Monday Watch

Today's Headlines

Bloomberg: 

• China Is Grappling With Hidden Unemployment. Cracks are starting to show in China’s labor market as struggling industrial firms leave millions of workers in flux. While official jobless numbers haven’t budged, the underemployment rate has jumped to more than 5 percent from near zero in 2010, according to Bai Peiwei, an economics professor at Xiamen University. Bai estimates the rate may be 10 percent in industries with excess capacity, such as unprofitable steel mills and coal mines that have slashed pay, reduced shifts and required unpaid leave. Many state-owned firms battling overcapacity favor putting workers in a holding pattern to avoid mass layoffs that risk fueling social unrest. While that helps airbrush the appearance of duress, it also slows the shift of workers to services jobs, where labor demand remains more solid in China’s shifting economy. 
• Koreans Are Reluctant to Get Married, Let Alone Have Babies.South Koreans are likely to have fewer weddings and babies this year than ever before, part of a demographic shift that risks hobbling the nation’s economy. The number of marriages and births recorded during the first five months of 2016 hit the lowest levels for the same period in any year since the nation’s statistics office started compiling monthly data in 2000. 
• Japanese Firms Head for Profit Reckoning Next Month as Yen Gains. After first-quarter earnings in Japan wrapped up this month with the steepest plunge since 2011, the prospect for an increase in annual profits is about to get even dimmer. Expect a round of corporate earnings downgrades in September, said Norihiro Fujito, a strategist at Mitsubishi UFJ Morgan Stanley Securities. Trends that slammed profit in the first quarter -- a stronger yen, negative interest rates and slumping China growth -- haven’t reversed. At stake is a second straight year of earnings decline that could bury Prime Minister Shinzo Abe’s push for companies to boost capital spending and raise wages to spur economic growth.
• Young Suicide Bomber Attacks Turkey Wedding Party; 51 Dead. A child suicide bomber killed at least 51 people and wounded nearly 70 others at a Kurdish wedding party near Turkey's border with Syria, President Recep Tayyip Erdogan said Sunday, decrying the attack as an apparent attempt by Islamic State extremists to destabilize the nation by exploiting ethnic and religious tensions. "As of now, the preliminary conclusions by our governor's office and the police establishment point to an attack by Daesh," Erdogan said, using another common term for IS. "It was clear that Daesh had such an organization in Gaziantep or was attempting to make room for itself in recent times," he said. The bombing late Saturday in Gaziantep was the deadliest attack in Turkey this year. 
• Erdogan to Complain to U.S. Over Gulen Extradition Delay. Turkish President Recep Tayyip Erdogan plans to complain to U.S. Vice President Joe Biden about the delay in extraditing an Islamic cleric accused by Turkish authorities of masterminding last month’s failed coup. The U.S. position on Fethullah Gulen, who lives in self-imposed exile in Pennsylvania, is “overshadowing our strategic partnership,” Erdogan said in televised comments on Sunday. “Turkey’s never asked from America to provide documents or proof on criminals that they’ve wanted us to extradite -- we’ve given them the terrorists they wanted,” he said.  
• Mission Impossible Looming for Italy’s 2016 Economic Growth Goal. The odds are stacked against Matteo Renzi’s economic ambitions for Italy. The prime minister needs to see a blistering pace in the second half of this year to meet his goal of a 1.2 percent increase in 2016. Economists say that’s not happening, spelling trouble for Renzi and the wider euro area.
• Dollar Gains After Hawkish Fed Comments; Asian Stocks Seen Mixed. The dollar rose against major peers, while futures foreshadowed a mixed open to the week for Asian stocks, as hawkish comments from a Federal Reserve official added to prospects that U.S. interest rates will increase this year. The yen dropped after Bank of Japan Governor Haruhiko Kuroda said there was a “sufficient chance” for more easing in September, highlighting the possibility of policy divergence from the Fed as central banks from Europe to Japan try to reignite flagging growth. Fed Vice Chairman Stanley Fischer signaled a 2016 rate increase is still under consideration, in a speech in Aspen, Colorado on Sunday.
• ‘Well-Timed’ OPEC Talk Forces Oil Bears Into Record Reversal. OPEC has done it again. Talk of a potential deal to freeze output helped push oil close to $50 a barrel and prompted money managers to cut bets on falling prices by the most ever. West Texas Intermediate, the U.S. benchmark, went from a bull to a bear market in less than three weeks. OPEC is on course to agree to a production freeze because its biggest members are pumping flat-out, said Chakib Khelil, the group’s former president. Saudi Energy Minister Khalid Al-Falih said that the talks may lead to action to stabilize the market.
• Iraq Will Boost Oil Exports This Week After Agreement on Kirkuk. Iraq, OPEC’s second-biggest producer, will increase crude exports by about 5 percent in the next few days after an agreement to resume shipments from three oil fields in Kirkuk. Shipments will increase to about 150,000 barrels a day as exports resume from the Baba Gorgor, Jambour and Khabbaz fields, Fouad Hussein, a member of the oil and energy committee of the Kirkuk provincial council, said by phone Sunday. Iraq’s exports were 3.71 million barrels a day in July, according to the International Energy Agency. Calls to the Kurdistan Regional Government for comment weren’t answered and text messages weren’t immediately returned.

