Thursday, December 01, 2016

Friday Watch

Evening Headlines
  • China Seizes Opening in U.S. Backyard After Trump Upends Policy. As Donald Trump weighs plans to tear up trade deals and deport illegal migrants from Latin America, Chinese President Xi Jinping is moving swiftly to reset relations in America’s backyard. Xi returned from a Latin American swing last week having lavished Ecuador with $10 billion in energy and infrastructure deals, and bestowed Ecuador and Chile with China’s highest diplomatic status. He told Peru’s Congress relations were “standing at a new historical starting point.” While attending a summit in Lima with his lame duck U.S. counterpart, Barack Obama, he cast China as the region’s most eager trade advocate. The Chinese leader’s trip highlighted how Trump’s surprise election win was tipping the geopolitical scales even before the Republican takes office with his “America First” platform. Until the vote, China had grappled with how to advance its more than 15-year foray into the traditional U.S. sphere, as its demand for commodities slows and left-wing political allies face setbacks in the region.
  • Jakarta on High Alert as Muslim Groups Protest Christian Leader. Hard-line Islamic groups began gathering in the Indonesian capital Friday to call for the detention of Jakarta’s Christian governor, who has been accused of blasphemy. President Joko Widodo put Jakarta on high alert and dispatched 22,000 soldiers and police to keep order, after a similar protest last month turned violent. Foreign embassies including the U.S. warned its citizens of the potential for extremists to use the demonstration as cover to incite violence.
  • Dollar Slips With Asian Stocks as New Angst Unseats Trump Trades. The Bloomberg Dollar Spot Index is headed for its first weekly drop since Donald Trump’s election to the presidency fueled bets on increased fiscal stimulus and a subsequent bounce in U.S. growth. A selloff in technology shares flowed through into Asia, driving declines in Japan, Australia and South Korea. The yen extended its rebound against the greenback amid caution ahead of key American jobs data, Italy’s weekend referendum and Austria’s presidential vote, and gold also rallied. Bonds in the region extended their slide as crude oil rose above $51 a barrel following the OPEC deal. Copper futures retreated. Almost twice as many stocks fell as advanced on the MSCI Asia Pacific Index as of 9:51am Tokyo time, with Japan's Topix index slipping .3% and the Kospi index down .6% in South Korea.
  • OPEC History Shows Hard Work on Cuts Deal Is Only Just Beginning. (video) OPEC’s work isn’t done yet. Oil traders and investors cheered Wednesday’s landmark deal to curtail oil production. But history shows compliance with past accords to be patchy at best. Even if countries stick to their output caps, those that won exemptions could make the collective target all but unreachable if they boost production. The difficulty of monitoring non-OPEC cuts adds a further layer of uncertainty.
  • Chipmakers Tumble Most Since June on Report Apple(AAPL) Cut Orders. Chipmakers dropped the most in five months after a report that Apple Inc. is reducing orders for iPhone 7 parts reignited a post U.S.-election selloff in technology stocks. The Philadelphia Semiconductor Index slumped 4.9 percent as all 30 members fell. The gauge is on pace for its worst week in almost 11 months, having declined 5.9 percent. The S&P 500 Information Technology Sector Index fell 2.3 percent, the most since early September. Apple slipped 1 percent to $109.47 after Digitimes said the company is cutting orders amid fading sales momentum.
  • Merck(MRK) CEO Says Drugmaker Is ‘Restrained’ on Price Increases. Merck & Co. keeps a disciplined approach to drug pricing and is “restrained” when it comes to price hikes, Chief Executive Officer Ken Frazier said Thursday in an interview. “I’m not saying we’re perfect,” he said Thursday after speaking on a panel at the Forbes Healthcare Summit in New York. “There will always be an individual drug in an individual year that you can point to and say, ‘That looks large in relation to others.’ But if you look at the whole portfolio, you will see that Merck has tended to be rather restrained when it comes to drug prices.” 
Wall Street Journal:
Zero Hedge:
Business Insider:
Night Trading 
  • Asian equity indices are -.75% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 126.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 41.75 +.25 basis point.
  • Bloomberg Emerging Markets Currency Index 69.23 +.04%
  • S&P 500 futures -.17%
  • NASDAQ 100 futures -.21%.
Morning Preview Links

Earnings of Note

  • (BIG)/-.01
  • (GCO)/.93
Economic Releases 
8:30 am EST
  • The Change in Non-Farm Payrolls for November is estimated to rise to 180K versus 161K in October.
  • The Unemployment Rate for November is estimated at 4.9% versus 4.9% in October.
  • Average Hourly Earnings MoM for November are estimated to rise +.2% versus a +.4% gain in October.
9:45 am EST
  • The ISM New York for November.
Upcoming Splits 
  • None of note
Other Potential Market Movers
  • The Fed's Tarullo speaking, Eurozone PPI, (DAL) November Traffic data, (FRED) Investor Day, (AFL) Outlook Call and the (ITW) Investor Day could also impact trading today.
BOTTOM LINE:  Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

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