Sunday, November 27, 2016

Monday Watch

Today's Headlines
  • China's Bad Banks Serve Zombies, Not Investors.
  • Fillon Wins French Republicans’ 2017 Presidential Nomination. Former Prime Minister Francois Fillon was nominated as the French Republicans’ candidate for next year’s presidential election, as voters on the right picked a figure promising tough economic reforms and unabashedly embracing traditional values to lead their party back to power. With about half the vote counted and Fillon leading by almost 40 percentage points, his rival Alain Juppe conceded and called on his supporters to rally behind the winner. Fillon led by 67 percent to 33 percent with almost all the polling stations having reported.
  • Oil Slump Sinks Asian Stocks Before OPEC as Yen Takes on Dollar. Sliding oil prices weighed on Asian energy stocks amid concern over the outcome of this week’s OPEC meeting, while the dollar retreated versus major peers, including the yen, as haven assets rallied. Oil and gas producers led equity declines in Asia, with U.S. crude sinking toward a two-week low after Saudi Arabia suggested the world’s biggest producers didn’t need to reduce output. Japan’s Topix index fell for the first time in 12 days, slipping from a 10-month high as the yen rallied a second day against the dollar. The Korean won and and South African rand led a rebound in developing-nation currencies as the so-called Trump trade -- which has buoyed the dollar since the U.S. election -- took a breather. Gold climbed along with Treasuries, as 10-year bond yields from Japan to Australia fell.
  • Even If OPEC Gets a Deal, It Risks Reviving Battered Oil Rivals. Three days from a crucial meeting, OPEC’s deal to curb oil production and end years of global oversupply hangs in the balance. But even if ministers hash out a meaningful accord on Wednesday, there are dangers for the oil-exporter club. For two years, OPEC tried to bury a growing army of upstart producers by flooding the markets with crude. Reversing course might hand a lifeline to the battered survivors like Premier Oil Plc who are rushing to reap the rewards. The London-listed company, whose 60,000 barrels a day of output amounts to a rounding error for OPEC, expects to use hedges to lock in 2017 prices of at least $50 a barrel, a level Brent has only touched briefly this year. That means Premier Oil has adapted well enough to the assault to at least break even at half the price it received on the futures market in 2015.
  • OPEC Pushes for Oil Deal as Saudis Open Door for No Output Cut. OPEC is embarking on a last-ditch diplomatic push to reach a production cut, with ministers flying to Russia for talks, as Saudi Arabia for the first time suggested the oil-club doesn’t necessarily need to curb output. The Organization of Petroleum Exporting Countries will meet on Wednesday in Vienna to try finalize the terms of its first production decrease in eight years. Yet the group remains divided about how to share the curbs internally and Khalid Al-Falih, the Saudi oil minister, has opened the door to leave the group’s production unchanged.
  • China’s Ball of Money Is Rolling Back to Commodities. In China, money flow is tightly controlled and capital markets are relatively underdeveloped, meaning the economy works like squeezing a balloon. You press it in one place, and it bulges in another. Policy-maker moves to cool one expansion only serve to inflate another. Now that "gyration of bubbles," according to Société Générale SA’s chief China economist Wei Yao, has been heating up the commodities market again.
  • Black Friday Shoppers Curb Spending as They Chase Discounts. Holiday shoppers spent less money over the Black Friday weekend than in 2015, another sign that U.S. consumers remain wary about opening their wallets without deep discounts. Shoppers spent an average of $289.19 over the four-day weekend, including both online and offline purchases, the National Retail Federation said on Sunday, citing a survey conducted by Prosper Insights & Analytics. Consumers shelled out $299.60 in 2015, the trade group found. The weekend was characterized by heavy markdowns and a shift toward e-commerce, meaning there were smaller crowds at the mall. Forty-four percent of consumers did their shopping online, compared with 40 percent at brick-and-mortar stores. In either case, many of them were looking for just one thing: a good deal.
Wall Street Journal:
Fox News:
  • Clinton joining vote recount appears to test fragile truce with Trump. (video) Donald Trump and Hillary Clinton’s truce and efforts to “come together” after their bitter White House race appeared to fray this weekend when Clinton joined in a vote-recount effort, then a top Trump adviser hedged about a criminal probe into Clinton’s emails. In the weeks since Trump’s win, the Republican president-elect has said that he’s not focused on pursing another criminal probe into Clinton’s use of a private email server as secretary of state, despite suggesting on the campaign trail Clinton “has to go to jail” over the issue, amid crowd cheers of “lock her up.”
Zero Hedge: 
Night Trading
  • Asian indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 127.0 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 44.25 +.75 basis point.
  • Bloomberg Emerging Markets Currency Index 69.24 +.17%.
  • S&P 500 futures -.24%.
  • NASDAQ 100 futures -.17%.

Earnings of Note
  • (SFUN)/-.08
  • (SCVL)/.55
  • (THO)/1.23
Economic Releases
10:30 am EST
  • The Dallas Fed Manufacturing Activity Index for November is estimated to rise to 1.5 versus -1.5 in October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Japan Retail Sales report, Japan Unemployment Rate and the CSFB Tech/Media/Telecom Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the week.

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