Monday, February 08, 2016

Tuesday Watch

Evening Headlines

  • Global Stock Rout Extends in Japan; Credit Risk Climbs With Yen. Anxiety over the global economy intensified, with equities in Tokyo sliding the most since August and index futures indicating U.S. stocks will add to declines that sent the Standard & Poor’s 500 Index to a 22-month low. The yen reached its strongest since 2014 and corporate bond risk climbed. Stock gauges in Japan and Australia slumped and U.S. index futures slid at least 0.9 percent. Markets from China to South Korea remained closed for Lunar New Year holidays. Evidence of mounting distress in global credit markets boosted government debt, with yields on New Zealand notes sliding to a record, while 10-year Japanese bond rates shed as much as four basis points to zero. Gold was on track for its longest rally since 2011 as the yen extended gains to surpass 115 per dollar for the first time since 2014, strengthening with the euro. U.S. oil traded above $30 a barrel. “We had a bubble in people’s expectations of the power of central banks,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd. “And now we’re seeing that bubble burst.” Japan’s Topix index tumbled 5 percent in Tokyo, falling the most since Aug. 24 as banks and financial shares led losses. The Nikkei 225 Stock Average dropped 4.9 percent, on course for its biggest decline since June 2013. The yen strengthened past 115 per dollar for the first time in more than a year and climbed against all its major peers. Global currency volatility rose to 11.77 percent, according to a JPMorgan Chase & Co. gauge. 
  • Global Bond Rally Near `Panic' Levels With Japan Yield at Zero. The yield on benchmark 10-year Japanese government bonds dropped to zero for the first time as a flight to haven assets drove a measure of global yields to the lowest in more than a decade. Treasury yields dropped to a one-year low as investors sought refuge from a continued slump in stock markets worldwide. Traders pared the odds that the Federal Reserve will raise interest rates this year to 30 percent, before Chair Janet Yellen begins her two-day semiannual testimony to Congress on Wednesday. The yield on the Bank of America Merrill Lynch World Sovereign Bond Index slid to 1.29 percent, the least in data to 2005. “It’s almost like a panic,” said Hideo Shimomura, the chief fund investor in Tokyo at Mitsubishi UFJ Kokusai Asset Management. “The flight to quality is exaggerated.”The yield on Japan’s 10-year notes was at 0.005 percent at 11:35 a.m. in Tokyo after earlier dipping to zero, a first for a Group-of-Seven economy.
Night Trading 
  • Asian equity indices are -3.0% to -1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 157.25 -1.75 basis points.
  • Asia Pacific Sovereign CDS Index 84.0 +3.75 basis points.
  • Bloomberg Emerging Markets Currency Index 68.24 -.15%.
  • S&P 500 futures -.90%.
  • NASDAQ 100 futures -1.05%.

Earnings of Note 
  • (AGU)/1.37
  • (KO)/.37
  • (CVS)/1.53
  • (GT)/.75
  • (HCP)/.78
  • (IR)/.93
  • (REGN)/3.31
  • (SAVE)/.97
  • (VIAB)/1.17
  • (VSH)/.12
  • (WCG)/.61
  • (WEN)/.11
  • (WYN)/.98
  • (AKAM)/.62
  • (CSC)/.69
  • (FWRD)/.65
  • (NCR)/.86
  • (PNRA)/1.78
  • (SCTY)/-2.59
  • (DIS)/1.46
  • (WYNN)/.78 
Economic Releases
6:00 am EST
  • The NFIB Small Business Optimism Index for January is estimated to fall to 94.5 versus 95.2 in December.   
10:00 am EST
  • JOLTS Job Openings for December are estimated to fall to 5413 versus 5431 in November.
  • Wholesale Inventories MoM for December are estimated to fall -.2% versus a -.3% decline in November.
  • Wholesale Trade Sales MoM for December are estimated to fall -.4% versus a -1.0% decline in November.
Upcoming Splits
  • (HRL) 2-for-1
Other Potential Market Movers
  • The UK Trade Balance report, $24B 3Y T-Note auction, weekly US retail sales reports, Stifel Transport/Logistics conference, Goldman Tech/Internet conference, USDA WASDE report, (OLN) investor day, (WEN) investor day and the (CBI) investor day could also impact trading today.
BOTTOM LINE: Asian indices are sharply lower, weighed down by industrial and financial shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.

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