Wall Street Journal:

• The Climate Prosecutors Can’t Dodge Congress Forever. The state officials who subpoenaed Exxon face questions from the House—and they have to answer.

Fox News:

• Clinton camp tries to deflect foreign money criticism, points finger at Trump campaign. (video) The Hillary Clinton campaign suggested Sunday that the resignation of Donald Trump’s campaign chairman doesn’t end Trump's possible connections to Russian money and Russian President Vladimir Putin, whom it implies is using Trump as a “puppet” in the White House race. “We need Donald Trump to explain to us the extent to which the hand of the Kremlin is at the core of his campaign," Clinton campaign manager Robbie Mook said on “ABC’s “This Week.”

CNBC: 

• Fed close to hitting job and inflation targets: Vice Chairman Fischer. The Federal Reserve is close to hitting its targets for full employment and 2 percent inflation, the Fed's No. 2 policymaker said on Sunday in comments that did not address when the U.S. central bank should next raise interest rates. The Fed has been suggesting it could raise rates in 2016 since it tightened policy in December for the first time in nearly a decade, but investors have doubts the central bank will follow through on that guidance.

Zero Hedge: 

• German Government Urges Citizens To Stockpile Food, Water For First Time Since Cold War Ended.
• The Fed Launches A Facebook Page... And The Result Is Not What It Had Expected.
• Goldman "Explains" Why Yellen Lost Credibility: "In Our View, The Fed Has Been Unlucky".
• As The Vancouver Housing Market Implodes, The "Smart Money" Is Rushing To Get Out Now.
• Hillary Clinton Flies 20 Miles In Private Jet To Attend Rothschild Nantucket Fundraiser.
• Clinton Campaign Refuses To Answer Questions Over Foundation Funding. (video)
• The Answer To Whether The Oil Market Has Rebalanced.
• Morgan Stanley(MS): "This Is The Most Dangerous Time As Hope And Greed Overtake Fear And Loathing".
• Battle Of The Unicorns: Uber Says Lyft Is Worth Only $2 Billion, One Third Of Its Latest Valuation Round.
• Oil Rally At Risk After Niger Delta Advisors Announce Ceasefire.
• Obamacare Is The Welfare State's Requiem.
• A Postmodern Tragedy In One Part: "The Fed Is Observing The Market And The Market Is Observing The Fed".
• Child Suicide Bomber Behind "Heinous" Attack At Turkish Wedding That Killed At Least 51.
• "The Most Difficult, Treacherous Year" - What The Market Wall Of Worry Looked Like In 2016.

Business Insider:

• Marginal buyers are heading for the exit.
• How the media abandoned Louisiana.
• A top Wall Street strategist explains why everything about markets seems broken right now.
• Obamacare has gone from the president's greatest achievement to a 'slow-motion death spiral'.
• Germany tightens Swiss border controls to choke off a flow of illegal immigrants.

Reuters:

• Pfizer nears deal to acquire Medivation for close to $14 billion. Pfizer Inc (PFE.N) is in advanced talks to acquire U.S. cancer drug company Medivation Inc (MDVN.O) for close to $14 billion, as it seeks to boost its oncology portfolio, people familiar with the matter said on Sunday. Pfizer has agreed to pay a little more than $80 per share for Medivation, one of the people said, a substantial premium to the $52.50 offer for Medivation that France's Sanofi SA (SASY.PA) made in April, which eventually resulted in the company putting itself up for sale. Medivation shares ended trading in New York on Friday at $67.16. Reuters reported earlier this week that Pfizer, Sanofi, Merck & Co Inc (MRK.N), Celgene Corp (CELG.O) and Gilead Sciences Inc (GILD.O) had submitted expressions of interest to acquire Medivation.

Night Trading

• Asian indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 111.50 -1.0 basis point.
• Asia Pacific Sovereign CDS Index 43.0 unch.
• Bloomberg Emerging Markets Currency Index 73.57 -.14%.
• S&P 500 futures -.05%.
• NASDAQ 100 futures -.03%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (NDSN)/1.33
• (ZOES)/.06
• (NQ)/.02 

Economic Releases

8:30 am EST

• The Chicago Fed National Activity Index for July.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Manufacturing PMI could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 week.