Wednesday, January 25, 2017

Thursday Watch

Evening Headlines
  • Wildest China Bond Market in Eight Years Boosts Hedging Demand. China’s most-volatile corporate bond market in eight years and angst over monetary tightening are spurring demand for tools to curtail risks. Thirty-day volatility on five-year top-rated corporate notes has spiked to the highest since early 2009, while one-year swap rates and 10-year government yields are both resuming the increases seen in December after falling earlier in the month. The volume of bond futures and interest-rate swaps both surged in the latest data. “Hedging is becoming an increasingly important factor our clients consider when they give us funds to manage,” said Wang Ming, chief operating officer at Shanghai Yaozhi Asset Management LLP, which oversees 20 billion yuan of fixed-income securities. “Before, clients were more concerned about total return or how to mitigate credit risks. Now they want to hedge interest-rate risks.”
  • U.K.’s May to Publish Bill to Trigger Brexit on Thursday. U.K. Prime Minister Theresa May’s government will publish the bill to trigger Brexit on Thursday, according to a person familiar with the situation. The bill will simply be published in a first reading -- the first stage of it going through Parliament -- and will be debated at a later date, the person said, declining to be identified because the plans are private. Some details of the proposed legislation are expected to be set out when Brexit Secretary David Davis answers questions from lawmakers in Parliament at 9:30 a.m.
  • Asian Stocks Poised to Jump After Dow Tops 20,000. Equity index futures from Japan to Hong Kong pointed higher as corporate earnings reignited investor optimism in economic growth. Boeing Co.’s best rally in three months lifted the index for American blue chips past the round-number milestone after a handful of rallies fell short in the past month. The yield on 10-year Treasury notes topped 2.50 percent. The yen slipped in early Thursday trading, while oil climbed back above $53 a barrel. Futures on the Nikkei 225 Stock Average climbed 0.8 percent in Singapore, after the gauge jumped 1.4 percent on Wednesday. Contracts in Hong Kong and South Korea were at least 0.4 percent higher, while those in China advanced 0.2 percent.
  • BP(BP) Sees a Future of Slowing Oil Demand Growth, Abundant Supplies. (video) Oil demand growth will slow and supplies will remain abundant in the coming decades, meaning producers in the Middle East, Russia and U.S. continue to gain market share at the expense of higher-cost rivals, said BP Plc. Demand for oil will expand by an average 0.7 percent a year over the next two decades, little more than half the rate in the preceding 20 years, BP said on Wednesday in its Energy Outlook 2035 report. By the early 2030s, transport will cease to be the main driver of growth, a significant departure from the historical trend.
Wall Street Journal: 
Zero Hedge:
Busines Insider: 
Night Trading 
  • Asian equity indices are +.25% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 110.75 -2.25 basis points.
  • Asia Pacific Sovereign CDS Index 32.75 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 70.68 +.11%
  • S&P 500 futures -.02%. 
  • NASDAQ 100 futures +.07%.
Morning Preview Links

Earnings of Note

  • (ADS)/4.63
  • (BHI)/-.13
  • (BIIB)/4.96
  • (BMY)/.66
  • (CAT)/.67
  • (CELG)/1.60
  • (CMCSA)/.87
  • (DOW)/.88
  • (FCAU)/.41
  • (F)/.32
  • (JBLU)/.49
  • (LLL)/2.09
  • (LEA)/3.49
  • (NOC)/2.49
  • (POT)/.09
  • (PHM)/.59
  • (RTN)/1.86
  • (RCL)/1.21
  • (SHW)/2.21
  • (LUV)/.69
  • (SWK)/1.68
  • (WHR)/4.40
  • (GOOGL)/9.62
  • (EMN)/1.50
  • (INTC)/.75
  • (JNPR)/.63
  • (KLAC)/1.40
  • (MXIM)/.43
  • (MSFT)/.79
  • (PYPL)/.42
  • (RHI)/.64
  • (SBUX)/.52
  • (VMW)/1.40  
Economic Releases 
8:30 am EST
  • Advance Goods Trade Balance for December is estimated at -$65.3B versus -$65.3B in November.
  • Preliminary Wholesale Inventories MoM for December are estimated to rise +.1% versus a +1.0% gain in November.
  • The Chicago Fed National Activity Index for December is estimated to rise to -.05 versus -.27 in November.
  • Initial Jobless Claims for last week are estimated to rise to 247K versus 234K the prior week.
  • Continuing Claims are estimated to fall to 2040K versus 2046K prior.   
9:45 am EST
  • Preliminary Markit US Services PMI for January is estimated to rise to 54.4 versus 53.9 in December.
10:00 am EST
  • New Home Sales for December are estimated to fall to 588K versus 592K in November. 
  • Leading Index for December is estimated to rise +.5% versus unch. in November.
11:00 am EST
  • The Kansas City Fed Manufacturing Index for January is estimated to fall to 8.0 versus 11.0 in December.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Japan CPI report, Australia PPI report, German GfK Consumer Confidence report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, $28B 7Y T-Note auction and the (WBA) annual meeting could also impact trading today.
BOTTOM LINE:  Asian indices are higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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