Wednesday Watch

Evening Headlines
Bloomberg: 

• Brexit Referendum Hangs in Balance as Campaign Enters Final Day. The U.K.’s membership of the European Union hung in the balance as politicians went into the final day of campaigning ahead of Thursday’s referendum. With different polls putting each side ahead, the BBC screened a debate Tuesday evening from Wembley Arena in London, where an audience of 6,000 cheered and jeered as advocates of leaving and remaining in the 28-nation bloc confronted each other. The fieriest arguments were within the governing Conservative Party. Former London Mayor Boris Johnson and Energy Minister Andrea Leadsom, arguing for “Leave,” were confronted by the leader of the party in Scotland, Ruth Davidson. “You are being asked to make a decision that is irreversible, we can’t change, we wake up on Friday and we don’t like it and we are being sold it on a lie,” Davidson said. “They lied about the cost of Europe, they lied about Turkey’s entrance to Europe, they lied about the European army,” she told the audience. “You deserve the truth.” Johnson urged the nation to make Thursday “our country’s independence day.” “They say we can’t do it,” he said. “We say we can. They say we have no choice but to bow down to Brussels. We say they are woefully underestimating this country.”
• The Lonely Aftermath of China's One Child Policy. In her chic Beijing studio, 26-year-old Summer Liu relaxes on a sofa, admiring the pink vase she keeps full of fresh flowers. In the eastern city of Jining, Hu Jiying, 81, sits on an old bed that’s scattered with clothes, towels and half a bag of snacks, worrying about the cost of her medicine. What they have in common is that they live alone, two ends of a rapidly growing demographic that is breaking down China’s traditional family structure and presenting the government with a social and environmental headache. China had 66 million registered one-person homes in 2014, or 15 percent of all households, compared with 6 percent in 1990, according to government data. The actual number may be as many as 83 million -- more than the population of Germany -- and could rise to 132 million by 2050, according to Jean Yeung, director of the center for family and population research at the National University of Singapore.
• Hong Kong-Singapore Stars Fade With Boom-to-Gloom in Finance. (graph) Asia’s financial-hub twins, Hong Kong and Singapore, are facing increasing brakes on growth even before potential turmoil from a Brexit vote in their ex-colonial master, with China’s slowdown and the continuing shrinkage of the financial industry striking both. Hong Kong’s economy unexpectedly contracted in the first quarter, weighed down by falling retail sales and the weakest property market in 25 years. Singapore eked out only a modest expansion in the same period, hurt by weak exports and a downturn in financial services. 
• North Korea Fires Two Mid-Range Ballistic Missiles; First Failed. North Korea on Wednesday launched what appeared to be two Musudan ballistic missiles, mid-range projectiles capable of hitting U.S. bases in Japan or Guam. The first of the launches took place at 5:58 a.m. South Korean time near the east-coast town of Wonsan and appeared to have failed, a South Korean Defense Ministry official said by phone, declining to be identified because of internal policy. The second launch was at 8 a.m., the official said, adding that the ministry had yet to determine if the firing had been a success. The official said the projectiles were likely Musudans with an estimated range of 3,000 kilometers (1,800 miles). Successive attempts to launch missiles in April and May ended in failure. A U.S. defense official said the indications were that Wednesday’s first launch failed in flight over the Sea of Japan.
• Asian Stocks Head for First Drop in Four Days as U.K. Vote Looms. Asian stocks headed for their first decline in four days, led lower by Japanese equities, as campaigning for the U.K. referendum on staying in the European Union enters the final day. The MSCI Asia Pacific Index slipped 0.3 percent to 129.37 as of 9:02 a.m. in Tokyo. Japan’s Topix index lost 0.6 percent. Federal Reserve Chair Janet Yellen told the U.S. Senate that she wants the economy to be on a “favorable path” before the central bank considers hiking interest rates. Betting shops put the probability of a “Leave” vote in the U.K. at about one in four, while most polls are still split on the outcome.

Wall Street Journal:

• SEC Readies Case Against Merrill Lynch Over Notes That Lost 95%. Expected case brings to light a dispute between Merrill and two of its brokers who sold structured notes to their clients.
• The Business Case for Brexit. Britain will thrive outside the EU, free from Brussels’ regulation and empowered to cut its own trade deals.
• ‘Brexit’ Vote Will Change Europe, No Matter the Outcome. Britain’s EU referendum calls into question march toward closer ties; resistance over ‘total integration’.

Fox News:

• After DNC attack, hacker Guccifer 2.0 claims Hillary Clinton 'dossier' leak. A hacker who goes by the name ‘Guccifer 2.0’ claims to have published a dossier of Hillary Clinton-related documents accessed during the recent attack on the Democratic National Committee’s computers. In a blog post Tuesday, Guccifer 2.0 described the haul as “a big folder of docs devoted to Hillary Clinton that I found on the DNC server.”

Zero Hedge:

• Unprecedented Mainstream Media Criticism Of Central Banking Bodes Ill For The Larger Economy.
• Clinton Foundation "Hacked By Russians", "Foundation Vulnerabilities" Document Leaked.
• Loretta Lynch Admits That Federal Authorities Have Lost The Orlando Shooter's Wife.
• More Banker Layoffs: RBS To Cut Another 900 Jobs. (graph)
• Yellen Asset Management Update.
• Musknado - Tesla(TSLA) Tumbles After Offering To Acquire SolarCity(SCTY).
• WTI Crude Spikes Above $50 On Massive Inventory Draw. (graph)
• Tuesday Humor: What's Wrong With This Chart? (graph)
• S&P Analyst Admits: Central Banks Have Destroyed Any Chance Of Fiscal Reform.
• Stocks Steady Amid Brexit Bounce, Yellen Yawn, & Copper Chaos. (graph)

Business Insider:

• Elon Musk just kicked his shareholders in the teeth.

Night Trading 

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 141.75 unch. 
• Asia Pacific Sovereign CDS Index 52.25 +.25 basis points.
• Bloomberg Emerging Markets Currency Index 72.15 -.06%. 
• S&P 500 futures -.10%. 
• NASDAQ 100 futures -.12%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ATU)/.37
• (WGO)/.45
• (APOG)/.49
• (BKS)/-.24
• (BBBY)/.86
• (FUL)/.68
• (MLHR)/.52
• (RHT)/.50
• (SCS)/.16

Economic Releases  
9:00 am EST

• The FHFA House Price Index MoM for April is estimated to rise +.6% versus a +.7% gain in March.

10:00 am EST

• Existing Home Sales for May are estimated to rise to 5.55M versus 5.45M in April.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,289,0900 barrels versus a -933,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -686,730 barrels versus a -2,625,000 barrel decline the prior week. Distillate inventories are estimated to rise by +500,910 barrels versus a +786,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.54% versus a -.7% decline prior.   

Upcoming Splits 

• (SSNC) 2-for-1

Other Potential Market Movers

• The Eurozone Consumer Confidence report, $28B 7Y T-Note auction, weekly MBA mortgage applications report, (SMTC) analyst day and the (IGT) analyst day 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 50% net long heading into the day.