Stumbles.

Business Insider:

• A perfect ACT score couldn't get this student into Yale, Princeton, or Stanford, and he says it's because he's Asian-American.

• A national egg shortage is threatening fast food breakfast.

• REPORT: HSBC is getting ready to cut up to 20,000 jobs.

• Russia is about to start construction on new Iranian nuke plant.

• The Fed's 'liquidity regime' has has made the market far more dangerous for investors.

• A yacht carrying more than 450 people sank during a cyclone in China.

Financial Times:

• China duck producer defaults after banks toughen credit stance. A profitable Chinese duck processing company has defaulted on its debts after banks refused to roll over its loans — in a sign of lenders’ wariness over refinancings as China’s economy slows.

Telegraph:

• Greece must stop hoping for a miracle - it needs to leave the euro. The best way for Greece to relearn the importance of economic orthodoxy is for it to test to destruction its own monetary policy, its own tax system and its own-self imposed rules.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.25% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 107.5 +.5 basis point.

• Asia Pacific Sovereign CDS Index 59.75 unch.

• S&P 500 futures -.03%.

• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (AMWD)/.56

• (CONN)/.41

• (CBRL)/1.37

• (DG)/.81

• (MDT)/1.08

• (ABM)/.35

• (GIII)/.07

• (GES)/-.05 

Economic Releases 

9:45 am EST

• ISM New York for May is estimated to fall to 58.0 versus 58.1 in April.

10:00 am EST

• Factor Orders for April are estimated to fall by -.1% versus a +2.1% gain in March.

• IBD/TIPP Economic Optimism for June is estimated to rise to 49.8 versus 49.7 in May.
  

Afternoon:

• Total Vehicle Sales are estimated to rise to 13.2M versus 12.88M in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Services PMI report, German Unemployment report, US weekly retail sales reports, Deutsche Bank Financial Services Conference, Stephens Investment Conference, CSFB Energy Conference, CSFB Homebuilding Conference, BofA Tech Conference, (URBN) annual meeting, (VNCE) annual meeting and the (IFF) investor day could also impact trading today.

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