Tuesday Watch

Evening Headlines
Bloomberg:

• These Are the Red Lines Europe Won't Cross in Brexit Talks. U.K. Prime Minister Theresa May faces a daunting array of demands from European Union nations when the time comes to negotiate Britain’s future relationship with the bloc, an analysis of the region’s 27 other members shows. The survey, based on responses from ministries, public comments from government officials and interviews with policy makers, reveals European leaders are laying down their own red lines as May’s team weighs what it wants to seek in the Brexit talks. The result is a complex patchwork of priorities -- from an insistence on freedom of movement to the sovereignty of Gibraltar -- that may run counter to what the U.K. wants to achieve and that it will have to seek to satisfy if May is to meet her commitment of making a success of Britain’s withdrawal from the EU.
• Asian Stocks Extend Gains With Crude Near $43 as Copper Retreats. Asian shares rose a fourth day, extending their advance at an almost one-year high as U.S. crude oil traded near its highest price in two weeks. Copper declined ahead of data on Chinese prices. Mining and consumer stocks drove gains in the regional benchmark, with Japanese equities up following a pullback in the yen. U.S. crude traded just below $43 a barrel after jumping 2.9 percent Monday as OPEC said the current bear market in the commodity would be short-lived. Copper declined following a rally in industrial metals, while New Zealand’s dollar strengthened. Corn extended its climb, leading gains among crop futures. The MSCI Asia Pacific Index added 0.2 percent as of 9:55 a.m. Tokyo time, with sub-indexes of raw-materials providers and industrial shares climbing at least 0.2 percent.
• OPEC Still Faces the Same Obstacles to Agreeing Oil-Output Limit. (video) An informal OPEC meeting next month is unlikely to deliver any agreement to limit production because several members including Iran are still pumping below capacity. Members of the Organization of Petroleum Exporting Countries are planning to hold talks next month on the sidelines of the International Energy Forum in Algeria, the group’s president Mohammed Al Sada said Monday. But the same obstacles that prevented an agreement on proposals to freeze output in April or fix a new production target in June are still there, according to UBS Group AG. “We still haven’t reached the moment when OPEC members will agree to a production agreement, as Iran has not yet recovered its pre-sanction production levels,” Giovanni Staunovo, an analyst at UBS, said by e-mail. “Nigerian and Libyan oil output are also currently below capacity.” 
• Aluminum Seen Falling Another 11% as China Boosts Supply: Chart.
• Tech Giants at the Debt Buffett.
• Gap(GPS) Shares Drop as Dismal Store Traffic Drags Down July Sales. Gap Inc., the biggest U.S. apparel-focused retailer, fell in late trading after posting July comparable sales that missed analysts’ estimates and indicated that foot traffic at its stores might not improve as much as expected later in the year. Same-store sales -- a key benchmark -- dropped 4 percent in July, the San Francisco-based retailer said in a statement Monday.

Wall Street Journal:

• Are Negative Rates Backfiring? Here’s Some Early Evidence. Economists worry that people and businesses are saving more, instead of spending.
• Chinese Traders Roil Commodity Markets. China has become a mover of global prices; trading volume on the Shanghai and Dalian exchanges has exploded.

Fox News:

• Clinton, Trump clash on economy. (video) Hillary Clinton clashed from afar with Donald Trump on the economy Monday, accusing him of peddling “old, tired ideas” that benefit the “really wealthy” – after the Republican nominee hammered the Democrats' “job-killing” agenda in a speech of his own where he unveiled a revised plan to jolt the economy by slashing taxes and regulations. Trump delivered his economic address early Monday afternoon in Detroit, touting a plan he called a "night-and-day-contrast" with the “job-killing, tax-raising, poverty-inducing Obama-Clinton agenda.”
• Parents of 2 Benghazi victims sue Hillary Clinton for wrongful death, defamation. (video) The parents of two of the four Americans who died in the Benghazi attack in 2012 filed a lawsuit Monday against Democratic presidential nominee Hillary Clinton, alleging her "reckless handling" of classified information contributed to their deaths.

Zero Hedge:

• Millennial 'Guru' Urges Millennials Living "Paycheck-To-Paycheck" To "Spend Now, Save Later".
• "Zika Zone" Turns Into Ghost-Town As Planes Spray Neurotoxic Insecticide Over Florida Residents.
• In First Autopilot Crash In China, Tesla(TSLA) Model S Driver Crashes In Beijing With Autopilot Engaged.
• Japan Orders Military To 'State Of Alert' As North Korea Accuses US Of Seeking 'Preemptive Nuclear Strike'.
• Why Morgan Stanley Still Expects The 10Y Treasury To Drop To 1%, In 4 Charts.
• A Crisis Of Intervention.
• ISIS Releases Photos Of Latest Batch Of Captured US Weapons. (pic)
• These Are The 10 Most Crowded Trades According To UBS.
• Ignore The Latest Jobs Data Hype: The Worst Expansion In 30 Years Continues.
• Bonds Bid, Stocks Skid As Crude Chaos Continues On Lowest Volume Day Of 2016. (graph)

Business Insider:

• UN hears details of bombings, chemical weapons use, and suffering in Aleppo, Syria.
• JIM GRANT: 'Central bank acrobatics' could result in a banking crisis.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 114.25 -2.0 basis points.
• Asia Pacific Sovereign CDS Index 44.5 -1.0 basis point.
• Bloomberg Emerging Markets Currency Index 72.96 -.04%. 
• S&P 500 futures +.02%. 
• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (COH)/.41
• (EXC)/.56
• (HCP)/.70
• (INCY)/-.02
• (MWW)/.03
• (RRGB)/.80
• (STE)/.77
• (VRX)/1.48
• (FOSL)/.08
• (JAZZ)/2.81
• (MYL)/1.13
• (SCTY)/-2.56
• (TDW)/-.74
• (DIS)/1.61
• (YELP)/.15 

Economic Releases 
6:00 am EST

• The NFIB Small Business Optimism Index for July is estimated at 94.5 versus 94.5 in June. 

8:30 am EST

• Preliminary 2Q Non-Farm Productivity is estimated to rise +.4% versus a -.6% decline in 1Q.
• Preliminary 2Q Unit Labor Costs are estimated to rise +1.8% versus a +4.5% gain in 1Q.
  

10:00 am EST

• Wholesale Inventories MoM for June are estimated unch.  versus a +.1% gain in May.
• Wholesale Sales MoM for June are estimated to rise +.5% versus a +.5% gain in May.
• The IBD/TIPP Economic Optimism Index for August is estimated to rise to 47.3 versus 45.5 in July.  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The UK Industrial Production report, German Trade Balance report, US weekly retail sales reports, $24B 3Y T-Note auction, Jefferies Industrials Conference, Oppenheimer Tech/Internet/Communications Conference, UBS Financial Services and the (ORLY) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and mining shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.