Wednesday Watch

Evening Headlines 

Bloomberg: 

• The Key Gauge of Abe’s Japan Inc. Revival Is Going the Wrong Way. The key yardstick of Prime Minister Shinzo Abe’s drive to make Japanese companies more profitable is heading in the wrong direction. The Topix index’s return on equity fell to 8.2 percent at the end of March from 8.6 percent a year earlier, according to data compiled by Bloomberg after the latest annual reporting season. The measure of income relative to shareholder capital, a buzzword for companies and investors in the Abe era, is retreating after surging in the early part of his term.
• Protesters Are Now Everywhere in Latin America as the Boom Fades. From Mexico to Chile, Latin Americans frustrated with scandals, stagnant economies and government incompetence are taking to the streets. Often they are protesting the very populist leaders they rallied around over the past decade, when rising wealth from a commodities boom fueled a surge in government spending and helped mask corruption.
• Vietnam Confronts Debt Surge Echoing China’s as Growth at Stake. For decades, Vietnam has modeled its growth after China’s, with a state-enterprise driven economy and a push toward low-cost manufacturing. Now, the Southeast Asian nation is trying to avoid the debt pitfalls of its larger neighbor. Vietnam’s national debt is rising too quickly, said Nguyen Duc Kien, deputy head of the National Assembly Economic Committee. It may climb to a record 64 percent of gross domestic product by the end of 2015 from 60 percent last year, he said, a forecast that includes government-guaranteed liabilities that ratings companies leave out in their assessments. 
• China Stocks Fall Most in Two Weeks After MSCI Rejects A Shares. China’s stocks fell the most in almost two weeks, led by industrial and commodity companies, after MSCI Inc. held off from adding mainland shares to its benchmark indexes. CRRC Corp., formed by merging Chinese rail companies CSR Corp. and China CNR Corp., slumped more than 5 percent for a second day as industrial companies retreated before the release of production data on Thursday. Jiangxi Copper Co. and coal producer China Shenhua Energy Co. declined more than 2 percent. The Shanghai Composite Index slid 1.8 percent to 5,024.18 at 9:34 a.m.
• Asia Stocks Swing as Energy Producers Rise, Consumer Shares Fall. Asian stocks swung between gains and losses as energy companies advanced and consumer shares slid. The MSCI Asia Pacific Index was little changed at 146.12 as of 9:16 a.m. in Tokyo after rising as much as 0.1 percent and falling less than 0.1 percent.

Wall Street Journal: 

• Iraqi City of Mosul Transformed a Year After Islamic State Capture. Beneath a veneer of order, residents live in fear.
• How the Next Financial Crisis Will Happen.
• ObamaCare Omen? President Obama goes after the Supreme Court even before it rules.
• Hillary Milhous Clinton. The similarities between Richard Nixon and Mrs. Clinton go well beyond their hostility toward the press.

Fox News:

• ISIS captures 88 Eritrean Christians in Libya, US official confirms. (video) The ISIS terror group kidnapped 88 Eritrean Christians from a people-smugglers' caravan in Libya last week, a U.S. defense official confirmed Monday. The defense official confirmed initial reports of the mass kidnapping to Fox News after seeing a recent intelligence report. The independent Libya Herald newspaper reported that the convoy was ambushed by militants south of Tripoli before dawn this past Wednesday morning.

CNBC: 

• Target(TGT) denies issuing release about $5B share buyback. (video) After releasing a statement, Target is now denying it announced a $5 billion stock buyback boost and an increase in its dividend. The original release posted to the retailer's website announced a 7.7 percent dividend rise along with an expansion of the company's share repurchase program to $10 billion from $5 billion.
• Netflix(NFLX) investors approve share increase.

Zero Hedge:

• Obama Goes Full Stalin: Tells Secret Court To Ignore Law He Signed 4 Hours Earlier, Extend Illegal NSA Surveillance.
• MSCI "On Track" For China Inclusion But Warns Liquidity Remains An Issue.
• Corporate Buybacks: Connecting The Dots To The F-Word. (graph)
• How To "Measure" Risk.
• Stocks Slide To Weakest Consecutive Close Since October's Bullard Bounce. (graph)
• Why Adding China To The MSCI Indices Could Be A Disaster (In 1 Simple Chart). (graph)
• The Sick Man Of Asia - China's Looming Health Disaster.
• This Time Is Different: Miami Condo Prices Flatline For First Time In Six Years. (graph)

Business Insider: 

• It is time to 'take some profits' in the Chinese stock market.
• Greece is embracing a holdout strategy.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 111.0 +.5 basis point.

• Asia Pacific Sovereign CDS Index 63.0 unch.

• S&P 500 futures +.15%.

• NASDAQ 100 futures +.11%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (KKD)/.22
• (MW)/.51
• (BOX)/-.29

Economic Releases

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,272,730 barrels versus a -1,948,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -554,550 barrels versus a -334,000 barrel decline the prior week. Distillate inventories are estimated to rise by +845,360 barrels versus a +3,773,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.1% versus a -.4% decline the prior week.

2:00 pm EST

• The Monthly Budget Deficit for May is estimated at -$97.0B versus -$130.0B in April.

Upcoming Splits

• (MPC) 2-for-1
• (ROST) 2-for-1

Other Potential Market Movers

• The UK Production report, Wasde Crop report, weekly MBA mortgage applications report and the (TGT) annual meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by technology and industrial 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.