Thursday Watch

Evening Headlines
Bloomberg:  

• Brexit ‘Disaster’ Strikes Euro Tourist Hotspots as Pound Plunges. It’s time for prayers, Irish restaurant owner Padraic Og Gallagher says, describing the prospect of Brexit with one word: “disaster.” About 40 percent of customers at Gallagher’s Boxty House in Dublin’s tourist district, Temple Bar, come from the U.K. Now, with the pound plunging, he’s worried. “I just had the first growth in seven years and now, Oh God, do I have to go through this again?” said Gallagher, 55, who has been serving boxty, a traditional Irish potato-bread dish, in the area since 1989. “The English are the cream -- they eat, they drink, they have fun.”
• Japan’s Industrial Production Drops Much More Than Forecast. (video) Japan’s industrial production declined more than economists forecast in another sign of sluggishness for the world’s third-largest economy as it struggles to recover. Output declined 2.3 percent in May from April when it rose 0.5 percent, the trade ministry reported on Thursday. The median forecast of economists surveyed by Bloomberg was for a 0.2 percent drop, and the slump was bigger than all but one of the estimates.
• Yuan Heads for Worst Quarter on Record as Outflows Seen Rising. The yuan’s worst quarterly performance on record is raising the risk of capital flight. China’s currency has slumped 2.9 percent since the end of March, the most since the nation unified the official and market rates at the start of 1994, to trade near its lowest level in five years. Losses deepened after the U.K.’s vote to secede from the European Union led to a jump in the dollar and dented the outlook for Chinese exports.
• China Investors Turn to Sovereign Debt Amid Company Defaults. There’s about to be a flight to quality in China’s bond market. Fourteen of 22 respondents in a Bloomberg survey of investors and analysts said they are most interested in buying securities issued by the government and policy banks in the next quarter, compared with just four of 19 in a similar poll three months ago. A run of defaults is the biggest risk facing China’s bond market in the next three months, and yield premiums are poised to widen, according to the most popular responses in the survey.
• Goldman(GS) Says China Metals Investors Fear Sharp Yuan Devaluation. Goldman Sachs Group Inc. said metals investors in China are concerned that the government may sharply weaken the nation’s currency in a decision that could trigger large swings in prices. There are “fears in the market over a sharp devaluation in China,” analysts Jeffrey Currie, Yubin Fu and Max Layton said in a report. The June 29 note summarized views from Chinese metals traders, producers and investors, and didn’t give the bank’s assessment of prospects for a devaluation. 
• Asia Stocks Rise as Global Rebound Gains Speed After Brexit Rout. Asian stocks climbed for a second day to track a global rebound, as anxiety over the economic fallout from the U.K. leaving the European Union diminished amid speculation central banks will support financial markets. The MSCI Asia Pacific Index advanced 0.7 percent to 128.63 as of 9:06 a.m. in Tokyo, after jumping 1.8 percent on Wednesday. The gauge has pared its monthly loss to 0.5 percent. Markets are regaining momentum after being roiled by last week’s U.K. vote to leave the EU. A gauge of global equities posted its steepest two-day gain since August as central banks around the world signaled a readiness to act if required in the aftermath of the so-called Brexit. 
• China’s Great Big Pile of Iron Ore Just Got Even Bigger: Chart. Iron ore stockpiles at China’s ports have capped a fourth quarterly increase in the longest run of gains in two years, signaling robust supply. BHP Billiton Ltd. predicted in May that the holdings -- which now stand at 101.5 million tons, the highest since December 2014 -- may go on rising right through this year. China has imported an excessive amount given that steel output has dropped from 2015, according to Ralph Leszczynski, Singapore-based head of research at shipbroker Banchero Costa & Co.

Fox News:

• Fox News Poll: Clinton up by 6 points, 89 percent say 'hot-headed' describes Trump. (video) Donald Trump has had a few rocky weeks on the campaign trail, and it shows in the latest Fox News Poll.  Just over half of Republicans would rather have someone besides Trump as their nominee, and his support in the presidential ballot test has dropped seven points since May. Democrat Hillary Clinton is up 44-38 percent over Trump in a head-to-head matchup.

Zero Hedge:

• IMF: "Deutsche Bank Poses The Greatest Risk To The Global Financial System".
• Brexit Aftermath - Here's What Will Happen Next.
• Revenge Of The Rubes - Why The Days Of The Financial Elite's Rule Are Numbered. (graph)
• Goldman Warns Of Downside Risk To $50 Oil Forecast Due To Ceasefire With Niger Delta Avengers.
• Paul Singer: "Donald Trump Will Cause A Widespread Global Depression". (video)
• Mainstream Media Explains The Benghazi Report.
• Health Care Costs Are Rising Sharply, And It Will Get Much Worse.
• Futures Spike After Banks Unveil Tens Of Billions In Buybacks.
• Fed Fails Deutsche Bank And Santander In Stress Test, As 31 Other Banks Unleash Dividend, Buyback Frenzy.
• For Those Who Still Care About Fundamentals, A Troubling Chart.
• From Brexit Wounds To Buying Panic (In Bonds & Stocks). (video)

Business Insider:

• China's smog is knocking 25 months off people's life expectancy.
• Mitch McConnell: 'Trump clearly needs to change'.

Telegraph: 

• Was Brexit fear a giant hoax or is this the calm before the next storm?

Night Trading 

• Asian equity indices are +.75% to +1.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 141.25 -4.5 basis points.
• Asia Pacific Sovereign CDS Index 50.75 -2.75 basis points.
• Bloomberg Emerging Markets Currency Index 72.42 -.05%. 
• S&P 500 futures +.02%. 
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (CAG)/.52
• (STZ)/1.52
• (DRI)/1.09
• (MKC)/.74
• (PAYX)/.49
• (SCHN)/.11
• (MU)/-.11

Economic Releases  
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 267K versus 259K the prior week.
• Continuing Claims are estimated to rise to 2151K versus 2142K prior.   

9:45 am EST

• Chicago Purchasing Manager for June is estimated to rise to 51.0 versus 49.3 in May.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Bullard speaking, China Manufacturing PMI, Eurozone inflation report, German Unemployment Rate, UK GDP report, Canada GDP report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (PRXL) investor day and the (CACI) investor day could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by commodity 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.