Sunday, January 22, 2017

Monday Watch

Today's Headlines
  • China Slams Western Democracy as Flawed. China’s state media used Donald Trump’s inauguration as U.S. president to warn about the perils of democracy, touting the relative stability of the Communist system as President Xi Jinping heads toward a twice-a-decade reshuffle of senior leadership posts. With ministries and senior officials stressing unity as a priority for China, smoothing the path for the party’s congress in the fourth quarter, state media were quick to highlight divisions within America shown by Trump’s elevation, without necessarily directly referencing the new president.
  • PBOC Conducts 60 Billion Yuan China Open-Market Operations. China’s central bank added funds to the financial system through open-market operations on Sunday, after injecting a record amount of cash last week and offering liquidity support to some lenders. The monetary authority added a net 60 billion yuan ($8.7 billion) using 14-day and 28-day reverse-repurchase agreements. There are no contracts maturing Sunday. The People’s Bank of China pumped in a net 1.13 trillion yuan last week.
  • These Companies Are at Risk in a U.S.-China Trade War. With the arrival of China-bashing Donald Trump as president in the White House, analysts are drawing up shortlists of winners and losers from any eruption of tensions between the world’s top two economies. It’s still far from clear how plans will shape up under Trump, who on the campaign trail blasted trade deals with China that generated record U.S. deficits. What is clear: China will retaliate against any protectionist steps -- not only are there reported contingency plans, but the historical example of measures against Japan when tensions flared in 2012.
  • Theresa May Gets Another Brexit Headache Amid Brussels Upheaval. U.K. Prime Minister Theresa May’s path to leave the European Union just got a little bit more complicated. The Socialist party, already struggling in France, Italy and the Netherlands, lost control of the European Parliament, which must approve any Brexit deal. The election last week signaled the end of a long-standing power-sharing agreement in the assembly, creating the possibility of division that could encumber May’s departure preparations.
  • Yen Weighs on Japan Shares; Asia Stocks Tip Gains. The yen strengthened in early trading, likely weighing on shares in Tokyo when Japan’s market opens. Asian equities elsewhere were poised for gains. Stock-index futures in China, Australia, and Hong Kong pointed to a higher open for cash markets. Australian bonds declined. The dollar fell against Japan’s currency as Asian traders reacted for the first time to Donald Trump’s inauguration and comments by Bank of Japan Governor Haruhiko Kuroda that the greenback could strengthen.
  • OPEC and Friends Agree on a Way to Monitor Oil-Output Cuts. OPEC and other oil producers agreed on a way to monitor their compliance with last month’s historic supply deal, putting global markets on track to re-balance after more than two years of oversupply. The countries have already cut oil supply by 1.5 million barrels a day, more than 80 percent of their collective target, since the deal took effect on Jan. 1, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih told reporters in Vienna. “Compliance is great -- it’s been really fantastic,” Al-Falih said Sunday. “Based on everything I know, I think it’s been one of the best agreements we’ve had for a long time.”
  • Medical-Laser Maker Cynosure Said to Eye Sale in Strategy Review. Cynosure Inc., the maker of lasers for medical and cosmetic treatments, is exploring strategic options including a sale, according to people familiar with the matter, amid increasing interest in the technology from larger global companies.
  • Foxconn Weighs $7 Billion U.S. Factory With Apple(AAPL), Nikkei Says. Foxconn Technology Group Chairman Terry Gou told reporters in Taipei the company is considering a joint investment with Apple Inc. for a display manufacturing facility in the U.S., according to a report by the Nikkei Asian Review. The facility would cost more than $7 billion and may create an eventual 30,000 to 50,000 jobs, the publication cited Gou as saying.
Wall Street Journal: 
Zero Hedge:
Business Insider:
  • Trump Seen Announcing Federal Workforce Freeze. President Trump in coming days is expected to announce a federal workforce freeze.
Bild am Sonntag:
  • Le Pen Says Trump Speech Shows His Proximity to Her Views. President Donald Trump's inauguration speech "showed lots of similarities with our own views," Marine Le Pen, head of the National Front in France, says in an interview. Says EU has failed when it comes to economic growth, border protection, fighting poverty; says "the EU is dead but doesn't know it yet."
Night Trading
  • Asian indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 114.50 -1.5 basis points.
  • Asia Pacific Sovereign CDS Index 34.5 -.25 basis point.
  • Bloomberg Emerging Markets Currency Index 70.36 +.11%.
  • S&P 500 futures -.29%.
  • NASDAQ 100 futures -.34%.

Earnings of Note
  • (HAL)/.02
  • (MCD)/1.41
  • (PETS)/.25
  • (BRO)/.41
  • (YHOO)/.21
  • (ZION)/.52
Economic Releases
  • None of note
Upcoming Splits
  • (OTEX) 2-for-1
Other Potential Market Movers
  • The Eurozone Consumer Confidence report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighted down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.

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