Monday, November 14, 2016

Tuesday Watch

Evening Headlines
  • China's Central Bank Faces Trump Headache. As if defusing the world’s biggest debt bomb while keeping economic growth humming wasn’t tough enough, Donald Trump’s shock election victory has just made the policy outlook even more complex for People’s Bank of China Governor Zhou Xiaochuan. The president-elect’s threats to slap tariffs of up to 45 percent on Chinese imports cast a shadow over the economy’s stabilization and the world’s most crucial trade relationship. Protectionism may fuel more international use of the yuan, according to Standard Chartered Plc, while UBS Group AG says tariffs may push the PBOC to let the yuan fall further. Longer-term ambitions like capital account opening and yuan internationalization are also clouded, hinging on whether President Trump delivers on candidate Trump’s promises.
  • The Euro-Dollar Parity Bet Is Back. Donald Trump’s electoral upset has breathed new life into the bet that diverging economic paths will drive the euro toward parity with the dollar for the first time since 2002. Traders see about a 45 percent chance the European currency will sink to $1 in the next year, about double the probability assigned a week ago, data compiled by Bloomberg show. The president-elect’s pledges to boost spending and cut taxes are fueling speculation that economic growth will accelerate, pushing the Federal Reserve to raise interest rates more quickly. 
  • Bond Selloff Abates as Dollar Retreats, Asian Stocks Stabilize. The fallout from Donald Trump’s election to the U.S. presidency showed some signs of moderating in financial markets with benchmark Treasuries advancing for the first time in more than a week, the dollar retreating and Asian stocks stabilizing. The yield on U.S. government debt due in a decade fell from its highest level of the year and government debt in Australia halted a three-day slide. The yen rose from near its weakest level since June and gold climbed from a five-month low. U.S. crude oil rebounded from an eight-week low as OPEC members were said to be working to bridge a gap between producers to secure a deal to cut output. The MSCI Asia Pacific Index was up 0.2 percent, with gains in technology shares countering losses in consumer staples.
  • Trump Tech Meltdown Hits Fourth Day With Amazon Cut by $35 Billion. The stock market’s post-election bifurcation sharpened Monday as technology shares extended their worst performance since the start of the bull market on speculation Donald Trump’s trade and immigration policies will translate into lower earnings. Apple Inc., Facebook Inc. and Alphabet Inc. led the S&P 500 Information Technology Index down 1.7 percent for the biggest retreat since September. The group stands out as the only industry that normally benefits from a rising economy not to rally on speculation Trump’s policies will stoke domestic growth. Tech stocks in the benchmark equity gauge have slumped 3.1 percent over four days, trailing the S&P 500 Index by 4.2 percentage points, the most since May 2009. Small caps in the Russell 2000 Index surged 1.2 percent to an all-time high.
  • Hedge Funds Added Tech Stocks Ahead of Trump Victory Sell-Off. Marquee money managers including Moore Capital Management and Point72 Asset Management boosted their holdings of technology firms in the third quarter, before the U.S. presidential election spurred a selloff in the industry.
  • Apple(AAPL) Considers Wearables Expansion With Digital Glasses.
Wall Street Journal:
Fox News:
  • Obama: Trump committed to NATO alliance; Dems should reflect on election loss. (graph) Calling the office of the presidency “bigger than any one person,” President Obama on Monday said the influence America has on a global scale will not be erased by the outcome of one election and added that Donald Trump told him the U.S. would reaffirm its commitment to the NATO alliance. As a candidate for president, Trump said other members of the treaty organization did not contribute enough for the protections it gets in return. Trump’s position seemed to change on the topic in recent days.
Zero Hedge:
Business Insider:
Night Trading 
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 131.50 +12.75 basis points. 
  • Asia Pacific Sovereign CDS Index 46.0 +4.25 basis points.
  • Bloomberg Emerging Markets Currency Index 69.70 +.07%
  • S&P 500 futures +.12%
  • NASDAQ 100 futures +.12%.
Morning Preview Links

Earnings of Note

  • (BZH)/.59
  • (DKS)/.42
  • (DBD)/.34
  • (HD)/1.58
  • (JD)/-.37
  • (KLIC)/.09
  • (MBLY)/.18
  • (SSYS)/.07
  • (TEVA)/1.28
  • (TJX)/.87
  • (A)/.52
Economic Releases 
8:30 am EST
  • The Import Price Index MoM for October is estimated to rise +.4% versus a +.1% gain in September.
  • Empire Manufacturing for November is estimated to rise to -2.5 versus -6.8 in October.
  • Retail Sales Advance MoM for October is estimated to rise +.6% versus a +.6% gain in September.
  • Retail Sales Ex Autos MoM for October is estimated to rise +.5% versus a +.5% gain in September.
  • Retail Sales Ex Autos and Gas for October is estimated to rise +.3% versus a +.3% gain in September.
10:00 am EST
  • Business Inventories for September are estimated to rise +.2% versus a +.2% gain in August.    
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Fed's Fischer speaking, Fed's Rosengren speaking, German GDP report, UK Retail Sales report, Eurozone ZEW Index, US weekly retail sales reports, Stifel Healthcare Conference, Morgan Stanley Consumer/Retail Conference, BofA Merrill Banking/Financial Services Conference, (CAR) Investor Day and the (UAL) Investor Day could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and financial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

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