Wednesday, July 20, 2016

Thursday Watch

Evening Headlines
  • Erdogan Says Turkey Will Impose 3-Month State of Emergency. (video) Turkey will impose a three-month state of emergency as the government pursues those responsible for a failed military coup, President Recep Tayyip Erdogan said. Erdogan spoke in a televised address after a day of meetings with top generals on the National Security Council, and then ministers in cabinet. Since the collapse of the attempted putsch on Saturday, authorities have arrested thousands of army officers, judges and prosecutors, and embarked on a purge of other institutions such as universities. Erdogan has blamed the U.S.-based cleric Fethullah Gulen for instigating the coup, and urged the Obama administration to extradite him. The turmoil pushed the lira to a record low on Tuesday as S&P Global Ratings downgraded the country’s debt.
  • Erdogan Says Europe Shouldn’t Interfere With Turkish Crackdown. European criticism won’t stop Turkey taking steps it deems necessary after last week’s failed coup, President Recep Tayyip Erdogan said. He projected a more conciliatory tone toward the U.S. and Russia. “The EU is not the whole world,” Erdogan said in an interview with Al Jazeera on Wednesday before announcing a 3-month state of emergency. “It is just 28 countries. The U.S. has the death penalty, Russia has it, China has it.”
  • Brazil Keeps Rate Amid Persistently High Prices, Shrinking GDP. Brazil’s central bank kept the benchmark interest rate unchanged Wednesday, matching analyst expectations as policy makers struggle to tame stubborn inflation without exacerbating a crippling recession. Policy makers, led for the first time by their new chief, Ilan Goldfajn, held the so-called Selic rate at 14.25 percent for their eighth consecutive meeting. All 38 analysts surveyed by Bloomberg forecast the decision. Traders in the swaps market don’t expect the rate to budge until October, when they forecast the first reduction since 2012.
  • RBNZ Says Lower Interest Rates May Be Needed to Boost Inflation. New Zealand’s central bank said further monetary easing may be required to lift inflation, reinforcing expectations of an interest-rate cut next month. “At this stage it seems likely that further policy easing will be required to ensure that future average inflation settles near the middle of the target range,” the Reserve Bank of New Zealand said in a statement Thursday in Wellington. The release was an assessment of economic conditions and not a review of the official cash rate, which isn’t scheduled until Aug. 11.
  • Asian Stocks Advance as Stimulus Hopes Buoy Japanese Shares. Asian stocks rose, with the regional benchmark index heading toward the highest closing level of the year, as expectations for a stimulus package in Japan weakened the yen and better-than-anticipated corporate earnings in the U.S. eased concerns over global growth. The MSCI Asia Pacific Index gained 0.3 percent to 134.25 as of 9:05 a.m. in Tokyo. Japan’s Topix index advanced 1.1 percent, resuming a rally after snapping a six-day advance on Wednesday.
  • The Risk Oil Drillers Couldn’t Hedge Away. Failing drilling companies lose valuable insurance that would protect them against falling oil prices.
  • Negative Yields Infecting Credit Markets as Investors Capitulate. It’s getting harder for corporate debt investors to avoid the volume of negative yielding bonds that are now pouring into credit markets. Investors are holding 465 billion euros ($512 billion) of investment-grade company bonds with yields below zero, an eleven-fold increase on the start of the year, according to Bank of America Merrill Lynch data. While this means they’re effectively paying for the luxury of holding the debt, that’s still better than buying into the safest government bonds, where yields are even lower. The dilemma facing investors is down to the European Central Bank’s asset-purchase stimulus program that’s pushed yields so low that buying some government bonds guarantees a loss. With the ECB setting deposit rates even deeper into negative territory, parking money there is a less viable alternative. Even though some short-dated indexes show corporate debt yields have dipped below or are approaching zero, the securities remain relatively attractive.
  • Hedge Fund Outflows Slowed in Second Quarter as Quant Funds Won. The amount of money leaving hedge funds slowed in the second quarter as firms that rely on computer algorithms made money in the selloff following the U.K.’s vote to exit the European Union. The industry saw $8.2 billion in net outflows in the second quarter, about 46 percent less than in the prior three months, Hedge Fund Research Inc. said Wednesday in a report. Global hedge fund assets rose by $42.1 billion in the second quarter to nearly $2.9 trillion, the third-highest quarterly total on record. Asset growth was the strongest since the first quarter of 2015, boosted by a 2 percent return for the HFRI Fund Weighted Composite Index.
Wall Street Journal:
Fox News:
  • US intel bulletin warns of persistent threat from 'Western female violent extremists'. The U.S. intelligence community is warning law enforcement agencies around the country of persistent terror threats posed by radicalized Western women. In a Joint Intelligence Bulletin – or JIB – distributed Tuesday and obtained by Fox News, the FBI, Department of Homeland Security, and National Counterterrorism Center note a “continued trend of Western female violent extremists… engaging or attempting to engage in plotting against targets in the West, including their home countries.”
  • GOP Convention: Live Blog.
Zero Hedge:
Business Insider:
  • Melania Trump speech writer is a Democrat. The woman who has taken responsibility for the Melania Trump plagiarism scandal at the Republican National Convention is a registered Democrat, according to an online database. TEGNA investigative reporter Brendan Keefe has learned Meredith McIver is shown as a registered Democrat in Lexis/Nexis, a database of information regularly used by journalists, lawyers and government officials. McIver is an in-house staff writer for the Trump Organization who also has ghostwritten multiple books written by Donald Trump. She has been a registered Democrat since 1996, according to the database.
Night Trading 
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 119.5 -1.75 basis points.
  • Asia Pacific Sovereign CDS Index 47.50 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 72.27 +.01%
  • S&P 500 futures -.01%. 
  • NASDAQ 100 futures +.08%.
Morning Preview Links

Earnings of Note

  • (ABB)/.35
  • (ALK)/2.09
  • (ADS)/3.59
  • (BBT)/.68
  • (BIIB)/4.69
  • (BX)/.39
  • (DISH)/.73
  • (DPZ)/.94
  • (DHI)/.66
  • (FCS)/.18
  • (GM)/1.50
  • (JCI)/1.03
  • (MAN)/1.52
  • (NUE)/.69
  • (PPG)/1.85
  • (PHM)/.32
  • (DGX)/1.32
  • (SHW)/4.16
  • (SNA)/2.23
  • (LUV)/1.21
  • (TRV)/2.05
  • (UNP)/1.16
  • (T)/.72
  • (COF)/1.88
  • (CMG)/.91
  • (FWRD)/.58
  • (MXIM)/.48
  • (OII)/.27
  • (PYPL)/.36
  • (SLB)/.21
  • (SBUX)/.49
  • (V)/.67
  • (WERN)/.23 
Economic Releases  
8:30 am EST
  • The Chicago Fed National Activity Index for June is estimated to rise to -.20 versus -.51 in May.
  • Initial Jobless Claims for last week are estimated to rise to 265K versus 254K the prior week. 
  • Continuing Claims are estimated to fall to 2140K versus 2149K prior.
  • The Philly Fed Business Outlook Index for July is estimated to rise to 4.8 versus 4.7 in June.  
9:00 am EST
  • The FHFA House Price Index MoM for May is estimated to rise +.4% versus a +.2% gain in April.
10:00 am EST
  • Existing Home Sales for June are estimated to fall to 5.48M versus 5.53M in May.
  • The Leading Index for June is estimated to rise +.2% versus a -.2% decline in May.   
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The ECB rate decision, ECB press conference, UK retail sales report, Bloomberg Economic Expectweekly EIA natural gas inventory report and the (CHS) annual meeting could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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