Monday, November 21, 2016

Tuesday Watch

Evening Headlines
  • $100 Billion Chinese-Made City Near Singapore 'Scares the Hell Out of Everybody'.
  • China May Face Yuan Float if Capital Controls Fail. Dollar strength and rising U.S. interest rates under President-elect Donald Trump would intensify pressure on capital outflows from China, forcing its policy makers to choose between tightening capital controls or a drastic floating of the currency in coming months. That’s according to Victor Shih, a University of California at San Diego professor who studies China’s government and finance and specializes in tracking politics at the most elite level. "Given the Chinese government’s consistent preference for control, we may see much more Draconian capital controls before a decision to float the currency can be made," Shih said in an interview in Beijing. "The main objective is to avoid a panicky float."
  • Yen Rises, Nikkei Retreats After Earthquake; Oil Holds Advance. The yen rose with Treasuries and Japanese stocks retreated as markets digested a tsunami warning in the Fukushima region. Oil extended its advance on optimism OPEC will agree to cut output, while Australian and South Korean stocks jumped after all four major U.S. equity benchmarks climbed to record highs. The Nikkei 225 Stock Average declined and 10-year Treasury yields fell two basis points to 2.30 percent. The S&P 500 Index, the Dow Jones Industrial Average, the Nasdaq Composite Index and the Russell 2000 Index rallied to their all-time peaks on Monday for the first time since 1999. Oil surged as Iran signaled optimism OPEC will agree to a supply-cut deal and Iraq said it will offer new proposals to help bolster unity before next week’s meeting in Vienna. The Nikkei fell as much as 0.3 percent, halting a four-day climb.
  • Oil Rises to Three-Week High Amid OPEC Deal Optimism. (video) Oil rose to a three-week high on expectation OPEC members will agree to supply cuts next week as Libya’s delegate to a preliminary meeting in Vienna said talks on assigning quotas to individual countries were progressing well. Futures for January delivery climbed as much as 1.1 percent in New York after the December contract expired 3.9 percent higher Monday. The discussions went well, Libyan OPEC Governor Mohamed Oun said as he left the group’s headquarters in Vienna on Monday evening. Goldman Sachs Group Inc. said the likelihood of a deal next week meant the bank was bullish on oil prices in the short term. U.S. crude stockpiles are forecast to gain by 250,000 barrels to 490.5 million barrels, according to a Bloomberg survey before government data Wednesday.
  • Global Gasoline Consumption Has All But Peaked. After fueling the 20th century automobile culture that reshaped cities and defined modern life, gasoline has had its day. The International Energy Agency forecasts that global gasoline consumption has all but peaked as more efficient cars and the advent of electric vehicles from new players such as Tesla Motors Inc. halt demand growth in the next 25 years. That shift will have profound consequences for the oil-refining industry because gasoline accounts for one in four barrels consumed worldwide. “Electric cars are happening,” IEA Executive Director Fatih Birol said in an interview in London, adding that their number will rise from little more than 1 million last year to more than 150 million by 2040.
  • Junk-Bond Market Heads Toward Deep Freeze.  
Wall Street Journal:
Zero Hedge
Business Insider:
Night Trading 
  • Asian equity indices are unch. to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 128.5 +1.0 basis point. 
  • Asia Pacific Sovereign CDS Index 44.25 +.5 basis point.
  • Bloomberg Emerging Markets Currency Index 69.62 +.11%
  • S&P 500 futures +.22%
  • NASDAQ 100 futures +.30%.
Morning Preview Links

Earnings of Note

  • (AMWD)/1.14
  • (ADI)/.89
  • (BKS)/-.39
  • (CPB)/.95
  • (CHS)/.13
  • (CBRL)/1.84
  • (DLTR)/.78
  • (EV)/.59
  • (HRL)/.45
  • (JEC)/.77
  • (MDT)/1.11
  • (PDCO)/.60
  • (SIG)/.20
  • (TECD)/1.26
  • (GME)/.47
  • (HPE)/.60
  • (HPQ)/.36
  • (URBN)/.44
Economic Releases 
10:00 am EST
  • The Richmond Fed Manufacturing Index for November is estimated to rise to 0.0 versus -4.0 in October.     
  • Existing Home Sales for October are estimated to fall to 5.44M versus 5.47M in September. 
Upcoming Splits 
  • (USNA) 2-for-1
Other Potential Market Movers
  • The Eurozone Consumer Confidence report, $34B 5Y T-Note auction, weekly US retail sales report and the (H) Investor Day could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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