Tuesday Watch

Evening Headlines 

Bloomberg: 

• Greece's Euro Exit Back on the Agenda Next Year, Economists Say. Don’t pack away the currency presses just yet, Greece’s euro exit may be back on the table next year. There’s still a danger that Greece will be forced out of the euro region by the end of 2016, according to 71 percent of respondents in a Bloomberg survey of 34 economists. Seventy percent said they reckon Greece should be safe for the rest of 2015, though almost half said they thought the 86 billion-euro ($93 billion) bailout package Prime Minister Alexis Tsipras is targeting will prove to be too small.

• The Brokers Left Stranded When China’s IPO Party Suddenly Ended. China’s sudden halt to a frenzy of initial public offerings came at just the wrong time for underwriters Everbright Securities Co., Guotai Junan Securities Co. and China Merchants Securities Co. The trio are the firms with the largest number of IPOs in limbo -- approved by regulators but yet to be completed -- after the government imposed an indefinite suspension this month, data compiled by Bloomberg show. Each has three on hold. 

• RBA Says Growth Likely Slowed Last Quarter, Aussie Too High. Australia’s central bank said growth probably slowed last quarter and the currency is offering less assistance than would be expected given weaker commodity prices. “Non-mining business investment had been subdued,” the Reserve Bank of Australia said in minutes released Tuesday of its July 7 meeting, when it kept interest rates unchanged at a record-low 2 percent. “Surveys of businesses’ investment intentions suggested that it would remain so over the coming year.” 

• Asian Stocks Climb, Led by Consumer Shares, as Yen Buoys Topix. Asian stocks rose as a weaker yen buoyed Japanese equities and consumer shares advanced. The MSCI Asia Pacific Index added 0.2 percent to 144.51 as of 9:01 a.m. in Tokyo. Consumer companies led gains, while energy shares were the worst performers for a second day. Crude oil fell below $50 a barrel on Tuesday, as gold traded near a five-year low.

• Iron Ore Supply to Overwhelm Weak China Demand, Goldman(GS) Predicts. Rising seaborne iron ore supplies over the next two quarters will probably overwhelm weak demand from mills in China, according to Goldman Sachs Group Inc., which said that a global glut was entering its second year. While housing starts in China have recovered and the infrastructure has overtaken property to become the largest market for steel, an improvement this half may not be strong enough to support iron ore, the bank said in a report. Prices are seen dropping over the next four quarters, from $49 a metric ton through September to $44 by the April-to-June period of 2016, according to analysts Christian Lelong and Amber Cai.

• BHP(BHP) creditors becoming more wary. BHP Billiton Ltd.’s creditors are becoming more wary as plunging energy and metal prices weigh on the outlook for debt sold by the world’s biggest miner. The cost of protecting the Melbourne-based producer’s bonds against non-payment has risen 23 basis points over the past 12 months to 87 basis points as of Friday and is at its highest level in almost five years versus the local credit-default swap benchmark, CMA data show.

• Commodities Will Face a Lot of Headwind: Fross. (video)

• Gold Leads Commodities ‘Mess’ That Has Many Investors Smarting. Pity the commodity investor. The Bloomberg Commodities Index dropped to a 13-year low Monday, weaker than after the banking meltdown of 2008 and the euro-zone crisis of 2012. From oil to copper to sugar, little has escaped the rout in the year’s worst-performing asset class. “Commodities are a mess,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, in a telephone interview. “We are not looking to add to positions.”

Wall Street Journal:

• Shake Shack(SHAK) Stockholders to Sell at Least 4 Million Shares. Danny Meyer and private-equity firm Leonard Green & Partners among selling shareholders.

• The Iran Deal’s Collapsing Rationale. Blowing up the Middle East in order to save it—that’s the logic at work.

CNBC:

• Apple(AAPL) earnings: Can it weather the China storm? (video) As critical as China has become to Apple's future, the tumbling stock market there has yet to dampen investor enthusiasm for the iPhone maker. Heading into Tuesday's quarterly earnings report, investors are bullish: Shares are up 40 percent in the past year, topped by an almost 6 percent rally over the last week.

Zero Hedge:

• Chinese Stocks Tumble As Labor Market Starts To Crack. (graph)

• New Obama Initiative To Ban Guns For Some Social Security Recipients, Veterans, And Disabled.

• "The Spell Is Broken" In China, Selling Pressure To Remain "Relentless": BofAML (graph)

• Charting The Slow, 30-Year Death Of The US Middle Class In A Global Context. (graph)

• 42 Billion Reasons Why Putin's Time May Be Running Out. (graph)

• Liquidity Is "Thin To Zero": Worried Bond Managers Shrink Trades, Dodge Cash Markets.

• The Greek Economy Is Finished! A Quarter Of Firms Shifting Abroad.

• 95% Of The Real Estate Market In Greece Is "All Cash".

• Martin Armstrong: "Little By Little These People Are Destroying Everything That Made Society Function".

• IBM Revenue Collapse Is Now Worse Than During Peak Of The Financial Crisis. (graph)

• Deja Vu: The Return Of The 4-Horseman Of Tech.

• Commodities Plunging To 2002 Level Sends "Investors" Rushing To Safety Of Overpriced Tech Megacaps. (graph)

Business Insider: 

• Japan is at risk of fading from existence.

• There's an epic amount of office space available in the epicenter of Canada's oil bust.

• Obama has his next pick for the Fed.

• A months-long cyber-attack against the UCLA hospital system could jeopardize 4.5 million people's information.

Information: 

• Qualcomm(QCOM) Said Preparing 'Several Thousand' Layoffs. Execs preparing to lay off as many as several thousand employees as smartphone prices fall and competition increases, citing people inside and outside the company.

Financial Times:

• QE feeding Europe house price bubble, says study.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 105.5 -.25 basis point.

• Asia Pacific Sovereign CDS Index 57.25 -1.25 basis points.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.09%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (ATI/.05

• (BHI)/-.13

• (BK)/.66

• (CP)/2.48

• (HOG)/1.40

• (INFY)/13.14

• (LXK)/.85

• (MAN)/1.27

• (NVR)/19.02

• (PNR)/.95

• (RF)/.20

• (SAP)/.84

• (AMTD)/.36

• (UTX)/1.72

• (VZ)/1.00

• (WWW)/.20

• (AAPL)/1.80

• (CMG)/4.45

• (GPRO)/.26

• (ILMN)/.77

• (ISRG)/3.98

• (LLTC)/.56

• (MSFT)/.57

• (NBR)/-.09

• (VMW)/.91

• (YHOO)/.19

Economic Releases

10:00 am EST

• Revisions: US Industrial Production/Capacity Utilization.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Bank of Japan Minutes, German IFO Index, Australian inflation report and the US weekly retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and consumer 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.