Wednesday, May 11, 2016

Thursday Watch

Evening Headlines

  • Hong Kong Property Market in `Free Fall': Hayman's Bass. Kyle Bass, the hedge-fund manager who’s wagering on a slowdown in China’s economy, said Hong Kong’s property market is in “free fall” and the credit expansion in Southeast Asian emerging markets will unravel. “Hong Kong’s in a worse position than it was in prior to the ’97 crisis today,” Bass said at the SkyBridge Alternatives Conference in Las Vegas on Wednesday. He said credit in Asian emerging markets has grown “recklessly,” citing Malaysia and Thailand. Hong Kong property prices have declined and sales are hovering near a 25-year low as the city grapples with the repercussions of a slowing Chinese economy. Home prices have dropped about 13 percent from a peak in September, according to data compiled by Centaline Property Agency Ltd.
  • Investors Fleeing $9 Trillion of Negative Yields Fuel Bond Binge. There’s no shortage of demand in the $100 trillion market for global debt, as investors crowd into corporate and long-term sovereign obligations to steer clear of negative yields. Yield-hungry bidders are snapping up government bonds. Auctions of long-term debt by the U.S., Spain and Portugal all drew strong demand Wednesday, with the Treasury sale seeing unprecedented appetite from one class of investors. Buyers are also clamoring for company bonds, in a week that may be the busiest this year for corporate borrowing in the U.S. and Europe.
  • Chinese Stocks Slump to Two-Month Low as Industrial Shares Sink. Chinese stocks fell to their lowest levels in more than two months, led by industrial and consumer companies, as investors awaited the release of economic data. The Shanghai Composite Index lost 1.7 percent. A gauge of industrial shares slid the most among company groups, taking its loss this year to 26 percent. Data on new loans and money supply may be released as early as today, while reports on industrial production and retail sales are also due this week. The Hang Seng China Enterprises Index headed for its lowest close since March 2.
  • Asian Stocks Head for First Decline in Three Days on Earnings. Asian stocks fell, with the regional benchmark index heading for its first decline in three days, following losses in U.S. shares amid growing pessimism over corporate earnings. The MSCI Asia Pacific Index slipped 0.5 percent to 127.16 as of 9:09 a.m. in Tokyo. Japan’s Topix index fell 0.9 percent, with Toyota Motor Corp. slumping 3.7 percent after forecasting its first annual profit drop in five years due to a stronger yen. With pessimism over the global outlook and concern over central banks’ firepower already keeping investors on tenterhooks, the mixed corporate earnings season has provided another dampener for equity markets, which lost more than $1 trillion in value last week.
  • Why the High-Yield Rally May Be a Little Overdone. (video)
  • Romney Warns of Possible ‘Bombshell’ in Trump’s Hidden Taxes. “It is disqualifying for a modern-day presidential nominee to refuse to release tax returns to the voters, especially one who has not been subject to public scrutiny in either military or public service,” Mitt Romney writes in post to verified Facebook page.
Wall Street Journal:
Fox News:
  • Comey rebuffs Clinton claim FBI only conducting ‘security inquiry’ on emails. (video) Hillary Clinton for months has downplayed the FBI investigation into her private email server and practices as a mere “security inquiry.” But when asked Wednesday by Fox News about Clinton's characterization of the bureau's probe, FBI Director James Comey said he doesn’t know what "security inquiry" means -- adding, “We’re conducting an investigation. … That’s what we do.”
Financial Times:
Night Trading 
  • Asian equity indices are -.75% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 143.75 +.75 basis point. 
  • Asia Pacific Sovereign CDS Index 53.25 unch.
  • Bloomberg Emerging Markets Currency Index 72.17 -.04%. 
  • S&P 500 futures +.10%. 
  • NASDAQ 100 futures +.01%.
Morning Preview Links

Earnings of Note

  • (KSS)/.37
  • (PRTY)/.03
  • (RL)/.83
  • (DDS)/2.57
  • (JWN)/.45
  • (NVDA)/.41
  • (SHAK)/.05
  • (SYMC)/.22
Economic Releases 
8:30 am EST
  • The Import Price Index MoM for April is estimated to rise +.6% versus a +.2% gain in March.
  • Initial Jobless Claims are estimated to fall to 270K versus 274K the prior week. 
  • Continuing Claims are estimated to fall to 2120K versus 2121K prior.     
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Fed's George speaking, Fed's Rosengren speaking, Fed's Mester speaking, BoE rate decision, BoE inflation report, $15B 30Y T-Bond auction, Bloomberg May US Economic Survey, weekly Bloomberg Consumer Comfort Index, (DOW) annual meeting, (RIG) annual meeting, (NSC) annual meeting, (VLO) annual meeting and the (FLEX) analyst meting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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