Monday, January 23, 2017

Tuesday Watch

Evening Headlines
  • Chinese Are Celebrating Lunar New Year by Escaping China. Shi Ying won’t be making the traditional pilgrimage back to Shanghai to celebrate the Lunar New Year holiday with her extended family. Instead, they’re all going to Japan for shopping and sightseeing. That new custom lets her family bypass the mobs, clogged roads and subways, lousy customer services -- and boredom -- that can mark holidays at home. During the past few celebrations, Shi and her relatives left China for Singapore, Malaysia, Thailand and the U.S. “The last thing my parents want for the Chinese New Year is a cheerless holiday with the three of us staying home in Shanghai,” said Shi, 30, who works for a non-governmental organization in Beijing. “Going overseas during the Spring Festival costs about the same as going to some domestic tourist spots.”
  • Top Goldman Forecaster Urges China to Tighten Monetary Policy. China should tighten monetary policy as signs of overheating emerge amid quickening inflation, according to the top-ranked forecaster for the nation’s economy. With policy makers torn between reining in price gains and stabilizing growth, corporate lending has become too cheap, said Song Yu, chief China economist at Beijing Gao Hua Securities Co. The real interest rate for companies -- the lending rate minus producer price increases -- has turned negative for the first time since 2011 as the People’s Bank of China kept its benchmark lending rate at a record low and the economy snapped out of a deflationary funk.
  • Death Cross for Biggest Emerging Markets ETF. (video)
  • Samsung Embarks on Share Buyback as Chips Fuel Higher Profit. Samsung Electronics Co.’s profit more than doubled in the last three months of 2016 on robust semiconductor sales and a recovery in its mobile business, giving it enough stamina to buy back 9.3 trillion won ($8 billion) of its own shares. Net income rose to 6.92 trillion won in the December quarter, largely buoyed by rising prices for memory chips and TV screens, the Suwon, South Korea-based company said in a statement Tuesday. Growth in demand for smartphone displays coupled with a weaker Korean won also lifted its component businesses. The repurchased shares, part of a shareholder return program unveiled in November, will be canceled, the company said.
  • Japan Shares Fall on Yen Gain, Dollar Pares Drop. Japanese shares fell for a second day after the yen touched the highest since November while Treasuries held gains that had been spurred when President Donald Trump targeted reworking America’s trade relationships. The dollar pared declines that had come after Treasury Secretary nominee Steven Mnuchin commented on currency strength. The Topix Index fell 0.4 percent as of 9:46 a.m. in Tokyo, while equities advanced in Australia. Futures on the S&P 500 Index were little changed after the benchmark declined Monday, when European shares fell to the lowest level of 2017. Gold retreated after touching the highest since November and 10-year Australian yields fell a second day. The MSCI Asia-Pacific Index was little changed.
  • OPEC Helps Cheap U.S. Oil Find Its Way to Group’s Top Customers. Add Southern Green Canyon and Mars Blend to the growing list of American crude that’s challenging OPEC’s dominance in the world’s biggest oil market. Cargoes of the two varieties produced in the Gulf of Mexico, which are heavier and more sulfurous than supply from U.S. shale fields, are poised to flow into Asia as they turn cheaper relative to similar-quality crudes from nations such as Saudi Arabia and Oman. The deal between producers worldwide to cut output and ease a glut is boosting the cost of Middle East supplies, priced against the Dubai benchmark, because most of the reductions are coming from the region. Meanwhile, U.S. marker West Texas Intermediate is turning relatively weaker as a rebound in global crude prices from the worst crash in a generation is spurring more American rigs into action. Shale oil that was already cheap enough to sail to Asia is now being joined by cargoes from more traditional fields.
  • Inside the Mind of Mnuchin: Too-Strong Dollar May Hurt Economy. (video) U.S. Treasury Secretary nominee Steven Mnuchin said an “excessively strong dollar” could have a negative short-term effect on the economy. “The strength of the dollar has historically been tied to the strength of the U.S. economy and the faith that investors have in doing business in America,” Mnuchin said in a written response to a senator’s question about the implications of a hypothetical 25 percent dollar rise. “From time to time, an excessively strong dollar may have negative short-term implications on the economy.”
  • Wells Fargo(WFC) Levied Fees on Mortgages It Delayed, ProPublica Says. Wells Fargo & Co. charged some homebuyers fees to extend promised interest rates when the bank failed to process their mortgage applications on time, ProPublica reported, citing four former employees from the Los Angeles area. The practice, apparently limited to that region, broke with the company’s policy of eating the fees when it was at fault for delays, the publication said. They typically amount to about $1,000 to $1,500 if deadlines are missed and interest rates have increased, it said.
  • Celgene's(CELG) Hugin: Drug Prices Should Be Fair. (video)
  • Alphabet(GOOGL) Gets Robotics Pioneer Back After Her Stint With Apple(AAPL). Alphabet Inc. re-hired Yoky Matsuoka to oversee technology at its Nest Labs Inc. smart home unit, snapping up the robotics and artificial intelligence expert after she recently left Apple Inc.
Wall Street Journal:
Zero Hedge:
Busines Insider:
Night Trading 
  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 114.25 -.25 basis point.
  • Asia Pacific Sovereign CDS Index 34.0 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 70.58 +.06%
  • S&P 500 futures -.02%. 
  • NASDAQ 100 futures -.01%.
Morning Preview Links

Earnings of Note

  • (MMM)/1.87
  • (AKS)/.07
  • (BABA)/1.13
  • (ATI)/-.12
  • (GLW)/.44
  • (DHI)/.48
  • (DD)/.42
  • (FITB)/.44
  • (JNJ)/1.56
  • (KMB)/1.41
  • (LMT)/3.04
  • (PII)/1.17
  • (SAP)/1.41
  • (TRV)/2.81
  • (VZ)/.89
  • (AA)/.24
  • (COF)/1.59
  • (CREE)/.13
  • (ISRG)/5.99
  • (STX)/1.08
  • (STLD)/.42
  • (SYK)/1.76
  • (TXN)/.86 
Economic Releases 
9:45 am EST
  • The Preliminary Markit US Manufacturing PMI for January is estimated to rise to 54.5 versus 54.3 in December.
10:00 am EST
  • Existing Home Sales for December are estimated to fall to 5.51m versus 5.61m in November.
  • The Richmond Fed Manufacturing Index for January is estimated to fall to 7.0 versus 8.0 in December.  
Upcoming Splits
  • (OTEX) 2-for-1
Other Potential Market Movers
  • The Australia CPI report, Eurozone PMI report, $26B 2Y T-Note auction and the weekly US retail sales reports 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 mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 50% net long heading into the day.

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