Tuesday Watch

Evening Headlines

Bloomberg:

• After Ripping America in China, Duterte Visits U.S. Ally Japan. Rodrigo Duterte travels to one of the U.S.’s strongest allies in Asia on Tuesday in the Philippine president’s first trip since announcing a foreign-policy pivot to China in Beijing last week. The visit to Japan comes days after Duterte announced a “separation" from the U.S. and took home $24 billion in investment pledges from the Chinese capital. While the outspoken leader later clarified his comments to say he wasn’t severing ties altogether, the remarks caused bafflement in Washington and sparked concern from U.S. allies in the region. Duterte’s anti-American remarks in recent months have been “hurtful, confusing, distressing,” U.S. Assistant Secretary of State Daniel Russel told reporters in Manila on Monday. But at the end of the day, he said, “what will matter is what Duterte decides to do."
• Offshore Yuan Weakens to Record as PBOC Seen Tolerating Decline. The offshore yuan fell to a record low as Chinese policy makers signaled they are willing to allow greater currency flexibility amid a slump in exports and an advance in the dollar. The exchange rate touched 6.7880 per dollar in New York Monday, the weakest intraday price in data going back to 2010, and was down 0.2 percent from Friday’s close. In Shanghai, the currency fell to 6.7770, the lowest level in six years and past the 6.75 year-end median forecast in a Bloomberg survey. The Chinese currency has come under increased pressure on signs that investors are taking more money out of the country. Unlike the yuan selloff earlier this year which sparked a global market rout, there’s no sense of panic yet as policy makers maintain a steady exchange rate against other currencies. A gauge of the dollar rose to a seven-month high versus major currencies Monday as traders bet that the Federal Reserve may raise borrowing costs soon.
• Barclays Warns ‘Politics of Rage’ Will Slow Global Growth. Globalization is fundamentally incompatible with rising nationalist anger.
• Britons Happy to Sacrifice Trade for Fewer Foreigners, Poll Says. Britons are more concerned with controlling immigration than maintaining access to the single market, according to a survey published Tuesday, adding further evidence that Prime Minister Theresa May’s Brexit strategy is in line with the prevailing mood of the country. As Britain prepares to exit the European Union, over half of adults polled cite an influx of foreigners as more worrisome than losing EU trade benefits, said the poll conducted by Survation Ltd for ITV plc. Fifty-eight percent of respondents said they approve May’shandling of the divorce, with only a quarter saying that they disapproved. The findings provide cover for May’s apparent plan to prioritize migration controls over access to the single market in Brexit negotiations. While the City of London is dismayedat the prospect of losing its financial services privileges, the rest of the country worries that growing numbers of workers from overseas are snatching jobs and pushing down wages.
• Dollar Advances to Seven-Month High on Policy Divergence Outlook. The dollar held at its highest level since March amid bets the Federal Reserve will raise interest rates this year as other major central banks maintain monetary easing. The greenback has risen against all of its Group-of-10 counterparts this month as the market-based odds of a U.S. hike by December climbed more than 10 percentage points to 71 percent. The currency completed a three-day gain Monday after a U.S. manufacturing gauge rose to the highest in a year. Canada’s dollar slid after central bank Governor Stephen Poloz clarified earlier remarks that had spurred speculation monetary policy would stay on hold.
• Asian Stocks Advance Amid Earnings as Dollar Gains; Oil Steady. Asian stocks rose to a two-week high after U.S. shares rallied amid a flurry of takeovers and better-than-expected corporate earnings. The dollar strengthened versus most peers. The MSCI Asia Pacific Index added 0.3 percent as of 9:28 a.m. Tokyo time. Australia’s S&P/ASX 200 Index rose 0.7 percent and Japan’s Topix gained 0.7 percent. While markets in Hong Kong haven’t started trading yet, futures on the city’s Hang Seng and Hang Seng China Enterprises Index slipped as much as 0.3 percent.
• Obamacare Benchmark Premiums to Rise 25% in Sharpest Jump Yet. Premiums for mid-level Obamacare health plans sold on the federal exchanges will see their biggest jump yet next year, another speed bump in the administration’s push for enrollment in the final months of the U.S. president’s term. Monthly premiums for benchmark silver-level plans are going up by an average of 25 percent in the 38 states using the federal HealthCare.gov website, the U.S. Department of Health and Human Services said in a report today. Last year, premiums for the second-lowest-cost silver plans went up by 7.5 percent on average across 37 states.

Zero Hedge:

• 14% Of Polled Wells Fargo Customers Have Decided To Leave The Bank.
• BofA Explains Why US Consumers Are Spending Less, Saving More.
• 5 Negative Factors For Oil Prices.
• Credit Card Delinquencies Creep Up To Highest Levels Since 2012 As Subprime Issuance Soars. (graph)
• "Something's Gone Terribly Wrong" - Young Voters Disgusted By "Negative Tone" Choose Not To Vote.
• AT&T Purchase Of Time Warner Greeted By Skepticism On Wall Street, Scrutiny In Congress.
• Manic Merger Monday Saves Stocks As China Currency Crashes To Record Low.

Business Insider:

• Twitter(TWTR) is planning to cut as much as 8 percent of its staff this week.
• FELDER: The probability of a market crash is 'as high as it's ever been'.
• CHART: The Chinese yuan has weakened against far more than the US dollar this year.
• Visa's(V) profit spikes 28%

Telegraph:

• The eurozone is turning into a poverty machine.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 114.75 -1.5 basis points. 
• Asia Pacific Sovereign CDS Index 33.75 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 72.33 -.06%. 
• S&P 500 futures +.06%. 
• NASDAQ 100 futures +.10%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (MMM)/2.14
• (AKS)/.13
• (ATI)/-.09
• (BHI)/-.44
• (BAX)/.45
• (EAT)/.55
• (CAT)/.76
• (GLW)/.38
• (DD)/.21
• (LLY)/.96
• (FCAU)/.35
• (FCX)/.20
• (GM)/1.45
• (JBLU)/.60
• (KEY)/.26
• (LMT)/2.87
• (MRK)/.99
• (PCAR)/.99
• (PG)/.98
• (R)/1.67
• (SCHN)/.50
• (SHW)/4.32
• (UA)/.25
• (UTX)/1.67
• (VLO)/.92
• (WHR)/3.85
• (AKAM)/.61
• (AAPL)/1.65
• (CHRW)/.96
• (COF)/1.94
• (CMG)/1.62
• (CB)/2.58
• (ETH)/.43
• (ESRX)/1.73
• (JNPR)/.52
• (NBR)/-.34
• (OI)/.66
• (PNRA)/1.34
• (WFT)/-.25

Economic Releases
9:00 am EST

• The FHFA House Price Index MoM for August is estimated to rise +.4% versus a +.5% gain in July.
• The S&P CoreLogic CS 20-City Composite for August is estimated to rise +.1% versus a -.01% decline in July.

10:00 am EST

• Consumer Confidence for October is estimated to fall to 101.5 versus 104.1 in September.  
• The Richmond Fed Manufacturing Index for October is estimated to rise to -4 versus -8 in September.
• The IDB/TIPP Economic Optimism Index for October is estimated to rise to 47.5 versus 46.7 in September. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The ECB's Draghi speaking, German IFO Business Climate Index, Australia CPI, weekly US retail sales reports and the $26B 2Y T-Note auction could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by consumer 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.