Sunday, October 02, 2016

Monday Watch

Today's Headlines
  • Chinese Cities Introduce Curbs to Cool Overheated Property. Local governments in seven Chinese cities tightened rules for home purchases over the past three days in a bid to damp resurgent demand and rein in excessive speculation. Authorities in those metropolitan areas introduced measures ranging from raising down-payment requirements for both first and second homes to ruling some potential buyers ineligible. Sichuan’s provincial capital Chengdu and Henan’s provincial capital Zhengzhou on Sunday banned people from buying a third property in some areas. Wuxi, a southern manufacturing base close to Shanghai, raised down-payment requirements for second homes to a minimum of 40 percent of the property’s value from 30 percent previously. 
  • Pimco Warns of Rising Asia Debt After Record Dollar Bond Sales. Pacific Investment Management Co. is wary of the risks of rising debt levels after sales of dollar bonds by borrowers in the Asia-Pacific region ballooned to a record. Issuance surged 66 percent last quarter from the year earlier to $152 billion, according to data compiled by Bloomberg. Borrowers have rushed to lock in lower financing costs as the average yield premium on the securities has fallen 72 basis points this year to 206, near the lowest since 2007, according to Bank of America Merrill Lynch indexes.
  • Singapore Home Prices Have Biggest Drop in More Than Seven Years. Singapore home prices had their steepest drop in more than seven years as the government holds steadfast on property cooling measures that it rolled out in 2009. An index tracking private residential prices fell 1.5 percent in the three months ended Sept. 30 from the previous quarter, the biggest decline since June 2009. Prices fell for the 12th straight quarter, the longest streak of quarterly losses when prices were first published in 1975, according to preliminary data from the Urban Redevelopment Authority Monday.
  • Japan Tankan Corporate Sentiment Gauge Misses Expectations. Japan’s large manufacturers don’t see business conditions getting any better, and they don’t see them getting any worse. At least for now. Still, they remained more downbeat over the past quarter than expected, and the least optimistic in more than three years, underscoring the effects of a stronger currency and weak global growth. This will likely make it more challenging for the Bank of Japan to stoke inflation and revitalize the economy.
  • Asian Stocks Advance as Japan Shares Climb, Bank Concerns Ease. Asian stocks rose, with the regional benchmark index rebounding from a one week low, as worries over the health of European banks eased and Japanese shares climbed on a weakening yen. The MSCI Asia Pacific Index gained 0.3 percent to 140.12 as of 9:11 a.m. in Tokyo. Japan’s Topix index rose 0.8 percent as the yen traded at 101.53 against the U.S. dollar, weakening for a fifth straight session. Relief swept over equity markets on Friday as Agence France-Presse reported Deutsche Bank AG is near a $5.4 billion deal with the U.S. Department of Justice, less than half the initial amounted requested to settle a probe related to bad mortgages.
  • Oil Drops as U.S. Adds Drill Rigs While Iran Seeks Export Boost. Oil declined from the highest close in six weeks as U.S. producers increased drilling and Iran signaled it’s seeking to boost exports after OPEC members agreed to reduce output at a meeting last week. Futures dropped as much as 1 percent in New York after advancing 8 percent during the previous three sessions. Rigs targeting crude in the U.S. rose a fifth consecutive week to the highest level since February, Baker Hughes Inc. said on its website Friday. Iran wants to increase exports to 2.35 million barrels a day in the coming months, state news agency IRNA reported. The OPEC member is currently shipping 2.2 million barrels a day.
Zero Hedge:
Frankfurter Allgemeine Sonntagszeitung:
  • Bafin Head Warns of 'Negative Perception Spiral' on Banks. Not every "nervous reaction" by capital markets toward banks is justified by facts, Felix Hufeld, head of German financial regulator Bafin, says in an interview. Talk about state aid for Deutsche Bank is "pseudo debate", he said.
Night Trading
  • Asian indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 117.5 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 32.75 unch.
  • Bloomberg Emerging Markets Currency Index 72.99 +.02%.
  • S&P 500 futures +.13%.
  • NASDAQ 100 futures +.14%.

Earnings of Note
  • None of note
Economic Releases
9:45 am EST
  • The Final Markit US Manufacturing PMI is estimated at 51.4 versus a prior estimate of 51.4.
10:00 am EST
  • Construction Spending MoM for August is estimated to rise +.3% versus unch. in July.
  • ISM Manufacturing for September is estimated to rise to 50.5 versus 49.4 in August.
  • ISM Prices Paid for September is estimated to rise to 53.5 versus 53.0 in August.  
  • Wards Total Vehicle Sales for September are estimated to rise to 17.4M versus 16.91M in August. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone PMI report, (ING) investor day and the (F) sales call could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted 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 week.

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