Sunday, October 23, 2016

Monday Watch

Posted by Gary .....at 9:09 PM
Today's Headlines
Bloomberg:
  • German Momentum Grows for Curbs on Chinese Overseas Investment. Germany is seeking tighter control over foreign investment in European companies, in a sign of a growing protectionist reaction to China’s appetite for overseas acquisitions. Spurred by the purchase of German robot maker Kuka AG by China’s Midea Group Co., Chancellor Angela Merkel’s deputy, Sigmar Gabriel, is calling for European Union measures to give national governments expanded powers to block or impose conditions on shareholdings of non-EU companies. He’s found an ally in EU Digital Economy Commissioner Guenther Oettinger, a German who’s a member of Merkel’s party. “It’s absolutely right to initiate this debate at the European level,” Oettinger said in an interview last week. “Everybody has to play by the same rules. Clearly, there are many countries, including big ones such as China, that make market access or corporate takeovers difficult or effectively impossible.”
  • How China's Dealmakers Pulled Off a $207 Billion Global Spree.
  • China Oceanwide Agrees to Buy Genworth(GNW) for $2.7 Billion Cash. China Oceanwide Holdings Group Co. agreed to buy Genworth Financial Inc. for $2.7 billion in cash, pledging to help the U.S. firm manage its debt and strengthen life insurance units after it was hurt by higher-than-expected losses tied to long-term care coverage.
  • Protectionist Clouds Resurface With Failing Canada-EU Trade Pact. The possible collapse of a free-trade agreement between the European Union and Canada is the latest sign of how rising protectionism is imperiling free trade. As policy makers and analysts try to make sense of Brexit, the rise of Donald Trump and a growing tide of populism, some say faltering talks between the EU and Canada raises questions about how other deals can possibly be clinched. The Europeans are holding similar, less-advanced talks with the U.S. about a free trade pact and are beginning negotiations with the UK over Brexit. The U.S. and Canada, meanwhile, are among the 12 nations working toward the Trans Pacific Partnership.
  • Japanese Exports Drop for 12th Month in Dismal Year for Trade. Japan’s exports fell for a 12th consecutive month in September, rounding out a year’s worth of poor returns for an economy struggling with a resurgent yen and weak global demand.
  • Euro Near Seven-Month Low Versus Dollar on Policy Divergence Bet. The euro stayed near a seven-month low amid speculation the European Central Bank will maintain its easy monetary policy as the Federal Reserve prepares to raise interest rates this year. The single currency slipped for a third week after ECB President Mario Draghi said Oct. 20 that neither tapering nor an extension of the bank’s bond-buying plan were discussed at its two-day policy meeting. The euro is set to drop for a fifth day, the longest losing streak since May, as expectations fade that the region’s central bankers back a sudden end to quantitative easing after March, which is the latest date that they’ve committed to for the program. Speculators increased their bearish-euro bets to the most since July.
  • Asia Stocks Drop After Best Weekly Gain in Month Before Earnings. Asian stocks pared their best weekly performance in a month, led lower by developers and banks, as investors braced for a busy week of earnings reports across Japan, China and the U.S. The MSCI Asia Pacific Index lost 0.1 percent to 139.56 as of 9:07 a.m. in Tokyo. The measure climbed 1.1 percent last week as data indicated Chinese economic growth is stabilizing while investors weighed the outlook for Federal Reserve interest-rate increases.
  • The Challenges Facing OPEC's Oil Output Deal. (video)
  • Iraq Balks at Joining OPEC Cuts, Making Oil Output Deal Harder. OPEC’s second-largest producer threw an obstacle in the group’s path toward a final deal to stabilize oil markets when Iraq balked at joining efforts to trim output to prop up crude prices. Iraq should be exempted from cutting production because it’s embroiled in a war with Islamic militants, Oil Minister Jabber Al-Luaibi said Sunday at a news conference in Baghdad. The country currently produces more than 4.7 million barrels a day it pumped in September, and Iraq’s output could rise higher still as the government urges international companies to boost production at its fields, he said. The minister disputed Organization of Petroleum Exporting Countries figures that peg Iraqi output at less than 4.2 million barrels daily. “We are with OPEC policy and OPEC unity,” Al-Luaibi said. “But this should not be at our expense.” A meeting in Algeria last month of the group’s 14 members stretched to seven hours as Iraq argued over the level of production that should be used as a baseline for setting quotas.
  • Sliding Corporate Profits Are a Darkening Cloud for U.S. Workers. Corporate profitability is casting a shadow on the brightest aspect of the U.S. economy -- the labor market. Profits have fallen for five straight quarters, the longest skid since the last recession, according to the Bureau of Economic Analysis. While early results from the current earnings season indicate the string could be snapped, Corporate America is facing an uphill battle to make money and may soon become more aggressive in its cost-cutting amid sluggish demand and scant pricing power.
  • TD Ameritrade, TD Bank Said Near $4 Billion Scottrade Deal. TD Ameritrade Holding Corp. and its largest stakeholder, Toronto-Dominion Bank, are close to a deal to buy online brokerage Scottrade Financial Services Inc. for $4 billion, according to people with knowledge of the matter. TD Ameritrade would acquire Scottrade’s brokerage operations for about $2.7 billion in cash and stock, while Toronto-Dominion would purchase Scottrade’s banking operations for $1.3 billion in cash, the people said, asking not to be identified because the talks aren’t public. The takeover may be announced as soon as Monday before markets open in North America, the people said.
Wall Street Journal:
Night Trading
  • Asian indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 116.25 +3.0 basis points.
  • Asia Pacific Sovereign CDS Index 34.0 unch.
  • Bloomberg Emerging Markets Currency Index 72.23 +.01%.
  • S&P 500 futures +.11%.
  • NASDAQ 100 futures +.08%.

Earnings of Note
Company/Estimate
  • (BEAV)/.80
  • (KMB)/1.54
  • (SOHU)/-2.33
  • (VFC)/1.15
  • (AVB)/2.08
  • (RE)/4.49
  • (SWFT)/.32
  • (V)/.73
  • (ZION)/.50
Economic Releases
8:30 am EST
  • The Chicago Fed National Activity Index for September is estimated to rise to -.13 in September versus -.55 om August.
9:45 am EST
  • The preliminary Markit US Manufacturing PMI for October is estimated to rise to 51.6 versus 51.5 in September.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Dudley speaking, Fed's Bullard speaking, Fed's Evans speaking, Fed's Powell speaking and the Eurozone Manufacturing PMI report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and industrial 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 week.

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