Sunday, May 22, 2016

Monday Watch

Today's Headlines
  • China’s Office Supply Set to Double Amid Building Frenzy: Chart. (graph) A building binge is under way in China as the government strives to revive sluggish real estate investment. Properties under construction will double the supply of commercial space to 10.7 million square meters (115.2 million square feet) this year, and will lift the vacancy rate nationwide to 21.5 percent from 13.8 percent in 2015, according to Cushman & Wakefield Inc.
  • A Look at China's Unusual Default Excuses. (video)
  • Abu Dhabi Stocks in Worst Run Since October as Gulf Markets Drop. Abu Dhabi stocks posted their longest losing streak since October amid a slump in trading across Gulf Arab equity markets as investors held out for more than a $1 billion worth of rights issues. The ADX General Index fell 1.1 percent, declining for the sixth straight day. Emirates Telecommunications Group Co., or Etisalat, the largest phone company in the Middle East, led the retreat with a 2.6 percent drop. Traders exchanged shares in about a third of companies on the gauge. The Bloomberg GCC 200 Index slipped for a third day, with volumes on the main gauges in the six-nation Gulf Cooperation Council languishing at less than half the 20-day average. Saudi Arabia’s Tadawul All Share Index slipped 1 percent, falling for a third day and taking its loss this year to 4.1 percent.
  • Iran Won’t Freeze Oil Output Before OPEC Meeting. Iran, which is due to meet with OPEC partners on June 2, has no plan to join any freeze in crude output as the country won’t be done ramping up oil exports to pre-sanctions levels before the second half of the year, the head of the state oil company said. The Persian Gulf state’s oil exports will likely surpass 2.2 million barrels a day by the middle of the summer, Rokneddin Javadi, managing director of National Iranian Oil Co., told Mehr news agency. Iran last exported at this level before sanctions were imposed on the country for its nuclear program more than four years ago. Sanctions were eased in January, and Iranian officials said they won’t discuss any output freeze or cut before reaching pre-sanctions levels. “The government has no plans for the time being to freeze or interrupt its increase in oil output and exports based on plans that are being carried out,” Javadi said. “In the current context, the oil ministry and the government have issued no policy or program to halt the increase in production and exports and so, the country’s plans to increase crude output continues.”
  • Williams Says Fed Rate Moves to Block Out Election-Year Pressure. The U.S. economy should be solid enough to merit an interest-rate increase this year, and the central bank won’t cave to political pressure to refrain from tightening during a presidential election year, said John Williams, president of the Federal Reserve Bank of San Francisco. While global threats to growth, including in Europe and Asia, have forced a “balancing act” against largely encouraging data in the U.S., Fed officials probably will raise the benchmark interest rate sometime this year, Williams said Sunday on Fox News. He doesn’t vote on monetary policy until 2018.
  • Hedge Funds That Choked on Momentum Stocks Taking Another Bite. Hedge funds are piling into the same shares that zapped their returns at the start of the year. They just added momentum stocks for a fifth consecutive quarter, according to an Evercore ISI analysis of 13F filings with the Securities and Exchange Commission. Those shares, loosely defined as the ones that went up the fastest in the past 12 months, posted some of their worst losses in seven years at the start of 2016.
  • Sanders’s Rift With Democrats Widens With Jab at Committee Chair. Bernie Sanders stepped up his feud with the Democratic leadership, saying he’s backing the primary opponent of Representative Debbie Wasserman Schultz, the party’s national committee chairwoman. “Clearly, I favor her opponent. His views are much closer to mine than Ms. Wasserman Schultz’s,” the Vermont senator said in an excerpt of an interview with CNN’s “State of the Union” that will air in full on Sunday. Sanders added he would not reappoint the congresswoman to head the committee if he’s elected president in November.
  • Had bullish commentary on (RHT), (PEP) and (FDC). 
  • Had bearish commentary on (BA).
Fox News:
  • Iraq launches military operation to retake ISIS-held city of Fallujah. (video) Iraqi Prime Minister Haider al-Abadi announced the beginning of military operations to retake the Islamic State-held held city of Fallujah, west of Baghdad, in a televised address on Sunday night. Iraqi forces are "approaching a moment of great victory" against the Islamic State group, said al-Abadi, who was surrounded by top military commanders from the Ministry of Defense and the country's elite counterterrorism forces.
  • US close to passing test for June rate rise, Fed official says. The US is on the verge of meeting most of the economic conditions the Federal Reserve has set to increase interest rates next month, according to a member of the rate-setting Federal Open Market Committee. Eric Rosengren, the president of the Federal Reserve Bank of Boston, told the Financial Times he was getting ready to back tighter monetary policy after financial and economic indicators swung in a positive direction after the Fed’s policy meeting in March
  • China pressures Taiwan's President Tsai Ing-wen to acknowledge One China. China has threatened to cut off regular communication with Taiwan unless the country's new president acknowledges the so-called One China principle. According to a report from Xinhua, the Chinese state media outlet, China's Taiwan Affairs Office spokesman Ma Xiaoguang said on Saturday that only by Taiwan confirming the One China principle - which dictates that the island of Taiwan and mainland China are parts of a single Chinese state - could "cross-Strait affairs authorities continue regular communication."
Zero Hedge: 
NY Times:
Night Trading
  • Asian indices are -.% to +.% on average.
  • Asia Ex-Japan Investment Grade CDS Index 145.5 unch.
  • Asia Pacific Sovereign CDS Index 53.5 -.25 basis point.
  • Bloomberg Emerging Markets Currency Index 70.84 unch.
  • S&P 500 futures +.01%.
  • NASDAQ 100 futures +.07%.

Earnings of Note
  • (CRMT)/.58
  • (SCOR)/.26
Economic Releases
9:45 am EST
  • The Preliminary Markit US Manufacturing PMI report for May is estimated to rise to 51.0 versus 50.8 in April.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Harker speaking, Fed's Bullard speaking, Eurozone PMI report, JPMorgan Tech/Media/Telecom conference, UBS Global Healthcare Conference, UBS Global Oil/Gas Conference and the (XLNX) Analyst Day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly mixed. The Portfolio is 50% net long heading into the week.

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