Sunday, December 04, 2016

Monday Watch

Today's Headlines
  • Renzi Resigns After Populists Defeat Italy Reforms in Referendum. (video) Prime Minister Matteo Renzi resigned in the early hours of Monday after accepting defeat in a constitutional referendum he’d staked his job on. With exit polls showing about 59 percent of Italians had voted against his plans to rein in the power of the Italian Senate, the prime minister said he will hand his resignations to President Sergio Mattarella. The euro fell to a 20-month low as he spoke. “I have lost,” Renzi said in a televised statement. “We gave the Italians an opportunity to change, but we didn’t succeed.”
  • Italy's Constitutional Referendum: Live Results.
  • Trump Takes on China in Tweets About Currency, South China Sea. Donald Trump took on the Chinese government via social media on Sunday, rejecting criticism of his decision to take a phone call from Taiwan’s president at the risk of triggering backlash from Beijing. The U.S. president-elect told his 16.6 million Twitter followers that he wouldn’t be told by China who he should or shouldn’t talk to, and reiterated some of the grievances about China used in his winning presidential campaign. “Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn’t tax them) or to build a massive military complex in the middle of the South China Sea? I don’t think so!” Trump tweeted.
  • Euro Slips With Asian Stocks While Bonds Rise as Italy Votes No. The euro retreated with riskier assets, while bonds rose, amid concern the failure of Italy’s referendum on constitutional reform will destabilize the country, emboldening anti-Europe and nationalist forces. The common currency touched its weakest point in 20 months as Prime Minister Matteo Renzi conceded defeat and said he’ll quit as results showed his bid to overhaul legislative decision-making in Italy had been voted down. Stocks from Tokyo to Sydney declined as the surprise resignation of New Zealand’s premier exacerbated pressure on the local currency. Government debt tracked a rebound in Treasuries from Friday, when mixed U.S. jobs data weighed on the dollar and stocks. Gold fluctuated, while oil fell with copper. The MSCI Asia Pacific Index declined .4%, with Japan's Topix index retreating .6%, Australia's S&P/ASX 200 Index down .7%, the Kospi losing .1% in Seoul and New Zealand's S&P/NZX50 Index dropping .4%
  • Oil Market’s New Engine Losing Steam on Modi’s Cash Crackdown. Oil demand growth in the world’s fastest-growing crude market may weaken as the government’s cash crackdown slows the economy. Diesel and gasoline use, which account for more than half of India’s oil demand, will slow or contract this month and possibly early next year, according to Ivy Global Energy Pte., FGE and Centrum Broking Ltd. Expansion in the world’s fastest-growing major economy is widely expected to ease temporarily after Prime Minister Narendra Modi last month withdrew high-value currency notes in a country where almost all consumer payments are in cash.
Wall Street Journal:
Fox News:
Zero Hedge:
Night Trading
  • Asian indices are -1.0% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 126.0 unch.
  • Asia Pacific Sovereign CDS Index 41.5 -.25 basis point.
  • Bloomberg Emerging Markets Currency Index 69.13 +.17%.
  • S&P 500 futures -.19%.
  • NASDAQ 100 futures -.24%.

Earnings of Note
  • None of note
Economic Releases
10:00 am EST
  • The ISM Non-Manufacturing Composite for November is estimated to rise to 55.3 versus 54.8 in October.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Evans speaking, Fed's Bullard speaking, Eurozone Services PMI report, UK Services PMI report, RBA Meeting, Raymond James Tech Conference, UBS Media/Communications Conference and the (TYC) Analyst Day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity 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 week.

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