Wednesday, July 27, 2016

Thursday Watch

Evening Headlines
  • China's Central Bank Ends Its War With Yuan Bears. For traders betting on a weaker yuan, the People’s Bank of China is turning from foe to friend. Six months after the monetary authority intervened to crush short sellers, Bank of America Merrill Lynch, Pacific Investment Management Co. and Societe Generale SA say the PBOC is more likely to guide the currency lower than to prop it up. Despite official pledges of exchange-rate stability last weekend, bears argue that China’s leaders are growing more comfortable with yuan weakness after a 3.3 percent slump since March failed to spark a repeat of January’s market turmoil.
  • Japan’s Helicopter-Money Ban Is Anchored in Occupation-Era Law. The law specifically prohibits the government from making the BOJ buy sovereign bonds or lend money to the state. A caveat allows for this to happen in special circumstances (without describing what these might be), and only up to an amount that must be approved by parliament. The central bank and government use the exception to directly sell debt to the BOJ to replace some bonds it holds that have matured. Under the "BOJ rollover" plan, the bankplans to buy 8 trillion yen ($76 billion) of bonds this fiscal year, according to the Ministry of Finance.
  • Leveraged Investors Lose Faith in Abenomics, BOJ Easing or Not. The biggest local cheerleaders for Japan Prime Minister Shinzo Abe are losing faith in his economic policies even as the stock market rallies on expectations of further stimulus. Japanese individuals trading using borrowed money cut their bets on a rising equity market to the lowest since March 2013, shortly before central bank Governor Haruhiko Kuroda unleashed unprecedented bond-buying that sent the Nikkei 225 Stock Average to its biggest annual gain in four decades. Even as most economists predict the Bank of Japan will add to monetary easing when its two-day policy meeting ends on Friday, leveraged investors are speculating this time won’t have the same effect.
  • Yen Rises as BOJ Easing Expectations Keep Traders on Tenterhooks. The yen strengthened against all except one of its 16 major peers as traders awaited Friday’s Bank of Japan decision on how much it will boost monetary easing to spur growth. Japan’s currency resumed gains after dropping on Wednesday when Prime Minister Shinzo Abe announced a 28 trillion yen ($267 billion) fiscal-stimulus package. A gauge of the greenback declined for a third day after the Federal Reserve said it expects to raise interest rates gradually. “The BOJ news tomorrow will trump the FOMC news last night,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “An above consensus amount of stimulus would surely push dollar-yen higher.” The yen advanced 0.5 percent to 104.87 per dollar as of 9:20 a.m. in Tokyo on Thursday, after sliding 0.7 percent on Wednesday. Japan’s currency rose 0.4 percent to 116.10 per euro.
  • Asian Stocks Rise Amid Central Bank Meetings; Japan Shares Slip. Asian stocks rose for a fourth day, with the regional benchmark index trading near a nine-month high, as investors digested policy decisions from the Federal Reserve and awaited results from a Bank of Japan meeting. Shares in Tokyo retreated as the yen strengthened. The MSCI Asia Pacific Index gained 0.2 percent to 135.10 as of 9:13 a.m. in Tokyo.
  • Deep Dive: Odds of Rate Hike, Copper Prices, CDS Spreads. (video)
Wall Street Journal:
  • Attacks in Germany Amplify Fears of Refugees, Helpers. Some fear a backlash as violent acts increase, opposition to open-door policies mounts.
  • How a Chinese Highway Became a Boulevard of Broken Dreams. Problem-plagued project shows why infrastructure spending is increasingly ineffective in spurring China’s economy. A highway project here that is four years behind schedule and hundreds of millions of dollars over budget helps explain why Beijing’s effort to raise infrastructure spending is an increasingly ineffective way to boost the​nation’s economy.
  • The Other Clinton ‘Change’. No one in Philadelphia wants to talk about the Clinton Foundation. Bill Clinton on Tuesday portrayed his wife as a “change maker” whose life has overflowed with good intentions and commitment to others. No one can spin a yarn like Bill, and for the believers it was a touching portrait. But if it’s true, why do the polls show that 68% of Americans don’t trust Hillary Clinton? That has to do with the rest of the story, which is how the Clintons have used politics to enrich themselves and retain power.
  • Trump’s Putin Illusions. Remember who mocked Mitt Romney for calling Russia a U.S. foe? Will someone—calling Ivanka—please tell Donald Trump that Vladimir Putin is no friend of America, or for that matter of Donald Trump? An intervention is needed after the Republican’s mouth-in-foot press conference Wednesday in which he invited Russia to turn over Hillary Clinton’s 33,000 missing emails from her private server.
Fox News:
  • Europe terror attacks spotlight security failings amid refugee crisis. (video) The European policy Germans call “Willkommenskultur” -- the enthusiastic embrace of refugees from Syria and other Muslim-majority countries -- has morphed into a summer of terror. Loose screening of refugees, lax counter-terrorism policies and lenient treatment of those with terrorist links or sympathies has led to a spate of attacks by terrorists already flagged by authorities. Tuesday’s attack in France, where a jihadist already under house arrest slit a priest’s throat, came just two days after a suicide bombing in Germany by a terrorist who a medical expert had predicted would “commit suicide in a spectacular fashion.” Critics say such cases are piling up.
  • DNC Convention: Live Blog.
Zero Hedge:
Business Insider:
Night Trading 
  • Asian equity indices are -.5% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 120.0 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 49.0 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 71.97 +.12%
  • S&P 500 futures +.14%. 
  • NASDAQ 100 futures +.02%.
Morning Preview Links

Earnings of Note

  • (ALXN)/1.17
  • (AMT)/1.28
  • (APD)/1.90
  • (AB)/.44
  • (AZN)/.83
  • (ADP)/.67
  • (BZH)/.12
  • (BWA)/.82
  • (BSX)/.27
  • (BMY)/.66
  • (BG)/.41
  • (CAB)/.62
  • (CBG)/.52
  • (CELG)/1.39
  • (CLF)/.03
  • (CME)/1.11
  • (CL)/.69
  • (COP)/-.61
  • (CS)/-.02
  • (DOW)/.86
  • (FITB)/.38
  • (F)/.60
  • (HOG)/1.53
  • (HCA)/1.56
  • (HSY)/.78
  • (IGT)/.46
  • (IP)/.84
  • (LLL)/1.69
  • (LEA)/3.32
  • (MA)/.90
  • (OSK)/.99
  • (PTEN)/-.62
  • (POT)/.18
  • (SEE)/.64
  • (ZBH)/1.97
  • (AFL)/1.68
  • (GOOG)/8.04
  • (AMZN)/1.12
  • (BIDU)/1.20
  • (CBS)/.86
  • (DECK)/-2.07
  • (FE)/.54
  • (KLAC)/1.42
  • (WDC)/.71
  • (WYNN)/.96
  • (YRCW)/.54 
Economic Releases 
8:30 am EST
  • Advance Goods Trade Balance for June is estimated at -$61.0B versus -$60.6B in May.
  • Initial Jobless Claims for last week are estimated to rise to 261K versus 253K the prior week.
  • Continuing Claims are estimated to rise to 2136K versus 2128K prior.
11:00 am EST
  • Kansas City Fed Manufacturing Activity Index for July is estimated to rise to 4.0 versus 2.0 in June.
Upcoming Splits 
  • (EBIX) 3-for-1
Other Potential Market Movers
  • The Eurozone Industrial Production report, the Japan Industrial report, weekly EIA natural gas inventory report and the Bloomberg weekly Consumer Comfort Index could also impact trading today.
BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology 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.

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